OnDeck announced third quarter 2017 financial results and affirmed that the Company is on track to achieve GAAP profitability in the fourth quarter of 2017.
"OnDeck's third quarter performance demonstrated tangible progress on our strategic priorities and goal of achieving GAAP profitability," said Noah Breslow, OnDeck's Chief Executive Officer. "Originations grew sequentially by 14%, operating expense was at its lowest level in more than two years, and credit trends continued to strengthen. Reflecting these initiatives, our bottom line performance improved over $12 million in the third quarter compared to the prior year period."
Breslow added, "We achieved these solid results despite the negative impact of Hurricanes Harvey and Irma. Absent these weather events, our Provision Rate and 15+ Day Delinquency Ratio would have improved sequentially and our GAAP net loss would have been closer to breakeven for the period. Looking ahead, our business is well-positioned to build on our strong customer demand and disciplined operating performance. As evidenced by our recent partnership announcement with VISA and Ingo Money, we remain committed to innovation that better serves our customers and drives responsible originations growth. We remain on track to achieve GAAP profitability in the fourth quarter and look forward to profitable growth in 2018."
Review of Financial Results for the Third Quarter of 2017
Originations grew to $531 million in the third quarter of 2017, up 14% from the prior quarter. Each of OnDeck's three distribution channels grew sequentially, driven primarily by increases in repeat customer volume. Credit quality of new originations, as measured by both OnDeck Score and personal credit scores, remained near historic highs.
Gross revenue increased to $83.7 million, up 8% year-over-year and driven primarily by higher interest income. Effective Interest Yield was 33.4%, up from 32.8% in the prior year period, primarily reflecting the increases in average loan pricing that occurred over the last twelve months. The weighted average APR for loans originated in the quarter was 43.8%.
Gain on sale was $0.1 million. Loans sold or designated as held for sale through OnDeck Marketplace represented 1.3% of term loan originations. Other Revenue was $3.4 million, up $0.7 million from the prior quarter, primarily reflecting increased revenues from the Company's OnDeck-as-a-Service (ODaaS) business. During the quarter, OnDeck and JPMorgan Chase extended their collaboration for up to four years to provide the underlying technology supporting Chase's online lending solution to small business customers.
Net revenue was $32.8 million during the third quarter of 2017, up 1% versus the prior year period.
Provision for loan losses was $39.6 million and the Provision Rate was 7.5%. A substantial majority of the quarter's provision for loan losses related to new originations in the period. Approximately $3.5 million of the third quarter's provision and 65 basis points of the Provision Rate related to anticipated losses from Hurricanes Harvey and Irma.
At September 30, 2017, the 15+ Day Delinquency Ratio was 7.5%, up from 7.2% at June 30, 2017. Broken out separately, the 15+ Day Delinquency Ratio at September 30, 2017 for the FEMA-designated "individual assistance" hurricane disaster areas was 14.5%, and for all areas other than those disaster areas it was 6.6%. At June 30, 2017, the 15+ Day Delinquency Ratio for those disaster areas was 7.3% and for all areas other than those disaster areas it was 7.2%. The sequential decrease in delinquency observed in the non-disaster areas resulted primarily from improved credit performance of recent originations and better collections execution. The Net Charge-off rate in the third quarter was 16.9%, down from 18.5% in the second quarter of 2017.
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