LendingClub Corporation

Good afternoon and welcome to the Lending Club fourth quarter and full year 2020 earnings 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 touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sameer Gokhale, Head of Investor Relations. Please go ahead.

Thank you and good afternoon. Welcome to Lending Club's fourth quarter and full year 2020 earnings conference call. Joining me today to talk about our results and recent events are Scott Sanborn, CEO, and Tom Casey, CFO. Please note that in addition to the presentation we usually provide with our quarterly results, We are also sharing a Lending Club Bank presentation that provides information about our business, including our new banking capabilities. You can find both presentations accompanying our earnings release on the investor relations section of our website. 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, future products and services, the effectiveness of certain strategy initiatives, anticipated financial results, and the impact and benefits of the radius acquisition and resulting bank charter on our business. 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-K. 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. The description of non-GAAP measures and reconciliation to GAAP measures are included in today's earnings release and related slide presentations. The press release and accompanying presentations are available through the Best Relations section of our website at ir.lendingclub.com. And now I'd like to turn the call over to Scott.

Thank you, Samir. Good afternoon, everybody, and thank you for joining us today. We are very excited to share the update on our business now that the acquisition of Radius is complete. We've worked long and hard to get to this point, and we are very bullish about how we're positioned to add value to our customers and deliver consistent and sustained multi-year earnings growth for our shareholders. It's really hard to imagine a better time to be launching a digital bank. We have got a lot of information to share today, and the financial expression of our business will be changing considerably. So Tom and I are going to split this up. I will focus my time on how the addition of the bank enhances our business and enables us to deliver on our strategy, And I'll let Tom provide the details on last quarter's results and how the acquisition informs our financial outlook for the year. When we launched back in 2007, LendingClub's vision was to leverage technology, data, and our marketplace model to transform the banking industry. We began by bringing a traditional credit product, the installment loan, into the digital age by moving it online, broadening access, lowering costs, and delivering a fast and frictionless experience. We redefined the category, and by 2019, personal loans were the fastest-growing segment of consumer finance, and we became the largest personal loan company in America, generating more than a billion in loan volume per month and helping more than 3 million customers lower their cost of credit and get on the path to eliminating their credit card debt. Getting out of debt is, in fact, our members' number one goal, and they love us for what we're doing for them. Our NTF score is approaching a truly outstanding 80. That's well above many leading brands and traditional banks. And the pandemic has demonstrated that they prioritize our loans above many of their other debt obligations, including even credit cards. And half of them return to us again within five years, providing us a virtually free source of loan volume. which we reward with a further simplified process and even lower rates compared to their first loan. Easy access to responsible, low-cost unsecured credit is a primary pain point for our members, and it represents a huge, immediately addressable market that's expected to grow at more than 20% annually over the coming years. But it's not the only pain point, and our mission to empower our members on their path to financial health doesn't end here. And note, our customers are not the underbanked or those shut out of the financial system. These are high-income, highly credit-worthy individuals who are already fully utilizing bank services. In fact, they're some of retail banking's most profitable customers. It's just working out better for the banks than it is for them. That's because together with their higher-than-average income, they also have higher-than-average debt, including credit card, auto, and student loans. They want to put this debt behind them, and they are highly motivated and willing to take action to get there. And as a digital marketplace bank, we can now do so much more to help. And our members tell us they are ready and eager for us to do so. In a recent survey, 83% said they're interested in more products and services from Lending Club. With the digital bank acquisition closed, we can take the next step. First up, we'll be building on Radius' multi-award-winning online and mobile deposit offering to make it very easy for our customers to manage their lending, spending, and savings in a holistic fashion. Because we're vertically integrated, we can capture more value, both from lending and from spending, and can use this, together with the behavioral data we'll be collecting, to offer powerful benefits and value to our customers. This sets Lending Club apart from the