LendingClub Corporation (LC) Earnings Call Transcript & Summary

Welcome, everyone. Please welcome Artem Nalivayko, Lending Club's Head of Investor Relations.

All right. Thank you, [ Dan]. All right. Good morning, everyone. For those of you here in person and those joining us virtually, thank you for attending LendingClub's 2025 Investor Day. My name is Artem Nalivayko, and I'm the Head of Investor Relations here at Lending Club. We've got a great program lined up for you today and this is actually our first Investor Day since becoming a bank. So we have a lot to share. But we also want to hear from you. So you have the program behind me. There will be several opportunities for you to ask any questions that you may have. We'll have a short Q&A session before lunch and a longer session planned for the end of the day. Before we jump in, I want to cover off on a few legal disclosures. Our program includes forward-looking statements, including with respect to our competitive advantages, strategy and future business and financial performance. Our actual results may differ as described in our filings with the Securities and Exchange Commission. We undertake no obligation to update these statements as a result of new information or future events. Further, our program also includes non-GAAP measures. 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 presentation materials, which have been posted to our IR website. With that, I'd like to turn it over to our CEO, Scott Sanborn.

All right. Good morning, everyone. Thank you for making the time today. We know all of your time is very, very valuable. So we plan to make this worth your while. I'm Scott Sanborn. I'm the CEO and I joined the company 15 years ago, you can't tell, I know. But it was a little more than an idea. I have been there through dramatic growth, a successful IPO, the acquisition of the bank [ charter], and I can tell you, I have never been more excited about the company's future than I am today. And I know that when you leave, you're going to be as bullish as I am and as we are about the future for LendingClub. The first point I want to make is that we are a radically different company today than we were even just a few years ago. The acquisition of the bank [ charter ] has unlocked our strategic potential and we are pursuing a very, very valuable audience and engaging them in a lifetime of lending and banking. We have a clear, compelling and winning strategy, very simple. Step one, acquire our customers through lending. That's our best-in-breed capability where we go after -- we deliver seamless access to low-cost credit and moments that really matter for our customers. And we click them into an engagement experience that keeps them coming back to us, provides insight into their daily lives. It incentivizes good financial behavior, and it also provides insight to us into their financial condition so that we can see when we have an opportunity to deliver additional products and services to them. This strategy is already working. And that's because it's based on our competitive advantages, which are very, very compelling and very difficult to replicate. Our first is our unmatched advantage in underwriting. This company was founded on the idea that lending is a data problem. And we built a modern platform that takes advantage of the latest techniques in machine learning and artificial intelligence. We've fed it with data from over $100 billion worth loans over close to 2 decades through multiple cycles and environments, and it's overseen by an incredibly capable team and it's delivering superior results for us across every single step of the credit cycle. So our Head of Credit strategy, Kiran Aware is going to join us, and he's going to give you all a look under the hood. We apply that underwriting experience to our products. And these products attract members for life. We go after areas of lending where there are structural inefficiencies and unnecessary friction for customers, and we deliver a magic experience that helps them borrow better and move forward and accomplish their financial goals. These experiences are so good. Our customers come back to us. So that's already happening. But we can do more for them. We can do more with more products and we can do it more often. And that's by delivering experiences that keep our members coming back. Our Chief Customer Officer, Mark Elliot, is going to join us, and he's going to share our engagement experiences. And then our final piece is what is this built on? It's built on our technology platform. We were founded as a tech company, we remain a tech company today, and we've built a proprietary platform where we fully own the experience stack, it allows us to test, iterate, rapidly deploy unique experiences for our customers. And this is housed within our unique business model, which delivers the best of both worlds. We've got the speed, the innovation, the reach of the fintech with the stability and the resiliency of a bank. We excel in generating a high-yield asset. We combine that with our low operating cost model that allows us to deliver enormous value for our borrowers, value for our loan buyers and value for our shareholders. And we also have the ability to optimize between the balance sheet and the marketplace based on market conditions. So Drew is going to come up, talk a little bit about business model. He's going to be joined by a panel of our investors, who will talk a little bit about what they appreciate about LendingClub and about the asset class. So clear strategy, compelling competitive advantages, when you add it all up, the math is very, very simple, and the path is clear for us to deliver sustainable growth and outsized shareholder returns. So our CFO, Drew LaBenne, is going to join us and share both our near term and our medium-term targets. And then you'll be able to see why you can be as bullish on LendingClub as we are. So I want to talk a little bit about the customer that we base our strategy on. So what you see here is the U.S. census divided by income. And just applying common sense to this chart, you would say, those people on the left, lower income, they have less access to credit, less ability to access credit. And those people on the right, over $200,000 in annual income, they have less need for credit because they can pay cash for most things. So logically, you would think LendingClub would over-index in the middle, and that is true. So this green line shows our issuance this year. And what you see is versus the U.S. census, we dramatically over-index to these customers between $50,000 and $200,000 in income. We call them the motivated middle. They represent about 32% of the U.S. population. They are goal oriented. So they make deliberate responsible use of credit to accomplish their goals. They are digitally capable. They go online to research their options, they're value conscious, and they're willing to engage in new relationships to achieve that value and help them accomplish their financial goals. Their FICO score is slightly better, but pretty in line with U.S. average, very solid, 719. But where they stand out is their income. It is higher than average. So it's individual income of $121,000 versus the average of $75, 000 for the U.S. What that higher income means is they have higher access to credit. So even though they're only 32% of the U.S. population, they're nearly half of the nonmortgage credit wallet. And when you look at them, this -- the first column there shows what percentage of these consumer credit products our customers hold and then how that indexes to the U.S. population. So they're far overindex for every form of consumer credit versus the U.S. population. And the size of that credit and the size of those loans is actually larger as well in everything but mortgages. So this is a hugely attractive customer base for a credit-centric digital bank and banks are serving them very poorly. I said they go online to find value. And that's because banking is no longer a place you go, it's something you do. It used to be that you chose your bank based on proximity. And because of that, banks did not need to earn your loyalty. They just needed to be conveniently located. They relied on that branch location to bring you in. They offered you a lower rate on savings than you could get elsewhere. They charge you a higher rate on the loan than you could get elsewhere, and consumers didn't change behavior. That paradigm has shifted dramatically. This is just over the last 5, 6 years, you can see a dramatic shift to mobile. So after decades in which branches were the deciding factor and branch-based factors were the deciding factor and what people chose for banking it has shifted to the utility of the mobile app. And that's where LendingClub really shines. We have a highly automated model where we officially generate our assets and deliver compelling value to customers. So for those people that value the utility of an online experience, they go online, looking for value they find us. So first is unsecured credit. The dominant way people access unsecured credit is credit cards. The average rate on a card that is carrying a balance today is 23%. That's outrageous. It's nearly double what it was 20 years ago. LendingClub offers consumers access to unsecured credit, 700 basis points less than that, 30% savings on [indiscernible] credit card. And again, that's due to both structural inefficiencies with credit cards that are supporting rewards programs and supporting people who aren't carrying balances as well as our efficiency and our underwriting which you're going to hear more about today. So that's for people looking to borrow money, what about people who are saving money. Well, at the large money center banks, you get a basis point on their savings accounts. Unless you have $1 million at which point you can get 2.5%, 250 basis points. LendingClub, no minimum balance required. All you need to do is engage in ongoing savings behavior, it gets 420 basis points. So 420x what you're going to get on your savings. So that's a better deal. So they go online looking for a better deal, and it's very easy to shop for solutions. There's just a few websites people go to when they're comparing bank offerings, loan offerings. Each one is slightly different in terms of how they prioritize their offers from their listing partners. How important is the rate? How important is the experience, how important is your ad budget, how important are the features you have in your product. We optimize our offering for each of these different partners and it's working. We are winning and we are getting the customers we want. An example is that a leading loan aggregation site when our offer is shown side-by-side with the competitor offers, we convert 50% more customers than the competition. And so it's not just rate that drives success. It's also our experience. So a new customer to LendingClub, somebody we've never seen before, takes the less than 5 minutes to complete an application for repeat customers, you'll see later today, significantly faster than that. 90% of these loans are fully automated, straight-through processing. That delivers real value to the customer and that you can see that in our Net Promoter Score, which is near twice what you would get as a typical bank. And that leaves our members wanting to do more with us. 83% say they want to do more with us. And they are doing more with us. This is a real member story that I want to share because it really exhibits how customers borrow better from us, move forward in their lives, come back and borrow again. And I want to say this is before we had an engagement strategy before we had a bank balance sheet. Raymond came to us in 2015, he had a medical expense that he decided to take out a personal loan for instead of putting on this credit card. FICO score, not so great, but strong income, came back 4 years later to consolidate his credit card debt. Look at the improvement in his credit score, its income also went up, came back 4 years later than that and refinanced an auto loan with us. FICO Score almost perfect income all the way up at the top. So we spent $200 to acquire Raymond and he generated $2,500 in revenue for the company. So that's for us. What about for Raymond? Raymond saved thousands of dollars, thousands of dollars by using these products. And you would think if he values this experience, and he's coming back over and over again, he likely values the payment, making the payment and staying current on this credit high up in his priority list and you would be correct. This is a recent study that just came out from FICO. I said that personal loan borrowers are 64% more likely to pay their personal loan before their credit card 64%. This is not the first time a study like this has been released. Several of the bureaus have released similar studies. We also see this in our own data. So customers really value their ability to access credit. Go back to that chart, this motivated middle. They are using credit to deliberately move their lives forward to get things done and to power their choices, and they come with high intent to pay. So I've laid out the strategy and engage the motivated middle, click them into an engagement experience and add other products and services. I'm going to turn it over to the team to get into the details of how we execute against these competitive advantages and they're going to provide concrete evidence, a lot of new information we'll share today that this strategy is working. So the first step is our unmatched advantage in underwriting. I'm going to turn it over to Kiran Aware, who's our Head of Credit strategy.

Thank you, Scott. I joined LendingClub in 2021. Before that, I have nearly 2 decades of experience in managing consumer credit across multiple large financial institutions such as HSBC, Capital One and Wells Fargo. During that tenure, I had opportunity to manage multiple credit cycles across different broad range of customer segments. I joined LendingClub because I believe advancement in machine learning as well as modern distributed computing, provide a strong foundation for a smarter credit framework. Scott already mentioned, lending is a data problem. That's exactly why here at LendingClub, we have built a credit system that is rich in data, technology forward and driven by experience. We have nearly 2 decades of experience in underwriting consumer loans across multiple cycles, and that has given us a significant data advantage. We have built one of the richest and most powerful data sets in the consumer lending space. We have decisioned over 100 million applications that provides how borrowers have evolved over time. We have validated about $1.6 trillion in loan demand that enables precision in credit distribution. And we leverage more than 150 million data serves across different payment patterns, credit bureau history, cash flow behaviors, fraud signals. All this depth in the data paired with years of applied learning, use LendingClub a structural advantage. And it's not just about data. It's about how we use this data across the entire life cycle, from underwriting, fraud, all the way to collections. This advantage translates into 3 clear proof points. First, our superior underwriting delivers 40% lower delinquencies than our competitive set. Second, we have one of the lowest fraud loss rate in the industry, driven by our AI power fraud defense system. Third, we have consistently delivered 25% better recovery rate than our competition through our smart collections. These trends add up to our end-to-end credit advantage, delivering superior loan economics. Let's start with underwriting. That is the foundation of how we manage risk and create value. With nearly 2 decades of experience, we have developed one of the most advanced and customized machine learning ecosystem in the consumer lending space. Now you hear a lot of people talk about AI, and that term gets used very, very loose. When it comes to banking and underwriting specifically, the real work house, the predictive science behind AI is machine learning, which is what we really have an edge in and we have been refining it for years. So let me give you a quick peek inside our box. We have over 60 tailored production models that are powering our decisions across underwriting, pricing, fraud, collections, marketing. We have more than 250 custom decision strategies that are finally tuned to customer segments, acquisition channels, loan usage, loan size and so on. And underneath it all, we have nearly 3,000, yes, 3,000 engineered customer attributes that goes far beyond what a FICO score can ever capture, behaviors like cash flow, digital engagement and much more. When you put all that together, it gives us an ability to distinguish borrowers that may look very similar to a FICO score, but they behave very differently. Let's bring that to life with a very simple and a real example. We have 2 borrowers, borrower A and borrower B, very similar FICO income and credit card balances. To the traditional model, those 2 borrowers look very identical. They will be approved with more or less very similar price. However, their behaviors and their underlying risks are very different. Our custom attributes and models, they don't rely on a single snapshot in time. They look at trajectory. They look at how borrowers' behavior have evolved over time before they apply for the loan. As you can see in this chart, borrower A is a debt consolidator and deleverage. Borrower B is a debt sprinter. He is rapidly accumulating debt. This behavior won't be differentiated by a traditional model. But our machine learning platform does, and it acts upon those insights. We approved borrower A and that borrower has successfully paid off our loan. We rejected borrower B that borrower was approved by our competitor and charged off in 6 months. Let's benchmark ourselves to one of the well-recognized industry standard FICO. In this chart, we have taken an applicant pool score with FICO and ran the population from lower risk on the left to the higher risk on the right. We took exact same population and score with our proprietary model. And what you clearly see is our model significantly outperforms FICO. In fact, it is 12x better than 5. The model is able to identify very accurately high-risk borrowers, prevent those losses and give better investor returns. Additionally, it is able to identify more high-quality borrowers give them better pricing and lower their cost of credit. There's another way to look at the power of our model. In this chart, we are going to compare LendingClub's underwriting to that based on traditional FICO-based model. FICO-based model hits a given default rate after approving 30% of the applications, whereas LendingClub's model, with this richer data and machine learning precision approves up to 72% of the application before reaching the same level of default rate. That is that is 2.4x more approvals within the same level of credit risk. This is a massive growth advantage, more addressable customers, more revenues, all within the same credit risk appetite. Beyond the model, success requires ability to read signals in real time and adapt quickly. Macroeconomic conditions are constantly evolving, and that requires constant testing for credit optimization. Our balance sheet enables and gives us an ability to test, learn and innovate quickly. We run 200-plus tests at any given point in time, we draw insights from 500-plus weekly experiments. This high-frequency testing enables a refinement for our models and strategies based on real-world outcomes. We have a very flexible platform where we can implement all these tests. Just this year, we have implemented 250 changes to refine and optimize our credit outcomes. And in fact, when things were challenging during the inflationary period, we have executed over 630 changes to manage our credit performance. Behind all these changes is experience. We have more than 300 years of experience on our team that allows forward-looking risk assessment and disciplined credit risk management. For example, post-COVID, where no model was built for, a lot of the lenders kept relying on inflated scores. Our experienced team was able to see beyond the models. They were able to extract the signals from the stimulus distortions, took the right actions and protected the investor returns. This prudent approach and ability to look beyond models is part of [indiscernible], and the proof is in the numbers. What you see on the chart is the credit performance comparison from Fitch and you can see LendingClub has consistently outperformed the competition. In fact, we have consistently delivered 40% lower delinquency rates than our competition. And don't just take my word for it, the federal [indiscernible] of Philadelphia independently concluded that LendingClub rating system is far superior to the traditional measures of credit risk when predicting likelihood of [ default]. This level of extent -- this level of external validation is very, very rare, and it further reinforces our credit strength. Let's turn to fraud, when someone is trying to game our system. We have one of the lowest fraud rate in the industry, and that has been the case for years now. Our AI back fraud detection models, analyzes more than 400 signals from identity, device, financial behavior, network attributes and make a decision in less than 1 second, combined with 20-plus third-party integrations, this ecosystem creates a defense layer that is fast, accurate and dynamic. Let me give you some examples on this slide. First, we detect multiple logins and countered IP flagging potential synthetic rings. Second, we are able to spot geo dislocation when an address is in Texas, but the login is from Florida. Third, we are able to detect new and suspicious e-mail address patterns to domain age, history and digital activity. The results are very clear, near 0 fraud, strong customer trust and superior loan economics. Even with the superior underwriting and near 0 fraud, some borrowers do face life events. And when they do face life events, they'd like you to fall behind their payments. We have invested over $50 million in building a modern, smart AI-assisted collections platform that helps them when they need it. It is built on 3 pillars. First, our proprietary early detection system. Our machine learning behavior score analyzes the changing patterns and profile of the consumers and segments them to a right collection strategy when they're likely to miss a payment. That enables us to intervene sooner and smarter. This precision drives 10% of outperformance against the competition in early stage roll rates. Second, our customer-centric engagement. We engage customers through omnichannel outreach to self-service tools. We also have empathy [ later ] hardship options for them when they need it. This customer-centric engagement helps us resolve 40% of delinquencies through self-service. And guess what? That's lower cost to collect with a better customer experience. Third, leading recoveries. We have diversified post charge-off recoveries that we optimize across multiple channels, such as debt sales, agency partnerships and settlement. This approach has consistently delivered 25% better recovery rate against the competition. When you put all these investments together, it creates a best-in-class collection platform. that delivers consistently sustainable, resilient, profitable portfolio performance. So to close, LendingClub's credit expertise is built on nearly 2 decades of data advantage, enhanced by machine learning and AI and guided by our years of experience. Simply put, LendingClub's great advantage is proven, durable and nearly impossible to replicate. With that, I will turn it over to Steve to talk about our product and experiences. Our unmatched care advantage is deeply and rooted in these products and experiences.

