LendingClub Corp
For the period ended Mar 31, 2025. Filed May 1, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 1, 2025
HAPN$15.96-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0001409970-24-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0001409970-25-000018
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 190 previous paragraphs and 184 current paragraphs.
94 unchanged; 57 reworded; 31 added; 35 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 33 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
The following is a summary of our results for thefirst quarter of 2025 compared to the same period in 2024, reflecting growth in loan originations, total net revenue and total assets:
Current report
•Provision for credit losses: Provision for credit losses for the first quarter of 2025 increased $26.2 million, or 82%, year over year. The increase was primarily driven by an increase in initial provision for credit losses from a higher volume of originated loans retained as HFI at amortized cost and additional economic qualitative allowance to reflect macroeconomic uncertainty.
Current report
•Net income: Net income for the first quarter of 2025 decreased $0.6 million, or 5%, year over year. Net income for the first quarter of 2025 included the negative impact of $8.1 million on allowance and net fair value adjustments due to macroeconomic uncertainty.
Current report
(3)The balances at March 31, 2025 and December 31, 2024 include a loan portfolio that was purchased with a $1.3 billion outstanding principal balance during the third quarter of 2024. This portfolio consisted of loans which we previously originated and sold.
Current report
Sequential: Origination fees were $69.9 million and $64.7 million for the first quarter of 2025 and fourth quarter of 2024, respectively, an increase of 8%. The increase was primarily due to the increase in the origination volume of marketplace loans.
Current report
Sequential: Servicing fees were $12.7 million and $17.4 million for the first quarter of 2025 and fourth quarter of 2024, respectively, a decrease of 27%. The decrease was primarily due to a decrease in the fair value of the servicing asset based on higher future expected borrower prepayments and a reduction in servicing fees on delinquent loan collections.
Current report
Sequential: Gain on sales of loans was $12.2 million and $15.0 million for the first quarter of 2025 and fourth quarter of 2024, respectively, a decrease of 19%. The decrease was primarily driven by the decrease in the volume of marketplace loans sold.
Current report
Sequential: Net fair value adjustments were $(29.3) million and $(25.0) million for the first quarter of 2025 and fourth quarter of 2024, respectively, an increased loss of $4.3 million. The increase was primarily due to an increase in the origination volume of marketplace loans and higher future expected borrower prepayments.
Current report
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
Current report
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
Current report
Year Over Year: The provision for credit losses was $58.1 million and $31.9 million for the first quarters of 2025 and 2024, respectively, an increase of 82%. The increase was primarily driven by an increase in the initial provision for credit losses from a higher volume of originated loans retained as HFI at amortized cost and additional economic qualitative allowance to reflect macroeconomic uncertainty.
Current report
(1)The first quarter of 2025 included an $8.0 million charge-off related to one office loan within our CRE portfolio, which was fully reserved for in prior periods.
Current report
(2)Relates to $96.3 million, $105.0 million and $72.1 million of unfunded commitments as of March 31, 2025, December 31, 2024 and March 31, 2024, respectively.
Current report
The following table presents nonaccrual loans and leases:
Current report
Sequential: Compensation and benefits expense remained relatively flat for the first quarter of 2025 compared to the fourth quarter of 2024.
Current report
Sequential: Marketing expense increased $5.8 million, or 25%, for the first quarter of 2025 compared to the fourth quarter of 2024.
Current report
The increases in equipment and software expense were primarily due to an increase in software license expense and cloud services.
Current report
Sequential: Depreciation and amortization expense decreased $5.8 million, or 30%, for the first quarter of 2025 compared to the fourth quarter of 2024. The decrease was primarily due to the impairment expense for internally-developed software recorded in the fourth quarter of 2024.
Current report
The increases in occupancy expense were primarily due to an increase in office maintenance expenses.
Current report
Sequential: Other non-interest expense decreased $1.0 million, or 7%, for the first quarter of 2025 compared to the fourth quarter of 2024.
