LendingClub Corp — Call Transcript 2025

Ladies and gentlemen, thank you for joining us, and welcome to the LendingClub Q3 2025 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star nine to raise your hand, star six to unmute. I will now hand the conference over to Artem Nalivayko, Head of Investor Relations. Please go ahead. Thank you, and good afternoon. Welcome to LendingClub's third quarter 2025 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. 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, demand for our loans and marketplace products, 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 earnings 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. Our remarks also include non-GAAP measures related to our performance, including tangible book value per common share, pre-provision net revenue, and return on tangible common equity. 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. Please note all financial comparisons in today's prepared remarks are to the prior year-end period unless otherwise noted. I'd like to turn the call over to Scott. Thank you, Artem. Welcome, everybody. We delivered another outstanding quarter with 37% growth in originations, 32% growth in revenue, and a near tripling of diluted earnings per share. Innovative products and experiences, compelling value propositions, a 5 million strong member base, consistent outperformance on credit, and a resilient balance sheet are all coming together to deliver sustainable, profitable growth. I'm excited to share more on our vision and our many competitive advantages at our upcoming Investor Day in two weeks, so I'll keep it brief today. Quarterly originations of $2.62 billion came in above the top end of our guidance, reflecting strong demand from both consumers and loan investors, our increased marketing efforts, and the power of our winning value proposition in customer experiences. With competitive loan rates enabled by our sophisticated credit models and a fast, frictionless process, we continue to be very successful at attracting our target customers. In fact, when our loan offers are made side by side in a leading loan comparison site, we close 50% more customers on average than the competition. We continue to be disciplined in our underwriting, our asset yield remains strong, and our borrower base continues to perform well. In fact, we're delivering our originations growth while also demonstrating roughly 40% outperformance on credit versus our competitor set. Consistent, strong credit performance on a high-yielding asset class has allowed us to confidently build our balance sheet, which now stands at over $11 billion, delivering a durable, resilient revenue stream that non-banks can't replicate. In fact, this quarter we generated our highest-ever net interest income of $158 million, enabled by a growing balance sheet and expanding net interest margin. Our loan marketplace is also thriving, with our reputation for strong credit performance and innovative solutions attracting marketplace investors and improving loan sales prices. We grew marketplace revenue by 75% to our highest level in three years and had our best quarter ever for structured certificate sales, totaling over $1 billion. We also secured earlier in the quarter a memorandum of understanding by which funds and accounts managed by BlackRock would purchase up to $1 billion through LendingClub's marketplace programs through 2026. What's more, our new rated product, specifically designed to attract insurance capital, is capturing strong interest, which should help us continue to improve loan sales prices and further boost marketplace revenue. As excited as I am about our financial performance, I'm equally excited about what we're seeing in member engagement and behavior. Our mobile app, combined with high-engagement products and experiences like LevelUp Checking and DebtIQ, are successfully encouraging members to visit us more often and are driving new product adoption. We launched LevelUp Checking in June of this year as the first of its kind banking product designed specifically for our borrowers. Members are responding positively, with a 7x increase in account openings over our prior checking product. In a recent survey, 84% of respondents said they were more likely to consider a LendingClub loan given the offer of 2% cashback for on-time payments through LevelUp Checking. What's really encouraging is that nearly 60% of new accounts being opened are being opened by borrowers. Our efforts are driving a nearly 50% increase in monthly app logins from our borrowers, and with that engagement, an increasing portion of our repeat loan issuance is now coming through the app. That's proof that these investments are enabling lower-cost acquisition from repeat members, keeping pace with our new member growth as we continue to ramp our marketing efforts. We'll share more examples at Investor Day of how our intentional product design, coupled with an engaging mobile experience, are creating a flywheel to increase lifetime value. Before I turn it over to Drew, I want to thank all LendingClubbers for their incredible execution and dedication to improving banking for our more than 5 million members. Their efforts are paying off, and I look forward to building on our momentum. With that, I'll turn it over to you, Drew. Thanks, Scott, and good afternoon, everyone. We delivered another outstanding quarter, extending the momentum we built throughout the first half of the year. For the third quarter, we generated improved results across all key measures, including originations, revenue, profitability, and returns. Total originations grew 37% year-over-year to over $2.6 billion, reflecting the impact of our growth initiatives, scaling of our paid marketing channels, and continued expansion of loan investors on our marketplace platform. Revenue grew 32% to $266 million, driven by higher marketplace volume, improved loan sales prices, and expanding net interest income. Pre-provision net revenue, or revenue less expenses, grew 58% to $104 million, reflecting the scalability of our model. The net impact of all these items is that we nearly tripled both diluted earnings per share and return on tangible common equity to $0.37 per share and 13.2%, respectively. The business is firing on all cylinders, demonstrating the earnings power of our digital marketplace bank model. Now let's turn to page 12 of our earnings presentation, where we will go further into originations growth. We delivered our highest level of originations in three years. Borrower demand remains strong, as the value we are providing in the core use case of refinancing credit card debt continues to be compelling. Loan investor demand also remains strong, with marketplace buyers looking to increase orders and prices steadily improving. Demand for our structured certificate program continues to grow, as we added the rated product, attracting new insurance capital. In addition to $1.4 billion of new issuance sold, we also sold $250 million of seasoned loans out of the extended seasoning portfolio, which included a rated transaction supported by insurance capital. Our consistently strong credit performance sets us apart from the competition and is one of the reasons we have been able to sell all of these loans without any need to provide credit enhancements. Leveraging one of the benefits of being a bank, we grew our held-for-sale extended seasoning portfolio to over $1.2 billion, consistent with our strategy to grow our balance sheet while maintaining an inventory of seasoned loans for our marketplace buyers. Finally, we retained nearly $600 million on our balance sheet in Q3 in our held-for-investment portfolio. Now let's turn to the two components of revenue on page 13. Non-interest income grew 75% to $108 million, benefiting from higher marketplace sales volumes, improved loan sales prices, continued strong credit performance, and lower benchmark rates. The fair value adjustment of our held-for-sale portfolio benefited by approximately $5 million in the quarter from lower benchmark rates. Net interest income increased to $158 million, another all-time high, supported by a larger portfolio of interest-earning assets and continued funding cost optimization. The growth in this important recurring revenue stream is expected to continue into the future as we leverage our available capital and liquidity to further grow the balance sheet. If you turn to page 14, you will see our net interest margin improved to 6.2%. We continue to see healthy deposit trends, and total deposits ended the quarter at $9.4 billion, a slight decrease from last year. The change was primarily attributable to a $600 million decrease in broker deposits, which was mostly offset by an increase in relationship deposits. LevelUp Savings remains a powerful franchise driver, approaching $3 billion in balances and representing the majority of our deposit growth this year. We are maintaining a disciplined approach to deposit pricing while providing meaningful value for our customers. Turning to expenses on page 15, non-interest expense was $163 million, up 19% year-over-year. As we signaled last quarter, the majority of the sequential increase was driven by marketing spend as we continue to scale, test, and optimize our origination channels to support continued growth in 2026. We continue to generate strong operating leverage on our growing revenue, and our efficiency ratio approached all-time best in the quarter. Let's move on to credit, where performance remains excellent. We continue to outperform the industry with delinquency and charge-off metrics in line with or better than our expectations. Provision for credit losses was $46 million, reflecting disciplined underwriting, stable consumer credit performance, and portfolio mix. Our net charge-off ratio improved modestly again this quarter to 2.9%, and we continue to see strong performance across our vintages. I would highlight that the net charge-off ratio also continues to benefit from the more recent vintages we've added to the balance sheet. We expect the charge-off ratio to revert upwards to more normalized levels as these vintages mature. These anticipated dynamics are already factored into our provision. On page 16, you will see that our expectation for lifetime losses are also stable to improving across all vintages. Turning to the balance sheet, total assets grew to $11.1 billion, up 3% compared to the prior quarter. Our balance sheet remains a competitive strength, allowing us to generate recurring revenue through retained loans while maintaining the flexibility to scale marketplace volume as loan investor demand grows. We ended the quarter well-capitalized with strong liquidity and positioned to fund future growth without raising additional capital. Moving to page 17, you can see that pre-tax income of $57 million more than tripled compared to a year ago and hit a record high for the company. Taxes for the quarter were $13 million, reflecting an effective tax rate of 22.6%. We continue to expect a normalized effective tax rate of 25.5%, but we may have some variability in this line due to the timing of stock grants and other factors. Putting it all together, net income came in at $44 million, and diluted earnings per share were $0.37, which nearly tripled compared to a year ago. Importantly, our return on tangible common equity of 13.2% showed continued improvement and came in above the high end of our guidance range, and our tangible book value per share now sits at $11.95. As we look ahead, the business enters the fourth quarter with significant momentum. Loan investor demand remains strong, loan sales pricing continues to trend higher, and our product and marketing initiatives are driving high-quality volume growth. As a reminder, in Q4, we typically see negative seasonality on originations due to the holiday season. With that in mind, we expect to deliver originations of $2.5 billion-$2.6 billion, up 35%-41% year-over-year, respectively. Our outlook for pre-provision net revenue is $90 million-$100 million, up 21%-35%, respectively. Our outlook assumes two interest rate cuts in Q4 and includes increased investment in marketing to test channel expansion, which will support originations growth in future quarters. We expect to deliver an ROTC in the range of 10%-11.5%, more than triple year over year. We will provide additional details on our strategic and financial framework at our Investor Day on November 5th, where we hope you will join us. With that, we'll open it up for Q&A. We will now begin the question-and-answer session. A reminder that if you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press star nine to raise your hand and star six to unmute. Please stand by while we compile the Q&A roster. Your first question comes from the line of Bill Ryan with Seaport Research Partners. Your line is open. Please go ahead. Bill, I think you're on mute. Got it. Thanks. First question, I just want to ask about the disposition plans looking into the future between your various channels, structured certificate, whole loans, and extended seasoning, and what your plans are to continue to grow the held-for-investment portfolio and the balance sheet. Looks like there's a little bit of a mixed shift the last couple of quarters, dialing back on the whole loan sales, focusing on the other two. If you could also maybe talk about the economics of what you're seeing between the various disposition channels. Yeah, great. Hey, Bill. Thanks for the question. For HFI for Q4, it's kind of steady as she goes in terms of what we plan each quarter. We're targeting roughly $500 million in HFI, and that sort of just depends on how the quarter evolves. Sometimes that's a little higher or a little lower. I'd say generally it's been a little higher the past couple of quarters. The other programs are roughly in line with where we've been for the past couple of quarters. We see demand for structured certificates being constant. We're seeing good pickup in the rated product as well. As I mentioned, we sold one of those out of extended seasoning this quarter, a rated deal, that is. Demand is strong and still there. With issuance being targeted to be roughly the same, the mix and disposition should also be roughly the same. I guess just, Bill, to make sure you're tracking, you probably are that, you know, not all of these sales are equal. Historically, whole loan sales to banks would come at a different price than, say, whole loan sales to an asset manager. As the insurance-rated transactions have been coming in, those prices, as we mentioned in the script, are really approaching bank prices now. In those cases, we're generally not retaining the A note. Effectively, it is a whole loan sale, and it's coming at a higher price. It's really the mix is based on where we're getting best execution. We are looking to develop certain channels. That's a channel we're developing, and it's going in the direction we like, which is building demand and higher prices there. OK, thanks, Scott. Just one big-picture follow-up. If you can maybe kind of touch on the competitive state of the market, origination volumes have increased quite a bit across the board. You've heard about some companies maybe have opened up their credit boxes a little bit, some with product structure, if you will, fixed-income investors allocating more capital to the sector. If you could kind of give us an overview of, have you seen any pressure on your underwriting standards at all? No, we haven't. I'd say, you know, as we say every quarter, this has always been a competitive space. In our case, our growth is coming off of a low, and it's coming off of a low that's been informed not just by tighter credit underwriting, which, you know, we're maintaining the discipline there, but also because we just pulled back on marketing. Our ability to grow is, if you still look at, you know, where you can see volume levels, you'll see we're still running below historical levels of spend and volume in a TAM that's larger than it ever was. We're not seeing the space is competitive. It's no more competitive than it was last quarter or the quarter before. As usual, we see a mix in who we're competing with in different environments. When the interest rate environment shifted, we were competing more with banks and less with fintechs. I'd say now we're competing a bit more with fintechs and a little bit less with some of the banks. It doesn't, it's not changing, certainly not affecting our underwriting standards. You know, we are absolutely in this for the long game. As you know, we're eating our own cooking here. We are looking to make sure we are delivering the returns for ourselves as well as for our loan buyers. We don't view the way we get rewarded long-term as by posting a temporary jump in growth through short-term decision-making on credit. OK, thanks for taking my questions. Our next question comes from the line of Tim Switzer with KBW. Tim, your line is open. Please go ahead. Hey, good afternoon. Thanks for taking my questions. My first one is, can you explain what drove the higher loss of that net fair value adjustment? I think you mentioned earlier on the call that pricing seems to be holding up on loan sales. Just curious what drove that adjustment line. Yeah, keep in mind we had a positive fair value adjustment in Q2 that I believe was about $9 million in the quarter, and we had $5 million this quarter. Positive adjustments in both quarters, but it was larger in Q2 than it was in Q3. That's a big part of the delta right there. As we said, prices moved up a little bit, so it's not price that's driving that. The other piece is, as we have a larger extended seasoning portfolio, there is natural roll-down that happens, and that comes through that net fair value adjustment line. That's also a little bit of the change that we're seeing quarter-over-quarter. It's just a larger portfolio. Got you. Is there a good way for us to be able to model the impact of the extended seasoning portfolio? There is. It's probably a little complicated to get into the details on this call, but we can follow up with you afterwards. Yeah, great for you to know. We can do it offline. Yeah. Can you also walk us through the loan reserve dynamics a bit this quarter? It went up quite a bit, but if we look at your slide 16, that indicates lower loss expectations for those legacy vintages. You obviously didn't grow the held-for-investment book a whole lot. Just curious on what was that reserve going up for, I guess? Yeah, so two factors. Last quarter, there was a one-timer that we called out in the provision line because we had a re-estimation of the lifetime losses, and that caused a positive benefit in the provision line. I think that was about $11 million, right, Artem? Yeah, $11 million last quarter. Credit was great again this quarter, but we didn't do a step change in the reserve on the previous vintages. That's one factor. The other is just as we're growing some of our businesses, like, for example, our purchase finance business into HFI, the duration is a little longer, so it has a little higher upfront CECL charge, but also fantastic economics on balance sheet. Those are the two main drivers. Gotcha. Thank you. One last one real quick. Can you explain what drove the increase in diluted shares? End of period went up a little bit, but not nearly as much as the diluted share count. Sorry if you said this earlier on the call. Yeah, no, I think share price is probably the biggest factor, right? If you just do the treasury, if you just think of the treasury stock method on the diluted shares, the higher the share price, the more dilution you effectively get on the outstanding grants that have been issued. There was no step change in terms of the vehicles that caused diluted share count. Got you. All right, thank you. Thank you. Your next question comes from the line of Giuliano Bologna. Your line is open. Please go ahead. Giuliano, your line is open. Please go ahead. Giuliano, I think you're on mute too. OK, we can come