Good morning, everyone. I'm Steve Mattics. I am Chief Lending Officer at LendingClub, and I've been with the organization for almost exactly 6 months now. I joined from U.S. Bank, where I led their credit and debit business, which served over 15 million consumers and small businesses. And the reason I joined LendingClub is because it was quite apparent that we all had all the ingredients, the conviction and ambition to drive outsized growth in the short, medium and long term. And I stand in front of you 6 months in, even more excited than the day I joined because it's that we're already on our way in that road map, and I hope to share quite a bit of that with you today. But first, we have a short video where we can hear directly from 2 of our members, how lending products help them move their lives forward and which is the thesis of my discussion, which is products that attract members for life. So let's start the video. [Presentation]

So that's a great video that shows an example of smart borrowers borrowing better. We've crafted purpose-built products to allow customers to borrow better and take charge of their financial freedom their lives forward. And as a result, our members develop an emotional connection with LendingClub. Our customers come to with conviction. They don't borrow to spend, they borrow to move their lives forward. And we intend to be there for every smart borrowing they have the start borrowing need that they have, whether it's consolidating debt, lowering a monthly payment, funding an important life choice and more. And when the customers do move, they come back again and again. Remember, Raymond came to us with a need to pay off a loan. I think he came back 4 years later, consolidated debt, improved and then came to us again 4 years after that to open an auto refinance loan to save even more. That's part of embedded growth engine where customers come to us to borrow better, they move forward and borrow better again, and you'll see more of that moving forward. So let's start with our core personal loan business, the business scaled on debt consolidation. So U.S. consumers are currently carrying about $1.2 trillion of revolving debt. That's an all-time high or near it. And Scott mentioned earlier that debt is at an average rate of about 23% and also near an all-time high. So we leaned into this problem and created a simple solution for customers, an installment loan with an affordable fixed monthly payment at a lower rate, so customers save money. And this has been our entry point for many of our customers, 82% of customers come to us primarily for debt consolidation. And when they do, they see immediate, measurable value. Scott mentioned earlier, customers, on average, save 700 basis points on their APRs when they consolidate a loan with us. And even more, customers see a 3-point average improvement in their FICO score within just a few months of opening their loan with us. That is borrowing better. It's all backed by a seamless digital experience. Customers can apply in minutes, get approved in seconds and get funded in hours. There's no jargon, no hidden fees. And for customers to come back for a repeat loan, they get our fastest and best experience to prefilled, you know me application that takes literally seconds and it works. 50% of our annual issuance comes from repeat borrowers. And better, 88% of those repeat borrowers come to us directly that drives massive efficiency in our customer acquisition costs. And when customers do come back for repeat loans, they don't just come back once, we saw with Raymond. On average, they come back between 3 and 4 times. That's our embedded growth engine. So we've been driving strong recent growth in our personal loan business, and we're confident in our ability to drive meaningful growth in the short and medium term. So I'm going to talk to you about 3 key areas of focus and investment that we're confident going to drive that growth. The first is our application funnel, driving efficiency in our application funnel. We're constantly optimizing the application. We're removing fields, or streamlining the flows, optimizing the experience, removing friction wherever we can. Think of this as a dynamic experience based on the customer's profile. If we know more about you, we'll ask a little less, if we know less about you, we'll ask more. And it's important for us to focus here because we take in about 1 million applications a month, so small changes make big impacts. Let me give you a great example of something we've done recently. So we recently started embedding AI assistance into our document verification process. Now you heard Scott earlier say that 90% of our loans are straight through processed, but there are times that we need to ask for additional information. For example, a self-employed borrower where we have to verify their income or a recent mover where their address doesn't match what's on the credit bureau. We ask for that information and then verify it. And these AI assisted flows have greatly reduced the time it requires to verify those documents. What used to take over a day to now we can do in minutes and seconds. And that speed and ease drives real throughput. Based on the pilot we're running right now that we're about to roll out, we're confident we're going to drive 9,000 incremental loans annually from that change and we're constantly doing these experiments. We've already done 125 of these optimizations or experiments this year, and we anticipate doing many more than that in 2026 to drive growth. Second big area of focus for growth is channel expansion, primarily expanding our marketing channels. We spend a fraction of what our competition does in paid marketing. And there are several key marketing channels that we're just not activated in at the moment. So we've been focusing this year on growing our partnerships. We've started maturing direct mail and just in the last month or so, we've been investing heavily in experimentation on paid digital marketing, particularly paid social and paid search. We know these channels work, both from recent, not too distant experience at LendingClub as well as those of us who worked with other companies and seen the efficacy of these paid digital channels. Our path of travel after experimentation, optimization and refinement is to activate all of these channels. And with our high confidence in seeing these work so well, we're quite sure we're going to be able to drive $2 billion of incremental annualized issuance from these channels by activating them. Third area of focus is product innovation. Let me give you a great example of a recent innovation that's driven real value for customers and for LendingClub, our top-up loan product. So the 4 customers would be paying their loan with us and they would have an additional need a new expense or something else that they would need to consolidate that on. And before they have to apply for a second loan, that comes with all the complexity of having a second payment, different tenures, managing all of that and with our top-up loan product, we solve that problem. Customers can now that old one into a new loan. They can bring in their additional needs as well as cash and customers absolutely love it. 93% customer satisfaction rate out of the gate. And from a standing start after launching it last year, we've grown that to $1 billion exit rate coming out of this year and growing. We have -- this is also a great example of our opportunity to test products on our balance sheet and refine them, optimize them and really take the thoughtful approach before rolling them out. This is just one example of many. We have several of these in our road map right now that we're anticipating launching next year to drive additional growth. So let's put it all together for personal loans. So total issuance, personal loans and everything else is about $10 billion right now on an annual basis. We are confident that we're going to grow our personal loan -- core personal loan business by $5 billion to $8 billion over the medium term for all the reasons I described, funnel efficiency, expanding our marketing channels as well as product innovation, not to mention that embedded growth engine of repeat borrowers. So now let's talk about our product that leverages all of our core advantages, underwriting products, experiences, tech, our platform to save customers even more money. And that's our auto refinance business. Auto refinance is a huge market, almost $0.5 trillion. And these are customers that are burdened by structural inefficiencies that results in them paying more for their loan than they should. Great example of that is dealer markups that are up to 250 basis points of additional APR that customers end up paying. We've got a simple solution for this, an easy application, digital application that takes customers literally minutes to fill out, and we take care of the rest. And when they do, they save real money. On average, our auto refi customers save $2,400 over the life of their loan. And when they move forward like that, they want to do more with us. Our auto refinance customers, we see almost 60% of them have applied for a personal loan. So it's another great example of the member flywheel. It's our embedded growth engine, borrow better, move forward, borrow better again. So we've shown a couple of great examples of how effective our model is in a direct-to-consumer model. I want to talk about a place where we're showing how well the model travels in a [ B2B, B2C ] distribution model as well. Again, we want to be there wherever a customer has a smart borrowing need and major purchase financing is one of those great opportunities. So what is major purchase financing that's smart borrowing for life's important choices. This is embedded point-of-sale financing for things like elective medical, elective dental fertility treatments, education and tutoring and select high-ticket retail. So massive market, $200 billion of spend annually. These are expenses that customers shouldn't or typically don't want to postpone and when customers are faced with one of these expenses, these life choices and they want financing, they want a couple of things. They want fast approvals. They want affordable payments from a trusted brand. And the providers in this space, they want high approval rates, they want reliable real-time funding, they want higher conversions. Let me give you a great example of how we're already establishing an advantage in this space, backed by the great underwriting the advanced underwriting that Kiran discussed. We recently did a head-to-head test against one of the largest lenders in the space, one of the largest competitors said a new plant dental provider. And when we compare our underwriting to their underwriting, we won 80% of the time. We won 2 different ways. One way we won was by approving customers that competitors did not. And then the other way we won is even when we approve the same customer, the customer chose our offer way more than they did the competitors. That's a real advantage for our partners. That's more yeses and that's more revenue in their pocket. It's all backed by a seamless digital experience for both customers and providers. customers can apply on their mobile phone, they can get approved in seconds, and they know exactly how much to budget for that procedure before their appointment. And providers get status of every single one of their -- the loans that are in process, and an analytics suite to help them run their business better, not to mention fast, real-time funding via our API suite. These experiences are deeply embedded in the partner's ecosystem to remove friction and increase switching costs? So we've been growing this business strongly. We're going to exit 2025 at a $1 billion run rate on this business. We've already scaled elective dental. We're scaling elective medical, moving forward on education, tutoring, we just launched ophthalmology and wellness practices, and we've been piloting select high ticket retail as well. And given our success in this B2B2C space, we're excited to share our entry into the next natural adjacency, leveraging all of our advantages. That's home improvement financing. Home improvement financing is a huge market, $0.5 trillion in annual spend. And this is growing and even more important now given that given the aging housing stock and the customers are staying in their houses quite a bit longer than they used to, market is fragmented, capital-constrained lenders, suboptimal underwriting, lackluster experiences. And we already have many of the capabilities to be successful here from our major purchase finance business. We have the underwriting or have the experience in large ticket loans. We have the B2B2C customer management capabilities, and we have the reliable funding needed in this space. We do have to build a couple of new capabilities, specifically vertical-specific technology, contractor specific technology as well as home improvement distribution to go to market. But we're jump-starting our entry. We've got 2 announcements today that both relate to those 2 capability that we need to build to win here. The first is that we acquired the code and select engineering talent from the former fintech lender [ Mosaic]. [ Mosaic ] has built a fantastic contractor centric digital platform that is purpose-built for the home improvement space. And by buying this technology as well as the team to run it, massively accelerates our capabilities and our time to market much faster than it would be to build it ourselves. The other announcement is we've -- we're entering a strategic distribution partnership with [ Vista]. [indiscernible] is a fast-growing lender in the home improvement space. They have deep integrations with software vendors and service platforms that serves a network of about 40,000 contractors across the U.S. This is a multiphase fascinated partnership that's going to culminate with us underwriting high-ticket loans on behalf of [ stack ] and book those customers of LendingClub members on our platform. This is a win-win for [ iStack], they get to have immediate success in the high-ticket project space. And for us, it gives us entry and distribution almost immediately. So let's put it all together. We're anticipating doubling our originations over the medium term versus where we are today. I already mentioned the $5 billion to $8 billion of core personal loan growth that we're highly confident in. In addition to that, we're anticipating growing our major purchase finance, which includes the home improvement entry that I just mentioned by $2 billion to $3 billion over where we are today as well as an additional $1 billion of growth coming from our secured products including the auto refinance. So all in all, $18 billion to $22 billion of our loan growth. So to recap, we are where smart borrowers borrow better. We want to be everywhere our customers have smart borrowing needs. We prove the model of debt consolidation, shown that the model travels in major purchase finance and home improvements are next natural scalable adjacency. It's a huge, huge opportunity for us, $2.5 trillion of addressable spend. And it's all amplified by our embedded growth engine where customers borrow better, move forward and they borrow better again. Thank you for your time. I'm now going to turn it over to Mark Elliot, our Chief Customer Officer, who's going to talk about our third core advantage, which is experiences that keep members coming back.

