Author Topic: LC Cash on Balance Sheet Down  (Read 5377 times)

Rob L

  • Hero Member
  • *****
  • Posts: 2132
    • View Profile
LC Cash on Balance Sheet Down
« on: November 08, 2017, 10:35:07 AM »
From Scott Sanborn prepared remarks:

"We ended the quarter with $604 million of cash and securities available for sale and no debt. We also held about $187 million in loans on the balance sheet, most of which we will use for our fourth quarter securitization."

And from the Q&A:

--------------------------------------------------------------------------------

Michael Matthew Tarkan, Compass Point Research & Trading, LLC, Research Division - MD, Director of Research, & Senior Research Analyst [34]

--------------------------------------------------------------------------------

Okay. And then last one, just on the cash level. And I know it went down. I know you're doing more securitization, but how should think about that move or that pushing through to the end of the year? Like, how should we think about cash level moving forward?

--------------------------------------------------------------------------------

Thomas W. Casey, LendingClub Corporation - CFO [35]

--------------------------------------------------------------------------------

I think, as I mentioned in my prepared remarks, we want to continue to maintain high levels of liquidity. That's first and foremost. The cash balance that you see moved down is just being redeployed into loans available for sale, which is part of the securitization that we had. So $187 million of loans are sitting in available for sale that is utilizing that cash.

--------------------------------------------------------------------------------

jd

  • Jr. Member
  • **
  • Posts: 65
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #1 on: November 08, 2017, 10:40:56 AM »
Questions Rob:

Are those numbers in any meaningful way different from ones you spoke of in the past? 

What do you think of their announcements today in regards to the health of the company? 

Thanks

Eddie


Rob L

  • Hero Member
  • *****
  • Posts: 2132
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #2 on: November 08, 2017, 11:10:38 AM »
Questions Rob:

Are those numbers in any meaningful way different from ones you spoke of in the past? 

What do you think of their announcements today in regards to the health of the company? 

Thanks

Eddie

Certainly different. Cash and equivalents down 21% Q/Q from $764m to $603m. They are down 25% Y/Y so pretty much the entire drop was this past quarter. If I remember they burn through about $20m cash per quarter to pay the bills. Loans on the books for sale up 739% Q/Q from $36m to $266m. This is an unprecedented change. Could be a good thing for the company or a bad thing, I dunno. There must be some degree of added risk.

jd

  • Jr. Member
  • **
  • Posts: 65
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #3 on: November 08, 2017, 11:12:57 AM »
Quote
Certainly different. Cash and equivalents down 21% Q/Q from $764m to $603m. They are down 25% Y/Y so pretty much the entire drop was this past quarter. If I remember they burn through about $20m cash per quarter to pay the bills. Loans on the books for sale up 739% Q/Q from $36m to $266m. This is an unprecedented change. Could be a good thing for the company or a bad thing, I dunno. There must be some degree of added risk.

Thanks

Rob L

  • Hero Member
  • *****
  • Posts: 2132
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #4 on: November 08, 2017, 12:12:36 PM »
One important thing did occur to me. The loans purchased by LC added to their originations THIS QUARTER big time.
Total originations this quarter were $2,443m. Of this $266m or about 10.8% were purchased by LC and put onto their books!
Were it not for these, originations this quarter would have been only $2,117m and would have resulted in a slight DROP in originations from the previous quarter (from $2,147).
Think that would have been seen as a disaster. Basically they had to buy those loans.

Edit: fixed typo.. was $2.443m and of course s/b $2,443m
« Last Edit: November 08, 2017, 04:37:19 PM by Rob L »

Tomp

  • Newbie
  • *
  • Posts: 24
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #5 on: November 08, 2017, 12:32:08 PM »
EXACTLY!!!! and they lost Creg.....and Scott Sanborn and CFO "DON'T KNOW" the number of repeat borrowers.  How much of the origination was churn?

Why is the credit team being fired????

Rob L

  • Hero Member
  • *****
  • Posts: 2132
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #6 on: November 08, 2017, 04:48:05 PM »
EXACTLY!!!! and they lost Creg.....and Scott Sanborn and CFO "DON'T KNOW" the number of repeat borrowers.  How much of the origination was churn?

Why is the credit team being fired????

Guess I didn't get the memo;
1) Who is Creg?
2) In their quarterly announcement LC made a very big deal of moving to a new credit scoring model ("G5"). Who is being fired?

Fred93

  • Hero Member
  • *****
  • Posts: 2245
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #7 on: November 08, 2017, 05:20:47 PM »
From Scott Sanborn prepared remarks:

"We ended the quarter with $604 million of cash and securities available for sale and no debt. We also held about $187 million in loans on the balance sheet, most of which we will use for our fourth quarter securitization."

If you add those two numbers, then cash isn't down significantly.  They're using some of their cash to buy and hold some loans for a short time until they bundle them up and sell them.  While they were able in the past to sell $25 chunks to retail investors, and to sell $17000 (average loan size) chunks to institutional investors, now they're pushing loans thru the securitization channel, and here the institutional investors expect much much larger chunks, so you've got to hold a pile of loans and then sell them as a package.  This temporary holding of a pile of loans requires the use of some cash.

Luckily, LC has some cash, ... so things work out.

It is important to realize that this is a temporary very low risk use of cash.  It doesn't take on much credit risk, because these loans are held for a very short time.  A few will default during that short holding window of course (some borrowers die, some declare  bankruptcy, some will fail to make their first payment), but this is a very small number.  This is not at all the same sort fo risk as holding loans long term.