back to Giuliano. We'll move on to Vincent Caintic of BTIG. Your line is open. Please go ahead. Hi, great. Can you hear me? Yes. Yes, having some tech issues. I have a feeling maybe others are as well. Thank you for taking my questions. First question, kind of a follow-up on that funding side. I want to ask about the demand for your marketplace loans, your structured certificates, and the seasoned portfolio. It's great to see that there's so much demand. I think there's been a lot of investor questions over the past month where we've seen some other companies have some issues, some bankruptcies, and so forth. There's been some concerns broadly about institutional investor appetite for fintech-originated loans. It looks like your demand is great. I was wondering if you can maybe talk about the broad industry and if you're seeing any differentiation and if maybe that's a competitive advantage of your funding vehicles and mechanisms versus the rest of the industry. Thank you. Yeah, thanks for the question, Vincent. A lot there. I'd say, first of all, the comments I'm going to make are really just focused on our asset class and our industry, not, you know, auto securitizations or any of the other things that are going on. Our team was just at a conference yesterday talking to loan current investors and potential investors. I'd say the appetite is still very strong. I don't think there's any fade on the appetite at all for the various vehicles that are out there, whether it's a structured product, a rated product, or whole loans out of extended seasoning. Demand is definitely there. I think track record matters. The demand is there for us. I think it's certainly there for other issuers as well. On the margin, issuers are also being maybe slightly more cautious on who they're partnering with. We're hearing that. We've been the partner of choice for years and I think continue to be. I think that plays to our advantage. Obviously, we're always watching the ABS markets to see if there's any major disruption there. Haven't seen much. Certainly, there's been a little noise, as you indicated, over the past couple of weeks. In summary, demand remains good. Prices are strong. We're feeling good going into the fourth quarter. OK, great. Thank you. That's very helpful. I guess. This one. Great, go ahead. One thing, just a little added color is we're certainly hearing that some capital providers are further narrowing their selection of who they're working with. We remain in the wallet and remain a really primary and important partner there, but certainly hearing some chatter of that. OK, great. That's super helpful. Thank you. Actually, kind of related to the volatility we've been hearing over the past month just in broader consumer credit, just wondering if you could talk about your credit performance and what you're seeing. It was great to see charge-offs at 2.9% this quarter. That's great. I'm just wondering if you're noticing, maybe not in the loans that are on your balance sheet already, but as you get applications, maybe has the quality of that changed? Are you noticing any themes in terms of delinquency evolution, like maybe with lower credit tiers or anything, any comments you might be seeing with that relative to past trend? Yeah, no, I'd say for us, reminder, we remain very, very restrictive compared to pre-COVID. That is even more so the case in the lower credit area. I acknowledge there's definitely been a decent amount of press about a bifurcated economy and where certain subsets of consumers could be struggling. In our portfolio, given how we're underwriting today, just for an example, there's talk about consumers who earn less than $50,000 a year. I think that represents 5% of our originations right now, so very, very small. Same thing with student loans. As you know, we've restricted underwriting to that group, so the percentage of people that are delinquent on a student loan incurring on us is now measured in basis points and is shrinking. On our book, we aren't seeing anything more than the normal kind of variability that you adapt and continue to manage to, which our platform is set up and our team is set up to do that quite well. No kind of broad themes, despite, again, we're reading the same thing you are, but we're not seeing it in our book. I think that's based on how we're underwriting. Great, thanks. Maybe I'll sneak one more in. This might end up having to be for the investor meeting. We want to leave some meat on there. Your CET1 of 18% is very healthy. I'm just wondering how much is too much. Thank you. Yeah, we'll see you in November. Sounds good. All right, thanks, guys. I appreciate it. See you then. In all seriousness, I think a little bit on that is, again, we do have what we would say is some excess capital. Our plan is to use that for growing the balance sheet as we ramp up originations. If we have enough capital to satisfy that primary goal and more than enough after that, then I think we'll consider other options. OK, great. See you on November 5th. Thanks very much. Thanks. OK, thank you. Our next question comes from Giuliano Bologna from Compass Point. Your line is now open. Sounds good. Hopefully, you guys can hear me now. I got the unmute notification this time. Congratulations on a great quarter. It's great to see the continued great results. When I look forward, there's obviously a tremendous amount of demand through the marketplace, whether it's structured certificates or whole loan sales. I'm curious, in a sense, how much more do you think you'd want to grow that versus grow the kind of overall HFI pie? The outlook is called 45% between HFI and extended seasoning, which is a pretty healthy amount. It looks like that could keep growing balances. Just trying to think about how you think about the balance going forward because you have a lot of dry powder, a lot of liquidity, and a lot of capital to kind of keep pushing. I'm curious how you think about how much you'd be willing to push both sides there. Yeah, yeah. We'll get into this more at Investor Day, but to give you an answer now for, you know, for Q4 or even longer term, the end goal is to grow originations enough that we can feed all of our desires to grow the balance sheet and we can feed all the investors in the marketplace that, you know, are paying the appropriate price for the loans we're originating. Our goal is to be able to do both. If we're not quite there on total originations, then it's a bit of a balancing act, right? We still want to see healthy growth on the balance sheet. We originate loans that are better off in the marketplace than on the balance sheet, and we're going to sell those. We have long-term investors that we want to keep our relationship with, and we're going to make sure we're able to allocate to them as well. Always a bit of a balancing act while we're still ramping originations. End goal is we have enough originations to feed both sides. That's very helpful. One thing I'm curious about, when I look at your marketing spend as a percentage of volume, it came up a little bit, but it's still much lower than I would have expected, given that you're pushing some new marketing channels. I'm calculating it, 1.55%, 1.553%. You obviously highlighted that you're going to push a little bit more harder on the marketing side in 4Q in anticipation of growth in 2026. It looks like HFI was down, so there should be a little bit less of a benefit from more capitalization or amortization of that through on HFI. It seems like that's continued to be very efficient from a percentage of volume perspective. I'm just curious how I should think about that going forward over the next few quarters. Yeah, as I mentioned, I think we, you know, excitedly, I'd say we still see a lot of opportunity there, right? We are coming from a place of reasonably low activity into a market that I think is pretty attractive in terms of the value proposition to the consumer and the experience we've got. Our efforts are working well. We are still, I mean, we're only two quarters into restarting direct mail as an example. We're on the third version of our response model. We will be on our fourth as we exit the year, building the creative optimization library, optimizing the experience, and then take that across some of the other channels like digital and all the rest. We still have a lot of opportunity in front of us. I think what you're also seeing in Q3 is not just the performance of those channels being positive, but also some of our other efforts. I touched on it in my prepared remarks that our other, we are growing, you know, we delivered 37% growth year on year. That was both in new and in repeat, marketing over indexes to driving new. Repeat is coming at a much lower, much lower cost. Our ability to scale that at an equivalent pace, we're still at 50/50, despite the big jump in year-on-year marketing spend. We're still, you know, roughly 50/50 with new versus repeat. Both of those efforts are working, the external marketing efforts, and the efforts to drive repeat and lifetime value from our customers. That's very, very helpful. I appreciate it. Congrats on the continued performance. I'm looking forward to seeing you guys in a couple of weeks. Great. Thanks, Giuliano. Thank you. Your next question comes from Reggie Smith of JPMorgan. Your line is open. Please go ahead. Reggie, your line is open. You're on mute, Reggie. There we go. Can you hear me now? Yes. I'm sorry. I wanted to follow up on the last question. Kind of thinking about marketing, obviously, it costs less to re-engage a previous customer. I guess thinking about that expense ratio, the 1.5% that we see on the income statement, my sense is that it's not evenly distributed and that maybe your incremental or your marginal loan is a little bit more. Help me understand how inefficient that is or where is the marginal cost to underwrite a loan and then maybe frame that against what you could sell one for. It's my sense and my gut is that despite the fact that your marketing channels are not optimized, there's still room there to kind of go, almost as though you're leaving money on the table, possibly. Not in a bad way, but just thinking about the opportunity there. Maybe talk a little bit about what the marginal cost to acquire a new loan is and then maybe frame that against what you can sell these loans for. It looks like origination of your marketplace ratio is about 5%. There seems to be a lot of room there. Anything you could share there would be great. Thank you. Yeah, you're certainly thinking about it the right way. We're underwriting to a marginal cost of acquisition that reflects the lifetime value of the customer. The part of this process, and what we are very, very focused on, is profitable, sustainable growth, right? We're not looking to just post inefficient volume that we can't rinse and repeat and drive further. As we push into these new channels, we'll find that efficient frontier. We work to basically bring it in by improving our targeting models, improving our creative and response rates, improving our pull-through on the experience, and the conversion rate on the experience so that we can then go deeper and push harder in those channels. I think you're right that we have more room to go, but it is very mathematically and/or scientifically backed, right? We've got a very good handle on what we can expect to get from our customers. That number is going up, right? As we, and we'll share a little bit more information on this, but as we get better and better, these repeat customers are not only lower cost to acquire, they're also lower credit loss. Oh, by the way, if we get you back once, it's likely we're going to get you back three or four times. There really is a real long-term benefit here that will drive up the lifetime value, which will drive up our ability to pay up at acquisition. We're building towards it, and we're building towards it incrementally every quarter. That makes sense. If I could sneak one more in, I'd love to hear more about the BlackRock program and the insurance sales channel. If I'm thinking about that right, I guess this is a way for kind of civilians to get exposure to these types of notes. How's the liquidity there for the consumer? Are they able to sell that stuff back? How does that kind of work? On the insurance side, do you think we'll get to a point where you're announcing a committed number from the insurance channel like you do for private credit today? Yeah, so a couple of things there. One, this is not direct to consumer sales that's happening. This is really, you know, in the BlackRock example, I think they have many different ways that they may represent other clients where they're managing money to purchase this program. I wouldn't want to box it into just one use case for them. It's not a direct or indirect to consumer investors that's happening in any way. I think the insurance pool is extremely deep. These are insurance companies who are taking premiums for various insurance policies and investing that money. It's a massive pool. As Scott was saying, usually the price is not quite as good as banks, but generally, it's still a very low cost of capital. We think we can make progress in terms of growing that channel and helping our overall average price that we're selling loans at as well. On the direct-to-consumer point, is that possible? Maybe not with BlackRock, but is that a channel that one day could be a thing? Are there things that prevent that regulatory-wise that would prevent that or make that difficult? There is capital in our loan book today that is provided by individuals. It's usually coming through funds that are managed by RIAs, that's some of the wealth managers and, you know, hedge funds and all the rest. There is private individual investor capital coming in to purchase the asset. That's one. Going direct to consumer retail would be, you know, going back to our original model. If you recall, you know, it is doable. The loans become securities, which comes with a lot of overhead and disclosure requirements. We have been able to operate a much better business without that because what I mean by that is we are required to announce when we make pricing changes. We're required to announce when we make credit changes. We had all of our competition downloading our publicly available data and using it to compete against us because we had to tell them what we were doing. It's not something I would gladly go back to in that old structure. Certainly, high net worth individual through funds is a source of capital today. I was thinking about how I'd love to pick up some yield versus what I get in my savings account now. I think that's something there. I don't know. Yeah, we can update you on that. Thanks a lot. Great quarter, guys. We'll talk soon. Thanks. Thanks. Thank you. A reminder that if you'd like to ask a question, please raise your hand. If you have dialed into today's call, press star nine to raise your hand, star six to unmute. Our next question comes from Kyle Joseph of Stephens. Your line is open. Please go ahead. Hey, good afternoon. Thanks for taking my questions. You guys have touched on this a bit, but just looking at slide 10 and kind of the delinquency trends amongst FICO bands, obviously, at least amongst the competitor set, you saw a pretty big increase on the lower band there. Just give us a sense for how that impacts your originations and investor demand, and where you're seeing kind of the best bang for your buck in terms across the FICO band score. Yeah, so that doesn't directly affect us. As I touched on before, we're certainly hearing some chatter about maybe people consolidating with a smaller handful of originators that have shown themselves to have more stable and predictable performance. What we're always looking at is what does the application profile look like coming at us? Is it shifting? Is it shifting in a way we like or we don't like? When you see an uptick like that, it's generally going to result in somebody else pulling back. We don't know. Is that one platform, two, three? Hard for us to say. What we'll be monitoring and adapting to is making sure we continue to get a consistent through-the-door population that we want. That may provide some opportunity. It might provide some risk. That's part of what our day job is. Got it. Helpful. Just one follow-up for me. We talked a lot about marketing expenses today, but just, you know, I imagine you'll cover this at the Investor Day as well, but just, you know, a sense for the operating leverage you have on the remaining expense items. Yeah, we think it's pretty significant. We will get into it more in Investor Day. I think you can already see it happening right now in terms of the revenue growth we've produced year-over-year compared to expenses. It's certainly not to say that other expenses won't go up as we grow the company. I think marketing is where you'll see the most variable cost as we scale up. Got it. That's it for me. Thanks very much for taking my questions. Great. Thank you for your questions. I will now turn the call to Artem for some questions via email. All right. Thanks, Kevin. Scott and Drew, we've got a couple of questions here that were submitted by our retail investors. First question is, we noticed a difference in origination growth rate across issuers and originators. To what do you attribute the differences in growth? Yeah, first, thanks to all the retail investors for submitting. I understand from Artem that we got quite a few this quarter. That's great. As we talked about on the call, not all originations are created equal. Our focus is on profitable, sustainable originations growth. I think 37% growth in originations to a level that's really getting close to our highest over the last several years is also coming with record high pretax net income and also coming with outperformance on credit by roughly 40%. We're not just looking at one number, which is dollars originated year on year. We're looking at a combined balance of what we think makes for a sustainable, profitable business. Perfect. All right. Second question, you talked a little bit about potential rebrand coming up. Any updates on the status? I'm only talking about it because you all keep asking. I would say, yes, we are, we've done quite a bit of work this year. We're in the final stages of the, let's call it, the research and development phase and landing on where we want to take it. Very excited about it. We're now entering the planning and execution phase, which we're going to be pretty deliberate about, as it won't surprise anyone on this call. We built up equity in this brand after almost 20 years. We think a new brand will give us a broader permission set with our customer base and kind of create new opportunities for us. We have to make sure we don't lose the tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels. Lots of work to do. When will it be out in the ether? We'll be probably middle-ish of next year. Don't hold me to that date exactly. We're doing the planning phase to make sure we know exactly what we're going to get and can support it with the marketing oomph that it's going to need to be successful. All right, perfect. Last question. Just any updates on the product roadmap or launching any new products? Yeah, so obviously this year, as we've been getting back to growth, we've also been expanding our ambitions on the product mix. We talked about LevelUp Checking on the call today. LevelUp Savings has been a big driver, which I think Drew talked about, DebtIQ this year. There is absolutely more to come. That's part of the reason we're going to be investing in a new brand. What I'd say is, stay tuned for Investor Day. We'll talk a little bit more about some opportunities we're going to be pursuing in the years to come. All right, perfect. Thanks, Scott. All right, thank you, everyone. With that, we'll wrap up our third quarter earnings conference call. Thanks again for joining us today. If you have any questions, please email us at [email protected].

