LendingClub Corp Q1 FY2025 Earnings Call

Good afternoon. Thank you for joining today's LendingClub First Quarter '25 Earnings Conference Call. All lines will be muted during the presentation, with a chance for questions and answers at the end. I will now turn the call over to Artem Nalivayko, Head of Investor Relations, to start. You may proceed.

Thank you, and good afternoon. Welcome to LendingClub's first quarter 2025 earnings conference call. Joining me today to talk about our results are Scott Sanborn, CEO, and Drew LaBenne, CFO. You can find the presentation accompanying our earnings release on the Investor Relations section of our website. On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via email. Our remarks today will include forward-looking statements, including with respect to our competitive advantages and strategy, macroeconomic conditions, platform volume and pricing, future products and services, and future business and financial performance. Our actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are described in today's press release and earnings presentation. Any forward-looking statements that we make on this call are based on current expectations and assumptions, and we undertake no obligation to update these statements as a result of new information or future events. Our remarks also include non-GAAP measures relating to our performance, including tangible book value per common share, pre-provisioned net revenue and return on tangible common equity. You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation. And now, I'd like to turn the call over to Scott.

Thank you, Artem. Welcome everyone. We delivered a strong start to the year. We generated $2 billion in loan volume, a 21% increase over last year, reflecting continued demand from borrowers and loan buyers, and positive initial results from our marketing channel expansion. We've now crossed $100 billion in lifetime loan originations with over 40% of that realized in the past five years. Total net revenue grew 20% to $218 million and pre-provision net revenue grew 52% year-over-year to $74 million. This financial outperformance came from both parts of our business. In our marketplace, we further improved loan sales pricing, thanks to our consistent and continued credit outperformance, unique structures and ongoing purchases by banks. In our own bank, we continue to grow our average interest-earning assets and are now benefiting from lower deposit costs, thanks to the success of our new LevelUp Savings product combined with the more favorable rate environment. Beyond the strength of these results, we also secured an investment-grade rating from Fitch for our first-rated certificate deal, closing a $100 million transaction with a top insurance company; we acquired the intellectual property and select talent behind Cushion, an AI-powered spending intelligence app that will further enhance our mobile experience and feature set; and we took advantage of depressed San Francisco real estate prices and our bank balance sheet to invest in the new headquarters at a fraction of the pre-pandemic cost. This was another strong quarter where we grew, executed well, and made meaningful progress against our vision. Let's get into the details, starting with credit. We saw outstanding performance in our portfolio with year-over-year delinquency and charge-off rates significantly improving. We've remained disciplined on underwriting with a credit box significantly tighter than pre-COVID and a continued focus on higher-quality borrowers. We are, of course, carefully monitoring the macro environment, and we increased our qualitative provision this quarter to be prepared for a scenario where unemployment rates increased to 5.3%. Our track record on credit through multiple environments, our status as a profitable nationally regulated bank that is the largest holder of our own loans, along with our ability to deliver innovative loan investment structures, all continue to drive investor demand. This has translated to a fifth straight quarter of improved loan sales pricing, which were up over 200 basis points year-over-year. Restructured certificates program, which has crossed $5 billion since launch, has clear benefits for private credit managers. These benefits help support higher loan sales pricing, while providing LendingClub with a risk remote security without the need for CECL provisioning. We closed multiple new certificate transactions in April at stable prices, and we maintain a pipeline of additional interest from new buyers. In Q1, we built on the success of the program by obtaining an investment-grade rating from Fitch for our first rated structured certificate deal. The rating supports higher loan sales prices, with LendingClub continuing to earn origination and servicing fees. This first transaction closed with a top insurance company, unlocking access to the industry's more than $8 trillion in assets. Bank purchases in the first quarter remained consistent, and we continue to develop a pipeline of new buyers in search of a return to historic bank participation levels. As we move through this period of broader economic uncertainty, we are uniquely positioned to leverage our many tools along with our status as a preferred counterparty to deliver profitable originations through a combination of marketplace sales and our own balance sheet capacity. I'll now turn to how we're growing in this environment. And while a personal loan can be used for more than debt consolidation, there is a historically large credit card refinance opportunity that we are especially focused on penetrating. Through a combination of product and experience innovation and marketing, we're making great progress against our strategy with compelling proof points that it's working. We have begun testing our way back into a number of marketing channels to accelerate our growth. Initial results are in line with our expectations, and we plan to continue to optimize and expand over the coming quarters. New members we acquire have an amazing experience. We save them money, improve their credit score, and simplify their financial life through a seamless process that requires no human intervention 86% of the time. It's no surprise that our NPS score for this experience is an extremely high 81 points, and that 83% of our members say they want to do more with us. That's where our mobile app comes into play, where we're not only reducing servicing costs, but also increasing interaction and issuance. Our Debt IQ offering, still early in its evolution, is already driving nearly 60% higher logins for those enrolled. What's more, enrolled members are driving a 30% increase in loan issuance. We're currently working on new Debt IQ features to drive wider adoption, deeper engagement, and even more issuance. That includes incorporating the card tracking and payments technology we acquired with Tally at the end of last year. Next up will be to incorporate the AI-powered spending intelligence functionality we gained through the acquisition of the intellectual property behind Cushion, an app that helps members track bills, payments and subscriptions. We're also continuing to improve and differentiate our core personal loan offering and functionality. For example, we launched TopUp last year to allow our members to easily refinance their existing LendingClub loan and add an additional balance to it. We've now enhanced the product to allow members to top up their non-LendingClub loans, making it easy to refinance away from the competition. So, as you can hear, we have multiple tools to drive continued efficient growth. While we don't have a crystal ball and we acknowledge the uncertainty around the environment, we are confident that LendingClub is fundamentally strong and well-positioned to deliver value to customers, loan investors, and shareholders alike, thanks to a historically large addressable market, a balance sheet at scale generating attractive returns, a strong capital and liquidity position, leading credit performance enabled by our distinct data advantage and technology platform and a reputation as a partner of choice in our asset class and an incredibly talented team dedicated to delivering real value to our more than 5 million members. With that, I'll turn it over to you Drew for more details on the results and our outlook.

