UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
   
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
Commission File Number: 001-36771
 
LendingClub Corporation
(Exact name of registrant as specified in its charter)

Delaware
51-0605731
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
71 Stevenson Street, Suite 300, San Francisco, CA 94105
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (415) 632-5600
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x

Accelerated filer
¨

Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨

Emerging growth company
 
¨

 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   x
As of July 31, 2017 , there were 411,400,103 shares of the registrant’s common stock outstanding.


LENDINGCLUB CORPORATION
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


LENDINGCLUB CORPORATION


Except as the context requires otherwise, as used herein, “LendingClub,” “Company,” “we,” “us,” and “our,” refer to LendingClub Corporation, a Delaware corporation, and, where appropriate, its subsidiaries and consolidated variable interest entities (VIEs):

•
LC Advisors, LLC and its wholly-owned subsidiaries (LCA), a wholly-owned registered investment advisor with the Securities and Exchange Commission (SEC) that acts as the general partner for certain private funds and as advisor to separately managed accounts and funds of which LCA’s wholly-owned subsidiaries are the general partners.
•
Springstone Financial, LLC (Springstone), a wholly-owned company that facilitates education and patient finance loans.
•
LC Trust I (the Trust), an independent Delaware business trust that acquires loans from the Company and holds them for the sole benefit of certain investors that have purchased a trust certificate (Certificate) issued by the Trust and that are related to specific underlying loans for the benefit of the investor.
•
As the sponsor of an asset-backed securities securitization transaction, LendingClub owns a 56% interest in a majority-owned affiliate (MOA), LendingClub Operated Aggregator Note (LOAN) NP I, LLC. The Company holds a controlling financial interest and is the primary beneficiary of the MOA.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this Quarterly Report on Form 10-Q (Report) include, without limitation, statements regarding borrowers, credit scoring, our strategy, future operations, expected losses, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth. You can identify these forward-looking statements by words such as “anticipate,” “appear,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “will,” or similar expressions.

These forward-looking statements include, among other things, statements about:

•
the ability of borrowers to repay loans and the plans of borrowers;
•
our ability to maintain investor confidence in the operation of our platform;
•
the likelihood of investors to continue to, directly or indirectly, invest through our platform;
•
our ability to secure additional sources of investor commitments for our platform and the continued deployment of those investor commitments on the platform;
•
expected rates of return for investors;
•
the effectiveness of our platform’s credit scoring models;
•
the use or potential use of our own capital to purchase loans;
•
commitments or investments in loans to support contractual obligations, such as to Springstone’s issuing bank for loans that Springstone facilitates and that are originated by the issuing bank partner but do not meet the credit criteria for purchase by the issuing bank partner (Pool B loans) or repurchase obligations, securitizations, regulatory commitments, such as direct mail, short-term marketplace equilibrium, the testing or initial launch of alternative loan terms, programs or channels that we do not have sufficient performance data on, or customer accommodations;
•
transaction fees or other revenue we expect to recognize after loans are issued by our issuing bank partners;
•
our financial condition and performance, including the impact that management’s estimates have on our financial performance and the relationship between the interim period and full year results;
•
capital expenditures;
•
the impact of new accounting standards;
•
investor, borrower, platform and loan performance-related factors that may affect our revenue;
•
the potential adoption rates and returns related to new products and services;
•
the potential impact of macro-economic developments that could impact the credit performance of our loans, notes and certificates, and influence borrower and investor behavior;
•
our ability to develop and maintain effective internal controls;

1

LENDINGCLUB CORPORATION


•
our ability to recruit and retain quality employees to support future growth;
•
our compliance with applicable local, state and Federal laws, regulations and regulatory developments or court decisions affecting our business; and
•
other risk factors listed from time to time in reports we file with the SEC.

We caution you that the foregoing list may not contain all of the forward-looking statements in this Report. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. We have included important factors in the cautionary statements included in this Report and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2016 , that could, among other things, cause actual results or events to differ materially from forward-looking statements contained in this Report. Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Report carefully and completely and with the understanding that actual future results may be materially different from what we expect. We do not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.


2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LENDINGCLUB CORPORATION
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
 
June 30, 
 2017
 
December 31, 
 2016
Assets
 
 
 
Cash and cash equivalents
$
538,444

 
$
515,602

Restricted cash
161,672

 
177,810

Securities available for sale at fair value (includes $17,536 and $0 in consolidated VIEs, respectively)
225,261

 
287,137

Loans at fair value (includes $2,145,465 and $2,600,422 in consolidated VIEs, respectively)
3,796,999

 
4,311,984

Loans held for sale at fair value
36,331

 
9,048

Accrued interest receivable (includes $19,552 and $24,037 in consolidated VIEs, respectively)
34,931

 
40,299

Property, equipment and software, net
97,943

 
89,263

Intangible assets, net
23,992

 
26,211

Goodwill
35,633

 
35,633

Other assets
78,232

 
69,644

Total assets
$
5,029,438

 
$
5,562,631

Liabilities and Equity
 
 
 
Accounts payable
$
13,452

 
$
10,889

Accrued interest payable (includes $22,308 and $26,839 in consolidated VIEs, respectively)
38,413

 
43,574

Accrued expenses and other liabilities
90,745

 
85,619

Payable to investors
97,218

 
125,884

Notes and certificates at fair value (includes $2,160,838 and $2,616,023 in consolidated VIEs, respectively)
3,805,582

 
4,320,895

Total liabilities
4,045,410

 
4,586,861

Equity
 
 
 
Common stock, $0.01 par value; 900,000,000 shares authorized; 413,009,296 and 400,262,472 shares issued, respectively; 410,726,596 and 397,979,772 shares outstanding, respectively
4,130

 
4,003

Additional paid-in capital
1,283,129

 
1,226,206

Accumulated deficit
(290,882
)
 
(234,187
)
Treasury stock, at cost; 2,282,700 shares
(19,485
)
 
(19,485
)
Accumulated other comprehensive loss
(596
)
 
(767
)
Total LendingClub stockholders’ equity
976,296

 
975,770

Noncontrolling interests
7,732

 
—

Total equity
984,028

 
975,770

Total liabilities and equity
$
5,029,438

 
$
5,562,631

See Notes to Condensed Consolidated Financial Statements.

3

LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)

    
 
Three Months Ended  
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Net revenue:
 
 
 
 
 
 
 
Transaction fees
$
107,314

 
$
96,605

 
$
206,006

 
$
221,113

Investor fees (1)
21,116

 
14,656

 
42,296

 
35,143

Other revenue (expense) (1)
4,223

 
(9,910
)
 
6,444

 
(3,807
)
Interest income
157,260

 
179,685

 
318,256

 
357,564

Interest expense
(150,340
)
 
(177,596
)
 
(308,947
)
 
(354,279
)
Net interest income
6,920

 
2,089

 
9,309

 
3,285

Total net revenue
139,573

 
103,440

 
264,055

 
255,734

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
55,582

 
49,737

 
110,165

 
116,312

Origination and servicing
21,274

 
20,934

 
41,723

 
40,132

Engineering and product development
35,718

 
29,209

 
71,478

 
53,407

Other general and administrative
52,495

 
53,457

 
96,069

 
91,492

Goodwill impairment
—

 
35,400

 
—

 
35,400

Total operating expenses
165,069

 
188,737

 
319,435

 
336,743

Income (loss) before income tax expense
(25,496
)
 
(85,297
)
 
(55,380
)
 
(81,009
)
Income tax (benefit) expense
(52
)
 
(3,946
)
 
(92
)
 
(3,795
)
Consolidated net loss
(25,444
)
 
(81,351
)
 
(55,288
)
 
(77,214
)
Less: Income attributable to noncontrolling interests
10

 
—

 
10

 
—

LendingClub net loss
$
(25,454
)
 
(81,351
)
 
(55,298
)
 
(77,214
)
Net loss per share attributable to LendingClub:
 
 
 
 
 
 
 
Basic
$
(0.06
)
 
$
(0.21
)
 
$
(0.14
)
 
$
(0.20
)
Diluted
$
(0.06
)
 
$
(0.21
)
 
$
(0.14
)
 
$
(0.20
)
Weighted-average common shares - Basic
406,676,996

 
382,893,402

 
403,510,351

 
381,794,090

Weighted-average common shares - Diluted
406,676,996

 
382,893,402

 
403,510,351

 
381,794,090

(1)  
Prior period amounts have been reclassified to conform to the current period presentation. See “ Note 1 – Basis of Presentation ” for additional information.

See Notes to Condensed Consolidated Financial Statements.


4

LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)

 
Three Months Ended  
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
LendingClub net income (loss)
$
(25,454
)
 
$
(81,351
)
 
$
(55,298
)
 
$
(77,214
)
Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
Net unrealized gain on securities available for sale
49

 
796

 
285

 
1,599

Other comprehensive income (loss), before tax
49

 
796

 
285

 
1,599

Income tax effect
19

 
650

 
114

 
650

Other comprehensive income (loss), net of tax
30

 
146

 
171

 
949

Less: Other comprehensive income attributable to noncontrolling interests
—


—

 
—

 
—

LendingClub other comprehensive income (loss), net of tax
30


146

 
171

 
949

LendingClub comprehensive income (loss)
(25,424
)

(81,205
)
 
(55,127
)
 
(76,265
)
Comprehensive income attributable to noncontrolling interests
—


—

 
—

 
—

Total comprehensive income (loss)
$
(25,424
)

$
(81,205
)
 
$
(55,127
)
 
$
(76,265
)

See Notes to Condensed Consolidated Financial Statements.

5

LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Changes in Equity
(In Thousands, Except Share Data)
(Unaudited)

 
LendingClub Corporation Stockholders
 
 
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Income
 
Accumulated
Deficit
 
Total LendingClub Stockholders’ Equity
 
Non-controlling interest
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
Balance at
December 31, 2016
397,979,772

 
$
4,003

 
$
1,226,206

 
2,282,700

 
$
(19,485
)
 
$
(767
)
 
$
(234,187
)
 
$
975,770

 
$
—

 
$
975,770

Stock-based compensation and related tax effects
—

 
—

 
45,192

 
—

 
—

 
—

 
(1,397
)
 
43,795

 
—

 
43,795

Stock option exercises and other
12,181,123

 
122

 
8,881

 
—

 
—

 
—

 
—

 
9,003

 
—

 
9,003

ESPP purchase shares
565,701

 
5

 
2,850

 
—

 
—

 
—

 
—

 
2,855

 
—

 
2,855

Net unrealized gain on available for sale securities, net of tax
—

 
—

 
—

 
—

 
—

 
171

 
—

 
171

 
—

 
171

Excess tax benefit from share-based award activity
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Contribution of interests in consolidated VIE
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
7,722

 
7,722

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(55,298
)
 
(55,298
)
 
10

 
(55,288
)
Balance at
June 30, 2017
410,726,596

 
$
4,130

 
$
1,283,129

 
2,282,700

 
$
(19,485
)
 
$
(596
)
 
$
(290,882
)
 
$
976,296

 
$
7,732

 
$
984,028


 
LendingClub Corporation Stockholders
 
 
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated Other Comprehensive Income
 
Accumulated
Deficit
 
Total LendingClub Stockholders’ Equity
 
Non-controlling interest
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
Balance at
December 31, 2015
379,716,630

 
$
3,797

 
$
1,127,951

 
—

 
$
—

 
$
(1,671
)
 
$
(88,217
)
 
$
1,041,860

 
$
—

 
$
1,041,860

Stock-based compensation and related tax effects
—

 
—

 
33,611

 
—

 
—

 
—

 
—

 
33,611

 
—

 
33,611

Stock option exercises and other
7,367,772

 
74

 
5,748

 
—

 
—

 
—

 
—

 
5,822

 
—

 
5,822

Treasury stock
(2,282,700
)
 
—

 
—

 
2,282,700

 
(19,485
)
 
—

 
—

 
(19,485
)
 
—

 
(19,485
)
ESPP purchase shares
721,918

 
7

 
2,508

 
—

 
—

 
—

 
—

 
2,515

 
—

 
2,515

Net unrealized gain on available for sale securities, net of tax
—

 
—

 
—

 
—

 
—

 
949

 
—

 
949

 
—

 
949

Excess tax benefit from share-based award activity
—

 
—

 
(62
)
 
—

 
—

 
—

 
—

 
(62
)
 
—

 
(62
)
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(77,214
)
 
(77,214
)
 
—

 
(77,214
)
Balance at
June 30, 2016
385,523,620

 
$
3,878

 
$
1,169,756

 
2,282,700

 
$
(19,485
)
 
$
(722
)
 
$
(165,431
)
 
$
987,996

 
$
—

 
$
987,996


See Notes to Condensed Consolidated Financial Statements.


6

LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

 
Six Months Ended 
 June 30,
 
2017
 
2016
Cash Flows from Operating Activities:
 
 
 
Consolidated net loss
$
(55,288
)
 
$
(77,214
)
Adjustments to reconcile consolidated net loss to net cash used for operating activities:
 
 
 
Net fair value adjustments of loans, loans held for sale, notes and certificates
3,588

 
1,208

Change in fair value of loan servicing liabilities
(1,448
)
 
(2,301
)
Change in fair value of loan servicing assets
9,122

 
4,663

Stock-based compensation, net
38,586

 
28,468

Excess tax benefit from share-based awards
—

 
62

Goodwill impairment charge
—

 
35,400

Depreciation and amortization
21,099

 
13,746

(Gain) Loss on sales of loans
(14,762
)
 
5,748

Other, net
608

 
541

Purchase of loans held for sale
(2,561,796
)
 
(2,557,171
)
Principal payments received on loans held for sale
8,291

 
932

Proceeds from sales of whole loans
2,521,761

 
2,539,614

Purchase of loans held for sale by consolidated VIE
(263,158
)
 
—

Proceeds from sale of securities by consolidated VIE, net of underwriting fees and costs
260,829

 
—

Net change in operating assets and liabilities:
 
 
 
Accrued interest receivable
5,368

 
(2,208
)
Other assets
(4,022
)
 
(3,190
)
Due from related parties
136

 
18

Accounts payable
1,614

 
2,038

Accrued interest payable
(5,161
)
 
3,657

Accrued expenses and other liabilities
3,981

 
4,799

Net cash used for operating activities
(30,652
)
 
(1,190
)
Cash Flows from Investing Activities:
 
 
 
Purchases of loans
(1,002,661
)
 
(1,441,716
)
Principal payments received on loans
1,265,892

 
1,180,096

Proceeds from recoveries and sales of charged-off loans
22,694

 
16,934

Proceeds from sales of whole loans
2,118

 
22,274

Purchases of securities available for sale
(56,210
)
 
(3,543
)
Proceeds from maturities of securities available for sale
135,834

 
42,806

Investment in Cirrix Capital
—

 
(10,000
)
Net change in restricted cash
16,138

 
(46,874
)
Purchases of property, equipment and software, net
(19,719
)
 
(26,905
)
Net cash provided by (used for) investing activities
364,086

 
(266,928
)

7

LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

 
Six Months Ended 
 June 30,
 
2017
 
2016
Cash Flows from Financing Activities:
 
 
 
Change in payable to investors
(28,666
)
 
14,658

Proceeds from issuances of notes and certificates
995,986

 
1,400,505

Proceeds from secured borrowings
—

 
22,274

Repayments of secured borrowings
—

 
(22,274
)
Principal payments and retirements of notes and certificates
(1,260,992
)
 
(1,169,545
)
Payments on notes and certificates from recoveries/sales of related charged-off loans
(22,493
)
 
(16,916
)
Repurchase of common stock
—

 
(19,485
)
Proceeds from stock option exercises and other
9,024

 
5,825

Proceeds from issuance of common stock for ESPP
2,856

 
2,516

Excess tax benefit from share-based awards
—

 
(62
)
Purchase of noncontrolling interest in consolidated VIE
(6,307
)
 
—

Other financing activities
—

 
17

Net cash (used for) provided by financing activities
(310,592
)
 
217,513

Net Increase (Decrease) in Cash and Cash Equivalents
22,842

 
(50,605
)
Cash and Cash Equivalents, Beginning of Period
515,602

 
623,531

Cash and Cash Equivalents, End of Period
$
538,444

 
$
572,926

Supplemental Cash Flow Information:
 
 
 
Cash paid for interest
$
313,976

 
$
350,490

Non-cash investing activity:
 
 
 
Accruals for property, equipment and software
$
2,070

 
$
3,135

Beneficial interests retained by consolidated VIE
$
17,536

 
$
—

Non-cash financing activity:
 
 
 
Noncontrolling interests’ contribution of beneficial interests in consolidated VIE
$
7,722

 
$
—


See Notes to Condensed Consolidated Financial Statements.


8

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)




1. Basis of Presentation

LendingClub Corporation (LendingClub) operates an online marketplace lending platform that connects borrowers and investors. LC Advisors, LLC (LCA), is a registered investment advisor with the Securities and Exchange Commission (SEC) and wholly-owned subsidiary of LendingClub that acts as the general partner for certain private funds. Additionally, LCA is an advisor to separately managed accounts (SMAs) and funds of which LCA’s wholly-owned subsidiaries are the general partners. Springstone Financial, LLC (Springstone), is a wholly-owned subsidiary of LendingClub that facilitates education and patient finance loans. LC Trust I (the Trust) is an independent Delaware business trust that acquires loans from LendingClub and holds them for the sole benefit of certain investors that have purchased trust certificates (Certificates) issued by the Trust that are related to specific underlying loans for the benefit of the investor.

As the sponsor of an asset-backed securities securitization transaction, LendingClub owns a 56% interest in a majority-owned affiliate (MOA). The Company holds a controlling financial interest and is the primary beneficiary of the MOA and consolidates the MOA in its financial statements. For additional information about the Company’s securitization activities, see “Note 6. Securitization of Personal Whole Loans.”

The accompanying unaudited condensed consolidated financial statements include LendingClub, its subsidiaries (collectively referred to as the Company, we, or us) and consolidated variable interest entities. Noncontrolling interests are reported as a separate component of consolidated equity from the equity attributable to LendingClub’s stockholders for all periods presented. All intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the results and financial position for the periods presented. These accounting principles require management to make certain estimates and assumptions that affect the amounts in the accompanying financial statements. Actual results may differ from those estimates, and results reported in the interim periods are not necessarily indicative of the results for the full year or any other interim period.

In the first quarter of 2017, the Company simplified the presentation of “Total net revenue” in the unaudited Condensed Consolidated Statements of Operations to present revenues from transactions with investors as a single line item reported as “Investor fees ” by aggregating the revenues previously separately reported as “Servicing fees” and “Management fees.” Additionally, the Company aggregated “Fair value adjustments - loans, loans held for sale, notes and certificates” into “Other revenue (expense).” These changes had no impact to “Total net revenue.” Prior period amounts have been reclassified to conform to the current period presentation.

The accompanying interim condensed consolidated financial statements and these related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (Annual Report) filed on February 28, 2017.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “ Part II – Item 8 – Financial Statements and Supplementary Data – Note 2. Summary of Significant Accounting Policies ” in the Annual Report. There have been no significant changes to these significant accounting policies for the six month period ended June 30, 2017 , except as noted below.


9

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



Transfers of Financial Assets

The Company accounts for transfers of financial assets as sales when it has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred. Gains and losses resulting from transfers are included in “Other revenue” in the accompanying consolidated statements of operations. Assets obtained and liabilities incurred in connection with transfers reported as sales are initially recognized in the balance sheet at fair value.

Transfers of financial assets that do not qualify for sale accounting are reported as secured borrowings. Accordingly, the related assets remain on the Company’s balance sheet and continue to be reported and accounted for as if the transfer had not occurred. Cash proceeds from these transfers are reported as liabilities, with related interest expense recognized over the life of the related transactions.

Goodwill and Intangible Assets

Goodwill represents the fair value of acquired businesses in excess of the aggregate fair value of the identified net assets acquired. Goodwill is not amortized but is tested for impairment annually or whenever indications of impairment exist. Impairment exists whenever the carrying value of a reporting unit with goodwill exceeds its estimated fair value. Our annual impairment testing date is April 1. In the first quarter of 2017, the Company adopted Accounting Standards Update (ASU) 2017-04, which simplifies the accounting for goodwill impairments by eliminating Step 2 of the goodwill impairment test. The Company amended its accounting policy for goodwill and intangible assets accordingly.

The Company can elect to qualitatively assess goodwill for impairment if it is more likely than not that the fair value of a reporting unit (generally defined as a component of a business for which financial information is available and reviewed regularly by management) exceeds its carrying value. A qualitative assessment may consider macroeconomic and other industry-specific factors, such as trends in short-term and long-term interest rates and the ability to access capital or company-specific factors, such as market capitalization in excess of net assets, trends in revenue generating activities and merger or acquisition activity.

If the Company does not qualitatively assess goodwill it compares a reporting unit’s estimated fair value to its carrying value. The estimated fair value of the Company’s reporting unit is established using an income approach based on a discounted cash flow model and a market approach, which compares the reporting unit to comparable companies in their respective industries.

Intangible assets are amortized over their useful lives in a manner that best reflects their economic benefit, which may include straight-line or accelerated methods of amortization. Intangible assets are reviewed for impairment quarterly and whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company does not have indefinite-lived intangible assets.

Noncontrolling Interests

Noncontrolling interests represent the noncontrolling holders’ share of income or losses, and share of total equity, from a consolidated subsidiary or consolidated variable interest entity in which the Company holds less than 100% ownership.


10

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



Legal Expenses

Legal fees are expensed as incurred and are included in other general and administrative expenses in the consolidated statements of operations. Insurance recoveries associated with the reimbursement of legal expenses incurred, if any, are included in other general and administrative expenses as a contra-expense in the consolidated statements of operations.

Adoption of New Accounting Standards

The Company adopted the following accounting standards during the six month period ended June 30, 2017 :

ASU 2016-09 Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), simplifies the accounting for employee share-based payment transactions, including the associated accounting for income taxes, forfeitures, and classification in the statement of cash flows. The Company adopted ASU 2016-09 effective January 1, 2017, under the modified retrospective method with the cumulative effect of adoption recorded as a reclassification to 2017 beginning accumulated deficit. The Company also elected to present the change in presentation in the Statement of Cash Flows related to excess tax benefits prospectively and, therefore, prior period amounts have not been adjusted.

Under ASU 2016-09, the Company now recognizes the excess income tax benefits or deficiencies from stock-based compensation in the income tax provision in the Consolidated Statements of Operations, and as an operating activity in the Consolidated Statements of Cash Flows. Additionally, excess tax benefits and tax deficiencies are now excluded from the calculation of assumed proceeds under the treasury stock method when computing fully diluted earnings per share. Upon the adoption of this standard, the Company recognized a $57.0 million deferred tax asset with a full valuation allowance (net zero impact upon adoption) in the consolidated balance sheets for the excess income tax benefits from stock-based compensation as of January 1, 2017.

The Company also elected to recognize forfeitures as they occur for equity awards with only a service condition, rather than estimate expected forfeitures, as permitted by ASU 2016-09. The Company recorded a $1.4 million reclassification to 2017 beginning accumulated deficit to remove the estimate of forfeitures as of January 1, 2017.

ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, simplifies the accounting for goodwill impairments by eliminating Step 2 of the goodwill impairment test. Under ASU 2017-04, a goodwill impairment loss is now measured as the amount by which the carrying amount of a reporting unit exceeds its fair value. The Company elected to early adopt ASU 2017-04 effective January 1, 2017. The adoption did not have an effect on the Company’s condensed consolidated financial statements for the six month period ended June 30, 2017 .

New Accounting Standards Not Yet Adopted

Updates to the new accounting standards not yet adopted as disclosed in the Company’s Annual Report for the year ended December 31, 2016 are as follows:

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which will be effective January 1, 2018. The guidance clarifies that revenue from contracts with customers should be recognized in a manner that depicts both the likelihood of payment and the timing of the related transfer of goods or performance of services. In March 2016, the FASB issued an amendment (ASU 2016-08) to the new revenue recognition guidance clarifying how to determine if an entity is a principal or agent in a transaction. In April (ASU 2016-10) and May (ASU 2016-12) of 2016, the FASB further amended the guidance to include performance obligation identification, licensing implementation, collectability assessment and other presentation and transition

11

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



clarifications. The effective date and transition requirements for the amendments are the same as for ASU 2014-09. The Company plans to adopt the revenue recognition guidance beginning January 1, 2018 and currently anticipates using the modified retrospective method of adoption. However, the adoption method to be used is subject to completion of the Company’s impact assessment. Upon initial evaluation, the Company believes there will be no material changes to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606. Additionally, we believe there will be no material changes to the presentation of revenue as gross versus net, or to the amount of capitalized contract costs. The Company has dedicated internal resources, engaged a service provider, and continues to execute its project plan to evaluate the impacts of implementation, including impacts to its processes and internal controls. Because we do not believe there will be a material change to the timing and pattern of revenue recognition, we do not expect there will be material changes to the Company’s processes and internal controls. However, that assessment currently is underway. The Company also will continue to evaluate new revenue streams and analyze other aspects of Topic 606 that may be relevant.

ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, (ASU 2017-09) , clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective prospectively for all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. The Company is still evaluating the impact of this ASU to its consolidated financial statements.

3. Net Loss Per Share

The following table details the computation of the Company’s basic and diluted net loss per share:
 
 
Three Months Ended  
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
LendingClub net loss
 
$
(25,454
)
 
$
(81,351
)
 
$
(55,298
)
 
$
(77,214
)
Weighted average common shares - Basic
 
406,676,996

 
382,893,402

 
403,510,351

 
381,794,090

Weighted average common shares - Diluted
 
406,676,996

 
382,893,402

 
403,510,351

 
381,794,090

Net loss per share attributable to LendingClub:
 
 
 
 
 
 
 
 
Basic
 
$
(0.06
)
 
$
(0.21
)
 
$
(0.14
)
 
$
(0.20
)
Diluted
 
$
(0.06
)
 
$
(0.21
)
 
$
(0.14
)
 
$
(0.20
)


12

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



4. Securities Available for Sale

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of June 30, 2017 and December 31, 2016 , were as follows:
June 30, 2017
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Corporate debt securities
$
140,613

 
$
192

 
$
(60
)
 
$
140,745

U.S. agency securities
19,600

 
6

 
—

 
19,606

Certificates of deposit
18,624

 
—

 
—

 
18,624

Asset-backed securities
11,544

 
—

 
(4
)
 
11,540

Commercial paper
10,718

 
—

 
—

 
10,718

U.S. Treasury securities
2,495

 
—

 
(4
)
 
2,491

Asset-backed securities related to
consolidated VIE
17,537

 
—

 
(1
)
 
17,536

Other securities
4,001

 
—

 
—

 
4,001

Total securities available for sale
$
225,132

 
$
198

 
$
(69
)
 
$
225,261

 
 
 
 
 
 
 
 
December 31, 2016
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Corporate debt securities
$
181,359

 
$
63

 
$
(199
)
 
$
181,223

Certificates of deposit
27,501

 
—

 
—

 
27,501

Asset-backed securities
25,369

 
4

 
(9
)
 
25,364

Commercial paper
20,164

 
—

 
—

 
20,164

U.S. agency securities
19,602

 
21

 
—

 
19,623

U.S. Treasury securities
2,493

 
3

 
—

 
2,496

Other securities
10,805

 
—

 
(39
)
 
10,766

Total securities available for sale
$
287,293

 
$
91

 
$
(247
)
 
$
287,137


The senior securities and the subordinated residual certificates related to the securitization transaction (See “Note 6. Securitization of Personal Whole Loans” ) are accounted for as securities available for sale. The senior securities and subordinate residual certificates are included in “Asset-backed securities related to consolidated VIE” in the table above. The senior securities are valued using prices obtained from third party pricing services (Level 2 of the fair value hierarchy) as described in the Company’s Annual Report ( “Note 2. Summary of Significant Accounting Policies” ). The subordinated residual certificates are valued by an independent valuation firm, which utilizes discounted cash flow models that incorporate contractual payment terms and estimates to discounts rates, credit losses, and prepayment rates (Level 3 of the fair value hierarchy). The fair value of the subordinated residual certificate was $3.5 million at June 30, 2017 .


13

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



A summary of securities available for sale with unrealized losses as of June 30, 2017 and December 31, 2016 , aggregated by period of continuous unrealized loss, is as follows:
 
Less than
12 months
 
12 months
or longer
 
Total
June 30, 2017
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Corporate debt securities
$
56,198

 
$
(56
)
 
$
3,999

 
$
(4
)
 
$
60,197

 
$
(60
)
Asset-backed securities
6,250

 
(4
)
 
—

 
—

 
6,250

 
(4
)
U.S. Treasury securities
2,491

 
(4
)
 
—

 
—

 
2,491

 
(4
)
Asset-backed securities related to
consolidated VIE
13,970

 
(1
)
 
—

 
—

 
13,970

 
(1
)
Total securities with unrealized losses (1)
$
78,909

 
$
(65
)
 
$
3,999

 
$
(4
)
 
$
82,908

 
$
(69
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than
12 months
 
12 months
or longer
 
Total
December 31, 2016
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Corporate debt securities
$
107,862

 
$
(185
)
 
$
11,682

 
$
(14
)
 
$
119,544

 
$
(199
)
Asset-backed securities
6,628

 
(8
)
 
1,870

 
(1
)
 
8,498

 
(9
)
Other securities
6,800

 
(3
)
 
3,966

 
(36
)
 
10,766

 
(39
)
Total securities with unrealized losses (1)
$
121,290

 
$
(196
)
 
$
17,518

 
$
(51
)
 
$
138,808

 
$
(247
)
(1)  
The number of investment positions with unrealized losses at June 30, 2017 and December 31, 2016 totaled 49 and 72 , respectively.

There were no impairment charges on securities available for sale recognized during the first half of 2017 or 2016 .

The contractual maturities of securities available for sale at June 30, 2017 , were as follows:
 
Within
1 year
After 1 year
through
5 years
After 5 years
through
10 years
After
10 years
Total
Corporate debt securities
$
101,323

$
39,422

$
—

$
—

$
140,745

U.S. agency securities
19,606

—

—

—

19,606

Certificates of deposit
17,120

1,504

—

—

18,624

Asset-backed securities
6,438

5,102

—

—

11,540

Commercial paper
10,718

—

—

—

10,718

U.S. Treasury securities
—

2,491

—

—

2,491

Asset-backed securities related to
consolidated VIE
—

—

17,536

—

17,536

Other securities
—

4,001

—

—

4,001

Total fair value
$
155,205

$
52,520

$
17,536

$
—

$
225,261

Total amortized cost
$
155,206

$
52,389

$
17,537

$
—

$
225,132



14

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



During the second quarter and first half of 2017 , the Company’s MOA sold $265.4 million in asset-backed securities related to its sponsored securitization transaction. There were no realized gains or losses related to such sales. For further information, see “ Note 6. Securitization of Personal Whole Loans .” There were no other sales of securities available for sale during the first half of 2017 or 2016 .

5. Loans, Loans Held For Sale, Notes and Certificates and Loan Servicing Rights

Loans, Loans Held For Sale, Notes and Certificates

The Company sells loans and issues notes and the Trust issues certificates as a means to allow investors to invest in the corresponding loans. At June 30, 2017 and December 31, 2016 , loans, loans held for sale, notes and certificates measured at fair value on a recurring basis were as follows:
 
Loans
 
Loans Held For Sale
 
Notes and Certificates
June 30, 
 2017
 
December 31, 
 2016
 
June 30, 
 2017
 
December 31, 
 2016
 
June 30, 
 2017
 
December 31, 
 2016
Aggregate principal balance outstanding
$
4,041,550

 
$
4,565,653

 
$
37,287

 
$
9,345

 
$
4,048,717

 
$
4,572,912

Net fair value adjustments
(244,551
)
 
(253,669
)
 
(956
)
 
(297
)
 
(243,135
)
 
(252,017
)
Fair value
$
3,796,999

 
$
4,311,984

 
$
36,331

 
$
9,048

 
$
3,805,582

 
$
4,320,895


Loans invested in by the Company for which there was no associated note or certificate had an aggregate principal balance outstanding of $57.2 million and a fair value of $54.8 million at June 30, 2017 . Loans invested in by
the Company for which there was no associated note or certificate had an aggregate principal balance outstanding of $27.9 million and a fair value of $25.9 million at December 31, 2016 .

The Company places all loans that are contractually past due by 120 days or more on non-accrual status. At June 30, 2017 and December 31, 2016 , loans that were 90 days or more past due (including non-accrual loans) were as follows:
 
June 30, 2017
 
December 31, 2016
 
>  90 days
past due
 
Non-accrual loans
 
>  90 days
past due
 
Non-accrual loans
Outstanding principal balance
$
36,357

 
$
1,375

 
$
45,718

 
$
5,055

Net fair value adjustments
(31,177
)
 
(1,154
)
 
(40,183
)
 
(4,392
)
Fair value
$
5,180

 
$
221

 
$
5,535

 
$
663

# of loans (not in thousands)
3,396

 
135

 
4,041

 
483


Loan Servicing Rights

Loans underlying loan servicing rights had a total outstanding principal balance of $7.08 billion and $6.54 billion as of June 30, 2017 and December 31, 2016 , respectively.

6. Securitization of Personal Whole Loans

On June 22, 2017, the Company sponsored the securitization of unsecured personal whole loans with an unpaid principal balance of $336.6 million through an asset-backed securitization transaction. The loans were facilitated through the Company’s marketplace and originally sold to third-party whole loan investors. In connection with this securitization, the Company established a majority-owned affiliate (MOA) to hold the risk retention interest

15

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



required to be held by the sponsor of a securitization transaction. The MOA purchased the loans from the investors and simultaneously transferred them to a securitization trust with the transfer accounted for as a sale of financial assets.

The securitization trust issued senior securities and subordinated residual certificates to the MOA with an aggregate value of $350.7 million as consideration for the transferred loans. The MOA sold 95% of senior securities to third-party investors for $260.8 million in net cash proceeds and then distributed the cash and 95% of the subordinated residual certificates to the original whole loan investors. To comply with regulatory credit risk retention rules, the MOA retained 5% of each of the senior securities and the subordinated residual certificate. As of June 30, 2017 , the fair value of the senior securities and subordinate residual certificates held by the MOA was $14.0 million and $3.5 million , respectively (See “Note 4. Securities Available for Sale” ).

As of June 30, 2017 , the Company owned 56% of the MOA, with the remaining 44% owned by unaffiliated investors that is reflected as noncontrolling interests in the Company’s consolidated financial statements. The MOA is a variable interest entity in which the Company holds a controlling financial interest and is the primary beneficiary. Accordingly, the Company consolidates the MOA in its financial statements. The securitization trust used to effect the transaction is a variable interest entity that the Company does not consolidate because it is not the primary beneficiary.

The net pre-tax gain on sale from this securitization transaction was $1.7 million , which is included in “Other revenue” in the consolidated statements of operations. Additionally, the Company retained the loan servicing responsibilities for which it will receive servicing fees over the life of the underlying loans. The fair value of the servicing asset related to the loans originally sold to third-party whole loan investors was reduced by $1.1 million , which is included in “Investor fees” in the consolidated statement of operations. The Company also deposited a $6.7 million servicing reserve with the securitization trust, which is included in “Other assets” in the Company’s consolidated balance sheet.

The Company and other investors in the subordinated residual certificates have rights to cash flows after the investors holding the securitization trust’s senior securities have first received their contractual cash flows. The investors and the securitization trust have no recourse to the Company’s assets, and holders of the securities issued by the securitization trust can look only to the assets of the securitization trust for payment. The beneficial interests held by the MOA are subject principally to the credit risk stemming from the underlying personal whole loans.

The senior securities and subordinate residual certificates are accounted for as securities available for sale. See “Note 4. Securities Available for Sale” and “Note 7. Fair Value of Assets and Liabilities.” Also refer to “Note 2. Summary of Significant Accounting Policies” in the Company’s Annual Report for further information regarding the Company’s accounting for securities available for sale and servicing assets.


16

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



The fair value sensitivity of the senior securities and subordinated residual certificates to adverse changes in key assumptions are as follows:
 
 
June 30, 2017
 
 
Asset-Backed Securities
 
 
Senior Securities
 
Subordinated Residual Certificates
Fair value of interests held
 
$
13,970

 
$
3,566

Expected weighted-average life (in years)
 
0.9

 
1.4

Discount rates
 
 
 
 
100 basis point increase
 
$
(124
)
 
$
(44
)
200 basis point increase
 
$
(245
)
 
$
(87
)
Expected credit loss rates on underlying loans
 
 
 
 
10% adverse change
 
$
—

 
$
(245
)
20% adverse change
 
$
—

 
$
(515
)
Expected prepayment rates
 
 
 
 
10% adverse change
 
$
—

 
$
(31
)
20% adverse change
 
$
—

 
$
(86
)

As of June 30, 2017 , the principal amount of the off-balance sheet loans that were securitized was $333.1 million , of which approximately $32 thousand was 31 days or more past due.

7. Fair Value of Assets and Liabilities

For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Note 2. Summary of
Significant Accounting Policies” in the Annual Report. The Company records certain assets and liabilities at fair value as listed in the following tables.


17

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



Financial Instruments Recorded at Fair Value

The following tables present the fair value hierarchy for assets and liabilities measured at fair value:
June 30, 2017
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
Loans
$
—

 
$
—

 
$
3,796,999

 
$
3,796,999

Loans held for sale
—

 
—

 
36,331

 
36,331

Securities available for sale:
 
 
 
 
 
 
 
Corporate debt securities
—

 
140,745

 
—

 
140,745

U.S. agency securities
—

 
19,606

 
—

 
19,606

Certificates of deposit
—

 
18,624

 
—

 
18,624

Asset-backed securities
—

 
11,540

 
—

 
11,540

Commercial paper
—

 
10,718

 
—

 
10,718

U.S. Treasury securities
—

 
2,491

 
—

 
2,491

Asset-backed securities related to consolidated VIE
—

 
13,969

 
3,567

 
17,536

Other securities
—

 
4,001

 
—

 
4,001

Total securities available for sale
—

 
221,694

 
3,567

 
225,261

Servicing assets
—

 
—

 
25,901

 
25,901

Total assets
$
—

 
$
221,694

 
$
3,862,798

 
$
4,084,492

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Notes and certificates
$
—

 
$
—

 
$
3,805,582

 
$
3,805,582

Servicing liabilities
—

 
—

 
1,711

 
1,711

Loan trailing fee liability
—

 
—

 
6,788

 
6,788

Total liabilities
$
—

 
$
—

 
$
3,814,081

 
$
3,814,081



18

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



December 31, 2016
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
Loans
$
—

 
$
—

 
$
4,311,984

 
$
4,311,984

Loans held for sale
—

 
—

 
9,048

 
9,048

Securities available for sale:
 
 
 
 
 
 
 
Corporate debt securities
—

 
181,223

 
—

 
181,223

Certificates of deposit
—

 
27,501

 
—

 
27,501

Asset-backed securities
—

 
25,364

 
—

 
25,364

Commercial paper
—

 
20,164

 
—

 
20,164

U.S. agency securities
—

 
19,623

 
—

 
19,623

U.S. Treasury securities
—

 
2,496

 
—

 
2,496

Other securities
—

 
10,766

 
—

 
10,766

Total securities available for sale
—

 
287,137

 
—

 
287,137

Servicing assets
—

 
—

 
21,398

 
21,398

Total assets
$
—

 
$
287,137

 
$
4,342,430

 
$
4,629,567

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Notes and certificates
$
—

 
$
—

 
$
4,320,895

 
$
4,320,895

Loan trailing fee liability
—

 
—

 
4,913

 
4,913

Servicing liabilities
—

 
—

 
2,846

 
2,846

Total liabilities
$
—

 
$
—

 
$
4,328,654

 
$
4,328,654


Financial instruments are categorized in the valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. Since the Company’s loans and related notes and certificates, loans held for sale, loan servicing rights, asset-backed securities related to consolidated VIEs, and loan trailing fee liability do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, changes in fair value for assets and liabilities within the Level 2 or Level 3 categories may include changes in fair value that were attributable to both observable and unobservable inputs. The Company did not transfer any assets or liabilities in or out of Level 3 during the first half of 2017 or the year ended December 31, 2016 .


19

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements at June 30, 2017 and December 31, 2016 :

 
 
 
 
 
 
 
 
June 30, 2017
 
 
 
 
Loans, Notes and Certificates
 
Servicing Asset/Liability
 
 
 
 
 
 
 
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
Discount rates
 
 
 
 
 
 
 
2.8
%
 
17.2
%
 
8.3
%
 
3.1
%
 
15.8
%
 
8.7
%
Net cumulative expected loss rates  (1)
 
0.7
%
 
44.1
%
 
14.0
%
 
0.3
%
 
44.1
%
 
12.3
%
Cumulative expected prepayment rates (1)
 
8.1
%
 
41.6
%
 
30.6
%
 
8.0
%
 
41.6
%
 
31.1
%
Total market servicing rates (% per annum on outstanding principal balance) (2)
 
N/A

 
N/A

 
N/A

 
0.63
%
 
0.90
%
 
0.63
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
 
 
 
Loan Trailing Fee Liability
 
Asset-Backed Securities
Related to Consolidated VIE
 
 
 
 
 
 
 
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
Discount rates
 
 
 
 
 
 
 
3.1
%
 
15.8
%
 
8.7
%
 
14.0
%
 
14.0
%
 
14.0
%
Net cumulative expected loss rates  (1) (3)
 
0.3
%
 
44.1
%
 
12.7
%
 
18.4
%
 
18.4
%
 
18.4
%
Cumulative expected prepayment rates  (1) (3)
 
8.0
%
 
41.6
%
 
30.6
%
 
23.5
%
 
23.5
%
 
23.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
Loans, Notes and Certificates
 
Servicing Asset/Liability
 
Loan Trailing Fee Liability
 
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
Discount rates
 
1.2
%
 
16.6
%
 
7.2
%
 
3.4
%
 
15.1
%
 
7.8
%
 
3.4
%
 
15.0
%
 
7.7
%
Net cumulative expected loss rates  (1)
 
0.3
%
 
33.9
%
 
14.6
%
 
0.3
%
 
33.9
%
 
12.8
%
 
0.3
%
 
33.9
%
 
13.5
%
Cumulative expected prepayment rates (1)
 
8.0
%
 
42.7
%
 
30.7
%
 
8.0
%
 
42.7
%
 
29.3
%
 
8.0
%
 
42.7
%
 
28.3
%
Total market servicing rates (% per annum on outstanding principal balance) (2)
 
N/A

 
N/A

 
N/A

 
0.63
%
 
0.90
%
 
0.63
%
 
N/A

 
N/A

 
N/A

N/A Not applicable
(1)  
Expressed as a percentage of the original principal balance of the loan, note or certificate, except for asset-backed securities.
(2)  
Includes collection fees estimated to be paid to a hypothetical third-party servicer.
(3)  
For asset-backed securities, expressed as a percentage of the outstanding collateral balance.

At June 30, 2017 and December 31, 2016 , the discounted cash flow methodology used to estimate the note and certificates’ fair values used the same projected net cash flows as their related loans. As demonstrated by the following tables, the fair value adjustments for loans were largely offset by the fair value adjustments of the notes and certificates due to the payment dependent design of the notes and certificates and because the principal balances of the loans were close to the combined principal balances of the notes and certificates.