Speaker 4: Ladies and gentlemen, thank you for joining us, and welcome to the LendingClub Q3 2025 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star nine to raise your hand, star six to unmute. I will now hand the conference over to Artem Nalivayko, Head of Investor Relations. Please go ahead. Ladies and gentlemen, thank you for joining us, and welcome to the LendingClub Q3 2025 earnings conference call. ladies and gentlemen thank you for joining us and welcome to the lendingclub q3 2025 earnings conference call After today's prepared remarks, we will host a question-and-answer session. after today's prepared remarks we will host a question-and-answer session If you would like to ask a question, please raise your hand. if you would like to ask a question please raise your hand If you have dialed in to today's call, please press star nine to raise your hand, star six to unmute. if you have dialed in to today's call please press star nine to raise your hand star six to unmute I will now hand the conference over to Artem Nalivayko, Head of Investor Relations. i will now hand the conference over to artem nalivayko head of investor relations Please go ahead. please go ahead

Speaker 3: Thank you, and good afternoon. Welcome to LendingClub's third quarter 2025 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. 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, demand for our loans and marketplace products, 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 earnings presentation. Thank you, and good afternoon. thank you and good afternoon Welcome to LendingClub's third quarter 2025 earnings conference call. welcome to lendingclub's third quarter 2025 earnings conference call Joining me today to talk about our results are Scott Sanborn, CEO, and Drew LaBenne, CFO. 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. you can find the presentation accompanying our earnings release 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. 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, demand for our loans and marketplace products, and future business and financial performance. our remarks today will include forward-looking statements including with respect to our competitive advantages demand for our loans and marketplace products and future business and financial performance Our actual results may differ materially from those contemplated by these forward-looking statements. 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 earnings presentation. factors that could cause these results to differ materially are described in today's press release and earnings 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. Our remarks also include non-GAAP measures related to our performance, including tangible book value per common share, pre-provision net revenue, and return on tangible common equity. 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. Please note all financial comparisons in today's prepared remarks are to the prior year-end period unless otherwise noted. I'd like to turn the call over to Scott. 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. 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 include non-GAAP measures related to our performance, including tangible book value per common share, pre-provision net revenue, and return on tangible common equity. our remarks also include non-gaap measures related to our performance including tangible book value per common share pre-provision net revenue and return on tangible common equity 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. 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 Please note all financial comparisons in today's prepared remarks are to the prior year-end period unless otherwise noted. please note all financial comparisons in today's prepared remarks are to the prior year-end period unless otherwise noted I'd like to turn the call over to Scott. i'd like to turn the call over to scott

Speaker 2: Thank you, Artem. Welcome, everybody. We delivered another outstanding quarter with 37% growth in originations, 32% growth in revenue, and a near tripling of diluted earnings per share. Innovative products and experiences, compelling value propositions, a 5 million strong member base, consistent outperformance on credit, and a resilient balance sheet are all coming together to deliver sustainable, profitable growth. I'm excited to share more on our vision and our many competitive advantages at our upcoming Investor Day in two weeks, so I'll keep it brief today. Quarterly originations of $2.62 billion came in above the top end of our guidance, reflecting strong demand from both consumers and loan investors, our increased marketing efforts, and the power of our winning value proposition in customer experiences. With competitive loan rates enabled by our sophisticated credit models and a fast, frictionless process, we continue to be very successful at attracting our target customers. Thank you, Artem. thank you artem Welcome, everybody. welcome everybody We delivered another outstanding quarter with 37% growth in originations, 32% growth in revenue, and a near tripling of diluted earnings per share. we delivered another outstanding quarter with 37% growth in originations 32% growth in revenue and a near tripling of diluted earnings per share Innovative products and experiences, compelling value propositions, a 5 million strong member base, consistent outperformance on credit, and a resilient balance sheet are all coming together to deliver sustainable, profitable growth. innovative products and experiences compelling value propositions a 5 million strong member base consistent outperformance on credit and a resilient balance sheet are all coming together to deliver sustainable profitable growth I'm excited to share more on our vision and our many competitive advantages at our upcoming Investor Day in two weeks, so I'll keep it brief today. i'm excited to share more on our vision and our many competitive advantages at our upcoming investor day in two weeks so i'll keep it brief today Quarterly originations of $2.62 billion came in above the top end of our guidance, reflecting strong demand from both consumers and loan investors, our increased marketing efforts, and the power of our winning value proposition in customer experiences. quarterly originations of $2.62 billion came in above the top end of our guidance reflecting strong demand from both consumers and loan investors our increased marketing efforts and the power of our winning value proposition in customer experiences With competitive loan rates enabled by our sophisticated credit models and a fast, frictionless process, we continue to be very successful at attracting our target customers. with competitive loan rates enabled by our sophisticated credit models and a fast frictionless process we continue to be very successful at attracting our target customers In fact, when our loan offers are made side by side in a leading loan comparison site, we close 50% more customers on average than the competition. We continue to be disciplined in our underwriting, our asset yield remains strong, and our borrower base continues to perform well. In fact, we're delivering our originations growth while also demonstrating roughly 40% outperformance on credit versus our competitor set. Consistent, strong credit performance on a high-yielding asset class has allowed us to confidently build our balance sheet, which now stands at over $11 billion, delivering a durable, resilient revenue stream that non-banks can't replicate. In fact, this quarter we generated our highest-ever net interest income of $158 million, enabled by a growing balance sheet and expanding net interest margin. In fact, when our loan offers are made side by side in a leading loan comparison site, we close 50% more customers on average than the competition. in fact when our loan offers are made side by side in a leading loan comparison site we close 50% more customers on average than the competition We continue to be disciplined in our underwriting, our asset yield remains strong, and our borrower base continues to perform well. we continue to be disciplined in our underwriting our asset yield remains strong and our borrower base continues to perform well In fact, we're delivering our originations growth while also demonstrating roughly 40% outperformance on credit versus our competitor set. in fact we're delivering our originations growth while also demonstrating roughly 40% outperformance on credit versus our competitor set Consistent, strong credit performance on a high-yielding asset class has allowed us to confidently build our balance sheet, which now stands at over $11 billion, delivering a durable, resilient revenue stream that non-banks can't replicate. consistent strong credit performance on a high-yielding asset class has allowed us to confidently build our balance sheet which now stands at over $11 billion delivering a durable resilient revenue stream that non-banks can't replicate In fact, this quarter we generated our highest-ever net interest income of $158 million, enabled by a growing balance sheet and expanding net interest margin. in fact this quarter we generated our highest-ever net interest income of $158 million enabled by a growing balance sheet and expanding net interest margin Our loan marketplace is also thriving, with our reputation for strong credit performance and innovative solutions attracting marketplace investors and improving loan sales prices. We grew marketplace revenue by 75% to our highest level in three years and had our best quarter ever for structured certificate sales, totaling over $1 billion. We also secured earlier in the quarter a memorandum of understanding by which funds and accounts managed by BlackRock would purchase up to $1 billion through LendingClub's marketplace programs through 2026. What's more, our new rated product, specifically designed to attract insurance capital, is capturing strong interest, which should help us continue to improve loan sales prices and further boost marketplace revenue. As excited as I am about our financial performance, I'm equally excited about what we're seeing in member engagement and behavior. Our loan marketplace is also thriving, with our reputation for strong credit performance and innovative solutions attracting marketplace investors and improving loan sales prices. our loan marketplace is also thriving with our reputation for strong credit performance and innovative solutions attracting marketplace investors and improving loan sales prices We grew marketplace revenue by 75% to our highest level in three years and had our best quarter ever for structured certificate sales, totaling over $1 billion. we grew marketplace revenue by 75% to our highest level in three years and had our best quarter ever for structured certificate sales totaling over $1 billion We also secured earlier in the quarter a memorandum of understanding by which funds and accounts managed by BlackRock would purchase up to $1 billion through LendingClub's marketplace programs through 2026. we also secured earlier in the quarter a memorandum of understanding by which funds and accounts managed by blackrock would purchase up to $1 billion through lendingclub's marketplace programs through 2026 What's more, our new rated product, specifically designed to attract insurance capital, is capturing strong interest, which should help us continue to improve loan sales prices and further boost marketplace revenue. what's more our new rated product specifically designed to attract insurance capital is capturing strong interest which should help us continue to improve loan sales prices and further boost marketplace revenue As excited as I am about our financial performance, I'm equally excited about what we're seeing in member engagement and behavior. as excited as i am about our financial performance i'm equally excited about what we're seeing in member engagement and behavior Our mobile app, combined with high-engagement products and experiences like LevelUp Checking and DebtIQ, are successfully encouraging members to visit us more often and are driving new product adoption. We launched LevelUp Checking in June of this year as the first of its kind banking product designed specifically for our borrowers. Members are responding positively, with a 7x increase in account openings over our prior checking product. In a recent survey, 84% of respondents said they were more likely to consider a LendingClub loan given the offer of 2% cashback for on-time payments through LevelUp Checking. What's really encouraging is that nearly 60% of new accounts being opened are being opened by borrowers. Our efforts are driving a nearly 50% increase in monthly app logins from our borrowers, and with that engagement, an increasing portion of our repeat loan issuance is now coming through the app. Our mobile app, combined with high-engagement products and experiences like LevelUp Checking and DebtIQ, are successfully encouraging members to visit us more often and are driving new product adoption. our mobile app combined with high-engagement products and experiences like levelup checking and debtiq are successfully encouraging members to visit us more often and are driving new product adoption We launched LevelUp Checking in June of this year as the first of its kind banking product designed specifically for our borrowers. we launched levelup checking in june of this year as the first of its kind banking product designed specifically for our borrowers Members are responding positively, with a 7x increase in account openings over our prior checking product. members are responding positively with a 7x increase in account openings over our prior checking product In a recent survey, 84% of respondents said they were more likely to consider a LendingClub loan given the offer of 2% cashback for on-time payments through LevelUp Checking. in a recent survey 84% of respondents said they were more likely to consider a lendingclub loan given the offer of 2% cashback for on-time payments through levelup checking What's really encouraging is that nearly 60% of new accounts being opened are being opened by borrowers. what's really encouraging is that nearly 60% of new accounts being opened are being opened by borrowers Our efforts are driving a nearly 50% increase in monthly app logins from our borrowers, and with that engagement, an increasing portion of our repeat loan issuance is now coming through the app. our efforts are driving a nearly 50% increase in monthly app logins from our borrowers and with that engagement an increasing portion of our repeat loan issuance is now coming through the app That's proof that these investments are enabling lower-cost acquisition from repeat members, keeping pace with our new member growth as we continue to ramp our marketing efforts. We'll share more examples at Investor Day of how our intentional product design, coupled with an engaging mobile experience, are creating a flywheel to increase lifetime value. Before I turn it over to Drew, I want to thank all LendingClubbers for their incredible execution and dedication to improving banking for our more than 5 million members. Their efforts are paying off, and I look forward to building on our momentum. With that, I'll turn it over to you, Drew. That's proof that these investments are enabling lower-cost acquisition from repeat members, keeping pace with our new member growth as we continue to ramp our marketing efforts. that's proof that these investments are enabling lower-cost acquisition from repeat members keeping pace with our new member growth as we continue to ramp our marketing efforts We'll share more examples at Investor Day of how our intentional product design, coupled with an engaging mobile experience, are creating a flywheel to increase lifetime value. we'll share more examples at investor day of how our intentional product design coupled with an engaging mobile experience are creating a flywheel to increase lifetime value Before I turn it over to Drew, I want to thank all LendingClubbers for their incredible execution and dedication to improving banking for our more than 5 million members. before i turn it over to drew i want to thank all lendingclubbers for their incredible execution and dedication to improving banking for our more than 5 million members Their efforts are paying off, and I look forward to building on our momentum. their efforts are paying off and i look forward to building on our momentum With that, I'll turn it over to you, Drew. with that i'll turn it over to you drew

