LendingClub 1Q22 Earnings Presentation
LendingClub
First Quarter 2022 Results
April 27, 2022
1Q 2022 Results & Financial Metrics
The Problem We’re Solving
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Many American households have turned to credit cards to manage their finances, which has resulted in ~40% of American households carrying over $1 trillion of revolving debt. Much of this debt is overpriced and LendingClub exists to provide Americans with a better way to access affordable credit.
LendingClub’s 4+ million members have already come to us to access lower-cost credit. While we serve a broad range of members, our average income is $100K with a high FICO (+700 avg.), but they also have high debt.
And 83% tell us they want to do more with us!
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Our direct-to-consumer digital marketplace bank features a vertically integrated model that allows us to reimagine banking, including lending, spending, and savings for our members.
Award-Winning Member-Focused Digital Marketplace Bank
Members¹
4+
Million
Originations¹
$70+
Billion
Become
America’s
Financial
Health Club.
Empower
Our Members
on Their Path
to Financial
Health.
Promise
To champion the
financial success
of our members
with fairness,
simplicity, and
heart.
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Best Checking
Account Overall
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Best Overall Checking
Account, April 2021
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1Q22 Highlights: Exceeded All Targets
| 1Q22 Guidance Targets | Actuals | Commentary | |
|---|---|---|---|
| Net Revenue | $255M to $265M | ✔$289.5M | Net Revenue up 10% QoQ and 174% YoY driven by: |
| ■ Marketplace revenue driven by origination growth of 5% and strong loan investor demand QoQ | |||
| ■ Net interest income accelerated by growing the average bank loan portfolio 7% QoQ and 65% YoY | |||
| GAAP Net Income | $25M to $30M | ✔$40.8M | Record GAAP Net Income, up 40% QoQ,and $87.9M YoY driven by revenue growth and strong operating leverage through expense management |
1Q22 Highlights: Transformative Financial Profile Emerging
NET REVENUE
174%
Net Revenue up 174% YoY to $289.5M, up 10% over last quarter’s record
GAAP NET INCOME
$41M
Record GAAP Net Income, up 40% QoQ, and +$87.9M YoY
NET INTEREST INCOME
$100M
Net Interest Income 439% YoY growth
NET INTEREST MARGIN
8.6%
Net Interest Margin expansion to 8.6% from 3.3% a year ago
DEPOSITS
68%
Deposit growth up 68% from a year ago to $4.0B
BANK LOAN PORTFOLIO
65%
Average loan portfolio growing 65% year-over-year to $3.1B
Best of Both Worlds
| LendingClub¹ | Fintechs | Banks | ||
|---|---|---|---|---|
| Economics | Ability to efficiently serve a broad range of customers | √Industry leading marketing efficiency;4M+ customers | √ | X |
| Economics | Capital-light, high-ROE marketplace earnings stream | √$190M Non-Interest Income | √ | X |
| Economics | Highly profitable earnings via loan portfolio | √$100M Net Interest Income | X | √ |
| Economics | Lower-cost deposit funding | √0.42% average cost of funds | X | √ |
| Economics | Fully integrated originations and deposit model | √$3.2B originations;$4B deposits | X | √ |
| Scale&Scalability | National digital-first consumer footprint | √Multi-award-winning digital experience | √ | X |
| Scale&Scalability | Vast data advantage from serving millions of personal loan customers | √150B+ cells of data;2K+ attributes | X | X |
| Scale&Scalability | Unencumbered by high-cost branch network and legacy systems | √Tech-first highly automated marketplace platform | √ | X |
| Scale&Scalability | Strong growth trajectory | √174% net revenue growth rate YoY | √ | X |
| Resiliency | Recurring revenue stream | √41% 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 & compliance infrastructure | X | √ |
New Vertically Integrated Marketplace Bank Model
Drives Superior Performance vs. Pure Marketplace Model
| Prior Record Net Income (4Q19) | New Marketplace Bank Model(1Q22) | Variance(4Q19 to 1Q22) | |
|---|---|---|---|
| Originations | $3.1B | $3.2B | +$0.1B |
| Net Interest Income | $25.5M | $99.7M | +$74.2M |
| Non-Interest Income | $162.9M | $189.9M | +$27M |
| Net Revenue | $188.5M | $289.5M | +$101M |
| GAAP Net Income | $0.2M | $40.8M | +$40.6M |
Net Income Growth Driven by Strong Revenue Growth and Operating Leverage
Pre-Tax, Pre-Provision Income
($ in millions)
| N/M | N/M | 52% | 10% | 33% |
|---|
Provision for Credit Losses
| 21.5 | 34.6 | 37.5 | 45.1 | 52.5 |
|---|
Income Tax Benefit (Expense)
| 2.8 | (0.2) | (2.7) | 0.2 | (5.0) |
|---|
GAAP Net Income (Loss)
($ in millions)
| N/M | N/M | 190% | 7% | 40% |
|---|
Diluted EPS
| ($0.49) | $0.09 | $0.26 | $0.27 | $0.39 |
|---|
Topline Growth Driven by Recurring Net Interest Income Stream
Combined With Strong Marketplace Revenue
- Note: There may be differences between the sum of the quarterly results due to rounding.
