Brian Zwerner of Kensington Blake Capital Commentary on OnDeck Capital 2nd Quarter Earnings

August 7, 2015

Kensington Blake Capital’s Managing Principal Brian Zwerner serves as Chief Executive Officer of Provider Web Capital, one of the leading finance providers to the healthcare small business market. He is witnessing firsthand the growth of non-bank finance companies lending to small businesses across all industries. Recently OnDeck Capital, one of the leaders across all small business industries, reporting earnings for the 2nd quarter.

While OnDeck achieved record gross revenues of $63.3MM in the quarter, the market did not cheer their results. Shares of the lender were quickly down over 20% and not sit well below the December IPO price at only $9.18. The market value of the company has fallen to only $630MM, after originally reaching just under $2 Billion.

OnDeck’s earnings release cheered its 78% revenue growth from last year’s second quarter. They also reported that net income jumped significantly from $1.5MM last year to $7.3MM this quarter. Origination volume at $419MM for the quarter was up 69% from the same quarter last year. OnDeck has also reduced its role as a balance sheet lender, selling off 34% of their volume for the quarter to third party investors. This trend should allow them to achieve higher multiples in the long run but has hurt short term earnings due to lower spread income.

The biggest problem with OnDeck’s results was the stagnation of their origination volumes. The $419MM number for the quarter was essentially unchanged from the $416MM in Q1 2015. OnDeck reported missteps in their marketing strategies which led to wasted expenses that did not produce results. They also reported a need to re-train some of their third party referral partners, which also hurt growth.

Provider Web Capital did not experience similar problems. The younger business is still in a heavy growth phase, with over 50% quarter over quarter origination growth. Provider Web’s specialized financing product better fits the needs of the healthcare market it serves, which is leading to many new customers and great results. Look for Provider Web to continue to take share from OnDeck and other established players.

Commentary by Brian Zwerner, Managing Principal, Kensington Blake Capital, LLC.

www.kensingtonblakecapital.com

Please see quarterly earnings release from OnDeck Capital:

https://investors.ondeck.com/press-and-events/press-releases/press-release-details/2015/OnDeck-Reports-Second-Quarter-2015-Financial-Results/default.aspx

Please see article from Motley Fool reviewing OnDeck’s results:

http://www.fool.com/investing/general/2015/08/04/why-shares-of-ondeck-dropped-more-than-20.aspx

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Provider Web Capital Achieves Significant Growth

Brian Zwerner leverages his experience in capital markets and risk management to serve as the managing principal of Kensington Blake Capital in Atlanta, Georgia. As an experienced business leader, Brian Zwerner also serves as the CEO of Provider Web Capital, a finance firm that specializes in working with health-care providers around the nation.

In a recent press release, Provider Web Capital publicized that it achieved its strongest performance in 2015 after acquiring five additional clients and almost $600,000 of loan origination. The company’s record-breaking month included $175,000 in funding to help a public health practice based in Kentucky expand and $125,000 in financing for the working capital needs of an ambulatory services company in California. Along with financing for its new clients, Provider Web Capital delivered $245,000 in funding to existing clients.

According to Zwerner, the company is continuing to expand its national reach, which benefits both the firm and its clients as the company becomes better able to diversify specific risk factors. By attaining clients in Michigan and Kentucky in April, Provider Web is currently working with clients in more than 20 percent of states across the country. The firm also grew more than 150 percent in the first quarter of 2015 and launched a new product called the Remit eXL Line of Credit to help practices access cash.

Brian Zwerner of Kensington Blake Capital Commentary on Explosive Growth of Small Biz Lenders

June 6, 2015

Kensington Blake Capital’s Managing Principal Brian Zwerner has been a participant in the fast growing business of providing finance to small businesses in the United States. While serving as the Chief Executive Officer of Provider Web Capital, he has seen firsthand how the needs of small businesses are not met by the banks any longer. Most businesses with less than $1 Million in annual revenues cannot meet the strict credit standards of banks and also cannot wait the months it takes for banks to complete their reviews and make a credit decision. These small businesses are turning to non-bank lenders to meet their needs.

OnDeck Capital is one of the leaders in the small business marketplace. They provide loans to small business across the United States in all industries, with a big focus on restaurants and retailers. Their typical loan is $50,000 for businesses doing $500K-$1MM in annual revenues. From their recent earnings release, the company reported record loan originations in the first quarter of over $400 Million.

