Kevin Johannes, a seventh degree black belt and owner of TASK Karate Academy, borrows through Prosper Loans because it offers him the best interest rates. But, that’s not the sole purpose of his loans.
As the owner of a karate and family fitness center in Wixom, Michigan, Johannes took out a loan to buy new exercise equipment for the preschool and kindergarten programs. With new foam machines and trampolines, preschoolers can grow strong and stay active, and kindergarteners develop tactical skills by practicing rolls on new floor mats and kicks with target aids.
The Dojo, or training hall, is fully matted for safety and mirrors help students develop proper form. Students use heavy bags, focus mitts and kick target aids to improve their technique and learn proper contact. Because the academy has updated equipment, students receive more advanced training and are winning more competitions, including the World Karate & Kickboxing Commission World Championships. Johannes is thankful to the Prosper community for helping him teach young kids karate skills and self discipline with updated equipment — and we’re thankful to him for training a new generation of karate kids!
We’re excited to announce today a partnership with Western Independent Bankers — a consortium of small community banks — that will give more banks the opportunity to offer credit to their customers, and more consumers access to affordable loans.
Banks are under increasing pressure to deliver attractive interest rates for all consumers, and smaller banks just can’t compete with the big institutions in offering credit, primarily because of overhead and other operating costs. At Prosper Marketplace, we believe that independent and community banks are essential to the future of the American economy, and this partnership gives them the ability to broaden their product offerings and vie for a piece of the credit market.
This exclusive WIB Endorsed Program partnership with Western Independent Bankers (WIB) opens the consumer credit doors to more than 160 independent and community banks in 13 states in the U.S. WIB provides community banks with networking opportunities, educational programs and access to new products and services. Not only does the partnership allow consortium banks to offer access to unsecured loans to customers, but it educates consumers about alternative lending as a smarter, lower cost option for borrowing money.
Community banks comprise 96.8 percent of all banks in the U.S., amounting to nearly 7,000 community banks with more than 50,000 locations. They’re the primary source of lending for small businesses and farms. Community banks focus on providing high-quality service for local families and business, much like we do for our borrowers and investors. That’s just one area that we see eye to eye.
Smaller banks are always looking for new ways to generate revenue while offering low interest rates. In fact, interest rate pressures are one of the top barriers community banks face for significant growth. We’re happy to welcome WIB into our community to provide more loans with attractive interest rates to a wider group of consumers.
We’ve just wrapped up 2014 and what a year it has been for everyone in our industry. First and foremost we want to say thank you to our customers, partners and investors. We could not have done it without you.
One of the big highlights of 2014 was our $2 Billion Strong Photo and Video Contests. We heard amazing stories from every corner of the country that reminded us of why we do what we do everyday. If you haven’t had a chance to check out the gallery, the videos and photos are still available on our Facebook page. In addition to the winners, here are a few more of my favorite videos:
In December, we reached $205 million in loan originations through the Prosper platform – our largest month ever and a great finale to the year. In total in 2014, there was $1.6 billion in loan originations on the Prosper platform and more than 123,000 people have turned to the platform for loans for everything from home improvement to debt consolidation to medical procedures as highlighted in the videos and photos above. We’re thrilled by the opportunity and humbled by the momentum and potential of our company and our industry. You may wonder why we are seeing such uptick and growth. There are a number of reasons:
Awareness — Word is getting out that people have alternatives to credit cards and traditional bank loans to get access to credit. As a result, lending marketplaces are becoming mainstream, much like ridesharing and other innovative online marketplaces are becoming more popular.
Quality — At Prosper we have a proprietary formula for assessing the risk of our borrowers with verification and validation of a host of criteria. Our first time borrowers fall within the prime or super-prime range, with an average FICO score between 700 and 710. This means investors can have confidence in the system, and everyone benefits. On average, our investors earned about 7 percent in 2014.
Convenience — In addition to low rates, one of the biggest benefits for borrowers is the ease and speed with which they can get loans online: 4-5 days rather than the 10 days or more it could take getting a traditional bank loan. Our customers also love the flexibility of online borrowing; we work around your schedule.
Partners — Prosper works with a number of partners, which include credit education sites, airlines and mortgage originators that help us get the word out about the benefits of working with Prosper. We continue to look for new companies that we can partner with to help our mutual customers.
Repeat visitors — After experiencing Prosper, many of our customers have started turning to us again for help through the various moments in their lives when they need financial support – medical bills, wedding expenses, travel costs or a second-car.
