03e64d3b eb72 455f 8d4c 9375b677f3e8
LendingClub
Third Quarter 2023 Results
October 25, 2023
Disclaimer
Some of the statements in this presentation, including statements regarding our competitive advantages, macroeconomic and business factors, are subject to change.
LendingClub Corporation (NYSE: LC) is the parent company of LendingClub Bank, National Association, Member FDIC.
Award-Winning Member-Focused Digital Marketplace Bank
Members
4.7+ Million
Average Customer Review
Members 1 4.7+
Originations 1 $90+ Billion
Net Promoter Score (NPS) 3
Originations¹
the ascent
A MOTLEY FOOL SERVICE
BEST BANKS
2022
AMERICA'S BEST BANKS 2022
Award-Winning Member-Focused Digital Marketplace Bank
Newsweek
GO BankingRates
BEST ONLINE BANK
GO BankingRates
TOP 100 BANKS
2022
Best Overall Checking Account
TOP WORK PLACES 2022-2023
The Problem We’re Solving
43% of American households carry over LendingClub’s 4.7+ million members have already come to us to access lower-cost credit. We serve a broad range of borrowers, including those with an average income of over $100K and a high FICO (700+ avg.), but they also have high debt.
$1.3 trillion of revolving debt, paying an estimated $133 billion in fees and interest in 2022 alone – up 23% over the prior year. 83% tell us they want to do more with us!
Total Addressable Market & Customer Value Proposition Has Never Been Greater
Record High Outstanding Revolving Consumer Credit
1 2
| | | | |
|---|---|---|---|---|
|$1,350| | |
|$1,250|$1.3T Total outstanding revolving consumer credit (August 2023)|
|$1,150| |
|$1,050| |
|$950| |
|$850| |
|$750| |
|Aug 08 Aug 09|Aug 10 Aug 11|Aug 12 Aug 13|Aug 14 Aug 15|Aug 16 Aug 17|Aug 18 Aug 19|Aug 20 Aug 21|Aug 22 Aug 23|
Record High Credit Card Revolving Interest Rates
| 21% | |
|---|
| |21.2% Commercial bank average interest rate on credit card plans (August 2023)|
|19%|
|17%|
|15%|
|13%|
|11%|
|Aug 08 Aug 09|Aug 10 Aug 11|Aug 12 Aug 13|Aug 14 Aug 15|Aug 16 Aug 17|Aug 18 Aug 19|Aug 20 Aug 21|Aug 22 Aug 23|
Strategically Positioned for Long-term Success
| LendingClub¹ | Fintechs | Banks | |||
|---|---|---|---|---|---|
| Economics | Ability to efficiently serve a broad range of customers | Industry-leading marketing efficiency; 4.7M+ members | √ | √ | X |
| Economics | Capital-light, high-ROE marketplace earnings stream | $63.8M Non-Interest Income | √ | √ | X |
| Economics | Profitable earnings via loan portfolio | $137.0M Net Interest Income | √ | X | √ |
| Economics | Lower-cost deposit funding | 4.19% avg. cost of funds; 37% annual deposit growth | √ | X | √ |
| Scale & Scalability | National digital-first consumer footprint | Multi-award-winning digital experience | √ | √ | X |
| Scale & Scalability | Vast data advantage from serving millions of PL customers | 150B+ cells of data; 2K+ attributes; 15+ years | √ | X | X |
| Scale & Scalability | Unencumbered by high-cost branches or legacy systems | Tech-first highly automated marketplace platform | √ | √ | X |
| Scale & Scalability | Bank balance sheet growth | 52% CAGR since acquisition | √ | X | √ |
| Resiliency | Recurring revenue stream | 85% recurring revenue (NII + Servicing Fees) | √ | X | √ |
| Resiliency | Stability of funding | Low-cost deposits and diverse investor funding | √ | X | √ |
| Resiliency | Clear and consistent regulatory framework | Strong control and compliance infrastructure | √ | X | √ |
3Q23 Highlights: Achieved Financial Targets
| 3Q23 Guidance Targets | Actuals | Commentary | |
|---|---|---|---|
| Q3 Total Originations | $1.4B to $1.7B | ✔$1.5B | Total originations of $1.5B within guidance range driven by approximately: |
| ■$500M of marketplace whole loans | |||
| ■$450M for structured certificate program | |||
| ■$250M Held for sale extended seasoning | |||
| ■$300M of Held for Investment loans | |||
| Q3 Pre-Provision Net Revenue (PPNR)^{1}$ | $40M to $50M | ✔$72.8M | Pre-Provision Net Revenue of $72.8M, above high end of guidance driven by $19.3M of non-recurring revenue and expense benefits^{2}$ |
Strong Capital & Liquidity Position
MAJORITY INSURED DEPOSITS
86%
$6.1B of $7.1B total deposits are insured compared to 57% average for all FDIC institutions as of 06/30/23 1
AMPLE CASH ON HAND
$1.3B
Cash represents 15% of Total Assets; provides 134% coverage of uninsured deposits
BORROWING CAPACITY
$3.8B
Includes loans and securities pledged as collateral with the Federal Reserve Bank and Federal Home Loan Bank
STRONG CAPITAL BUFFER
Strong Tier 1 leverage provides substantial capital buffer above minimum thresholds
13.2%
MINIMAL MARK ON SECURITIES
AMPLE CASH ON HAND
$1.3B
HFI LOAN FAIR VALUE ABOVE CARRYING VALUE
>$170M
Accumulated Other Comprehensive Loss
Short duration of assets uniquely positions the company to have the fair value of the net held for investment loan portfolio above the carrying value, or an additional ~$1.5 per share
Revenue Driven by Loan Investor Mix Shift and Asset Mix
Total Net Revenue $ ^{1} ($ in millions)
NON-INTEREST INCOME
Revenue Driven by Loan Investor Mix Shift and Asset Mix concentration of asset managers relative to banks, partially offset by
NET INTEREST INCOME
Sequential change due to lower mix of held for investment loans and higher mix of securities via the Structured Certificates program. Recurring revenue, including servicing fees, now represents 85% of total net revenue.