neobanking fintech competition. What's even more exciting is that the bank is being added to an already formidable platform with two sizable benefits. First, as you can see on slide nine of the Lending Club Bank presentation, we have incredible data superiority. We have 14 years of history on $60 billion in loans to millions of customers, informed by rigorous testing resulting in 140 billion data cells added to our proprietary database. Access to this vast amount of data gives us a significant competitive advantage. Our team of more than 130 data analysts and scientists mine this historical data with leading-edge machine learning and AI analytic techniques to continuously refine our dozens of proprietary models to optimize fraud risk, repayment risk, loan exposure, and loan pricing. And it's working. Our experience shows that our proprietary scoring system is 20 times more effective traditional credit scores such as FICO at predicting defaults. As a result, we can approve more borrowers, offer significantly lower interest rates, and price competitively for attractive risk-adjusted returns across the credit spectrum. Benchmarking data from one of the leading online aggregators shows that our loan offers are priced very competitively and are very likely to be ranked as best in class. And several independent studies including those conducted by the Philadelphia Federal Reserve researchers, confirm our ability to make credit more affordable than traditional alternatives. Coming out of the pandemic, the strength of our underwriting has now also been cycle tested. Losses on loans issued pre-COVID are in line with our pre-pandemic expectations, and loans issued since the pandemic are some of our best performing loans in recent years. So we haven't just collected a wealth of data. We're leveraging it, and it's clearly giving us an edge. Another key differentiator is our technology infrastructure. Our tech team encompasses nearly 400 lending clubbers. We've built proprietary software and systems that enable us to deliver seamless, highly automated access to credit and deliver a fantastic customer experience. We've issued 13 patents and have 27 pending. it would take others many years and a significant capital outlay to try and replicate the competitive mode that we've created. With the acquisition of Radius, we're adding to our competitive advantages by evolving to a unique and powerful new business model, a marketplace bank. As you can see on slide 10, this model wins against both traditional banks and against fintech marketplaces. Versus banks, we expect to grow more rapidly fueled by the combination of interest income from our high-earning asset, together with significant fee-based income from our capital-wide marketplace. We'll be even more efficient at customer acquisition, supported by our national footprint and our ecosystem with funding partners that allow us to serve a broader range of customers than a typical bank. And we'll be highly adaptable at a lower operating cost, as a digital-first entity unencumbered by legacy tech infrastructure or high-cost branches. We also have advantages over pure fintech marketplaces, the limitations of which we understand better than anybody, and that's why we've evolved our business model. Versus fintech marketplaces, our marketplace bank will be more resilient with access to stable funding, a recurring and sustained revenue stream, and a clear and established regulatory framework, and we'll be able to reach higher profitability given our lower funding costs and higher earnings per loan. All of these advantages position us well to capitalize on a clear trend that has been accelerated due to COVID, the move to digital banking. Bank is no longer a place you go. It's a thing you do, increasingly from your mobile phone. And consumers are now more than ever weighing the importance of that experience versus proximity to a bank branch. With one of the best mobile experiences in the industry, we're starting from a good place here. I've been with Lending Club for more than 10 years, and I have never been more excited about the combinations of capabilities and market conditions for us to achieve our ambitions and transform the industry. Our marketplace bank begins today with an industry-leading loan and deposit products, a strong brand and loyal customer base, considerable technology and data advantages, and a differentiated offering that allows us to better serve an expanded total addressable market. which will allow us to drive sustained earnings growth. Near-term, personal loans will be our primary economic driver, and we plan to grow originations by 45% and revenue by 55% this year. As Tom will lay out for you in a minute, the growth and earnings power of LendingClub will become quite clear after we absorb the cost and accounting implications of operational integration. As a team, we are very committed to executing on our strategy and building long-term value for our shareholders. Together with our core unsecured lending capabilities, our digital bank gives us a highly differentiated offering that positions us well to compete while providing cost-effective financial solutions for our customers. It is our intention to stay disciplined, execute, and deliver in the near term while investing for the future to achieve our broader ambition and redefine banking for our customers. Okay, with that, I will pass it over to you, Tom.