Happen Bank deposits rise 18% as LevelUp accounts gain with borrowers

Happen Bank deposits rose 18% from a year earlier to $10.8 billion at quarter-end, according to the company, as its LevelUp checking and savings products gained more use among existing borrowers. The deposit growth gives Happen a larger funding base for its balance sheet while extending customer relationships beyond personal loans.

Chief Executive Scott Sanborn told analysts on a July 27 conference call that LevelUp checking account openings during the quarter were four times the level recorded a year earlier. Borrowers made up more than half of the new checking accounts, he said, showing that Happen is using its lending business as an entry point for broader digital banking relationships.

Sanborn said borrowers with a LevelUp checking account interact more frequently with the company, logging in more than five times as often each month as borrowers without a deposit account. On the savings side, borrowers accounted for 20% of new LevelUp savings accounts opened year to date, according to Sanborn.

What happened to Happen Bank deposits?

Happen Bank ended the quarter with $10.8 billion in deposits, up 18% year over year, according to the company. Deposits matter because checking and savings balances can be used to fund a bank’s assets, including loans held on its balance sheet, while also keeping customers connected after an initial borrowing need has ended.

Sanborn said balances in new savings accounts tend to start small. After borrowers finish repaying their loans, he said, those savings balances rise to an average range of $16,000 to $18,000.

Loan originations increased without a stated credit shift

Chief Financial Officer Drew LaBenne said total loan originations climbed 29% from a year earlier to more than $3.1 billion, above the high end of Happen’s guidance. Management said the increase reflected the reopening of marketing channels that had been reduced during the higher-rate and inflationary period, continued changes to offer presentation and the application process, and stronger repeat-customer activity.

Sanborn told analysts that the growth did not reflect a meaningful change in the company’s credit stance. The net charge-off ratio on the held-for-investment portfolio improved to 3.2% from 3.8% a year earlier, according to LaBenne, who said charge-offs should move higher toward target levels as the portfolio seasons.

The company expects another benefit from its credit-loss provision in the third quarter, though smaller than the benefit recorded in the second quarter, management said.

Happen expands products and AI operations

Happen also moved into home improvement lending during the quarter. Management described the business as small for now and said it expects a more meaningful contribution next year. The company has launched two distribution partnerships and said more partners are being developed.

Sanborn also identified home equity lending as a future area for expansion, positioned alongside Happen’s debt-consolidation and home-improvement products.

The company said its digital investment also extends to internal operations. More than 90% of employees regularly use Happen’s AI infrastructure, according to management. Its AI member-service agent, Penny, is resolving 30% more calls than the prior system, while other AI servicing tools have cut after-call work by 65% and average call time by 10%.

Total revenue increased 6% to $263 million. Management raised the low end of its full-year origination outlook, now expecting $12.2 billion to $12.6 billion, compared with the prior range of $11.6 billion to $12.6 billion. Shares rose 5% in after-hours trading Tuesday.

This story draws on original reporting from PYMNTS.