Lending Club plans to lay off 179 workers, or about 12% of its workforce, its latest response to a still-unfolding crisis that has cooled investors' interest in the firm's loans and pushed the company to dismiss its founding chief executive.
The San Francisco online lender reported the layoffs in a securities filing early Tuesday. The company also said an internal review had uncovered problems with some investor disclosures and had found a series of questionable loans made to former CEO Renaud Laplanche and his family members.
The company said the layoffs were part of a plan to "reduce costs, streamline operations and more closely align staffing with anticipated long-term loan volumes," indicating it expects business to remain slow for a while.
The report came just hours before Lending Club held its annual investor meeting. The gathering had been scheduled for the first week of June but was postponed because of the upheaval sparked by earlier revelations that ultimately cost Laplanche his job.
Scott Sanborn, who had been Lending Club's acting CEO since Laplanche's ouster last month, was named to the position permanently on Tuesday. He said during the meeting that the past few weeks have been a "humbling" time for the company, and that he is working "to rebuild confidence in the Lending Club brand, brick by brick."
Laplanche was pushed out of the company last month after revelations that the firm had improperly changed the application dates on about $3 million in loans sold to an investment bank and that Laplanche had not disclosed his involvement with an investment fund Lending Club was considering taking a stake in.
Those reporting problems caused investors to pull back from investing in Lending Club loans, resulting in a rare drop in new loans made to borrowers.
In Tuesday's filing, the company reported that it expects to lend about one-third less in the current quarter than it did in the first three months of the year. It issued $2.75 billion in loans in the first quarter, putting the company on pace to issue about $1.8 billion in the second quarter, which ends this week.
That would end a string of 30 consecutive quarters of loan growth dating back to the fall of 2008. The company, which was founded in 2006, went public in December 2014.
Jefferson Harralson, an analyst at San Francisco investment bank Keefe Bruyette & Woods, said originations could fall further in the third quarter, as that will be the first full quarter since Lending Club revealed its problems.
"That $1.8 billion figure doesn't show the full quarter impact of the damage," Harralson said. "It might be some time before we're at the $2.7 billion origination number again."
The latest disclosures Tuesday, uncovered by a company investigation, found that in the last few weeks of December 2009, Laplanche and three relatives took out 32 loans for a total of $722,800. All but three of those loans were repaid in full over the next two months, implying they were taken out to artificially goose loan numbers.
The review also found that Lending Club had used non-standard accounting practices when it reported the value of certain loans held by investors through a Lending Club-managed investment fund.
At Tuesday's meeting, Lending Club Chairman Hans Morris called Laplanche a friend but said the findings of the review were "profoundly disappointing."
The company said Tuesday that it planned to spend $9 million this quarter to increase incentives for investors, a move aimed at helping the firm ramp up loan volume again.
Unlike banks and other traditional lenders, Lending Club does not have its own pool of capital to lend. Rather, it lines up borrowers with investors. That means when investors pull back, Lending Club can't issue as many loans.
Earlier this month, the company said it would raise interest rates for most new loans and also cut back on lending to borrowers with lots of existing debt — the idea being that safer, higher-yielding loans would be more attractive to investors.
Despite those sweeteners, investors remain wary. Lending Club executives noted Tuesday that banks, hedge funds and other firms that have purchased Lending Club loans in the past are reexamining the company before investing again.
Harralson said it will take time for investors to trust the company as much as they might have just a few months ago.
"I think you have to believe that most of the damage has been done," he said. "I don't know that an investor can feel the confidence in that, given that we continue to learn new things."
However, shareholders took the news well on Tuesday. Shares closed up 31 cents, or 7.2%, to $4.61.
Shares have been in free-fall for much of the year and have lost nearly 70% of their value since the company went public at $15 a share.
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2:10 p.m.: This article was updated throughout with additional details.