Speaker 1: Thanks, Scott, and good afternoon, everyone. We delivered another outstanding quarter, extending the momentum we built throughout the first half of the year. For the third quarter, we generated improved results across all key measures, including originations, revenue, profitability, and returns. Total originations grew 37% year-over-year to over $2.6 billion, reflecting the impact of our growth initiatives, scaling of our paid marketing channels, and continued expansion of loan investors on our marketplace platform. Revenue grew 32% to $266 million, driven by higher marketplace volume, improved loan sales prices, and expanding net interest income. Pre-provision net revenue, or revenue less expenses, grew 58% to $104 million, reflecting the scalability of our model. The net impact of all these items is that we nearly tripled both diluted earnings per share and return on tangible common equity to $0.37 per share and 13.2%, respectively. Thanks, Scott, and good afternoon, everyone. thanks scott and good afternoon everyone We delivered another outstanding quarter, extending the momentum we built throughout the first half of the year. we delivered another outstanding quarter extending the momentum we built throughout the first half of the year For the third quarter, we generated improved results across all key measures, including originations, revenue, profitability, and returns. for the third quarter we generated improved results across all key measures including originations revenue profitability and returns Total originations grew 37% year- over- year to over $2.6 billion, reflecting the impact of our growth initiatives, scaling of our paid marketing channels, and continued expansion of loan investors on our marketplace platform. total originations grew 37% year- over- year to over $2.6 billion reflecting the impact of our growth initiatives scaling of our paid marketing channels and continued expansion of loan investors on our marketplace platform Revenue grew 32% to $266 million, driven by higher marketplace volume, improved loan sales prices, and expanding net interest income. revenue grew 32% to $266 million driven by higher marketplace volume improved loan sales prices and expanding net interest income Pre-provision net revenue, or revenue less expenses, grew 58% to $104 million, reflecting the scalability of our model. pre-provision net revenue or revenue less expenses grew 58% to $104 million reflecting the scalability of our model The net impact of all these items is that we nearly tripled both diluted earnings per share and return on tangible common equity to $0.37 per share and 13.2%, respectively. the net impact of all these items is that we nearly tripled both diluted earnings per share and return on tangible common equity to $0.37 per share and 13.2% respectively The business is firing on all cylinders, demonstrating the earnings power of our digital marketplace bank model. Now let's turn to page 12 of our earnings presentation, where we will go further into originations growth. We delivered our highest level of originations in three years. Borrower demand remains strong, as the value we are providing in the core use case of refinancing credit card debt continues to be compelling. Loan investor demand also remains strong, with marketplace buyers looking to increase orders and prices steadily improving. Demand for our structured certificate program continues to grow, as we added the rated product, attracting new insurance capital. In addition to $1.4 billion of new issuance sold, we also sold $250 million of seasoned loans out of the extended seasoning portfolio, which included a rated transaction supported by insurance capital. The business is firing on all cylinders, demonstrating the earnings power of our digital marketplace bank model. the business is firing on all cylinders demonstrating the earnings power of our digital marketplace bank model Now let's turn to page 12 of our earnings presentation, where we will go further into originations growth. now let's turn to page 12 of our earnings presentation where we will go further into originations growth We delivered our highest level of originations in three years. we delivered our highest level of originations in three years Borrower demand remains strong, as the value we are providing in the core use case of refinancing credit card debt continues to be compelling. borrower demand remains strong as the value we are providing in the core use case of refinancing credit card debt continues to be compelling Loan investor demand also remains strong, with marketplace buyers looking to increase orders and prices steadily improving. loan investor demand also remains strong with marketplace buyers looking to increase orders and prices steadily improving Demand for our structured certificate program continues to grow, as we added the rated product, attracting new insurance capital. demand for our structured certificate program continues to grow as we added the rated product attracting new insurance capital In addition to $1.4 billion of new issuance sold, we also sold $250 million of seasoned loans out of the extended seasoning portfolio, which included a rated transaction supported by insurance capital. in addition to $1.4 billion of new issuance sold we also sold $250 million of seasoned loans out of the extended seasoning portfolio which included a rated transaction supported by insurance capital Our consistently strong credit performance sets us apart from the competition and is one of the reasons we have been able to sell all of these loans without any need to provide credit enhancements. Leveraging one of the benefits of being a bank, we grew our held-for-sale extended seasoning portfolio to over $1.2 billion, consistent with our strategy to grow our balance sheet while maintaining an inventory of seasoned loans for our marketplace buyers. Finally, we retained nearly $600 million on our balance sheet in Q3 in our held-for-investment portfolio. Now let's turn to the two components of revenue on page 13. Non-interest income grew 75% to $108 million, benefiting from higher marketplace sales volumes, improved loan sales prices, continued strong credit performance, and lower benchmark rates. The fair value adjustment of our held-for-sale portfolio benefited by approximately $5 million in the quarter from lower benchmark rates. Our consistently strong credit performance sets us apart from the competition and is one of the reasons we have been able to sell all of these loans without any need to provide credit enhancements. our consistently strong credit performance sets us apart from the competition and is one of the reasons we have been able to sell all of these loans without any need to provide credit enhancements Leveraging one of the benefits of being a bank, we grew our held-for-sale extended seasoning portfolio to over $1.2 billion, consistent with our strategy to grow our balance sheet while maintaining an inventory of seasoned loans for our marketplace buyers. leveraging one of the benefits of being a bank we grew our held-for-sale extended seasoning portfolio to over $1.2 billion consistent with our strategy to grow our balance sheet while maintaining an inventory of seasoned loans for our marketplace buyers Finally, we retained nearly $600 million on our balance sheet in Q3 in our held-for-investment portfolio. finally we retained nearly $600 million on our balance sheet in q3 in our held-for-investment portfolio Now let's turn to the two components of revenue on page 13. now let's turn to the two components of revenue on page 13 Non-interest income grew 75% to $108 million, benefiting from higher marketplace sales volumes, improved loan sales prices, continued strong credit performance, and lower benchmark rates. non-interest income grew 75% to $108 million benefiting from higher marketplace sales volumes improved loan sales prices continued strong credit performance and lower benchmark rates The fair value adjustment of our held-for-sale portfolio benefited by approximately $5 million in the quarter from lower benchmark rates. the fair value adjustment of our held-for-sale portfolio benefited by approximately $5 million in the quarter from lower benchmark rates Net interest income increased to $158 million, another all-time high, supported by a larger portfolio of interest-earning assets and continued funding cost optimization. The growth in this important recurring revenue stream is expected to continue into the future as we leverage our available capital and liquidity to further grow the balance sheet. If you turn to page 14, you will see our net interest margin improved to 6.2%. We continue to see healthy deposit trends, and total deposits ended the quarter at $9.4 billion, a slight decrease from last year. The change was primarily attributable to a $600 million decrease in broker deposits, which was mostly offset by an increase in relationship deposits. LevelUp Savings remains a powerful franchise driver, approaching $3 billion in balances and representing the majority of our deposit growth this year. Net interest income increased to $158 million, another all-time high, supported by a larger portfolio of interest-earning assets and continued funding cost optimization. net interest income increased to $158 million another all-time high supported by a larger portfolio of interest-earning assets and continued funding cost optimization The growth in this important recurring revenue stream is expected to continue into the future as we leverage our available capital and liquidity to further grow the balance sheet. the growth in this important recurring revenue stream is expected to continue into the future as we leverage our available capital and liquidity to further grow the balance sheet If you turn to page 14, you will see our net interest margin improved to 6.2%. if you turn to page 14 you will see our net interest margin improved to 6.2% We continue to see healthy deposit trends, and total deposits ended the quarter at $9.4 billion, a slight decrease from last year. we continue to see healthy deposit trends and total deposits ended the quarter at $9.4 billion a slight decrease from last year The change was primarily attributable to a $600 million decrease in broker deposits, which was mostly offset by an increase in relationship deposits. the change was primarily attributable to a $600 million decrease in broker deposits which was mostly offset by an increase in relationship deposits LevelUp Savings remains a powerful franchise driver, approaching $3 billion in balances and representing the majority of our deposit growth this year. levelup savings remains a powerful franchise driver approaching $3 billion in balances and representing the majority of our deposit growth this year We are maintaining a disciplined approach to deposit pricing while providing meaningful value for our customers. Turning to expenses on page 15, non-interest expense was $163 million, up 19% year-over-year. As we signaled last quarter, the majority of the sequential increase was driven by marketing spend as we continue to scale, test, and optimize our origination channels to support continued growth in 2026. We continue to generate strong operating leverage on our growing revenue, and our efficiency ratio approached all-time best in the quarter. Let's move on to credit, where performance remains excellent. We continue to outperform the industry with delinquency and charge-off metrics in line with or better than our expectations. Provision for credit losses was $46 million, reflecting disciplined underwriting, stable consumer credit performance, and portfolio mix. We are maintaining a disciplined approach to deposit pricing while providing meaningful value for our customers. we are maintaining a disciplined approach to deposit pricing while providing meaningful value for our customers Turning to expenses on page 15, non-interest expense was $163 million, up 19% year- over- year. turning to expenses on page 15 non-interest expense was $163 million up 19% year- over- year As we signaled last quarter, the majority of the sequential increase was driven by marketing spend as we continue to scale, test, and optimize our origination channels to support continued growth in 2026. as we signaled last quarter the majority of the sequential increase was driven by marketing spend as we continue to scale test and optimize our origination channels to support continued growth in 2026 We continue to generate strong operating leverage on our growing revenue, and our efficiency ratio approached all-time best in the quarter. we continue to generate strong operating leverage on our growing revenue and our efficiency ratio approached all-time best in the quarter Let's move on to credit, where performance remains excellent. let's move on to credit where performance remains excellent We continue to outperform the industry with delinquency and charge-off metrics in line with or better than our expectations. we continue to outperform the industry with delinquency and charge-off metrics in line with or better than our expectations Provision for credit losses was $46 million, reflecting disciplined underwriting, stable consumer credit performance, and portfolio mix. provision for credit losses was $46 million reflecting disciplined underwriting stable consumer credit performance and portfolio mix Our net charge-off ratio improved modestly again this quarter to 2.9%, and we continue to see strong performance across our vintages. I would highlight that the net charge-off ratio also continues to benefit from the more recent vintages we've added to the balance sheet. We expect the charge-off ratio to revert upwards to more normalized levels as these vintages mature. These anticipated dynamics are already factored into our provision. On page 16, you will see that our expectation for lifetime losses are also stable to improving across all vintages. Turning to the balance sheet, total assets grew to $11.1 billion, up 3% compared to the prior quarter. Our balance sheet remains a competitive strength, allowing us to generate recurring revenue through retained loans while maintaining the flexibility to scale marketplace volume as loan investor demand grows. Our net charge-off ratio improved modestly again this quarter to 2.9%, and we continue to see strong performance across our vintages. our net charge-off ratio improved modestly again this quarter to 2.9% and we continue to see strong performance across our vintages I would highlight that the net charge-off ratio also continues to benefit from the more recent vintages we've added to the balance sheet. i would highlight that the net charge-off ratio also continues to benefit from the more recent vintages we've added to the balance sheet We expect the charge-off ratio to revert upwards to more normalized levels as these vintages mature. we expect the charge-off ratio to revert upwards to more normalized levels as these vintages mature These anticipated dynamics are already factored into our provision. these anticipated dynamics are already factored into our provision On page 16, you will see that our expectation for lifetime losses are also stable to improving across all vintages. on page 16 you will see that our expectation for lifetime losses are also stable to improving across all vintages Turning to the balance sheet, total assets grew to $11.1 billion, up 3% compared to the prior quarter. turning to the balance sheet total assets grew to $11.1 billion up 3% compared to the prior quarter Our balance sheet remains a competitive strength, allowing us to generate recurring revenue through retained loans while maintaining the flexibility to scale marketplace volume as loan investor demand grows. our balance sheet remains a competitive strength allowing us to generate recurring revenue through retained loans while maintaining the flexibility to scale marketplace volume as loan investor demand grows We ended the quarter well-capitalized with strong liquidity and positioned to fund future growth without raising additional capital. Moving to page 17, you can see that pre-tax income of $57 million more than tripled compared to a year ago and hit a record high for the company. Taxes for the quarter were $13 million, reflecting an effective tax rate of 22.6%. We continue to expect a normalized effective tax rate of 25.5%, but we may have some variability in this line due to the timing of stock grants and other factors. Putting it all together, net income came in at $44 million, and diluted earnings per share were $0.37, which nearly tripled compared to a year ago. We ended the quarter well-capitalized with strong liquidity and positioned to fund future growth without raising additional capital. we ended the quarter well-capitalized with strong liquidity and positioned to fund future growth without raising additional capital Moving to page 17, you can see that pre-tax income of $57 million more than tripled compared to a year ago and hit a record high for the company. moving to page 17 you can see that pre-tax income of $57 million more than tripled compared to a year ago and hit a record high for the company Taxes for the quarter were $13 million, reflecting an effective tax rate of 22.6%. taxes for the quarter were $13 million reflecting an effective tax rate of 22.6% We continue to expect a normalized effective tax rate of 25.5%, but we may have some variability in this line due to the timing of stock grants and other factors. we continue to expect a normalized effective tax rate of 25.5% but we may have some variability in this line due to the timing of stock grants and other factors Putting it all together, net income came in at $44 million, and diluted earnings per share were $0.37, which nearly tripled compared to a year ago. putting it all together net income came in at $44 million and diluted earnings per share were $0.37 which nearly tripled compared to a year ago Importantly, our return on tangible common equity of 13.2% showed continued improvement and came in above the high end of our guidance range, and our tangible book value per share now sits at $11.95. As we look ahead, the business enters the fourth quarter with significant momentum. Loan investor demand remains strong, loan sales pricing continues to trend higher, and our product and marketing initiatives are driving high-quality volume growth. As a reminder, in Q4, we typically see negative seasonality on originations due to the holiday season. With that in mind, we expect to deliver originations of $2.5 billion-$2.6 billion, up 35%-41% year-over-year, respectively. Our outlook for pre-provision net revenue is $90 million-$100 million, up 21%-35%, respectively. Importantly, our return on tangible common equity of 13.2% showed continued improvement and came in above the high end of our guidance range, and our tangible book value per share now sits at $11.95. importantly our return on tangible common equity of 13.2% showed continued improvement and came in above the high end of our guidance range and our tangible book value per share now sits at $11.95 As we look ahead, the business enters the fourth quarter with significant momentum. as we look ahead the business enters the fourth quarter with significant momentum Loan investor demand remains strong, loan sales pricing continues to trend higher, and our product and marketing initiatives are driving high-quality volume growth. loan investor demand remains strong loan sales pricing continues to trend higher and our product and marketing initiatives are driving high-quality volume growth As a reminder, in Q4, we typically see negative seasonality on originations due to the holiday season. as a reminder in q4 we typically see negative seasonality on originations due to the holiday season With that in mind, we expect to deliver originations of $2.5 billion- $2.6 billion, up 35%- 41% year- over- year, respectively. with that in mind we expect to deliver originations of $2.5 billion- $2.6 billion up 35%- 41% year- over- year respectively Our outlook for pre-provision net revenue is $90 million- $100 million, up 21%- 35%, respectively. our outlook for pre-provision net revenue is $90 million- $100 million up 21%- 35% respectively Our outlook assumes two interest rate cuts in Q4 and includes increased investment in marketing to test channel expansion, which will support originations growth in future quarters. We expect to deliver an ROTC in the range of 10%-11.5%, more than triple year over year. We will provide additional details on our strategic and financial framework at our Investor Day on November 5th, where we hope you will join us. With that, we'll open it up for Q&A. Our outlook assumes two interest rate cuts in Q4 and includes increased investment in marketing to test channel expansion, which will support originations growth in future quarters. our outlook assumes two interest rate cuts in q4 and includes increased investment in marketing to test channel expansion which will support originations growth in future quarters We expect to deliver an ROTC in the range of 10%- 11.5%, more than triple year over year. we expect to deliver an rotc in the range of 10%- 11.5% more than triple year over year We will provide additional details on our strategic and financial framework at our Investor Day on November 5th, where we hope you will join us. we will provide additional details on our strategic and financial framework at our investor day on november 5th where we hope you will join us With that, we'll open it up for Q&A. with that we'll open it up for q&a

Speaker 4: We will now begin the question-and-answer session. A reminder that if you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press star nine to raise your hand and star six to unmute. Please stand by while we compile the Q&A roster. Your first question comes from the line of Bill Ryan with Seaport Research Partners. Your line is open. Please go ahead. We will now begin the question-and-answer session. we will now begin the question-and-answer session A reminder that if you would like to ask a question, please raise your hand now. a reminder that if you would like to ask a question please raise your hand now If you have dialed in to today's call, please press star nine to raise your hand and star six to unmute. if you have dialed in to today's call please press star nine to raise your hand and star six to unmute Please stand by while we compile the Q&A roster. please stand by while we compile the q&a roster Your first question comes from the line of Bill Ryan with Seaport Research Partners. your first question comes from the line of bill ryan with seaport research partners Your line is open. your line is open Please go ahead. please go ahead

Speaker 3: Bill, I think you're on mute. Bill, I think you're on mute. bill i think you're on mute

Speaker 8: Got it. Thanks. First question, I just want to ask about the disposition plans looking into the future between your various channels, structured certificate, whole loans, and extended seasoning, and what your plans are to continue to grow the held-for-investment portfolio and the balance sheet. Looks like there's a little bit of a mixed shift the last couple of quarters, dialing back on the whole loan sales, focusing on the other two. If you could also maybe talk about the economics of what you're seeing between the various disposition channels. Got it. got it Thanks. thanks First question, I just want to ask about the disposition plans looking into the future between your various channels, structured certificate, whole loans, and extended seasoning, and what your plans are to continue to grow the held-for-investment portfolio and the balance sheet. first question i just want to ask about the disposition plans looking into the future between your various channels structured certificate whole loans and extended seasoning and what your plans are to continue to grow the held-for-investment portfolio and the balance sheet Looks like there's a little bit of a mixed shift the last couple of quarters, dialing back on the whole loan sales, focusing on the other two. looks like there's a little bit of a mixed shift the last couple of quarters dialing back on the whole loan sales focusing on the other two If you could also maybe talk about the economics of what you're seeing between the various disposition channels. if you could also maybe talk about the economics of what you're seeing between the various disposition channels