Thanks, Scott. As Scott mentioned, we were above our guidance on both key measures and credit performed exceptionally well. Importantly, we added reserves on a qualitative basis to account for heightened macroeconomic uncertainty, which manifested at the end of the quarter. Specifically, we increased our provision by $8.5 million and decreased the fair value of our extended seasoning portfolio by $2.6 million, both pre-tax. Without these adjustments, the net result would have been nearly $20 million of net income instead of the $11.7 million that we've reported. We believe it prudent to increase reserves in the face of macroeconomic uncertainty, but having said that, the underlying momentum of the business is strong and expected to continue in the second quarter. So, with that additional context, let's go into the detailed results. We originated nearly $2 billion in the quarter, which was a 21% increase year-over-year. Originations were driven by the successful execution of our paid marketing initiatives, new product enhancements and strong demand for our loans. If you turn to Page 12 of our earnings presentation, you can see the originations breakdown across the four funding programs. Improving marketplace economics continue to enable us to reinvest and retain more of our high-yielding held-for-investment loans. We also increased retention in our extended seasoning portfolio given the success of that program to date and expect to direct more volume into this portfolio as we move through the year. In the second quarter, we expect to retain roughly half of our total originations between the held-for-investment and extended seasoning programs. As shown on Page 13, total revenue for the quarter was $218 million, up 20% from the same quarter of the prior year. Now, let's dig into the two components of revenue. First, non-interest income was $68 million in the quarter, up 17% over the same quarter of the prior year. This increase was driven by better loan sales pricing, which has improved in each of the last five quarters. This improvement was partially offset by higher loan prepayments impacting the servicing asset value and the previously mentioned impact of qualitative factors impacting the net fair value adjustments line. Now, let's move on to net interest income, which was $150 million in the quarter, which is an all-time high and up 22% over the same quarter last year. The increase was primarily driven by continued growth in our balance sheet and further optimization of our funding costs with the introduction of LevelUp Savings and the removal of our highest-cost legacy deposit relationship in the fourth quarter. Growing this source of recurring revenue has been a primary focus and we are pleased with the progress thus far. On Slide 14, you can see our net interest margin moved up to 6%. As we indicated last quarter, the main driver of the incremental improvement was reduced deposit funding costs, as well as a lower mix of cash in interest-earning assets. We believe net interest margin will remain around this level until the Fed takes further actions. I want to take a moment to provide additional perspective on how the impact of credit flows through the various parts of the income statement for loans held-for-investment under CECL and loans held-for-sale under fair value. In both cases, the average yield in the NIM table excludes credit losses. In the case of held-for-investment loans, these losses are captured in the provision using the CECL methodology. For held-for-sale loans, the losses come through net fair value adjustments, which reduce non-interest income. For this quarter, loans held-for-sale at fair value were yielding 12.05%, representing only the coupon on these loans versus our discount rate of 7.4%, which is the current expected yield of this portfolio, net of credit losses. These credit losses and other adjustments appear as a reduction in the net fair value adjustments line within non-interest income. As we grow our extended seasoning portfolio, this will become more impactful to our financials. Now, let's turn to Page 15 of our presentation, which covers non-interest expense. Non-interest expense was $144 million in the quarter, up 9% compared to the prior year, almost half of which was driven by our investment in marketing. Expenses came in approximately $4 million under our expectations due to several items, including slower hiring, higher deferred marketing expense and other one-time items. For Q2, this spend will catch up, and we expect to see another increase in marketing expense. We have created significant operating leverage as demonstrated when comparing the 20% revenue growth to the 9% increase in expenses over the past year. Taken together, pre-provision net revenue, or revenue less expenses, was $74 million for the quarter, up 52% from the same quarter last year and came in above our guidance range of $60 million to $70 million. Now, let's turn to provision on Page 16. Provision for credit losses was $58 million during the quarter compared to $32 million in the same quarter of the prior year. The increase was primarily due to higher day-one CECL as we more than doubled retention for held-for-investment loans to $675 million. As I mentioned earlier, the provision was also higher as we increased our economic qualitative allowance for losses. We estimate our allowance corresponds to an assumed 5.3% peak unemployment rate, which gives us additional reserves if the economy enters a downcycle. You can see this impact clearly on Slide 17 as the 2024 vintage has the highest lifetime loss estimate, solely due to higher levels of qualitative reserves due to the longer remaining life of the vintage. You can also see that the earlier vintages have stable credit performance relative to the estimates we provided last quarter. For the entire portfolio, credit continues to perform well as evidenced by the net charge-off ratio for our held-for-investment loan portfolio of 4.8% in the quarter, down from 6.9% in the same quarter last year. For the consumer portion of the portfolio, the net charge-off ratio was 4.7%, down from 8.1% in the same quarter last year. For the quarter, EPS was $0.10 per share and tangible book value per share was $11.22. Now, let's move on to guidance. We are executing well and are coming into the quarter with a lot of momentum. For the second quarter, we anticipate originations of $2.1 billion to $2.3 billion, up 16% to 27% year-on-year. We are continuing our push in the paid marketing channels as we enter the seasonally favorable second and third quarters. We expect PPNR in the range of $70 million to $80 million in the second quarter, up 27% to 46% year-over-year. We are expecting revenue growth from higher volumes and stronger net interest income, with expenses rising from investments in our product roadmap, marketing channel expansion and our people to support continued growth. Looking ahead to the fourth quarter and excluding any deterioration in macroeconomic conditions, the underlying business momentum also has us on track to achieve our fourth quarter originations and ROTCE targets. With that, we'd like to open it up for Q&A.

