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Orchard Loan Data: Two for Two Picking Super Bowl Winner. Let’s Try for Three.

As the big game approaches this weekend, we are once again viewing the two teams through the lens of the online borrowing and credit criteria of their respective states to determine who we think is going to win. Although I am hoping for another big win for a certain team whose name happens to rhyme with “smatriots” as I am 2-for-2 when letting the borrowing data decide my bet, we will keep the same methodology as past years.

We therefore compare New England and Georgia in terms of Loan Volume, Borrower Characteristics, Loan Characteristics and Performance from Lending Club loans originated from 2010 through September 2016 (except performance which uses only the last three years of loans).

Once again, let the games begin!

First Quarter: Loan Volume

The population of New England, at approximately 14.7 million is 1.45 times the population of Georgia, approximately 10.1 million.[1] Regarding loan volume, however, New England has been proportionally somewhat higher since 2010; In 2016 through September, New England had 1.58 times the loan volume that Georgia does.

Falcons Patriots   Patriots to
Falcons ratio
2010 4,575,700 8,759,575 1.914
2011 8,879,475 15,481,850 1.744
2012 22,438,375 40,155,075 1.790
2013 63,378,925 99,948,775 1.577
2014 114,642,800 176,845,375 1.543
2015 217,481,100 330,735,750 1.521
2016 167,909,625 265,113,575 1.579

In terms of individual states, Georgia has higher volume than any state in New England, although Massachusetts has a higher volume in proportion to its population.





Second Quarter: 2016 Vintage Loan Borrower Characteristics

In 2016, borrowers from New England had higher incomes and FICO scores, with lower debt-to-income ratios, while borrowers in Georgia had one percent lower revolving credit utilization.

While a larger percentage of borrowers in New England rent their home, a lower percent have mortgages. The percent of straight ownership is similar between the two regions.

Falcons Patriots
Annual Income $78,691.44 $82,371.85
Average FICO Score 694.50 696.44
Debt-to-Income Ratio 20.22% 18.06%
Revolving Credit Utilization 50.78% 51.63%
Home Ownership Status
Mortgage 57.9% 48.3%
Ownership 13.2% 11.7%
Rent 28.9% 39.9%




Third Quarter: 2016 Vintage Loan Characteristics

Loans in both Georgia and New England had similar sized loans. Interest rates for those loans in Georgia were slightly higher, while the distribution of terms and types were fairly consistent, as were the purposes.

Falcons Patriots
Average Amount Borrowed $15,198.19 $15,132.05
Average Borrower Rate 12.98% 12.59%
Loan Term
36 month 72.62% 73.20%
60 month 27.38% 26.80%
Loan Type
Whole 78.44% 79.11%
Fractional 21.56% 20.89%
Loan Purpose
Debt Consolidation 57.54% 57.64%
Credit Card 19.35% 22.64%
Home Improvement 8.67% 6.99%
Other 6.04% 6.10%
Major Purchase 2.83% 2.12%

In terms of grade distribution, a slightly higher percent of loans to New Englanders had higher risk scores, both A-grade and B-grade, while a slightly higher percent of loans to Georgians had lower risk grades, specifically D-grade and E-grade loans. This is consistent with the slightly higher interest rates seen for borrowers in Georgia.

Falcons Patriots
A 17.56% 19.25%
B 29.51% 31.60%
C 29.72% 28.44%
D 13.44% 12.13%
E 6.56% 5.66%
F 2.59% 2.32%
G 0.62% 0.59%




Fourth Quarter: 2014 Loan Performance

So far the two regions have been fairly close in their borrower and loan characteristics. The fourth quarter is where it all comes together. The performance of the loans, including both returns and charge-offs, is the deciding factor.

Performance of 2014 vintage loans was used to compare the two regions. As the table below shows, although loans from Georgia have a higher charge-off rate, they also have a higher weighted average interest rate, and therefore the annualized return is slightly higher for the Falcon fans. Note that the difference between interest rate and charge-off rate is slightly lower than annualized return due to late charges assessed and paid.[2]

Weighted Average Interest Rate Annualized Charge Off Rate Annualized Return
Falcons 14.13% 7.20% 8.61%
Patriots 13.61% 6.68% 8.49%



As we can see, up to month 24, the annualized return has been close between Falcon fans and Patriot country. The higher return has gone back and forth between the two regions over the past few months, and although the Georgian borrowers have a higher charge-off rate, higher interest rates result in an ever so slight edge on returns.




I can’t believe this, but at the end of the 4th quarter, we have a tie and we are going into overtime!

Overtime: 2013 Loan Performance

Our tie-breaker will be 2013 loan performance of 36 month term loans. This way, we can see the full history of the loans, and use that to evaluate the regions.

Weighted Average Interest Rate Annualized Charge Off Rate Annualized Return
Falcons 14.80% 8.35% 9.30%
Patriots 14.46% 8.70% 8.74%



As we can see, the higher interest rates on borrowers in Georgia just barely makes up for the higher charge-off rate. After the first 24 months, borrowers in New England have a higher charge-off rate, and borrowers from Georgia eek out a higher return.




Will this be the outcome of Sunday’s game? Will it be this close on the field too? Can we use loan detail to estimate how many of the advertisements will be worth the costs or exactly what Lady Gaga and Tony Bennett will do? Guess there are some things we have to wait until Sunday to find out. Best of luck to both teams and to all the fans out there!

[1] Sources include: United States Census Bureau

[2] In past years, we have included an estimate for service fees, but this was omitted this year.