Current report
Reportable Segments
Current report
(1) Total net income from reportable segments reflects net income on a consolidated basis.
Current report
We believe ROTCE is an important measure because it reflects the Company's ability to generate income from its core assets. ROTCE is a non-GAAP financial measure calculated by dividing net income by the average tangible common equity for the applicable period.
Current report
The following table presents the actual capital amounts and ratios of the Company and LC Bank as well as LC Bank’s regulatory capital minimum and “well capitalized” requirements (dollars in millions):
Current report
(1) Required minimums presented for risk-based capital ratios include the required capital conservation buffer of 2.5%.
Current report
(2)As of March 31, 2025 and December 31, 2024, the Company had $3.0 billion and $3.2 billion in loans pledged under the FRB Discount Window, respectively.
Current report
(3)As of March 31, 2025, the Company had $447.6 million in loans and $375.5 million in securities pledgedto the FHLB of Des Moines. As of December 31, 2024, the Company had $456.4 million in loans and $373.5 million in securities pledgedto the FHLB of Des Moines.
Current report
Deposits
Current report
Deposits represent an important source of funding for LC Bank. We offer deposit accounts to our members, which include both interest-bearing and noninterest-bearing deposits. As of both March 31, 2025 and December 31, 2024, the amount of uninsured deposits totaled $1.2 billion, or 13%, of total deposits. Uninsured time deposits as of March 31, 2025, by remaining time to maturity, were as follows:
Current report
(1)Consist of certificates of deposit accounts that are in excess of the FDIC insurance limit of $250 thousand per account holder.
Current report
Capital Expenditures
Removed paragraphs (35)
Previous report
The following results for the third quarter of 2024 reflect growth in originations and improved loan sales pricing. In addition, during the third quarter of 2024, we acquired a loan portfolio with a $1.3 billion outstanding principal balance which drove growth in total assets.
Previous report
•Provision for credit losses: Provision for credit losses for the third quarter of 2024 increased $12.0 million, or 34%, sequentially and decreased $16.9 million, or 26%, year over year. The sequential increase was primarily driven by an increase in initial provision from a higher volume of originated loans retained as HFI at amortized cost, partially offset by the impact of a $5.3 million provision in our Commercial Real Estate (CRE) portfolio due to one office loan, which was recognized in the second quarter of 2024. Excluding this one office loan, the CRE office loan portfolio balance was under $35 million as of September 30, 2024. The majority of office loans were originated prior to the Acquisition. The year-over-year decrease was primarily driven by a higher quantitative and qualitative allowance in the third quarter of 2023 due to an increase in expected losses and a less favorable economic outlook, partially offset by an increase in the initial provision for credit losses from a higher volume of originated loans retained as HFI at amortized cost.
Previous report
•Net income: Net income for the third quarter of 2024 decreased $0.4 million, or 3%, sequentially and increased $9.4 million, or 189%, year over year.
Previous report
(3)Prior period amounts have been reclassified to conform to the current period presentation.
Previous report
(4)The balance at September 30, 2024 includes a loan portfolio acquired during the third quarter of 2024 with a $1.3 billion outstanding principal balance.
Previous report
Sequential: Origination fees were $71.5 million and $77.1 million for the third and second quarters of 2024, respectively, a decrease of 7%.
Previous report
Nine Months Over Nine Months: Origination fees were $218.7 million and $202.4 million for the first nine months of 2024 and 2023, respectively, an increase of 8%.
Previous report
The changes in origination fees were primarily driven by the increase or decrease in the origination volume of marketplace loans.
Previous report
Sequential: Servicing fees were $8.1 million and $19.9 million for the third and second quarters of 2024, respectively, a decrease of 59%.
Previous report
Nine Months Over Nine Months: Servicing fees were $47.5 million and $81.2 million for the first nine months of 2024 and 2023, respectively, a decrease of 41%.