Thank you, Steve. It's a pleasure to be here with you today. My name is Mark Elliot. I'm our Chief Customer Officer. I've been here about 2 years after spending about 20 years in consumer banking, mostly at larger institutions like Capital One and JPMorgan Chase. And one of the main reasons I joined is for a long time I've had a really deep belief that banking remains broken for most Americans. And what I saw in LendingClub was a company that had both the foundational elements and the scale to make a real difference in people's lives. You've actually seen the impact we can have on people's lives today. You've seen real examples of how much money we're saving our borrowers. You've also seen how easy we make it. But one of the challenges that we've seen over the last few years is that our loans are episodic by nature, especially when you consider that when somebody sets up alone, the vast majority of them set up auto pay, they have a fixed payment date and a fixed payment amount. There weren't a lot of reasons for them to come back. So a few years ago, our borrowers might interact with us only a few times over the life of their loan. But they told us time and time again, they wanted to do more with us. So we asked ourselves, imagine what we can do if we actually intentionally engage our members as a lifelong partner. And engagement really matters because what we have found is that those who are engaging more often with us are much more likely to go down that lifelong lending relationship lending path that Steve shared with you. We ask our members, what are the kind of things expected from us? What would they like to see from us that would incent them to do more. And the answer was pretty clear. They want convenience, insights and value. If we can deliver these things to them, they're more likely to come back to us for their future borrowing needs will be top of mind. And that matters because again, repeat issuance is one of the core drivers of issuance, lower cost and better credit outcomes. Let me actually bring the financial impact of this to life for you for a second. Single loan borrowers are very profitable for us, and Drew is going to share more later about the core personal loan economics. But once again, I'm going to remind you about Raymond, that borrower who came back to us several times for different needs over the course of many years. When our members do more with us, the impact is not linear. It's actually exponential. Borrowers who get 2 loans from us, we see 2.6x the lifetime value, again, driven by that lower marketing cost and better credit performance. But the real magic is with those lifelong borrowers who borrow more than twice from us, we see that number jump to 6.5x the index lifetime value. In order to continue to accelerate this, -- we've delivered a set of intentional engagement experiences to drive this flywheel. Custom designed for the motivated middle who are not getting their needs met by traditional banks. Increasingly, we are top of mind when they have a need we can address and not an episodic lending relationship. As Scott started the day, it all starts with mobile banking. Mobile banking is increasingly the core element of consumers' financial engagement. And as a reminder, a few short years ago, there weren't a lot of reasons for people to engage with us regularly. In fact, 2 years ago, only 25% of our borrowers would log in, in a given month. But our members told us they were demanding a better banking experience. They wanted us to meet them where they are. It's a dentist office, when they're meeting with a contractor to talk about home improvements and yes, of course, in their pockets. They wanted us to deliver this convenience on their terms. So we built a custom banking and lending mobile app to deliver for them, and we started encouraging our members to use it as part of the loan experience. And there's also far been impactful. In 2 short years, we've seen that number digitally active monthly customers jump to about 42% of our borrowers. And those who are logging in are logging in 50% more often. It's not just enough to have a mobile app. You have to deliver a great experience, and we're delivering. In both the Apple App Store and Google Play, we have great ratings and reviews, and this is something we monitor very closely, and we actually take a lot of the feedback to continue to improve and make the app even better. Increasingly, this is also a critical decision criteria that consumers weigh when they're considering a brand they haven't used before. This investment we made in convenience is already paying off, and I'm going to start showing you how it's paying off with issuance. By making it incredibly easy for our borrowers to apply for another loan, we're seeing that they're embracing the app for their borrowing needs. So if you go back to the first 3 quarters of -- if you go back to the first 3 quarters of 2024, we saw about $66 million of issuance directly in our app. Same time period this year, that number jumps to over $360 million. And just to give you a sense of how quickly this is growing and while we do see some seasonality in our issuance trends, our September app issuance when we annualize it is over $700 million. For members considering alone, the app delivers a convenience and easy experience for them and for us, it gives us full control over that experience. We can decide what offers we want to deliver to them, when and how. We have seen those using the app are more likely to do more with us. This allows us to continue to scale that repeat issuance, while we invest in new channels for growth. Of course, we've also spent a lot of time developing and improving the app for servicing. And as we've done that, we've seen a 20% decline in calls from our members who are digitally active. This not only reduces our cost, but more importantly, delivers a great experience to them as well. We're now delivering everyday convenience. So it's one of those core drivers I talked about earlier around engagement. And so with that in place, we're now focusing on some of the other elements around insights and value. And for us, Insights is going to start with our core lending proposition and a product we call DebtIQ. DebtIQ delivers free debt and credit insights to our members, helping them after they get their loan with us, but also importantly, giving them a reason to come back. I'm going to share a little bit more about the impact we're seeing from DebtIQ in a second. On the deposit side, we have level of savings, a product that delivers a great everyday value to members, but importantly delivers even more value if they save each and every month. One of the things Scott talked about is we really want to be a brand that encourages our members to go down the right financial path and exhibit good financial behaviors. And with level of savings, we're rewarding them for that. And then [ level up ] checking. This is our first deposit product designed from scratch explicitly for our borrowers. We'll offer 2% cash back for on-time loan payments, again, incenting the right financial behaviors and 1% cash back on essential debit purchases like gas, groceries and drug store. Again, encouraging the spend money they have for everyday spend, not necessarily use a credit card and potentially use money that they would have to borrow. So how are these products working? Well, I'll start with DebtIQ. DebtIQ addresses a very specific problem that we've seen for the motivated middle, a lack of transparency and control over their debt. They often have multiple cards, all with different interest rates, which are nearly impossible for them to find, different due dates and different payment amounts. We did research with our members, and we found that they were resorting to spreadsheets or Post-Its to try to keep track of it all. DebtIQ brings all of that information in the palm of their hands, at their fingertips, giving them convenient control center for keeping track of it all and, importantly, insights in an ongoing way, real time into their debt and interest rates that they're paying. The response so far has been amazing. We've seen a 65% year-over-year increase in our active DebtIQ users. And again, now that there's a reason for them to come back, a 50% increase in the login rate for our members using DebtIQ. When they log in more often and they come back and they're keeping track of their debt and credit, they're more likely to do more with us. In fact, we see 20% of our repeat loans are coming from our DebtIQ users. This is a tool our members love and, of course, it keeps us top of mind for them. On the deposit side, in August of 2024, we launched LevelUp Savings. Our primary goal with LevelUp Savings was to fund the continued growth in our balance sheet, and we've actually been very successful. This product has reached nearly $3 billion to date. We've also won awards, including one from Money Magazine for Best High-Yield Savings Account in 2025 and the same award from Motley Fool in 2025 as well. I'm also actually very excited to announce that this morning, Motley Fool announced we won this award again for the second year in a row for LevelUp Savings, Best High-Yield Savings Account. But what's been really interesting is not necessarily just the issuance of the awards; it's been the response from our borrowers. We leveraged the exact same convenient experience Steve talked about when they get [ on their ] loan from us and made it just as easy for them to open up a savings account with us. And as we've done that, what we've seen recently is 13% of our level of savings accounts are coming from our borrowers. Two-thirds of them are saving that $250 a month and getting that LevelUp Savings rate. We're delivering value to them, reinforcing that brand story about encouraging positive financial behaviors and, of course, building long-term loyalty to LendingClub. And what I'm really excited about is that moment when a borrower is either about to pay off their loan or has just paid off their loan. Perhaps at that moment, they don't have another borrowing need. Rather than say goodbye, we now have the opportunity to encourage them to take some of that monthly budgeted loan payment and turn it into savings here with us, and they can do it in a few clicks. For our borrowers who have opened up a LevelUp Savings account, we've seen their engagement rate triple. They're logging in 3 times as often. And just to reinforce a point Scott made earlier about the attractiveness of the motivated middle, we're winning our borrower savings dollars from other banks. And as we're doing that, we're seeing our current and former borrowers grow these savings accounts to over $10,000 on average. But what we're really excited about is our new product LevelUp Checking launched in June of this year: again, our first checking product designed from scratch for our borrowers. It's getting noticed in the market, including with a glowing review from Bank Rate. And even early days, it's already delivering results. We've seen a 7x increase in our daily check account openings since launch. Again, we designed this product for our borrowers, and it's resonating with them. 60% of our new checking accounts are coming from current and former borrowers. This is very much by design and exactly what we were hoping to see. And in this short time, 8% of our borrowers who've opened up a LevelUp Checking account have also opened up another loan. I mentioned earlier that delivering value is one of the core tenets to drive long-term engagement. And this product is delivering: value for our members and for LendingClub. We're tracking to deliver about $200 in annualized cash back to our borrowers using this product across both their loan rewards and their debit cash back. We've also seen a 400% growth in the number of loan payments being made to us directly from a LendingClub deposit account since launch. This gives us more data and insights on their income, on their spend, and through the value we're delivering to our members, more engagement and brand loyalty. And as a reminder, customers are only rewarded for on-time loan payments. It's good for them. And of course, it's good for us and our loan investors. We actually reached out to our customers who opened this product and asked them what they thought about it. And the answer is they love it. 84% of the customers we surveyed said this product makes them more likely to consider LendingClub for any lending needs they might have in the future. I'm not going to read the quotes on the page, but it's really clear that the value we're delivering resonates with our members. And this will only accelerate the lifetime lending flywheel Steve talked about earlier. So if you take all the things I shared today, how can this transform our model over time? Well, it's actually pretty dramatic. When we look at members whose relationship spans a loan, DebtIQ and LevelUp Checking, the impact is nothing short of transformational. Now as a reminder, I started this presentation sharing that fewer than half of our typical borrowers might log in and engage with us in a given month. But for our members who have a loan, DebtIQ and LevelUp Checking, that number jumps to over 90%. This population has grown by 6x since we launched LevelUp Checking this year. We're driving a profound step change from a quarterly to a monthly and now more than weekly relationship with our members by intentionally delivering convenience, insights and value to them. Lukasz is going to share more later about how these products come together in a great experience for our members. And as we expand into new verticals, this competitive moat we're building is only going to grow larger. The engagement model combined with the product expansion that Steve shared will turbocharge our embedded growth engine as we scale purchase finance, auto refinance, home improvement and more. Every engagement moment is an opportunity for us to clear the way for the motivated middle and help them move forward. Scott started the day sharing how we're a very different company than we were just a few years ago. And that's certainly true with our engagement model. Our engagement model is driving results. It's built on [ proved ] success driving lifelong lending relationships with our members. And it's built on elements that aren't easily replicated, a loyal member base that wants to do more with us, an app custom-built for the motivated middle across banking and lending, and products and experiences intentionally designed to deliver value and drive engagement. Lukasz is going to share more about how our technology drives this competitive advantage and enables these great experiences for our members. But first, I'd like to call the morning presenters up for Q&A.

Okay. So happy to take any questions. I think Artem back there has got a microphone, so just raise your hand. I know some of you have read ahead. But in fairness, we'd like to keep questions on the materials from the second half of the day for the Q&A session then. So ideally just keep it limited to what we presented this morning. .

Crispin Love, Piper Sandler. So just first on just home improvement, definitely an interesting opportunity. Can you discuss how you expect to leverage your current personal loan members or past members? You talked a lot about repeat borrower. So is there a meaningful cross-sell opportunity there? And then what percent of your current LendingClub borrowers are homeowners today?

Yes. So I'll start just on the customer. So our customers are kind of, average likelihood to own a home, roughly half of them own a home. The personal loan, as you all can imagine, you can use it for anything, and that includes home improvement projects. We do see that behavior today. It's not an experience we've leaned into. We haven't marketed it as much as we have the debt consolidation just because that particular use case is so easy to market and the need is so big. Here what we're doing is embedding it into kind of where that decision is made, which is at the point of purchase. I think the big thing for us is we're already in this major purchase space delivering services through other providers. And because we're able to read the data that we're getting on this massive direct-to-consumer business and just apply that data and those -- the experience we've built to this model, we're just seeing an ability to really, really win, which is what's given us conviction in the home improvement space. I don't know, Steve, if anything you'd add there?

Yes. Just to reiterate, not so much cross-sell to the existing member base, but embedding at that moment that matters, right, with the contractor or software vendor or another platform. However, we do -- we're incredibly optimistic about the fact that we bring members on via those new distribution points, that we will be able to effectively cross-sell other products, primarily loans, leveraging the engagement strategies that Mark talked about.