20

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



The following tables present additional information about Level 3 loans, loans held for sale, notes and certificates measured at fair value on a recurring basis for the second quarters and first halves of 2017 and 2016 :
 
 
Loans
 
Loans Held For Sale
 
Notes and Certificates
 
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
Beginning balance at March 31, 2017
 
$
4,312,252

 
$
(285,497
)
 
$
4,026,755

 
$
9,724

 
$
(315
)
 
$
9,409

 
$
4,318,302

 
$
(283,945
)
 
$
4,034,357

Purchases
 
478,250

 
(1
)
 
478,249

 
1,722,255

 
6,424

 
1,728,679

 
—

 
—

 
—

Issuances
 
—

 
—

 
—

 
—

 
—

 
—

 
472,681

 
—

 
472,681

Sales
 
—

 
—

 
—

 
(1,686,950
)
 
(5,687
)
 
(1,692,637
)
 
—

 
—

 
—

Principal payments and retirements
 
(625,744
)
 
—

 
(625,744
)
 
(7,541
)
 
—

 
(7,541
)
 
(619,889
)
 
—

 
(619,889
)
Charge-offs
 
(123,208
)
 
123,208

 
—

 
(201
)
 
201

 
—

 
(122,377
)
 
122,377

 
—

Recoveries
 
—

 
(11,805
)
 
(11,805
)
 
—

 
—

 
—

 
—

 
(11,703
)
 
(11,703
)
Change in fair value recorded in earnings
 
—

 
(70,456
)
 
(70,456
)
 
—

 
(1,579
)
 
(1,579
)
 
—

 
(69,864
)
 
(69,864
)
Ending balance at June 30, 2017
 
$
4,041,550

 
$
(244,551
)
 
$
3,796,999

 
$
37,287

 
$
(956
)
 
$
36,331

 
$
4,048,717

 
$
(243,135
)
 
$
3,805,582

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
Loans Held For Sale
 
Notes and Certificates
 
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
Beginning balance at March 31, 2016
 
$
4,932,346

 
$
(216,190
)
 
$
4,716,156

 
$
—

 
$
—

 
$
—

 
$
4,929,468

 
$
(216,019
)
 
$
4,713,449

Purchases
 
525,205

 
—

 
525,205

 
1,221,122

 
—

 
1,221,122

 
—

 
—

 
—

Transfers from loans to loans held for sale
 
(28,533
)
 
—

 
(28,533
)
 
28,533

 
—

 
28,533

 
—

 
—

 
—

Issuances
 
—

 
—

 
—

 
—

 
—

 
—

 
501,899

 
—

 
501,899

Sales
 
—

 
—

 
—

 
(1,231,151
)
 
—

 
(1,231,151
)
 
—

 
—

 
—

Principal payments and retirements
 
(592,992
)
 
—

 
(592,992
)
 
(1,877
)
 
—

 
(1,877
)
 
(588,216
)
 
—

 
(588,216
)
Charge-offs
 
(87,395
)
 
87,395

 
—

 
—

 
—

 
—

 
(87,305
)
 
87,305

 
—

Recoveries
 
—

 
(6,743
)
 
(6,743
)
 
—

 
—

 
—

 
—

 
(6,739
)
 
(6,739
)
Change in fair value recorded in earnings
 
—

 
(205,332
)
 
(205,332
)
 
—

 
(217
)
 
(217
)
 
—

 
(204,508
)
 
(204,508
)
Ending balance at June 30, 2016
 
$
4,748,631

 
$
(340,870
)
 
$
4,407,761

 
$
16,627

 
$
(217
)
 
$
16,410

 
$
4,755,846

 
$
(339,961
)
 
$
4,415,885






21

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



 
 
Loans
 
Loans Held For Sale
 
Notes and Certificates
 
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
Beginning balance at December 31, 2016
 
$
4,565,653

 
$
(253,669
)
 
$
4,311,984

 
$
9,345

 
$
(297
)
 
$
9,048

 
$
4,572,912

 
$
(252,017
)
 
$
4,320,895

Purchases
 
1,002,666

 
(5
)
 
1,002,661

 
2,898,410

 
6,423

 
2,904,833

 
—

 
—

 
—

Transfers from loans to loans held for sale

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Issuances
 
—

 
—

 
—

 
—

 
—

 
—

 
995,986

 
—

 
995,986

Sales
 
—

 
—

 
—

 
(2,861,386
)
 
(5,530
)
 
(2,866,916
)
 
—

 
—

 
—

Principal payments and retirements
 
(1,265,463
)
 
—

 
(1,265,463
)
 
(8,721
)
 
—

 
(8,721
)
 
(1,260,994
)
 
2

 
(1,260,992
)
Charge-offs
 
(261,306
)
 
261,306

 
—

 
(361
)
 
361

 
—

 
(259,187
)
 
259,187

 
—

Recoveries
 
—

 
(22,694
)
 
(22,694
)
 
—

 
—

 
—

 
—

 
(22,493
)
 
(22,493
)
Change in fair value recorded in earnings
 
—

 
(229,489
)
 
(229,489
)
 
—

 
(1,913
)
 
(1,913
)
 
—

 
(227,814
)
 
(227,814
)
Ending balance at June 30, 2017
 
$
4,041,550

 
$
(244,551
)
 
$
3,796,999

 
$
37,287

 
$
(956
)
 
$
36,331

 
$
4,048,717

 
$
(243,135
)
 
$
3,805,582

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
Loans Held For Sale
 
Notes and Certificates
 
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
Beginning balance at December 31, 2015
 
$
4,681,671

 
$
(125,590
)
 
$
4,556,081

 
$
—

 
$
—

 
$
—

 
$
4,697,169

 
$
(125,586
)
 
$
4,571,583

Purchases
 
1,447,030

 
—

 
1,447,030

 
2,529,585

 
—

 
2,529,585

 
—

 
—

 
—

Transfers from loans to loans held for sale

 
(28,533
)
 
—

 
(28,533
)
 
28,533

 
—

 
28,533

 
—

 
—

 
—

Issuances
 
—

 
—

 
—

 
—

 
—

 
—

 
1,403,546

 
—

 
1,403,546

Sales
 
—

 
—

 
—

 
(2,539,614
)
 
—

 
(2,539,614
)
 
—

 
—

 
—

Principal payments and retirements
 
(1,179,151
)
 
—

 
(1,179,151
)
 
(1,877
)
 
—

 
(1,877
)
 
(1,172,587
)
 
—

 
(1,172,587
)
Charge-offs
 
(172,386
)
 
172,386

 
—

 
—

 
—

 
—

 
(172,282
)
 
172,282

 
—

Recoveries
 
—

 
(16,934
)
 
(16,934
)
 
—

 
—

 
—

 
—

 
(16,916
)
 
(16,916
)
Change in fair value recorded in earnings
 
—

 
(370,732
)
 
(370,732
)
 
—

 
(217
)
 
(217
)
 
—

 
(369,741
)
 
(369,741
)
Ending balance at June 30, 2016
 
$
4,748,631

 
$
(340,870
)
 
$
4,407,761

 
$
16,627

 
$
(217
)
 
$
16,410

 
$
4,755,846

 
$
(339,961
)
 
$
4,415,885



22

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



The following tables present additional information about Level 3 servicing assets and liabilities measured at fair value on a recurring basis for the second quarters and first halves of 2017 and 2016 :
 
 
Three Months Ended June 30, 2017
 
Three Months Ended June 30, 2016
 
 
Servicing Assets
 
Servicing Liabilities
 
Servicing Assets
 
Servicing Liabilities
Fair value at beginning of period
 
$
22,360

 
$
2,311

 
$
16,964

 
$
2,827

Issuances (1)
 
8,580

 
39

 
4,344

 
808

Change in fair value, included in investor fees
 
(5,075
)
 
(639
)
 
(4,895
)
 
(223
)
Other net changes included in deferred revenue
 
36

 
—

 
(287
)
 
—

Fair value at end of period
 
$
25,901

 
$
1,711

 
$
16,126

 
$
3,412

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended 
 June 30, 2017
 
Six Months Ended 
 June 30, 2016
 
 
Servicing Assets
 
Servicing Liabilities
 
Servicing Assets
 
Servicing Liabilities
Fair value at beginning of period
 
$
21,398

 
$
2,846

 
$
10,250

 
$
3,973

Issuances (1)
 
13,897

 
313

 
9,975

 
1,740

Change in fair value, included in investor fees
 
(9,122
)
 
(1,448
)
 
(4,663
)
 
(2,301
)
Other net changes included in deferred revenue
 
(272
)
 
—

 
564

 
—

Fair value at end of period
 
$
25,901

 
$
1,711

 
$
16,126

 
$
3,412

(1)  
Represents the gains or losses on sales of the related loans, recorded in other revenue.

The following table presents additional information about Level 3 loan trailing fee liability measured at fair value on a recurring basis for the second quarters and first halves of 2017 and 2016 :
 
Three Months Ended  
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Fair value at beginning of period
$
5,814

 
$
1,002

 
$
4,913

 
$
—

Issuances
1,811

 
1,496

 
3,474

 
2,498

Cash payment of loan trailing fee
(998
)
 
(185
)
 
(1,824
)
 
(189
)
Change in fair value, included in origination and servicing
161

 
11

 
225

 
15

Fair value at end of period
$
6,788

 
$
2,324

 
$
6,788

 
$
2,324


Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity

Fair valuation adjustments are recorded through earnings related to Level 3 instruments for the second quarters and first halves of 2017 and 2016 . Generally, changes in the net cumulative expected loss rates, cumulative prepayment rates, and discount rates will have an immaterial net impact on the fair value of loans, notes and certificates, servicing assets and liabilities, and loan trailing fee liability.

Certain of these unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the

23

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



valuation techniques for loans, notes and certificates, servicing assets and liabilities, and loan trailing fee liability, a change in one input in a certain direction may be offset by an opposite change from another input.

A specific loan that is projected to have larger future default losses than previously estimated has lower expected future cash flows over its remaining life, which reduces its estimated fair value. Conversely, a specific loan that is projected to have smaller future default losses than previously estimated has increased expected future cash flows over its remaining life, which increases its estimated fair value.

The Company’s selection of the most representative market servicing rates for servicing assets and servicing liabilities is inherently judgmental. The Company reviews third-party servicing rates for its loans, loans in similar credit sectors, and market servicing benchmarking analyses provided by third-party valuation firms, when available. The table below shows the impact on the estimated fair value of servicing assets and liabilities, calculated using different market servicing rate assumptions as of June 30, 2017 and December 31, 2016 :
 
June 30, 2017
 
December 31, 2016
 
Servicing Assets
 
Servicing Liabilities
 
Servicing Assets
 
Servicing Liabilities
Weighted-average market servicing rate assumptions
0.63
%
 
0.63
%
 
0.63
%
 
0.63
%
Change in fair value from:
 
 
 
 
 
 
 
Servicing rate increase by 0.10%
$
(6,512
)
 
$
541

 
$
(5,673
)
 
$
964

Servicing rate decrease by 0.10%
$
6,587

 
$
(466
)
 
$
5,812

 
$
(825
)

Financial Instruments, Assets, and Liabilities Not Recorded at Fair Value

The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value:
June 30, 2017
Carrying Amount
 
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (1)
$
538,444

 
$
—

 
$
538,444

 
$
—

 
$
538,444

Restricted cash
161,672

 
—

 
161,672

 
—

 
161,672

Servicer reserve receivable
10,379

 
—

 
10,379

 
—

 
10,379

Deposits
855

 
—

 
855

 
—

 
855

Total assets
$
711,350

 
$
—

 
$
711,350

 
$
—

 
$
711,350

Liabilities:
 
 
 
 
 
 
 
 
 
Accrued expenses and other liabilities
$
14,562

 
$
—

 
$
—

 
$
14,562

 
$
14,562

Accounts payable
13,452

 
—

 
13,452

 
—

 
13,452

Payables to investors
97,218

 
—

 
97,218

 
—

 
97,218

Total liabilities
$
125,232

 
$
—

 
$
110,670

 
$
14,562

 
$
125,232

(1)  
Carrying amount approximates fair value due to the short maturity of these financial instruments.


24

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



December 31, 2016
Carrying Amount
 
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (1)
$
515,602

 
$
—

 
$
515,602

 
$
—

 
$
515,602

Restricted cash
177,810

 
—

 
177,810

 
—

 
177,810

Servicer reserve receivable
4,938

 
—

 
4,938

 
—

 
4,938

Deposits
855

 
—

 
855

 
—

 
855

Total assets
$
699,205

 
$
—

 
$
699,205

 
$
—

 
$
699,205

Liabilities:
 
 
 
 
 
 
 
 
 
Accrued expenses and other liabilities
$
10,981

 
$
—

 
$
—

 
$
10,981

 
$
10,981

Accounts payable
10,889

 
—

 
10,889

 
—

 
10,889

Payables to investors
125,884

 
—

 
125,884

 
—

 
125,884

Total liabilities
$
147,754

 
$
—

 
$
136,773

 
$
10,981

 
$
147,754

(1)  
Carrying amount approximates fair value due to the short maturity of these financial instruments.

8. Property, Equipment and Software, Net

Property, equipment and software, net, consist of the following:
 
June 30, 
 2017
 
December 31, 
 2016
Internally developed software (1)
$
98,278

 
$
75,202

Leasehold improvements
23,069

 
22,637

Computer equipment
19,118

 
18,080

Purchased software
7,856

 
7,598

Furniture and fixtures
6,832

 
6,827

Construction in progress
2,713

 
707

Total property, equipment and software
157,866

 
131,051

Accumulated depreciation and amortization
(59,923
)
 
(41,788
)
Total property, equipment and software, net
$
97,943

 
$
89,263

(1)
Includes $11.8 million and $7.4 million in development in progress as of June 30, 2017 and December 31, 2016 , respectively.
Depreciation and amortization expense on property, equipment and software was $9.8 million and $18.9 million for the second quarter and first half of 2017 , respectively. Depreciation and amortization expense on property, equipment and software was $5.9 million and $11.3 million for the second quarter and first half of 2016 , respectively.


25

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



9. Other Assets

Other assets consist of the following:
 
June 30, 
 2017
 
December 31, 
 2016
Loan servicing assets, at fair value
$
25,901

 
$
21,398

Prepaid expenses
19,699

 
16,960

Other investments
10,570

 
10,372

Servicer reserve receivable
10,379

 
4,938

Accounts receivable
7,810

 
7,572

Receivable from investors
1,369

 
1,566

Due from related parties (1)
340

 
476

Tenant improvement receivable
137

 
3,290

Other
2,027

 
3,072

Total other assets
$
78,232

 
$
69,644

(1)  
Represents management fees from certain private funds for which LCA or its subsidiaries act as the general partner.

10. Intangible Assets and Goodwill

Intangible Assets

The Company’s intangible asset balance was $24.0 million and $26.2 million at June 30, 2017 and December 31, 2016 , respectively. Amortization expense associated with intangible assets for the second quarter and first half of 2017 was $1.1 million and $2.2 million , respectively. Amortization expense associated with intangible assets for the second quarter and first half of 2016 was $1.2 million and $2.4 million , respectively.

Goodwill

The Company’s goodwill balance was $35.6 million at June 30, 2017 and December 31, 2016 , respectively. The Company’s annual goodwill impairment testing date is April 1. In testing for potential impairment of goodwill, management performed an assessment of each of the Company’s reporting units (generally defined as the Company’s businesses for which financial information is available and reviewed regularly by management). Only the education and patient finance reporting unit contains goodwill. Upon completion of the annual impairment test in the second quarter of 2017 , the Company did not record any goodwill impairment expense.

The Company recorded a goodwill impairment expense of $35.4 million in the second quarter of 2016 .


26

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



11. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:
 
June 30, 
 2017
 
December 31, 
 2016
Accrued expenses
$
23,171

 
$
19,734

Accrued compensation (1)
21,351

 
27,009

Deferred rent
14,201

 
11,638

Transaction fee refund reserve
12,190

 
9,098

Loan trailing fee liability, at fair value
6,788

 
4,913

Credit loss coverage reserve
2,973

 
2,529

Deferred revenue
2,284

 
2,556

Loan servicing liabilities, at fair value
1,711

 
2,846

Contingent liabilities
1,570

 
—

Reimbursement payable to limited partners of LCA private funds
1,520

 
2,313

Payable to issuing banks
966

 
1,658

Other
2,020

 
1,325

Total accrued expenses and other liabilities
$
90,745

 
$
85,619

(1)
Includes accrued cash retention awards of $0.4 million and $3.0 million as of June 30, 2017 and December 31, 2016 , respectively.

12. Secured Borrowings

During the second quarter of 2016, the Company repurchased $22.3 million of near-prime loans from a single institutional investor that did not meet a non-credit, non-pricing requirement of the investor, of which $15.1 million were originally sold to the investor prior to March 31, 2016. As a result, these loans were accounted for as secured borrowings at March 31, 2016. During the second quarter of 2016, the Company resold the loans to a different investor at par. This subsequent transfer qualified for sale accounting treatment, and the loans were removed from the Company’s condensed consolidated balance sheet and the secured borrowings liability was reduced to zero in the second quarter of 2016. There were no secured borrowing liabilities as of June 30, 2017 or December 31, 2016 .

13. Employee Incentive Plans

The Company’s equity incentive plans provide for granting stock options and restricted stock units (RSUs) to employees, consultants, officers and directors.


27

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



Stock-based compensation expense was as follows for the periods presented:
 
Three Months Ended  
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Stock options
$
4,147

 
$
3,767

 
$
8,492

 
$
11,424

RSUs
14,522

 
8,775

 
29,156

 
13,901

ESPP
394

 
447

 
779

 
835

Stock issued related to acquisition
25

 
458

 
159

 
2,308

Total stock-based compensation expense
$
19,088

 
$
13,447

 
$
38,586

 
$
28,468


The following table presents the Company’s stock-based compensation expense recorded in the condensed consolidated statements of operations:
 
Three Months Ended  
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Sales and marketing
$
1,967

 
$
1,413

 
$
4,266

 
$
3,317

Origination and servicing
1,354

 
963

 
2,770

 
1,709

Engineering and product development
5,773

 
4,480

 
12,361

 
8,203

Other general and administrative
9,994

 
6,591

 
19,189

 
15,239

Total stock-based compensation expense
$
19,088

 
$
13,447

 
$
38,586

 
$
28,468


The Company capitalized $2.7 million and $2.1 million of stock-based compensation expense associated with developing software for internal use during the second quarters of 2017 and 2016 , respectively. The Company capitalized $5.2 million and $4.0 million of stock-based compensation expense associated with developing software for internal use during the first halves of 2017 and 2016 , respectively.

The Company adopted ASU 2016-09 on January 1, 2017. See Note 2, “ Summary of Significant Accounting Policies, ” for information on the adoption of ASU 2016-09.

Performance-based Restricted Stock Units

During the first quarter of 2017, the Company’s chief executive officer received performance-based restricted stock units (PBRSUs). PBRSUs are equity awards that may be earned based on achieving pre-established performance metrics over a specific performance period. Depending on the probability of achieving the pre-established performance targets, the PBRSUs issued could range from 0% to 200% of the target amount. PBRSUs granted under the Company’s equity incentive plans generally have a one -year performance period with one-half of the grant vesting in one-year following the completion of the performance period and the remaining one-half vesting in two -years following the completion of the performance period. Over the performance period, the number of PBRSUs that may be earned and the related stock-based compensation expense that is recognized is adjusted upward or downward based upon the probability of achieving the pre-established performance targets against the performance metrics.

14. Income Taxes

The Company continues to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.

28

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)




15. Commitments and Contingencies

Operating Lease Commitments

Total facilities rental expense for the second quarter and first half of 2017 was $4.0 million and $7.8 million , respectively. Total facilities rental expense for the second quarter and first half of 2016 was $3.6 million and $6.8 million , respectively. Minimum lease payments for the second quarter and first half of 2017 were $3.4 million and $7.0 million , respectively. Minimum lease payments for the second quarter and first half of 2016 were $2.6 million and $4.9 million , respectively. As of June 30, 2017 , the Company pledged $0.8 million of cash and $4.7 million in letters of credit as security deposits in connection with its lease agreements.

The Company’s future minimum payments under non-cancelable operating leases in excess of one year and anticipated sublease income as of June 30, 2017 , were as follows:
 
Operating Leases
Subleases
Net
2017
$
8,067

$
151

$
7,916

2018
16,065

310

15,755

2019
15,633

39

15,594

2020
16,534

—

16,534

2021
16,790

—

16,790

Thereafter
41,223

—

41,223

Total
$
114,312

$
500

$
113,812


Loan Purchase Obligation

Under the Company’s loan account program with WebBank, which serves as the Company’s primary issuing bank, WebBank retains ownership of the loans facilitated through LendingClub’s marketplace for two business days after origination. As part of this arrangement, the Company has committed to purchase the loans at par plus accrued interest, at the conclusion of the two business days. As of June 30, 2017 and December 31, 2016 , the Company was committed to purchase loans with an outstanding principal balance of $69.0 million and $32.2 million at par, respectively.

Loan Repurchase Obligations

The Company has historically limited its loan or note repurchase obligations to events of verified identity theft or in connection with certain customer accommodations. In connection with securitizations, the Company has agreed to repurchase obligations that are customary and consistent with institutional loan and securitization market standards.

In addition to and distinct from the repurchase obligations described in the preceding paragraph, the Company performs certain administrative functions for a variety of retail and institutional investors, including executing, without discretion, loan investments as directed by the investor. To the extent loans do not meet the investor’s investment criteria at the time of issuance, or are transferred to the investor as a result of a system error by the Company, the Company is obligated to repurchase such loans at par. As a result of the loan repurchase obligations described above, the Company repurchased $1.1 million in loans during the first half of 2017 .


29

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



Purchase Commitments and Loan Funding

As required by applicable regulations, the Company is obligated to purchase loans resulting from direct marketing efforts if such loans are not otherwise invested in by investors on the platform. The Company was not required to purchase any such loans during the first half of 2017 . Additionally, loans in the process of being facilitated and originated by the Company’s issuing bank partner at June 30, 2017 , were substantially funded in July  2017 . As of the date of this report, no loans remained without investor commitments and the Company was not required to purchase any of these loans.

In addition, if neither Springstone nor the Company can arrange for other investors to invest in or purchase loans that Springstone facilitates and that are originated by an issuing bank partner but do not meet the credit criteria for
purchase by the issuing bank partner (Pool B loans), Springstone and the Company are contractually committed to purchase these loans. As of June 30, 2017 , the Company had a $9.0 million deposit in a bank account to secure potential future purchases of these loans, if necessary. The funds are recorded as restricted cash on the Company’s consolidated balance sheets. During the first half of 2017 , the Company was required to purchase $9.1 million of Pool B loans. Pool B loans are held on the Company’s balance sheet and have an outstanding principal balance and fair value of $8.5 million and $8.3 million as of June 30, 2017 , respectively. The Company believes it will be required to purchase additional Pool B loans in the second half of 2017 as it seeks to arrange for other investors to invest in or purchase these loans.

In addition to the purchase commitments discussed above, the Company also used its own capital to purchase $175.7 million in loans during the second quarter of 2017 , of which approximately $120 million was used to support securitization partners and upcoming securitization initiatives and approximately $50 million was used to fund custom program loans. The Company purchased $189.4 million , in loans during the first half of 2017 . Additionally, as part of the Company’s sponsored securitization transaction during the second quarter of 2017 , the MOA purchased $336.6 million in loans from investors and simultaneously transferred them to a securitization trust.

Credit Support Agreements

In connection with a significant platform purchase agreement, the Company is subject to a credit support agreement with a third-party whole loan investor that requires the Company to reimburse the investor for credit losses in excess of a specified percentage of the original principal balance of whole loans acquired by the investor during a 12 -month period. During the first half of 2017 , the Company paid the investor $6.5 million under this agreement, which terminates in October 2017. As of June 30, 2017 , the Company has accrued approximately $3.0 million for future expected payments to the investor.

The Company is also subject to a credit support agreement with Cirrix Capital (Investment Fund). The credit support agreement requires the Company to pledge and restrict cash in support of its contingent obligation to reimburse the Investment Fund for net credit losses on loans underlying the Investment Fund’s certificates that are in excess of a specified, aggregate net loss threshold. On April 14, 2017, the credit support agreement was terminated effective December 31, 2016. However, the Company remains subject to the credit support agreement for credit losses on loans underlying the Investment Fund’s certificates that were issued on or prior to December 31, 2016. The Company pledged and restricted $2.6 million and $3.4 million as of June 30, 2017 and December 31, 2016 , respectively, to support this contingent obligation. The Company’s maximum exposure to loss under this credit support agreement was limited to $6.0 million as of June 30, 2017 .

Legal

Securities Class Actions. During the year ended December 31, 2016, several putative class action lawsuits alleging violations of federal securities laws were filed in California Superior Court, naming as defendants the Company,

30

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



current and former directors, certain officers, and the underwriters in the December 2014 initial public offering (the IPO). All of these actions were consolidated into a single action (Consolidated State Court Action), entitled In re LendingClub Corporation Shareholder Litigation , No. CIV537300. In August 2016, plaintiffs filed an amended complaint alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (Securities Act) based on allegedly false and misleading statements in the IPO registration statement and prospectus. The Company filed a demurrer requesting the Court dismiss certain of the claims alleged in the amended complaint, which was granted in part in the fourth quarter of 2016. The plaintiffs then filed a Second Amended Consolidated Complaint which the Company responded to with a new demurrer seeking to dismiss certain claims. The Court granted in part and denied in part this new demurrer. The Plaintiffs then amended their complaint again in light to comply with this Order, setting the operative complaint. In early April 2017 the plaintiffs filed their motion for class certification, which the Company opposed. The motion was granted in part in a June 2017 Order. Discovery is continuing. The Company believes that the plaintiffs’ allegations are without merit, and intends to vigorously defend against the claims.

