LendingClub Corp Q2 FY2025 Earnings Call

Good afternoon. Thank you for attending today's LendingClub Q2 2025 Earnings Conference Call. My name is Tamia, and I will be your moderator for today's call. I would now like to pass the conference over to your host, Artem Nalivayko, Head of Investor Relations. You may proceed.

Thank you, and good afternoon. Welcome to LendingClub's Second Quarter 2025 Earnings Conference Call. Joining me today to talk about our results are Scott Sanborn, CEO; Andrew 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 e-mail. 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-provision net revenue and return on tangible common equity. You could find more information on our use of the 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 had a fantastic quarter, delivering 32% year-on-year growth in originations and 33% growth in revenue. We more than doubled our earnings, generating $38 million in GAAP net income compared to $15 million last year. And as a result, we achieved an ROTCE of nearly 12%, well north of the 8% target we set at the beginning of the year and delivered well ahead of schedule. Beyond the strength of our financial performance, we continue to outperform on prime credit, sustaining our 40% improvement versus the competitive set. We extended our forward flow agreement with Blue Owl for up to $3.4 billion of new originations. We closed our first transaction with BlackRock, enabled by our recently launched Fitch rated structured certificate program, and we introduced LevelUp Checking, a first-of-its-kind checking product offering cash back rewards for on-time loan payments. Let me hit on a few of the highlights of our performance across the business. I'll start with originations volume. We said we were going to drive growth through marketing and product innovation, and we did just that, generating meaningful originations growth, both sequentially and year-on-year, while realizing better-than-expected marketing efficiency as we return to channels including direct mail and online advertising. We also delivered strong credit performance, thanks to our vast data sets, advanced models and decades of experience. We're not only consistently beating our competition, but we're also beating our own expectations. And while we continue to closely monitor the macro environment, our data is demonstrating the effectiveness of our underwriting and the resilience of our borrower base. Our consistent credit performance and status as a provider of choice continues to generate strong loan investor demand, which over time leads to higher loan sales prices and increased marketplace revenue. We just announced the extension of our funding partnership with Blue Owl for up to $3.4 billion in structured certificate transactions over 2 years with up to $600 million closing within the next several months. And last quarter, we launched our Fitch rated structured certificate program to enable improved loan sales prices by attracting lower cost pools of capital, including insurance. We successfully closed the first of these transactions with a top global insurance company in Q1, and I'm happy to announce today that we recently completed an inaugural $100 million transaction with funds and accounts managed by BlackRock, and we hope to partner with them on more transactions like this in the future. Now I want to spend some time talking about our innovation efforts built on our mobile-first platform, each designed to more regularly engage our members and build multiproduct relationships. That's because engaged multiproduct members have better credit outcomes and higher lifetime value. We launched LevelUp Savings last year, offering a higher rate to depositors who make a regular habit of savings. To date, we've reached $2.7 billion in LevelUp Savings deposits with almost 80% of those accounts meeting the threshold to earn the highest rate. It's also driving engagement with these members logging in 30% more often than those with our prior savings product. Now LevelUp Savings was designed specifically for savers who have cash to put to work. And even so, we're finding that over 10% of new accounts are being opened by our borrowers who are coming to us for loans, which is indicative of their desire to engage more deeply with us. Building on the success of LevelUp Savings, we launched LevelUp Checking specifically for our borrowers, along with paying 1% interest on qualifying balances, it has 2 key features. First, it is 1% unlimited cash back on everyday purchases like gas and groceries. Here, we're rewarding our members for using money that they have versus money that they borrow thereby incenting good financial behavior. Second, and this is unique to us, we're offering 2% cash back for on-time personal loan payments from a LevelUp Checking account. We're rewarding borrowers for their financial discipline while allowing us to benefit from a stickier relationship. While it's still early, the initial results are encouraging. We're now opening 6 times more checking accounts per day than prior to launch, with nearly 60% of these accounts being opened by borrowers. Next up on our product roadmap is an enhanced version of DebtIQ, which will move beyond credit monitoring to include card-linking, in-app payments, and automated payment strategies. DebtIQ will give our members transparency and control over their debt in an easy-to-use command center. We're currently in beta testing in a limited fashion as we work towards a broader rollout later this fall. In closing, this quarter marks an inflection point in both our strategic and our financial trajectory, where the work we've been doing over the past several years is translating into tangible results for both our members and our shareholders. I'm energized by the momentum we have going into the back half of the year and the many opportunities in front of us. I want to close by thanking the LendingClub team for their continued outstanding work and focus. And with that, I'll hand it over to you, Drew.

