Figure posts huge HELOC volume in strong earnings debut

Figure Technology Solutions posted a strong quarter in its first public earnings report, including $2.4 billion in home equity line of credit lending. 

The fintech, which went public in September, recorded $89.8 million in net income for the third quarter, exceeding a Standard & Poor's consensus estimate of $35 million. That also surpassed its $27.4 million profit in the year ago period, the only other single quarter for which Figure provided information Thursday. 

While company executives discussed Figure's broader operations in Friday's earnings call, they described a growing home loan business which counts over 246 partners. Figure, which works with over half of the top 20 independent mortgage banks, also said it onboarded "one of the largest" mortgage servicers in the quarter.

The lender says it's the top nonbank HELOC producer, and that claim is so far undisputed, as the nation's biggest originators don't usually specify their volume in this product in earnings. In sharing more detail about its originations, the fintech said its average production cost per loan was $730 at the end of last year.

At the end of the quarter, Figure-branded HELOCs had average customer interest rates of 9% and loan balances of $90,000, whereas its partner-branded HELOCs had slightly higher rates and balances of 9.2% and $93,000. The unpaid principal balance of the company's over 302,000 HELOCs was $11.1 billion at the end of the quarter. 

The lender also warehouse lines totaling $1.85 billion, and customers were able to borrow up to $41.2 million on undrawn HELOC loans as of Sept. 30. 

Figure's non-HELOC lending and beyond

Besides traditional home equity lines, Figure reported $80 million in volume in the quarter from other products including crypto-backed loans, small-to-medium business loans, debt service coverage ratio loans and HELOC for seniors which are interest-only. 

CEO Michael Tannenbaum additionally described another growing segment of originations, first-lien HELOCs typically used to pay off an existing loan, akin to cash-out or rate-and-term refinances. Some of the fintech's partners are adopting the first-line product but not offering customers the more-traditional use for a HELOC. 

"Where we really see growth there, just to be even more specific, is among especially small balance first-lien," he said, "because the cost to originate for Figure is $1,000 whereas industry average is $12 (thousand)."

Executives in Friday's call also spoke about the company's other ventures, including Figure Connect, a blockchain-based marketplace for private credit, its MERS competitor DART, and the public Provenance Blockchain.

Earlier this year Figure also launched a stablecoin, $YLDS. It's also rolling out Democratized Prime, a DeFi marketplace which allows participants to lend their assets or excess cash at a market-clearing rate. Democratized Prime includes HELOC, crypto loans and an Exchange Margin asset. 

Borrower fees are 50 basis points of the outstanding balance, according to the company. The platform hasn't generated material revenue yet, but announced Synergy One as its first institutional client. 

"Our frictionless, short-term liquidity funding marketplace is delivering financing rates below those achievable in wholesale capital markets," said Tannenbaum. "This not only validates DeFi's potential efficiency but also gives us a roadmap to extend this to other asset classes."

In yet another rollout, Figure this week said it will issue tokenized stock which will trade on its own platform and be convertible to shares of Class A common stock on a 1-for-1 basis. While the company will disclose more information next week, Mike Cagney, Figure's co-founder and executive chairman, called the offering a "transformational" opportunity to build a new capital market ecosystem. 

Figure posted net revenue of $156.3 million in the third quarter, up from $101 million in the year ago period. As of the end of the quarter, the lender had $1 billion in cash and cash equivalents.

The company's stock, which opened at $36 per share in its Wall Street debut two months ago, was up around 20% Friday midday, trading at $41.55 per share.