We’re building a strong community, with quality borrowers, confident investors and a growing numbers of partners. And we’re expanding our company and investing in people to meet the demand for services. Prosper Marketplace is up to 240 employees, with a thriving new office in Phoenix and new headquarters in San Francisco. And we’re going to keep growing — Prosper Marketplace is looking to add significantly more people to its team in the coming year.
But one thing that remains constant is our focus on the community we’ve built through our marketplace. So you’ll see new services and features coming in 2015 that are designed to enhance the borrowing and lending experiences even more – area like mobile access, and even faster verification and validation.
It’s been a fantastic journey so far, and we’re grateful to our customers, partners and investors that have joined us. We feel this is only the beginning, so stay tuned for more in 2015.
CEO, Prosper Marketplace
 Average FICO score for first-time borrowers who obtained loans in 2014
 Average investor return of about 7% is based on estimated return of loans originated in 2014
 Average time Prosper borrowers obtain loan based on loan originations in 2014
This is an historic moment. Lending Club debuted on the New York Stock Exchange this morning, becoming the first online credit marketplace to go public. It’s a huge validation for the industry and will bring an increased level of awareness and education about the space. We want to congratulate them on a successful IPO.
When Prosper pioneered the market more than eight years ago, the scenario was quite different. The idea that people had an alternative to borrowing from banks was novel, and even scary for some. Today, more than 250,000 have borrowed over $2 billion from individual and institutional lenders through the Prosper marketplace. We’re one of the fastest growing credit marketplaces, with loan originations on the platform up 420 percent over the last year (Q3 2014 vs. Q3 2013). It took us eight years to cross the first $1 billion in loans on the Prosper platform (announced in April 2014), and just six months later, in October, we announced the $2 billion milestone. Clearly, marketplace lending is moving into the mainstream as people see it as an easier, more cost-effective alternative to traditional bank lending. This week’s activities only confirm this.
The market is only getting bigger. We may have started out helping cash strapped consumers to consolidate their credit card debt, but today, people are turning to us when they need money for special occasions, home improvements, a second auto, and many other everyday and lifetime events. Online marketplaces have transformed numerous industries — retail, lodging and travel, to name a few. Prosper saw a need for similar innovation in the financial services and lending industry — where borrowers are subject to high interest rates and fees and layers of paperwork, and diversity and yields are limited for investors. By opening up the market and connecting investors and borrowers directly, we smooth out and bring transparency to a seemingly arbitrary process. Competition in the lending market means more options for everyone. And for consumers, more choice means better rates, lower payments, improved customer service and increased ease of use.
We’re excited about 2015. We have more than 200 employees and we’re hiring many more, including recent top executives recruits who bring a wealth of experience and diversity. We raised $70 million this year (nearly $200 million total) to help us target a market that is expected to top $9 billion in loans this year. And we plan to roll out new features and functionality, further supporting mobile and expanding partnerships. We’re laser focused on offering consumers the simplest and most efficient customer experience on a platform they can trust.
As always, thank you to the Prosper community for getting us to where we are today. We are inspired by your stories and look forward to hearing many more in 2015.
July 2012 marks Prosper 2.0’s third birthday. Consistent loan performance over the past three years demonstrates the significant improvements made since Prosper’s pioneering 1.0 model. Over the past 36 months our investors have experienced 18 months of returns greater than 1%, 35 months of returns greater than 0.80%, and not a single down month.* Prosper 2.0’s performance underscores the fundamental durability of the returns available in consumer credit, a fact that remains greatly underappreciated by the majority of investors today.
Recently, TransUnion published a report on consumer credit trends. These indicate that U.S. credit card delinquencies continue to improve. As we review the article alongside recent Federal Reserve data, we realize that the improvement in credit delinquency trends speaks volumes to the changes in borrower behavior brought on by the calamity of the 2008 financial crisis. Consider the graph below that charts the history of consumer credit card delinquency and charge-off rates:
The charge-off data in this chart, reported since March of 1985, shows that the current reading of 4.25% ranks in the 40th percentile of this entire data range. In other words, 60% of the time, charge-off rates have been higher. Good, but certainly not extraordinary. Now, consider the shorter delinquency data series in grey. Beginning in March 1991, the delinquency reading was almost 6%. The current reading of 3.07% is the lowest on record.