Reggie Smith with JPMorgan. I would love to dig into your underwriting capabilities a little bit more. Just thinking about what's the source of your, I guess, data advantage in underwriting. Is it checking account banking data? Is it more granular FICO data? So I was hoping you could talk about that. And then as I think about what's driving incremental improvements in your model, is it more data or is it like better computational power? And then finally, you had a slide, and I've seen it before, where you show, I guess, delinquencies at 9 months. And the way I've always thought about personal loan lending is that there's personal aspect of credit quality and then the macro kind of takes over. And I'm guessing at 9 months maybe is when the macro takes over. Maybe talk about what you saw in the first 9 months and then kind of what impacts performance after that? A lot there.

That's 3 questions, right? So maybe -- do you want to take the first 2?

I can start with what data really drives the decisions. So it's not just one data set. We have complementing data sets beyond bureaus. We constantly look at the trade line information for the consumers. We mine our own attributes. I think I said more than 3,000 attributes are engineered in-house, which are trade line attributes, if you look at debt patterns, how they have changed their behaviors over time. So all of that feeds into the model. So it's not a static evaluation, it constantly evolves because life is changing, environment is dynamic. So we need to constantly look at this evolving signals to say what should be the next signal that we should embed in our underwriting. So it is a very constant evaluation.

And there's also, right, Kiran, Reggie, that we've got our own data. We've been collecting people's e-mail addresses for 18 years. We know if that e-mail address is associated with an employer, and if that's an employer that we verified. Okay, that's a piece of -- you said you work at UPS, your e-mail address is UPS and you are responding via that e-mail. That is a source of information. People have applied with us for all this time telling us this is what they earn. And okay, you say you're a driver for UPS and you earn $250,000. Well, that doesn't square with our own data that we've seen over the years. So it isn't just third-party data. We also have our own -- how long is it taking you to complete an application. There's a lot that goes in that we are collecting and observing ourselves.

And I guess model improvements and then talking about the shift between, I guess, idiosyncratic risk of the consumer versus the macro and like when that shift occurs and...

Yes. So the 9 months is really more about -- these are short-duration loans and it's hard to get a clear signal month on book. You can't even charge off a month on book too, right? You need to be -- the loan needs to be delinquent longer. So 9 months is basically saying, at that point, we have a very good understanding. There's a high correlation to how they're doing at that point and how the entire vintage is going to perform. So that's why we picked the 9 months. If you looked at it at 12 or 6, you'd see the same separation of us with others. Nine months is just kind of the test point where we can say confidently we pretty much know exactly how this is going to go, barring macroeconomic, exogenous kind of shock. So you could see a divergence if, for example, COVID hit. But the 9 months is just to say, hey, this data is very stable at this point and we have a good view.

This is Giuliano Bologna from Compass Point. Maybe digging into the home improvement topic a little bit more. The primary use case for personal loans is credit card refi, but there's also a chunk of your originations that are going to go to home improvement already. I'm curious how much data can you gather from that universe that you already have that's already electing or saying, this is for home improvement in the first case? And how much does that help inform what you're doing in the actual home improvement vertical? And how much can you increase the loan size when you actually pivot that way?

So we have been operating at higher loan size in our major purchase finance businesses. And that does provide a lot of information in terms of how those loans came, who these borrowers are and how that actually translates. So I think we think that experience is very much aligned to what the needs and how the consumer behaves for the large ticket.

Yes. And I'd say, Giuliano, it's less -- so as I think Kiran talked about before, we have decision strategies overlaid on top of these models that reflect loan use case, the channel we're getting them through. So I would actually say it's less extrapolating from a direct-to-consumer who came to us and said, "I want to use it for home improvement," but we don't actually know that that's -- right? There's a little information asymmetry there. Are they actually using it for home improvement? Versus in the actual channel where the loan is being delivered by a service provider. So what we've seen in our purchase finance business is controlling the use of proceeds, just like we do with credit card refi. You say you want to pay off your credit card debt? Great. Here are your credit cards. Click which ones you're paying off, right? And if you don't click them, you're not getting the loan that you want because we're going to raise the rate, we're going to do more verification. Same thing is true in these purchase finance channels where there's an inherent positive bias there, like I would say the last thing you do before you go bankrupt is not a fertility treatment for $25,000, right? You're -- so there's value in the channel and in the distribution. So we're more extrapolating from that than we are the direct-to-consumer business. But we are applying more broadly all of our data and our models that we've built on the direct-to-consumer business and then tuning them for these channels.

That sounds good. Maybe a question that -- in terms of some of the references in the -- what you're saying in the presentation, in the deck. There's a lot of [indiscernible] near term and medium term. When you think about near term and medium term [indiscernible]?

You didn't get that part about the back half of the day, which is also when hard questions get directed to Drew. Yes, we'll come back to that at the end of the day.

It's David Scharf at Citizens Capital Markets. I just wanted to stay focused on home improvement, just to better understand the asset class. Well, number one, is this -- generally, it's unsecured lending, I imagine. But help me out. I know I evilly think of everybody with a HELOC, and if I want to do something. Is this competing with bank HELOCs in terms of kind of who you're marketing to? To the effect that half of your borrowers already are homeowners, I assume a lot of them have home equity line of credits and -- so a little bit on just kind of who you're competing against and then also the secondary market or I guess the funding channels, third parties that typically fund home improvement loans besides banks on balance sheet?

Yes. So HELOC can be used for home improvement. Obviously, the big difference is taking out a HELOC loan takes you a very long time and requires a lot of paper work. And even today, our customers that use the loan for home improvement, in our research, would say, why did you do this instead of do a HELOC? And they said, "Because you gave me the loan instantly. And it's not that big a loan, like maybe I'll roll it into a HELOC later. But right now, I just want my pool." And so that's what we hear from consumers. You are correct that over time HELOC would be a more efficient, lower cost means for them to take on that debt. So when we talk about over a longer term what kind of products could we be offering to this customer base that's using us, that certainly would make sense in the mix. But the dominant use case in the space today from lenders that are active in the space is actually unsecured credit. For that reason. You can do stage funding, instant approval and the credit is quite good. There is a -- we didn't really get into the results, but the unit economics in our purchase finance space are as good or better as the direct-to-consumer in terms of -- I think the credit is probably, what, another 20 points higher FICO or so?

Yes. And it stays resilient through the cycles. Because of the closed-end nature of the use case, it stays more resilient than your regular [indiscernible].

Tim Switzer, KBW. Can you discuss your market share of the personal lending market today, and what's assumed in your new medium-term outlook for origination growth? It seems like the pie is getting a lot bigger with credit card debt at all-time highs. But also a lot of your peers are kind of reaccelerating their marketing efforts to [indiscernible] the opportunity to grow your share.

Yes. So our share is, I'd say, for much of our history, we operate at about a 10% market share. And when the inflationary cycle hit, I think we were quite public, we were not rewarded for this statement, but we said, hey, we are seeing worrying leading indicators in our borrower behavior, and we are going to pull back and we are going to cede market share because we don't like the looks of what's happening. And so that market share shrank to, call it, mid-single digits. And if you look at just stepping back and say, what do you need to believe for us to hit the growth targets we have? I joined the company in 2010. The industry has grown at a CAGR of about 14%. So it's been one of the faster-growing categories of credit. And our market share is below what we would historically go at. So even if you assumed us returning to, say, our historic, call it, 10% market share with a modest market growth in the single digits, then you could achieve these numbers.

Kyle Joseph with Stephens. Thanks for having us today. I wanted to dig into credit a little bit. Scott, in terms of your introductory remarks, just maybe a naive question, but why is the consumer so much more likely to repay a personal loan above card?

Yes. So it's a great question. And as I said, people find it hard to believe, we were saying, look, our data is showing this, our data is showing this, we can see it. And then, as I mentioned, over the years, there have been multiple bureau studies [ that do that ]. But I think there's a lot there. One is you heard -- it's hard to express -- the reason we presented that video is if you read the reviews on LendingClub and you see what people say, there is an emotional attachment to like, "Hey, you guys were there when I was deciding to do something important," like I said, a fertility treatment or a home improvement project or getting married, starting a business in that case. So there's a real emotional attachment and a desire to be able to access that credit. I think what you see with cards is our consumers will have an average of 5 cards. They will look at that and say, "Hey, I can pay this 1 loan, I can pay the 5 cards." We think what they're doing is sort of prioritizing where they want to be able to access credit in the future. So they might not pay a couple of cards and keep one current, and then continue to pay their personal run.

Got it. And then just following up on the slide where you highlight delinquency outperformance kind of across FICO bands, just wondering how that performs through cycles. Do you see a greater variance when things are bad, good or kind of cycle agnostic?

I think it's agnostic. So we see it consistent.

What I'd say is -- and I think we've said publicly, Drew and I, multiple times, we don't expect this separation to continue. We're sort of confounded as to -- that it has continued this long. We expected the -- we have multiple times in our history zigged when others have zagged. Kiran talked about the importance of layering the human intelligence on top of the models and the data. So when COVID hit, we pursued a very different servicing strategy than the rest of the market. We put our plans online. We said, hey, we can't -- how do we know who's being affected? We just got to be there for them and help them get through. It resulted in us having much higher hardships than the rest of the market. Again, we got criticized for that. Fast forward a year later, we had much lower delinquencies and charge-offs because we bridged our customers through that. Student loan payments were coming, we said, hey, we know those payments are going to resume. Let's start thinking about who might be under stress when those payments are required. And let's start maybe segmenting or separating those people out and being a little stricter with our underwriting there, so that we're in front of this. We didn't wait for the delinquencies to manifest and then adjust our model. So I do think part of the ongoing separation has just been that, us kind of staying in front of the evolving environment.

Vincent Caintic, BTIG. Thanks for all the information about the growth. So I wanted to focus on that, the different products specifically. If you could talk about the economics of the different products, so how we should think about customer acquisition costs, are they different between the 2, the risk-adjusted margins and the capital usage of each of the different products? And then secondly, the investments you need to get to those great growth rates that you illustrated. You talked about acquiring Mosaic's technology as well as Wisetack partnership, anything else that you need to do?

I didn't hear the second part. Yes. So the first part was just the economics. So the unsecured, as I think I mentioned, across direct-to-consumer purchase finance, the unit economics are quite similar. In fact, maybe slightly stronger in the major purchase, purchase finance space, but very, very similar. And auto is obviously different, although compared to what you're used to in auto, just to make sure everybody understands what we're doing there. The majority of cars are actually bought preowned, used cars. That's the market we're going after. We are not competing with dealer-supported financing. These are people who bought a used car, the dealer added a markup -- first of all, they might not have gone to the lender that had the best rate. They might have gone to a lender that they got a kickback or a volume-based incentive, and then they added on a markup. And the dealer was underwriting at point of origination where, let's call it the motivation is a little mismatch, you really, really, really want that car. What we're doing is saying, let's just wait 6 months. Are they making their payment? Great. What happens if I lower their payment? That's probably a net positive for credit. So while the economics are not as strong as a personal loan, they're still very robust. And then the question was just a little bit more about the partnership with Wisetack and the Mosaic platform.

Yes. So I mean, the Mosaic platform, as I said, it gives us instant -- almost instant ability to develop the contractor specific tech, both contractor and consumer-facing, in that B2B2C environment. We have most of it with a major purchase finance business, but you just need to add an extra to be purpose-built for the home improvement market. And then like I mentioned, Wisetack is a distribution partnership. It helps us get distribution very, very quickly, and it's a win-win outcome. So we couldn't be more excited to partner with such a great company.

Yes. So there's a few ways you can go. You can actually go to the individual [ practice ] to compare this to our other purchase finance business. We had thousands of individual dentists that use us and offer financing for, again, big-ticket items. This is not a cavity. These are things like full mouth, teeth replacement, those kind of things. But we can go to the individual dentist or we can partner with a corporate provider in the space. Same thing is true in home improvement. You can partner with a corporate provider, you can go to the individuals. It does require -- the level of oversight and management required on that base is higher, and so -- and also there's some product structural items that are a little bit different. So this accelerates that. And in the case of Wisetack, it's basically somebody who's already gone out, done integrations with partners and providers, corporate providers, has signed up individual contractors, has vetted them and is working with them. And we're just saying, hey, they're currently capped at smaller loan sizes. They're a nonbank. We are providing the ability to do bigger ticket purchases. And as Kiran said, we've been doing that for quite some time successfully. So we're comfortable with our models and our underwriting there. And a nice side note, they are a former LendingClubbers who started the company. So the circle is around.

All right. Thank you for the great questions. We're going to take a break, until 10:45. [Break]

We're going to get started here in just a few minutes. So if you can start coming back to your seats. Thank you. Okay. We're going to get started again. I'd like you to please welcome our Chief Technology Officer, Lukasz Strozek.

