LendingClub Corporation (NYSE: LC) announced an agreement to acquire a $1.05 billion loan portfolio. The portfolio consists of personal loans that were originated through LendingClub’s marketplace and will support its growing revenue stream of recurring net interest income.
The personal loans were previously acquired by MUFG Union Bank and became available for purchase following U.S. Bancorp’s recently completed acquisition of MUFG Union Bank’s core regional banking franchise. The loans are currently being serviced by LendingClub and have a current outstanding principal weighted average FICO score of 729.
“LendingClub utilized its strong balance sheet to support marketplace liquidity while mitigating a slowdown in marketplace revenue by adding a high-quality loan portfolio that will generate attractive returns,” said Scott Sanborn, LendingClub’s CEO. “This portfolio was acquired through a competitive bidding process and exemplifies a mutually beneficial transaction.”
Expenses associated with the acquisition are expected to be approximately $4 million, primarily related to the derecognition of the associated servicing asset, which will be more than offset over time by interest income from the loan portfolio. Due to the short remaining duration of the acquired loan portfolio, LendingClub has elected to account for the held for investment loan portfolio under the fair value option, which will not require upfront credit loss provisioning under the Current Expected Credit Loss (CECL) methodology.