Absolutely. We will now open the line for questions. The first question is from Bill Ryan with Seaport Research Partners. Bill, your line is now open.

Thank you, and good afternoon. I'll begin with a broad question followed by a more specific one. Could you provide us with an update on current investor demand and pricing in the marketplace, especially considering the changes that have occurred over the quarter and into early April?

Yes, Bill. I'll begin, and Drew can jump in as well. Despite the noise in the broader environment that we recognize since April, we feel confident in our current outlook. We are maintaining our pricing strategy, ensuring discipline in our structure and credit. As we stated in the call, the transactions we planned for April went smoothly and were executed at the appropriate price. Our credit metrics are looking very strong, as reflected in the data we've shared. Additionally, we have a growing pipeline of new buyers, including interest in the rated products we've released and more banks entering the pipeline. It's worth noting that while there has been some volatility in the securitization markets, we have positioned ourselves to avoid the uncertainties associated with that through our arrangements and structures. The sentiment among investors is somewhat variable day to day, but for now, we're not feeling any adverse effects. We are optimistic about meeting our increased origination targets and sustaining our pricing unless some significant news dramatically alters the market perspective, but as of now, everything looks good.

Okay. Thanks for that color. And just second question on the PPNR guide for Q2, it was $70 million to $80 million, a little bit below consensus of $83 million. And if I kind of read in between the lines of what you said during the call, it sounds like that's stepping up the investment in marketing kind of in preparation of building up your volume. But it also sounds like there could be an offset on the provision line as far as EPS goes.