CAN Capital is another leader in the small business lending arena. They recently reported breaking through the $5 Billion mark on loans provided to date to their small business clients. Like OnDeck, CAN Capital works with small businesses across all sectors. They also reported an increase in their credit facility to $650 Million led by Wells Fargo and J.P. Morgan to increase their own lending capacity.

Provider Web Capital is a specialized finance firm that works exclusively with healthcare providers across the United States. This focus on one sector allows the company to better serve its clients with a core product focused on the needs of this particular group. Remit eXL is a financing product that does not require daily fixed repayments, unlike most of the loans from OnDeck or CAN Capital. With Remit eXL, companies pay a small portion of their revenue to Provider Web Capital only when they receive it from their payers such as Medicare, Medicaid, and private insurance companies. This product allows customers to better manage their working capital and focus on providing services to their patients. Provider Web Capital is growing rapidly with over 100% quarterly growth in the first quarter that is likely to be repeating again in the second quarter of 2015. They are really one to watch.

Commentary by Brian Zwerner, Managing Principal, Kensington Blake Capital, LLC.

www.kensingtonblakecapital.com

Please see quarterly earnings release from OnDeck Capital:

https://www.ondeck.com/company/in-the-news/press-releases/ondeck-reports-first-quarter-2015-financial-results/

Please see recent press release from CAN Capital on loan growth:

http://www.prnewswire.com/news-releases/can-capital-hits-5-billion-milestone-300079851.html

Please see recent press release from Provider Web Capital on customer growth:

http://www.1888pressrelease.com/provider-web-capital-breaks-new-origination-records-in-may-pr-565371.html

Brian Zwerner of Kensington Blake Capital Commentary on Marketplace Loan Quality

May 16, 2015

Kensington Blake Capital’s Managing Principal Brian Zwerner been a participant in the marketplace or Peer 2 Peer loan markets now for about 9 months. We have been able to build a portfolio that has an attractive risk/reward profile in the consumer loan space. Against the backdrop of ultra-low rates in government, municipal, and corporate bonds, we believe consumer loans offer exceptional value.

The largest Peer 2 Peer loan originators are currently Lending Club and Prosper. Bloomberg News published an article questioning the loan quality of this market. Their main arguments was very high loan volume growth rates and the presence of securitization to add leverage to the market. While these factors are worthy of concern, they are not indicators of future default. The attempt to draw a parallel from this market to the subprime mortgage loan market of 2007 is a stretch in our opinion.

By investing in this marketplace, we have been able to assemble a portfolio that is of acceptable credit risk. The average consumer FICO score on our portfolio is just under a 700, not really comparable to the 650 score on the typical subprime mortgage. The average borrower in our portfolio has a 20 year credit history and has been employed for over 11 years. The average debt to income ratio of the borrowers in our portfolio is around 33%, a manageable level. In addition, these loans pay monthly principal and interest, with an average life of two-years.

With the Peer 2 Peer loan portfolio described above yielding over 15% per annum, we believe the reward far outweighs the risks in the current low yield market environment.

Commentary by Brian Zwerner, Managing Principal, Kensington Blake Capital, LLC.

www.kensingtonblakecapital.com

Please see recent article in Bloomberg News on marketplace lenders:

http://www.bloomberg.com/news/articles/2015-05-14/wall-street-loves-peer-to-peer-loans-despite-concerns-of-a-bubble

Brian Zwerner of Kensington Blake Capital Commentary on Marketplace Lender Distribution Partnerships

April 26, 2015

Kensington Blake Capital’s Managing Principal Brian Zwerner has observed the significant growth of lenders with marketplace business models and believes this growth will continue. The marketplace lending community is finding ways to create partnerships with key players in the consumer and business world and with each other. These partnerships will be a key source of growth in the coming years.

Lending Club is the largest marketplace lender in the U.S. and the only one to complete a public stock offering thus far. They recently announced a significant partnership deal with Alibaba, the giant e-commerce company in China. This partnership will allow U.S. consumers and small businesses to finance the purchase of goods through Alibaba’s online market from manufacturers in China. This should provide significant loan opportunities for Lending Club to grow their portfolio.

Another interesting partnership recently announce was between two marketplace lenders with differing strategies. Prosper is the second largest consumer marketplace lender, trailing only Lending Club in volume. They recently teamed up on what appears to be a cross referral basis with OnDeck Capital, a leading small business lender that recently completed its own stock offering.