In May 2016, two related putative securities class actions (entitled Evellard v. LendingClub Corporation, et al. , No. 16-CV-2627-WHA, and Wertz v. LendingClub Corporation, et al. , No. 16-CV-2670-WHA) were filed in the United States District Court for the Northern District of California, naming as defendants the Company and certain of its officers and directors. In mid-August 2016, the two actions were consolidated into a single action. The Company moved to dismiss the amended complaint filed in the fourth quarter of 2016. The Court held a hearing on this motion in the first quarter of 2017 and ultimately granted in part and denied in part the motion. The plaintiffs thereafter amended their complaint consistent with the Order and the parties have now begun discovery. The Court has set a schedule which includes a mediation in September 2017, a hearing for motion for class certification for October 2017, and trial for September 2018. The Company believes that the plaintiffs’ allegations are without merit, and intends to vigorously defend against the claims.

Derivative Lawsuits . In May 2016 and August 2016, respectively, two putative shareholder derivative actions were filed ( Avila v. Laplanche, et al. , No. CIV538758 and Dua v. Laplanche, et al. , CGC-16-553731) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. Both actions were voluntarily dismissed without prejudice. On December 14, 2016, a new putative shareholder derivative action was filed in the Delaware Court of Chancery ( Steinberg, et al. v. Morris, et al., C.A. No. 12984-CB), against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. The action is based on allegations similar to those in the securities class action litigation described above. The defendants are moving to stay this matter in light of the other pending proceedings.

Federal Consumer Class Action. In April 2016, a putative class action lawsuit was filed in federal court in New York ( Bethune v. LendingClub Corporation et al. (16 Civ. 2778)(NRB)), alleging that persons received loans, through the Company’s platform, that exceeded states’ usury limits in violation of state usury and consumer protection laws, and the federal RICO statute. The Company filed a motion to compel arbitration on an individual basis, which was granted in February 2017. The plaintiff has now filed an arbitration demand seeking relief on an individual basis. The Company believes that the plaintiff’s allegations are without merit, and intends to defend this matter vigorously.

On May 9, 2016, following the announcement of the internal board review described more fully in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Board Review” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016 (referenced to herein as the “internal board review”), the Company received a grand jury subpoena from the U.S. Department of Justice (DOJ). The Company also received formal requests for information from the SEC and Federal Trade Commission (FTC). The Company continues cooperating with the DOJ, SEC, FTC and any other governmental or regulatory authorities or agencies. No assurance can be given as to the timing or outcome of these matters.


31

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



In addition to the foregoing, the Company is subject to, and may continue to be subject to legal proceedings and regulatory actions in the ordinary course of business, including inquiries by state regulatory bodies related to the Company’s marketplace lending model. These include inquiries from the California Department of Business Oversight, Colorado Department of Law, New York Department of Financial Services, and West Virginia Attorney General’s office. No assurance can be given as to the timing or outcome.

16. Segment Reporting

The Company defines operating segments to be components of the Company for which discrete financial information is evaluated regularly by the Company’s executive management committee as chief operating decision maker (CODM). For purposes of allocating resources and evaluating financial performance, the Company’s CODM reviews financial information by the product types of personal loans, and education and patient finance loans. These product types are aggregated and viewed as one operating segment, and therefore, one reportable segment because the small business, auto, and education and patient finance operating segments are immaterial both individually and in the aggregate.

Substantially all of the Company’s revenue is generated in the United States. No individual borrower or investor accounted for 10% or more of consolidated net revenue for any of the periods presented.

17. Related Party Transactions

Related party transactions must be reviewed and approved by the Audit Committee of the Company’s board of directors when not conducted in the ordinary course of business subject to the standard terms of the Company’s online marketplace or certificate investment program. Related party transactions may include any transaction between entities under common control or with a related person occurring since the beginning of the Company’s latest fiscal year, or any currently proposed transaction. This review also includes any material amendment or modification to an existing related party transaction. The Company has defined related persons as members of the board of directors, executive officers, principal owners of the Company’s outstanding stock and any immediate family members of each such related persons, as well as any other person or entity with significant influence over the Company’s management or operations.

Several of the Company’s executive officers and directors (including immediate family members) have made deposits and withdrawals to their investor accounts and purchased loans, notes and certificates or have investments in private funds managed by LCA. The Company believes all such transactions by related persons were made in the ordinary course of business and were transacted on terms and conditions that were not more favorable than those obtained by similarly situated third-party investors.

On April 1, 2016, the Company closed its $10.0 million investment, for an approximate ownership interest of 15% in the Investment Fund, a holding company that participates in a family of funds with other unrelated third parties and purchases whole loans and interests in loans from the Company. As of June 30, 2017 , the Company and a board member had an aggregate ownership interest of approximately 27% in the Investment Fund.

During the first half of 2017 , this family of funds purchased $49.4 million of whole loans and interests in whole loans. During the first half of 2017 , the Company earned $496 thousand in investor fees from this family of funds, and paid interest of $4.3 million on interests in whole loans to the family of funds. The Company believes that the sales of whole loans and interests in whole loans, and the investor fees charged were on terms and conditions that were not more favorable than those obtained by other third-party investors.


32

LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)



18. Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to June 30, 2017 , through the date the condensed consolidated financial statements were filed with the SEC. Based on this evaluation, other than as recorded or disclosed within these condensed consolidated financial statements and related notes, the Company has determined none of these events were required to be recognized or disclosed.

33

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (Report). In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly in “ Part II – Other Information – Item 1A – Risk Factors ” in this Report and “ Part I – Item 1A – Risk Factors ” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (Annual Report). The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof.

Overview

LendingClub operates America’s largest online marketplace lending platform that connects borrowers and investors. We believe a technology-powered marketplace is a more efficient mechanism to allocate capital between borrowers and investors than the traditional banking system. Qualified consumers and small business owners borrow through LendingClub to lower the cost of their credit and enjoy a better experience than that provided by traditional banks.

Investors use LendingClub to earn solid risk-adjusted returns from an asset class that has generally been closed to many investors and only available on a limited basis to institutional investors. The capital to invest in the loans enabled through our marketplace comes directly from a wide range of investors, including retail investors, high-net-worth individuals and family offices, banks and finance companies, insurance companies, hedge funds, foundations, pension plans and university endowments, and through a variety of investment channels.

As a general matter, loans that are facilitated through our marketplace are funded by the issuance of Notes to our retail investors and the issuance of certificates or whole loan sales to institutional investors without the use of the Company’s capital. However, to expand the Company’s investor base, the Company has recently developed capabilities to support securitization of loans. In the second quarter of 2017, the Company used its own capital to purchase loans to leverage this newly developed securitization capability and sponsored its first securitization. We intend to use more of our capital to purchase loans for future securitizations or loan sales. We also use our own capital to fulfill contractual purchase obligations for loans funded without a matched third-party investor, from time to time. Additionally, we may use our own capital to invest in loans to fulfill regulatory obligations, support short-term marketplace equilibrium, offer customer accommodations, or to test and establish a track record of performance for new or alternative loan terms, programs, or channels.

We generate revenue primarily from transaction fees from our marketplace’s role in accepting and decisioning applications for our bank partners to enable loan originations, investor fees that include servicing fees from investors for various services, including servicing and collection efforts and matching available loan assets with capital and management fees from investment funds and other managed accounts, and interest income earned from loans held on our balance sheet to support future sponsored securitization transactions.

The transaction fees we receive from issuing banks in connection with our marketplace’s role in facilitating loan originations range from 1% to 7% of the initial principal amount of the loan. In addition, for education and patient finance loans, we also collect fees earned from issuing banks and service providers. Investor fees paid to us vary based on investment channel. Note investors generally pay us a fee equal to 1% of payment amounts received from the borrower. Whole loan purchasers pay a monthly fee of up to 1.3% per annum, which is generally based on the month-end principal balance of loans serviced. Certificate holders generally pay a monthly fee of up to 1.5% per annum of the month-end balance of assets under management or the month-end balance of unpaid principal of the underlying Certificate.

34

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)


Since beginning operations in 2007 , our marketplace has facilitated $28.8 billion in loan originations. These loans were facilitated through the following investment channels: (i) the issuance of member payment dependent notes, (ii) the sale of trust certificates, or (iii) the sale of whole loans directly to qualified investors or through an asset-backed securitization transaction. Since our inception $5.1 billion of our loan originations were invested in through member payment dependent notes, $7.4 billion were invested in through trust certificates and $16.3 billion were invested in through whole loan sales. In the second quarter of 2017 , our marketplace facilitated $2.15 billion of loan originations, of which approximately $270 million were invested in through member payment dependent notes, $200 million were invested in through trust certificates and $1.68 billion were invested in through whole loan sales. See “ Item 1A – Risk Factors – A decline in economic conditions may adversely affect our customers, which may negatively impact our business and results of operations” in our Annual Report on Form 10-K for the year ended December 31, 2016.

Current Economic and Business Environment

LendingClub monitors a variety of economic, credit and competitive indicators in connection with operating its online marketplace lending platform.

Our approach to risk-management is a data-driven, continuous and proactive process that runs against a constantly shifting set of conditions. Our online marketplace lending platform seeks to adapt to changing market conditions, including by leveraging market and loan performance data to propose changes to underwriting or pricing models for the related issuing bank’s approval.

During the first half of 2016, we began to observe pockets of underperformance in higher risk segments. This trend was subsequently observed across all loan grades in the third quarter of 2016, although it was less notable in lower risk grades and more notable in higher risk grades, particularly grades E, F and G. We responded to these observations by implementing changes to optimize the credit model several times in 2016, and again in January and May of 2017. While we have observed stable credit performance more recently, we will continue to monitor credit performance on new vintages as data becomes available and any impact from the broader macroeconomic environment. This information will assist us in assessing if and when to implement further changes to the credit model or interest rates. We have also invested in our multifaceted collections capabilities to further mitigate risk to our existing loan portfolio, including adding new recovery strategies, and augmenting collections team capacity.

In addition, we continue to actively explore ways to diversify our investor base and obtain additional investment capital for the platform loans. This could include the strategic use of our balance sheet to access new investors, monetize excess demand for loans, or support capital market transactions to provide liquidity to our existing investors.

Factors That Can Affect Revenue

As a marketplace, we work toward matching supply and demand while also growing the overall volume of originations and correspondingly revenue at a pace commensurate with proper planning, compliance, risk management, user experience, and operational controls that work to optimize the quality of the customer experience, customer satisfaction and long term growth. In addition, as the business grows, we utilize our balance sheet to hold loans in certain contexts, including testing of terms and conditions, repurchasing loans that did not meet an investor’s criteria, or in preparation for sponsored securitizations. In some instances, we may subsequently sell those loans, recognizing a gain or loss on their sale.

The interplay of the volume, timing and quality of loan applications, investment appetite, the impact of our holding certain loans on balance sheet, investor confidence in our data, controls and processes and available investment

35

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

capital from investors, platform loan processing and originations, and the subsequent performance of loans, which directly impacts our servicing fees, can affect our revenue in any particular period. These drivers collectively result in transaction or investor fees earned by us related to these transactions, interest income and other revenue related to loans held on balance sheet, and their future performance. As these drivers can be affected by a variety of factors, both in and out of our control, revenues may fluctuate from period to period. Factors that can affect these drivers and ultimately revenue and its timing include:

•
market confidence in our data, controls, and processes,
•
announcements of governmental inquiries or private litigation,
•
the mix of borrower products and corresponding transaction fees,
•
availability or the timing of the deployment of investment capital by investors,
•
the availability and amount of new capital from pooled investment vehicles and managed accounts that typically deploy their capital at the start of a period,
•
the amount of purchase limitations we can impose on larger investors as a way to maintain investor balance and fairness,
•
the attractiveness of alternative opportunities for borrowers or investors,
•
the responsiveness of applicants to our marketing efforts,
•
expenditures on marketing initiatives in a period,
•
the sufficiency of operational staff to process any manual portion of the loan applications in a timely manner,
•
the responsiveness of borrowers to satisfy additional income or employment verification requirements related to their application,
•
borrower withdrawal rates,
•
the percentage distribution of loans between the whole and fractional loan platforms,
•
platform system performance,
•
seasonality in demand for our platform and services, which is generally lower in the first and fourth quarters,
•
determination to hold loans for purposes of subsequently distributing the loans through sale or securitization;
•
changes in the credit performance of our loans or market interest rates,
•
and other factors.

At any point in time we have loan applications in various stages from initial application through issuance, as well as loans held on our balance sheet. Depending upon the timing and impact of the factors described above, loans may not be issued by our issuing bank in the same period in which the corresponding application was originally made resulting in a portion of that subsequent period’s revenue being earned from loan applications that were initiated in the immediately prior period. Loans may also be held on balance sheet before being subsequently sold. Consistent with our revenue recognition accounting policy under GAAP, we do not recognize the associated transaction fee revenue with a loan until the loan is issued by our issuing banks and the proceeds are delivered to the borrower. Our transaction fees are generally paid by the issuing bank, or in the case of patient finance loans, by the participating medical service provider, and are accordingly independent of who is investing in a loan or how a loan is invested in.


36

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Key Operating and Financial Metrics

We regularly review several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The following presents our key operating and financial metrics:
 
Three Months Ended
 
Six Months Ended June 30,
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
2017
 
2016
Loan originations
$
2,147,335

 
$
1,958,749

 
$
1,955,401

 
$
4,106,084

 
$
4,705,434

Net revenue
$
139,573

 
$
124,482

 
$
103,440

 
$
264,055

 
$
255,734

Consolidated net loss
$
(25,444
)
 
$
(29,844
)
 
$
(81,351
)
 
$
(55,288
)
 
$
(77,214
)
Contribution (1)(2)
$
66,038

 
$
53,165

 
$
35,145

 
$
119,203

 
$
104,316

Contribution margin (1)(2)
47.3
%
 
42.7
%
 
34.0
 %
 
45.1
%
 
40.8
 %
Adjusted EBITDA (1)(2)
$
4,493

 
$
161

 
$
(29,067
)
 
$
4,654

 
$
(2,810
)
Adjusted EBITDA margin (1)(2)
3.2
%
 
0.1
%
 
(28.1
)%
 
1.8
%
 
(1.1
)%
(1)  
Contribution, Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding these measures and a reconciliation of these measures to the most comparable GAAP measure, see “ Non-GAAP Financial Measures .”
(2)
Prior period amounts have been reclassified to conform to the current period presentation. See “Non-GAAP Financial Measures” for additional information.

Loan Originations

We believe originations are a key indicator of the adoption rate of our marketplace, growth of our brand, scale of our business, strength of our network effect, economic competitiveness of our products and future growth. Factors that could affect loan originations include investor confidence in our platform and internal processes, the amount of our capital available to invest in loans, interest rate and economic environment; the competitiveness of our products, primarily based on our platform’s rates and fees; the success of our operational efforts to balance investor and borrower demand; any limitations on the ability or willingness of our issuing banks to originate loans; our ability to develop new products or enhance existing products for borrowers and investors; the success of our sales and marketing initiatives and the success of borrower and investor acquisition and retention.


37

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Loan originations and weighted average transactions fees (as a percent of origination balance) by its major loan products are as follows:
 
Three Months Ended
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
(in millions, except percentages)
Origination Volume
Weighted- Average Transaction Fees
 
Origination Volume
Weighted- Average Transaction Fees
 
Origination Volume
Weighted- Average Transaction Fees
Personal loans - standard program
$
1,538.4

4.9
%
 
$
1,438.0

5.0
%
 
$
1,443.4

4.9
%
Personal loans - custom program
391.2

5.5

 
300.9

5.6

 
295.7

5.4

Other loans
217.8

4.5

 
219.8

4.5

 
216.3

4.4

Total
$
2,147.4

5.0
%
 
$
1,958.7

5.0
%
 
$
1,955.4

4.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
 
June 30, 
 2017
 
June 30,  
 2016
(in millions, except percentages)
 
 
 
Origination Volume
Weighted Average Transaction Fees
 
Origination Volume
Weighted Average Transaction Fees
Personal loans - standard program
 
 
 
$
2,976.4

5.0
%
 
$
3,530.6

4.7
%
Personal loans - custom program
 
 
 
692.1

5.5

 
754.9

5.1

Other loans
 
 
 
437.6

4.5

 
419.9

4.4

Total
 
 
 
$
4,106.1

5.0
%
 
$
4,705.4

4.7
%

Loans Serviced On Our Platform

The following table provides the outstanding principal balance of loans serviced at the end of the periods indicated, by the method in which the loans were financed (in millions):
 
 
June 30, 
 2017
 
December 31, 
 2016
Notes
 
$
1,740

 
$
1,795

Certificates
 
2,281

 
2,752

Whole loans sold
 
7,081

 
6,542

Other (1)
 
49

 
28

Total
 
$
11,151

 
$
11,117

(1)  
Includes loans invested in by the Company for which there were no associated notes or certificates.


38

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Results of Operations

The following table sets forth the condensed consolidated statements of operations data for each of the periods presented:
 
Three Months Ended
 
Change (%)
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Net revenue:
 
 
 
 
 
 
 
 
 
Transaction fees
$
107,314

 
$
98,692

 
$
96,605

 
11
 %
 
9
 %
Investor fees (1)
21,116

 
21,180

 
14,656

 
44
 %
 
—
 %
Other revenue (expense) (1)
4,223

 
2,221

 
(9,910
)
 
(143
)%
 
90
 %
Interest income
157,260

 
160,996

 
179,685

 
(12
)%
 
(2
)%
Interest expense
(150,340
)
 
(158,607
)
 
(177,596
)
 
(15
)%
 
(5
)%
Net interest income
6,920

 
2,389

 
2,089

 
231
 %
 
190
 %
Total net revenue
139,573

 
124,482

 
103,440

 
35
 %
 
12
 %
Operating expenses: (2)
 
 
 
 
 
 
 
 
 
Sales and marketing
55,582

 
54,583

 
49,737

 
12
 %
 
2
 %
Origination and servicing
21,274

 
20,449

 
20,934

 
2
 %
 
4
 %
Engineering and product development
35,718

 
35,760

 
29,209

 
22
 %
 
—
 %
Other general and administrative
52,495

 
43,574

 
53,457

 
(2
)%
 
20
 %
Goodwill impairment
—

 
—

 
35,400

 
(100
)%
 
—
 %
Total operating expenses
165,069

 
154,366

 
188,737

 
(13
)%
 
7
 %
Income (loss) before income tax expense
(25,496
)
 
(29,884
)
 
(85,297
)
 
(70
)%
 
(15
)%
Income tax (benefit) expense
(52
)
 
(40
)
 
(3,946
)
 
99
 %
 
30
 %
Consolidated net loss
$
(25,444
)
 
$
(29,844
)
 
$
(81,351
)
 
(69
)%
 
(15
)%
Less: Income attributable to noncontrolling interests
10

 
—

 
—

 
N/M

 
N/M

LendingClub net loss
$
(25,454
)
 
$
(29,844
)
 
$
(81,351
)
 
(69
)%
 
(15
)%
N/M Not meaningful.
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “ Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation ” for additional information.
(2) Includes stock-based compensation expense as follows:
 
Three Months Ended
 
Change (%)
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Sales and marketing
$
1,967

 
$
2,299

 
$
1,413

 
39
 %
 
(14
)%
Origination and servicing
1,354

 
1,416

 
963

 
41
 %
 
(4
)%
Engineering and product development
5,773

 
6,588

 
4,480

 
29
 %
 
(12
)%
Other general and administrative
9,994

 
9,195

 
6,591

 
52
 %
 
9
 %
Total stock-based compensation expense
$
19,088

 
$
19,498

 
$
13,447

 
42
 %
 
(2
)%

39

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

 
 
Six Months Ended 
 June 30,
 
 
 
 
2017
 
2016
 
Change (%)
Net revenue:
 
 
 
 
 
 
Transaction fees
 
$
206,006

 
$
221,113

 
(7
)%
Investor fees (1)
 
42,296

 
35,143

 
20
 %
Other revenue (expense) (1)
 
6,444

 
(3,807
)
 
N/M

Interest income
 
318,256

 
357,564

 
(11
)%
Interest expense
 
(308,947
)
 
(354,279
)
 
(13
)%
Net interest income
 
9,309

 
3,285

 
183
 %
Total net revenue
 
264,055

 
255,734

 
3
 %
Operating expenses (1) :
 
 
 
 
 
 
Sales and marketing
 
110,165

 
116,312

 
(5
)%
Origination and servicing
 
41,723

 
40,132

 
4
 %
Engineering and product development
 
71,478

 
53,407

 
34
 %
Other general and administrative
 
96,069

 
91,492

 
5
 %
Goodwill impairment
 
—

 
35,400

 
(100
)%
Total operating expenses
 
319,435

 
336,743

 
(5
)%
Income (loss) before income tax expense
 
(55,380
)
 
(81,009
)
 
(32
)%
Income tax (benefit) expense
 
(92
)
 
(3,795
)
 
(98
)%
Consolidated net loss
 
$
(55,288
)
 
$
(77,214
)
 
(28
)%
Less: Income attributable to noncontrolling interests
 
10

 
—

 
N/M

LendingClub net loss
 
$
(55,298
)
 
$
(77,214
)
 
(28
)%
N/M Not meaningful.
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “ Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation ” for additional information.
(2) Includes stock-based compensation expense as follows:
 
 
Six Months Ended 
 June 30,
 
 
 
 
2017
 
2016
 
Change (%)
Sales and marketing
 
$
4,266

 
$
3,317

 
29
 %
Origination and servicing
 
2,770

 
1,709

 
62
 %
Engineering and product development
 
12,361

 
8,203

 
51
 %
Other general and administrative
 
19,189

 
15,239

 
26
 %
Total stock-based compensation expense
 
$
38,586

 
$
28,468

 
36
 %


40

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Total Net Revenue
 
Three Months Ended  
 
Change (%)
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Net Revenue
 
 
 
 
 
 
 
 
 
Transaction fees
$
107,314

 
$
98,692

 
$
96,605

 
11
 %
 
9
 %
Investor fees (1)
21,116

 
21,180

 
14,656

 
44
 %
 
—
 %
Other revenue (expense) (1)
4,223

 
2,221

 
(9,910
)
 
(143
)%
 
90
 %
Interest income
157,260

 
160,996

 
179,685

 
(12
)%
 
(2
)%
Interest expense
(150,340
)
 
(158,607
)
 
(177,596
)
 
(15
)%
 
(5
)%
Net interest income
6,920

 
2,389

 
2,089

 
231
 %
 
190
 %
Total net revenue
$
139,573

 
$
124,482

 
$
103,440

 
35
 %
 
12
 %
 
Six Months Ended 
 June 30,
 
 
 
2017
 
2016
 
Change (%)
Net Revenue
 
 
 
 
 
Transaction fees
$
206,006

 
$
221,113

 
(7
)%
Investor fees (1)
42,296

 
35,143

 
20
 %
Other revenue (expense) (1)
6,444

 
(3,807
)
 
N/M

Interest income
318,256

 
357,564

 
(11
)%
Interest expense
(308,947
)
 
(354,279
)
 
(13
)%
Net interest income
9,309

 
3,285

 
183
 %
Total net revenue
$
264,055

 
$
255,734

 
3
 %
N/M
Not meaningful.
(1)  
Prior period amounts have been reclassified to conform to the current period presentation. See “ Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation ” for additional information.

