Key Highlights

  • Happen, formerly LendingClub, reported second-quarter Loan originations of $3.15 billion, up 29% year-over-year and above its quarterly guidance range.
  • The company uses AI and proprietary data to underwrite loans for a target customer base it calls the "motivated middle," consumers with average incomes of $120,000 and Credit scores above 720.
  • Net income grew 52% year-over-year in the second quarter, with return on tangible common Equity rising to 15.9% from 11.8% a year earlier.
  • Despite stronger returns than close competitor SoFi Technologies, Happen trades at a valuation discount, with a next-12-month price-to-earnings multiple of 8.75x compared to SoFi's 24.3x.

From Peer-to-Peer Lender to Full-Service Digital Bank

Happen, the company formerly known as LendingClub, has transformed from a peer-to-peer lending marketplace founded in 2006 into a full-service digital bank following a series of strategic pivots. The company paused new loans for six months in 2008 amid a required SEC registration, went public in 2014, and lost founder Renaud Laplanche in 2016 after violations of company Business practices. Current CEO Scott Sanborn took over following Laplanche's departure and has overseen the company's shift toward banking, including a 2020 Acquisition of Radius Bank and its formal rebrand to Happen Inc. in June.

The company's bank charter provides access to lower-cost deposits, allowing it to fund loans more efficiently while expanding into complementary financial products such as savings and checking accounts.

AI Underwriting Targets High-Quality Borrower Base

Happen focuses on what it calls the "motivated middle," consumers with average annual incomes of $120,000 and credit scores averaging above 720, offering personal loans for credit card consolidation at rates roughly 700 basis points below existing credit card debt. The company's AI-driven underwriting model uses its extensive proprietary dataset to make credit decisions, resulting in lower delinquency and Fraud rates compared to traditional FICO-based models, according to the company.

More than 90% of loans issued are fully automated, with average application completion times of less than five minutes. Happen structures many loans for sale to institutional investors through its marketplace while retaining higher-quality loans on its own balance sheet.

Strong Growth Metrics, but Valuation Lags Peers

Second-quarter loan originations grew 29% year-over-year to $3.15 billion, above the company's guidance range of $3 billion to $3.1 billion. Net Income rose 52% year-over-year, and the company raised its full-year Earnings per share guidance to a range of $1.80 to $1.90. Return on tangible common equity improved to 15.9% from 11.8% a year earlier.

Happen's closest competitor, SoFi Technologies, posted faster loan origination growth of 69% year-over-year but a lower return on tangible common equity of 7.1%. SoFi also trades at a substantially higher valuation, with a price-to-tangible Book Value of 2.41x compared with 1.44x for Happen. The company's stock is up 17% over the past year but remains well below its 2014 all-time high near $140.