OnDeck Capital's disappointing first-quarter results have provided the clearest evidence yet of just how quickly institutional investors have soured on marketplace lending.

While industry watchers have been warning for months that lenders were struggling to find buyers for their loans — or at least buyers' willing to pay attractive prices — OnDeck's weak earnings report late Monday illustrated the speed and extent of investors' retreat.

OnDeck executives said on a conference call Monday that the volume of loans sold to investors plunged to 26% in first quarter, down from 40% just three months earlier. They warned that volume is expected to decline even further this quarter, to around 15%.

The abrupt pullback took a huge bite of OnDeck's first-quarter earnings, as the company was forced to hold more loans on its balance sheet, depriving it of gains on loan sales and compelling it to set aside more cash for anticipated losses. The firm reported a $12.6 million quarterly loss and signaled that it does not expect much improvement before next year.

The results seemed to stun shareholders. OnDeck's stock price was trading at an all-time low of $5.37 late Tuesday, down 34% from Monday's closing price. The New York-based lender's shares debuted at $20 in December 2014.

During a conference call with analysts, OnDeck executives said that the investors who buy the company's loans fall into two camps. Investors in the first group plan to hold the loans to maturity, and their interest in purchasing from OnDeck has not waned.

The second group of institutional investors buys the loans with the aim of securitizing them, using leverage to magnify their returns. "So this quarter," said Chief Executive Noah Breslow, referring to sales to securitizers, "it went down almost to zero." He added that more than half the loans sold in the fourth quarter went to this group.

OnDeck said that it could have sold more of its loans to investors during the first quarter, but did not because the pricing would have been unfavorable.

The reasons for the rapid retreat by institutional investors are hard to pin down with precision, but several factors likely contributed.

First, some investors seem worried that more borrowers will start defaulting on their loans, though the percentage of OnDeck loans that were at least 15 days delinquent actually dropped in the first quarter.

Marketplace lending is still a young industry. "So it's hard to know," said Mike Taiano, an analyst at Fitch Ratings, "how those loans will perform in a stressed environment."

Second, pricing in the securitization markets has become less favorable in recent months across a range of asset classes, including marketplace lending.

Third, the yields that investors can earn from the sector have been shrinking. At OnDeck, the effective interest yield was 34.5% in the first quarter; that was down from 37.6% in the same period a year earlier, though it was up slightly from the fourth quarter of last year.

"We expect the rate of decline to stabilize," OnDeck Chief Financial Officer Howard Katzenberg told analysts.

OnDeck is not the marketplace lender to feel the negative effects of the credit contraction.

Last month, industry leader Lending Club disclosed that it was raising the interest rates it charges to borrowers for the third time in six months, part of an effort to compete for investors. Lending Club does not report its first-quarter earnings until Monday, but investors seem to be bracing for the worst. In heavy trading, Lending Club's shares were down more than 10% late Tuesday, to $7.11.

Another leading platform, Prosper Marketplace, recently parted ways with Citigroup, which had been purchasing large volumes of Prosper loans with plans to package them into bonds and resell them.

Some observers expect the marketplace lending sector to contract rapidly in response to the diminished demand among purchasers.

"I suspect you're going to see some massive layoffs coming in the next quarter or two with some of these platforms," said Don Davis, managing director at Prime Meridian Capital Management, which invests in the marketplace lending sector. "Or if they don't do that, some massive red ink."