Speaker 1: Yeah, great. Hey, Bill. Thanks for the question. For HFI for Q4, it's kind of steady as she goes in terms of what we plan each quarter. We're targeting roughly $500 million in HFI, and that sort of just depends on how the quarter evolves. Sometimes that's a little higher or a little lower. I'd say generally it's been a little higher the past couple of quarters. The other programs are roughly in line with where we've been for the past couple of quarters. We see demand for structured certificates being constant. We're seeing good pickup in the rated product as well. As I mentioned, we sold one of those out of extended seasoning this quarter, a rated deal, that is. Demand is strong and still there. With issuance being targeted to be roughly the same, the mix and disposition should also be roughly the same. Yeah, great. yeah great Hey, Bill. hey bill Thanks for the question. thanks for the question For HFI for Q4, it's kind of steady as she goes in terms of what we plan each quarter. for hfi for q4 it's kind of steady as she goes in terms of what we plan each quarter We're targeting roughly $500 million in HFI, and that sort of just depends on how the quarter evolves. we're targeting roughly $500 million in hfi and that sort of just depends on how the quarter evolves Sometimes that's a little higher or a little lower. sometimes that's a little higher or a little lower I'd say generally it's been a little higher the past couple of quarters. i'd say generally it's been a little higher the past couple of quarters The other programs are roughly in line with where we've been for the past couple of quarters. the other programs are roughly in line with where we've been for the past couple of quarters We see demand for structured certificates being constant. we see demand for structured certificates being constant We're seeing good pickup in the rated product as well. we're seeing good pickup in the rated product as well As I mentioned, we sold one of those out of extended seasoning this quarter, a rated deal, that is. as i mentioned we sold one of those out of extended seasoning this quarter a rated deal that is Demand is strong and still there. demand is strong and still there With issuance being targeted to be roughly the same, the mix and disposition should also be roughly the same. with issuance being targeted to be roughly the same the mix and disposition should also be roughly the same

Speaker 2: I guess just, Bill, to make sure you're tracking, you probably are that, you know, not all of these sales are equal. Historically, whole loan sales to banks would come at a different price than, say, whole loan sales to an asset manager. As the insurance-rated transactions have been coming in, those prices, as we mentioned in the script, are really approaching bank prices now. In those cases, we're generally not retaining the A note. Effectively, it is a whole loan sale, and it's coming at a higher price. It's really the mix is based on where we're getting best execution. We are looking to develop certain channels. That's a channel we're developing, and it's going in the direction we like, which is building demand and higher prices there. I guess just, Bill, to make sure you're tracking, you probably are that, you know, not all of these sales are equal. i guess just bill to make sure you're tracking you probably are that you know not all of these sales are equal Historically, whole loan sales to banks would come at a different price than, say, whole loan sales to an asset manager. historically whole loan sales to banks would come at a different price than say whole loan sales to an asset manager As the insurance-rated transactions have been coming in, those prices, as we mentioned in the script, are really approaching bank prices now. as the insurance-rated transactions have been coming in those prices as we mentioned in the script are really approaching bank prices now In those cases, we're generally not retaining the A note. in those cases we're generally not retaining the a note Effectively, it is a whole loan sale, and it's coming at a higher price. effectively it is a whole loan sale and it's coming at a higher price It's really the mix is based on where we're getting best execution. it's really the mix is based on where we're getting best execution We are looking to develop certain channels. we are looking to develop certain channels That's a channel we're developing, and it's going in the direction we like, which is building demand and higher prices there. that's a channel we're developing and it's going in the direction we like which is building demand and higher prices there

Speaker 8: OK, thanks, Scott. Just one big-picture follow-up. If you can maybe kind of touch on the competitive state of the market, origination volumes have increased quite a bit across the board. You've heard about some companies maybe have opened up their credit boxes a little bit, some with product structure, if you will, fixed-income investors allocating more capital to the sector. If you could kind of give us an overview of, have you seen any pressure on your underwriting standards at all? OK, thanks, Scott. ok thanks scott Just one big-picture follow-up. just one big-picture follow-up If you can maybe kind of touch on the competitive state of the market, origination volumes have increased quite a bit across the board. if you can maybe kind of touch on the competitive state of the market origination volumes have increased quite a bit across the board You've heard about some companies maybe have opened up their credit boxes a little bit, some with product structure, if you will, fixed-income investors allocating more capital to the sector. you've heard about some companies maybe have opened up their credit boxes a little bit some with product structure if you will fixed-income investors allocating more capital to the sector If you could kind of give us an overview of, have you seen any pressure on your underwriting standards at all? if you could kind of give us an overview of have you seen any pressure on your underwriting standards at all

Speaker 2: No, we haven't. I'd say, you know, as we say every quarter, this has always been a competitive space. In our case, our growth is coming off of a low, and it's coming off of a low that's been informed not just by tighter credit underwriting, which, you know, we're maintaining the discipline there, but also because we just pulled back on marketing. Our ability to grow is, if you still look at, you know, where you can see volume levels, you'll see we're still running below historical levels of spend and volume in a TAM that's larger than it ever was. We're not seeing the space is competitive. It's no more competitive than it was last quarter or the quarter before. As usual, we see a mix in who we're competing with in different environments. No, we haven't. no we haven't I'd say, you know, as we say every quarter, this has always been a competitive space. i'd say you know as we say every quarter this has always been a competitive space In our case, our growth is coming off of a low, and it's coming off of a low that's been informed not just by tighter credit underwriting, which, you know, we're maintaining the discipline there, but also because we just pulled back on marketing. in our case our growth is coming off of a low and it's coming off of a low that's been informed not just by tighter credit underwriting which you know we're maintaining the discipline there but also because we just pulled back on marketing Our ability to grow is, if you still look at, you know, where you can see volume levels, you'll see we're still running below historical levels of spend and volume in a TAM that's larger than it ever was. our ability to grow is if you still look at you know where you can see volume levels you'll see we're still running below historical levels of spend and volume in a tam that's larger than it ever was We're not seeing the space is competitive. we're not seeing the space is competitive It's no more competitive than it was last quarter or the quarter before. it's no more competitive than it was last quarter or the quarter before As usual, we see a mix in who we're competing with in different environments. as usual we see a mix in who we're competing with in different environments When the interest rate environment shifted, we were competing more with banks and less with fintechs. I'd say now we're competing a bit more with fintechs and a little bit less with some of the banks. It doesn't, it's not changing, certainly not affecting our underwriting standards. You know, we are absolutely in this for the long game. As you know, we're eating our own cooking here. We are looking to make sure we are delivering the returns for ourselves as well as for our loan buyers. We don't view the way we get rewarded long-term as by posting a temporary jump in growth through short-term decision-making on credit. When the interest rate environment shifted, we were competing more with banks and less with fintechs. when the interest rate environment shifted we were competing more with banks and less with fintechs I'd say now we're competing a bit more with fintechs and a little bit less with some of the banks. i'd say now we're competing a bit more with fintechs and a little bit less with some of the banks It doesn't, it's not changing, certainly not affecting our underwriting standards. it doesn't it's not changing certainly not affecting our underwriting standards You know, we are absolutely in this for the long game. you know we are absolutely in this for the long game As you know, we're eating our own cooking here. as you know we're eating our own cooking here We are looking to make sure we are delivering the returns for ourselves as well as for our loan buyers. we are looking to make sure we are delivering the returns for ourselves as well as for our loan buyers We don't view the way we get rewarded long-term as by posting a temporary jump in growth through short-term decision-making on credit. we don't view the way we get rewarded long-term as by posting a temporary jump in growth through short-term decision-making on credit

Speaker 8: OK, thanks for taking my questions. OK, thanks for taking my questions. ok thanks for taking my questions

Speaker 4: Our next question comes from the line of Tim Switzer with KBW. Tim, your line is open. Please go ahead. Our next question comes from the line of Tim Switzer with K B W. our next question comes from the line of tim switzer with k b w Tim, your line is open. tim your line is open Please go ahead. please go ahead

Speaker 9: Hey, good afternoon. Thanks for taking my questions. My first one is, can you explain what drove the higher loss of that net fair value adjustment? I think you mentioned earlier on the call that pricing seems to be holding up on loan sales. Just curious what drove that adjustment line. Hey, good afternoon. hey good afternoon Thanks for taking my questions. thanks for taking my questions My first one is, can you explain what drove the higher loss of that net fair value adjustment? my first one is can you explain what drove the higher loss of that net fair value adjustment I think you mentioned earlier on the call that pricing seems to be holding up on loan sales. i think you mentioned earlier on the call that pricing seems to be holding up on loan sales Just curious what drove that adjustment line. just curious what drove that adjustment line

Speaker 1: Yeah, keep in mind we had a positive fair value adjustment in Q2 that I believe was about $9 million in the quarter, and we had $5 million this quarter. Positive adjustments in both quarters, but it was larger in Q2 than it was in Q3. That's a big part of the delta right there. As we said, prices moved up a little bit, so it's not price that's driving that. The other piece is, as we have a larger extended seasoning portfolio, there is natural roll-down that happens, and that comes through that net fair value adjustment line. That's also a little bit of the change that we're seeing quarter-over-quarter. It's just a larger portfolio. Yeah, keep in mind we had a positive fair value adjustment in Q2 that I believe was about $9 million in the quarter, and we had $5 million this quarter. yeah keep in mind we had a positive fair value adjustment in q2 that i believe was about $9 million in the quarter and we had $5 million this quarter Positive adjustments in both quarters, but it was larger in Q2 than it was in Q3. positive adjustments in both quarters but it was larger in q2 than it was in q3 That's a big part of the delta right there. that's a big part of the delta right there As we said, prices moved up a little bit, so it's not price that's driving that. as we said prices moved up a little bit so it's not price that's driving that The other piece is, as we have a larger extended seasoning portfolio, there is natural roll-down that happens, and that comes through that net fair value adjustment line. the other piece is as we have a larger extended seasoning portfolio there is natural roll-down that happens and that comes through that net fair value adjustment line That's also a little bit of the change that we're seeing quarter- over- quarter. that's also a little bit of the change that we're seeing quarter- over- quarter It's just a larger portfolio. it's just a larger portfolio

Speaker 9: Got you. Is there a good way for us to be able to model the impact of the extended seasoning portfolio? Got you. got you Is there a good way for us to be able to model the impact of the extended seasoning portfolio? is there a good way for us to be able to model the impact of the extended seasoning portfolio

Speaker 1: There is. It's probably a little complicated to get into the details on this call, but we can follow up with you afterwards. There is. there is It's probably a little complicated to get into the details on this call, but we can follow up with you afterwards. it's probably a little complicated to get into the details on this call but we can follow up with you afterwards

Speaker 9: Yeah, great for you to know. We can do it offline. Yeah, great for you to know. yeah great for you to know We can do it offline. we can do it offline

Speaker 2: Yeah. Yeah. yeah

Speaker 9: Can you also walk us through the loan reserve dynamics a bit this quarter? It went up quite a bit, but if we look at your slide 16, that indicates lower loss expectations for those legacy vintages. You obviously didn't grow the held-for-investment book a whole lot. Just curious on what was that reserve going up for, I guess? Can you also walk us through the loan reserve dynamics a bit this quarter? can you also walk us through the loan reserve dynamics a bit this quarter It went up quite a bit, but if we look at your slide 16, that indicates lower loss expectations for those legacy vintages. it went up quite a bit but if we look at your slide 16 that indicates lower loss expectations for those legacy vintages You obviously didn't grow the held-for-investment book a whole lot. you obviously didn't grow the held-for-investment book a whole lot Just curious on what was that reserve going up for, I guess? just curious on what was that reserve going up for i guess

Speaker 1: Yeah, so two factors. Last quarter, there was a one-timer that we called out in the provision line because we had a re-estimation of the lifetime losses, and that caused a positive benefit in the provision line. I think that was about $11 million, right, Artem? Yeah, $11 million last quarter. Credit was great again this quarter, but we didn't do a step change in the reserve on the previous vintages. That's one factor. The other is just as we're growing some of our businesses, like, for example, our purchase finance business into HFI, the duration is a little longer, so it has a little higher upfront CECL charge, but also fantastic economics on balance sheet. Those are the two main drivers. Yeah, so two factors. yeah so two factors Last quarter, there was a one-timer that we called out in the provision line because we had a re-estimation of the lifetime losses, and that caused a positive benefit in the provision line. last quarter there was a one-timer that we called out in the provision line because we had a re-estimation of the lifetime losses and that caused a positive benefit in the provision line I think that was about $11 million, right, Artem? i think that was about $11 million right artem Yeah, $11 million last quarter. yeah $11 million last quarter Credit was great again this quarter, but we didn't do a step change in the reserve on the previous vintages. credit was great again this quarter but we didn't do a step change in the reserve on the previous vintages That's one factor. that's one factor The other is just as we're growing some of our businesses, like, for example, our purchase finance business into HFI, the duration is a little longer, so it has a little higher upfront CECL charge, but also fantastic economics on balance sheet. the other is just as we're growing some of our businesses like for example our purchase finance business into hfi the duration is a little longer so it has a little higher upfront cecl charge but also fantastic economics on balance sheet Those are the two main drivers. those are the two main drivers

Speaker 9: Gotcha. Thank you. One last one real quick. Can you explain what drove the increase in diluted shares? End of period went up a little bit, but not nearly as much as the diluted share count. Sorry if you said this earlier on the call. Gotcha. gotcha Thank you. thank you One last one real quick. one last one real quick Can you explain what drove the increase in diluted shares? can you explain what drove the increase in diluted shares End of period went up a little bit, but not nearly as much as the diluted share count. end of period went up a little bit but not nearly as much as the diluted share count Sorry if you said this earlier on the call. sorry if you said this earlier on the call

Speaker 1: Yeah, no, I think share price is probably the biggest factor, right? If you just do the treasury, if you just think of the treasury stock method on the diluted shares, the higher the share price, the more dilution you effectively get on the outstanding grants that have been issued. There was no step change in terms of the vehicles that caused diluted share count. Yeah, no, I think share price is probably the biggest factor, right? yeah no i think share price is probably the biggest factor right If you just do the treasury, if you just think of the treasury stock method on the diluted shares, the higher the share price, the more dilution you effectively get on the outstanding grants that have been issued. if you just do the treasury if you just think of the treasury stock method on the diluted shares the higher the share price the more dilution you effectively get on the outstanding grants that have been issued There was no step change in terms of the vehicles that caused diluted share count. there was no step change in terms of the vehicles that caused diluted share count

Speaker 9: Got you. All right, thank you. Got you. got you All right, thank you. all right thank you