I think you mostly have the right idea regarding the PPNR guide. We're anticipating an increase in revenue, and on the expense side, we plan to invest in expanding our marketing channels. Additionally, we'll see the higher technology spending and people investments that we've been discussing come through in Q2. All of these factors are included in the guide. As for the provision line, credit conditions are currently strong, and we expect that to continue in the near term, barring any significant change in the environment. We'll evaluate qualitative factors at the end of Q2, but we made a significant adjustment at the end of Q1 to account for that. So, we'll see how things play out at the end of Q2. However, the quantitative aspects of our provision, particularly regarding our own credit, look very promising.

Okay. Thanks for taking my questions.

Thank you. The next question is from the line of Giuliano Bologna with Compass Point. Your line is now open.

Hi, good afternoon. Congrats on another successful quarter. One thing I'd be curious about digging into and kind of getting your perspective on is, if you look at the guidance for 2Q on origination volume, it's, yeah, arguably increasing faster than I predicted based on where things were last quarter. And it's already been kind of pretty close to what you're kind of implying for the 4Q run rate or at least the 4Q threshold in terms of $2.3 million-plus. I'm curious when you look at that, I mean, how should we think about the trajectory as you're continuing to ramp up marketing spend? It seems like it's putting on a very good trajectory relative to the 4Q guide and outlook. And, I'm curious to have any puts and takes and, obviously, considerations for the macro uncertainties.

I believe you are correct, Giuliano. What we mentioned at the beginning of the year is that we recognize these channels are effective, but we haven't utilized them recently. We need to rebuild our entire dataset, which means for a few quarters, efficiency might be low as we intentionally expand our efforts to refresh the response models. We're making solid progress, and we understand the market's presence and its requirements. Looking at our Q1 results, without the qualitative adjustments, we would have surpassed a 6% ROTCE with $2 billion in originations. In terms of our forecast for Q2, we are nearing the lower end of our target for Q4, which gives us confidence in our growth path. The primary consideration is how the environment will look when we reach that point. We believe we are well-positioned due to buyer demand, balance sheet strength, market size, early results from our marketing strategies, and our product development plans. Overall, in a favorable environment, we expect to perform exceptionally well, and even in a challenging environment, we are still prepared to achieve strong results.

That's very helpful. When I calculated the numbers, I arrived at 6.4% or 6.3% for ROTCE adjusted for those other items this quarter, which is clearly moving much closer to your goal of over 8% for the fourth quarter. I'm curious about your marketing spend; do you have a rough estimate of how much you advance the growth in marketing spending in any given period, or is it more influenced by market conditions regarding how quickly you increase that marketing spend?

This quarter, most of the increase in marketing spend occurred at the end. As Scott mentioned, this incremental marketing investment is currently less efficient than where we expect it to be in the long term as we refine our models. We anticipate a similar trend in Q2, with originations projected to rise and additional marketing spend as we continue to develop our channels. By Q3 or Q4, we are aiming to be much closer to optimizing that spending alongside origination volume. Despite being less efficient, we maintain a long-term perspective. We are coming off historically low acquisition costs due to recent optimizations. Even with these new channels, which are less efficient, we feel positive about the overall unit economics in the current environment. We are satisfied with the initial results and believe there is potential for further improvement.

That's very helpful. I appreciate it. And maybe one question, hopefully not duplicating anything, but, I'm curious on the bank side, if you're seeing continued interest from banks, and then in terms of growth potential from bank buyers and then how that weighs against the significant demand from a lot of your non-bank buyers out there, and how you kind of balance those opportunities?

Yeah. I mean, the bank buyers who we had in place in Q4 remain in Q1, and we're expecting them to continue buying through the rest of the year, unabated. So that's I think very positive. We had a couple of new bank buyers enter into the pipeline for potential future acquisition. We're still talking to other banks to come in as well. I'd say, certainly probably the tariff announcement gave everyone some pause to rethink things, but we think the bank buyers will continue to come in as we go through the year and go forward.

I'd say those buyers, as we've mentioned before, the good thing about them is once they commit, they tend to stay loyal unless there's a sale of the institution or a regional banking crisis. It takes time to get them on board, and it's challenging to predict exactly when that will happen. We feel optimistic about the pipeline and the discussions we're having. However, predicting the timing is more difficult for us. We've noted that some banks have rejoined the platform, with some taking longer than anticipated and others coming in sooner than expected. It can be tricky to assess this based on their internal processes.

That's great. I appreciate it. And, I'll jump back in queue.

Great.

Thank you. The next question is from Vincent Caintic with BTIG. Your line is now open.