The analysis below is presented for the following periods: Second quarter of 2017 compared to the second quarter of 2016 (Quarter Over Quarter), second quarter of 2017 compared to the first quarter of 2017 (Sequential), and the first half of 2017 compared to the first half of 2016 (Six Months Over Six Months).

Transaction Fees

Transaction fees are fees paid by issuing banks or education and patient service providers to us for the work we perform through our marketplace’s role in facilitating loans for our issuing bank partners. The amount of these fees is based upon the terms of the loan, including grade, rate, term and other factors. As of June 30, 2017 , these fees ranged from 1% to 7% of the initial principal amount of a loan. In addition, for education and patient finance loans, we also collect fees earned from issuing banks and service providers. We record transaction fee revenue net of program fees paid to WebBank, our primary issuing bank partner.

In July  2017 , we recognized approximately $9.1 million in transaction fee revenue associated with the issuance of loans in which the loan application process had commenced prior to the end of the second quarter of 2017 . In

41

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

July  2016 , we recognized approximately $6.4 million in transaction fee revenue associated with the issuance of loans in which the loan application process had commenced prior to the end of the second quarter of 2016 .

Quarter Over Quarter : Transaction fees were $107.3 million and $96.6 million for the second quarters of 2017 and 2016 , respectively, an increase of 11% . The increase was due to higher origination volume and higher average transaction fees in the second quarter of 2017 compared to the second quarter of 2016 . The average transaction fee as a percentage of the initial principal balance of the loan was 5.0% and 4.9% for the second quarters of 2017 and 2016 , respectively.

Sequential : Transaction fees were $107.3 million and $98.7 million for the second and first quarters of 2017 , respectively, an increase of 9% . The increase was primarily due to higher origination volume in the second quarter of 2017 compared to the first quarter of 2017.

Six Months Over Six Months : Transaction fees were $206.0 million and $221.1 million for the first halves of 2017 and 2016 , respectively, a decrease of 7% . The decrease was due to lower origination volume, partially offset by higher average transaction fees in the first half of 2017 compared to the first half of 2016. The average transaction fee as a percentage of the initial principal balance of the loan was 5.0% and 4.7% for the first halves of 2017 and 2016 , respectively. In March 2016, we increased the transaction fee that we earn from our primary issuing bank partner for certain prime and near-prime C through G graded loans from 5% to 6%, B graded loans from 4% to 5%, and A graded loans by approximately 1% at each subgrade level for grades A2 to A5.

Investor Fees

The table below illustrates the composition of investor fees by investment channel for each period presented:
 
Three Months Ended  
 
Change (%)
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Investor fees – whole loans sold
$
12,216

 
$
12,210

 
$
6,721

 
82
 %
 
—
 %
Investor fees – notes, certificates, and self-directed accounts
7,783

 
7,812

 
6,257

 
24
 %
 
—
 %
Investor fees – Funds and separately managed accounts  (1)
1,117

 
1,158

 
1,678

 
(33
)%
 
(4
)%
Total investor fees
$
21,116

 
$
21,180

 
$
14,656

 
44
 %
 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
 
2017
 
2016
 
Change (%)
Investor fees – whole loans sold
 
 
 
 
$
24,426

 
$
18,530

 
32
 %
Investor fees – notes, certificates, and self-directed accounts
 
 
 
 
15,595

 
12,774

 
22
 %
Investor fees – Funds and separately managed accounts (1)
 
 
 
 
2,275

 
3,839

 
(41
)%
Total investor fees
 
 
 
 
$
42,296

 
$
35,143

 
20
 %
(1)  
Funds are the private funds for which LCA or its subsidiaries act as general partner.


42

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

For each investment channel, the Company receives fees to compensate us for the costs we incur in servicing the related loan, including managing payments from borrowers, collections, payments to investors, maintaining investors’ account portfolios, and providing information and issuing monthly statements. Additionally, the investor fees earned from the Funds and separately managed accounts compensate us for the management and advisory services we provide related to the investment portfolios of these investors. The amount of investor fee revenue earned is predominantly affected by the various servicing rates paid by whole loan, note, and self-directed investors, the outstanding principal balance of whole loans and loans underlying notes and certificates serviced, and the amount of principal and interest collected from borrowers and remitted to whole loan, note, self-directed, and certain certificate investors.

Investor fee revenue related to whole loans sold also includes the change in fair value of our servicing assets and liabilities associated with the loans. Servicing rights are recorded as either an asset or liability depending on the degree to which the contractual loan servicing fee is above or below, respectively, an estimated market rate loan servicing fee. The change in fair value of servicing rights does not affect the contractual fees that we collect monthly from the whole loan investors.

Investor Fees – whole loans sold : Investor fee revenue related to the servicing of whole loans sold was $12.2 million and $6.7 million for the second quarters of 2017 and 2016 , respectively, an increase of 82% . The increase in revenue was due to a higher balance of whole loans serviced and increase in collection fees in the second quarter of 2017 compared to the second quarter of 2016. Investor fee revenue related to the servicing of whole loans sold was $12.2 million for both the second and first quarters of 2017 , respectively.

Investor fee revenue related to the servicing of whole loans sold was $24.4 million and $18.5 million for the first halves of 2017 and 2016 , respectively, an increase of 32% . The increase in revenue was due to a higher balance of whole loans serviced and increase in collection fees in the first half of 2017 compared to the first half of 2016, partially offset by a change in the fair value of servicing rights.

Investor fees – notes, certificates, and self-directed : Investor fee revenue related to the servicing of underlying notes, certificates, and self-directed accounts was $7.8 million and $6.3 million for the second quarters of 2017 and 2016 , respectively, an increase of 24% . The increase in revenue was due to an increase in the principal and interest payments processed on notes, increase in collection fees and an increase in self-directed fees in the second quarter of 2017 compared to the second quarter of 2016. Investor fee revenue related to the servicing of loans underlying notes, certificates, and self-directed accounts was $7.8 million for both the second and first quarters of 2017 .

Investor fee revenue related to the servicing of underlying notes, certificates, and self-directed accounts was $15.6 million and $12.8 million for the first halves of 2017 and 2016 , respectively, an increase of 22% . The increase in revenue was due to an increase in the principal and interest payments processed on notes, increase in collection fees and an increase in self-directed fees in the first half of 2017 compared to the first half of 2016.

Investor fees – Funds and separately managed accounts : Investor fee revenue related to the Funds and separately managed accounts was $1.1 million and $1.7 million for the second quarters of 2017 and 2016 , respectively, a decrease of 33% . This decrease was primarily due to a 40% decrease in the average assets underlying these investment channels. Investor fee revenue related to the Funds and separately managed accounts of $1.1 million in the second quarter of 2017 remained relatively flat compared to investor fee revenue of $1.2 million in the first quarter of 2017 . We currently anticipate that the assets under management associated with the Funds will continue to decrease as a result of a significant amount of redemption requests outstanding. This potential reduction will negatively affect investor fee revenue related to the Funds. Additionally, in July 2016, certain of the Funds ceased accepting contributions and limited redemption requests pursuant to the terms of the respective limited partnership agreements.


43

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Investor fee revenue related to the Funds and separately managed accounts was $2.3 million and $3.8 million in the first halves of 2017 and 2016 , respectively, a decrease of 41% . This decrease was primarily due to a 38% decrease in the average assets underlying these investment channels as a result of the redemption requests and contribution gate discussed above.

Other Revenue (Expense)

Other revenue (expense) generally consists of gains and losses on sales of whole loans and sponsored securitization transactions, fair value adjustments on loans, notes and certificates, and referral revenue. In connection with whole loan sales, in addition to investor fees earned with respect to the corresponding loan, we recognize a gain or loss on the sale of that loan based on the degree to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee. Referral revenue consists of fees earned from third-party companies when customers referred by us complete specified actions with such third-party companies.

As we expand the use of the Company’s own capital to invest in loans for strategic business purposes, such as securitization transactions, we expect the net negative fair value adjustments on loans to increase, as such loans’ fair value adjustments will not be offset by fair value adjustments on notes or certificates. The Company expects fair value adjustments to be offset by the interest income earned from holding such loans.

The table below illustrates the composition of other revenue for each period presented:
 
 
Three Months Ended
 
Change (%)
 
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Gain (loss) on sales of loans (1)
 
$
4,445

 
$
1,892

 
$
(10,447
)
 
143
 %
 
135
 %
Referral revenue
 
1,637

 
1,406

 
1,510

 
8
 %
 
16
 %
Net fair value adjustments on Loans, Notes and Certificates
 
(2,171
)
 
(1,417
)
 
(1,040
)
 
(109
)%
 
(53
)%
Other
 
312

 
340

 
67

 
N/M

 
(8
)%
Other revenue (expense) (2)
 
$
4,223

 
$
2,221

 
$
(9,910
)
 
143
 %
 
90
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
 
 
2017
 
2016
 
Change (%)
Gain (loss) on sales of loans (1)
 
$
6,337

 
$
(5,748
)
 
N/M

Referral revenue
 
3,043

 
3,042

 
—
 %
Net fair value adjustments on Loans, Notes and Certificates
 
(3,588
)
 
(1,207
)
 
(197
)%
Other
 
652

 
106

 
N/M

Other revenue (expense) (2)
 
$
6,444

 
$
(3,807
)
 
N/M

N/M
Not meaningful.
(1)  
Presented net of credit support agreement expense in the second and first quarters of 2017 and first half of 2017.
(2)  
Prior period amounts have been reclassified to conform to the current period presentation. See “ Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation ” for additional information.


44

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Quarter Over Quarter : Other revenue (expense) was $4.2 million and $(9.9) million for the second quarters of 2017 and 2016 , respectively. The increase was due to an increase in the gain on sale of loans primarily resulting from $14.0 million of sales incentives provided to whole loan investors that reduced the gain on sale in the second quarter of 2016, a higher volume of loans sold and, to a lesser extent, change in investor mix in the second quarter of 2017 compared to the second quarter of 2016. This increase was partially offset by a reimbursement to a whole loan investor pursuant to a credit support agreement in the second quarter of 2017. No such sales incentives were offered in the second quarter of 2017.

Sequential : Other revenue (expense) was $4.2 million and $2.2 million for the second and first quarters of 2017 , respectively. The increase was primarily due to an increase on the gain on sales of loans related to a sponsored securitization transaction.

Six Months Over Six Months : Other revenue (expense) was $6.4 million and $(3.8) million for the first halves of 2017 and 2016 , respectively. The increase was due to an increase in the gain on sale of loans primarily resulting from $14.0 million of sales incentives provided to whole loan investors that reduced the gain on sale in the second quarter of 2016, a higher volume of loans sold and, to a lesser extent, change in investor mix in the second quarter of 2017 compared to the second quarter of 2016. The increase was partially offset by a reimbursement to a whole loan investor pursuant to a credit support agreement in the first half of 2017, as described above, and an increase in the net fair value adjustment on loans, notes and certificates in the first half of 2017 compared to the first half of 2016. No such sales incentives were offered in the first half of 2017.

Net Interest Income (Expense)

We do not assume principal or interest rate risk on loans facilitated through our marketplace that are funded by notes and certificates because loan balances, interest rates and maturities are matched and offset by an equal balance of notes or certificates with the exact same interest rates and maturities. The interest expense related to the notes and certificates is completely offset with interest income on the associated loans on our statement of operations. Interest income on loans not funded by a note or certificate is recorded in the condensed consolidated statement of operations without corresponding interest expense. We expect net interest income to increase as we expand the use our capital for strategic business purposes, such as investing in and holding loans on balance sheet for future sponsored securitization transactions.


45

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Additionally, interest income includes interest income earned on cash and cash equivalents and the securities available for sale portfolio. Our investment policy and strategy is focused first on the preservation of capital and supporting our liquidity requirements, and then maximizing returns. The following tables provide additional detail related to net interest income (expense):
 
 
Three Months Ended
 
Change (%)
 
 
June 30, 2017
 
March 31, 
 2017
 
June 30, 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Interest income:
 
 
 
 
 
 
 
 
 
 
Loans and loans held for sale
 
$
155,545

 
$
159,488

 
$
178,452

 
(13
)%
 
(2
)%
Securities available for sale
 
1,008

 
940

 
750

 
34
 %
 
7
 %
Cash and cash equivalents
 
707

 
568

 
483

 
46
 %
 
24
 %
Total interest income
 
157,260

 
160,996

 
179,685

 
(12
)%
 
(2
)%
Interest expense:
 
 
 
 
 
 
 
 
 
 
Notes and certificates
 
(150,340
)
 
(158,607
)
 
(177,596
)
 
(15
%)
 
(5
)%
Total interest expense
 
(150,340
)
 
(158,607
)
 
(177,596
)
 
(15
%)
 
(5
)%
Net interest income
 
$
6,920

 
$
2,389

 
$
2,089

 
231
 %
 
190
 %
Average outstanding balances:
 
 
 
 
 
 
 
 
 
 
Loans
 
$
4,127,408

 
$
4,393,061

 
$
4,836,993

 
(15
)%
 
(6
)%
Loans held for sale
 
$
67,722

 
$
8,122

 
$
—

 
N/M

 
N/M

Notes and certificates
 
$
4,138,136

 
$
4,410,812

 
$
4,832,056

 
(14
)%
 
(6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
2017
 
2016
 
Change (%)
Interest income:
 
 
 
 
 
 
 
 
Loans and loans held for sale
 
 
 
$
315,033

 
$
355,096

 
(11
)%
Securities available for sale
 
 
 
1,948

 
1,492

 
31
 %
Cash and cash equivalents
 
 
 
1,275

 
976

 
31
 %
Total interest income
 
 
 
318,256

 
357,564

 
(11
)%
Interest expense:
 
 
 
 
 
 
 
 
Notes and certificates
 
 
 
(308,947
)
 
(354,279
)
 
(13
%)
Total interest expense
 
 
 
(308,947
)
 
(354,279
)
 
(13
%)
Net interest income
 
 
 
$
9,309

 
$
3,285

 
183
 %
Average outstanding balances:
 
 
 
 
 
 
 
 
Loans
 
 
 
$
4,260,235

 
$
4,847,973

 
(12
)%
Loans held for sale
 
 
 
$
37,922

 
$
—

 
N/M

Notes and certificates
 
 
 
$
4,274,474

 
$
4,854,039

 
(12
)%
N/M Not meaningful.

Quarter Over Quarter : Interest income from loans and loans held for sale was $155.5 million and $178.5 million for the second quarters of 2017 and 2016 , respectively. The decrease in interest income on loans was primarily due to a decrease in the average outstanding balance of loans, driven by a larger portion of current quarter loans originated being sold to whole loan investors.
 

46

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Interest expense for notes and certificates was $150.3 million and $177.6 million for the second quarters of 2017 and 2016 , respectively. The decrease in interest expense was primarily due to a decrease in the average outstanding balances of notes and certificates, driven by a larger portion of current quarter loans originated being sold to whole loan investors.

Net interest income was $6.9 million and $2.1 million for the second quarters of 2017 and 2016 , respectively. The increase in net interest income was primarily due to the increase in the average outstanding balances of loans held on the Company’s balance sheet during the second quarter of 2017 to support securitization partners and upcoming securitization transactions. Such loans did not have a corresponding note or certificate on the Company’s balance sheet.

Sequential : Interest income from loans and loans held for sale was $155.5 million and $159.5 million for the second and first quarters of 2017 , respectively. The decrease in interest income on loans was primarily due to a decrease in the average outstanding balance of loans, driven by a larger portion of current quarter loans originated being sold to whole loan investors.

Interest expense for notes and certificates was $150.3 million and $158.6 million for the second and first quarters of 2017 , respectively. The decrease in interest expense was primarily due to a decrease in the average outstanding balances of notes and certificates, driven by a larger portion of current quarter loans originated being sold to whole loan investors.

Net interest income was $6.9 million and $2.4 million for the second and first quarters of 2017 , respectively. The increase in net interest income was primarily due to the increase in the average outstanding balances of loans held on the Company’s balance sheet during the second quarter of 2017 to support securitization partners and upcoming securitization transactions, as discussed above.

Six Months Over Six Months : Interest income from loans and loans held for sale was $315.0 million and $355.1 million for the first halves of 2017 and 2016 , respectively. The decrease in interest income on loans was primarily due to a decrease in the average outstanding balance of loans, driven by a larger portion of loans originated in the first half of 2017 being sold to whole loan investors.

Interest expense for notes and certificates was $308.9 million and $354.3 million for the first halves of 2017 and 2016 , respectively. The decrease in interest expense was primarily due to a decrease in the average outstanding balances of notes and certificates, driven by a larger portion of loans originated in the first half of 2017 being sold to whole loan investors.

Net interest income was $9.3 million and $3.3 million for the first halves of 2017 and 2016 , respectively. The increase in net interest income was primarily due to the increase in the average outstanding balances of loans held on the Company’s balance sheet during the second quarter of 2017 to support securitization partners and upcoming securitization transactions, as discussed above.

Operating Expenses

Our operating expenses consist of sales and marketing, origination and servicing, engineering and product development and other general and administrative expenses as described below.

Sales and Marketing: Sales and marketing expense consists primarily of borrower and investor acquisition efforts including costs attributable to marketing and selling the loans we facilitate. This includes costs of building general brand awareness, and salaries, benefits and stock-based compensation expense related to our sales and marketing team.

47

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)


Origination and Servicing: Origination and servicing expense consists of salaries, benefits and stock-based compensation expense and vendor costs attributable to activities that most directly relate to originating and servicing loans for borrowers and investors. These costs relate to the credit, collections, customer support and payment processing teams and related vendors.

Engineering and Product Development: Engineering and product development expense consists primarily of salaries, benefits and stock-based compensation expense for engineering and product management teams, and the cost of contractors who work on the development and maintenance of our platform. Engineering and product development expense also includes non-capitalized hardware and software costs and depreciation and amortization of technology assets.

Other General and Administrative: Other general and administrative expense consists primarily of salaries, benefits and stock-based compensation expense for our accounting, finance, legal, risk, compliance, human resources and facilities teams, professional services fees and facilities expense.

After announcing the findings of the internal board review, and the significant decrease in the trading price of our common stock in May 2016, we offered incentive retention awards to certain members of the executive management team and other key personnel that totaled $34.9 million that were recognized as compensation expense ratably through May 2017. In addition, we have incurred and expect to continue to incur significant legal and other expenses in connection with the inquiries and private litigation that have arisen and may continue to arise from the internal board review, and our response to ongoing governmental requests for information.
 
 
Three Months Ended  
 
Change (%)
 
 
June 30, 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
Q2 2017
vs
Q2 2016
 
Q2 2017
vs
Q1 2017
Sales and marketing
 
$
55,582

 
$
54,583

 
$
49,737

 
12
 %
 
2
 %
Origination and servicing
 
21,274

 
20,449

 
20,934

 
2
 %
 
4
 %
Engineering and product development
 
35,718

 
35,760

 
29,209

 
22
 %
 
—
 %
Other general and administrative
 
52,495

 
43,574

 
53,457

 
(2
)%
 
20
 %
Goodwill impairment
 
—

 
—

 
35,400

 
N/M

 
N/M

Total operating expenses
 
$
165,069

 
$
154,366

 
$
188,737

 
(13
)%
 
7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
 
 
2017
 
2016
 
Change (%)
Sales and marketing
$
110,165

 
$
116,312

 
(5
)%
Origination and servicing
41,723

 
40,132

 
4
 %
Engineering and product development
71,478

 
53,407

 
34
 %
Other general and administrative
96,069

 
91,492

 
5
 %
Goodwill impairment
—

 
35,400

 
N/M

Total operating expenses
$
319,435

 
$
336,743

 
(5
)%
N/M
Not meaningful.

Sales and marketing : Sales and marketing expense was $55.6 million and $49.7 million for the second quarters of 2017 and 2016 , respectively, an increase of 12% . The increase was primarily due to a $9.2 million increase in

48

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

variable marketing expenses, partially offset by a $2.8 million decrease due to a non-recurring advisory fee in the second quarter of 2016. Sales and marketing expense as a percent of loan originations was 2.6% in the second quarter of 2017 compared to 2.5% in the second quarter of 2016 . A portion of this increase is attributable to the fact that credit policies were tightened in 2016 and the first quarter of 2017, resulting in an increase of applications that were declined, thus increasing the cost per acquisition of a new borrower. We expect sales and marketing expense as a percent of loan originations to flatten toward the end of 2017 .

On a sequential basis, sales and marketing expense was $55.6 million and $54.6 million for the second and first quarters of 2017 , respectively, an increase of 2% . As a percent of originations, sales and marketing expense was 2.6% in the second quarter of 2017 compared to 2.8% in the first quarter of 2017.

Sales and marketing expense was $110.2 million and $116.3 million for the first halves of 2017 and 2016 , respectively, a decrease of 5% . The decrease was primarily due to a $3.3 million decrease in variable marketing expenses and a $2.8 million decrease due to a non-recurring advisory fee in the first half of 2016. Sales and marketing expense as a percent of loan originations was 2.7% in the first half of 2017 compared to 2.5% in the first half of 2016.

Origination and servicing : Origination and servicing expense remained relatively flat at $21.3 million and $20.9 million for the second quarters of 2017 and 2016 , respectively.

On a sequential basis, origination and servicing expense was $21.3 million and $20.4 million for the second and first quarters of 2017 , respectively, an increase of 4% . The increase was primarily due to a $0.7 million increase in loan processing costs driven by higher loan originations and a $0.2 million increase in personnel-related expenses associated with higher headcount levels.

Origination and servicing expense was $41.7 million and $40.1 million for the first halves of 2017 and 2016 , respectively, an increase of 4% . The increase was primarily due to a $2.7 million increase in personnel-related expenses associated with higher headcount levels, partially offset by a $1.8 million decrease in loan processing costs.

Engineering and product development : Engineering and product development expense was $35.7 million and $29.2 million for the second quarters of 2017 and 2016 , respectively, an increase of 22% . The increase was primarily driven by continued investment in technology and platform improvements that are focused on enhancing our credit decisioning capabilities, internal testing environment and cloud infrastructure, which included a $1.8 million increase in personnel-related expenses resulting from increased headcount, salaries and retention costs, and a $4.3 million increase in equipment, software and depreciation expense.