So I don't see this as a problem for LC invstors or customers.

As an individual investors, I wish they were more focused on the retail and small institutional market, rather than securitizations, but that's my POV, rather than a statement what is good for LC long  term.

jd

  • Jr. Member
  • **
  • Posts: 65
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #8 on: November 08, 2017, 06:06:16 PM »
Thanks Fred.

Quote
As an individual investors, I wish they were more focused on the retail and small institutional market, rather than securitizations, but that's my POV, rather than a statement what is good for LC long  term.


Is there anything in todays announcements that change your view on the company?


« Last Edit: November 08, 2017, 06:54:05 PM by jd »

nonattender

  • Hero Member
  • *****
  • Posts: 726
  • I am not here.
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #9 on: November 08, 2017, 06:32:52 PM »
I'm not concerned about self-financing securitizations.  My major point of curiosity is around what "other" originationas may portend, in the future, wrt product development(s).  I'm ok waiting to find out - the numbers look non-negligible, so that's actually quite a positive signal...

Also, unsaid thoughts about this old conversation:  https://forum.lendacademy.com/index.php/topic,1282.0.html
« Last Edit: November 08, 2017, 06:39:14 PM by nonattender »
A little nonsense now and then is relished by the wisest men.

Rob L

  • Hero Member
  • *****
  • Posts: 2132
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #10 on: November 08, 2017, 07:09:29 PM »
From Scott Sanborn prepared remarks:

"We ended the quarter with $604 million of cash and securities available for sale and no debt. We also held about $187 million in loans on the balance sheet, most of which we will use for our fourth quarter securitization."

If you add those two numbers, then cash isn't down significantly.  They're using some of their cash to buy and hold some loans for a short time until they bundle them up and sell them.  While they were able in the past to sell $25 chunks to retail investors, and to sell $17000 (average loan size) chunks to institutional investors, now they're pushing loans thru the securitization channel, and here the institutional investors expect much much larger chunks, so you've got to hold a pile of loans and then sell them as a package.  This temporary holding of a pile of loans requires the use of some cash.

Luckily, LC has some cash, ... so things work out.

It is important to realize that this is a temporary very low risk use of cash.  It doesn't take on much credit risk, because these loans are held for a very short time.  A few will default during that short holding window of course (some borrowers die, some declare  bankruptcy, some will fail to make their first payment), but this is a very small number.  This is not at all the same sort fo risk as holding loans long term.

So I don't see this as a problem for LC invstors or customers.

As an individual investors, I wish they were more focused on the retail and small institutional market, rather than securitizations, but that's my POV, rather than a statement what is good for LC long  term.

LUCASFILM LTD.
Obi-Wan: These aren't the droids you're looking for.

Stormtrooper: These aren't the droids we're looking for.

Obi-Wan: He can go about his business.

Stormtrooper: You can go about your business.

Obi-Wan: Move along.

Stormtrooper: Move along... move along.

Film: A New Hope (1977)

Tomp

  • Newbie
  • *
  • Posts: 24
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #11 on: November 11, 2017, 01:02:24 PM »
EXACTLY!!!! and they lost Creg.....and Scott Sanborn and CFO "DON'T KNOW" the number of repeat borrowers.  How much of the origination was churn?

Why is the credit team being fired????

Guess I didn't get the memo;
1) Who is Creg?
2) In their quarterly announcement LC made a very big deal of moving to a new credit scoring model ("G5"). Who is being fired?

LENDING CLUB LOST THIS DEAL.......of course they said it was just a "stop gap" lol- I meant to say that the whole credit team SHOULD be fired.  Having said that---look for lending club to actually start hiring some women-failing companies usually do that when they feel like they have nothing left to lose.

SAN FRANCISCO, Nov. 7, 2016 /PRNewswire/ -- Lending Club (NYSE: LC), the world's largest online marketplace connecting borrowers and investors, announced that National Bank of Canada has approved investing up to $1.3 billion to be deployed on the Lending Club platform over the next twelve months. The investment will be undertaken by Credigy, a U.S. subsidiary of National Bank of Canada, which specializes in consumer finance investment.

Lovinglifestyle

  • Hero Member
  • *****
  • Posts: 902
    • View Profile
    • Email
Re: LC Cash on Balance Sheet Down
« Reply #12 on: November 11, 2017, 03:01:02 PM »
Does a Canadian bank get to write off its LC losses against its interest income?

Tomp

  • Newbie
  • *
  • Posts: 24
    • View Profile
Re: LC Cash on Balance Sheet Down
« Reply #13 on: November 11, 2017, 04:21:50 PM »
You can't write off principal losses against interest income.  I don't know if they lost money but clearly returns were lower than expected.  I think lending club's management is very poor-always has been. That said-I actually bought stock at 4.30 -the board has to move and get rid of CEO, CFO and "new" President or someone else will do it for them.

Lovinglifestyle

  • Hero Member
  • *****
  • Posts: 902
    • View Profile
    • Email
Re: LC Cash on Balance Sheet Down
« Reply #14 on: November 11, 2017, 06:17:45 PM »
Sorry--I didn't notice the date about that "up to 1.3 billion" was a year ago.  I was just wondering if Canadians enjoy some tax advantages we don't that would make the investment less risky for them than for a US based securitization group.