Speaker 4: Thank you. Your next question comes from the line of Giuliano Bologna. Your line is open. Please go ahead. Giuliano, your line is open. Please go ahead. Thank you. thank you Your next question comes from the line of Giuliano Bologna. your next question comes from the line of giuliano bologna Your line is open. your line is open Please go ahead. please go ahead Giuliano, your line is open. giuliano your line is open Please go ahead. please go ahead

Speaker 3: Giuliano, I think you're on mute too. Giuliano, I think you're on mute too. giuliano i think you're on mute too

Speaker 4: OK, we can come back to Giuliano. We'll move on to Vincent Caintic of BTIG. Your line is open. Please go ahead. OK, we can come back to Giuliano. ok we can come back to giuliano We'll move on to Vincent Caintic of BTIG. we'll move on to vincent caintic of btig Your line is open. your line is open Please go ahead. please go ahead

Speaker 6: Hi, great. Can you hear me? Hi, great. hi great Can you hear me? can you hear me

Speaker 2: Yes. Yes. yes

Speaker 6: Yes, having some tech issues. I have a feeling maybe others are as well. Thank you for taking my questions. First question, kind of a follow-up on that funding side. I want to ask about the demand for your marketplace loans, your structured certificates, and the seasoned portfolio. It's great to see that there's so much demand. I think there's been a lot of investor questions over the past month where we've seen some other companies have some issues, some bankruptcies, and so forth. There's been some concerns broadly about institutional investor appetite for fintech-originated loans. It looks like your demand is great. I was wondering if you can maybe talk about the broad industry and if you're seeing any differentiation and if maybe that's a competitive advantage of your funding vehicles and mechanisms versus the rest of the industry. Thank you. Yes, having some tech issues. yes having some tech issues I have a feeling maybe others are as well. i have a feeling maybe others are as well Thank you for taking my questions. thank you for taking my questions First question, kind of a follow-up on that funding side. first question kind of a follow-up on that funding side I want to ask about the demand for your marketplace loans, your structured certificates, and the seasoned portfolio. i want to ask about the demand for your marketplace loans your structured certificates and the seasoned portfolio It's great to see that there's so much demand. it's great to see that there's so much demand I think there's been a lot of investor questions over the past month where we've seen some other companies have some issues, some bankruptcies, and so forth. i think there's been a lot of investor questions over the past month where we've seen some other companies have some issues some bankruptcies and so forth There's been some concerns broadly about institutional investor appetite for fintech-originated loans. there's been some concerns broadly about institutional investor appetite for fintech-originated loans It looks like your demand is great. it looks like your demand is great I was wondering if you can maybe talk about the broad industry and if you're seeing any differentiation and if maybe that's a competitive advantage of your funding vehicles and mechanisms versus the rest of the industry. i was wondering if you can maybe talk about the broad industry and if you're seeing any differentiation and if maybe that's a competitive advantage of your funding vehicles and mechanisms versus the rest of the industry Thank you. thank you

Speaker 1: Yeah, thanks for the question, Vincent. A lot there. I'd say, first of all, the comments I'm going to make are really just focused on our asset class and our industry, not, you know, auto securitizations or any of the other things that are going on. Our team was just at a conference yesterday talking to loan current investors and potential investors. I'd say the appetite is still very strong. I don't think there's any fade on the appetite at all for the various vehicles that are out there, whether it's a structured product, a rated product, or whole loans out of extended seasoning. Demand is definitely there. I think track record matters. The demand is there for us. I think it's certainly there for other issuers as well. On the margin, issuers are also being maybe slightly more cautious on who they're partnering with. We're hearing that. Yeah, thanks for the question, Vincent. yeah thanks for the question vincent A lot there. a lot there I'd say, first of all, the comments I'm going to make are really just focused on our asset class and our industry, not, you know, auto securitizations or any of the other things that are going on. i'd say first of all the comments i'm going to make are really just focused on our asset class and our industry not you know auto securitizations or any of the other things that are going on Our team was just at a conference yesterday talking to loan current investors and potential investors. our team was just at a conference yesterday talking to loan current investors and potential investors I'd say the appetite is still very strong. i'd say the appetite is still very strong I don't think there's any fade on the appetite at all for the various vehicles that are out there, whether it's a structured product, a rated product, or whole loans out of extended seasoning. i don't think there's any fade on the appetite at all for the various vehicles that are out there whether it's a structured product a rated product or whole loans out of extended seasoning Demand is definitely there. demand is definitely there I think track record matters. i think track record matters The demand is there for us. the demand is there for us I think it's certainly there for other issuers as well. i think it's certainly there for other issuers as well On the margin, issuers are also being maybe slightly more cautious on who they're partnering with. on the margin issuers are also being maybe slightly more cautious on who they're partnering with We're hearing that. we're hearing that We've been the partner of choice for years and I think continue to be. I think that plays to our advantage. Obviously, we're always watching the ABS markets to see if there's any major disruption there. Haven't seen much. Certainly, there's been a little noise, as you indicated, over the past couple of weeks. In summary, demand remains good. Prices are strong. We're feeling good going into the fourth quarter. We've been the partner of choice for years and I think continue to be. we've been the partner of choice for years and i think continue to be I think that plays to our advantage. i think that plays to our advantage Obviously, we're always watching the ABS markets to see if there's any major disruption there. obviously we're always watching the abs markets to see if there's any major disruption there Haven't seen much. haven't seen much Certainly, there's been a little noise, as you indicated, over the past couple of weeks. certainly there's been a little noise as you indicated over the past couple of weeks In summary, demand remains good. in summary demand remains good Prices are strong. prices are strong We're feeling good going into the fourth quarter. we're feeling good going into the fourth quarter

Speaker 6: OK, great. Thank you. That's very helpful. I guess. OK, great. ok great Thank you. thank you That's very helpful. that's very helpful I guess. i guess

Speaker 2: This one. This one. this one

Speaker 6: Great, go ahead. Great, go ahead. great go ahead

Speaker 2: One thing, just a little added color is we're certainly hearing that some capital providers are further narrowing their selection of who they're working with. We remain in the wallet and remain a really primary and important partner there, but certainly hearing some chatter of that. One thing, just a little added color is we're certainly hearing that some capital providers are further narrowing their selection of who they're working with. one thing just a little added color is we're certainly hearing that some capital providers are further narrowing their selection of who they're working with We remain in the wallet and remain a really primary and important partner there, but certainly hearing some chatter of that. we remain in the wallet and remain a really primary and important partner there but certainly hearing some chatter of that

Speaker 6: OK, great. That's super helpful. Thank you. Actually, kind of related to the volatility we've been hearing over the past month just in broader consumer credit, just wondering if you could talk about your credit performance and what you're seeing. It was great to see charge-offs at 2.9% this quarter. That's great. I'm just wondering if you're noticing, maybe not in the loans that are on your balance sheet already, but as you get applications, maybe has the quality of that changed? Are you noticing any themes in terms of delinquency evolution, like maybe with lower credit tiers or anything, any comments you might be seeing with that relative to past trend? OK, great. ok great That's super helpful. that's super helpful Thank you. thank you Actually, kind of related to the volatility we've been hearing over the past month just in broader consumer credit, just wondering if you could talk about your credit performance and what you're seeing. actually kind of related to the volatility we've been hearing over the past month just in broader consumer credit just wondering if you could talk about your credit performance and what you're seeing It was great to see charge-offs at 2.9% this quarter. it was great to see charge-offs at 2.9% this quarter That's great. that's great I'm just wondering if you're noticing, maybe not in the loans that are on your balance sheet already, but as you get applications, maybe has the quality of that changed? i'm just wondering if you're noticing maybe not in the loans that are on your balance sheet already but as you get applications maybe has the quality of that changed Are you noticing any themes in terms of delinquency evolution, like maybe with lower credit tiers or anything, any comments you might be seeing with that relative to past trend? are you noticing any themes in terms of delinquency evolution like maybe with lower credit tiers or anything any comments you might be seeing with that relative to past trend

Speaker 2: Yeah, no, I'd say for us, reminder, we remain very, very restrictive compared to pre-COVID. That is even more so the case in the lower credit area. I acknowledge there's definitely been a decent amount of press about a bifurcated economy and where certain subsets of consumers could be struggling. In our portfolio, given how we're underwriting today, just for an example, there's talk about consumers who earn less than $50,000 a year. I think that represents 5% of our originations right now, so very, very small. Same thing with student loans. As you know, we've restricted underwriting to that group, so the percentage of people that are delinquent on a student loan incurring on us is now measured in basis points and is shrinking. Yeah, no, I'd say for us, reminder, we remain very, very restrictive compared to pre-COVID. yeah no i'd say for us reminder we remain very very restrictive compared to pre-covid That is even more so the case in the lower credit area. that is even more so the case in the lower credit area I acknowledge there's definitely been a decent amount of press about a bifurcated economy and where certain subsets of consumers could be struggling. i acknowledge there's definitely been a decent amount of press about a bifurcated economy and where certain subsets of consumers could be struggling In our portfolio, given how we're underwriting today, just for an example, there's talk about consumers who earn less than $50,000 a year. in our portfolio given how we're underwriting today just for an example there's talk about consumers who earn less than $50,000 a year I think that represents 5% of our originations right now, so very, very small. i think that represents 5% of our originations right now so very very small Same thing with student loans. same thing with student loans As you know, we've restricted underwriting to that group, so the percentage of people that are delinquent on a student loan incurring on us is now measured in basis points and is shrinking. as you know we've restricted underwriting to that group so the percentage of people that are delinquent on a student loan incurring on us is now measured in basis points and is shrinking On our book, we aren't seeing anything more than the normal kind of variability that you adapt and continue to manage to, which our platform is set up and our team is set up to do that quite well. No kind of broad themes, despite, again, we're reading the same thing you are, but we're not seeing it in our book. I think that's based on how we're underwriting. On our book, we aren't seeing anything more than the normal kind of variability that you adapt and continue to manage to, which our platform is set up and our team is set up to do that quite well. on our book we aren't seeing anything more than the normal kind of variability that you adapt and continue to manage to which our platform is set up and our team is set up to do that quite well No kind of broad themes, despite, again, we're reading the same thing you are, but we're not seeing it in our book. no kind of broad themes despite again we're reading the same thing you are but we're not seeing it in our book I think that's based on how we're underwriting. i think that's based on how we're underwriting

Speaker 6: Great, thanks. Maybe I'll sneak one more in. This might end up having to be for the investor meeting. We want to leave some meat on there. Your CET1 of 18% is very healthy. I'm just wondering how much is too much. Thank you. Great, thanks. great thanks Maybe I'll sneak one more in. maybe i'll sneak one more in This might end up having to be for the investor meeting. this might end up having to be for the investor meeting We want to leave some meat on there. we want to leave some meat on there Your CET1 of 18% is very healthy. your cet1 of 18% is very healthy I'm just wondering how much is too much. i'm just wondering how much is too much Thank you. thank you

Speaker 1: Yeah, we'll see you in November. Yeah, we'll see you in November. yeah we'll see you in november Sounds good. Sounds good. sounds good

Speaker 6: All right, thanks, guys. I appreciate it. See you then. All right, thanks, guys. all right thanks guys I appreciate it. i appreciate it See you then. see you then

Speaker 1: In all seriousness, I think a little bit on that is, again, we do have what we would say is some excess capital. Our plan is to use that for growing the balance sheet as we ramp up originations. If we have enough capital to satisfy that primary goal and more than enough after that, then I think we'll consider other options. In all seriousness, I think a little bit on that is, again, we do have what we would say is some excess capital. in all seriousness i think a little bit on that is again we do have what we would say is some excess capital Our plan is to use that for growing the balance sheet as we ramp up originations. our plan is to use that for growing the balance sheet as we ramp up originations If we have enough capital to satisfy that primary goal and more than enough after that, then I think we'll consider other options. if we have enough capital to satisfy that primary goal and more than enough after that then i think we'll consider other options

Speaker 6: OK, great. See you on November 5th. Thanks very much. OK, great. ok great See you on November 5th. see you on november 5th Thanks very much. thanks very much

Speaker 1: Thanks. Thanks. thanks

Speaker 4: OK, thank you. Our next question comes from Giuliano Bologna from Compass Point. Your line is now open. OK, thank you. ok thank you Our next question comes from Giuliano Bologna from Compass Point. our next question comes from giuliano bologna from compass point Your line is now open. your line is now open

Speaker 7: Sounds good. Hopefully, you guys can hear me now. I got the unmute notification this time. Congratulations on a great quarter. It's great to see the continued great results. When I look forward, there's obviously a tremendous amount of demand through the marketplace, whether it's structured certificates or whole loan sales. I'm curious, in a sense, how much more do you think you'd want to grow that versus grow the kind of overall HFI pie? The outlook is called 45% between HFI and extended seasoning, which is a pretty healthy amount. It looks like that could keep growing balances. Just trying to think about how you think about the balance going forward because you have a lot of dry powder, a lot of liquidity, and a lot of capital to kind of keep pushing. I'm curious how you think about how much you'd be willing to push both sides there. Sounds good. sounds good Hopefully, you guys can hear me now. hopefully you guys can hear me now I got the unmute notification this time. i got the unmute notification this time Congratulations on a great quarter. congratulations on a great quarter It's great to see the continued great results. it's great to see the continued great results When I look forward, there's obviously a tremendous amount of demand through the marketplace, whether it's structured certificates or whole loan sales. when i look forward there's obviously a tremendous amount of demand through the marketplace whether it's structured certificates or whole loan sales I'm curious, in a sense, how much more do you think you'd want to grow that versus grow the kind of overall HFI pie? i'm curious in a sense how much more do you think you'd want to grow that versus grow the kind of overall hfi pie The outlook is called 45% between HFI and extended seasoning, which is a pretty healthy amount. the outlook is called 45% between hfi and extended seasoning which is a pretty healthy amount It looks like that could keep growing balances. it looks like that could keep growing balances Just trying to think about how you think about the balance going forward because you have a lot of dry powder, a lot of liquidity, and a lot of capital to kind of keep pushing. just trying to think about how you think about the balance going forward because you have a lot of dry powder a lot of liquidity and a lot of capital to kind of keep pushing I'm curious how you think about how much you'd be willing to push both sides there. i'm curious how you think about how much you'd be willing to push both sides there