Thanks, Scott. This quarter marks my 3-year anniversary at LendingClub, and this has been the most exceptional quarter yet. Let's walk through the details of our results. We originated $2.4 billion in loans in the quarter, which was a 32% increase year-over-year. The increase in originations was driven by the successful execution of our paid marketing initiatives and new product enhancements. If you turn to Page 12 of our earnings presentation, you can see the originations broken down across the 4 funding channels. We increased the dollars retained in both our held for investment and extended seasoning portfolios. Given the demand for seasoned loans, we expect to direct more volume into the extended seasoning portfolio as we move through the second half of the year. As shown on Page 13, total revenue for the quarter was $248 million, up 33% from the same quarter of the prior year. As a reminder, our business has 2 primary revenue streams. First, we have the capital-light Marketplace business that generates fee-based revenue through loan sales to funding partners. The Marketplace business is highly scalable, capital-efficient, and allows us to serve more borrowers across the credit spectrum while generating in-period revenue. The Marketplace business represents the vast majority of our noninterest income. Second, we have net interest income from loans held on the balance sheet. These loans generate a strong recurring revenue stream funded by customer deposits and our own capital. We generate approximately 3 times the earnings over the life of the loans for those held to maturity compared to selling through the marketplace. Since the bank acquisition in 2021, we have quadrupled the size of the balance sheet, which is now almost $11 billion in total assets. Taken together, these 2 revenue streams complement each other. The highly scalable nature of the marketplace enables rapid growth during periods of strong demand in the capital markets, and the bank balance sheet provides a durable recurring revenue stream to sustain the business through all economic cycles. Now let's dig into these 2 components of revenue. First, noninterest income was $94 million in the quarter, up 60% over the same quarter of the prior year. This increase was driven by more originations sold through the marketplace and improved loan sales pricing. Marketplace investors continue to value our best-in-class credit performance and the resulting attractive asset yields. As Scott discussed, our outlook on credit performance continues to improve and the mark on the held-for-sale portfolio improved by approximately $11 million. Looking ahead, we are very pleased with the trajectory of the Marketplace business and look forward to building on the momentum as we move through the balance of the year. Now let's move on to net interest income, which was $154 million in the quarter, up 20% over the same quarter last year. This is another all-time high for us as we continue to grow and optimize our balance sheet. In addition to the strong balance sheet and revenue growth, net interest margin improved again to 6.1%. Margin continues to expand as we are repricing our deposit portfolios in response to previous Fed cuts. To date, our repricing beta on deposits has been nearly 100%. We expect the balance sheet to continue growing and net interest margin to maintain around current levels until the Fed cuts interest rates further. Now please turn to Page 15 of our presentation, which covers noninterest expense. Noninterest expense was $155 million in the quarter, up 17% compared to the prior year. As we foreshadowed last quarter, the largest driver of expense growth was marketing spend, which was up 26% compared to the prior year, enabling a 32% growth in originations. We are harnessing the power of our marketplace bank model to deliver significant operating leverage with revenue growth of 33%, outpacing expense growth by nearly 2 to 1 over the past year. Taken together, pre-provision net revenue, or revenue less expenses, was $94 million for the quarter, up 70% from the same quarter last year and above our guidance range of $70 million to $80 million. To summarize the earlier comments, the large improvement over the high end of our range was driven by stronger-than-forecasted originations and an improvement in fair value marks of approximately $11 million related to credit outperformance, which may not repeat in future quarters. Now let's turn to provision on Page 16. In the quarter, we more than doubled retention of held-for-investment loans versus last year. Despite that, provision for credit losses was only up modestly to $40 million compared to $36 million in the same quarter of the prior year. The increase in provision from higher retention was largely offset by better-than-expected credit performance. Across all vintages, stronger credit performance resulted in a provision benefit to our pretax income for the quarter of approximately $9 million. You can see evidence of the credit improvement on Slide 17, as the lifetime loss expectation for the 2024 vintage came down. As a reminder, the 2024 vintage carries higher qualitative reserves compared to the previous vintages, given its longer remaining life. Excluding those qualitative reserves, the 2024 vintage is expected to have lower losses than the previous vintages. It's also worth noting, we did not make any material adjustments to our qualitative reserves in our allowance this quarter. The net charge-off ratio for our held-for-investment loan portfolio improved further to 3% in the quarter, down from 6.2% in the same quarter last year. The net charge-off rate for the quarter is unusually low as it benefited not only from improving credit performance but also from dynamics around the timing of recoveries and the age of the portfolio. We, therefore, expect net charge-off rates to move modestly upward from these low levels as the more recent vintages season. All of these dynamics have already been provisioned for on a discounted basis and are reflected in our allowance. Now let's move to taxes. Taxes in the quarter were $15.8 million or 29% of pretax income. The higher effective tax rate this quarter was due to a change in California tax law, which will lead to a lower statutory rate in the future but had the impact of reducing our deferred tax assets by $2.3 million. The good news is while we will have some variability in our effective tax rate from quarter to quarter, our long-term statutory tax rate expectation is now reduced to 25.5% from 27%. The combination of originations growth, credit outperformance, strong marketplace demand, and margin expansion drove an exceptional quarter. Net income came in at $38 million, up 156% compared to the same quarter last year. This translated to a diluted EPS of $0.33 per share and tangible book value per share of $11.53. This quarter represents a step function improvement in our financial performance that we expect to continue. We are executing well and are coming into the second half of the year with significant momentum. For the third quarter, we anticipate growing originations to $2.5 billion to $2.6 billion, up 31% to 36% compared to the same period last year. We are continuing our push in the paid marketing acquisition, and we have seen early success, and we'll look to build further on the growth coming out of the second quarter. We expect PPNR in the range of $90 million to $100 million, up 37% to 53% compared to the same period last year. The growth was driven by higher marketplace volumes, stable loan pricing, and growing net interest income. This also factors in expenses arising from investments in our product roadmap and marketing channel expansion to support continued growth. We are pleased to have already exceeded the $2.3 billion originations target and the 8% ROTCE Q4 exit rate target we set at the beginning of the year. To that point, we are increasing our ROTCE target to a range of 10% to 11.5% for the third quarter, reflecting top line momentum translating to bottom line earnings for our shareholders. In the fourth quarter, we typically have some seasonal headwinds to origination volumes. Despite that, we expect overall results to be similar to our third quarter guidance.