Previous report
The decreases in servicing fees were primarily due to a decrease in loan balances serviced for others as well as a $7.7 million servicing asset write-off related to the loan portfolio purchase during the third quarter of 2024. In addition, the year over year and nine months over nine months decreases were also driven by a one-time benefit related to recouping volume-based purchase incentives during the third quarter of 2023 as well as an increase in the fair value of the servicing asset based on higher expected servicing fee revenue in 2023.
Previous report
Sequential: Gain on sales of loans was $12.4 million and $10.7 million for the third and second quarters of 2024, respectively, an increase of 16%.
Previous report
Nine Months Over Nine Months: Gain on sales of loans was $34.1 million and $35.9 million for the first nine months of 2024 and 2023, respectively, a decrease of 5%.
Previous report
The changes in the gain on sales of loans were primarily driven by the increase or decrease in the volume of marketplace loans sold.
Previous report
Sequential: Net fair value adjustments were $(33.6) million and $(51.4) million for the third and second quarters of 2024, respectively, a decreased loss of $17.8 million.
Previous report
Nine Months Over Nine Months: Net fair value adjustments were $(129.7) million and $(80.2) million for the first nine months of 2024 and 2023, respectively, an increased loss of $49.5 million.
Previous report
The changes in net fair value adjustments were primarily driven by the increase or decrease in the origination volume of marketplace loans. In addition, the decreased losses sequentially and year over year were attributable to higher loan sales prices, resulting from lower interest rates and increased investor demand.
Previous report
Year Over Year: The provision for credit losses was $47.5 million and $64.5 million for the third quarters of 2024 and 2023, respectively, a decrease of 26%. The decrease was primarily driven by a higher quantitative and qualitative allowance in the third quarter of 2023 due to an increase in expected losses and a less favorable economic outlook, partially offset by an increase in the initial provision for credit losses from a higher volume of originated loans retained as HFI at amortized cost.
Previous report
Nine Months Over Nine Months: The provision for credit losses was $115.0 million and $201.7 million for the first nine months of 2024 and 2023, respectively, a decrease of 43%. The decrease was primarily driven by a decrease in the initial provision for credit losses from a lower volume of originated loans retained as HFI at amortized cost.
Previous report
(1)Relates to $105.3 million, $91.5 million and $89.5 million of unfunded commitments as of September 30, 2024, June 30, 2024 and September 30, 2023, respectively. As of September 30, 2024, $11.4 million of the $105.3 million of unfunded commitments is unconditionally cancellable and therefore has no associated reserve.
Previous report
Sequential: Compensation and benefits expense increased $0.9 million, or 2%, for the third quarter of 2024 compared to the second quarter of 2024.
Previous report
Nine Months Over Nine Months: Compensation and benefits expense decreased $29.9 million, or 15%, for the first nine months of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in headcount as a result of the workforce reduction plans we implemented in 2023.
Previous report
Sequential: Marketing expense decreased $0.5 million, or 2%, for the third quarter of 2024 compared to the second quarter of 2024.
Previous report
Nine Months Over Nine Months: Marketing expense increased $6.6 million, or 9%, for the first nine months of 2024 compared to the same period in 2023.
Previous report
Nine Months Over Nine Months: Equipment and software expense decreased $2.5 million, or 6%, for the first nine months of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in software license expense.
Previous report
Sequential: Depreciation and amortization expense increased $0.3 million, or 2%, for the third quarter of 2024 compared to the second quarter of 2024.
Previous report
Nine Months Over Nine Months: Depreciation and amortization expense increased $3.8 million, or 11%, for the first nine months of 2024 compared to the same period in 2023.
Previous report
Nine Months Over Nine Months: Professional services decreased $4.5 million, or 17%, for the first nine months of 2024 compared to the same period in 2023.
Previous report
Nine Months Over Nine Months: Occupancy expense decreased $1.8 million, or 13%, for the first nine months of 2024 compared to the same period in 2023.
