OnDeck Defends Strategy After $17.9M Loss

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The marketplace lender OnDeck Capital is sticking with its lend-and-hold strategy even though the practice contributed to a second consecutive quarterly loss.

Chief Executive Noah Breslow said keeping a large chunk of loans on balance sheet instead of selling them has cost OnDeck some short-term revenue but will pay off in the long run.

"We believe that retaining a greater percentage of loans on our balance sheet is the right decision for the long-term economics of the business," Breslow said in a news release Monday.

OnDeck reported a net loss for the second quarter of $17.9 million compared with a $5 million profit in the year-earlier period. It had a loss of $12.3 million in the first quarter.

The company's shares fell 1.7% to $5.16 on Monday; its second-quarter results were announced after the market closed, and the stock held steady in after-hours trading.

Loan originations rose 41% to $590 million. The effective interest yield on its loans fell to 33.3% from 35.9%. The percentage of loans at least 15 days late improved to 5.3% from 8%.

Loans under management rose 47% to $1.01 billion. Gross revenue rose 10% to $69.5 million. Net revenue, which backs out the loan-loss provision and funding costs, fell 33% to $28.9 million. Operating expenses rose 24% to $47.5 million.

OnDeck's results coincide with investor worries about worsening credit quality and shrinking yields at marketplace lenders. Lending Club on Monday reported a second-quarter loss of $81.4 million, and its chief financial officer resigned.

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