Leveraging Bank Capabilities to Evolve Issuance Mix and Transition Balance Sheet Towards Lower Risk, High Yield Securities
| Average Balances | Average Yield | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | |
| Cash & Other Interest-earning Assets1 | $998 | $1,206 | $1,267 | $1,545 | $1,271 | 3.49% | 4.31% | 4.86% | 5.26% | 5.54% |
| Securities Available for Sale at FV2 | $397 | $350 | $363 | $437 | $602 | 3.85% | 3.84% | 4.30% | 5.44% | 6.30% |
| Loans Held for Sale at FV | $126 | $115 | $111 | $107 | $286 | 18.59% | 19.93% | 20.83% | 16.59% | 13.40% |
| Unsecured Consumer Loans Held for Investment | $3,269 | $3,826 | $4,067 | $4,361 | $4,257 | 13.52% | 13.16% | 13.15% | 13.33% | 13.35% |
| Secured Consumer, Commercial Loans Held for Investment | $1,135 | $1,164 | $1,176 | $1,157 | $1,147 | 4.78% | 5.22% | 5.71% | 5.82% | 5.87% |
| Loans Held for Investment at FV | $18 | $309 | $836 | $671 | $363 | 17.83% | 14.08% | 12.86% | 12.93% | 13.00% |
| Total Interest-earning Assets | $5,943 | $6,969 | $7,819 | $8,278 | $7,926 | 9.64% | 9.99% | 10.35% | 10.36% | 10.47% |
| Interest-bearing Deposits | $4,453 | $5,505 | $6,381 | $6,944 | $6,629 | 1.35% | 2.58% | 3.39% | 3.84% | 4.16% |
| All Other Interest-bearing Liabilities | $245 | $172 | $154 | $64 | $36 | 7.12% | 6.98% | 6.33% | 8.18% | 10.03% |
| Total Interest-bearing Liabilities | $4,698 | $5,678 | $6,535 | $7,008 | $6,665 | 1.65% | 2.71% | 3.46% | 3.88% | 4.19% |
| Net Interest Margin | 8.32% | 7.76% | 7.50% | 7.09% | 6.91% |
Disciplined Expense Management Supporting Efficiency Ratio
Total Non-Interest Expense 1
Efficiency Ratio
(Non-Interest Expense as a % of Net Revenue)
Total Non-Interest Expense $ in millions)
| 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | |
|---|---|---|---|---|---|
| Compensation & Benefits 2 | $84.9 | $87.8 | $73.3 | $71.6 | $58.5 |
| Marketing | 46.0 | 35.1 | 26.9 | 23.9 | 19.6 |
| Equipment & Software | 12.5 | 13.2 | 13.7 | 14.0 | 12.6 |
| Depreciation & Amortization | 10.7 | 11.6 | 12.4 | 11.6 | 11.3 |
| Professional Services | 11.9 | 10.0 | 9.1 | 10.0 | 8.4 |
| Occupancy | 5.1 | 4.7 | 4.3 | 4.7 | 4.6 |
| Other Non-Interest Expense | 15.1 | 17.7 | 17.7 | 15.3 | 13.1 |
| Total Non-Interest Expense | $186.2 | $180.0 | $157.3 | $151.1 | $128.0 |
Continue to Deliver Profitability
| Pre-Provision Net Revenue (PPNR) | Net Income | |
|---|---|---|
| ($ in millions) | $118.7 | $43.2 |
| 3Q22 | 2Q23 | 3Q23 |
| Provision for Credit Losses | Income Tax Benefit (Expense) | |
| ($82.7) | $7.2 1) | ($66.6) |
| Pre-Provision Net Revenue is equal to total Net Revenue less Non-Interest Expense. Please see pages 17 & 18 for additional information on our use of non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measures | ||
| Diluted EPS | Book Value Per Common Share | Tangible Book Value per Common Share |
| $0.41 | $10.67 | $9.78 |
| $0.09 | $11.09 | $10.26 |
| $0.05 | $11.02 | $10.21 |
Held for Investment Credit Performance by Vintage
Expected Personal Loans Lifetime Net Loss Rate*
2021 Vintage 2022 Vintage
§ 2021 vintage maturing with expected
8.5 - 9.0%
8.8%
lifetime net loss rates reflecting post-**
Future 7.9 - 8.2% 0.5%**
8.1% 0.9% - 1.4%
