LendingClub Corporation

Ladies and gentlemen, thank you for joining us, and welcome to the Lending Club 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 9 to raise your hand, star 6 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 Drula Ben, 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-provisioned net revenue, and return on tangible common equity. You can find more information on our use of non-GAAP measures in a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation. Finally, please note all financial comparisons in today's prepared remarks are to the prior year and period unless otherwise noted. And now 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 origination's 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 to 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 Level Up Checking and DebtIQ, are successfully encouraging members to visit us more often and are driving new product adoption. We launched Level Up 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 Lending Club loan given the offer of 2% cash back for on-time payments through level-up checking. And 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 lending clubbers 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 37 cents 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. Borrowware 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 rate of 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 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 brokered deposits, which was mostly offset by an increase in relationship deposits. Level-up 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 37 cents, 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 to $2.6 billion, up 35% to 41% year-over-year, respectively. Our outlook for pre-provision net revenue is $90 to $100 million, up 21% to 35%, respectively. Our outlook assumes two interest rate cuts in Q4 and includes increased investment in marketing to test channel expansion, which will support Origination's growth in future quarters. We expect to deliver an ROTCE in the range of 10% to 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 pit, 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. And if you have dialed in to today's call, please press star 9 to raise your hand and star 6 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. So first question, I just want to ask about the disposition plans, looking at the future between your various channels, structured certificate, whole loans, and extended seasoning, and what your plans are to continue to grow the health for investment portfolio on the balance sheet. Looks like there's a little bit of a mix shift the last couple of quarters, dialing back on the whole loan sales, focusing on the other two. and if you could also kind of maybe talk about the economics of what you're seeing between the various disposition channels.

Yeah, great. Hey, Bill, thanks for the question. So, you know, for HFI for Q4, it's kind of steady as she goes in terms of what we plan each quarter. So we're targeting, you know, 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 quarters. The other programs are roughly in line with where we've been for the past couple quarters. We see demand for structured certificates being constant. You know, we're seeing good pickup in the rated product as well, and we, as I mentioned, we sold one of those out of extended seasoning this quarter, a rated deal, that is. So demand is strong and still there, and with issuance being consistent, targeted to be roughly the same kind of the mix and disposition should also be roughly the same i guess just bill to make sure uh you're tracking you probably are um

that 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. And in those cases, we're generally not retaining the A notes. So effectively, it is a whole loan sale, and it's coming at a higher price. So it's really the mix is based on where we're getting best execution. And, you know, we are looking to develop certain channels. So that's a channel we're developing, and it's going in the direction we like, which is building demand and higher prices there.

Okay, thanks, Scott. And just one big picture follow-up, if you can maybe kind of touch on the competitive state of the market. I mean, 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. I mean, if you can 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, 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 we're maintaining the discipline there, but also because we just pulled back on marketing. So our ability to grow is, if you still look at 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. So 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. So 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. a little bit less with some of the banks, but it's not... changing, certainly not affecting our underwriting standards. And, you know, we are absolutely in this for the long game. And as you know, we're eating our own cooking here. So we are looking to make sure we are delivering the returns for ourselves as well as for our loan buyers. And 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.

Okay, 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 for value adjustment? And, you know, I think you mentioned earlier on the call that pricing seems to be holding up on loan sales. So just curious what drove that adjustment line.

Yeah, so 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. So positive adjustments in both quarters, but it was larger in Q2 than it was in Q3. And so 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. So that's also a little bit of the change that we're seeing quarter over quarter is 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, appreciate that.

We can do it offline. And then can you also walk us through the loan reserve dynamics a bit this quarter? Because it went up quite a bit, but if we look at your slide 16, that indicates lower loss expectations for those legacy vintages. And you obviously didn't grow the HFIs. book a whole lot. So I'm just curious on, you know, what was that reserve going up for, I guess?