Speaker 1: Yeah, yeah. We'll get into this more at Investor Day, but to give you an answer now for, you know, for Q4 or even longer term, the end goal is to grow originations enough that we can feed all of our desires to grow the balance sheet and we can feed all the investors in the marketplace that, you know, are paying the appropriate price for the loans we're originating. Our goal is to be able to do both. If we're not quite there on total originations, then it's a bit of a balancing act, right? We still want to see healthy growth on the balance sheet. We originate loans that are better off in the marketplace than on the balance sheet, and we're going to sell those. Yeah, yeah. yeah yeah We'll get into this more at Investor Day, but to give you an answer now for, you know, for Q4 or even longer term, the end goal is to grow originations enough that we can feed all of our desires to grow the balance sheet and we can feed all the investors in the marketplace that, you know, are paying the appropriate price for the loans we're originating. we'll get into this more at investor day but to give you an answer now for you know for q4 or even longer term the end goal is to grow originations enough that we can feed all of our desires to grow the balance sheet and we can feed all the investors in the marketplace that you know are paying the appropriate price for the loans we're originating Our goal is to be able to do both. our goal is to be able to do both If we're not quite there on total originations, then it's a bit of a balancing act, right? if we're not quite there on total originations then it's a bit of a balancing act right We still want to see healthy growth on the balance sheet. we still want to see healthy growth on the balance sheet We originate loans that are better off in the marketplace than on the balance sheet, and we're going to sell those. we originate loans that are better off in the marketplace than on the balance sheet and we're going to sell those We have long-term investors that we want to keep our relationship with, and we're going to make sure we're able to allocate to them as well. Always a bit of a balancing act while we're still ramping originations. End goal is we have enough originations to feed both sides. We have long-term investors that we want to keep our relationship with, and we're going to make sure we're able to allocate to them as well. we have long-term investors that we want to keep our relationship with and we're going to make sure we're able to allocate to them as well Always a bit of a balancing act while we're still ramping originations. always a bit of a balancing act while we're still ramping originations End goal is we have enough originations to feed both sides. end goal is we have enough originations to feed both sides

Speaker 7: That's very helpful. One thing I'm curious about, when I look at your marketing spend as a percentage of volume, it came up a little bit, but it's still much lower than I would have expected, given that you're pushing some new marketing channels. I'm calculating it, 1.55%, 1.553%. You obviously highlighted that you're going to push a little bit more harder on the marketing side in 4Q in anticipation of growth in 2026. It looks like HFI was down, so there should be a little bit less of a benefit from more capitalization or amortization of that through on HFI. It seems like that's continued to be very efficient from a percentage of volume perspective. I'm just curious how I should think about that going forward over the next few quarters. That's very helpful. that's very helpful One thing I'm curious about, when I look at your marketing spend as a percentage of volume, it came up a little bit, but it's still much lower than I would have expected, given that you're pushing some new marketing channels. one thing i'm curious about when i look at your marketing spend as a percentage of volume it came up a little bit but it's still much lower than i would have expected given that you're pushing some new marketing channels I'm calculating it, 1.55%, 1.553%. i'm calculating it 1.55% 1.553% You obviously highlighted that you're going to push a little bit more harder on the marketing side in 4Q in anticipation of growth in 2026. you obviously highlighted that you're going to push a little bit more harder on the marketing side in 4q in anticipation of growth in 2026 It looks like HFI was down, so there should be a little bit less of a benefit from more capitalization or amortization of that through on HFI. it looks like hfi was down so there should be a little bit less of a benefit from more capitalization or amortization of that through on hfi It seems like that's continued to be very efficient from a percentage of volume perspective. it seems like that's continued to be very efficient from a percentage of volume perspective I'm just curious how I should think about that going forward over the next few quarters. i'm just curious how i should think about that going forward over the next few quarters

Speaker 2: Yeah, as I mentioned, I think we, you know, excitedly, I'd say we still see a lot of opportunity there, right? We are coming from a place of reasonably low activity into a market that I think is pretty attractive in terms of the value proposition to the consumer and the experience we've got. Our efforts are working well. We are still, I mean, we're only two quarters into restarting direct mail as an example. We're on the third version of our response model. We will be on our fourth as we exit the year, building the creative optimization library, optimizing the experience, and then take that across some of the other channels like digital and all the rest. We still have a lot of opportunity in front of us. Yeah, as I mentioned, I think we, you know, excitedly, I'd say we still see a lot of opportunity there, right? yeah as i mentioned i think we you know excitedly i'd say we still see a lot of opportunity there right We are coming from a place of reasonably low activity into a market that I think is pretty attractive in terms of the value proposition to the consumer and the experience we've got. we are coming from a place of reasonably low activity into a market that i think is pretty attractive in terms of the value proposition to the consumer and the experience we've got Our efforts are working well. our efforts are working well We are still, I mean, we're only two quarters into restarting direct mail as an example. we are still i mean we're only two quarters into restarting direct mail as an example We're on the third version of our response model. we're on the third version of our response model We will be on our fourth as we exit the year, building the creative optimization library, optimizing the experience, and then take that across some of the other channels like digital and all the rest. we will be on our fourth as we exit the year building the creative optimization library optimizing the experience and then take that across some of the other channels like digital and all the rest We still have a lot of opportunity in front of us. we still have a lot of opportunity in front of us I think what you're also seeing in Q3 is not just the performance of those channels being positive, but also some of our other efforts. I touched on it in my prepared remarks that our other, we are growing, you know, we delivered 37% growth year on year. That was both in new and in repeat, marketing over indexes to driving new. Repeat is coming at a much lower, much lower cost. Our ability to scale that at an equivalent pace, we're still at 50/50, despite the big jump in year-on-year marketing spend. We're still, you know, roughly 50/50 with new versus repeat. Both of those efforts are working, the external marketing efforts, and the efforts to drive repeat and lifetime value from our customers. I think what you're also seeing in Q3 is not just the performance of those channels being positive, but also some of our other efforts. i think what you're also seeing in q3 is not just the performance of those channels being positive but also some of our other efforts I touched on it in my prepared remarks that our other, we are growing, you know, we delivered 37% growth year on year. i touched on it in my prepared remarks that our other we are growing you know we delivered 37% growth year on year That was both in new and in repeat, marketing over indexes to driving new. that was both in new and in repeat marketing over indexes to driving new Repeat is coming at a much lower, much lower cost. repeat is coming at a much lower much lower cost Our ability to scale that at an equivalent pace, we're still at 50/50, despite the big jump in year-on-year marketing spend. our ability to scale that at an equivalent pace we're still at 50/50 despite the big jump in year-on-year marketing spend We're still, you know, roughly 50/50 with new versus repeat. we're still you know roughly 50/50 with new versus repeat Both of those efforts are working, the external marketing efforts, and the efforts to drive repeat and lifetime value from our customers. both of those efforts are working the external marketing efforts and the efforts to drive repeat and lifetime value from our customers

Speaker 7: That's very, very helpful. I appreciate it. Congrats on the continued performance. I'm looking forward to seeing you guys in a couple of weeks. That's very, very helpful. that's very very helpful I appreciate it. i appreciate it Congrats on the continued performance. congrats on the continued performance I'm looking forward to seeing you guys in a couple of weeks. i'm looking forward to seeing you guys in a couple of weeks

Speaker 2: Great. Thanks, Giuliano. Great. great Thanks, Giuliano. thanks giuliano

Speaker 4: Thank you. Your next question comes from Reggie Smith of JPMorgan. Your line is open. Please go ahead. Reggie, your line is open. Thank you. thank you Your next question comes from Reggie Smith of JPMorgan . your next question comes from reggie smith of jpmorgan Your line is open. your line is open Please go ahead. please go ahead Reggie, your line is open. reggie your line is open

Speaker 2: You're on mute, Reggie. You're on mute, Reggie. you're on mute reggie

Speaker 10: There we go. Can you hear me now? There we go. there we go Can you hear me now? can you hear me now

Speaker 2: Yes. Yes. yes

Speaker 10: I'm sorry. I wanted to follow up on the last question. Kind of thinking about marketing, obviously, it costs less to re-engage a previous customer. I guess thinking about that expense ratio, the 1.5% that we see on the income statement, my sense is that it's not evenly distributed and that maybe your incremental or your marginal loan is a little bit more. Help me understand how inefficient that is or where is the marginal cost to underwrite a loan and then maybe frame that against what you could sell one for. It's my sense and my gut is that despite the fact that your marketing channels are not optimized, there's still room there to kind of go, almost as though you're leaving money on the table, possibly. Not in a bad way, but just thinking about the opportunity there. I'm sorry. i'm sorry I wanted to follow up on the last question. i wanted to follow up on the last question Kind of thinking about marketing, obviously, it costs less to re-engage a previous customer. kind of thinking about marketing obviously it costs less to re-engage a previous customer I guess thinking about that expense ratio, the 1.5% that we see on the income statement, my sense is that it's not evenly distributed and that maybe your incremental or your marginal loan is a little bit more. i guess thinking about that expense ratio the 1.5% that we see on the income statement my sense is that it's not evenly distributed and that maybe your incremental or your marginal loan is a little bit more Help me understand how inefficient that is or where is the marginal cost to underwrite a loan and then maybe frame that against what you could sell one for. help me understand how inefficient that is or where is the marginal cost to underwrite a loan and then maybe frame that against what you could sell one for It's my sense and my gut is that despite the fact that your marketing channels are not optimized, there's still room there to kind of go, almost as though you're leaving money on the table, possibly. it's my sense and my gut is that despite the fact that your marketing channels are not optimized there's still room there to kind of go almost as though you're leaving money on the table possibly Not in a bad way, but just thinking about the opportunity there. not in a bad way but just thinking about the opportunity there Maybe talk a little bit about what the marginal cost to acquire a new loan is and then maybe frame that against what you can sell these loans for. It looks like origination of your marketplace ratio is about 5%. There seems to be a lot of room there. Anything you could share there would be great. Thank you. Maybe talk a little bit about what the marginal cost to acquire a new loan is and then maybe frame that against what you can sell these loans for. maybe talk a little bit about what the marginal cost to acquire a new loan is and then maybe frame that against what you can sell these loans for It looks like origination of your marketplace ratio is about 5%. it looks like origination of your marketplace ratio is about 5% There seems to be a lot of room there. there seems to be a lot of room there Anything you could share there would be great. anything you could share there would be great Thank you. thank you

Speaker 2: Yeah, you're certainly thinking about it the right way. We're underwriting to a marginal cost of acquisition that reflects the lifetime value of the customer. The part of this process, and what we are very, very focused on, is profitable, sustainable growth, right? We're not looking to just post inefficient volume that we can't rinse and repeat and drive further. As we push into these new channels, we'll find that efficient frontier. We work to basically bring it in by improving our targeting models, improving our creative and response rates, improving our pull-through on the experience, and the conversion rate on the experience so that we can then go deeper and push harder in those channels. I think you're right that we have more room to go, but it is very mathematically and/or scientifically backed, right? Yeah, you're certainly thinking about it the right way. yeah you're certainly thinking about it the right way We're underwriting to a marginal cost of acquisition that reflects the lifetime value of the customer. we're underwriting to a marginal cost of acquisition that reflects the lifetime value of the customer The part of this process, and what we are very, very focused on, is profitable, sustainable growth, right? the part of this process and what we are very very focused on is profitable sustainable growth right We're not looking to just post inefficient volume that we can't rinse and repeat and drive further. we're not looking to just post inefficient volume that we can't rinse and repeat and drive further As we push into these new channels, we'll find that efficient frontier. as we push into these new channels we'll find that efficient frontier We work to basically bring it in by improving our targeting models, improving our creative and response rates, improving our pull-through on the experience, and the conversion rate on the experience so that we can then go deeper and push harder in those channels. we work to basically bring it in by improving our targeting models improving our creative and response rates improving our pull-through on the experience and the conversion rate on the experience so that we can then go deeper and push harder in those channels I think you're right that we have more room to go, but it is very mathematically and/or scientifically backed, right? i think you're right that we have more room to go but it is very mathematically and/or scientifically backed right We've got a very good handle on what we can expect to get from our customers. That number is going up, right? As we, and we'll share a little bit more information on this, but as we get better and better, these repeat customers are not only lower cost to acquire, they're also lower credit loss. Oh, by the way, if we get you back once, it's likely we're going to get you back three or four times. There really is a real long-term benefit here that will drive up the lifetime value, which will drive up our ability to pay up at acquisition. We're building towards it, and we're building towards it incrementally every quarter. We've got a very good handle on what we can expect to get from our customers. we've got a very good handle on what we can expect to get from our customers That number is going up, right? that number is going up right As we, and we'll share a little bit more information on this, but as we get better and better, these repeat customers are not only lower cost to acquire, they're also lower credit loss. as we and we'll share a little bit more information on this but as we get better and better these repeat customers are not only lower cost to acquire they're also lower credit loss Oh, by the way, if we get you back once, it's likely we're going to get you back three or four times. oh by the way if we get you back once it's likely we're going to get you back three or four times There really is a real long-term benefit here that will drive up the lifetime value, which will drive up our ability to pay up at acquisition. there really is a real long-term benefit here that will drive up the lifetime value which will drive up our ability to pay up at acquisition We're building towards it, and we're building towards it incrementally every quarter. we're building towards it and we're building towards it incrementally every quarter

Speaker 10: That makes sense. If I could sneak one more in, I'd love to hear more about the BlackRock program and the insurance sales channel. If I'm thinking about that right, I guess this is a way for kind of civilians to get exposure to these types of notes. How's the liquidity there for the consumer? Are they able to sell that stuff back? How does that kind of work? On the insurance side, do you think we'll get to a point where you're announcing a committed number from the insurance channel like you do for private credit today? That makes sense. that makes sense If I could sneak one more in, I'd love to hear more about the BlackRock program and the insurance sales channel. if i could sneak one more in i'd love to hear more about the blackrock program and the insurance sales channel If I'm thinking about that right, I guess this is a way for kind of civilians to get exposure to these types of notes. if i'm thinking about that right i guess this is a way for kind of civilians to get exposure to these types of notes How's the liquidity there for the consumer? how's the liquidity there for the consumer Are they able to sell that stuff back? are they able to sell that stuff back How does that kind of work? how does that kind of work On the insurance side, do you think we'll get to a point where you're announcing a committed number from the insurance channel like you do for private credit today? on the insurance side do you think we'll get to a point where you're announcing a committed number from the insurance channel like you do for private credit today

Speaker 1: Yeah, so a couple of things there. One, this is not direct to consumer sales that's happening. This is really, you know, in the BlackRock example, I think they have many different ways that they may represent other clients where they're managing money to purchase this program. I wouldn't want to box it into just one use case for them. It's not a direct or indirect to consumer investors that's happening in any way. I think the insurance pool is extremely deep. These are insurance companies who are taking premiums for various insurance policies and investing that money. It's a massive pool. As Scott was saying, usually the price is not quite as good as banks, but generally, it's still a very low cost of capital. Yeah, so a couple of things there. yeah so a couple of things there One, this is not direct to consumer sales that's happening. one this is not direct to consumer sales that's happening This is really, you know, in the BlackRock example, I think they have many different ways that they may represent other clients where they're managing money to purchase this program. this is really you know in the blackrock example i think they have many different ways that they may represent other clients where they're managing money to purchase this program I wouldn't want to box it into just one use case for them. i wouldn't want to box it into just one use case for them It's not a direct or indirect to consumer investors that's happening in any way. it's not a direct or indirect to consumer investors that's happening in any way I think the insurance pool is extremely deep. i think the insurance pool is extremely deep These are insurance companies who are taking premiums for various insurance policies and investing that money. these are insurance companies who are taking premiums for various insurance policies and investing that money It's a massive pool. it's a massive pool As Scott was saying, usually the price is not quite as good as banks, but generally, it's still a very low cost of capital. as scott was saying usually the price is not quite as good as banks but generally it's still a very low cost of capital We think we can make progress in terms of growing that channel and helping our overall average price that we're selling loans at as well. We think we can make progress in terms of growing that channel and helping our overall average price that we're selling loans at as well. we think we can make progress in terms of growing that channel and helping our overall average price that we're selling loans at as well