Previous report
The year over year and nine months over nine months decreases in occupancy expense were primarily due to a decrease in rent expense.
Previous report
Sequential: Other non-interest expense increased $2.7 million, or 23%, for the third quarter of 2024 compared to the second quarter of 2024.
Previous report
Nine Months Over Nine Months: Other non-interest expense decreased $7.4 million, or 16%, for the first nine months of 2024 compared to the same period in 2023.
Previous report
The following table summarizes the Company’s and LC Bank’s regulatory capital amounts (in millions) and ratios:
Previous report
In response to the COVID-19 pandemic, the FRB, OCC, and FDIC adopted a final rule related to the regulatory capital treatment of the allowance for credit losses under CECL. As permitted by the rule, the Company elected to delay the estimated impact of CECL on regulatory capital resulting in a capital benefit of $35 million at December 31, 2021. This benefit is phased out over a three-year transition period that commenced on January 1, 2022 at a rate of 25% each year through January 1, 2025.
Previous report
(2)Includes both loans and securities available for sale pledged as collateral.
Reworded paragraphs (57)
Previous wording
LendingClub operates a leading digital marketplace bank and is one of a small number of fintech companies with a national bank charter. We are building a new of kind of bank, one that aims to advantage our members with the information, tools, and guidance they need to achieve their own version of financial success. We do this by leveraging data and technology to increase access to credit, lower borrowing costs, and improve the return on savings – all through a smart, simple, and rewarding digital experience.
Current wording
LendingClub operates a leading, nationally chartered, digital marketplace bank that aims to advantage our members with the information, tools, and guidance needed to achieve their own version of financial success. We do this through a smart, simple, and rewarding digital experience that leverages data and technology to increase access to credit, lower borrowing costs, and improve returns on savings.
Previous wording
•Loan originations: Loan originations for the third quarter of 2024 increased $100.1 million, or 6%, sequentially and $404.8 million, or 27%, year over year. The increases were driven by an increase in unsecured personal loan origination volume combined with investor demand for Structured Certificates.
Current wording
•Loan originations: Loan originations for the first quarter of 2025 increased $342.4 million, or 21%, year over year. The increase was driven by an increase in unsecured personal loan origination volume.
Previous wording
◦Loan originations held for investment (HFI) at amortized cost for the third quarter of 2024 increased $173.9 million, or 52%, sequentially and $183.3 million, or 56%, year over year.
Current wording
◦Loan originations held for investment (HFI) at amortized cost for the first quarter of 2025 increased $389.4 million, or 136%, year over year.
Previous wording
◦Loan originations HFI at amortized cost as a percentage of loan originations was 27% and 19% for the third and second quarters of 2024, respectively, and 22% for the third quarter of 2023. The percentage of loan originations HFI in any period is dependent on many factors, including quarterly loan origination volume, risk-adjusted returns, liquidity and general regulatory capital considerations.
Current wording
◦Loan originations HFI at amortized cost as a percentage of loan originations was 34% and 17% for the first quarters of 2025 and 2024, respectively. The percentage of loan originations HFI in any period is dependent on many factors, including quarterly loan origination volume, risk-adjusted returns, liquidity and general regulatory capital considerations.
Previous wording
•Total net revenue: Total net revenue for the third quarter of 2024 increased $14.6 million, or 8%, sequentially and $1.0 million, or 1%, year over year.
Current wording
•Total net revenue: Total net revenue for the first quarter of 2025 increased $37.0 million, or 20%, year over year.
Previous wording
◦Marketplace revenue: Marketplace revenue for the third quarter of 2024 increased $2.0 million, or 4%, sequentially and decreased $2.5 million, or 4%, year over year. The sequential increase was primarily due to improved loan sales prices. The year-over-year decrease was primarily due to a decrease in loan balances serviced for others, partially offset by improved loan sales prices. In addition, both the sequential and year-over-year changes reflect a $7.7 million servicing asset write-off related to the loan portfolio purchase during the third quarter of 2024.