Yeah, so two factors. Again, 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. And so I think that's 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, so that's one factor there. The other is just as we're growing some of our businesses, like, for example, our purchase finance business, HFI, the duration is a little longer, so it has a little higher upfront CECL charge, but also fantastic economics on balance sheet. And so those are the two main drivers.

Gotcha. Thank you. And one last one real quick. Can you explain what drove the increase in diluted shares? And the period went up a little bit, but not nearly as much as diluted share count. Sorry if you said this earlier on the call.

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. So there was no step change in terms of kind of the vehicles that caused a looted share count.

Got you. All right. Thank you. Thank you. Your next question comes from the line of Juliano Bologna. Your line is open. Please go ahead. Juliano, your line is open. Please go ahead. Juliano, I think you're on mute too. Okay, we can come back to Juliano. We'll move on to Vincent Kaintick 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, but... Yeah, so thank you for taking my questions. First question, kind of a follow-up on that funding side, and I want to ask it kind of the demand for, you know, your marketplace loans, the structure certificates, and the seasoned portfolio. It's great to see that there's so much demand, and, you know, I think a lot of – there's been a lot of investor questions over the past months where we've seen some other companies – I have some issues, some bankruptcies and so forth. And so there's been some concerns broadly about institutional investor appetite for FinTech originated loans. So it looks like your demand is great. And I was wondering if you can maybe talk about kind of 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. So thanks for the question, Vincent. A lot there. So I'd say, first of all, the comments I'm going to make are really just focused on our asset class and our industry, so not, you know, auto securitizations or any of the other things that are going on. But, you know, we just actually – our team was just at a conference yesterday talking to, you know, current investors and potential investors, and I'd say the appetite – is still very strong. I don't think there's any fade on the appetite at all for, you know, the various vehicles that are out there, whether it's a structured product, a rated product, or, you know, hold-ons out of extended seasoning. So demand is definitely there. I think track record matters. So the demand is there for us. I think it's certainly there for other issuers as well. But I'd say on the margin that issuers are also – being maybe slightly more cautious on who they're partnering with, and we're hearing that. And we've been the partner of choice for years and I think continue to be. So I think that plays to our advantage. Obviously, we're always watching the ABS markets to see if there's any, you know, major disruption there. And haven't seen much. Certainly there's been a little noise, as you indicated, over the past couple weeks. But summary, demand remains good. Prices are strong, so we're feeling good. We're feeling good going into the fourth quarter.

Okay, great. Thank you. That's very helpful.

And I guess 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.

but you know hard for us to kind of but you know we we remain in the wallet and remain a really primary and important partner there but certainly hearing some chatter of that okay great that's super helpful thank you um and actually kind of related to you know the the volatility we've been hearing over the past month just in broader consumer credit just wondering if you could talk about you know your your credit performance and what you're seeing so it was great to see charge us 2.9 percent this quarter um 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 maybe 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 mean, I'd say for us, you know, reminder, we remain very, very restrictive compared to, you know, pre-COVID. And that is even more so the case in sort of the lower credit area. So I acknowledge there's definitely been a decent amount of press about a bifurcated economy and, you know, where, you know, certain subsets of consumers could be struggling. But, you know, in our portfolio, given how we're underwriting today, I mean, just for example, there's talk about, you know, Consumers who earn less than 50K 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 percent of people that are delinquent on a student loan and current on us is now measured in basis points and is shrinking. So we, on our book, aren't seeing anything more than the normal kind of you know, variability that you adapt and continue to manage to, which, you know, our platform is set up and our team is set up to do that quite well. So no, you know, no kind of broad themes, despite, again, we're reading the same thing you are, but we're not seeing it in our book. And I think that's based on how we're underwriting.

Great, thanks. And maybe I'll sneak one more in, and this might end up having to be for the investor meeting. We want to leave some meat on there. But 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. All right, thanks, guys.

I appreciate it. See you then.

In all seriousness, I think, you know, a little bit on that is, again, we're – We do have what we would say is some excess capital. And, you know, our plan is to use that for growing the balance sheet as we ramp up originations. And, you know, if we have enough capital to satisfy that primary goal and more than enough after that, then I think we'll consider other options.