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Net Interest Income
439% YoY growth reflects average loan growth of 65% and NIM expansion to 8.6%
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Non-Interest Income
Marketplace revenue reflects YoY marketplace origination growth of $1.2B and stronger loan investor demand
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| Loan Originations Driving Higher Revenues | Marketplace Revenue Reflects Higher Marketplace Originations and Strong Loan Investor Demand | ||
|---|---|---|---|
| Quarterly Loan Originations | 1,2 | Quarterly Marketplace Revenue | |
| ($ in millions) Retained Loans | Marketplace Originations | ($ in millions) | |
| $1,483 $1,139 $344 | $2,722 $2,182 $541 | $3,107 $2,471 $636 | $3,069 $2,308 $761 |
| 1Q21 | 2Q21 | 3Q21 | 4Q21 |
| Loan Origination Growth (% QoQ) | |||
| 63% 23% | 84% Held for Investment % of Originations 20% 1) 2) | 14% 20% | (1%) 25% Note: There may be differences between the sum of the quarterly results due to rounding. Quarterly Loan Originations include Personal Loans, Education and Patient Finance Loans, and Auto Loans. |
Interest Income from HFI Portfolio Grew 19% QoQ as Consumer Loan Portfolio Momentum Builds
Bank Average Held for Investment Balances¹
($ in millions)
Bank Interest Income from Held for Investment Loans²
($ in millions)
Bank HFI Balances (% QoQ)
| Consumer Loans | 56% | 39% | 36% | 16% |
|---|---|---|---|---|
| Commercial/PPP Loans | 1% | (15%) | (10%) | (11%) |
| HFI Total | 21% | 10% | 17% | 7% |
Bank HFI Interest Income (% QoQ)
| Consumer Loans | 273% | 79% | 46% | 25% |
|---|---|---|---|---|
| Commercial/PPP Loans | 66% | (7%) | (7%) | (14%) |
| HFI Total | 155% | 48% | 34% | 19% |
LC Consumer Loans Held for Investment (including both unsecured and secured consumer loans) are net of deferred fees and amortization. Please see next page for additional detail.
1Q21 interest income includes 2 months of Radius Bank financials after the 02/01/2021 acquisition.
Commercial/ PPP Loans includes PPP average balances that have declined from $621M in 1Q21 to $223M in 1Q22.
