Lending Club (LC) reported earnings on Mon 9 May 2016 (b/o)

** charts before earnings **

 

** charts after earnings **

 

** next day **

** 3 days later **

Lending Club reports EPS in-line, beats on revs; announces resignation of CEO following internal review  :

• Reports Q1 (Mar) earnings of $0.05 per share, in-line with the Capital IQ Consensus of $0.05; revenues rose 86.8% year/year to $151.3 mln vs the $147.9 mln Capital IQ Consensus.
• Operating revenue as a percent of originations, or revenue yield, was 5.50% in the first quarter, up from 4.95% in the same period last year. Lending Club today also reported that on May 6, 2016, the board of directors accepted the resignation of Renaud Laplanche as Chairman and CEO. His resignation followed an internal review of sales of $22 million in near-prime loans to a single investor, in contravention of the investor's express instructions as to a non-credit and non-pricing element, in March and April 2016.
• Scott Sanborn will continue in his role of President and will become acting CEO, assuming additional managerial responsibilities for the Company.
• 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.
• 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.
• In light of the recent events, the Company believes it is prudent not to provide guidance at this time. The Company intends to provide guidance as soon as appropriate.