Lendingclub

LendingClub Announces Acquisition Of Radius Bank

wiseclerk

Lending ClubLendingClub (NYSE:LC) announced that it has signed a definitive agreement to acquire Radius Bancorp, and its wholly owned subsidiary Radius Bank, (together “Radius”) valued at 185 million USD. LendingClub says Combining Radius and LendingClub will create a digitally native marketplace bank at scale with the power to deliver an integrated customer experience, enabling consumers to both pay less when borrowing and earn more when saving.

Radius is an online bank founded in 1987 and based in Boston, MA, with more than 1.4 billion USD in diversified assets. Its platform provides features such as check deposit, bill pay, card management, and a personal financial management dashboard, as well as open APIs to offer “banking-as-a-service” (BaaS) functionality to leading fintechs. In addition, the company offers commercial lending options for businesses, and treasury management services for pension funds, unions, municipalities, and non-profit organizations.

‘This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of our customers,’ said Scott Sanborn, CEO of LendingClub. ‘By combining with Radius, we will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.’

‘LendingClub has always been a fintech innovator, and I look forward to leveraging the strengths of both of our talented teams as we usher in a new era in banking,’ said Mike Butler, Radius’ President and CEO. ‘We are excited for our employees to operate our virtual banking platform with more resources and for our clients to gain access to an industry-leading lending product. This is a perfect marriage, with LendingClub bringing the leading digital asset generation platform, and Radius contributing a leading online deposit gathering platform, to position the combined company for long-term success.’

The combined entity expects to be substantially accretive with a cash payback of the purchase price premium and all costs in two years. The purchase price is subject to certain adjustments set forth in the definitive agreement, and the transaction is subject to regulatory approval and other customary closing conditions and is expected to close in the next twelve to fifteen months with benefits starting to materialize immediately after close.

Further, to facilitate compliance with federal banking regulations and prevent closing of the Radius acquisition being delayed or disrupted, the LendingClub Board of Directors has adopted a Temporary Bank Charter Protection Agreement, also known as a stockholder rights agreement, and approved a dividend distribution of one purchase right for each outstanding share of the Company’s stock as of March 19, 2020. The agreement is intended to deter stock positions in excess of certain thresholds set forth by the Federal Reserve under the Bank Holding Company Act. Specifically, it provides for the dilution of any person or group of persons who acquire:

(i) 25 percent or more equity interest in LendingClub or
(ii) 7.5 percent or more of any class of LendingClub’s voting securities. This threshold automatically increases to 10 percent as set forth in the agreement.

Anyone already above such thresholds is grandfathered in at their current levels. The agreement is effective immediately and will automatically expire on either the closing of the Radius acquisition or after 18 months, whichever is earlier.

Lending Club Launches Auto Refinance Loans

wiseclerk

Today Lending Club has unveiled a new product offer. Borrowers in California will be able to refinance auto loans through Lending Club. Lending Club says that the opportunity is huge with currently more than 1 trillion US$ in auto debt outstanding, while just a fraction of that – 40 billion US$ – refinanced annually. The company states this represents huge potential for both Lending Club’s platform and the millions of Americans who could save by refinancing into a more affordable product. Lending Club estimates the average APR for borrowers on new loans through Lending Club will be about 1-3% lower than their current loan, translating into an average savings of up to 1,350 US$ over the life of the loan.

“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars. The practices and processes of the auto lending industry offer consumers limited options and a lack of transparency. This has created a gap between the rates consumers pay and the rates they might otherwise qualify for, unnecessarily driving up debt burdens,” said Scott Sanborn, Lending Club’s President and Chief Executive Officer.  “We are excited to leverage our technology and core capabilities to put thousands of dollars back in consumers’ pockets.”. “This is Lending Club’s first offering of access to a secured loan with an overall risk and return profile that’s complementary to the unsecured loans available through our platform. It’s a big step in the evolution of our platform, a win for consumers, and will give our investors access to another proven asset,” Sanborn said.