We capitalized $12.5 million and $10.4 million in software development costs in the second quarters of 2017 and 2016 , respectively.

On a sequential basis, engineering and product development expense remained relatively flat at $35.7 million and $35.8 million for the second and first quarters of 2017 , respectively.

Engineering and product development expense was $71.5 million and $53.4 million for the first halves of 2017 and 2016 , respectively, an increase of 34% . The increase was primarily driven by a $8.9 million increase in personnel-related expenses resulting from increased headcount, salaries and retention costs, and an $8.6 million increase in equipment, software and depreciation expense.

We capitalized $23.9 million and $20.1 million in software development costs in the first halves of 2017 and 2016 , respectively.

49

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)


Other general and administrative expense : Other general and administrative expense was $52.5 million and $53.5 million for the second quarters of 2017 and 2016 , respectively, a decrease of 2% . The decrease was primarily due to a decrease of $5.2 million in professional services related to legal, audit, communications, and advisory fees and a $2.4 million insurance reimbursement for certain legal expenses incurred as a result of the Company’s board review and related governmental and regulatory inquiries. The decrease was partially offset by an increase of $5.6 million in salaries and stock-based compensation expense related to increased headcount, salaries of newly hired executives as we invested in infrastructure and support teams, and retention costs, and a $1.0 million increase in facilities expense.

On a sequential basis, other general and administrative expense was $52.5 million and $43.6 million for the second and first quarters of 2017 , respectively, an increase of 20% . The increase was primarily driven by a $6.9 million increase in professional services related to legal, audit, communications, and advisory fees, and a $2.9 million increase in salaries and stock-based compensation expense related to increased headcount, salaries of newly hired executives, and retention costs. Legal expense in the second and first quarters of 2017 were offset by $2.4 million and $9.6 million of insurance reimbursements for certain legal expenses, as discussed above.

Other general and administrative expense was $96.1 million and $91.5 million for the first halves of 2017 and 2016 , respectively, an increase of 5% . The increase was primarily driven by increases of $10.0 million in salaries and stock-based compensation expense, $2.4 million in facilities expense, and $2.4 million in professional services related to legal, audit, communications, and advisory fees. These increases were offset by $12.0 million of insurance reimbursements in the first half of 2017 for certain legal expenses, as discussed above.

Goodwill Impairment

Goodwill impairment consists of a charge for the excess of the carrying value of goodwill over the fair value of the education and patient finance reporting unit.

In the second quarter of 2016, the Company recorded a goodwill impairment charge of $35.4 million as related to the education and patient finance reporting unit. There were no goodwill charges in the second quarter or first half of 2017. See “ Part I – Financial Information – Item 1 – Financial Statements – Note 10. Intangible Assets and Goodwill” for a further description of this impairment.

Income Taxes

We continued to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures in evaluating our operating results. We believe that contribution, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and investor fees before changes in fair value of servicing assets and servicing liabilities help identify trends in our core business results and allow for greater transparency with respect to key metrics used by our management in its decision making.

Our non-GAAP measures of contribution, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and investor fees before changes in fair value of assets and liabilities have limitations as analytical tools and you should not consider them in isolation. These non-GAAP measures should not be viewed as substitutes for, or superior to, net income (loss) as prepared in accordance with GAAP. In evaluating these non-GAAP measures, you should be

50

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

aware that in the future we will incur expenses similar to the adjustments in this presentation. There are a number of limitations related to the use of these non-GAAP financial measures versus their most directly comparable GAAP measures, which include the following:

•
Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.
•
These measures do not consider the potentially dilutive impact of stock-based compensation.
•
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA and adjusted EBITDA margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.
•
Adjusted EBITDA and adjusted EBITDA margin do not reflect tax payments that may represent a reduction in cash available to us.

Contribution and Contribution Margin

Contribution is a non-GAAP financial measure that is calculated as net revenue less “sales and marketing” and “origination and servicing” expenses on the Company’s Statement of Operations, adjusted to exclude non-cash stock-based compensation expense within these captions. These costs represent the costs that are most directly related to generating such revenue. Contribution Margin is a non-GAAP financial measure calculated by dividing Contribution by total net revenue.

Contribution and Contribution Margin are measures of overall direct product profitability that our management and board of directors find useful, and believe investors may find useful, in understanding the relationship between costs most directly associated with revenue generating activities and the related revenue, and remaining amount available to support our costs of engineering and product development and other general and administrative expense to evaluate our operating performance and trends. While we believe Contribution and Contribution Margin are useful for the reasons above, they are not an overall measure of our profitability, as they exclude engineering and product development and other general and administrative expenses that are required to run our business. Factors that affect our Contribution and Contribution Margin include revenue mix, variable marketing expenses and origination and servicing expenses.

The following table shows the calculation of contribution and contribution margin:
 
Three Months Ended
 
Six Months Ended
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
June 30, 
 2017
 
June 30,  
 2016
Total net revenue
$
139,573

 
$
124,482

 
$
103,440

 
$
264,055

 
$
255,734

Less: Sales and marketing expense
55,582

 
54,583

 
49,737

 
110,165

 
116,312

Less: Origination and servicing expense  
21,274

 
20,449

 
20,934

 
41,723

 
40,132

Total direct expenses
$
76,856

 
$
75,032

 
$
70,671

 
$
151,888

 
$
156,444

Add: Stock-based compensation (1)
$
3,321

 
$
3,715

 
$
2,376

 
$
7,036

 
$
5,026

Contribution (2)
$
66,038

 
$
53,165

 
$
35,145

 
$
119,203

 
$
104,316

Contribution margin (2)
47.3
%
 
42.7
%
 
34.0
%
 
45.1
%
 
40.8
%
(1)
Contribution excludes stock-based compensation expense included in the sales and marketing and origination and servicing expense categories.

51

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

(2)  
Beginning in the first quarter of 2017, contribution includes net interest revenue to capture the full spectrum of revenue we expect to generate. Prior period amounts have been reclassified to conform to the current period presentation.

The following table presents a reconciliation of net income (loss) to contribution for each of the periods indicated:
 
Three Months Ended
 
Six Months Ended
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
June 30, 
 2017
 
June 30,  
 2016
Consolidated net loss
$
(25,444
)
 
$
(29,844
)
 
$
(81,351
)
 
$
(55,288
)
 
$
(77,214
)
Engineering and product development expense
35,718

 
35,760

 
29,209

 
71,478

 
53,407

Other general and administrative expense
52,495

 
43,574

 
53,457

 
96,069

 
91,492

Goodwill impairment
—

 
—

 
35,400

 
—

 
35,400

Stock-based compensation expense (1)
3,321

 
3,715

 
2,376

 
7,036

 
5,026

Income tax (benefit) expense
(52
)
 
(40
)
 
(3,946
)
 
(92
)
 
(3,795
)
Contribution  (2)
$
66,038

 
$
53,165

 
$
35,145

 
$
119,203

 
$
104,316

Total net revenue
$
139,573

 
$
124,482

 
$
103,440

 
$
264,055

 
$
255,734

Contribution margin (2)
47.3
%
 
42.7
%
 
34.0
%
 
45.1
%
 
40.8
%
(1)
Contribution excludes stock-based compensation expense included in the sales and marketing and origination and servicing expense categories.
(2)  
Beginning in the first quarter of 2017, contribution includes net interest revenue to capture the full spectrum of revenue we expect to generate. Prior period amounts have been adjusted to conform to the current period presentation.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is a non-GAAP financial measure defined as net income (loss) before (1) depreciation and amortization expense, (2) stock-based compensation expense, (3) income tax (benefit) expense, (4) acquisition related expenses, and (5) other non-recurring expenses, if any, including goodwill impairments. Adjusted EBITDA margin is a non-GAAP financial measure calculated by dividing adjusted EBITDA by total net revenue.

We believe that adjusted EBITDA is an important measure of operating performance because it allows management, investors and our board to evaluate and compare our core operating results, including our return on capital and operating efficiencies, from period to period by removing the impact of asset base (depreciation and amortization), other non-operating, and share-based compensation, tax consequences, and our capital structure (interest expense from any outstanding debt). Additionally, we utilize Adjusted EBITDA as an operating performance measure as an input into the Company’s calculation of the annual bonus plan. In addition to its use by management, Adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of our company and other companies in our industry as well as in the broader financial services and technology industries.


52

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated:
 
Three Months Ended
 
Six Months Ended
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
June 30, 
 2017
 
June 30,  
 2016
Consolidated net loss
$
(25,444
)
 
$
(29,844
)
 
$
(81,351
)
 
$
(55,288
)
 
$
(77,214
)
Acquisition and related expense
56

 
293

 
293

 
349

 
586

Depreciation expense:
 
 
 
 
 
 
 
 
 
Engineering and product development
8,483

 
7,794

 
4,917

 
16,277

 
9,410

Other general and administrative
1,305

 
1,298

 
993

 
2,603

 
1,899

Amortization of intangible assets
1,057

 
1,162

 
1,180

 
2,219

 
2,436

Goodwill impairment
—

 
—

 
35,400

 
—

 
35,400

Stock-based compensation expense
19,088

 
19,498

 
13,447

 
38,586

 
28,468

Income tax (benefit) expense
(52
)
 
(40
)
 
(3,946
)
 
(92
)
 
(3,795
)
Adjusted EBITDA  (1)
$
4,493

 
$
161

 
$
(29,067
)
 
$
4,654

 
$
(2,810
)
Total net revenue
$
139,573

 
$
124,482

 
$
103,440

 
$
264,055

 
$
255,734

Adjusted EBITDA margin (1)
3.2
%
 
0.1
%
 
(28.1
)%
 
1.8
%
 
(1.1
)%
(1)  
Beginning in the first quarter of 2017, adjusted EBITDA includes net interest revenue to capture the full spectrum of revenue we expect to generate. Prior period amounts have been adjusted to conform to the current period presentation.

Operating expenses include the following amounts of stock-based compensation for the periods presented:
 
Three Months Ended
 
Six Months Ended
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
June 30, 
 2017
 
June 30,  
 2016
Sales and marketing
$
1,967

 
$
2,299

 
$
1,413

 
$
4,266

 
$
3,317

Origination and servicing
1,354

 
1,416

 
963

 
2,770

 
1,709

Engineering and product development
5,773

 
6,588

 
4,480

 
12,361

 
8,203

Other general and administrative
9,994

 
9,195

 
6,591

 
19,189

 
15,239

Total stock-based compensation expense  
$
19,088

 
$
19,498

 
$
13,447

 
$
38,586

 
$
28,468


Investor Fees Before Changes in Fair Value of Servicing Assets and Liabilities

Investor fee revenue, excluding fair market value accounting adjustments, is a non-GAAP financial measure that is calculated as investor fees less the change in fair value of servicing assets and liabilities. We account for servicing assets and liabilities at fair value with changes in fair value recorded through earnings in the period of change. We believe this is a useful non-GAAP financial measure because it reflects the amount of fees actually collected. We

53

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

believe that the fair value adjustments to the servicing assets and liabilities is less useful in particular because the Company does not trade or transfer such servicing assets or liabilities.

The following table presents a reconciliation of investor fees to investor fees before change in fair value of servicing assets and liabilities:
 
Three Months Ended
 
Six Months Ended
 
June 30, 
 2017
 
March 31, 
 2017
 
June 30,  
 2016
 
June 30, 
 2017
 
June 30,  
 2016
Investor fees
$
21,116

 
$
21,180

 
$
14,656

 
$
42,296

 
$
35,143

Change in fair value of servicing assets and liabilities
4,436

 
3,238

 
4,672

 
7,674

 
2,362

Investor fees before change in fair value of servicing assets and liabilities
$
25,552

 
$
24,418

 
$
19,328

 
$
49,970

 
$
37,505


Investments by Investment Channel and Investor Concentration

The following table shows the percentage of loan originations funded by investment channel for the periods presented:
 
 
June 30, 2017
 
March 31, 
 2017
 
December 31, 
 2016
 
September 30, 
 2016
 
June 30, 2016
Originations by Investor Type:
 
 
 
 
 
 
 
 
 
 
Managed accounts
 
31
%
 
33
%
 
43
%
 
55
%
 
35
%
Self-directed
 
13
%
 
15
%
 
13
%
 
14
%
 
17
%
Banks
 
44
%
 
40
%
 
31
%
 
13
%
 
28
%
Other institutional investors
 
12
%
 
12
%
 
13
%
 
18
%
 
20
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%

Managed accounts include the private funds managed by LCA, dedicated third-party funds and separately managed accounts. Self-directed investors include our self-directed retail investor base. Banks are deposit taking institutions, while other institutional investors include asset managers, insurance companies, hedge funds and other large non-bank investors.

The following table provides the percentage of loans invested in by the ten largest investors during each of the previous five quarters (by dollars invested):
 
 
June 30, 2017
 
March 31, 
 2017
 
December 31, 
 2016
 
September 30, 
 2016
 
June 30, 2016
Percentage of loans invested in by ten largest investors (by $ invested)
 
59
%
 
61
%
 
68
%
 
72
%
 
62
%

For the quarter ended June 30, 2017 , no single investor accounted for more than 20% of the loans invested in through our marketplace. The composition of the top ten investors may vary from period to period. In addition to these investors, private funds associated with LCA and publicly issued member payment dependent notes accounted for approximately 1% and 14% , respectively, of investment capital provided through our marketplace during the period.


54

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

For the quarter ended June 30, 2016 , no single investor accounted for more than 15% of the loans invested in through our marketplace. In addition to these investors, private funds associated with LCA and publicly issued member payment dependent notes accounted for approximately 2% and 17%, respectively, of investment capital provided through our marketplace during the period.

Effectiveness of Scoring Models

Our ability to attract borrowers and investors to our marketplace is significantly dependent on our platform’s ability to effectively evaluate a borrower’s credit profile and likelihood of default.

Our marketplace platform’s credit decisioning and scoring models are evaluated on a regular basis and the additional data on loan history experience, borrower behavior, economic factors and prepayment trends that we accumulate are leveraged to continually improve the models. We believe we have a history of effectively evaluating borrower’s credit worthiness and likelihood of defaults, as evidenced by the performance of various loan vintages facilitated through our marketplace. If our marketplace’s credit decisioning and scoring models ultimately prove to be ineffective, or fail to appropriately account for a decline in the macroeconomic environment, investors may experience higher than expected losses and lose confidence in our business. The following charts display the historical lifetime cumulative net charge-off rates (expressed as a percent of original loan balances) through June 30, 2017 , by booking year, for all grades and 36 or 60 month terms of standard program loans for each of the years shown:

A36MONTHCHARTUPDATEDA02.JPG

55

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

NCOCHART60MONTHGRADE63017.JPG

Loan Portfolio Information and Credit Metrics

We classify the loans held on our balance sheet into three major loan products: standard program personal loans, custom program personal loans and other loans. The majority of the loans facilitated on our platform and retained on the balance sheet are standard program personal loans which represent loans made to prime borrowers that are publicly available to note investors and through certificates to private investors. Custom program personal loans include all other personal loans that are not eligible for our standard program and are available only to private investors. Other loans is comprised of education and patient finance loans, small business loans, small business lines of credit, and auto refinance loans. The loans held on our balance sheet are financed by notes issued by us, certificates issued by the Trust, or loans invested in directly by us.

Fair Value and Delinquencies

The outstanding principal balance, fair value and percentage of these loans that are delinquent, by loan product, are as follows:
 
June 30, 2017
 
December 31, 2016
(in millions, except percentages)
Outstanding Principal Balance
Fair
Value (2)
Delinquent Loans (2)
 
Outstanding Principal Balance
Fair
Value (2)
Delinquent Loans (2)
Personal loans - standard program
$
3,859.5

94.1
%
3.0
%
 
$
4,290.4

94.6
%
3.2
%
Personal loans - custom program  
196.3

91.7

6.0

 
267.4

91.4

5.6

Other loans (1)
23.0

97.4

2.8

 
17.2

96.8

2.8

Total  
$
4,078.8

94.0
%
3.2
%
 
$
4,575.0

94.5
%
3.3
%
(1) Components of other loans are less than 10% of the outstanding principal balance presented individually.
(2) Expressed as a percent of outstanding principal balance.

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LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)


Declines in the fair value of loans from December 31, 2016 to June 30, 2017 were primarily due to increases in the yields required by investors to purchase our loans, notes and certificates, and an increase in expected credit losses.

Net Annualized Charge-Off Rates

The following tables show annualized net charge-off rates, which is an alternative measure of the performance of the loans held in our portfolio from the graphs above. Net cumulative lifetime charge-off rates used above show total charge-offs as a function of original principal balance, while these tables show the annualized net charge-off rates that reflect the charged-off balance of loans in a specific period as a percentage of the average outstanding balance of the loans during the periods presented.

Net annualized charge-off rates are affected by the average age of the loans in the portfolio for a given quarter and the credit performance of the loans. We generally expect charge-off rates to increase with loan age, as new loans generally have fewer credit losses than seasoned loans. Annualized charge-off rates can also be affected by changes in the credit performance of loans that are outstanding for a given quarter. Additionally, in any particular quarter the portfolios include loans from past vintages that were originated under prior credit underwriting parameters, and thus do not reflect the current credit underwriting models used to originate new loans.

The annualized net charge-off rates for personal loans for both standard and custom programs in total for the last five quarters are as follows:
Total Platform (1)
June 30, 
 2017
March 31, 
 2017
December 31, 
 2016
September 30, 
 2016
June 30, 
 2016
Personal Loans - Standard Program:
 
 
 
 
 
Annualized net charge-off rate
8.1
%
8.5
%
8.0
%
6.1
%
4.9
%
Weighted average age in months
12.9

12.5

12.0

11.3

10.3

 
 
 
 
 
 
Personal Loans - Custom Program:
 
 
 
 
 
Annualized net charge-off rate
14.1
%
15.7
%
14.6
%
11.0
%
8.6
%
Weighted average age in months
10.5

10.5

9.8

9.1

8.4

Loans retained on balance sheet
June 30, 
 2017
March 31, 
 2017
December 31, 
 2016
September 30, 
 2016
June 30, 
 2016
Personal Loans - Standard Program:
 
 
 
 
 
Annualized net charge-off rate
10.2
%
10.9
%
10.4
%
8.2
%
6.5
%
Weighted average age in months
14.9

14.2

13.5

12.9

12.1

 
 
 
 
 
 
Personal Loans - Custom Program:
 
 
 
 
 
Annualized net charge-off rate
15.5
%
19.6
%
19.1
%
14.0
%
8.2
%
Weighted average age in months
15.7

14.3

12.4

10.9

8.4

(1)
Total platform comprises all loans facilitated through the marketplace, including whole loans sold and loans financed by notes and certificates.

The decrease in the annualized net charge-off rates in the second quarter of 2017 compared to the first quarter of 2017 reflects the effect of lower observed actual charge-offs, offset by the impact of an increase in the weighted average age of the loans. In the second quarter of 2017, we observed lower delinquencies and charge-offs in both the standard and custom personal loans programs. These declines were driven by a decrease in the annualized net

57

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

charge-off rate in the second quarter of 2017 compared to the first quarter of 2017, as well as an increase in recovery rates for charged-off loans in the second quarter of 2017. These changes were a result of a combination of factors:
•
The effect of credit tightening implemented in 2016 and early 2017. As the newer vintages are beginning to season we are seeing improved loss performance vintage-over-vintage as a result of the tighter credit criteria.
•
The benefits from investments made in servicing of delinquent loans, including increased staffing and improved technology infrastructure.
•
An increase in recovery rates as sales prices of charged-off debt have trended back up.

We generally expect charge-off rates to increase with loan age, as new loans generally have fewer credit losses than seasoned loans. However, net annualized charge-off rates declined in the second quarter of 2017 despite an increase in the average age of the loans. Prior to 2016, our loan portfolios grew significantly as the volume of loans facilitated increased. As a result, the average age of the portfolio, and with it the average charge-off rate, stayed low during this prior period. In 2016, loan originations grew at a slower rate, causing the average loan age to increase resulting in an increase in the aggregate annualized charge-off rate. See “ Current Economic and Business Environment ” for further discussion regarding how we responded to these observations and credit performance by implementing changes to the credit model, increasing interest rates and supplementing collections efforts.

The annualized net charge-off rates for standard program loans are higher for loans retained on our balance sheet compared to loans reflected at the total platform level for each quarter because of a difference in grade distribution for the two portfolios. The proportion of grade A and B loans is approximately 30% of the retained loan portfolio compared to approximately 41% for the total platform level as of June 30, 2017 . This difference in loan grade distribution results in higher net charge-off rates for the loans on the balance sheet, as grade A and B loans have lower expected and actual credit losses.

Regulatory Environment

As a result of the internal board review and resignation of our former CEO, we have received inquiries from governmental entities, and we continue to cooperate fully with such governmental entities. Responding to inquiries of this nature are costly and time consuming, can generate negative publicity, and could have a material and adverse effect on our business. See “ Part I – Financial Information – Item 1 – Financial Statements – Note 15. Commitments and Contingencies ” for further discussion regarding these inquiries.

In addition, there has been (and may continue to be) other litigation challenging lending arrangements where a bank or other third party has made a loan and then sells and assigns it to an entity that is engaged in assisting with the origination and servicing of a loan. In January 2017, the Colorado Administrator of the Uniform Consumer Credit Code filed suit against Avant, Inc., an online consumer loan platform. The Administrator asserts that loans to Colorado residents facilitated on the Avant platform were required to comply with Colorado laws regarding interest rates and fees, and that those laws were not preempted by federal laws that apply to loans originated by our banking partner, WebBank, a federally regulated bank. In March 2017, WebBank filed its own lawsuit in federal district court for the District of Colorado seeking declaratory relief that loans originated by WebBank are “valid when made” and are subject to federal requirements that pre-empt Colorado state requirements. No assurance can be given as to the timing or outcome of these matters. However, these matters could potentially impact the Company’s business, including the maximum interest rates and fees that can be charged and application of certain consumer protection statutes.


58

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

Liquidity and Capital Resources

Liquidity

The following table sets forth certain cash flow information for the periods presented:
 
Six Months Ended June 30,
Condensed Cash Flow Information:
2017
 
2016
Net cash used for operating activities
$
(30,652
)
 
$
(1,190
)
 
 
 
 
Cash flow related to loan investing activities (1)
288,043

 
(222,412
)
Cash flow related to all other investing activities
76,043

 
(44,516
)
Net cash provided by (used for) investing activities
364,086

 
(266,928
)
 
 
 
 
Cash flow related to note/certificate and secured borrowings financing (1)
(287,499
)
 
214,044

Cash flow used for all other financing activities
(23,093
)
 
3,469

Net cash (used for) provided by financing activities
(310,592
)
 
217,513

Net increase (decrease) in cash and cash equivalents
$
22,842

 
$
(50,605
)
(1)  
Cash flow related to loan investing activities includes the purchase of loans and repayment of loans facilitated through our marketplace. Cash flow related to note/certificate and secured borrowings financing activities includes the issuance of notes and certificates to investors and the repayment of those notes and certificates. These amounts generally correspond and offset each other.