Okay, great. And see you November 5th. Thanks very much.

Okay, thank you. Our next question comes from Juliano Bologna from CompassPoint. Your line is now open.

Sounds good. Hopefully you guys can hear me now. I have the unmute notification this time. Congratulations on a great quarter. It's great to see the continued great results. When I look forward, I mean, there's obviously a tremendous amount of demand through the marketplace, whether it's structured certificates or whole loan sales. You know, I'm curious in a sense, you know, how much more do you think you'd want to grow that versus grow the kind of overall HFI pie? Because, you know, the outlook is called 45% between HFI and extended seasoning, which is a pretty healthy amount. And it looks like that could, you know, keep growing balances. But just trying to think about, you know, how you think about the balance going forward, because you have a lot of drive out or a lot of liquidity and a lot of capital to kind of keep pushing. So I'm curious how you think about, you know, how much you'd want to push both sides there.

Yeah, yeah, and we'll get into this more in Besser Day, but to give you an answer now for Q4, or even longer term, I mean, the end goal – is to grow originations enough that we can feed our all of our desires to grow the balance sheet and we can feed all the investors in the marketplace that you know are playing paying the appropriate price for for the loans we're originating so our goal is to be able to do both um and then you know if we're not quite there on total originations then it's a bit of a balancing act right where we still want to see healthy growth on the balance sheet But we originate loans that are better off in the marketplace on the balance sheet, and we're going to sell those. And we have long-term investors that we want to keep our relationship with, and so we're going to make sure we're able to allocate to them as well. So, you know, always a bit of a balancing act while we're still ramping originations. And 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 mean, 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 26%. You know, it looks like, you know, I mean, HFI was down, so there should be, you know, a little bit less of a benefit from more, you know, capitalization or amortization of that through, you know, on HFI. But it seems like that's, you know, continued to be very efficient, you know, from a percentage of volume perspective. I'm just curious, you know, how I should think about that, you know, going forward over the next few quarters.

Yeah, so 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 you know it's 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 uh we will be on our fourth as we exit the year you know building the creative optimization library optimizing the experience and then take that across some of the other channels like digital and all the rest so we still have a lot of opportunity in front of us um i think what you're also seeing in q3 is not just the performance of those channels being you know positive but also some of our other efforts i touched on it in in my prepared remarks that our other we are growing we you know we delivered 37 growth year on year that was both in new and in repeat marketing over indexes to driving new but repeat is coming at a much lower cost. So 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 roughly 50-50 with new versus repeat. So both of those efforts are working, the external marketing efforts and then the efforts to drive repeat and lifetime value from our customers.

That's very helpful. I appreciate it. And congrats on the continued performance. I'm looking forward to seeing you guys in a couple weeks. Great. Thanks, Juliano.

Thank you. And your next question comes from Reggie Smith of J.P. Morgan. 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. So, you know, kind of thinking about marketing, you know, obviously it costs less to reengage a previous customer. I guess thinking about that expense ratio, you know, the 1.5 that we see on the income statement, my sense is that it's not evenly distributed and that you know maybe your incremental or your your marginal loan is a little bit more help me understand um i guess 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. 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 kind of go uh almost as though you're leaving money on the table possibly um not in a bad way but just just thinking about the opportunity to maybe talk a little bit about what the marginal cost to acquire a new loan is and then maybe frame that against you know what you can sell these loans for it looks like origination your marketplace ratio is about five percent so there seems to be a lot of room there uh but anything you can share there would be great thank you

Yeah, so 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. And, you know, the part of this process, you know, 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. So as we push into these new channels, we'll find that efficient frontier, and then we work to basically bring it in, right, 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. So I think you're right that we have more room to go, but it is – it is very mathematically and or scientifically backed right it's uh we've got a very good handle on what we can expect to get uh from our customers now that 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 you know these repeat customers are not only lower cost to acquire they're also lower credit loss and oh by the way if we get you back once it's likely we're going to get you back three or four times uh so 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. But 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. Like, how is liquidity there for the consumer? Are they able to sell that stuff back? Like, how does that kind of work? And then on the insurance side, like, do you think we'll get to a point where you're announcing, you know, a committed number from the insurance channel like you do for, you know, kind of private credit today? Thank you.