The first question comes from Bill Ryan with Seaport Research Partners.

I normally obviously don't say congratulations, but you guys have really held the line on credit the last couple of years, and it's obviously paying dividends right now. First question I have is about competition, it's coming up a little bit more frequently given you've seen very high volumes come out of the private or the personal lenders, a lot of capital being allocated to the sector. There are some new products being introduced, one of your competitors talked about an interest-only product, at least for a few months when they take out the loan. Personally, I've gotten offers from Bread Financial for a personal loan, and more recently, one name, which I must say, I kind of picked that one a little bit personal. But if you could kind of maybe give us some idea of what you're seeing on the competitive front, any obstacles into the future, any risk that you're seeing out there?

Thank you, Bill, for recognizing our efforts in credit. It's an aspect that often reflects its value over the long term rather than immediately. We're currently witnessing positive outcomes in our results, including our balance sheet performance and the new partners we are onboarding, as well as the prices at which we are selling. On the competitive side, our results show that we achieved a 32% year-on-year growth in volume and a 20% quarter-on-quarter increase, while still maintaining marketing efficiency, despite returning to less optimized channels without refined response models or creative strategies. Overall, we are confident in our competitive capabilities. We understand how to succeed in this market, possessing a diverse range of products and customer engagement strategies that effectively attract our desired clientele. Our infrastructure supports this goal. We anticipated a competitive landscape, and it's important to note that this market has always been competitive with new entrants appearing regularly. While these newcomers often enter with strong offerings, they tend to retreat over time once they realize the complexities involved in establishing a successful model and achieving expected returns. At this stage, we are not facing any concerns regarding our competitive standing or our capacity to sustain our current growth trajectory.