The implications of this conclusion are profound. Delinquency rates are traditionally an excellent precursor for future charge-off rates. Low and falling delinquency rates suggest that future aggregate credit charge-off rates for consumer credit will continue to improve. However, more startling is that these improvements are occurring in the weakest economic recovery on record since World War II. This seems counterintuitive. One would expect to see improved credit performance during periods of economic growth like the boom of the mid-90s, for instance. Or the post-bubble period last decade. Instead, we see higher economic growth, lower unemployment and better income statistics, which should lead to improving credit performance. So what gives?
In our May Update, we discussed at some length the dramatic declines in net income and net worth experienced by American families since 2000. We think that the answer to the above question lies in the combination of this data and scars of the 2008 Financial Crisis. Very few experts dispute that throughout the remainder of this decade, we are likely to witness a massive deleveraging of the Western World’s balance sheet. A consequence of this will be sub-par economic growth, an environment that Bill Gross, the CIO of PIMCO, has dubbed the “new normal”.
So what would responsible credit worthy borrowers do in an environment of little future income growth and uncertain job stability? They would tend carefully to their debt – lowering interest costs where possible and insuring pay down of outstanding debt. And perhaps above all, they would preserve access to credit by staying current on their bills. Seen through this prism, improvements in consumer credit behavior make perfect sense as a rational adaptation to the brave new world of deleveraging. The upside? As an investor in P2P you can take advantage of this secular trend, helping creditworthy borrowers to achieve their logical goals and benefiting from consistent returns.
More information on July’s monthly performance update can be found here. For further explanation of this commentary or with any other questions or comments, please contact our investor marketing team at firstname.lastname@example.org or 1-877-611-8797.
Joseph L. Toms
Chief Investment Officer
*Platform Monthly Return on Principal for All Vintages (Seasoned & Unseasoned) is the dollar-weighted average return of all the discrete loan vintage returns for a given calendar month based on outstanding principal at the beginning of the month. For a loan vintage to be considered in the calendar return, it must fall between July 2009 and the month prior to the reporting month (e.g. the December 2010 calendar return would be the average return of loan vintages from July 2009 through November 2010). The periodic return for calendar month and respective loan vintages is calculated by taking the net payments received on borrower loans (which are net of principal repayment, credit losses, and servicing costs for such loans) as a percentage of the principal outstanding at the beginning of the period.
**To calculate the Return on Principal by monthly loan vintage, all payments received on borrower loans (which are net of principal repayment, credit losses, and servicing costs for such loans) originated during the month are aggregated and then divided by the average amount of aggregate outstanding principal. To annualize this return, it is divided by the dollar-weighted average age of the loans in months and then multiplied by 12. To be included in the Seasoned Returns calculations, Notes must be associated with a borrower loan originated at least 10 months prior; this calculation uses loans originated through August 31, 2011. Our research shows that loan portfolios that have reached 10 months of age more accurately reflect the likely long-term performance as the loans have had sufficient time to experience the impact of potential defaults. Seasoned Return is not necessarily indicative of future performance of any Notes.
Notes offered by Prospectus.
This presentation includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. You should carefully read the factors described in the “Risk Factors” section of the Prospectus for a description of certain risks that could, among other things, cause our actual results to differ from these forward-looking statements.
All forward-looking statements speak only as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements above and in the Prospectus. We undertake no obligation to update or revise forward-looking statements that may be made in this presentation to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
Notice: Blogs and other materials posted on or linked from this page that use the name "Prosper" generally use that name to refer to Prosper Marketplace, Inc. if published before January 31, 2013 and to refer to Prosper Funding LLC if published on or after February 1, 2013.
As of February 1, 2013, the Prosper marketplace was transferred by Prosper Marketplace, Inc. to Prosper Funding LLC, a wholly-owned subsidiary of Prosper Marketplace, Inc. From and after February 1, 2013 Prosper Funding LLC is the sole obligator of Notes offered and secured by loans made through the Prosper marketplace, including Notes originally issues by Prosper Marketplace, Inc. prior to such transfer. Prosper Marketplace Inc. contiinues to provide services to Prosper Funding LLC relating to loan and Note servicing, and may interact with borrowers and investors in relation thereto as agent of Prosper Funding, LLC. Except where otherwise noted, throughout this website "Prosper" refers to Prosper Funding LLC including acting directly or through its agents.
All personal loans are made by WebBank, a Utah-chartered Industrial Bank. All Prosper personal loans are unsecured, fully amortizing personal loans.
Notes offered by Prospectus. Notes investors receive are dependent for payment on personal loans to borrowers. Not FDIC-insured; Investments may lose value; No Prosper or bank guarantee. Prosper does not verify all information provided by borrowers in listings. Investors should review the prospectus before investing.