Good afternoon. I appreciate the opportunity to ask my questions. My first question is a follow-up regarding the guidance related to PPNR and origination volume. You have consistently surpassed your loan origination volume and PPNR guidance, similar to what we saw in the first quarter. Your discussions appear to be increasingly positive, and it seems you're planning to increase marketing expenditures and growth initiatives for the second quarter, which should aid performance for the rest of the year. When I examine the origination guidance, it seems somewhat conservative. I would like to understand what factors contribute to this conservatism, whether they are macroeconomic or other influences. If current trends continue in a stable environment, what could we expect those numbers to look like? I’m trying to gain insight into the reasoning behind the conservative stance in your origination guidance. Thank you.

Yeah. So, I guess, I wouldn't call our originations guidance for Q2 conservative. Q1, yes, we beat, but on an overall percentage basis versus the total, I wouldn't call it out of bounds. So, I think we gave a broader range in Q2 than we gave in Q1, given that some of these vehicles are newer and really knowing what the response rate will be, take rate, offer rate, loan size, all of that is a bit more in question. We gave a bit of a broader range, but I wouldn't call the overall growth rate too conservative. On PPNR, maybe Drew, you can just talk about what drives us to the top of the range versus the bottom of the range in the quarter.

Yeah. On PPNR, at least from the revenue side, the top end of the range is really going to be driven by hitting the high end of the origination guidance and pricing continuing to come in stable, which we expect to happen. I think some of the factors that could put it to the lower end of the range would be obviously originations coming in a bit lower in the range and also if there was some reason to take qualitative factors again into consideration at the end of Q2. Not what we're expecting right now, but certainly there's still uncertainty in the environment as we go through Q2.

Okay, understood. And then, on the pricing, so you spoke about your first rated structured security sale to an insurance company. Could you kind of give a flavor for how much better the pricing is and how much demand there is for that?

We definitely saw an improvement in pricing during that transaction, approximately 30 basis points on the first sale. There is a strong demand for the product from insurance companies, and we are currently working on another transaction. It would be beneficial if the capital markets stabilize a bit more to facilitate another one of those transactions. As we approach the end of this quarter or into the third quarter, I believe we will successfully initiate more of these transactions.

I think 30 basis points to 50 basis points price above the standard is probably about right to expect.

Okay, great. Sorry, one last question from me. Could you discuss your capital levels and remind us of your target for those levels as well as your plans for share repurchases, especially with the stock currently trading below your book value? Thank you.

Yeah. So, the capital levels continue to remain strong. We haven't put out target capital levels, but certainly, we have room within our existing capital and liquidity to keep growing the balance sheet well above the levels we're at today, and we'll look and we're holding that capital to be able to do that going forward in the future. I think, for share repurchase, it's certainly an option that is available to us. We have not obviously done it to this point. We would like to keep the capital for growth, but it will continue to remain in the consideration set.

Okay. Got it. Helpful. Thank you very much.

Thank you. The next question is from Tim Switzer with KBW. Your line is now open.

Hey. Good afternoon. Thank you for taking my questions.

Hey, Tim.

I was looking for a quick clarification regarding the increase in the loan reserve. I understand much of it was based on qualitative factors and that you adjusted the unemployment rate in your scenario. Can we assume that this reflects the macroeconomic changes we've observed since March 31? And if we don't see any worsening trends from now, should we expect there to be no further adjustments to the reserve?

It was at the very end of the quarter when we made this decision, coinciding with the announcements for Liberation Day. We determined that we needed to increase the qualitative factors. This includes the uncertainty created by Liberation Day. If everything had remained stable at the end of Q2, we would have relied on the external forecast provided by Moody's, as many other banks do, to assess their scenarios and decide whether we needed to include more uncertainty or if it was already accounted for. If the situation stays stable, I can't guarantee we wouldn't incorporate more, but we would review the scenarios. If they remain stable, we might not need to make any adjustments.

Okay. Got you. And, sorry if I missed this earlier in the call, but your servicing fees were a bit lower this quarter. Was that primarily due to the prepayments you guys mentioned, or are there other kind of, like, one-timers in there? And should we expect it to get back to kind of that $18 to $20 million run rate?

Yeah. Prepayments were the biggest factor there, so you should see some rebound in those levels as we get back into Q2.

Okay. Great. And the last question I have is, your outlook for lower deposit costs, obviously, pretty good trends in Q1, but I believe partially driven by the exit of that larger customer you guys have, but what are the expectations going forward?