Okay. I have a follow-up question regarding marketing efficiency. Many have been accounting for higher marketing costs in their models, but this quarter turned out better than expected when looking at marketing as a percentage of marketplace originations and total originations. Can you provide some guidance on how we should approach modeling this moving forward from the current levels?

Yes, you should anticipate continued increases as we have indicated. It did rise a bit this quarter. Additionally, you can expect to see growth in originations. I think our marketing efficiency may not maintain these levels as we increase volumes, but we have made a solid start to our expansion and are eager to continue it.

Yes. A little color is we leaned more heavily into reaching current members through some of the new channels and got really strong response there as we ramp up the prospecting efforts. We are maintaining our roughly 50-50 new versus repeat. So about half of our business comes from prior customers. We're maintaining that as we lean into the new channels, but we're seeing strong response from those new channels from our prior customers.

The next question comes from Crispin Love from Piper Sandler.

First, on credit quality, definitely a very strong quarter, improving metrics, a lower provision following the qualitative adjustment last quarter. So can you share your thoughts as you sit today? Are you seeing similar trends versus 3 months ago on the last call, but just a better macro environment compared to that volatility early in the quarter? And then secondly and relatedly, would you expect any impacts from the end of the student loan moratorium?

Thank you for the question, Crispin. At the end of last quarter, we observed strong credit performance from consumers, and this trend has continued to improve throughout Q2. The increase in provisions at the end of Q1 was primarily due to qualitative factors, where we anticipated economic signals and made adjustments accordingly. This change was not reflective of the core performance we are witnessing in the consumer portfolio. As we conclude this quarter, the environment seems more stable, and we did not significantly alter the qualitative reserves. Instead, we are recognizing the benefits from the stronger consumer performance.

Yes. Regarding student loans, we have proactively reduced our exposure to that segment more than a year before repayments resumed. We implemented various programs to monitor the situation and serve our customers' needs. Since payments resumed, we have not observed any significant changes. The next concern may be wage garnishment, but only about 1% of our customers, who are supposed to pay student loans, are not doing so. Currently, we are not seeing any impact on performance from that group, so we feel quite confident.

That definitely clarifies the guidance on the credit side. Regarding the ROTCE targets, you are aiming for double-digit ROTCE in the third quarter. As mentioned during the call, you were earlier predicting over 8% for Q4, but it seems there are no specific Q4 targets currently available. Looking ahead, do you anticipate maintaining that double-digit ROTCE target for Q4 and beyond, or are there other factors to consider over the next few quarters?

Yes, that is our expectation. I mentioned it earlier. We expect the financial momentum to continue, and we anticipate similar levels of ROTCE in Q4 as we had in Q3. We will provide a more official guidance as we approach the fourth quarter.

The next question comes from Vincent Caintic with BTIG.

First question, could you clarify your approach to providing guidance? You've shown strong performance lately, consistently exceeding your prior guidance. For instance, you surpassed the fourth quarter volume forecasts even in the second quarter. I'm curious about what factors enabled this significant outperformance. Additionally, as you consider your origination volume guidance for the third quarter, are you factoring in a potentially weaker macroeconomic environment? I'm trying to understand if there's some caution included in that estimate. Regarding your PPNR guidance, it appears to remain unchanged in the third quarter compared to the second quarter. You've mentioned elements such as the $11 million in fair value marks and a provision benefit of $9 million. You also referenced an increase in marketing expenses in the press release; could you share how much this might affect PPNR? Lastly, I would like to know if there's any conservatism included in that guidance.

