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IEG Holdings (IEGH) Reports 2Q Results, Declares Dividend & Terminates Offer for LendingClub

08/02/2017
By Steven Ralston, CFA

OTC:IEGH

Yesterday, IEG Holdings (OTC:IEGH) reported financial results for the quarter ending June 30, 2017. Total revenues decreased 24.1% to $413,941 from $545,356 in the comparable quarter in 2016, primarily due to a decrease in the average interest-earning loan book size of consumer receivables. 

Cumulative loan volume increased to $14,669,023, representing 10.2% YOY growth in cumulative loan originations.

However, cumulative loan volume growth increased only 2.9% on a sequential quarter basis. Net loan receivables declined 34.4% YOY (13.0% sequentially) to $5,055,063 compared to $7,701,377 as of the end of the second quarter of 2016, due to lower loan originations versus repayment of loan principal by customers.

As of June 30, 2017, the company had 74 loans with a total balance of $335,563 that were in default or delinquent (as defined as over 90 days past due), an improvement from the first quarter-end of 103 loans (total balance of $454,452). The unsecured personal loan delinquency rate improved to 5.6% sequentially from 6.6%. The quarterly provision for credit losses expense increased 11.2% YOY to $394,836 versus compared to $354,918 in the second quarter of 2016, primarily due to higher loan write-offs versus the comparable period. The company carries a provision for credit losses which is estimated collectively based on the loan portfolio and general economic conditions, which currently targets a 16.0% allowance.

The second quarter of 2017 also reflected the substantial cost cuts that management had implemented over the company’s operating business in the first quarter. 

Salaries and compensation expenses decreased 70.7% (or $287,398) to $118,925 versus $406,323 in the second quarter of 2016, primarily due to the CEO’s annual base compensation having been reduced from $1.0 million to $1. (This expense will increase dramatically in the third quarter since the CEO’s annual base compensation was reinstituted and raised to $1.2 million being July 1st). Other operating expenses decreased 80.6% (or $330,045) to $79,262. Advertising expenses decreased 98.5% (or $170,905) to $2,580 versus $173,485 due to a decrease in customer acquisition costs, including those for online advertising, direct mail and lead generation.  Rent expense decreased 70.4% (or $34,746) to $18,032 versus the comparable period in 2016, primarily due to termination of leases in Florida, Illinois and Arizona during 2016. However, public company and corporate finance expenses increased 70.4% (or $484,011) to $697,344 due to the significant costs related to the OneMain tender offer. Overall, total operating expenses declined 26.9% (or $484,011).

The company reported a net loss of $1,051,983 ($0.10 per diluted share) compared to a net loss of $1,245,953 ($0.13 per diluted share) in the comparable quarter last year. As of June 30, 2017, stockholders’ equity was $8,770,041, a 28.6% increase (or $1,949,127) as compared to $6,820,887 on December 31, 2016. 

During the second quarter, the company closed its tender offer for shares of OneMain Holdings (OMF). IEG Holdings received 151,994 shares of OMF in exchange for 3,039,880 shares of IEGH. As a result, shares outstanding increased 31.3% to 12,754,066 shares compared to 9,714,186 at the end of the first quarter. On June 22, 2017, one week after completing the tender offer, IEG Holdings all 151,994 shares of OMF realizing net proceeds of $3,400,106. The cash inflow will allow the company to meet budgeted cash operating expenses over the next 12 months. As of June 30th, net cash represented $0.293 per share.

Concurrent with the quarterly financial results, IEG Holdings declared another cash dividend of $0.005 per common share (record date of August 11, 2017). The company continues to expect to pay quarterly dividends going forward. Thus far, no shares have been repurchased under the $2,000,000 stock repurchase program authorized in January 2017. Also, the Reverse-Forward Stock Split announced on June 21 has been abandoned.

On July 12, 2017, IEG Holdings launched a tender offer for up to 40,345,603 shares of Lending Club common stock (LC) on an exchange basis of four shares of IEGH for each share of LC. On August 1, 2017, IEG Holdings terminated the tender offer for LC shares.

IEG Holdings Corp. is a consumer finance company that offers unsecured consumer loans (under the brand name “Mr. Amazing Loans”) to individuals in 19 states via an online platform (mramazingloans.com). The company provides $5,000 and $10,000 personal consumer loans over a term of five years in Alabama, Arizona, California, Florida, Georgia, Illinois, Kentucky, Louisiana, Maryland, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Texas, Utah and Virginia. 

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