Thank you, Dan. I'm delighted to be here with you today. I've been working in technology for over 20 years, most notably at Bridgewater and SoFi, so I'm well-steeped in fintech. I joined LendingClub 1.5 years ago, attracted to its technology platform that's been engineered for innovation. You heard Scott say that LendingClub is at its heart a technology company. Well, all these amazing things that we've shared with you today are enabled by our talented engineering team working hand-in-hand with the business. Since our founding, we've invested heavily in our technology capabilities, with over 500 LendingClubbers dedicated to innovation. We're combining superior innovation skills of our Bay Area-based engineering team with 24-hour coverage of a distributed workforce. We secured 46 patents, with more underway. Our advantage starts with us owning our tech stack. When it comes to customer experience, owning the full technology stack is something that only a handful of larger banks are able to do. You heard that at LendingClub, data powers everything. And so our stack starts with data infrastructure and support for machine learning and AI. On top of that, our proprietary systems for decisioning and servicing. We also extend best-in-class financial course to suit our needs. Our stack includes a digital experience platform optimized for mobile as well as our technology for customer acquisition and partner integration APIs. And all the LendingClub products, whether it's lending, deposits, DebtIQ leverage this full stack. And this matters because we can be responsive to our customers, offering them a differentiated experience rather than an off-the-shelf app that most banks provide. We can focus on the needs of our core customer segment and not depend on vendors who have to cater to a mass audience. Speed is another benefit. We're not slowed down by third-party release schedules. We can ship software fast, and our results are impressive. We do 25 complex releases every year. Steve highlighted the partners to whom we extend financing. Us owning our stack allows us to create custom experiences for them in no time. Take, for example, a medical provider whose customers we offer loans to. In just 4 weeks, we've been able to build a custom credit solution for them and integrate it deeply into their ecosystem. And this ability to embed custom experiences into our partner flows creates stickiness for our solutions and it's a strong competitive advantage. Our team is able to deal with unprecedented complexity. Let's take a look at our decisioning platform. We've integrated it with 36 different data sources. It's processing over 240 million transactions every year with sub-1 second latency. Even more importantly, we've engineered it for efficiency. We've architected our system so that credit analysts can fully self-serve the changes, eliminating engineering bottlenecks. This is particularly critical in a dynamic macro environment like the one we've experienced recently, and Kiran alluded to that. Our technology gave our credit team the ability to respond rapidly. They end up making over 630 changes over that time period without engineering's involvement, which comes out to a little over 1 day. We built our technology platform to be modular, extensible and scalable. This way, we can meet the demands for today while being able to grow and offer new products tomorrow. Of course, we're cloud-based, taking advantage of the scalability and reliability behind the world's most popular services, cutting-edge infrastructure and tooling. The best example of our platform's extensibility are the number of successful technology acquisitions. Narmi gave us a head start in building our mobile experience. Tally jump-started our development of DebtIQ. Cushion gave us AI capabilities, which we're able to build into DebtIQ. And Mosaic is allowing us to quickly enter the home improvement space. This is a competitive advantage for us. Each of these technologies would take years to build. Instead, we're able to integrate each of these acquired technologies in around 6 months. And unlike other banks that rely on expensive full acquisitions, our path is both faster and much more cost efficient. Technologies such as Mosaic allows us to offer flexible integrations with our partners. And Steve covered Wisetack, which is an example of a partner that's able to leverage this flexibility. Our technology story is a story of continued efficiency. Over the last 3 years, with technology, AI and process improvements, we've lowered our loan operating costs by 26%. We've been using neural networks in our models and natural language processing in our call center for years. But it's really with generative and agentic AI that we've seen an explosion in internal uses of AI at LendingClub. Just in the last 5 months, we've developed over 60 AI use cases throughout the whole company. Naturally, our engineers use AI in the day-to-day extensively. But in addition to efficiency gains, we're also seeing tangible business benefits of using AI, and Steve talked about that earlier. Whether it's higher conversion due to faster document approval or more repeat borrowers due to satisfaction with a more efficient customer support. The technology we own, our extensible platform and the focus on our core customer all come together in an end-to-end application experience. And so I'd like to give you a view into the experience we've been creating. In the demo that you'll see, Olivia has a personal loan with us and has recently opened a LevelUp Checking account. She logs into the app several times a week for banking and to get insights into her finances. Let's take a look. [Presentation]

This is Olivia's homepage. It shows a dashboard of all our LendingClub accounts across lending and banking. Here we market additional products to her with a few clicks to apply. Our Rewards Tracker reminds her of the value she's getting from her relationship with LendingClub, including cash-back from her loan payments. And here's DebtIQ. Olivia linked her credit cards to see that she has a total of $11,000 in credit card debt at 22.5% interest. With LendingClub, she can see that she can do much better. Our members want to be able to see all their credit cards in one place. With DebtIQ, no more spreadsheets and sticky notes. We're pulling Olivia's full and real-time card data. This unique feature gives her an accurate view of her debt, and LendingClub gets additional insights to inform our underwriting and marketing strategy. DebtIQ data allows us to identify opportunities to save Olivia money. Our members are often surprised at how much they are paying in credit card interest. And with DebtIQ, this information is at their fingertips. Olivia decides to check out our offer. We leverage card data to make a direct payment of credit card balances [indiscernible]. Olivia qualifies for a little extra cash. With intelligence around offer data, we can present choices that best balance interest rate and duration. Olivia chooses the offer that's within her budget. Members can direct funds right into the LendingClub checking account for 2% cash-back on their loan payments. Olivia gets the additional cash deposited to her checking account. Here is her new loan and her credit card balances are gone. Thanks to our technology, we've packaged 3 complex products into a single intuitive experience for Olivia.

Our technology is just one part of our advantage. And the other is our marketplace model. And so let me hand it over to our CFO, Drew LaBenne, to talk about that.

Great. Thanks, Lukasz. That was an awesome demo. I love it every time I see it. So I'm Drew LaBenne, Chief Financial Officer. It's great to see so many familiar faces in the audience and a few new ones as well. A little bit about my background. I spent my first 20 years in larger financial institutions, mainly Capital One, where I was the CFO of the Retail Bank and the CFO of the Commercial Bank. And then I've spent the last 10 years at smaller public companies, fintechs and banks as the Chief Financial Officer as well. When I started talking to Scott about the opportunity at LendingClub, I was struck by the similarities between where LendingClub was then in my time at Capital One back in the early 2000s. Back at Capital One, we were at a point where we had a very high-yielding consumer asset and we were quickly growing the digital bank. The combination of that high-yielding asset with a rapidly growing digital bank created amazing returns and a growth engine for the future. And that's exactly what we're doing here today at LendingClub. So it's a very exciting time to be an employee and, hopefully, to be an investor. So the marketplace and the bank together is a more powerful model than each one separately. The marketplace is a powerful capital-light growth engine able to generate high returns in period. And when conditions are favorable, we can scale it rapidly. The bank balance sheet is available for putting assets on balance sheet, growing resilient returns now and in the future. Together, we can generate higher growth and returns compared to a traditional bank, and with greater financial resilience than a marketplace alone. The model for success is pretty simple for us, and it comes down to 2 key variables -- 2 key metrics. First, originations, pretty intuitive, net asset yield, which I'll get into a little bit more. So you've heard a lot about originations today, and Steve talked about the growth vectors available to us. But again, to hit the major drivers on originations, first, a very large addressable market in the personal loan space, and then new verticals that we're opening up for growth in the future, namely home improvement. Second of all, at the beginning of this year, we started to scale back marketing, making investment in our marketing channels, reopening those channels and redeveloping our models. We're seeing the improvements now in originations, and we're just getting started with more investment and more growth to come. Third, product and funnel innovation is really a way of life at LendingClub, and you heard Lukasz talk about our significant capabilities in the space and what we're driving in the future. Ultimately, we're trying to generate more lifetime lending and more value out of our borrowers. So what do we do with all these originations? We take these originations and we optimize where we're going to put them, whether it's on the balance sheet or the marketplace. And we do this optimization consistently. It's not a static model. So as we go through the quarter, as we go through the year, we're optimizing how many loans we put on balance sheet, how many loans we're selling through the marketplace based on market conditions. The loan originations that we're putting on balance sheet help grow total assets at a very attractive net interest margin and generate strong noninterest income that's resilient through the cycle. The originations we sell through the marketplace generate strong day 1 revenue and show up in our marketplace revenue through noninterest income, and also generate that capital-light in-period returns that I probably talked about 2 or 3 times already today. The second key metric is net asset yield. And again, as I said, probably requires a little bit more explanation. You see, not all originations are created equal. It takes time, effort and experience to generate an exceptional asset yield. It starts with our borrowers who, as we discussed before, are usually revolving with high credit card APRs and we're able to save them 700 basis points or more on the interest that they're paying on those revolving credit card [ balances ]. We then acquire the customer, service the customer, and of course, we have some credit costs that we need to reserve for. And we end up generating about a 9.5% asset yield on our prime consumer originations. Very strong. So how strong is that asset yield? I want to put it in context for everyone. So what we're showing here is our asset yield compared to other consumer asset classes in the market today. And so on the right, you can see that 9.5% asset yield and how it compares to other products like HELOCs, auto loans, first-lien, second-lien mortgages. It's near the top of the stack. The only one higher is really credit cards, which is where we're helping consumers refinance out of. If you take those asset yields and you duration-adjust them against a risk-free benchmark, the performance is even better, with LendingClub personal loans generating 200 to 400 basis points more in net asset yield than most other asset classes. What that does is it creates an asset class that is ideal for putting on a bank balance sheet but also provides attractive returns for private credit, insurance, other loan buyers that are looking to invest their customers' capital. So let me go a little bit more into the economics of unsecured consumer lending. So again, starting with that 16% APR that we're giving to customers, which is a combination of the coupon and the origination fee. The cost that we incurred to produce that are: first, about a 1.5% annualized cost of acquisition and servicing. And then on top of that, about a 5% annualized net credit loss. The net result is that 9.5% asset yield. Now the reason I give you this level of detail here in the middle is because the acquisition and servicing and the credit losses, we believe we are best-in-class in that space. And that's what we spent the morning talking about. How do we excel in all of these areas? Just to give a little more finer point to it, for every 10 basis point improvement in net asset yield, we get $20 million more in annual revenue. So this performance matters, and this is a key part of where we outcompete the competition. So what do we do with those -- with this asset yield when we put it on balance sheet? We take that 9.5% net asset yield. We fund it with our balance sheet, deposits, capital. It's about a 3.5% cost of funds all in for us right now, resulting in net economics on the bank balance sheet. What the bank has allowed us to do is keep these loans and keep all the economics for ourselves. So it probably sounds a little bit greedy, but when you're selling loans, you're splitting it with another party. So keeping these loans provides more economics for us. Obviously, it requires capital, liquidity, very strong bank balance sheet management, all of those capabilities we've built over the past 4 years. So you might be saying, why are you selling anything? I would get asked that sometimes. Why sell anything? Why not keep it all for yourself? So the answer is, having a marketplace makes us a better bank for a number of reasons. So first of all, it allows us to expand our credit appetite. That 9.5% net asset yield that I was just talking about is in the prime consumer space. And that's primarily where we use our balance sheet. Almost all loans that we put on balance sheet are prime. This allows us to go into near prime and other areas, originate more loans, get more efficient on our marketing spend, more efficient on our servicing. Second, scalable funding source. So we are -- the marketplace allows us to be unconstrained or less constrained in terms of the capital and liquidity on the balance sheet. When times are good and the consumer is performing well as they are today, we have the ability to scale up very rapidly, beyond the capacity of our balance sheet even, and sell more loans into the marketplace. Third, we're creating more lifetime members. So whether we put those loans on balance sheet or we sell them, we are still retaining the customer. We're servicing the customer, we have the relationship, it allows us to create lifetime lending relationships and hopefully have that customer come back again and again. And then finally, I think maybe I've said it 3 times now, it's capital light, right? So we can generate strong in-period earnings, which just helps the bottom line quarter after quarter. But being a bank also helps us to be a better marketplace. So first, we're a trusted counterparty. We're regulated by the Fed. We're regulated by the OCC. We have significant adult oversight in our activities and how we operate. And it's made us a better originator, it's made us a better bank. Second, we have aligned incentives. So as Scott likes to say, we eat our own cooking. What that really means is we are the largest holder of LendingClub loans. So we care deeply about the credit we're originating and the net asset yield we're creating. That shows up in our performance and it shows up in the performance of our loan buyers. Third, we have a low cost of capital. It may not be totally intuitive. But if you think about it, using our balance sheet to facilitate loan sales has been a major win for us over the past few years. And I'll point directly to the great success of our Structured Certificate Program where, in 2 years -- in 2 years, we've done $7 billion in originations. So it's been transformative in terms of helping us to facilitate more loans for our partners at better prices for us and better economics for them. Finally, testing and innovation. Before we were a bank, if we were going to test a new loan program or we're going to test different terms or even a new product, we would have to test that and sell it to our partners, without a track record of performance. And so what that would usually mean is we would have to take lower prices or we'd have to offer performance guarantees, things of that nature to get the buyer comfortable. With our own balance sheet to be able to test and innovate, we can take those programs on balance sheet, watch the performance, build a track record and then go sell the loans, which is, again, a win-win for us and for the loan buyers. So you're probably a little tired now hearing me talk about how great our model is, so what I'm going to do now is I'm going to ask the General Manager of our Marketplace, Clarke Roberts, to come up and run a panel with some of our most important loan buyers.

All right. Thanks, Drew. I'm Clarke Roberts. And as our General Manager, I'm proud to be here and excited to be here with our esteemed partners. It has been my goal to elevate the Marketplace to be the partner of choice for top institutions, who bring scale, flexibility and they enable us to say yes to more members. As a result, our Marketplace revenue is up 75% year-over-year. So let's dive in and hear from them on why LendingClub is valuable to their business. All right. Matt, let's start with you, and thanks for being here and representing Liberty Bank and really our bank segment overall. As a bank, what problem or challenges were you facing before choosing us?

I think you just saw it, explained very well. As a bank, I think most community banks, mutual banks, Liberty Bank is under $10 billion in assets. If you look at our balance sheet, most of it was commercial and consumer, but the consumer chunk was, most of it, residential mortgage loans. And as you just saw, it's a pretty low net asset yield, right, around 2%. So at the time we partnered, we had a decent amount of capital, looking to deploy that. We started purchasing loans, and we've been very happy. Obviously, it's improved. For me, pound for pound, it's probably one of the best asset classes we have on our balance sheet. And I think that was problem number one. Problem number two for us is really, longer term, thinking about how do we solve this for our customers. Because customers were coming into our branches or coming online and going to our competitors. And partnering with LendingClub has given us the ability to learn about the asset class, test it internally, get some experience with it and then essentially build our own product going forward.