Speaker 10: On the direct-to-consumer point, is that possible? Maybe not with BlackRock, but is that a channel that one day could be a thing? Are there things that prevent that regulatory-wise that would prevent that or make that difficult? On the direct-to-consumer point, is that possible? on the direct-to-consumer point is that possible Maybe not with BlackRock, but is that a channel that one day could be a thing? maybe not with blackrock but is that a channel that one day could be a thing Are there things that prevent that regulatory-wise that would prevent that or make that difficult? are there things that prevent that regulatory-wise that would prevent that or make that difficult

Speaker 2: There is capital in our loan book today that is provided by individuals. It's usually coming through funds that are managed by RIAs, that's some of the wealth managers and, you know, hedge funds and all the rest. There is private individual investor capital coming in to purchase the asset. That's one. Going direct to consumer retail would be, you know, going back to our original model. If you recall, you know, it is doable. The loans become securities, which comes with a lot of overhead and disclosure requirements. We have been able to operate a much better business without that because what I mean by that is we are required to announce when we make pricing changes. We're required to announce when we make credit changes. There is capital in our loan book today that is provided by individuals. there is capital in our loan book today that is provided by individuals It's usually coming through funds that are managed by RIAs, that's some of the wealth managers and, you know, hedge funds and all the rest. it's usually coming through funds that are managed by rias that's some of the wealth managers and you know hedge funds and all the rest There is private individual investor capital coming in to purchase the asset. there is private individual investor capital coming in to purchase the asset That's one. that's one Going direct to consumer retail would be, you know, going back to our original model. going direct to consumer retail would be you know going back to our original model If you recall, you know, it is doable. if you recall you know it is doable The loans become securities, which comes with a lot of overhead and disclosure requirements. the loans become securities which comes with a lot of overhead and disclosure requirements We have been able to operate a much better business without that because what I mean by that is we are required to announce when we make pricing changes. we have been able to operate a much better business without that because what i mean by that is we are required to announce when we make pricing changes We're required to announce when we make credit changes. we're required to announce when we make credit changes We had all of our competition downloading our publicly available data and using it to compete against us because we had to tell them what we were doing. It's not something I would gladly go back to in that old structure. Certainly, high net worth individual through funds is a source of capital today. We had all of our competition downloading our publicly available data and using it to compete against us because we had to tell them what we were doing. we had all of our competition downloading our publicly available data and using it to compete against us because we had to tell them what we were doing It's not something I would gladly go back to in that old structure. it's not something i would gladly go back to in that old structure Certainly, high net worth individual through funds is a source of capital today. certainly high net worth individual through funds is a source of capital today

Speaker 10: I was thinking about how I'd love to pick up some yield versus what I get in my savings account now. I think that's something there. I don't know. I was thinking about how I'd love to pick up some yield versus what I get in my savings account now. i was thinking about how i'd love to pick up some yield versus what i get in my savings account now I think that's something there. i think that's something there I don't know. i don't know

Speaker 2: Yeah, we can update you on that. Yeah, we can update you on that. yeah we can update you on that

Speaker 10: Thanks a lot. Great quarter, guys. We'll talk soon. Thanks a lot. thanks a lot Great quarter, guys. great quarter guys We'll talk soon. we'll talk soon

Speaker 2: Thanks. Thanks. thanks

Speaker 1: Thanks. Thanks. thanks

Speaker 4: Thank you. A reminder that if you'd like to ask a question, please raise your hand. If you have dialed into today's call, press star nine to raise your hand, star six to unmute. Our next question comes from Kyle Joseph of Stephens. Your line is open. Please go ahead. Thank you. thank you A reminder that if you'd like to ask a question, please raise your hand. a reminder that if you'd like to ask a question please raise your hand If you have dialed into today's call, press star nine to raise your hand, star six to unmute. if you have dialed into today's call press star nine to raise your hand star six to unmute Our next question comes from Kyle Joseph of Stephens . our next question comes from kyle joseph of stephens Your line is open. your line is open Please go ahead. please go ahead

Speaker 5: Hey, good afternoon. Thanks for taking my questions. You guys have touched on this a bit, but just looking at slide 10 and kind of the delinquency trends amongst FICO bands, obviously, at least amongst the competitor set, you saw a pretty big increase on the lower band there. Just give us a sense for how that impacts your originations and investor demand, and where you're seeing kind of the best bang for your buck in terms across the FICO band score. Hey, good afternoon. hey good afternoon Thanks for taking my questions. thanks for taking my questions You guys have touched on this a bit, but just looking at slide 10 and kind of the delinquency trends amongst FICO bands, obviously, at least amongst the competitor set, you saw a pretty big increase on the lower band there. you guys have touched on this a bit but just looking at slide 10 and kind of the delinquency trends amongst fico bands obviously at least amongst the competitor set you saw a pretty big increase on the lower band there Just give us a sense for how that impacts your originations and investor demand, and where you're seeing kind of the best bang for your buck in terms across the FICO band score. just give us a sense for how that impacts your originations and investor demand and where you're seeing kind of the best bang for your buck in terms across the fico band score

Speaker 2: Yeah, so that doesn't directly affect us. As I touched on before, we're certainly hearing some chatter about maybe people consolidating with a smaller handful of originators that have shown themselves to have more stable and predictable performance. What we're always looking at is what does the application profile look like coming at us? Is it shifting? Is it shifting in a way we like or we don't like? When you see an uptick like that, it's generally going to result in somebody else pulling back. We don't know. Is that one platform, two, three? Hard for us to say. What we'll be monitoring and adapting to is making sure we continue to get a consistent through-the-door population that we want. That may provide some opportunity. It might provide some risk. That's part of what our day job is. Yeah, so that doesn't directly affect us. yeah so that doesn't directly affect us As I touched on before, we're certainly hearing some chatter about maybe people consolidating with a smaller handful of originators that have shown themselves to have more stable and predictable performance. as i touched on before we're certainly hearing some chatter about maybe people consolidating with a smaller handful of originators that have shown themselves to have more stable and predictable performance What we're always looking at is what does the application profile look like coming at us? what we're always looking at is what does the application profile look like coming at us Is it shifting? is it shifting Is it shifting in a way we like or we don't like? is it shifting in a way we like or we don't like When you see an uptick like that, it's generally going to result in somebody else pulling back. when you see an uptick like that it's generally going to result in somebody else pulling back We don't know. we don't know Is that one platform, two, three? is that one platform two three Hard for us to say. hard for us to say What we'll be monitoring and adapting to is making sure we continue to get a consistent through-the-door population that we want. what we'll be monitoring and adapting to is making sure we continue to get a consistent through-the-door population that we want That may provide some opportunity. that may provide some opportunity It might provide some risk. it might provide some risk That's part of what our day job is. that's part of what our day job is

Speaker 5: Got it. Helpful. Just one follow-up for me. We talked a lot about marketing expenses today, but just, you know, I imagine you'll cover this at the Investor Day as well, but just, you know, a sense for the operating leverage you have on the remaining expense items. Got it. got it Helpful. helpful Just one follow-up for me. just one follow-up for me We talked a lot about marketing expenses today, but just, you know, I imagine you'll cover this at the Investor Day as well, but just, you know, a sense for the operating leverage you have on the remaining expense items. we talked a lot about marketing expenses today but just you know i imagine you'll cover this at the investor day as well but just you know a sense for the operating leverage you have on the remaining expense items

Speaker 1: Yeah, we think it's pretty significant. We will get into it more in Investor Day. I think you can already see it happening right now in terms of the revenue growth we've produced year-over-year compared to expenses. It's certainly not to say that other expenses won't go up as we grow the company. I think marketing is where you'll see the most variable cost as we scale up. Yeah, we think it's pretty significant. yeah we think it's pretty significant We will get into it more in Investor Day. we will get into it more in investor day I think you can already see it happening right now in terms of the revenue growth we've produced year- over- year compared to expenses. i think you can already see it happening right now in terms of the revenue growth we've produced year- over- year compared to expenses It's certainly not to say that other expenses won't go up as we grow the company. it's certainly not to say that other expenses won't go up as we grow the company I think marketing is where you'll see the most variable cost as we scale up. i think marketing is where you'll see the most variable cost as we scale up

Speaker 5: Got it. That's it for me. Thanks very much for taking my questions. Got it. got it That's it for me. that's it for me Thanks very much for taking my questions. thanks very much for taking my questions

Speaker 2: Great. Great. great

Speaker 4: Thank you for your questions. I will now turn the call to Artem for some questions via email. Thank you for your questions. thank you for your questions I will now turn the call to Artem for some questions via email. i will now turn the call to artem for some questions via email

Speaker 3: All right. Thanks, Kevin. Scott and Drew, we've got a couple of questions here that were submitted by our retail investors. First question is, we noticed a difference in origination growth rate across issuers and originators. To what do you attribute the differences in growth? All right. all right Thanks, Kevin. thanks kevin Scott and Drew, we've got a couple of questions here that were submitted by our retail investors. scott and drew we've got a couple of questions here that were submitted by our retail investors First question is, we noticed a difference in origination growth rate across issuers and originators. first question is we noticed a difference in origination growth rate across issuers and originators To what do you attribute the differences in growth? to what do you attribute the differences in growth

Speaker 2: Yeah, first, thanks to all the retail investors for submitting. I understand from Artem that we got quite a few this quarter. That's great. As we talked about on the call, not all originations are created equal. Our focus is on profitable, sustainable originations growth. I think 37% growth in originations to a level that's really getting close to our highest over the last several years is also coming with record high pretax net income and also coming with outperformance on credit by roughly 40%. We're not just looking at one number, which is dollars originated year on year. We're looking at a combined balance of what we think makes for a sustainable, profitable business. Yeah, first, thanks to all the retail investors for submitting. yeah first thanks to all the retail investors for submitting I understand from Artem that we got quite a few this quarter. i understand from artem that we got quite a few this quarter That's great. that's great As we talked about on the call, not all originations are created equal. as we talked about on the call not all originations are created equal Our focus is on profitable, sustainable originations growth. our focus is on profitable sustainable originations growth I think 37% growth in originations to a level that's really getting close to our highest over the last several years is also coming with record high pretax net income and also coming with outperformance on credit by roughly 40%. i think 37% growth in originations to a level that's really getting close to our highest over the last several years is also coming with record high pretax net income and also coming with outperformance on credit by roughly 40% We're not just looking at one number, which is dollars originated year on year. we're not just looking at one number which is dollars originated year on year We're looking at a combined balance of what we think makes for a sustainable, profitable business. we're looking at a combined balance of what we think makes for a sustainable profitable business

Speaker 3: Perfect. All right. Second question, you talked a little bit about potential rebrand coming up. Any updates on the status? Perfect. perfect All right. all right Second question, you talked a little bit about potential rebrand coming up. second question you talked a little bit about potential rebrand coming up Any updates on the status? any updates on the status

Speaker 2: I'm only talking about it because you all keep asking. I would say, yes, we are, we've done quite a bit of work this year. We're in the final stages of the, let's call it, the research and development phase and landing on where we want to take it. Very excited about it. We're now entering the planning and execution phase, which we're going to be pretty deliberate about, as it won't surprise anyone on this call. We built up equity in this brand after almost 20 years. We think a new brand will give us a broader permission set with our customer base and kind of create new opportunities for us. We have to make sure we don't lose the tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels. Lots of work to do. I'm only talking about it because you all keep asking. i'm only talking about it because you all keep asking I would say, yes, we are, we've done quite a bit of work this year. i would say yes we are we've done quite a bit of work this year We're in the final stages of the, let's call it, the research and development phase and landing on where we want to take it. we're in the final stages of the let's call it the research and development phase and landing on where we want to take it Very excited about it. very excited about it We're now entering the planning and execution phase, which we're going to be pretty deliberate about, as it won't surprise anyone on this call. we're now entering the planning and execution phase which we're going to be pretty deliberate about as it won't surprise anyone on this call We built up equity in this brand after almost 20 years. we built up equity in this brand after almost 20 years We think a new brand will give us a broader permission set with our customer base and kind of create new opportunities for us. we think a new brand will give us a broader permission set with our customer base and kind of create new opportunities for us We have to make sure we don't lose the tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels. we have to make sure we don't lose the tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels Lots of work to do. lots of work to do When will it be out in the ether? We'll be probably middle-ish of next year. Don't hold me to that date exactly. We're doing the planning phase to make sure we know exactly what we're going to get and can support it with the marketing oomph that it's going to need to be successful. When will it be out in the ether? when will it be out in the ether We'll be probably middle-ish of next year. we'll be probably middle-ish of next year Don't hold me to that date exactly. don't hold me to that date exactly We're doing the planning phase to make sure we know exactly what we're going to get and can support it with the marketing oomph that it's going to need to be successful. we're doing the planning phase to make sure we know exactly what we're going to get and can support it with the marketing oomph that it's going to need to be successful

Speaker 3: All right, perfect. Last question. Just any updates on the product roadmap or launching any new products? All right, perfect. all right perfect Last question. last question Just any updates on the product roadmap or launching any new products? just any updates on the product roadmap or launching any new products

Speaker 2: Yeah, so obviously this year, as we've been getting back to growth, we've also been expanding our ambitions on the product mix. We talked about LevelUp Checking on the call today. LevelUp Savings has been a big driver, which I think Drew talked about, DebtIQ this year. There is absolutely more to come. That's part of the reason we're going to be investing in a new brand. What I'd say is, stay tuned for Investor Day. We'll talk a little bit more about some opportunities we're going to be pursuing in the years to come. Yeah, so obviously this year, as we've been getting back to growth, we've also been expanding our ambitions on the product mix. yeah so obviously this year as we've been getting back to growth we've also been expanding our ambitions on the product mix We talked about LevelUp Checking on the call today. we talked about levelup checking on the call today LevelUp Savings has been a big driver, which I think Drew talked about, DebtIQ this year. levelup savings has been a big driver which i think drew talked about debtiq this year There is absolutely more to come. there is absolutely more to come That's part of the reason we're going to be investing in a new brand. that's part of the reason we're going to be investing in a new brand What I'd say is, stay tuned for Investor Day. what i'd say is stay tuned for investor day We'll talk a little bit more about some opportunities we're going to be pursuing in the years to come. we'll talk a little bit more about some opportunities we're going to be pursuing in the years to come

Speaker 3: All right, perfect. Thanks, Scott. All right, thank you, everyone. With that, we'll wrap up our third quarter earnings conference call. Thanks again for joining us today. If you have any questions, please email us at [email protected]. All right, perfect. all right perfect Thanks, Scott. thanks scott All right, thank you, everyone. all right thank you everyone With that, we'll wrap up our third quarter earnings conference call. with that we'll wrap up our third quarter earnings conference call Thanks again for joining us today. thanks again for joining us today If you have any questions, please email us at [email protected]. if you have any questions please email us at [email protected]