Investors at this point can participate in the marketplace lending market by purchasing loans on a number of different platforms. These can be consumer loans from companies like Lending Club or Prosper, or small business loans from Funding Circle or others. Investors can also buy into the growth in the sector by purchasing the stock of Lending Club or OnDeck. Other marketplace lenders are sure to go public and be available for broader investor purchase soon. Funding Circle recently completed a $150MM private equity sale, so a public offering is likely not too far off. At Kensington Blake Capital, we view this as an important sector for investors and will continue to provide commentary as the market evolves.

Commentary by Brian Zwerner, Managing Principal, Kensington Blake Capital, LLC.

www.kensingtonblakecapital.com

Please see recent article in Bloomberg News on Lending Club’s partnership with Alibaba

http://www.bloomberg.com/news/articles/2015-02-03/alibaba-picks-lendingclub-as-finance-partner-after-bank-of-china

Please see press release below on partnership between Prosper and OnDeck Capital

http://www.prnewswire.com/news-releases/prosper-marketplace-and-ondeck-announce-strategic-partnership-300065272.html

Brian Zwerner of Kensington Blake Capital Commentary on March Jobs Report

April 6, 2015

Kensington Blake Capital’s Managing Principal Brian Zwerner reviewed the March unemployment report from the Bureau of Labor Statistics and believes this will change the course of the Federal Reserve rate movement for 2015.

As reported by the BLS, the U.S. economy only added 126,000 jobs in March. This result was significantly below 189,000 consensus of economists as polled by Bloomberg prior to the report. While there have been a few articles highlighting that difficult weather was at least partly to blame for the poor result, there can be no denying that this was a weak number. In addition, prior month’s revisions were also negative as reported last week.

Another area that optimists have pointed to is that the unemployment rate. The rate stayed unchanged at a fairly low level of 5.5%. However the participation rate continued to drop, with 96,000 people dropping out of the workforce to allow the unemployment rate to stay the same.

At Kensington Blake Capital, we believe this is the final decision item for the Federal Reserve to close the door on a possible June rate hike. The rhetoric coming out of Federal Reserve officials made it sound as if a June rate hike would only happen if the data forced their hand. This weak March report gives ammunition to the doves to hold off on any rate increase.

When looking past the June meeting, the meeting in September is still very much in play for the Federal Reserve. With two further meetings in 2015 following that one, it is possible the Fed Funds rate could be at 0.75-1.25% at year end. We will continue to monitor the data and update our forecasts going forward as more information on the U.S. economy is provided.

Commentary by Brian Zwerner, Managing Principal, Kensington Blake Capital, LLC.

www.kensingtonblakecapital.com

Brian Zwerner of Kensington Blake Capital Commentary on Federal Reserve

February 22, 2015

Kensington Blake Capital’s Managing Principal Brian Zwerner has analyzed the current economic environment and probability for Federal Reserve action in 2015. With employment expanding and the stock market at all-time high levels, the odds of an increase in the Federal Funds rate at the June 2015 meeting are rising. These positive factors have to be balanced against the large repricing of oil, which will keep a lid on inflation prospects.

Employment has grown steadily throughout 2014 and is off to a good start in 2015. The U.S. Bureau of Labor Statistics reported on February 6, 2015 that January employment in the country rose by 257,000. Economists expect that employment will continue to increase throughout 2015, and there is evidence that employees are getting more pricing power in their discussions with employers. Employment has been the main item monitored by the Federal Reserve and this strong performance will be a key deciding factor on the timing of the first rate increase.

The positives for the economy in job growth are partially offset by the collapse in oil prices. Oil prices peaked this summer above $100 per barrel. They have subsequently fallen to nearly $50 per barrel. Gasoline prices at the pump have fallen from over $4 per gallon to nearly $2 per gallon. This drop in oil and gas prices will have broad impacts on inflation across the U.S. economy. Inflation was already struggling to show a consistent growth rate. The Federal Reserve targets a 2% inflation growth rate, which is unlikely to occur in 2015, even with an increase in the Federal Funds rate.

When weighing the positive economic signs against the potential drop in inflation, it is our view that the Federal Reserve will favor a move up in interest rates in the summer 2015.

Commentary by Brian Zwerner, Managing Principal, Kensington Blake Capital, LLC.

www.kensingtonblakecapital.com