Drew, I'll let you take that. Just to reiterate, when we started the year, we communicated that we anticipated more ambitious growth beginning in the second quarter, as that’s when seasonality works in our favor. We expected our loan sales prices to provide the kind of unit economics needed to invest in those growth areas. While our Q1 guidance was roughly in line with Q4, we shared that number to indicate we expect an upward trajectory moving forward. Although Q4 to Q1 numbers are consistent, we foresee growth in volumes throughout the year, particularly profitable growth, which would enhance our bottom line and return on tangible common equity. That’s why we presented that figure. Additionally, despite the welcome stabilization in the market, there were many fluctuating forecasts at the beginning of the year regarding interest rates, inflation, and unemployment, and considering all those significant changes from quarter to quarter...

Yes. To add to that, at the end of Q1 when we provided guidance for Q2, there was uncertainty following Liberation Day about what the future would hold. Fortunately, the situation became clearer midway through the quarter, which positively influenced our results. Even when accounting for one-time events, we performed slightly better than our PPNR guidance. There will likely always be some one-time adjustments needed because of the nature of our business. This quarter marks the first time we've actually provided a ROTCE guidance for the next quarter. We feel that our visibility into the upcoming quarter is improving compared to the past year and a half, and we aim to offer even more visibility going forward.

I have a question regarding the marketing dollars.

Yes. And I think marketing dollars probably without totally guiding to the number, probably the increase next quarter, similar to slightly higher than the increase you saw this quarter.

Okay, that's very helpful. I appreciate the context. Regarding the ROTCE comments, it's great to see the guidance increase. With your CET1 ratio at 17.5%, that's quite high. If you were to normalize that ratio, I imagine your ROTCE guidance would be even greater. I'm curious about your thoughts on that 17.5%. If you were to allocate that capital, what would your priorities be and what time frame are you considering?

Yes. If you reflect on the time since we've been a bank, we're about a little over 4 years in. We've transformed the balance sheet over that 4 years. So it's been pretty substantial growth over that time. We're looking to continue a high level of growth with the balance sheet and with the business, and we want the capital to be able to do that. We're very conscious of the dilution that we create for shareholders, and we've been able to not raise common at all over those 4 years. And I think we're very proud of how we've grown tangible book value per share for shareholders, and we're going to look to continue to do that and use the capital we have for that growth versus having to go back out and raise more capital in a dilutive fashion.

Okay. Okay. Maybe sneaking in one more. I guess to that point, when you think about the incremental loan that you're putting on and the returns on that, I guess you do have a slide on that, but that's sort of a high teens or 20% ROTCE for every incremental loan you're putting on?

No, the marginal ROTCEs on our personal loans have been kind of 25% to 30% range for several quarters. And our other businesses perform at similar levels. So we think the marginal returns that we're putting on the balance sheet are very attractive for shareholders.

The following question comes from Kyle Joseph with Stephens.

Congrats on a good quarter. I just want to get your thoughts on kind of the competitive environment and how you envision that influencing your mix of originations, whether HFI or vice versa. Obviously, there's a lot of capital out there and that makes the marketplace loans attractive, but I think one of the big competitive advantages for you guys is your bank and ability to balance sheet those. So just kind of how you're thinking about the world, how you're thinking about the mix in terms of originations going forward?

Yes. We aim to grow our originations at a rate that allows us to expand our balance sheet while meeting market demand and achieving favorable economic conditions. We believe that the synergy of these factors will deliver attractive returns for investors based on our base balance sheet, in addition to our banking and marketplace business, which will elevate those returns in comparison to the industry. Therefore, it is crucial for us to continue increasing originations. Currently, there is strong investor demand, and we intend to support both balance sheet growth and satisfy the investor community that is seeking more loans.

The next question comes from David Scharf with Citizens Capital Markets.

A question on just the demand side of the marketplace in terms of the consumer. Obviously, originations were outstanding, and it sounds like marketing efficiencies as well. I'm wondering, do you have any sense in maybe some historical context as well, do you have any sense whether prime card borrowers are becoming more willing to engage with you or respond to marketing, the more that there are headlines around rate cuts that are muddled? I'm just curious if historically, if those prime borrowers do not feel like there's any daylight towards getting more conviction on rate cuts, then they're definitely more willing to pull the trigger on refinancing?