Yes. And that's a lot about what we're hearing from other banks as well. Thank you for that. Jon, thanks for being here and representing BlackRock. What initially drew you to explore joining our Marketplace? And what did you like about us as a partner?

Yes. That's a great question, Clarke. Part of the challenge that I have in my job is trying to uncover new opportunities and ways that we can partner with lenders. And so we spend a fair amount of time on due diligence and meeting with lenders really across the whole space. In my world, there are roughly about 40 different verticals. LendingClub is one of those verticals. When we started the engagement, I think what really resonated for us was kind of the thoughtfulness and the knowledge of the capital markets team. And no surprise, we asked the same, just like you guys, we asked the same questions to different investors, to lenders. And from time to time, we get different answers. And so for us, it really -- the thoughtful way that they articulated the strategy, how they underwrite and think about credit, really fueled our engagement, and led us down the path, probably say, after, I don't know, how many months, to where we are today where we're very active, involved with the Marketplace.

Yes. Thank you for that. And Ivan, thanks for joining and representing Blue Owl. How would you rank the most important factors to you when seeking out a new partner?

Yes. So just a quick backdrop for -- we've been doing this for 20 years. I started a business called Atalaya. We sold that business to Blue Owl. Now we're the Alternative Credit business for Blue Owl. And we did it pre-GFC, post-GFC, we bought it nonperforming, performing, we -- many different flavors of ice cream, if you will, in terms of consumer and specialty finance and other asset classes. So we've seen the evolution pre-LendingClub before it existed and obviously up until today, which is a radically different business. And we continue to do a lot with a lot of different counterparties today. We finance or buy assets from, roughly speaking, 50 different platforms. And so just to give you a sense of perspective, and obviously, we're proud to be a meaningful partner to LendingClub in terms of agreeing to buy billions of dollars of loans and hopefully there will be more to come. So with all that said, I think we really look at it in the most simple way and say, what do we really care about? Alignment of incentives. That was a slide. There's a lot of people who say, these are great, how about you take them? Obviously, that doesn't work particularly well. But pre-LendingClub, having a balance sheet of any consequence, it's a very challenging thing. You can structure around it. You can do deferrals of economics, you can do guarantees or other things. But having somebody who's going to stand up and essentially eat exactly what you're eating side-by-side with you is critically important. So alignment of incentives financially is one. Another one is really predictable. So we'd actually prefer somebody to have lower but predictable returns than volatile returns. It might be really great sometimes and less so good sometimes because, again, we can probably analyze that better and finance that better. And then finally, I think the one important part that's maybe even less obvious is shared, let's call it, like a cognitive alignment. What that really means is a common understanding of, hey, if Drew says the loans are going to make a 9, and we roughly think it's going to be a little lower, that's a shared perspective. If Drew tells me he's going to make a 12 and we think he's going to make a 7, that's going to end into divorce at some point. We might be able to structure around that in a temporary fashion that might be a trade, but that's not a setup for a long-term success. So I think having that third item is probably the hardest to see from your perspective, is that not everyone has that. Some people might say, you know what, I'm going to make it up to you. I don't really care that we have a difference of opinion. That matters way more than I think people probably appreciate.

Yes. And that alignment is something that comes up with a lot of our partners. So thanks for sharing that. Maybe, Matt, going back to you really quickly. Were there any specific aspects that stood out to you in partnering with LendingClub?

I think for us, just the ease, obviously, as a bank, we're ultimately responsible for what goes on, obviously, on our balance sheet. But handing over a complete package to our operational risk management, our Chief Risk Officer, very easy. model risk management, operations, compliance, everything from complaints to servicing. And I think most importantly, just the credit risk management. I've been -- our bank have been really happy with how that's been managed. I would say it's been better than -- it's been exceeding our expectations in terms of what we've been getting on our balance sheet and the losses that we originally expected. But I would say the easiest way to answer is just the ease. It was very quick. any document that our compliance team needed, our risk team needed, I just -- it was there, handed it right over, and we were up and running very quickly.

That's great. Okay. Let's pivot now to the product fit and experience. Since becoming a bank, we relaunched our capital markets program about 2 years ago. And we've executed over $7 billion in that time. We've partnered with Fitch. We brought them on as a major rating agency, and we launched lender, our new program that caters to insurance capital. So maybe, John, starting with you, BlackRock can purchase a variety of securities and whole loans Tell us about your experience buying LendingClub structured products such as lender? And how do you decide on which product you're going to purchase?

That's a great question. Global fixed income, where we work is quite large. And I think what's not really well known is the diversity of the clients that we manage money for. It spans a wide spectrum. In fact, it spans just about every type of fixed income investor you could possibly imagine. And so really, the challenge for me and my team is really come up with creative expressions that we think are thoughtful from a risk and return perspective. And the thing that we love about partnering with LendingClub is they're agnostic about how they want to deliver products to us as long as they're delivering the credit that we want. And so it's that flexibility and that scalability that really resonates, I think, really well with us. And you talk about the lender platform. Lender is optimized for our insurance clients. It works really well. The structured certificates also work across a wide range of clients in global fixed income. And then even being able to engage in bulk sales of loans or forward flow, we have places to go there as well. And so again, we like the alignment of risks. And I think any investor sitting up here will highlight that. That's super important. But we also like the flexibility, the scalability and the ability to kind of connect with them in areas that really make a lot of sense for us.

Yes. Thank you for that. Ivan, why are consumer loans such a good fit for your investment strategy?

Sure. I think that we found over a long history of doing this that the LendingClub loans are reasonable. They're almost the Goldilocks in the sense that they're in the middle. They're not long and they're not too short. You make enough, call it, P&L from each individual tranche or vintage. And you can stick it in the case of our various pockets of capital into lots of different structures. You could have it in an opportunity fund depending upon which flavor you like. You could have that in something that's generating more income-like strategy or income-like returns for maybe our interval fund or other products. And then to John's point, you can also -- now that the scale and effectively the ratings and others have come along, you can also use that for insurance capital. And because it's not as digestible on average for the average insurance company who might not understand the underlying nuances, we can deliver value to our clients. I'm sure John likewise in terms of understanding that -- bringing that understanding to their less sophisticated insurance clients. So I think the reason why we like it is it's an attractive yield, of course, from a risk-adjusted basis. But because of the nature of it, we can put it in different places. That makes it an interesting repeat opportunity for us. One of the key things that we speak to investors about is that we are trying to do more with the partners with whom we think are excellent. And what that means is we want to do new products, we want to do existing products. We want to figure out how to use different forms of our investor capital to be a good partner for LendingClub because that means that we're going to also be a better partner for them and that mutual respect, that mutual flywheel work better for both of us.

Yes. Thank you. And maybe, Matt, focusing on the experience, our history actually goes back nearly 10 years when you were with another bank who is also buying loans from LendingClub. How have you seen us navigate changes in the environment since that time?

It's a significant maturation process that I've witnessed over the last 10 years. It's pretty remarkable. And I'm thinking primarily just from a risk management framework perspective. Initially, at my prior bank, the losses in some cases were higher than expected. And again, I'm going back 10 years. But I think it's been definitely a lot more predictable and just hearing from Karen and others, the credit risk management is top-notch. There's -- and I think Scott even talked about it, just the data that you all have is unmatched. I was just going to comment, though, just briefly something that John and Ivan said, for us, it is the scalability. That's huge. We have our own personal program, but the weighted average, it's 1.5 years. It's never going to be enough for us to originate on our own. So there's always a place for purchases on our balance sheet. And Ivan Goldilocks was exactly what I was thinking in terms of this asset class, especially if you're keeping yourself to the higher credit, which is what we're doing, you can still get a pretty good yield and relatively low losses, which we've come to appreciate. But just very briefly, I mean, what I've witnessed is just a huge maturation of the risk management framework over the last 10 years, even over the last 3 years.

Yes. And I appreciate you sticking with us through all those times. All right. So our final set of questions here, getting into the outlook. Everybody is talking about the greater economic outlook and general liquidity trends. And would love to hear from each of you how you feel about this asset as you're looking forward. So Ivan, congratulations on the successful launch of your interval fund. Let's start with you.

I think it's a question, of course, we get often from investors. I've been doing my own version of this. Maybe there's somebody in the audience that are asking me about all the narratives around the headlines today. We'll save those for the coffee break. But I think the punchline that we always use is we don't have a monolithic answer to we always -- we like the consumer, we don't like the consumer. In other words, it's like me asking you all, do you like stocks? The answer is I like some stocks, but I don't like all of them, and I'm going to pick this one and that one and maybe not that one. And so we would say we have a fundamental view that it's pretty good. It's probably going to get worse over the intermediate period. We're not investing on that basis. We're really investing on the basis of -- we like the people who originate these loans, these types of loans because of the way they source it, because the way structure it. And look, ultimately, that's our alpha, if you will, is selecting who's good at originating those, not saying we have a macro call that rates are going up or rates are going down or the consumer is really weak or not. I think that we often or at least investors perceive us to, for example, have a view and consumer credit is like going to get dramatically weaker or dramatically better. I think we look and say, no, no, this is always parts of the ecosystem that are attractive. There are some people who are clearly better at it. We're going to try to partner with the better partners. And more importantly, we're going to be a stable partner for them. But ultimately, we would hope that they also change their underwriting when the world gets worse. And in fact, -- if you look back at our history with some of the people that we do the most with, we saw people in '22 change their underwriting dramatically every month because if you underwrote a loan at the beginning of '22 and look backwards, looked very different from middle of the year. And I use that example mostly to highlight that there is no monolithic answer that we like consumer credit in one period of time and we hate it in others. There's always flavors of it to do with the right partners. And so at some level, I'd say the answer is it doesn't matter. Of course, it matters. It makes it a little bit easier, a little bit harder. But I think by virtue of being partnered with the right people that we are going to get the right assets and they're going to have the right partners who are going to be stable, repeatable, reliable counterparts when they need it.

All right. Matt, going back to you from a bank perspective. What trends are -- how are you looking at this asset as you look...

Well, I always think about it from the lens of the consumer and the consumer health. And so I always -- I'm always challenged probably like many people like you are. The headline is debts are all-time highs, debts are going up quickly. Delinquencies are up. But if you look at it, delinquencies are still below historical averages. But one of the most important metrics that I always look at is percentage of disposable income that consumers are spending on debt service. And it's still well below historical standards. I think leading up to the Great Recession, it was somewhere around 17% or 18%. And I think today, it's below 12%. And I'm pretty sure that number is below where it was even pre-COVID. So the health of the consumer, we feel -- obviously, there are some potential weaknesses, but we're feeling okay about -- I think for us and most banks, it's just liquidity and deposits moving forward, right? How do we manage that.

Okay. John, LendingClub recently issued a press release that outlined our $1 billion MOU. How has that been received on your side? And how are you thinking about this asset as you look forward?

Yes. So look, the real benefit for us by issuing that press release was to just raise awareness and raise awareness with -- internally with our own clients. And I think literally the next day or actually that afternoon, we received several inbound inquiries from clients saying, "Hey, wow, this is really interesting. Can you show us how you can deliver the marketplace to us?" And we found that really resonated really well. There's a lot of noise out there, and we felt that this provided a little bit of clarity in terms of how we're thinking about Lending Club, how we're thinking about opportunities in the market and how we want to deliver that durable alpha to our clients.

All right. All right, Matt, we're going to save the last question for you here. What advice would you give other banks who are considering buying this asset?

Buy, buy before you try. I think so many banks have tried to get into this space, and I did at a couple of different banks, and it's very easy to fail fast from a fraud perspective and credit perspective. By buying, getting the experience, I think, just helps for us, especially just an executive management team, a Board, a risk team, just and myself included, right, not a whole lot of experience with the asset class, but by buying, you get the experience, you see the losses come in. But more importantly, you see the risk-adjusted return. And so I always say, buy and it's okay to go slow, right, have a small portfolio, and that's the beauty of the partnership is the ability to scale it up.

Before you try, I like that. What a wonderful way to end this portion. And so just an announcement for kind of what's going to follow. We're having a slight schedule change. So I'm going to welcome Drew back up here to talk about our financial framework. And then we'll open up for Q&A, and Scott will take us with his final thoughts to close this out for the day. So in the meantime, I really just want to thank our panelists for really an engaging discussion, and we'll turn it over to Drew.