Provision Estimate 0.0 - 0.3%
(to be recognized in future periods)
1.8%
2.5%
§ 2022 vintage reflects post-pandemic
Allowance on Book**
(reserve taken for expected**
4.8% credit normalization within previously disclosed range.**
5.3%**
§ Future provision estimate primarily
6.3%
reflects ongoing recognition of provision**
5.4%
expense for discounted lifetime losses**
3.5%
Targeting High Marginal ROEs for Balance Sheet Usage
2023 HFI Vintage Estimated Outlook
| Marginal Return on Equity (Personal Loans) | Higher Loss Estimate | Loss Estimate | Structured Certificates (SLCLC) |
|---|---|---|---|
| Net Interest Margin¹ | 9.0% | 9.0% | 2.2% |
| Variable Operating (Expenses)/Revenue² | (0.6%) | (0.6%) | 0.5% |
| ANCL (Annualized Net Credit Losses)³ | (5.0%) | (4.0%) | 0.0% |
| Unlevered Yield | 3.4% | 4.4% | 2.7% |
| Marginal Levered Return on Equity (post-tax @28%) | 25% | 30% | 20% |
| Risk Weight | 100% | 20% |
Increasing Structured Certificate Originations on Balance Sheet to Enhance Flexibility on Capital and Future Sales
Consumer Originations
$1,000 - $1,200
Held on Balance Sheet ($ in millions)
$1,002
$878
$811
Structured Certificates 19% 60-70% 34%
Retained HFI
Extended 100% Seasoning 28% Retained HFI 81%
Extended Seasoning
Retained HFI** 37% 30-40%
4Q23 Guidance
| Total Originations | Pre-Provision Net Revenue |
|---|---|
| 4Q23 Guidance | Outlook Context |
| Total Originations | $1.5B to $1.7B |
| Total Originations | $35M to $45M |
Reconciliation of GAAP to Non-GAAP Measures: Tangible Book Value Per Common Share
We believe Tangible Book Value (TBV) Per Common Share is an important measure used to evaluate the company's use of equity.
| In thousands, except share and per share data | September 30, 2023 | June 30, 2023 | September 30, 2022 | |||
|---|---|---|---|---|---|---|
| GAAP common equity | $ | 1,208,219 | $ | 1,205,523 | $ | 1,121,410 |
| Less: Goodwill | (75,717) | (75,717) | (75,717) | |||
| Less: Intangible assets | (13,151) | (14,167) | (17,512) | |||
| Tangible common equity | $ | 1,119,351 | $ | 1,115,639 | $ | 1,028,181 |
| Book value per common share | ||||||
| GAAP common equity | $ | 1,208,219 | $ | 1,205,523 | $ | 1,121,410 |
| Common shares issued and outstanding | 109,648,769 | 108,694,120 | 105,088,761 | |||
| Book value per common share | $ | 11.02 | $ | 11.09 | $ | 10.67 |
| Tangible book value per common share | ||||||
| Tangible common equity | $ | 1,119,351 | $ | 1,115,639 | $ | 1,028,181 |
| Common shares issued and outstanding | 109,648,769 | 108,694,120 | 105,088,761 | |||
| Tangible book value per common share | $ | 10.21 | $ | 10.26 | $ | 9.78 |
Reconciliation of GAAP to Non-GAAP Measures: Pre-Provision Net Revenue
We believe Pre-Provision Net Revenue (PPNR) is an important measure reflecting the financial performance of our business operations.
For the three months ended
| In thousands | September 30, 2023 | June 30, 2023 | September 30, 2022 | |||
|---|---|---|---|---|---|---|
| GAAP Net income | $5008 | $10110 | $43198 | |||
| Less: Provision for credit losses | (64479) | (66595) | (82739) | |||
| Less: Income tax benefit (expense) | (3327) | (4686) | 7243 | |||
| Pre-provision net revenue | $72814 | $81391 | $118694 |