LendingClub Shares Tumble After CEO Laplanche Resigns

(RTTNews) - LendingClub Corp. (LC) said that Renaud Laplanche has resigned as chairman and CEO of the company following an internal review of sales of $22 million in near-prime loans to a single investor that failed to conform to the investor's express instructions. Shares of the company are down 25 percent following the news.

Director Hans Morris said, "While the financial impact of this $22 million in loan sales was minor, a violation of the Company's business practices along with a lack of full disclosure during the review was unacceptable to the board."

President Scott Sanborn will assume the additional role of acting CEO, while Morris has assumed the newly created role of executive chairman.

LendingClub said a subcommittee of its board of directors conducted a review with the assistance of independent outside counsel regarding non-conforming sales to a single, accredited institutional investor of $22 million of near-prime loans - $15 million in March 2016 and $7 million in April 2016.

The loans failed to conform to the investor's express instructions as to a non-credit and non-pricing element. The company noted that "certain personnel apparently were aware" that the sale did not meet the investor's criteria.

In early April, LendingClub repurchased these loans at par and subsequently resold them at par to another investor. These loans were then recorded as secured borrowings on the company's balance sheet, at fair value.

As a result, the company was unable to recognize about $150,000 in revenue as of March 31, 2016, related to gains on sales of these loans.

Further, the review discovered another matter unrelated to the sale of the loans. This involved 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 fund. This had no impact on financial results for the first quarter.

LendingClub also reported first-quarter net income of $4.1 million or $0.01 per share, compared to net loss of $6.4 million or $0.02 per share in the same period last year. Adjusted earnings were $0.05 per share, compared to $0.02 per share in the year-ago period.

Operating revenue surged 87 percent from last year to $151.3 million from $81 million in the prior-year period.

On average, analysts polled by Thomson Reuters expected the company to earn $0.05 per share for the quarter on revenues of $148.23 million. Analysts' estimates typically exclude special items.

LC is trading at $5.32, down $1.78 or 25.10 percent on a volume of 6.74 million shares.