• Originations: $1.8 billion in Q4, up 13% year-over-year.
• Total Net Revenue: $217 million, up 17% from the previous year.
• Pre-Provision Net Revenue (PPNR): $74 million, up 34% from last year.
• Non-Interest Income: $75 million, up 38% year-over-year.
• Net Interest Income: $142 million, up 8% from the previous year.
• Net Interest Margin: 5.42%, slightly down for the quarter.
• Non-Interest Expense: $143 million, including a $4.4 million pre-tax software impairment.
• Provision for Credit Losses: $63 million, up from $42 million last year.
• Net Charge-Offs: $46 million, improved from $83 million last year.
• Net Income: $9.7 million, including a $3.2 million post-tax software impairment.
• Deposit Base Growth: Increased by 24%.
• Loan Sales Prices: Increased by 170 basis points year-on-year.

• Warning! GuruFocus has detected 5 Warning Signs with LC.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• LendingClub Corp (NYSE:LC) reported a 13% year-over-year increase in originations for the fourth quarter.
• The company achieved a 34% increase in pre-provision net revenue, indicating strong financial performance.
• LendingClub Corp (NYSE:LC) successfully exited its new bank operating agreement, becoming one of the first fintech banks to do so.
• The company increased its deposit base by 24%, driven by the launch of the LevelUp Savings product.
• LendingClub Corp (NYSE:LC) is working towards obtaining an investment-grade rating for its senior security, which could open up new investor opportunities.

Negative Points

• Provision for credit losses increased to $63 million, up from $42 million in the same quarter of the prior year.
• Net interest margin decreased slightly to 5.42%, which the company expects to be the low point for upcoming quarters.
• The company experienced a $4.4 million pre-tax impairment of internally developed software due to the Tally Technology purchase.
• Marketing expenses are expected to rise as LendingClub Corp (NYSE:LC) plans to expand acquisition channels.
• The company faces challenges in reactivating dormant marketing channels, which could impact growth in the short term.

Q & A Highlights

Q: Can you explain why the first quarter volume guidance is flat compared to recent growth, and how interest rate changes might affect pricing and volume? A: Scott Sanborn, CEO: Q4 and Q1 are typically challenging due to seasonal factors. We plan to maintain credit discipline and will reactivate marketing channels as we exit Q1. Drew LaBenne, CFO: We expect to raise sales prices even without further Fed rate cuts, depending on buyer mix and rate environment.

Q: What are the long-term volume and ROE expectations, and what will it take to reach mature run rates? A: Scott Sanborn, CEO: Historically, we've reached $3-4 billion in quarterly issuance. We aim to return to and exceed those levels, even with tighter credit. Drew LaBenne, CFO: Our 2025 exit rate is a stepping stone for further improvement, not our final destination.

Q: Has there been any change in loan performance across different consumer cohorts? A: Scott Sanborn, CEO: Performance is stable but elevated across the board. We see outperformance in the near-prime space, possibly due to our underwriting.

Q: How are you managing deposit costs, and what impact will the exit of a commercial deposit customer have? A: Drew LaBenne, CFO: We exited a high-cost commercial deposit, which will benefit Q1. We effectively repriced deposits with an 80% beta to Fed rate changes. Scott Sanborn, CEO: Our LevelUp Savings product has been successful, bringing in $1.2 billion in deposits.

Q: What is the strategy for holding more loans on the balance sheet as loan sale pricing improves? A: Drew LaBenne, CFO: We plan to retain similar amounts of loans on the balance sheet and replenish the held-for-sale portfolio. Scott Sanborn, CEO: Operating conditions have improved, and we aim to maintain inventory for large buyers.

Q: How does the competitive landscape look, and is there enough origination volume for everyone? A: Scott Sanborn, CEO: The competitive landscape remains stable. We focus on efficiency and conversion rates in our channels, and borrower demand is strong.

Q: What are the secondary factors considered when allocating against different funding channels? A: Scott Sanborn, CEO: We focus on delivering consistency and size, which is rewarded in terms of price and predictability. We aim to drive price increases within the static mix and evolve the mix deliberately.

Q: Is there potential for acquiring entities to grow the member base? A: Scott Sanborn, CEO: We are open to acquisitions that enhance capabilities and accelerate our roadmap, as seen with the Tally acquisition. Drew LaBenne, CFO: We remain disciplined in using shareholder capital wisely.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.