All right. Well, not yet. That was great. So first of all, I just learned something, buy before you try, like I am going to use that. I love that. I love that. Thank you, Matthew. All right. So we -- good news travels fast. And so we're speeding up our agenda or we're moving a little bit forward here. We're going to do most things before lunch. We pride ourselves on flexibility. So I'm going to talk about where the model can take us. So first of all, we've already unlocked the power of the marketplace bank model. And so I think as probably most of you know, we acquired Radius Bank in early 2021. When we acquired Radius, it was $2.7 billion in assets. Today, after just over 4 years, we have $11 billion in assets. So that is 4x or quadrupling the growth of the bank in about as many years, really strong performance. This next stat actually surprised me a little bit when I first looked at it. We also looked at tangible book value per share growth over that same period. So when we bought the bank, $6.50, today, $11.95. That's a 14% compounded annual growth rate over that same time period. So I'll put that in a little more industry context in a few slides, but I think very strong performance since we acquired the bank. We still have multiple levers to continue improving returns, and I'll get into each one of these in a second. But in summary, balance sheet growth primarily coming from higher originations, continued marketplace expansion from the performance we've already seen and then continuing our track record of generating operating leverage on higher revenue. So first, doubling originations today versus the medium term. Steve already took you through this slide. But what we're seeing today is a pretty constructive macroeconomic environment despite all the noise that's out there. Unemployment still remains low. Inflation is pretty benign. The Fed is still lowering rates, I think. They just did, hopefully some more. And the yield curve is getting back into a more normalized shape. These are all very constructive for us to continue our originations growth into the future into the medium term. So as we discussed, we're at about $10 billion in annual originations today. We think the core personal loan business can drive another $5 billion to $8 billion in annual originations over the medium term. Now to put that in context, the largest player in the space right now is doing $30 billion annualized. So there is a lot of room for growth and some room for market share improvement as well. Second, we talked about more about market -- major purchase finance, which is probably the first time you've heard some of these details. We expect that to be an outsized growth vector for us, particularly with the entry into home improvement. And we think over the medium term, we can generate $2 billion to $3 billion in incremental originations annually. Now to put that one in context as well, the largest originator in the home improvement space is doing $7 billion annually right now. So we think we have a great opportunity to get into that space, use our capabilities and excel. And then finally, our secured businesses, we expect to contribute another $1 billion in annual originations over the medium term. And that's our auto refinance business and our small business business, which is really an SBA business as well. So we see great opportunity, and we expect that all adds up to $18 billion to $22 billion in annual originations over the medium term. So let's talk about what that does for the balance sheet. So if you -- again, going back to what we just spoke about, since we acquired the bank in early 2021, we went from $2.7 billion to $11 billion, $8.3 billion in growth. Over the medium term, we expect to do it again. We think with that originations forecast and the profile of our bank, we can get the bank size up to $20 billion over the medium term. we're not sacrificing margin when we do that. If you look back at where we were when the Fed was at peak rates, our net interest margin was 5.4%. Since the Fed has dropped rates about 125 basis points, we've moved up our net interest margin to 6.2%. We think as the Fed achieves a more neutral rate of 3% or lower, we can get to 6.5% plus in net interest margin. So that's great growth for a bank balance sheet at exceptional net interest margin. On to the marketplace. So if we go back a couple of years, the marketplace was probably at its most pivotal point when the Fed had just done their historic rate increase up to 5.5%. Consumers were dealing with inflation and we had an inverted yield curve, sorry. At that point, our marketplace revenue margin was 2.8%. Since the environment has normalized and the Fed has started lowering rates, we've expanded that margin by 180 basis points to 4.6%. At the same time, we've moved our quarterly marketplace originations up from $1.2 billion to $2 billion as of this most recent quarter. As we go forward over the medium term, under very similar economic conditions as we are today with the Fed moving rates down to 3%, we think we'll be able to continue expanding Marketplace margin by close to 100 to 150 basis points. At the same time, we expect our marketplace sales to increase from $2 billion today to a range of $2.5 billion to $3 billion, eclipsing the previous high watermark for marketplace sales. And then finally, expenses. This management team has shown a lot of operating discipline over the past several years. We've been growing originations, growing the balance sheet, growing revenue. But at the same time, we've pretty much continuously improved our efficiency ratio over that time, down to 61% this most recent quarter. We're going to continue to make smart investments as we go into the future, including the build-out of home improvement, obviously, more marketing spend to grow originations, rebranding, which we'll talk about more in the future and other tech and other innovations. With those investments, we believe we will still be able to improve efficiency ratio and generate operating leverage over the medium term. So investing for growth and getting more efficient. And then finally, we're going to simplify our financials. I often get -- Scott and I often get asked, you're -- you've been under fair value, you've been under CECL. Wouldn't it be easier to just align under one. And we agree. So we are going to move to fair value starting with new originations in Q1 of 2026. There are several benefits to making this move, but probably the 2 biggest ones are we will have better alignment of revenue recognition with loss -- with the timing of losses, and we'll be able to create consistency across the bank and the marketplace in terms of our financial reporting. Now the graph on the right, which I won't dive into too much, just shows the cumulative timing of earnings under both accounting methods. And the really most important thing to take away is at the end of the day, it's all the same. But the timing is different. Under CECL, you take this large reserve upfront for losses that you haven't incurred and you defer revenue you have earned over fair value, we still book our loans at a discount day 1, but we get that revenue faster, more in line with the timing of losses. So net-net, for a company with our growth aspirations, fair value makes more sense to align across the business. So what does it all add up to? So return on tangible common equity is a metric that we spend a tremendous amount of time talking about amongst the management team and amongst the Board. And we've made a lot of progress over the last several years in terms of improving. In Q2 and Q3, our ROTCE was 12% and 13%, respectively. As we look forward, we see a number of drivers for improvement. So breaking it down, the balance sheet growth and the NIM expansion that I talked about first, we expect to generate 3% to 4% incremental return on tangible common equity over the medium term. The marketplace originations growth and margin improvement, we expect to generate 1% to 2% incremental ROTCE growth. And then operating leverage, which is continuing to make investments, but operating with discipline as we grow, we expect to generate another 1% to 2% in ROTCE expansion. Adding it all up, that takes us to 18% to 20% ROTCE over the medium term. Now obviously, this is all -- we need the economy to continue doing what it's doing. We expect the Fed to lower rates a little bit, but we believe this is highly achievable in the conditions we're experiencing today. So just summarizing it all between near term and long term. First of all, near term, we're going to build on our position of strength. We expect to see originations continuing to grow 20% to 30% year-over-year, and we expect to drive ROTCE up to 13% to 15% in the near term. Over the medium term, more of the same with some of the other growth factors that we discussed, we expect to achieve sustainable, responsible growth, continue that 20% to 30% originations growth over the medium term and get our return on tangible common equity up to 18% to 20%. So we're executing, we're scaling, and we're well positioned for growth. All right. So why invest now? Let's talk about it. So one, pulling back up on that slide, I promised to show again our compounded annual growth rate of 14% on tangible book value per share. We wanted to put that into some industry context. So what we've done here is we've shown Pier 1 and Pier 2, no name spaces, but they are 2 large competitors in the personal loan space. And we've looked at their performance on this key metric over the same time period. Pier 1 set 11% compounded annual growth rate over the same period, pretty good. It's not 14%, but it's pretty good. Pier 2 has actually decreased their tangible book value per share over this same period. not as good. And then if you compare our performance to a traditional bank over that same time period, we estimate that they generated about a 10% growth in tangible book value per share, including capital distributions and dividends, et cetera. So we think very strong performance, whether you're looking at a fintech, fintech bank or a traditional bank peer. So let's talk about what types of multiples that's garnered for us in the market today. We're looking at really 3 key measures here. The 2026 consensus revenue multiple, today's price of tangible book value, it's actually not today's. I think it's October 31, and a lot has changed over the past couple of days. So it's a day or 2 old. And then the consensus estimates for price to earnings in 2026. Us compared to our peers shows that we have a lot of room for potential improvement, and we think that the value is pretty compelling. So with that, a big reveal that you probably already know. We're becoming a buyer. So we announced $100 million stock repurchase and acquisition program today, which we'll begin executing on later this week. Most importantly, with all the forward projections that we've shown you, our internal rate of capital generation is enough to sustain the growth that we've put out there. Today, we stand with excess capital, and so we're going to deploy it. So with that, I'm going to have Scott come on stage. And Giuliano, I'm not going to tell you what near term means.

All right. We'll open it up for Q&A. So I think that everybody was pretty pleased to see the 18% to 20% ROTCE. Can you talk us a little bit more through how you're thinking about rightsized capital levels versus peers?

Yes. So we obviously didn't put out any target capital ratios today, but I want to talk a little bit about how we think about our internal targets for capital. So what we're really driving that off of is our internal stress testing. We're looking at our balance sheet now. We're looking at our balance sheet in the future, and we're running stress testing on that balance sheet now and balance sheet in the future, and we're determining how much capital we need to hold, much like the bigger banks do the CCAR scenario. Based on that, we set our internal levels of capital. Now as balance sheet composition may change in the future, we may adjust those targets as well and where we want them to be. Given we have excess capital today, which we've now said we're going to deploy and we have capital available for growth, the internal targets are lower than where we're sitting today even with the share repurchase. But over time, they'll continue to adjust as we adjust the balance sheet.

No, the other question I was going to ask was going to be on repayment rates. We've been hearing a lot about with rates lower, there's been elevated prepayments from the consumer in various parts of the FICO bands. Can you just talk about how you think about that and how that translates to balance sheet growth and overall returns?

Yes. So I think we said on the last earnings call, we've seen prepayment rates tick back up. They are within the range of historical norms. I'd say the only -- we've been doing this a long time. These rates are usually operate in a pretty narrow band. The only time we saw that really diverge was COVID, where they -- when the stimulus came and they surged much higher and then inflation when people got really tight and they dropped below our normal threshold. So I would say, as you would expect, as rates come down, consumers can save money, so there's an opportunity to refinance. So that's happening, but it's happening within historical rates. And I'd say on balance, we stand to be a net winner. The top-up product we talked about is a great example of a way for us not only to provide a service to our own customers, but also to offer, hey, top up your Pier 1 loan, right, and do it with LendingClub.

It's probably also safe to say when we look across the industry compared to competitors, our prepay rates are fair amount lower, and some of that just has to do with the upfront structuring of the product.

That's right.

Crispin Love, Piper Sandler. First, just going to fair value accounting, can you discuss some of the key determinants there in going that route, some pros versus cons and then expectations for provisioning as you move through '26 and '27 with the changes?

Yes. I mean I think, honestly, one of the biggest pros is being able to explain to investors one type of loan accounting versus 2. And so it's no disrespect to the audience, but it often gets lost between CECL versus fair value and how are these things changing. And our back book is going to stay under CECL for a while. So we're still going to have that dynamic. But moving everything to fair value allows us to more clearly articulate what's happening with the portfolio from an accounting perspective. And I would just note this since you've given me the opportunity to talk about it. We've been under both methodologies for a while. There's -- both are appropriate. Losses show up the same way, whether it's CECL or fair value. So we're not changing anything we've done in our fair value portfolio. Our discount rate was, I think, 7.6% this past quarter. Nothing in this change would change that. We're still booking loans at a slight discount when we put them on the balance sheet. The only thing that's going to change that is improving loan prices. So the core methodologies that we've been using remain the same.

I'd say the other thing I think that is helpful is that our public competition is under fair value. So it also makes our results more directly comparable to others.

Go ahead, Bill.

Bill Ryan, Seaport Research Partners. A couple of questions. First, on the fair value accounting. Obviously, there's some upsides to it. The downside is increased volatility depending on how credit performance and capital markets are doing and interest rates. And I assume there was some discussion about that volatility that it can increase some of the dynamics in the income statement. Could you kind of talk about the internal discussions that you had about the volatility when adopting fair value accounting? And then I have one follow-up question.

Yes, absolutely. So I'd say let's talk about credit first. Between fair value and CECL, there actually isn't any material credit difference. If we see a degradation or improvement in performance, whether it's CECL or fair value, we're going to take that through both accounting methodologies. So credit-wise, we're not creating any more volatility than already existed. Fair value marks, so for example, which would be caused by interest rates or benchmark spreads or prices, there will be some more volatility there. We plan to enhance our hedging methodologies that we have today. So you will see incremental sophistication in how we hedge as we go into 2026. And then capital levels, think of -- you want to have the appropriate amount of loss absorbing capital, whether that's in your allowance or that's in your base capital ratios. And so under fair value, that changes and that you need to hold a little more capital under stress for a loan under fair value than you do under CECL. So we're going to end up with the same amount of protective capital at the end of the day. It will just end up being in a different place.

And one follow-up question. Last quarter, you kind of talked about credit normalization. The credit has been trending much better than you expected. Over what kind of time frame should investors expect that the credit to normalize? Because I know personal loans have a very rapid turnover.

Yes. I think you're referring to the net charge-off rate that we reported in Q2 and Q3, which was about, I think, 3% for the overall portfolio. That -- as I said on both calls, that is lower than we expect to be at run rate because of the seasoning of the vintages and some of the recovery trends that were happening. So a more normalized charge-off rate for our consumer loan portfolio would be 4.5% to 5%. And so I think it will -- I was wrong last quarter, it actually went down and I expected it to go up slightly, but it should normalize back up over several quarters.

Tim Switzer at KBW. A follow-up on the fair value accounting stuff. What were your discussions like with regulators regarding the change? And do they indicate any kind of preference in terms of which method is used? And will it change how they look at your reported capital levels?

Yes. I mean I'm not going to go into kind of our regulatory conversations, but obviously, they're aware that we're making the change. They're aware that one of our other banking competitors is on that model. And I think it's perfectly acceptable. And in many ways, fair value is a more transparent accounting model than CECL. So I don't think there's any issue there. What I think they'll always want to be sure of is we have the appropriate amount of capital, whether it's in our core capital levels or it's in our allowance. And stress testing is really how we get to that, and we share that, obviously, with our regulators on an ongoing basis.

Got it. And now that we have your medium-term ROTCE target, what does that ROE look like at different points of the cycle? There's still some cyclical elements of the business model with the capital markets and consumer credit exposure. So I'm curious, what does that look like maybe in a trough year? And what could that look like in a peak year?

Yes. I mean I think as we grow the balance sheet, this has been one of the key strategic reasons for getting a bank. As we grow the balance sheet, we're going to create more resilient recurring revenue in the form of net interest margin. Marketplace is awesome. It also has volatility to it, and we know that. So the goal would be that we can get that recurring revenue to a spot where we're returning -- we're providing a return to investors at the lower end of the cycle that is still at or close to the cost of capital that's been provided to us. When it's humming, we should be doing much, much better than that.