Current wording
◦Marketplace revenue: Marketplace revenue for the first quarter of 2025 increased $9.8 million, or 17%, year over year. The increase was primarily due to improved loan sales prices, partially offset by a decrease in loan balances serviced for others.
Previous wording
◦Net interest income: Net interest income for the third quarter of 2024 increased $11.7 million, or 9%, sequentially and $3.2 million, or 2%, year over year. The increases were primarily due to growth in total interest-earning assets driven by the $1.3 billion loan portfolio purchase during the third quarter of 2024, partially offset by an increase in interest expense associated with growth in interest-bearing deposits.
Current wording
◦Net interest income: Net interest income for the first quarter of 2025 increased $27.1 million, or 22%, year over year primarily due to an increase in total interest-earning assets and a decrease in interest expense associated with a lower average rate on interest-bearing deposits.
Previous wording
◦Net interest margin: Net interest margin for the third quarter of 2024 was 5.63%, decreasing from 5.75% in the second quarter of 2024 and from 6.91% in the third quarter of 2023.
Current wording
◦Net interest margin: Net interest margin for the first quarter of 2025 was 5.97%, increasing from 5.75% in the first quarter of 2024.
Previous wording
•Total non-interest expense: Total non-interest expense for the third quarter of 2024 increased $4.1 million, or 3%, sequentially and $8.3 million, or 6%, year over year. The year-over-year increase was primarily due to an increase in marketing expense based on higher origination volume of marketplace loans and an increase in depreciation and amortization expense, partially offset by a decrease in compensation and benefits expense due to the workforce reduction plans we implemented in 2023.
Current wording
•Total non-interest expense: Total non-interest expense for the first quarter of 2025 increased $11.6 million, or 9%, year over year. The increase was primarily due to an increase in marketing expense based on higher origination volume as well as the resumption of certain marketing initiatives.
Previous wording
•Diluted earnings per share (EPS): Diluted EPS was $0.13 for both the third and second quarters of 2024 and $0.05 for the third quarter of 2023.
Current wording
•Diluted earnings per share (EPS): Diluted EPS was $0.10, compared to $0.11 for the first quarter of 2024.
Previous wording
•Pre-provision net revenue (PPNR): Pre-provision net revenue for the third quarter of 2024 increased $10.6 million, or 19%, sequentially and decreased $7.3 million, or 10%, year over year. The sequential increase was driven by an increase in total net revenue, partially offset by an increase in non-interest expense. The year-over-year decrease was driven by an increase in non-interest expense.
Current wording
•Pre-provision net revenue (PPNR): PPNR for the first quarter of 2025 increased $25.4 million, or 52%, year over year, driven by an increase in total net revenue, partially offset by an increase in non-interest expense.
Previous wording
•Total assets: Total assets as of September 30, 2024 increased $1.5 billion, or 15%, sequentially and $2.6 billion, or 30%, year over year. The increases primarily reflect growth in loans held for investment at fair value, including the acquisition of a loan portfolio during the third quarter of 2024 with a $1.3 billion outstanding principal balance, securities related to our Structured Certificates program, and loans held for sale (HFS) related to our extended seasoning program.
Current wording
•Total assets: Total assets as of March 31, 2025 increased $1.2 billion, or 13%, year over year. The increase primarily reflects growth in securities related to our Structured Certificates program and our HFI and held for sale (HFS) loan portfolios at fair value.
Previous wording
•Deposits: Total deposits as of September 30, 2024 increased $1.4 billion, or 17%, sequentially, and $2.5 billion, or 35%, year over year. The increases primarily reflect growth in high-yield savings and certificates of deposit. Federal Deposit Insurance Corporation (FDIC)-insured deposits represent approximately 88% of total deposits as of September 30, 2024.
Current wording
•Deposits: Total deposits as of March 31, 2025 increased $1.4 billion, or 18%, year over year. The increase was primarily due to growth in high-yield savings and certificates of deposit. Federal Deposit Insurance Corporation (FDIC)-insured deposits represent approximately 87% of total deposits as of March 31, 2025.