yeah so so a couple things there one this is not this is not direct to consumer sales that's happening it this is really you know in the blackrock example i think they have many different ways that they may you know represent other clients where they're managing money to purchase this program so i wouldn't want to box it into just one use case for them but it's not a you know director and direct to consumer investors that's that's happening um in any way the 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. It is As Scott was saying, usually the price is not quite as good as banks, but generally it's still very low cost of capital, and so 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.

And I guess on a direct-to-consumer point, is that possible? Maybe not with BlackRock, but is that like a channel that one day – be a thing, or are there things that prevent that, regulatory-wise, that would prevent that or make that difficult?

So there are... There is capital in our loan book today that is provided by individuals. It's usually coming through funds that are managed by RIAs and some of the wealth managers and, you know, hedge funds and all the rest. So there is private individual investor capital coming in to purchase the asset. So that's one. Going direct to consumer retail would be going back to our original model. And if you recall, it is doable. Then the loans become securities, which comes with a lot of overhead and disclosure requirements. And 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. So it's not something I would gladly go back to in that old structure. But certainly high net worth individual through funds is a source of capital today.

I was thinking about how I would love to pick up some yield versus what I get in my savings account now. I think there's something there. I don't know. Yeah, we can help you out. Thanks a lot. Listen, great quarter, guys. We'll talk soon.

Thanks. Thanks. Thank you. And 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 9 to raise your hand, star 6 to unmute. Our next question comes from Kyle Joseph of Stevens. Your line is open. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. 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, you know, how that impacts your originations and investor demand and, you know, where you're seeing kind of the best bang for your buck 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, you know, 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? So, you know, 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, like hard for us to say. But what we'll be monitoring and adapting to is making sure we continue to get a consistent through-the-door population that we want. Because that may provide some opportunity, it might provide some risk, and that's part of, you know, what our day job is.

Got it. Helpful. And then just one follow-up for me. You talked a lot about marketing expenses today, but just, you know, and imagine you'll cover this at the investor day as well, but just, you know, a sentence for the operating leverage you have on the remaining expense items.

Yeah, so 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, you know, the revenue growth we've produced year over year compared to expenses. And it's certainly not to say that other expenses won't go up as we grow the company, but I think marketing is where you'll see the most variable costs as we scale up.

Got it. That's it for me. Thanks very much for taking my questions. Thank you.

Thank you for your questions. I will now turn the call to Artem for some questions via email.

All right. Thanks, Kevin. So, Scott and Drew, we've got a couple 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, so first, thanks to all the retail investors for submitting. I understand from Artem that we got quite a few this quarter, so that's great. As we talked about on the call, not all originations are created equal. Our focus is on profitable, sustainable originations growth, and 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 pre-tax net income and also coming with outperformance on credit by roughly 40%. So 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 um you talked a little bit about potential rebrand uh coming up any updates on the status yeah i'm only talking about it because you all keep asking uh but i i would say we're yes we are we are uh we've done quite a bit of work this year and we're in the final stages of the let's call it the research and development phase and landing on you know where we want to take it it's 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 and kind of create new opportunities for us but we got to make sure we don't lose the you know tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels and so lots of work to do so when will it be you know out in the ether will be probably middle-ish of next year. Don't hold me to that date exactly, but 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. And last question, 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 level up checking on the call today. Level up savings has been a big driver, which I think Drew talked about that IQ this year. So 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, you know, stay tuned for Investor Day where 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, so thank you, everyone. With that, we'll wrap up our third quarter earnings conference call. Thanks again for joining us today, and if you have any questions, please email us at ir at lendingclub.com.