If I get one more. You just mentioned the 4.5%, 5% loss rate you kind of expect for your consumer products broadly. Does that differ at all from your traditional personal loan versus your purchase finance loans? And do you have to change the underwriting you do for those 2 products?

Well, I'll probably let Scott take the underwriting. But I think the product itself has a lot of similarities. It is a longer duration product, right? And so we were talking about this last quarter with our CECL provision. Since it's longer duration, if you were under CECL, the upfront charge you would take even for the same type of loss content would be higher because of the longer duration, which is also part of why fair value maybe makes sense for where we're going. But net, I think the content is pretty similar.

The performance of the asset is quite similar. We're -- as I mentioned, we're applying all the learnings we get apply to the space and then the strategies that we layer on top of those are tuned to the use case and the channel. But it's quite similar, just tend to be larger, tend to be longer duration.

JP, go ahead.

Just on that last point you made, Drew, about the greater ballast from the recurring revenue. Is there a desired mix that we should think about in terms of terminal levels of how much you hold and how much you sell? I know it's implicit maybe in some of the numbers you gave, but where are you trying to get to?

Yes. I don't know that we have a terminal level to put out there. What I -- I get that question a lot. What I always say is we want to keep originations growing responsibly at a pace that we can feed all of our key marketplace investors like the ones who are just on stage today and hit kind of that 15% to 20% growth rate on the balance sheet I'll say, over the medium term, but for the foreseeable future. At some point, if that starts to slow down, we'll have to make a little bit of tougher decisions on how we allocate. But I foresee us always having an active marketplace with key investors and still being able to use the balance sheet for growth.

Sorry, if this has been covered. Reggie Smith from JPMorgan. Did you guys define medium term? I wasn't sure if I missed that. Okay. My second question, is there a way to contextualize or frame the impact the accounting change is having on your ROTCE? I was excited to see the increase of the guide higher anyway, and it feels like there may be more juice there with the accounting change. And then finally, thinking about discount rate assumptions, there are a lot of them across these lenders. Like how do you arrive at that? And maybe talk about the factors that could cause that to change and why yours may be higher than someone else's?

Yes. That's a lot there. Where do we start? Why don't we start backwards just on the discount rate, right? So the way we determine the discount rate is really through loan sales prices. And I'd probably break it up into a few different components. One is structured certificates is a great example, right, where someone is buying the residual or the bottom piece of the stack and then we have a senior security on top, right? It's very observable what the spread is for senior securities, right? It could be 150 basis points, 300 basis points depending on the market, and we've obviously been coming down. And then there's what is the residual return that the investor is targeting. And so we can break that discount rate into 2 pieces and say, how much is -- what's the required return on the risk, what's the required return on the senior and then watch how those things move to the discount rate. But when you -- it's obviously not up there anymore. But when you look at all the different asset classes and the net asset yield that were up there, there should be a logical sequencing of assets, right? A senior security should never trade at a discount rate -- or spread or discount rate that's tighter than an unsecured consumer loan, right? If that sequencing isn't making sense, then there's other questions to be answered, I think.

The same question was contribution, if any, of accounting change to the ROTCE targets.

Yes. I think in the near term, there are certainly some benefits that come out of that, right? Longer term, we -- or medium term, I should say, using the appropriate language. Medium term, it's -- there's a little bit of benefit, but you're getting closer to steady state at that point where the 2 accounting methodologies really start to converge and it ends up being less meaningful to those ROTCE targets.

For what it's worth, I mean, I feel like you guys were racing with a way you vest on in this kind of levels of playing field versus your competitors moving to fair value. So I think it's cool.

[ Yona ] from Jefferies. So looking at your past acquisitions, most recently, Mosaic, it seems like you've been really investing in the engineering front and then building up that platform so that you can grow, but not necessarily -- what kind of thoughts and discussion have gone into deciding on choosing that route versus directing volume or asset growth? And how do you see that differ as you're thinking about capital growth or these new verticals that you're looking to expand?

Yes, I'll start with this. The increased rate cycle has been very challenging for the nonbank lenders, right? The same way you saw our marketplace margin compress, but that was offset by having the balance sheet. So it's given us the opportunity to look at a lot of companies that were having difficulty kind of navigating through the environment that could be accretive to our strategy and to our road map. The challenge has consistently been expectations of value. And so what we've found ourselves here is that as we look at ways to diversify our acquisition channels to diversify the use cases by applying what we're good at to additional use cases, and to enhance our engagement strategy by adding features and capabilities to our platform. We've just been able to find on multiple occasions, really, really solid technology for companies that couldn't make it through, right? So we're basically able to acquire the tech that in some cases, in the case of Tally, a lot of money went into developing that over many, many years. We're able to pick it up for very, very good value. And as you heard from Lucas, we've got the ability to integrate it within 6 months and significantly accelerate our road map. So we -- I wouldn't call that our exclusive path. It's just so happened that under these market conditions, we've been able to identify repeated opportunities for ourselves to kind of accelerate our strategic road map.

Yes. And I'd say if there's one thing to tie together with that as well is Lukas covering the technology organization and the capabilities, that is a huge defensive moat to what we do, right? We've invested so much in technology, in the funnel technology, the originations technology. A lender can't come in and just replicate that and be ready to go. That has really a big part of what has driven our outperformance versus the industry.

Yes. And to maybe sort of put some dimension around those 4 acquisitions, we're talking about in total for all 4 of those acquisitions, you're looking at $20 million, $25 million taken together. So the relative expense of that versus the benefit we've gotten to drive our business is an enormous value.

Yes. The other thing I'd say is, I think you said it right. We've looked at a lot of M&A, and we haven't found a spot beyond the bank and the ones we've discussed where we felt like we could generate enough shareholder value or fast enough return for shareholders to justify the transaction. Having said that, we'll always keep looking. We've been very disciplined. But also our capital stack is extremely simple. It is just common. So there are other levers out there beyond going out to raise more common to do a deal. There's no sub debt, no preferred, no convert, nothing. So I think we have a lot of flexibility in the capital stack if we ever chose to use it.

Kyle Joseph with Stephens. One more for you guys. Just appreciated the marketplace panel, but I was hoping to get some more color, call it, a capital markets update in terms of investor demand and kind of how you're thinking about the mix shift of marketplace sales and forward flows versus securitizations. Obviously, it's a positive that you expect your marketplace revenue margin to increase, but weighing that with, call it, recent pickup in volatility.

Yes. Maybe I'll start and say, the -- we are focused on quality, durable partnerships. We look to deeply understand what our partners' needs are, what they're trying to get done and set ourselves up to deliver against that. over the medium term. So we are not ourselves engaging in public market securitizations, but we are doing flow arrangements as you've heard us announce several. I'd say what we've been most pleased with is this lender product that has been deliberately structured to attract insurance capital in terms of how the payment flows come through and with the rating attached. And there, the demand has been really, really strong. But I'd say across the whole platform, I'd say we're not constrained by the investor supply of capital.

Correct.

[indiscernible] There's no real issues in investors' minds. It's been around for a while. But I'm curious about how you're thinking about disclosure because right now, on your -- those that you are accounting for in fair value, it's kind of -- it's not apparent on the P&L. It's sort of a contra item in your marketplace revenue. So really 2 disclosure questions. One, come January 1, '26, whenever, will you pretty much have a line item within net revenue that says change in fair value like everyone else does? And then secondly, to take it even further, there's typically 2 components. There's the current period losses and then there's the mark-to-market change. And so that you don't have to dig through schedules kind of what's really in that fair value line?

Yes. So I'd say, one, just to give ourselves a little credit, I think we've been recognized at least by some, maybe many to have some of the best disclosures on credit performance in the industry. And we take a lot of pride at that. We have 1 or 2 slides we joke about that this is like the most expensive slide that has ever been made at LendingClub because we put so much thought into some of these things. And we're going to continue that, right? And we realize that when we get into -- I don't know if it will be January 1, we get into Q1 results for 2026, we are going to adjust some of the disclosures, and we're having that conversation now. We wanted to be very apparent how -- especially since we'll still have some CECL portfolios, how CECL plus fair value are performing on key measures, probably more in the MD&A than anywhere else and then the earnings release. So I won't give you more than that now because we're under construction, but we realize the need and we'll address it.

Vincent Caintic, BTIG. First, thanks for this presentation. I think the details both -- and it was great to get to see the buyer's perspective and actually Lucas' perspective on the technology. I did want to focus on that. The -- so the product set is great. You're able to make the consumer kind of see very quickly how much money they can save and then make the process quick to get the LendingClub loan to pay off the debt. I think one of the key questions as it have been around for a while is to actually make the customer aware to start, to make them aware that there is a LendingClub that once they get the app, they'll be able to do this whole process in 5 minutes and then you'll be able to access the TAM because it seems like the customer is very much in the money to do this. why hasn't there been that much growth in the past since -- they've been in the money. So if you could talk about that, that would be great. And then if maybe where your product is relative to the rest of the competition.

Yes. So you are correct that once -- and I think that you saw in the data that Mark shared that as the user uses and clicks into more of our experiences, they become even more tightly engaged with us. They learn more, we learn more. Why haven't we grown that faster? If you think about our period post bank acquisition, job #1 was taking over issuance through our own bank charter, growing originations, building the online funding gathering, the ability to take deposits at scale. The bank we purchased was great, but it was not designed to attract billions of dollars of digital-only applications. So a lot of our early efforts were around that and applying our industry-leading fraud to the deposit side, all of those pieces. So we really only in the last 2 years, started to assemble this engagement framework and put it into the market. And we've been balancing our investment in that with delivering returns. Drew shared the unprecedented increase in rates put a pinch on marketplace margins. That pinch meant our capacity to invest and get these products out into the hands of our consumers and put marketing dollars behind it for those consumers has been constrained. That is quickly changing, as you can see in our results over the last couple of years. That's why as we talk about next year, we're saying, hey, we are going to put more muscle behind this, and we're going to be really advertising, marketing this broader experience. It's one of the drivers, as Drew talked about, for us moving towards a rebrand next year to just get broader permission, right, inherent in the name that we do more than just lending. We do the full digital banking suite for our customers.

This is Giuliano Bologna from Compass Point. Maybe shifting gears away from a lot of discussion on accounting and assets. But you've obviously rolled out a lot of technology and also some new products on the deposit side and the funding side. But when we think about that, I'm curious when you think about potential cost of capital savings opportunities as you roll out more checking products, the adoption increases, and even as you get more adoption and kind of cross interest from borrowers also having greater exposure to your deposit accounts, is there any opportunity for a better deposit beta or slightly less competitive pricing from a market perspective?

Yes. I'd say it's a great question. It's early days. We have not factored that into how we think about the outlook. In fact, we thought if they had a lot of savings, they wouldn't need to borrow. So this won't be a great source of savings. So we've been -- that's why we shared the data. It's the first time we've put that out that, hey, 13% of our savings accounts are coming from borrowers and the average balance is $10,000, that's great. And we're really just getting started with all that. And same thing would be true with the checking experience is -- as we look to open that up to the broader market and evaluate that, we have the opportunity to acquire new to LendingClub through that checking experience, right? It provides yet another product to be marketing that can bring people in and bring them into our lending ecosystem. And I'd say it's too early to say, but we're very encouraged by the initial data we're seeing there.

Yes. And I'd say on deposit betas, I mean, the checking account, in particular, the goal isn't to become a primary funding source. It's become a primary relationship source, right? And so it doesn't mean that over time, it couldn't accumulate to a spot where it's meaningful. I wouldn't bake that in. In terms of betas, just having done deposit portfolios for a long time, and Mark can jump in if he feels like I get it wrong. But it's -- you often are able to improve your betas incrementally as you go through cycles, right? But during a cycle, you usually are at where you're at. And you can often choose your rate or you can choose your deposit growth, but choosing both is very, very difficult. You need to remain competitive and make sure you're hitting your growth targets as well.

I will say, though, we've been pretty pleased. Level Up was -- our first savings product was, I'd call it, a vanilla high-yield savings account, Level up where you get the rate boost for engaging in good behavior. We shared the market response to that. It's won a bunch of awards. Consumers love it. We have been encouraged as well by the stickiness of those deposits and the behavior we're seeing on the way down in the rate cycle, right? There's something about -- somebody wrote an article that said, "I love LendingClub because it's forced me to treat my savings like a bill. right? I got to pay it every month. I don't want to put $250 in and you see that they're logging in 3 times a month, right, checking am I getting the level up rate, what's going on? So we've been encouraged by that.

If there are no other questions, Scott has a quick -- some closing remarks.

Okay. So on the last thing between you all and lunch. I just want to do a quick recap. I appreciate everybody making the time today. So repeating, one, I hope you've seen today through the new data that we've released, the product suite we've released, more insight into the strategy and our competitive advantages. We are a radically different company. The strategy is very, very clear. It is very compelling. It is working very well, and we're just getting started. We have 5 key competitive advantages that are very difficult to replicate. You actually heard one of our banking partners say, "Hey, it's kind of like yoga, it looks easy until you try it, right? It's very difficult. If you think you can go to a bureau and build an inference model and compete with LendingClub and unsecured lending, you are going to be very, very surprised. And many, many banks have tried and very many big banks have tried, including some base here in New York, and that's because of these 5 key advantages. And all of this comes together in what we believe is sustainable growth at expanding margins. The math is simple, path is clear. So I appreciate everybody's time and attention today. Lunch is waiting for you outside. So happy to catch up one-on-one out there. Thank you.

And that concludes LendingClub's Investor Day.