Previous wording
(4) Assets under management (AUM) reflects loans serviced on our platform, which includes outstanding balances of unsecured personal loans, auto refinance loans and education and patient finance loans serviced for others and retained for investment by the Company.
Current wording
(4) Assets under management (AUM) reflects loans serviced on our platform, which includes outstanding balances of unsecured personal loans, auto refinance loans and education and patient finance loans serviced for others and retained by the Company.
Previous wording
(5)Calculated as ALLL or gross ALLL, where applicable, to the corresponding portfolio segment balance of loans and leases held for investment at amortized cost.
Current wording
(4)Calculated as ALLL or gross ALLL, where applicable, to the corresponding portfolio segment balance of loans and leases held for investment at amortized cost.
Previous wording
(6)Calculated as annualized net charge-offs divided by average outstanding loans and leases HFI at amortized cost, net, during the period.
Current wording
(5)Calculated as annualized net charge-offs divided by average outstanding loans and leases HFI at amortized cost, net, during the period.
Previous wording
The analysis below is presented for the following periods: Third quarter of 2024 compared to the second quarter of 2024 (sequential), third quarter of 2024 compared to the third quarter of 2023 (year over year) and the first nine months of 2024 compared to the first nine months of 2023 (nine months over nine months).
Current wording
The analysis below is presented for the following periods: First quarter of 2025 compared to the fourth quarter of 2024 (sequential) and first quarter of 2025 compared to the first quarter of 2024 (year over year).
Previous wording
The following tables present loan origination volume during each of the periods set forth below:
Current wording
The following table presents loan origination volume during each of the periods set forth below:
Previous wording
Year Over Year: Origination fees were $71.5 million and $60.9 million for the third quarters of 2024 and 2023, respectively, an increase of 17%.
Current wording
Year Over Year: Origination fees were $69.9 million and $70.1 million for the first quarters of 2025 and 2024, respectively, remaining relatively flat.
Previous wording
In addition to the loans serviced on our marketplace platform, we serviced $106.5 million, $111.6 million and $138.8 million in outstanding principal balance of commercial loans sold as of September 30, 2024, June 30, 2024 and September 30, 2023, respectively.
Current wording
In addition to the loans serviced on our marketplace platform, we serviced $93.1 million, $102.0 million and $124.4 million in outstanding principal balance of commercial loans sold as of March 31, 2025, December 31, 2024 and March 31, 2024, respectively.
Previous wording
Year Over Year: Servicing fees were $8.1 million and $32.8 million for the third quarters of 2024 and 2023, respectively, a decrease of 75%.
Current wording
Year Over Year: Servicing fees were $12.7 million and $19.6 million for the first quarters of 2025 and 2024, respectively, a decrease of 35%. The decrease was primarily due to a lower principal balance of loans serviced.
Previous wording
Year Over Year: Gain on sales of loans was $12.4 million and $8.6 million for the third quarters of 2024 and 2023, respectively, an increase of 45%.
Current wording
Year Over Year: Gain on sales of loans was $12.2 million and $10.9 million for the first quarters of 2025 and 2024, respectively, an increase of 12%. The increase was due to higher Structured Program transaction expenses in the first quarter of 2024.
Previous wording
We record fair value adjustments on loans that are recorded at fair value, which include gains or losses from sale prices in excess of or less than the loan principal amount sold and realized net charge-offs. In addition, as loans are held on the Balance Sheet, incremental fair value loss adjustments on the loans are recorded in “Net fair value adjustments” within “Marketplace revenue,” whereas the associated interest income, based on the loans’ contractual interest rate, is recorded within “Net interest income.”