Yes. It’s challenging to pinpoint the direct driver. Overall, the need and market potential are at an all-time high. The main barrier has often been a lack of awareness—not just awareness of refinancing as an option, but crucially, awareness of their actual credit card bills. Our research indicates that half of consumers do not know the APR on their cards, and among those who think they do, half are incorrect. Consequently, we frequently find that when we present an offer, like 14%, to customers who chose not to take it and ask them why, they often respond that it seems too high. When we ask what they believe their credit card interest rate is, they typically guess around 8% or 9%. After guiding them to locate their actual rate, they discover it is 21%, which often surprises them. The key challenge is ensuring that people truly understand this. If you haven’t already, I suggest you try to find your credit card APR right now and see how easy it is. It often isn’t at the beginning or end of a lengthy statement; it’s buried in the middle. For us, once we break through that initial barrier with consumers, we witness strong repeat behavior, as the process becomes much easier the next time. With a better product structure and rate, DebtIQ empowers us to demonstrate to people that if they hold $8,000 on a card with a 21% interest rate, this is the cost of interest. By taking a different approach, they can secure a much better deal. We believe that overcoming this awareness challenge represents our biggest opportunity, and it drives our efforts with DebtIQ.

Got it. No, that's helpful, clearly top of funnel is very strong. One quick follow-up on the charge-off rate. I didn't quite catch. I thought you had mentioned 1 or 2 factors that may have kind of artificially depressed it this quarter. I'm not sure if it was the timing of recoveries or the sale of charge-offs. Can you just kind of repeat the factors?

Yes. It primarily depends on the timing of both older and newer vintages. Currently, we are seeing a higher level of recoveries from older vintages that previously had charge-offs. Consequently, the recovery figures for this quarter, and for the last couple of quarters, have been higher than we might anticipate moving forward. Additionally, we have been adding more loans to the held-for-investment (HFI) category, resulting in a somewhat younger HFI portfolio. A younger portfolio generally leads to a lower charge-off rate, which can increase as the portfolio ages. These are the natural dynamics of the personal loan portfolio, and it's crucial to consider these factors when comparing charge-off rates across the industry.

Yes. And I think the other piece there, those are the artificial things. Obviously, the organic trend is positive. So those are on top of it. And that's one of the reasons we put those annual vintage disclosures out there so you can see what have we reserved for and what has happened, right? And so you'll see most notably, our most recent 2024 vintage, you'll see our reserve coming down because of the observed performance.

The next question comes from Reggie Smith with JPMorgan.

I'm curious, I know you mentioned last quarter that you were going to lean into direct mail and online ads. I was curious if you can frame how your mix of applicants have changed? Like what proportion of your incoming applications are coming from these channels now? It sounds like you haven't optimized it fully. But kind of where can that go? And then how should we think about those channels changing your conversion, your quality of borrower, APRs? Any way to kind of frame out or directionally point us in the direction of how that will play out on the income statement and in your approvals?

Yes. To begin with, there was a significant factor contributing to the quarter-on-quarter growth, in addition to ongoing product experience and innovation. We're still in the early stages as we work on optimizing response models, targeting, creative aspects, pricing, and everything related to that channel. Our growth is intentional for the reasons you mentioned. We understand the performance differences across channels and how to price and underwrite accordingly, but that data is continually changing. Therefore, we are careful as we proceed. Regarding the impact on the profit and loss statement, we typically see a 50-50 split between new and repeat applicants. As we increase new applicants, we generally see a corresponding rise in repeat. This quarter, we had a slightly higher percentage of new applicants due to some of the new channels we explored. However, the main factor affecting the profit and loss is the relative efficiency of these new channels, which may be lower initially but will improve as we gain experience with them. Another important aspect is how much we retain, as that influences how we recognize acquisition costs. This will also affect the efficiency, rather than just the total dollar amount.

The following comes from Tim Switzer with KBW.

I wanted to follow up on some of your guys' comments about the new deposit programs you guys have put in place, the new deposit accounts. So what's the kind of like incremental funding improvement that gives you 100 basis point kind of basis there? And then as the Fed begins to cut rates, does that spread widen?