I think what you saw from Q4 to Q1 was the significant improvement we expected, which increased the net interest margin to 6%, and we are very pleased with that. Without any further actions from the Fed, we likely won't see dramatic changes in our funding costs moving forward. Any improvements would be relatively small in the short term. However, we believe the net interest margin will likely remain around these levels, possibly improving slightly as we progress through the next few quarters.

There are a couple of things happening. We exited a higher cost deposit relationship, and with the launch of LevelUp, we had the ability to reprice on our side. This provided us a good lever to grow balances while also reducing costs. However, I agree with Drew that, at this point, since we plan to continue growing the balance sheet, any further downward movement is likely dependent on the macro environment and the actions of the Fed.

Got it. Very helpful. Thank you, guys.

Thank you. The next question is from Crispin Love with Piper Sandler. Your line is now open.

Thank you. Good afternoon. I appreciate you taking my questions. First, can you discuss how loan demand has been from consumers so far in the second quarter amid the recent volatility? Have you noticed any changes in behavior or has it been pretty similar to what you've seen recently? In general, Q1 is typically a slower season, while Q4 and Q1 are also a bit slower. In Q2, we usually see a seasonal pickup, so we would have expected a modest increase in originations from one quarter to the next, all else being equal. However, the larger increase is mainly due to our product and marketing initiatives. When considering how our consumers and products will perform in various economic conditions, I believe the underlying use case remains strong. Generally, when we engage with consumers and suggest actions that could save them money and improve their FICO scores, they respond positively. Interestingly, when there is uncertainty in the outlook, we tend to see a stronger response, as people often pull back on discretionary spending and their savings rates begin to rise. Overall, we have observed a more favorable response to our new outreach efforts than we initially anticipated, and I would say the overall signs look positive. Great. I think that's all really helpful. Last question for me. You called out the structured certificate transaction with a major insurance company. Can you discuss the insurance opportunity broadly as being a buyer of loans over time? What that could look like over the intermediate or long term? And how big you think that opportunity could be over the next few quarters or even years?

I believe there is a significant opportunity in the insurance market. Many of the transactions we are currently engaged in with asset managers involve a considerable amount of insurance funds. While we will continue collaborating with our partners, there's also a chance to approach insurance companies directly with this product. Different insurance companies have varying needs for utilizing capital, and they typically require a rating to achieve optimal capital efficiency for a significant portion of their investments. Therefore, offering this product opens up that market for us, which presents tremendous potential. One aspect to keep in mind is that with the unrated structured certificate, we have benefited from holding that senior security on our balance sheet, thanks to its risk weighting, yield, and the enhancement it brings to our balance sheet. However, if we choose to sell the rated product, we forfeit that senior security. Thus, we will need to find a balance between these two structures, whole loans, and other methods for selling loans in the market.

Yeah. I think another way to think about it is, we can sell whole loans to banks because that's the form they prefer it in, and we're typically getting the best price. We can sell certificates to the private credit guys where we keep the senior note. That's a price below that. The insurance sales price, the rate deal is in between the two, but you are selling the whole loan and not taking the certificate. So, it's sort of you're getting a better price, but you're not holding the A-note. So, it's basically another tool to have in the toolkit. I'd say if we see more success with banks, we may do on balance slightly less of this. We see less success with banks, we might do slightly more of it.

Great. Thank you. I appreciate all the details and color there.

Thank you. There are no further questions in queue. I would now like to turn it back to the LendingClub team for some questions submitted via email.

All right. Thanks, Joel. So, Scott and Drew, we do have a couple of questions here that were submitted by one of our retail investors. The question is, so in the decision to buy a building, how did you think about using that capital versus using it for something else like share buyback, for example?

Yeah, sure. I'll take that one. For us, this decision to buy the building in San Francisco made all the sense in the world. The amount of capital we use or we would use to renew our current lease is about the same as the amount of capital we would use to buy the building on the balance sheet. So, you can think about that as about less than $10 million of leverage capital on the balance sheet to purchase the building for $74.5 million. So, a pretty efficient use of capital. And even under conservative assumptions, the impact on net income of us to own versus lease is about the same and we have upside in terms of rental income and appreciation on the asset over time. So for us, we think it makes a lot of financial sense and we're very excited to be owners.

All right, great. Thank you. I think we've covered all of the questions. So, with that, we'll wrap up our first quarter earnings conference call. Thanks for joining us today. And if you have any questions, please email us at IR@lendingclub.com. Thank you.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.