Loans will be for amounts from 5K to 50K US$ with terms of 24 to 72 months and APRs ranging from 2.49% to 19.99%.

Lending Club strives to offer a much simpler application process than competitors. While the loans are initially limited to borrowers in California it seems likely that Lending Club will expand that. An article with more details is on Lendacademy.

lendingclub-auto-loan

Shanda Group Buys 11% Stake in Lending Club

wiseclerk

Chinese billionaire Chen Tianqiao has bought a close to 12 percent stake in Lending Club.

Singapore-based private investment group Shanda Group, which is led by Chen, said on Monday that it saw the online lender’s battered stock as an attractive buying opportunity.

The sale of the 11.7 percent stake comes as growth in Lending Club’s loan originations is slowing and regulatory interest in the sector is increasing.

Lending Club shares were up in yesterday’s trading. The stock had fallen more than 40 percent since the May 9 announcement of Chief Executive Officer Renaud Laplanche’s resignation after an internal investigation found the company had knowingly sold 22 million US$ of loans that did not match the buyer’s specifications.

‘We have been in discussions with Shanda regarding their investment, and we look forward to a continued dialogue with them,’ a Lending Club spokesman said.

Shanda Group said in a statement that it was a “strong believer” in the business model that Lending Club has pioneered and was “positive on its long-term prospects as it continues to evolve and refine its business.”

The company bought a total of about 29 million Lending Club shares for $148.7 million. It also has call options to buy 15.7 million shares for $11.2 million. Some of the shares were bought before Laplanche’s resignation but the bulk of the purchases were conducted after May 9th.

(Source: Reuters & other)

 

Lending Club CEO Renaud Laplanche Resigns

wiseclerk

Today’s news that Renaud Laplanche, founder of Lending Club, resigns came as a surprise for me and I think pretty much everybody else in the industry. Renaud Laplanche steered Lending Club from launch to the position it as the largest marketplace lending service for consumer loans in the US.

The board has reportedly asked for his resination after an investigation into a sale of 22 million US$ in loans to  an institutional investor that mismatched the investor’s criteria. The loans were subsequently repurchased by Lending Club.

Today’s press release states:

Lending Club conducted a review, under the supervision of a sub-committee of the board of directors and with the assistance of independent outside counsel and other advisors, regarding non-conforming sales to a single, accredited institutional investor of $22 million of near-prime loans ($15 million in March and $7 million in April). The loans in question failed to conform to the investor’s express instructions as to a non-credit and non-pricing element. Certain personnel apparently were aware that the sale did not meet the investor’s criteria.

In early April 2016, Lending Club repurchased these loans at par and subsequently resold them at par to another investor. As a result of the repurchase, as of March 31, 2016, these loans were recorded as secured borrowings on the Company’s balance sheet and were also recorded at fair value. The financial impact of this reporting is that the Company was unable to recognize approximately $150,000 in revenue as of March 31, 2016, related to gains on sales of these loans.

The review began with discovery of a change in the application dates for $3.0 million of the loans described above, which was promptly remediated. The board also hired an outside expert firm to review all other loans facilitated in the first quarter of 2016 and the firm did not find changes to data in these or other Q1 loans.

The review further discovered another matter unrelated to the sale of the loans, involving a failure to inform the board’s Risk Committee of personal interests held in a third party fund while the Company was contemplating an investment in the same fund. This lack of disclosure had no impact on financial results for the first quarter.

Given the events above, the Company took, and will continue to take, remediation steps to resolve the material weaknesses in internal control over financial reporting identified in the first quarter of 2016 — one related to the sales of non-conforming loans and the other to the failure to disclose the personal investment interests — and to restore the effectiveness of its disclosure controls and procedures. These remediation steps included the termination or resignation of three senior managers involved in the sales of the $22 million of near-prime loans.

Scott Sanborn will continue in his role of President and will become acting CEO.

The LC stock is currently trading 25% down following the news.