Our short-term liquidity needs generally relate to our working capital requirements. These liquidity needs are generally met through cash generated from the operations of facilitating loan originations. If we experience a pause in investor capital on our platform, cash generated from facilitating loan originations could decline, in which case we may need to use our cash and cash equivalents on hand, which was $538.4 million at June 30, 2017 , to meet our working capital needs. Additionally, we had $225.3 million of available for sale securities at June 30, 2017 . The consolidated net loss during the first half of of 2017 , along with the purchase of loans the Company sold and intends to sell, and the payment of the 2016 corporate cash bonus in February 2017, resulted in negative operating cash flows for the first half of 2017 .

Additionally, given the payment dependent structure of the notes and certificates, principal and interest payments on notes and certificates are paid only when received from borrowers on the corresponding retained loans, resulting in no material impact to our liquidity. During the first half of 2017 , we purchased a total of $189.4 million of loans through the platform to support securitization initiatives and fulfill contractual purchase obligations. The outstanding principal balance of loans for which we remained invested in as of June 30, 2017 amounted to $57.2 million .

Cash and cash equivalents are primarily held in institutional money market funds, interest-bearing deposit accounts at investment grade financial institutions, certificates of deposit, and commercial paper. Cash and cash equivalents were $538.4 million and $515.6 million as of June 30, 2017 and December 31, 2016 , respectively. Changes in the balance of cash and cash equivalents are generally a result of timing related to working capital requirements or investments in or out of our securities available for sale portfolio and changes in restricted cash and other investments.

Restricted cash consists primarily of bank deposit accounts and money market funds that are: (i) pledged to, or held in escrow at correspondent banks as security for transactions processed on or related to our platform or activities by certain investors; (ii) pledged through a credit support agreement with a certificate holder; (iii) received from

59

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

investors but not yet been applied to their accounts on the platform and transferred to segregated bank accounts that hold investors’ funds; or (iv) as of December 31, 2016, held in a Rabbi Trust through a grantor trust agreement to satisfy obligations to partnerships under the 2016 Cash Retention Bonus Plan. Restricted cash was $161.7 million and $177.8 million at June 30, 2017 and December 31, 2016 , respectively. The decrease in restricted cash is primarily attributable to a decrease in cash received from investors that has not yet been applied to their accounts.

We invest in securities classified as available for sale. The fair value of securities available for sale as of June 30, 2017 and December 31, 2016 was $225.3 million and $287.1 million , respectively. At June 30, 2017 , these securities included corporate debt securities, certificates of deposit, asset-backed securities, commercial paper, U.S. agency securities, U.S. Treasury securities, asset-backed securities related to consolidated VIE and other securities. All securities, except for the subordinate residual certificates of the consolidated VIE related to a sponsored securitization transaction, were rated investment grade (defined as a rating equivalent to a Moody’s rating of “Baa3” or higher, or a Standard & Poor’s rating of “BBB-” or higher) and there were no significant unrealized losses. These securities provided $1.9 million and $1.8 million of interest income for the first halves of 2017 and 2016 , respectively. These securities continue to be available to meet liquidity needs.

Our available liquidity resources may also be provided by external sources. On December 17, 2015 , we entered into a credit and guaranty agreement with several lenders for an aggregate $120.0 million secured revolving credit facility (Credit Facility). In connection with the credit agreement, we entered into a pledge and security agreement with Morgan Stanley Senior Funding, Inc., as collateral agent. Proceeds of loans made under the Credit Facility may be borrowed, repaid and reborrowed until December 17, 2020 . Repayment of any outstanding proceeds are payable on December 17, 2020 , but may be prepaid without penalty. We did not have any loans outstanding under the Credit Facility during the first half of 2017 .

Borrowings under the Credit Facility bear interest, at our option, at an annual rate based on LIBOR rate plus a spread of 1.75% to 2.00%, which is fixed for a Company-selected interest period of one, two, three, six or 12 months, or at an alternative base rate (which is tied to either the prime rate, federal funds effective rate, or the adjusted eurocurrency rate, as defined in the credit agreement). Base rate borrowings may be prepaid at any time without penalty, however pre-payment of LIBOR-based borrowings before the end of the selected interest period may result in us incurring expense to compensate the lenders for their funding costs through the end of the interest period. Interest is payable quarterly. Additionally, we are required to pay a quarterly commitment fee to the lenders of between 0.25% and 0.375% per annum, depending on our total net leverage ratio, on the average undrawn portion available under the revolving loan facility.

The Credit Facility and pledge and security agreement contain certain covenants applicable to us, including restrictions on the Company’s ability to pay dividends, incur indebtedness, pledge our assets, merge or consolidate, make investments, and enter into certain affiliate transactions. The Credit Facility required us to maintain a maximum total net leverage ratio (defined as the ratio of net debt to Adjusted EBITDA, on a consolidated basis for the four most recent Fiscal Quarter periods) of 4.00:1.00 initially, which decreases over the term of the Credit Facility to 3.00:1.00 on and after June 30, 2018 (on a consolidated basis). As of June 30, 2017 , the total net leverage ratio, calculated as defined in the Credit Facility, was 0%.

As a general matter, loans that are facilitated through our marketplace are funded by the issuance of Notes to our retail investors and the issuance of certificates or whole loan sales to institutional investors without the use of the Company’s capital. However, to expand the Company’s investor base, the Company has recently developed capabilities to support securitization of loans. In the second quarter of 2017, the Company used its own capital to purchase loans to leverage this newly developed securitization capability and sponsored its first securitization. We intend to use more of our capital to purchase loans for future securitizations or loan sales. We also use our own capital to fulfill contractual purchase obligations for loans funded without a matched third-party investor, from time to time. Additionally, we may use our own capital to invest in loans to fulfill regulatory obligations, support short-

60

LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)

term marketplace equilibrium, offer customer accommodations, or to test and establish a track record of performance for new or alternative loan terms, programs, or channels.

We believe based on our projections and ability to reduce loan volume if needed, that our cash on hand, funds available from our line of credit, and our cash flow from operations is expected to be sufficient to meet our liquidity needs for the next twelve months.

Capital Resources

Net capital expenditures were $19.7 million , or 7.3% of total net revenue, and $26.9 million , or 10.5% of total net revenue, for the first halves of 2017 and 2016 , respectively. Capital expenditures generally consist of internally developed software, computer equipment, and construction in progress. Capital expenditures in 2017 are expected to be approximately $50.0 million , primarily related to costs associated with the continued development and support of our lending platform. In the future, we expect our capital expenditures to increase as we continue to enhance our platform to support the growth in our business.

Off-Balance Sheet Arrangements

As of both June 30, 2017 and December 31, 2016 , a total of $4.7 million in standby letters of credit were outstanding related to certain financial covenants required for our leased facilities. To date, no amounts have been drawn against the letters of credit, which renew annually and expire at various dates through July 2026.

Contingencies

For a comprehensive discussion of contingencies as of June 30, 2017 , see “ Part I – Financial Information – Item 1 – Financial Statements – Note 15. Commitments and Contingencies. ”

Critical Accounting Policies and Estimates

Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “ Part  II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Estimates ” in the Annual Report. There have been no significant changes to these critical accounting estimates during the first half of 2017 , except as disclosed in “Note 2. Summary of Significant Accounting Policies,” pertaining to “Goodwill and Intangible Assets.”


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LENDINGCLUB CORPORATION


Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in market prices and rates.

Discount Rate Sensitivity

We are exposed to market risk on loans facilitated through our marketplace that are not sold or funded with offsetting notes and certificates. Changes in the fair value of these loans are primarily related to changes in market discount rates and actual credit performance. The fair values of loans are estimated using a discounted cash flow methodology, where the discount rate represents an estimate of the required rate of return by market participants. The discount rates for our loans may change due to expected loan performance or changes in the expected returns of similar financial instruments available in the market.

During the second quarter of 2017 , we purchased a total of $183.2 million of loans through the platform, primarily to support securitization partners and upcoming securitization initiatives, fund certain custom program loans, and fulfill contractual purchase obligations. In the second quarter of 2017 , we sold $142.4 million of loans we previously purchased. We recorded a negative $2.2 million net fair value adjustment related to the loans we invested in as of June 30, 2017. The outstanding principal balance of loans for which we remained invested in as of June 30, 2017 was $57.2 million . We do not believe the interest rate risk associated with the remaining loans we held as of June 30, 2017 is material, but we will experience increased exposure to market risks if we increase the amount of our capital used to invest in loans. See “ Current Economic and Business Environment ” and “ Liquidity and Capital Resources – Liquidity ” for additional discussion. We do not hold or issue other financial instruments for trading purposes.

Interest Rate Sensitivity

We invest in securities classified as available for sale. The fair value of securities available for sale as of June 30, 2017 and December 31, 2016 was $225.3 million and $287.1 million , respectively, consisting of corporate debt securities, asset-backed securities, U.S. agency securities, certificates of deposit, commercial paper, U.S. Treasury securities, asset-backed securities related to a consolidated VIE and other securities. To mitigate the risk of loss, our investment policy and strategy is focused first on the preservation of capital and supporting our liquidity requirements, and then maximizing returns. To manage this risk, the Company limits and monitors maturities, credit ratings, and concentrations within the investment portfolio. Changes in U.S. interest rates affect the interest earned on our securities available for sale and the market value of those securities. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $0.8 million in the fair value of our securities available for sale as of June 30, 2017 . A hypothetical 100 basis point decrease in interest rates would result in an increase of approximately $0.8 million in the fair value of our securities available for sale as of June 30, 2017 . Any unrealized gains or losses resulting from such interest rate changes would only be recorded if we sold the securities prior to maturity or if the securities were not considered other-than-temporarily impaired.

We had cash and cash equivalents of $538.4 million as of June 30, 2017 . These amounts were held primarily in interest-bearing deposits at investment grade financial institutions, institutional money market funds, certificates of deposit, and commercial paper, which are short-term. Cash and cash equivalents are held for working capital purposes. Due to their short-term nature, we do not believe we have material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will not materially reduce interest income on these cash and cash equivalents because of the current low rate environment. Increases in short-term interest rates will modestly increase the interest income earned on these cash balances.


62

LENDINGCLUB CORPORATION


Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2017 . In designing and evaluating its disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, of achieving the desired control objectives, and is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures as of June 30, 2017 were designed and functioned effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities and Exchange Act of 1934, as amended, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) was identified during the second quarter of 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see “ Part 1 – Financial Information – Item 1 – Financial Statements – Note 15. Commitments and Contingencies – Legal, ” which is incorporated herein by reference.

Item 1A. Risk Factors

The risks described in “Part I – Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2016, could materially and adversely affect our business, financial condition, operating results and prospects, and the trading price of our common stock could decline. While we believe the risks and uncertainties described therein include all material risks currently known by us, it is possible that these may not be the only ones we face. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2016, remains current in all material respects, with the exception of the below.

We Design, Create and Offer Products and Services, Including Our Platform, Which Incorporate Innovative Technologies That Involves Risks and We May Not Realize the Degree or Timing of Benefits

We operate a platform to offer innovative credit products to borrowers and exposure to credit for investors. Our products and services operate in a very dynamic industry and, to stay relevant and effective, we will utilize technology to develop our products and design our platform for greater efficiency. We expect spending in technology and data management and science will increase over time as we add computer scientists, designers, software engineers, data scientists and other employees. We seek to invest efficiently in several areas of technology and data and expansion of new and existing product categories and service offerings, such as our platform product. We also invest in our technology infrastructure to enhance the customer experience, improve our processes and

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LENDINGCLUB CORPORATION


more efficiently match borrower and investor demand. To best take advantage of these continued advances in technology, we are investing in initiatives to build and deploy innovative and efficient software.

We seek to achieve growth through the design, development, and support of our products and services, including an innovative loan platform that incorporates advanced technologies. Our products and services, including our platform, change as we invest substantial amounts in research and development efforts to pursue advancements and better use our data. If our design and development efforts are delayed, or if third-party developers cannot timely deliver or perform to our standards, we may not meet customers’ schedules or expectations. Such issues could result in material additional costs, including penalties that could be assessed under existing contractual provisions. Our ability to realize the anticipated benefits of our technological advancements depends on a variety of factors, including meeting development, production, third-party requirements and approval and regulatory approval schedules; execution of internal and external performance plans; availability of third-party developers and suppliers; hiring and training of qualified personnel; achieving cost and production efficiencies; identification of emerging technological trends in our markets; validation of innovative technologies; the level of customer interest in new technologies and products; and borrower and investor acceptance of our products and products that incorporate technologies we develop. These products and services may incorporate additional technologies developed by third parties and involve additional risks and uncertainties. As a result, the performance and market acceptance of these third-party products and services could affect the level of customer interest and acceptance of our own products in the marketplace.

Any development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as competitive offerings. In addition, the markets for our products or products that incorporate our technologies may not develop or grow as we anticipate. We or our customers, suppliers or subcontractors may encounter difficulties in developing and producing new products and services, and may not realize the degree or timing of benefits initially anticipated or may otherwise suffer significant adverse financial consequences. Due to the design complexity of our products, we may in the future experience delays in completing the development and introduction of platform enhancements and new products. Any delays could result in increased development costs or deflect resources from other projects.

In addition, some of our agreements with platform investors contain provisions regarding the manner in which our marketplace platform product operates that could constrain the manner in which our marketplace platform product can develop, particularly with respect to how loans are selected for investment. Some of these agreements provide for significant damages in the event of a breach. These agreements could constrain the development of the marketplace or result in significant damages that could impact our results in a given period.

If we fail to accurately estimate our costs or the time required to support or complete a product enhancement, including any platform enhancements, the profitability of our products and services may be materially and adversely affected. Some of our contracts provide for liquidated damages in the event that we are unable to perform and deliver in accordance with the contractual specifications and schedule. In addition, we may face customer directed cost reduction targets that could have a material adverse effect on the profitability of our contracts. Furthermore, we cannot be sure that our competitors will not develop competing technologies which gain market acceptance in advance of or instead of our platform and products. The possibility exists that our competitors might develop new technology or offerings that might cause our existing technology and offerings to become obsolete. Any of the foregoing could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Our ability to protect the confidential information of our borrowers and investors may be adversely affected by cyber-attacks, internal employee or other insider misconduct, computer viruses, physical or electronic break-ins or similar disruptions.

Our business involves the collection, storage, processing and transmission of customers' personal data, including financial information. The highly automated nature of our marketplace may make it an attractive target and

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potentially vulnerable to cyber attacks, computer viruses, physical or electronic break-ins or similar disruptions. In addition, in certain circumstances we utilize third-party vendors to facilitate the servicing of borrower and investor accounts. Under these arrangements, these third-party vendors require access to certain customer data for the purpose of servicing the accounts. While we have taken steps to protect confidential information that we have access to, our security measures or those of our third-party vendors could be breached. Any accidental or willful security breaches or other unauthorized access to our marketplace or servicing systems could cause confidential borrower and investor information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, third-party vendor error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, our relationships with borrowers and investors could be severely damaged, and we could incur significant liability.

The techniques used to obtain unauthorized, improper or illegal access to our systems, our data or customers' data, disable or degrade service, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized until after they have been launched against a target. Unauthorized parties may attempt to gain access to our systems or facilities through various means, including, among others, hacking into the systems or facilities of us or our partners or customers, or attempting to fraudulently induce our employees, partners, customers or others into disclosing user names, passwords, or other sensitive information, which may in turn be used to access our information technology systems. Certain efforts may be state-sponsored and supported by significant financial and technological resources, making them even more difficult to detect.

Federal regulators and many federal and state regulations require notice if data security breaches involve certain personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause borrowers and investors to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, we could lose borrowers, investors and ecosystem partners and our business and operations could be adversely affected. Additionally, our insurance policies carry a self-insured retention and coverage limits, which may not be adequate to reimburse us for losses caused by security breaches, and we may not be able to collect fully, if at all, under these insurance policies.

If we are unable to maintain our relationships with issuing banks, our business will suffer.

We rely on issuing banks to originate all loans and to comply with various federal, state and other laws. Our primary issuing bank is WebBank, a Utah-chartered industrial bank that handles a variety of consumer and commercial financing programs. Springstone Financial, LLC (Springstone), our wholly-owned subsidiary, relies on NBT Bank and Comenity Capital Bank as issuing banks for its purchase finance loans such as education and patient finance loans. Our agreements with WebBank are non-exclusive and do not prohibit WebBank from working with our competitors or from offering competing services. Our current agreements with WebBank have initial terms ending in January 2020, with two automatic, one-year renewal terms, subject to certain early termination provisions as set forth in the agreements. These agreements provide WebBank with a right to originate a certain percentage of the loans facilitated through our platform. WebBank currently offers loan programs through other online marketplaces and other alternative lenders. WebBank could decide that working with us is not in its interest, could make working with it cost prohibitive or could decide to enter into exclusive or more favorable relationships with our competitors. In addition, WebBank may not perform as expected under our agreements including potentially being unable to accommodate our projected growth in loan volume. We could in the future have disagreements or disputes with WebBank or other issuing banks, which could negatively impact or threaten our relationship.

WebBank is subject to oversight by the FDIC and the State of Utah and must comply with complex rules and regulations, licensing and examination requirements, including requirements to maintain a certain amount of regulatory capital relative to its outstanding loans. We are a service provider to WebBank, and as such, we are subject to audit by WebBank in accordance with FDIC guidance related to management of third-party vendors. We are also subject to the examination and enforcement authority of the FDIC as a bank service company covered by

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the Bank Service Company Act. If WebBank were to suspend, limit or cease its operations or our relationship with WebBank were to otherwise terminate, we would need to implement a substantially similar arrangement with another issuing bank, obtain additional state licenses or curtail our operations. We work to have one or more issuing banks to serve as a backup issuing bank to WebBank. To date, no backup issuing banks have originated any loans through our platform and we do not believe that we have a backup origination arrangement that could be in a position to originate loans without significant investment in time and resources, resulting in a disruption to the business. Our relationships with such backup issuing banks are subject to a number of risks and may be subject to change or termination with appropriate notice. In the event that our relationships with such backup issuing banks change, we may need to enter into alternative arrangements with different issuing banks.

We believe that our relationships with all of our issuing bank partners are critical to our business and that maintaining backup arrangements for origination of loans is vital to the health of our business. However, if we need to enter into alternative arrangements with a different issuing bank to replace our existing arrangements, we may not be able to negotiate a comparable alternative arrangement. Transitioning loan originations to a new issuing bank is untested and may result in delays in the issuance of loans or, if our platform becomes inoperable, may result in our inability to facilitate loans through our platform. If we were unable to enter in an alternative arrangement with a different issuing bank, we would need to obtain a state license in each state in which we operate to enable us to originate loans, as well as comply with other state and federal laws, which would be costly and time-consuming. If we are unsuccessful in maintaining our relationships with WebBank or other issuing banks, our ability to provide loan products could be materially impaired and our operating results would suffer.

If we breach representations or warranties that we made in our securitization financing transactions, or if either we or our Sponsor suffer a loss in our retained interests in that transaction, our financial condition could be harmed.

In June 2017 we sponsored the sale of unsecured personal whole loans through an asset-backed securitization. In connection with this securitization, we made certain customary representations, warranties and covenants. If there is a breach of those representations and warranties or a defect in the documentation of any of the contributed assets, which breach or defect materially and adversely affects the value of the subject contributed asset, then we will be required to either cure the breach, repurchase the affected contributed asset from the issuing entity, replace the affected contributed asset with another asset or make a loss of value payment, as the case may be. Any such loss could be material and have an adverse effect on our financial condition.

Further in connection with the securitization, we established a majority-owned affiliate (MOA) that purchased the loans from investors and simultaneously transferred them to a securitization trust. To comply with regulatory risk retention rules, the MOA retained 5% of each of the senior securities and the subordinate residual certificate. In the event that the MOA suffers loss on all or a portion of the retained interests, we would suffer losses equal to our percentage ownership interest in the MOA.

We may enter into similar transactions in the future and those transactions could likely entail similar and other substantial risks.

Risk retention rules and recent developments in our business may increase our compliance costs, impair our liquidity and otherwise adversely affect our operating results .

We have been using, and may increasingly use, securitizations as a source of liquidity and financing for our business. Securitizations provide us with additional sources of investor demand for the consumer loans facilitated through our platform. If credit rating downgrades, market volatility, market disruptions, regulatory requirements or other factors impede our ability to complete additional securitization transactions on a timely basis or upon terms acceptable to us, our ability to fund our business may be adversely affected.

As described in “ Part I. Financial Information – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – 15. Commitments and Contingencies – Purchase Commitments and Loan Funding ,” we have

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and will utilize a greater share of our balance sheet to support securitization initiatives. Historically our business has not been dependent on using our balance sheet and assuming credit risk for loans facilitated through our platform. As we continue such activities (whether in connection with supporting securitization initiatives or otherwise), our financial condition, liquidity or results of operations will become more dependent upon the performance of the retained loans and retained interests in securitizations.

Effective as of December 24, 2016, “risk retention” rules promulgated by U.S. federal regulators under the Dodd-Frank Act require a “securitizer” or “sponsor” of a securitization transaction to retain, directly or through a “majority-owned affiliate” (as defined in the U.S. Risk Retention Rules), in one or more prescribed forms, at least 5% of the credit risk of the securitized assets (the “U.S. Risk Retention Rules”). For securitizations for which we have acted as “sponsor,” we have sought to satisfy the risk retention requirements under the U.S. Risk Retention Rules through a majority-owned affiliate. See “Note 1. Basis of Presentation” and “Note 6. Securitization of Personal Whole Loans . ” There can be no assurance that applicable regulatory or governmental authorities will agree that this approach (or any other approach we may adopt in the future) satisfies the U.S. Risk Retention Rules. Furthermore, we have also participated in other securitizations for  which we have determined that we are not “sponsor,” and accordingly, we have not sought to comply with risk retention or requirements that would be applicable to the “sponsor” of those transactions. The U.S. Risk Retention Rules are subject to varying interpretations, and one or more regulatory or governmental authorities could take positions with respect to the U.S. Risk Retention Rules that conflict with, or are inconsistent with, the U.S. Risk Retention Rules as understood or interpreted by us, the securitization industry generally, or past or current regulatory or governmental authorities. There can be no assurance that applicable regulatory or governmental authorities will agree with any of our determinations described above, and if such authorities disagree with such determinations, we may be exposed to additional costs and expenses, in addition to potential liability. Furthermore, we expect that compliance with the U.S. Risk Retention Rules (and other related laws and regulations), as currently understood by us, may entail the implementation of new forms, processes, procedures, controls and infrastructure. Such implementation may be costly and may adversely affect our operating results.