Growing Consumer Loan Portfolio Mix Drives Net Interest Margin Expansion to 8.61%
Key Bank Balance Sheet Data
(Average balances; $ in millions)
| Average Balances | Average Yield | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | |
| Unsecured consumer loans | $147 | $512 | $991 | $1,542 | $2,060 | 13.85% | 15.24% | 15.95% | 15.66% | 15.22% |
| Secured consumer loans | $521 | $532 | $464 | $436 | $232 | 3.70% | 3.89% | 4.04% | 3.69% | 3.92% |
| Commercial loans and leases | $605 | $624 | $617 | $620 | $621 | 5.07% | 5.81% | 5.11% | 5.59% | 4.89% |
| PPP loans | $621 | $616 | $437 | $325 | $223 | 3.45% | 3.46% | 5.07% | 4.78% | 5.76% |
| HFI Loans | $1,895 | $2,284 | $2,509 | $2,923 | $3,136 | 4.84% | 6.84% | 9.19% | 10.53% | 11.66% |
| Other interest-earning assets2 | $1,034 | $862 | $1,023 | $973 | $1,332 | 1.27% | 2.91% | 2.72% | 2.61% | 2.52% |
| Total Interest-earning Assets | $2,929 | $3,145 | $3,533 | $3,896 | $4,468 | 3.58% | 5.76% | 7.32% | 8.55% | 8.94% |
| Non-interest bearing deposits | $156 | $103 | $114 | $283 | $300 | |||||
| Interest-bearing deposits | $2,059 | $2,373 | $2,529 | $2,727 | $3,312 | 0.30% | 0.29% | 0.30% | 0.38% | 0.42% |
| Advances from PPPLF/Other | $411 | $315 | $417 | $342 | $235 | 0.35% | 0.35% | 0.36% | 0.36% | 0.35% |
| Total Interest-bearing Liabilities | $2,470 | $2,688 | $2,946 | $3,069 | $3,546 | 0.31% | 0.29% | 0.31% | 0.38% | 0.42% |
| Interest Rate Spread | 3.27% | 5.47% | 7.01% | 8.17% | 8.52% | |||||
| Net Interest Margin | 3.33% | 5.51% | 7.06% | 8.25% | 8.61% |
High Quality Prime Portfolio Driving Strong HFI Credit Performance
Strong HFI Credit Performance
| Servicing Portfolio¹ | HFI Portfolio³ | |
|---|---|---|
| Avg. FICO | 722 | 727 |
| Avg. Income ($000)⁴ | $112 | $113 |
| Avg. Debt-to-Income⁵ | 20% | 19% |
| Avg. Coupon | 13.1% | 11.6% |
Personal Loan Credit Performance
▪ PL Prime originations focused on customers with average FICO 700+ and average income $100K+
▪ Delinquency rates remain well below pre-pandemic levels, beginning to normalize in-line with expectations
▪ Held for Investment (HFI) portfolio delinquencies growing as portfolio grows and matures
▪ High yielding avg. coupon rates drive net interest income as HFI portfolio grows and consumer asset mix increases
Improving Operating Leverage While Continuing to Invest in Long-term Growth
Total Non-interest Expense
Efficiency Ratio (Non-interest Expense as a % of Net Revenue¹)
($ in millions)
1
Total Non-interest Expense
($ in millions)
| 1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | |
|---|---|---|---|---|---|
| Compensation&Benefits | 64.4 | 71.9 | 73.3 | 78.7 | 81.6 |
| Marketing | 19.5 | 35.1 | 50.8 | 50.7 | 55.1 |
| Equipment&Software | 7.9 | 9.3 | 10.3 | 12.0 | 11.0 |
| Occupancy | 6.9 | 6.2 | 6.5 | 4.7 | 6.0 |
| Depreciation&Amortization | 11.8 | 11.5 | 10.5 | 10.5 | 11.1 |
| ProfessionalServices | 11.6 | 11.5 | 11.7 | 12.7 | 12.4 |
| OtherNon-interestExpense | 12.1 | 14.6 | 15.6 | 18.9 | 14.0 |
| TotalNon-InterestExpense | 134.3 | 160.1 | 178.8 | 188.2 | 191.2 |
Raising 2022 Full Year Outlook
| As of 04/27/22 | As of 01/26/22 | |||
|---|---|---|---|---|
| 2Q22 Guidance | FY22 Guidance | vs. Prior FY22 Guidance | Commentary | |
| Net Revenue | $295M to $305M+44% to 49% YoY | $1.15B to $1.25B+40% to 53% YoY | +$50M | Increasing origination target top end by $500M to $13.5B for FY22 |
| GAAP Net Income | $40M to $45M4.2X to 4.8X YoY | $145M to $165M7.8X to 8.9X YoY | +$15M | Increasing origination target top end by $500M to $13.5B for FY22 |