OnDeck Capital said in its third-quarter results that loan origination volume jumped double digits year over year and sequentially, where the volume of $648 million was up 22 percent from the 2017 third quarter and up 10 percent from the second quarter of this year.
Credit metrics also improved, said the company, as measured year on year. The provision rate was 6 percent, down from 7 and a half percent last year.
Unpaid principal balances grew 7 percent sequentially, said the company, and 16 percent from a year ago to more than $1 billion. Origination volume, management noted, stands at an all-time high reflecting growth across term loans and lines of credit offerings.
The average term loan size remained relatively unchanged at roughly $56,000.
In terms of headline numbers, the company said that it logged adjusted earnings of 17 cents a share, which topped estimates by 6 cents. Gross revenues stood at $103 million, gaining 23 percent year on year and better than expectations by about $4 million.
Interest yield was 36.5 percent, gaining 400 basis points from the second quarter and gaining 340 basis points from a year ago.
Net interest margin increased to 32.9 percent from 32 percent in the second quarter and 28.9 percent last year.
Drilling down a bit into supplemental materials provided by the company in tandem with earnings, the 15-day delinquency ratio was 6.4 percent, down 40 basis points sequentially, and down 110 basis points year on year. Funding costs — where lower numbers aid profitability — were up slightly, by 3 percent year on year but down 4 percent quarter on quarter.
Management said on the conference call with analysts that international origination loan volume was up 50 percent year over year. “Portfolio quality is better than in the U.S. in terms of both delinquencies and credit losses,” CEO Noah Breslow noted on the call. International business is not profitable yet, he said, stating that “it is just a matter of prudently growing the portfolio to get scale.” Elsewhere he noted that the instant funding option offered by the company is seeing strong client adoption.
At the end of the quarter, the company said in those supplemental materials, of total funding capacity of more than $1 billion, $225 million of loans were done via securitization, while $594 million were warehouse loans.
The company said that for the year gross revenue should be in the range of $392 million to $396 million, up from $380 million to $386 million. That compares with Street estimates of $384 million.
For 2019, said the company, OnDeck “expects low double-digit loan growth, stable net interest margin as higher market interest rates mitigate lower borrowing spreads, and a stable annual efficiency ratio as positive operating leverage in the U.S. lending business offsets about $15M of incremental investment in strategic growth initiatives.” CEO Breslow said on the call that spending on those initiatives will center in part on ODX, the company’s platform as a service business.