In terms of this, the focus is on ensuring that the strategic driver of this product is more about engagement with borrowers than about funding. We know we're already very effective at attracting customers to LendingClub because we provide a compelling savings opportunity, and they continue to choose us due to the ease of doing business and the improvements over time. We believe, supported by industry data, that having a checking relationship will enhance reengagement with us and increase lifetime value. Instead of borrowers getting a loan, paying it off, and only interacting with us years later due to life changes like having a baby or getting married, they will be engaged with us continuously. With LevelUp Checking and DebtIQ, we can monitor what’s happening in their financial lives regarding both income and debt, which allows us to offer relevant opportunities. The key driver is the expectation of higher lifetime value and increased cross-selling of additional products, with less reliance on funding. Nonetheless, the overall cost of this product will be significantly lower than what we're currently paying for high-yield savings accounts, even though the rewards remain competitive in the market. There will be a higher cost for active personal loan borrowers who receive cash back rewards on their personal loan accounts. Interestingly, about one-third of those who signed up for the account are previous LendingClub borrowers who do not currently have an active loan, which indicates their loyalty to the brand and their desire for a banking experience with us.

Yes, Tim, to summarize the financial aspects, we do not anticipate any significant impact on lowering interest expenses or funding costs on the balance sheet in the near term. However, there are several other advantages, and Scott mentioned that there is likely potential in the longer term.

As for your guidance for a more flat NIM, assuming no rate cuts, what kind of benefit do you think we would see if we do get 1 or 2 rate cuts in the back half of the year? And with these new products you're bringing in, like is 100% beta sustainable for a few more quarters? Just curious your thoughts on that.

If the Fed doesn't change rates, achieving 100% beta is very straightforward for us. We're already positioned for that. We maintain a growth strategy for our deposit franchise, so we will be careful about lowering rates while ensuring we achieve the deposit growth necessary to expand our balance sheet. This means we may not reduce by the full 25 basis points with the next move, as we will be more strategic about it. While it should move down in line with the Fed, it likely won't be at the full 100% beta.

And keep in mind, the other benefit we will get will be depending on the reason the Fed moves down and how that changes the outlook, but if we see movements in the 2-year curve, which is an important metric for loan buyers, we should get that through in sales price improvements.

I'd now like to turn it back to the LendingClub team to answer a few questions submitted by retail investors.

Thanks, Tamia. So Scott and Drew, we do have a couple of questions here that were submitted by some of our retail investors. The first question, given all the innovation over the last couple of years in some of your acquisitions, you've talked about a rebrand in the past. Any updates for us there?

Yes, we believe that as we introduce more products like DebtIQ and LevelUp Checking, having a broader name than LendingClub would be advantageous since lending is part of the current name. We are actively working on this now, bringing an agency on board to handle the research and development. In terms of timing, we expect this to align with the launch of LevelUp Checking next year. Currently, LevelUp Checking and DebtIQ are only accessible to our existing members as we stand them up and optimize the experience. By next year, these will be available as open market products, and we think a new brand umbrella could be very beneficial in the medium term. So, stay tuned.

Thank you. You answered the second question, which is an update on the mobile-first multi-platform offering, but any additional insights there?

We've mentioned that for an institution of our size, it's unique that we have complete control over our mobile stack. This isn't a white label service where we have to file changes; we can fully customize it for our customers and our offerings, allowing us to create more seamless experiences. We're currently live on that platform, which supports both Checking and LevelUp Savings. For those of you using our products, if your CD expires at a traditional bank and you'd like to roll it over into a savings account, it typically involves paperwork and potentially opening a new account. In contrast, at LendingClub, it's just a few clicks. This multi-product experience is already well established on the deposit side, positively impacting our balance retention and CD rollover rates. With LevelUp Checking, we are beginning to integrate checking and lending. If you have a loan with us, you'll earn additional rewards. This means you can deposit your loan into your LendingClub checking account and access the funds instantly. We're actively putting our products together, and our initial focus has been to ensure our core offerings function effectively, which is currently happening. The next goal is to introduce an engagement layer that encourages users to return, followed by launching new products that work seamlessly with the existing offerings.

All right. Perfect. That's all the questions we had. So thank you. With that, we'll wrap up our second quarter earnings conference call. Thanks for joining us today. And if you have any questions, please e-mail us at ir@lendingclub.com.

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