Current wording
We record fair value adjustments on loans that are recorded at fair value, which include gains or losses from sale prices in excess of or less than the loan principal amount sold and realized net charge-offs. In addition, as loans are held on the Balance Sheet, incremental fair value loss adjustments on the loans are recorded in “Net fair value adjustments” within “Marketplace revenue,” whereas the associated interest income is recorded within “Net interest income.”
Previous wording
Year Over Year: Net fair value adjustments were $(33.6) million and $(41.4) million for the third quarters of 2024 and 2023, respectively, a decreased loss of $7.8 million.
Current wording
Year Over Year: Net fair value adjustments were $(29.3) million and $(44.7) million for the first quarters of 2025 and 2024, respectively, a decreased loss of $15.4 million. The decrease was primarily due to improved loan sale prices.
Previous wording
The allowance for loan and lease losses (ALLL) for lifetime expected losses under CECL on HFI loans and leases at amortized cost is initially recognized as “Provision for credit losses” at the time of origination. The ALLL is estimated using a discounted cash flow (DCF) approach, where effective interest rates are used to calculate the NPV of expected cash flows. The effective interest rates are calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and costs, to provide a constant rate of return over the loan term. The NPV from the DCF approach is then compared to the amortized cost basis of the loans and leases to derive expected credit losses. Under the DCF approach, the provision for credit losses in subsequent periods includes a credit loss expense related to the discounting effect due to the passage of time after the initial recognition of ALLL on originated HFI loans at amortized cost.
Current wording
The allowance for loan and lease losses (ALLL) for lifetime expected losses under CECL on HFI loans and leases at amortized cost is initially recognized as “Provision for credit losses” at the time of origination. The ALLL is estimated using a discounted cash flow (DCF) approach, where effective interest rates are used to calculate the net present value (NPV) of expected cash flows. The effective interest rates are calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and costs, to provide a constant rate of return over the loan term. The NPV from the DCF approach is then compared to the amortized cost basis of the loans and leases to derive expected credit losses. Under the DCF approach, the provision for credit losses in subsequent periods includes a credit loss expense related to the discounting effect due to the passage of time after the initial recognition of ALLL on originated HFI loans at amortized cost.
Previous wording
Sequential: The provision for credit losses was $47.5 million and $35.6 million for the third and second quarters of 2024, respectively, an increase of 34%. The increase was primarily driven by an increase in initial provision from a higher volume of originated loans retained as HFI at amortized cost, partially offset by the impact of a $5.3 million provision in our Commercial Real Estate (CRE) portfolio due to one office loan, which was recognized in the second quarter of 2024. Excluding this one office loan, the CRE office loan portfolio balance was under $35 million as of September 30, 2024. The majority of office loans were originated prior to the Acquisition.
Current wording
Sequential: The provision for credit losses was $58.1 million and $63.2 million for the first quarter of 2025 and fourth quarter of 2024, respectively, a decrease of 8%. The decrease was primarily driven by higher future expected borrower prepayments and a $3.5 million provision in our Commercial Real Estate (CRE) portfolio due to one office loan, which was recognized in the fourth quarter of 2024. The CRE office loan portfolio balance was under $35 million as of March 31, 2025. The decrease in the provision for credit losses was partially offset by additional economic qualitative allowance to reflect macroeconomic uncertainty.
Previous wording
The following table presents the components of the allowance for loan and lease losses:
Current wording
The following table presents the components of the ALLL:
Previous wording
Year Over Year: Compensation and benefits expense decreased $1.1 million, or 2%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Compensation and benefits expense decreased $1.2 million, or 2%, for the first quarter of 2025 compared to the same period in 2024. The decrease in compensation and benefits expense was primarily due to a decrease in variable compensation expense.
Previous wording
Year Over Year: Marketing expense increased $6.6 million, or 34%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Marketing expense increased $5.1 million, or 21%, for the first quarter of 2025 compared to the same period in 2024.
Previous wording
The increases year over year and nine months over nine months in marketing expense were primarily due to an increase in variable marketing expenses based on higher origination volume of marketplace loans.
