LendingClub Corporation

Good afternoon. Thank you for attending the Lending Club first quarter 2024 earnings conference call. My name is Jayla and I'll be a moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, the head of investor relations, Autumn Nelly-Vaco.

Thank you and good afternoon. Welcome to LendingClub's first quarter earnings conference call. Joining me today to talk about our results are Scott Tambor, CEO, and Drew Levin, CFO. You can find the presentation accompanying our earnings release on the investor relations section of our website. On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via email. Our remarks today will include forward-looking statements, including with respect business and financial performance. 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 presentation. Any forward-looking statements that we make on this call are based on current expectations and assumptions and we undertake no obligation to update these statements as a result of new information or future events. Our remarks also include non- provision net revenue. You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation. And now, I'd like to turn the call over to Scott.

All right. Thank you, Marta. Welcome, everybody. We kicked off the year with another solid quarter, and we're pleased with how well we're executing against the factors we can control, de-risking the business while also advancing our strategy and setting the stage for future growth. Our operating discipline, credit outperformance, and continued innovation are resulting in a sustainable operating rhythm that has us well positioned to outperform as conditions improve. Let's start with our loan volumes. Total originations for the quarter came in just above $1.6 billion, which was in line with the prior quarter despite typical adverse seasonality. Pre-provision net revenue of $48 million came in above the high end of our range, thanks to strong execution combined with temporary benefits in both expenses and loan sales prices. Importantly, we delivered net income of $12 million, marking 12 straight quarters of GAAP profitability since we became a bank, a notable feat given the turbulent macro environment over the last two years. In February, we successfully exited the three-year operating agreement required of us as a new bank, a milestone in our evolution that gives us more flexibility in how we manage the business. Our management priority is currently deploying our excess capital to build the balance sheet and bolster our net interest income, which we believe is the best way to drive durable shareholder value in a hire-for-longer environment. For example, this past quarter, we grew the balance sheet by $415 million, adding new originations in the form of whole loans and securities and a repurchase of a portfolio of previously sold Lending Club loans. These actions to increase the balance sheet will support a return to growth and net interest income going forward. Now turning to credit, where we continue to demonstrate our leadership. You'll see on page nine of our earnings presentation that we've delivered our 13th consecutive quarter of material outperformance versus our competitive set across all core customer segments that we serve. This outperformance reflects our vast data advantage derived from over $90 billion in issued loans, our flexible technology platform that allows us to rapidly respond to changing market dynamics, and the efforts of our highly seasoned team with the human intelligence to look ahead and beyond the models. Our sustained credit performance gives us confidence in our ability to increase shareholder value through a sustained elevated interest rate environment. And it firmly reinforces our position as the partner of choice for marketplace investors. Turning to the marketplace, where asset manager demand for our structured certificate program remains strong. We sold over 785 million of new issuance through the program this quarter. generating fee revenue and capital efficient risk remote interest income without an upfront CECL charge. Beyond asset managers, conversations with select banks are gaining momentum. Depending on the rate environment, we are cautiously optimistic that we'll see engagement beginning in the back half of this year, which should help drive up pricing and corresponding marketplace revenue. Given the consistent demand that we're seeing from asset managers and the momentum that's building with banks, we are increasing our held for sale portfolio, which provides interest income near term and the potential for sales at higher gains down the road. Stepping back, as credit card balances and average APRs hit new highs, our TAM has never been larger and our value to consumers has never been more compelling. Refinancing credit card debt through a lending club loan provides substantial savings and has been shown to increase a borrower's credit score by an average of 48 points. And we make it easy, with new borrowers able to apply in a matter of minutes, and existing members able to redeem a pre-approved offer in a few clicks. For LendingClub, these borrowers deliver strong credit performance, high marketing efficiency, and a powerful opportunity to engage and reward them over time. Given the historic refinance opportunity in front of us, We're focused on coiling the spring to enable accelerated growth when conditions permit. We're building on our 15 plus years of industry leadership and further elevating and differentiating our offering through several initiatives that include an increasingly robust set of credit monitoring and management tools that provides members with visibility into their credit profile, current debt, and the cost of that debt, all of which serves to highlight the personal loan value propositions. With just the credit profile portion of the functionality live, we're seeing enrolled members visiting us close to 50% more often than those who haven't. With these positive early results, we're excited about the broader debt monitoring portion of the experience that's currently live and testing with a select group of members in advance of a broader release later this year. A second initiative is a turnkey embedded finance integration that enables digital delivery of personalized pre-screened loan offers via advertising. We are testing this functionality on our own site where we're seeing substantial lifts in response and approval rates from high quality borrowers, and we hope to offer the integration to select partners as we exit the year. We're also iterating on unique to Lending Club member products such as Top Up and Clean Sweep that offer members a powerful benefit to staying engaged with us. Top-Up allows members to easily add incremental funds to their existing loan balance while maintaining a single payment within their budget. We're currently testing our way into the program, and we're seeing materially higher response rates and issuance volumes. Clean Sweep is a revolving line of credit that gives existing members a way to easily sweep new credit card balances into a fixed payment plan, allowing them to get the card rewards they love while saving on interest if they need to carry a balance. Clean Sweep provides a compelling, easy to access experience that is unique to Lending Club and drives ongoing engagement. It's also the first step towards offering other revolving use cases down the road. While we have an extensive learning agenda here, early results again show extremely positive response and take rates. These and other new initiatives are helping us deliver on our promise to relentlessly advantage our members by delivering financial solutions that are smart, simple, and rewarding. The positive early results help us offset our typical seasonality in Q1, and we expect them to deliver nearly half a billion in new high-quality issuance this year. Equally importantly, these initiatives further differentiate LendingClub's offering in the market and set the stage for longer-term growth. In closing, I'm incredibly proud of what we've been able to accomplish through this environment, including delivering consistent GAAP profitability, remaining strong stewards of credit, rapidly innovating to meet investor needs, innovating on new tools, features, and experiences to deliver value for our members, and successfully exiting our operating agreement. We're now reaching a sustainable baseline from which we can expect to grow originations, our balance sheet, and our member base. We will do so modestly if the current rate conditions persist with a more pronounced acceleration as the Fed's interest rate policy eases. I'll again thank the entire Lending Club team for their continued innovation and dedication to our mission. Thanks to their hard work, we're well positioned to capture the incredible opportunity in front of us. With that, I'll turn it over to Drew.