Quarterly Investor Update – Q3 2020

Continued Resilience and Stable Credit Performance

As we begin the fourth quarter of what has been an unprecedented and challenging year, we would like to provide our investor community an update on the performance of the Prosper portfolio, as well as our view of the overall macro environment. Since our last investor update in July, we continue to see gradual recovery in the macro-environment. In September, the unemployment rate was at 7.9% compared to 11.1% in June[1].  Household spending on goods and services, which accounts for more than two-thirds of GDP, rose 2.5% in August from June[2].  These improving trends, combined with our disciplined underwriting approach over the last 3 years, have led to resilient and stable credit performance on the Prosper platform.

Existing Portfolio Performance

Overall, performance of our outstanding portfolio is trending favorable relative to pre-pandemic levels.

  • 30+ Days Past Due (DPD) balances for our outstanding portfolio are trending 16% favorable to January 2020.  In addition, overall payment rates on the portfolio are trending favorable year-over-year
  • As of October 13, 3.8% of borrowers are enrolled in a COVID-19 relief plan. 95% of these borrowers are in a payment reduction program; the remaining 5% are in a payment deferral program. 
  • 98% of the loans originally enrolled in a payment deferral program have graduated. 92% of borrowers graduating from the payment deferral program have either made a payment or have enrolled in the payment reduction program by their payment due date
  • 97% of borrowers on a payment reduction program are making a payment upon their due date. 

New Originations Credit Quality and Early Performance

  • Early delinquency rate for the vintages underwritten just before the pandemic (2019Q4, 2020Q1), as well as the vintages underwritten during the pandemic (2020Q2), is trending favorable.
  • Loan weighted average FICO for Q3 2020 originations was 729, improving 10 points year-over-year and 21 points vs Q3 2017.
  • In Q3 2020, 17.4% of originations were from C-HR rated loans vs. 33.5% in Q3 2019 and 58.4% in Q3 2017.
  • Median monthly loan payment to income ratio (PTI) was 5.0% in Q3 2020 vs. 7.0% in Q3 2017.
  • In Q3 2020, the mix of repeat borrowers increased 38% year-over-year.  Historically, repeat borrowers have demonstrated significantly better credit performance than new borrowers.
  • Compared to pre-pandemic levels, borrower rates on the platform remain higher to help provide enough cushion to platform investors against volatility in the macro environment.

The performance and data shared above for the Prosper platform reflects our deliberate and focused approach to managing credit performance, as well as our focus on delivering solid-risk adjusted returns for our investors. While we are encouraged by the trends, we continue to operate in a dynamic environment due to the ongoing pandemic. As such, we remain disciplined and cautious in our approach. We are actively monitoring the evolving economic environment and taking actions as necessary.

[1] https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm
[2] https://fred.stlouisfed.org/series/PCE

All data on this blog post is presented for informational use only. This data is impersonal and is not directed to the specific investment objectives, financial situation or investment needs of any particular person, and should not be considered investment advice. This information is not intended to be, nor should you interpret it to be, a prediction of how any particular portfolio will actually perform. You should always carefully consider investments in any security and you should be comfortable with your understanding of the investment prior to investing. Actual results may vary.

This blog post includes forward-looking statements.  Forward-looking statements may include financial and other projections; statements about  the impact of our credit and underwriting initiatives and our ability to successfully navigate the current macro-economic environment; statements regarding investor returns, loan performance, and the impact of the current pandemic; as well as the assumptions underlying any of the foregoing.  Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations in these statements, and there can be no assurance that the expectation or plan will result or be achieved or accomplished.  All forward-looking statements speak only as of the date of this blog post and are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise forward-looking statements that may be made in this blog post to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

Prosper’s borrower payment dependent notes (“Notes”) are offered pursuant to a Prospectus filed with the SEC.  Notes are not guaranteed or FDIC insured, and investors may lose some or all of the principal invested. Investors should carefully consider the risks, uncertainties, and other information described in the Prospectus before investing.

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