Current wording
The increases in marketing expense were primarily due to an increase in variable marketing expenses based on higher origination volume as well as the resumption of certain marketing initiatives.
Previous wording
Sequential: Equipment and software expense increased $0.4 million, or 3%, for the third quarter of 2024 compared to the second quarter of 2024.
Current wording
Sequential: Equipment and software expense increased $1.3 million, or 10%, for the first quarter of 2025 compared to the fourth quarter of 2024.
Previous wording
Year Over Year: Equipment and software expense increased $0.2 million, or 1%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Equipment and software expense increased $2.0 million, or 15%, for the first quarter of 2025 compared to the same period in 2024.
Previous wording
Year Over Year: Depreciation and amortization expense increased $2.1 million, or 19%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Depreciation and amortization expense increased $1.2 million, or 10%, for the first quarter of 2025 compared to the same period in 2024. The increase was primarily due to an increase in the amortization of internally-developed software.
Previous wording
Sequential: Professional services increased $0.2 million, or 3%, for the third quarter of 2024 compared to the second quarter of 2024.
Current wording
Sequential: Professional services increased $0.6 million, or 7%, for the first quarter of 2025 compared to the fourth quarter of 2024.
Previous wording
Year Over Year: Professional services decreased $0.4 million, or 5%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Professional services increased $2.7 million, or 38%, for the first quarter of 2025 compared to the same period in 2024.
Previous wording
The changes in professional services expense were primarily due to an increase or decrease in consulting fees.
Current wording
The increases in professional services expense were primarily due to an increase in business consulting and compliance advisory services.
Previous wording
Sequential: Occupancy expense increased $0.1 million, or 2%, for the third quarter of 2024 compared to the second quarter of 2024.
Current wording
Sequential: Occupancy expense increased $0.4 million, or 9%, for the first quarter of 2025 compared to the fourth quarter of 2024.
Previous wording
Year Over Year: Occupancy expense decreased $0.6 million, or 13%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Occupancy expense increased $0.5 million, or 13%, for the first quarter of 2025 compared to the same period in 2024.
Previous wording
Year Over Year: Other non-interest expense increased $1.5 million, or 12%, for the third quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Other non-interest expense increased $1.3 million, or 11%, for the first quarter of 2025 compared to the same period in 2024.
Previous wording
For the third quarter and first nine months of 2024, we recorded an income tax expense of $3.6 million and $12.3 million, respectively, representing an effective tax rate of 19.7% and 22.9%, respectively. For the third quarter and first nine months of 2023, we recorded an income tax expense of $3.3 million and $12.1 million, respectively, representing an effective tax rate of 39.9% and 29.7%, respectively. The effective tax rate differs from the statutory rate due to the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the net discrete impact of stock-based compensation. The decrease in effective tax rates for the 2024 periods compared to the same periods in 2023 is primarily due to the net discrete impact of stock-based compensation.
Current wording
For the first quarter 2025, we recorded an income tax expense of $4.0 million, representing an effective tax rate of 25.6%. For the first quarter 2024, we recorded an income tax expense of $4.3 million, representing an effective tax rate of 25.9%. The effective tax rates differ from the federal statutory rate due to state taxes, the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the net discrete impact of stock-based compensation.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The following table provides a reconciliation of ROTCE to the nearest GAAP measure:
Current report — wording carried from elsewhere
Operations – Critical Accounting Estimates” in our Annual Report. There have been no significant changes to these critical accounting estimates during the first quarter of 2025.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
(1) Nonaccrual loans and any related income are included in their respective loan categories.
Previous report — wording carried elsewhere
An analysis of the nine months over nine months changes in the categories of interest revenue and interest expense resulting from changes in volume and rate is as follows:
Previous report — wording carried elsewhere
The following table presents information regarding total nonaccrual loans and leases:
Previous report — wording carried elsewhere
The increases in depreciation and amortization expense were primarily due to an increase in the amortization of internally-developed software.