Scott Sanborn: Yes, just a thing to think about is the prepayment speeds over the last couple years have changed pretty dramatically. So the duration on the ‘21 vintage is actually fairly short, because consumers had enough excess liquidity that they were paying down faster and that’s really normalized up to through till today.
David Chiaverini : Got it, thanks for that. And then last one for me, appreciate the guide on expenses, ex-marketing the 115 to 120. Kind of zooming in on the marketing expense, most recent quarter, you know, $20 million. Is it fair to assume the new origination guidance, if we’re at the top end of that guidance range, then we could be north of $20 million. And then if we’re at the low end of that guidance range, it could be roughly the same of $20 million. Any commentary on the marketing expense going forward?
Drew LaBenne: Yes, I think you’re thinking about it right, you know, assuming the same marketing efficiency, which is a good assumption that, that math should hold.
Scott Sanborn: Yes, that’ll hold until, you know, once we really get back in growth mode, we’ve obviously optimized right now for the lowest cost channels and you know yet we are also maintaining our historical balance of new customers versus repeat members, right? So we’re still investing and building the membership base today. So when we get back into growth mode and we go into higher cost channels, there’ll be some upward movement on that. But we won’t do that. I just want to come back to your question on pricing. I think there’s a little maybe tick down in pricing in Q4, but as Drew said in his prepared remarks, we’re really pleased with the amount of demand we’re seeing for the programs we’re offering. Our goal right now from here is to optimize price.
We don’t see a lot of pressure on price, because we’re not really going to sell below what we’re selling at today. So where that would show up is volume or not. And for us to be doing more volume, we’re going to, you know, meaningfully more volume, we’re going to look for better pricing.
David Chiaverini: Great. Thanks very much.
Operator: Our next question comes from John Hecht with Jefferies. Please proceed.
John Hecht: Hey, guys. Thanks very much. Just a couple questions in the structured certificate program. I mean, I think you’ve given us sort of a mix into the near-term. I mean how do we think about the use of that relative to other, call it liquidating outlets over the course of ’24, if rates are where they are versus with rates drop? And then what does, kind of, a NIM trajectory look like thinking about those different scenarios?
Drew LaBenne: Yes, so I think for ‘24 it’s a little early, I think, to call the ball on how much we’re going to allocate to this program. Our initial goal when we set it up was to get multiple buyers in and get demand up for the program, which I think we have now accomplished, and then start to work on price. As we go into ‘24 and we think about how we’re going to allocate capital and how we’re going to allocate balance sheet, it will be a function of obviously demand, but also price that we’re getting through the various structures and will seek to optimize based on price and return on capital as we go through there. So it’s — I think we need more visibility into ‘24 before we’re making that final allocation, but look to come back on the next call with more details.
As far as NIM, I mean, obviously the structured certificates given that they’re pretty risk remote in terms of taking a loss, they come with a with a thinner coupon, which is going to bring NIMM down, but from a you know they also come with no provision, so we’re making a trade here where we’re going have a little bit, we’re going have some pressure on NIM, but we should have lower provision over time as well.
John Hecht: Okay.
Drew LaBenne: Just as a reminder I think it’s — I would say just as a reminder, I think it’s probably clear from the presentation, but we have a 20% risk weighting on those securities right now. So as we’re going into next year and we’re thinking about our capital levels, that potentially gives us some more latitude to think about where our targets should be from a leverage and a risk-based capital ratio.
John Hecht: Yes. And then on that topic, you guys mentioned 20%, whatever risk adjusted, waiting for the structured certificate program. Is that what we should think about what it would be in terms of the regulatory capital ratios or is that something that can change over time?
Drew LaBenne: That is, as we are booking these [Indiscernible] these securities, they are coming with the 20% risk weighting as far as our, for example, our CET1 capital. You know, there are certainly situations where credit significantly deteriorated. That could go to a 50% risk weighting or I guess 100% risk weighting, but assuming our credit outlook is, you know, holds, then they’re very efficient from that perspective.
John Hecht: Okay and then last question, just kind of on the front end of the funnel, I mean you guys cite you know a big kind of pool of unsecured debt at fairly high rates of interest? You know, so a growing TAM for you. I’m just wondering kind of in the application side you know are you in terms of like the characteristics of applications for loans and kind of the funnel approval rates and this and that, is there anything you can point to in terms of trend changes or characteristics that are developing?
Scott Sanborn: Yes, I mean we’re — I’d say mostly coming from us, consumer demand remains intact, right? They’re continuing to see their credit card balances move up, and they’re seeing their — the size of their bill move up in proportion to that plus their rate. So on the demand side, it remains strong. We have moved even more of our origination to that use case and away from other alternative use cases that would just result in providing people more cash, given that we’re anticipating the potential for continued strain and/or stress due to the inflationary environment. We are overall, we are tighter overall on the front end in terms of who we’re allowing in. That said, you know, some of the things I touched on is the experience we’re working on and plan to have ready for when we resume growth will be the ability to get approved for a personal loan at the same time as you’re approved for a bank account, have the ability to service your loan in a mobile app, and within that mobile app also be able to manage your credit card debt.
