LendingClub Corporation

And welcome to LendingClub's third quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. Please note, this event is being recorded. I would now like to turn the conference over to Samir Gokhale, head of investor relations. Please go ahead.

Thank you and good afternoon. Welcome to LendingClub's third quarter 2020 earnings conference call. Joining me today to talk about our results and recent events are Scott Sanborn, CEO, and Tom Casey, CFO. Our remarks today will include forward-looking statements that are based on our current expectations and forecasts and involve risks and uncertainties. These statements include, but are not limited to, the impact of COVID-19, our ability to navigate the current economic environment, the timing and benefits of our pending acquisition of Radius, platform volume, and the future performance of our business and products. Our actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are described in today's press release and our most recent Forms 10-K and 10-Q. Each is filed with the SEC, as well as our subsequent filings made with the Securities and Exchange Commission, including our upcoming Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. Also, during this call, we will present and discuss both GAAP and non-GAAP financial measures. A description of non-GAAP measures and reconciliation to GAAP measures are included in today's earnings press release and related slide presentations. The press release and accompanying presentations are available through the investor relations section of our website at ir.lendingclub.com. And now I'd like to turn the call over to Scott.

Thanks, Samir, and thank you, everyone. We know it's a busy time right now and appreciate you all joining us today to discuss our third quarter results. So let's get to it. In what continues to be an uncertain environment, we do feel good about our ability to control what we can control. We increased loan volume by roughly 80% quarter on quarter. That is in line with what we told you to expect back in August. And investor demand continues to build, driven by the strong performance of the pre-COVID loans, as well as encouraging early data on the post-COVID vintages. We are managing our business for success over the long run, and we are remaining prudently conservative in the short term. We anticipate continued but deliberate loan growth as we monitor the path of the virus and its impact on the economy, can see the size and form of any additional government stimulus package, and observe the evolution of consumer behavior, all while we collect additional data on the performance of our post-COVID vintages and continue to test and learn on pricing and policies suited to this unique environment. I'd note we are not sitting still and hoping for things to get better. Rather, we're actively strengthening our core capabilities and enhancing our adaptability. We are investing in our electronic trading platform, LCX, which gives us the capability to seamlessly auction loans at above and below par prices without the use of our balance sheet, and which is scaling nicely. We've developed a new price testing infrastructure and are implementing a revised go-to-market strategy that we believe will enhance our recovery. And we've taken steps to decrease our fixed operating costs, reduce our operating risk, and increase our liquidity. So with the proactive actions we've taken to deliver strong investor returns, improve efficiency, and build a substantial amount of liquidity, we are well-positioned to navigate the current environment and complete the acquisition of RADIUS, which remains our top strategic priority. So before I go into further updates, I'll spend a minute on the broader environment. Clearly, conditions to date have been better than feared after the initial onset of COVID. GDP is rebounding, initial unemployment claims are dropping, and consumer spending is recovering in many categories. That said, There are still things we don't know. Initial unemployment claims remain well above pre-pandemic levels. The virus continues to grip the country, and the timing and size of an additional government stimulus package is unclear. The good news is that consumers came into this recession with strong balance sheets, and they do appear to be behaving prudently with increased savings rates and a focus on paying down their debts. We are therefore seeing encouraging stabilization of credit performance across consumer asset classes which is great, and we're closely monitoring to see how this performance holds as the effects of stimulus and payment moratoriums fade. Since the onset of the pandemic, we've organized our efforts around five guiding principles, and let me update you on where we stand on each of these. Our first priority is to keep our employees safe, engaged, and working productively. I'm pleased to say that we remain safe with few reported cases of COVID, and lending clubbers remain engaged, productive, and able to effectively operate our business and serve our customers. As a result, we are not asking employees to return to our offices until at least the summer of next year. Our next priority is to protect loan investor returns, and we are encouraged by the data we're seeing. Our pre-COVID vintages, which represent the bulk of our servicing portfolio, are demonstrating enormous resilience. IRRs are getting close to our historical averages, coming in at roughly 4 percent, which is 100 basis points higher than our most recent forecast. I'd highlight that the installment nature of our product and its short duration means that risk for loan investors is receding with every passing month. On new post-COVID issuance, we're seeing equally encouraging early data and currently expect prime portfolio IRRs to be in the 5 to 6 percent range. This is well above our historical averages and provides a good buffer against any potential future volatility. So these strong results to date are driving investor confidence and are resulting in an increase in Q4 purchase orders as well as interest from new investors to come onto the platform. While we are pleased by what we're seeing, we are responsible stewards of credit and will continue to maintain a prudent approach with a relatively tight credit box as we get a few more months of data and closely monitor the broader environment. Our new issuance is primarily focused on existing members as these loans perform better and cost less to acquire than loans to first-time borrowers. I'd remind everybody that we've been sharpening our focus on the existing member and existing member experience for some time in order to improve utilization. We've streamlined the experience. We've developed customized underwriting by leveraging the richer data available to us. And we see this loyal member base as a key competitive advantage, which will become even more valuable when we can offer additional products and services at the bank, which is why building and maintaining a strong member base is the next strategic priority I'll touch on. One of the reasons Lending Club has such high net promoter scores and return rates is because our customers know that we're genuinely committed to helping them improve their financial well-being. Since the onset of the pandemic, we've helped more than 217,000 of our members with much needed forbearance relief. We've rolled out new payment plans, new payment options, and new ways for them to reach us. And as you can see in the results, it worked. On to our fourth priority, preserving liquidity, where it's worth calling out that we increased net cash this quarter to $445 million while paying down our warehouse lines and paying off all of our revolving debt. We are now in a strong position to navigate the current environment and to acquire Radius Bank. After the acquisition, we will be a very different company. We will be the first public neobank and the only full-spectrum fintech marketplace bank What does that mean? What's a marketplace bank? Put simply, we will maintain the benefits of our marketplace while retaining a portion of our installment loans on our balance sheet financed with the low-cost deposits of RADIUS and delivered through our branchless infrastructure. The attractive economics generated by this combination will enable us to price competitively and deliver value to both depositors and borrowers. And perhaps most importantly, the checking experience and accompanying mobile applications will give us a platform for ongoing member engagement that provides for an ever-deeper understanding of our customers so that we can identify additional opportunities for them to save while driving a significant increase in the lifetime value of each relationship. In addition to these member benefits, there are significant strategic and financial benefits to LendingClub of the acquisition, including access to stable funding, wider margins, and recurring revenue. So acquiring Radius will be a win for our members, our loan investors, and our shareholders. In slide seven of the earnings presentation, we show the progress we've made as we work towards completing the acquisition. We filed our Y3 application with the Federal Reserve on September 25th, deployed cross-functional teams across both organizations, and announced the first of our intended new deposit products. We are working hard to complete the acquisition within the timeline we laid out. in February. So, with that, I'm going to turn the call over to Tom for a detailed discussion of our financial results.