In addition to the increased costs we expect to be generated by our efforts to comply with the U.S. Risk Retention Rules, which may be significant, we expect the U.S. Risk Retention Rules to tie up our capital, which could potentially have been deployed in other ways that could have generated better value for our shareholders. Holding risk retention interests or loans in contemplation of securitizations increases our exposure to the performance of the loans that underlie or are expected to underlie those securitizations. Accordingly, although compliance with the U.S. Risk Retention Rules would be expected to more closely align our incentives with those of the investors in our loans, it is also expected that poor loan performance may have a heightened adverse effect on the value of our shares. This may exacerbate the negative effects of poor loan performance on the value of our shares. Acting as a “sponsor” for a securitization transaction may also increase our risk of litigation from, and indemnification exposure to, third-party participants and investors in the securities offered pursuant to such securitization transactions.

To the extent we obtain any third-party financing in connection with retaining the requisite risk retention interest, such as through recourse financings as contemplated by the U.S. Risk Retention Rules, the terms of such financing may impose additional limitations or restrictions on our business that could adversely alter the way our business is operated, reduce the value acting as "sponsor" to us and to our shareholders, or otherwise adversely affect our business and operations generally, or the value of our shares. 

There can also be no assurance that there will not be a change in applicable law or rules and regulations in the future, particularly in light of recent statements made by the Trump Administration and the House Financial Services Committee. Any such changes could adversely affect us or the securitization transactions for which we act as “sponsor,” including by making any structural changes undertaken to facilitate compliance with the U.S. Risk Retention Rules obsolete, unnecessarily burdensome or otherwise economically or administratively disadvantageous.


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Recent legislative and regulatory initiatives have imposed restrictions and requirements on financial institutions that could have an adverse effect on our business.

The Dodd-Frank Act and other legislation and regulations relating to financial institutions and markets, including alternative asset management funds, has resulted in increased oversight and taxation. However, the recent presidential and congressional elections in the United States could result in significant changes in, and uncertainty with respect to, legislation, regulation and government policy. There has been, and may continue to be, a related increase in regulatory investigations of the trading and other investment activities of alternative investment funds. Such investigations may impose additional expenses on us, may require the attention of senior management and may result in fines if any of our funds are deemed to have violated any regulations.

The Dodd-Frank Act is extensive and significant legislation enacting changes that broadly affect most aspects of the financial services industry. The Dodd-Frank Act, among other things, contains a risk retention requirement for all asset-backed securities, which, if applied to our business, would change our business model. Under these risk retention rules, sponsors of both public and private issuances of asset-backed securities are generally (subject to certain exceptions) required to retain, in one or more prescribed forms, at least 5% of the credit risk of the assets collateralizing such asset-backed securities. In some cases, this risk retention requirement may be retained by a majority-owned affiliate (as determined by GAAP) of the sponsor. These regulations generally prohibit the sponsor or its affiliate from directly or indirectly hedging or otherwise selling or transferring the retained interest for a specified period of time, depending on the type of asset that is securitized. All sponsors of issuances of asset-backed securities are required to comply with such rules beginning in December 2015, with respect to asset-backed securities collateralized by residential mortgages, and December 2016 with regard to all other classes of asset-backed securities. These changes could impact our access to the asset-backed securities capital markets and, to the extent we issue, or act as the sponsor for issuances of, asset-backed securities ourselves, our financing programs could be less effective.

The Consumer Financial Protection Bureau (CFPB) published a final rule on July 19, 2017, applicable to certain providers of consumer financial products or services that prevent a provider from using a mandatory arbitration clause to bar a consumer from filing or participating in a class action and requires providers who invoke use of a pre-dispute arbitration clause to submit certain arbitration and court records to the CFPB within a specified time frame. After the compliance date of this rule, we may see an industry-wide increase in class actions filed against providers of financial products or services. This may result in a corresponding increase in cost for our business to defend against alleged class actions. In addition, we may incur an increased cost for compliance with the CFPB reporting requirements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.


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Item 6. Exhibits

Exhibit Index

The exhibits noted in the accompanying Exhibit Index are filed or incorporated by reference as a part of this Report and such Exhibit Index is incorporated herein by reference.
 
 
Incorporated by Reference
 
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing
Date
Filed Herewith
10.1
Whole Loans Backup Servicing Agreement
 
 
 
 
X
10.2
Fractional Loans Backup Servicing Agreement
 
 
 
 
X
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
X
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
X
32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
 
X
101.INS
XBRL Instance Document
 
 
 
 
X
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
 
 
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
 
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase
 
 
 
 
X
101.LAB
XBRL Taxonomy Extension Label Linkbase
 
 
 
 
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
 
 
 
 
X


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LENDINGCLUB CORPORATION


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
 
 
LENDINGCLUB CORPORATION
 
 
 
(Registrant)
 
 
 
 
 
 
Date:
August 8, 2017
 
/s/ SCOTT SANBORN
 
 
 
 
Scott Sanborn
 
 
 
Chief Executive Officer and President
 
 
 
 
 
Date:
August 8, 2017
 
/s/ THOMAS W. CASEY
 
 
 
 
Thomas W. Casey
 
 
 
Chief Financial Officer


70
[***] Confidential Treatment Requested Exhibit 10.1 Execution Version WHOLE LOANS BACKUP SERVICING AGREEMENT This WHOLE LOANS BACKUP SERVICING AGREEMENT (this “Agreement”), dated as of July 27, 2017 (the “Effective Date”), is entered into by and between LendingClub Corporation, a Delaware corporation (“Client”), and First Associates Loan Servicing, LLC, a Delaware limited liability company (“Backup Servicer”). WHEREAS, Client is in the business of facilitating loans through its online marketplace and servicing such loans in its ordinary course of business; WHEREAS, Backup Servicer is engaged in the business of providing backup loan servicing; WHEREAS, Client wishes to engage Backup Servicer to perform certain backup servicing duties on Loans in Client’s whole loan channel program in accordance with the terms of this Agreement, and assume the role of Successor Servicer (as defined below) under the circumstances set forth in this Agreement; and WHEREAS, Backup Servicer is willing to perform the backup servicing duties specified herein and to assume the role of Successor Servicer (as defined below) pursuant to the conditions described herein. NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Client and Backup Servicer hereby agree as follows: 1. Definitions. All capitalized terms not otherwise defined herein shall have the meanings set forth in the applicable Servicing Agreement. “Bankruptcy Event” shall mean the voluntary commencement by Client of liquidation proceedings under 11 U.S. Code Chapter 7, as evidenced by a formal filing by Client in a United States federal bankruptcy court. “Business Day” means any day other than: (a) a Saturday or Sunday; (b) a legal or federal holiday; and (c) a day on which banking and savings and loan institutions in San Francisco, California, New York, New York, or the State of Utah are required or authorized by law or Regulatory Authority to be closed for business. “Collateral Package Items” shall mean, with respect to each Loan, the related Note Receivable and each of the other items listed in Exhibit B attached hereto, which are maintained by Client as transferable electronic records. “Document Management Platform” shall mean eOriginal, Inc., or any other third party document management platform holding Obligor Loan documentation. “Investor” shall mean a purchaser and beneficial owner of a Loan, evidenced by promissory notes and related Loan documentation. “Loan” means an unsecured, closed-end consumer loan facilitated by Client and sold to investors as a whole loan. Loans under this Agreement before the Appointment Effective Date shall only include those consumer loans allocated, in Client’s sole discretion, to Backup Servicer as a platform backup, and identified in each respective Monthly Backup Servicing File provided by Client to Backup Servicer, such

 
- 2 - Loan evidenced by a Note Receivable and identified by Client in the Collateral Package Items. Loans under this Agreement on and after the Appointment Effective Date shall include all consumer loans in the last Monthly Backup Servicing File before the Appointment Effective Date or all consumer loans for which Client intends for Backup Servicer to become Successor Servicer for, as evidenced by Client providing or making available to Backup Servicer documentation concerning such consumer loans on or after the Appointment Effective Date. Any loans that have been sold by Client as part of a securitization shall not be considered a Loan for purposes of this Agreement. “Note Receivable” shall mean a promissory note executed electronically by an Obligor with respect to a Loan and maintained as an electronic record by Client. “Obligor” shall mean an obligor with respect to a Loan. “Servicing Agreement” means Client’s standard master loan servicing agreement, as amended from time to time and filed as part of Client’s public securities filings. In the event that Backup Servicer is appointed to become Successor Servicer and Client is no longer publicly filing its standard master loan servicing agreement, the Servicing Agreement shall be the last publicly filed standard master loan servicing agreement. 2. Obligations as Backup Servicer. From and after the date hereof until the Appointment Effective Date (as defined below), Backup Servicer agrees to perform the Backup Servicer functions as set forth in this Section 2 with respect to the Loans. (a) Client shall deliver to Backup Servicer daily information on a daily basis for Loans that are to be allocated to Backup Servicer for a particular calendar month that shall include, at a minimum, (i) the status of each Loan and its outstanding principal balance; (ii) transaction information posted to each Loan; and (iii) current information regarding ownership of each Loan, payment processing information including all information reasonably required to initiate ACH transfers from Obligors’ bank accounts, and Obligor contact information with respect to each Loan (collectively, the “Backup Servicing Information”). The format and substance of the Backup Servicing Information and the means of providing the Backup Servicing Information shall be agreed to between Client and Backup Servicer. (b) Within five (5) Business Days of receipt of the Backup Servicing Information for any calendar month, Backup Servicer shall load the Backup Servicing Information into Backup Servicer’s data system, reconcile the Backup Servicing Information it has received against a monthly reconciliation report to be provided by Client (the format and content of which shall be agreed to between Client and Backup Servicer) and provide Client with a certificate stating that the complete set of Backup Servicing Information has been received for such month (the “Monthly Backup Servicing File”), is in a mutually agreed upon format and Backup Servicer is able to begin servicing of the Loans within thirty (30) days of receipt of such Monthly Backup Servicing File. (c) Backup Servicer shall, upon the execution of this Agreement, perform the one-time setup activities set forth on Exhibit C. (d) Backup Servicer shall, on an ongoing basis during the Term and after the Appointment Effective Date and until this Agreement is terminated in accordance with the terms of herein, perform the activities set forth on Exhibit D. 3. Appointment and Obligations as Successor Servicer. (a) During the Term, upon written notice from an authorized representative of Client or a party designated by Client pursuant to the form attached hereto as Exhibit E, Backup Servicer shall be

 
- 3 - appointed to act as the successor servicer (the “Successor Servicer”) of the Loans. Client or an authorized representative of Client shall give written notice of such appointment in the form attached hereto as Exhibit F upon one of the following events (each, a “Triggering Event”): (i) Client’s inability to pay its debts and obligations as they become due, as determined by Client in its sole discretion, (ii) any event rendering Client unable to perform its loan servicing activities with respect to the Loans, as determined by Client in its sole discretion, or (iii) a Bankruptcy Event. Upon the occurrence of a Triggering Event, Client shall promptly give such written notice. Within three (3) business days of giving such written notice, Client shall provide or make available for retrieval or download, to the extent not already done so, the information necessary to enable Backup Servicer to initiate automated clearing house (ACH) transfers from Obligor bank accounts for all Loans and shall provide or make available for retrieval, to the extent not already done so, all Collateral Package Items and Backup Servicing Information. Within twenty (20) business days of Backup Servicer’s receipt of the foregoing documentation, Backup Servicer shall assume the obligations and duties as set forth in the Servicing Agreement. The date on which Backup Servicer assumes these obligations and duties shall be the “Appointment Effective Date.” For the avoidance of doubt and notwithstanding anything to the contrary herein, Backup Servicer shall have no duty to assume the obligations and duties as set forth in the Servicing Agreement until Backup Servicer has received complete documentation as set forth above. If requested by Client in writing, Backup Servicer shall deliver at such time such written instruments of acceptance of appointment as Successor Servicer. On and after the Appointment Effective Date, Backup Servicer shall serve as Successor Servicer pursuant to the Servicing Agreement. (b) Upon the appointment of Backup Servicer as Successor Servicer, Client shall: (i) in accordance with Section 3(a) above, provide or make available for retrieval or download copies of all authentic Obligor Loan documentation in its possession to Successor Servicer; (ii) use commercially reasonable efforts to assign at Backup Servicer’s request, unless otherwise prohibited by applicable law or contract, all collections services agreements with third parties with respect to the Loans to Successor Servicer. (c) Upon the appointment of Backup Servicer as Successor Servicer on the Appointment Effective Date, Backup Servicer shall be ready, willing and able to assume, and shall assume, all obligations and duties required of “Servicer” under the Servicing Agreement and conduct all activities as Successor Servicer and “Servicer” under the Servicing Agreement using a standard of care and diligence reasonable in the unsecured consumer loan servicing industry. Such obligations include, but are not limited to: (i) maintaining one bank account which Backup Servicer will instruct Obligors to send payments due under the terms of each Loan; (ii) attempting to collect Obligor payments from the address listed in the applicable Obligor Loan documentation; (iii) maintaining a toll free number (staffed between normal business hours during its regular Business Days) for Obligors and Investors to call with inquiries with respect to the Loans, and responding to such inquiries; (iv) responding to inquiries by regulatory authorities with respect to the Loans; (v) investigating and maintaining collection procedures for delinquencies; (vi) processing payments provided by Obligors on the Loans; (vii) setting up accounts for each Investor holding a Loan being serviced by Backup Servicer hereunder; and (viii) disbursing Obligor payments, including principal, interest, liquidation proceeds and any other collections from Loans required to be deposited to the applicable Investor accounts or transferred to Investors pursuant to the Servicing Agreement. (d) Client shall use commercially reasonable efforts to consult fully with Backup Servicer as may be necessary from time to time for Backup Servicer to perform or carry out its obligations hereunder, unless otherwise prohibited by law or contract.

 
- 4 - 4. Additional Obligations as Backup Servicer. (a) Except as provided herein, Backup Servicer shall have no obligation to supervise, verify, monitor or administer the performance of Client and shall have no liability for any action taken or omitted by Client. (b) In the execution of its duties hereunder, Backup Servicer shall use a standard of care and diligence reasonable in the consumer loan servicing industry. (c) Backup Servicer shall obtain and maintain all appropriate licenses to conduct its business in compliance with all legal requirements, the failure to comply with which would have a material adverse effect on Backup Servicer’s ability to perform its obligations as Backup Servicer or Successor Servicer under this Agreement. (d) Upon Backup Servicer’s appointment as Successor Servicer, Backup Servicer shall be responsible for the activities set forth in the Servicing Agreement; provided, however, that Backup Servicer shall have no liability for any losses incurred as a result of incomplete or inaccurate data provided to Backup Servicer by Client or any other prior servicer, any matter resulting from and relating to the origination of the Loans, errors made by prior vendors or servicers, or ACH authorizations executed by Client or other parties. All references to a “Purchaser Online Account” in the Servicing Agreement shall be eliminated and Backup Servicer shall have no obligations with respect to any “Purchaser Online Account.” Backup Servicer acknowledges that the Servicing Agreement may be subject to change by Client from time to time. (e) Upon becoming Successor Servicer, Backup Servicer shall enter into and maintain such NACHA agreements and other arrangements necessary to ensure that Backup Servicer may initiate ACH transfers from Obligor bank accounts. Backup Servicer hereby acknowledges that it has reviewed the form ACH authorization attached hereto as Exhibit H and agrees that such ACH authorizations provided by Client to Backup Servicer are transferable to Backup Servicer and would be valid upon such transfer or upon a transfer in connection with an Annual Test in accordance with Section 8 of this Agreement. (f) Backup Servicer shall maintain one bank account which it will use for all ACH payments from Loans subject to Servicing Agreements, unless otherwise agreed to by Backup Servicer. (g) Backup Servicer agrees to maintain at its sole expense the following insurance coverage during the term of this Agreement: (a) all insurance required by federal, state, or local law and statute, including worker’s compensation insurance; (b) employer’s general liability insurance of $2,000,000 per claim and in the aggregate; and (c) errors & omissions insurance of $2,000,000 per claim and in the aggregate. 5. Backup Servicer’s Fees. Up and until the Appointment Effective Date, Client shall pay Backup Servicer the fees and expense reimbursements set forth in Exhibit A. After the Appointment Effective Date: (a) Backup Servicer will charge an ongoing servicing fee of $[***] to be paid by the respective Investors of each Loan, provided, that if Backup Servicer is unable to charge up to $[***] on any Loan, Backup Servicer shall not be required to perform the servicing activities set forth in this Agreement with respect to such Loan. In such a circumstance, Client shall not be held responsible and Backup Servicer shall not be entitled to terminate or claim a breach of this Agreement by Client on such basis;

 
- 5 - (b) Backup Servicer will charge a maximum percentage fee on any funds collected on any Loan more than one hundred and twenty (120) days late equal to such percentage fee charged by Client to its own investors in the Servicing Agreement for consumer loans more than one hundred and twenty (120) days late. Such fee is to be paid by the respective Investors of such Loans, provided, that if Backup Servicer is unable to charge up to this percentage fee on any Loan more than 120 days late, Backup Servicer shall not be required to perform the servicing activities set forth in this Agreement with respect to such Loan. In such a circumstance, Client shall not be held responsible and Backup Servicer shall not be entitled to terminate or claim a breach of this Agreement by Client on such basis; (c) Backup Servicer will seek to charge a one-time conversion fee of $[***] per Investor with greater than $[***] in dollars of Loans outstanding, $[***] per Investor with dollars of Loans outstanding between $[***] and $[***] and $[***] per Investor with up to $[***] in dollars of Loans outstanding. Such conversion fees shall be payable by the respective Investors of the Loans, provided that if Backup Servicer is unable to charge such conversion fees, Backup Servicer shall not be required to perform the servicing activities set forth in this Agreement with respect to Loans held by such Investor. In such a circumstance, Client shall not be held responsible and Backup Servicer shall not be entitled to terminate or claim a breach of this Agreement by Client on such basis 6. Access to Records. (a) Backup Servicer shall afford to Client and its employees, agents, accountants, representatives, counsel and advisors, reasonable access during normal business hours to the books, records, documents and other information concerning the Loans and the conduct and performance of Backup Servicer of its obligations hereunder. 7. Representations and Warranties. Backup Servicer hereby makes the following representations and warranties as of the date hereof: (a) Organization and Good Standing. It is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Delaware. (b) Due Qualification. It is, and during the term of this Agreement shall be, duly qualified to do business and, where necessary, in good standing as a foreign limited liability company (or is exempt from such requirements), and has obtained and will maintain all necessary licenses and approvals in each jurisdiction in which the servicing of the Loans requires such qualification except where the failure to so qualify or obtain such licenses and approvals would not have a material adverse effect on its ability to perform its obligations under this Agreement. (c) Due Authorization. It has duly authorized, by all necessary action on its part, the execution and delivery of this Agreement and the consummation of the transactions provided for or contemplated by this Agreement. (d) No Conflict. Its execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement and the fulfillment of the terms hereof applicable to it will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which it is a party or by which it or its properties are bound. (e) No Violation. Its execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement and its fulfillment of the terms hereof applicable to it will not conflict with or violate any law applicable to it.

 
- 6 - (f) No Proceedings. There are no proceedings pending or, to the best of its knowledge, threatened or investigations pending or threatened against it before or by any governmental authority (i) seeking damages individually or in the aggregate in excess of $5,000,000, (ii) asserting the invalidity of this Agreement, (iii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, (iv) seeking any determination or ruling that would reasonably be expected to materially and adversely affect its performance of its obligations under this Agreement or (v) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement. If such a proceeding is initiated against Backup Servicer during the Term, Backup Servicer shall promptly notify Client of such proceeding. (g) All Consents Required. All material authorizations, consents, orders, approvals, licenses or other actions of any governmental authority required to be obtained or effected by it in connection with its execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement and the fulfillment of the terms hereof applicable to it have been duly obtained or effected and are in full force and effect. (h) Enforceability. This Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms hereof, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect affecting the enforcement of creditors’ rights and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). (i) Preservation of Security Interests. It will defend the Loans against all persons, claims, and demands whatsoever. It shall not assign, sell, pledge, or exchange, or in any way encumber or otherwise dispose of the Loans, except as expressly permitted under this Agreement. (j) No Ownership Interest. It does not have any ownership or other interest in the underlying assets, payment streams, equipment, legal documents, or other tangible or intangible assets of the Loans. (k) Compliance with Laws. It has complied, and at all times during the term of this Agreement shall comply, with all applicable federal, state and local laws, regulations and rules (“Applicable Law”). It is responsible for (i) monitoring, interpreting and complying with Applicable Law, (ii) determining the particular actions, disclosures, notices, formulas, calculations, and procedures required to ensure the services provided under this Agreement are provided in compliance with Applicable Law, and (iii) maintaining an ongoing program for compliance with Applicable Law. (l) FCPA. It is aware of and familiar with the provisions of the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and will act in compliance with and take no action and make no payment in violation of, or which might cause it or Servicer and each of their respective directors, officers, employees, or agents to be in violation of the FCPA. (m) Audit Report and Audit Rights. During the term of this Agreement, Backup Servicer shall have an audit conducted by a reputable third-party accounting firm regularly servicing the books and records of Backup Servicer or nationally-recognized independent third-party audit firm, that describes the Backup Servicer’s security and control policies and procedures and is in the form as described in the then-current Statement on Standards for Attestation Engagements 16 Report (the “SSAE 16 Report”), which audit report shall be no more than one (1) year old and shall certify that the Backup Servicer is in compliance with the minimum servicing standards as described in the SSAE 16 Report. A copy of such audit report has been delivered by the Backup Servicer to Client. Backup Servicer shall deliver an updated SSAE 16 Report to Client on an annual basis. Backup Servicer further agrees that during the Term, upon Client's written request and at Client’s expense, Backup Servicer shall allow Client or Client's authorized representative to inspect and make copies of any and all records relating to Backup Servicer’s performance of its duties hereunder; provided that any such inspection shall take place

 
- 7 - during regular business hours and Client provides Backup Servicer with reasonable advance written notice. 8. Annual Testing. Once per calendar year in the month of August, Client shall have the right to conduct a test (an “Annual Test”) of Backup Servicer’s ability to assume its responsibilities as Successor Servicer. The Annual Test will consist of (i) a temporary test transfer of Obligor loan documentation for a sample of one hundred (100) Loans to Backup Servicer and (ii) a demonstration by Backup Servicer of Backup Servicer’s ability to successfully load such sample of Loans onto its systems Client and Backup Servicer shall agree on the date of the Annual Test no fewer than thirty (30) days prior to conducting an Annual Test and any testing activities shall take place during regular business hours. The parties shall work together to ensure that the Annual Test is conducted in a reasonable, efficient and timely manner. Upon the conclusion of the Annual Test, Backup Servicer shall permanently delete or transfer back to Client all Obligor Loan documentation that was transferred for purposes of the Annual Test. 9. Online Capabilities for Borrowers. Within sixty (60) days of Backup Servicer becoming and assuming the responsibilities of Successor Servicer, Backup Servicer shall allow Obligors with outstanding Loans to securely log in to a website maintained by Backup Servicer to view, at a minimum, their outstanding loan balances, Obligor Loan statements, interest rate, current amount due or overdue and date due. Such website will also allow Obligors the ability to securely make payments to their loans online. 10. Background Checks and Verifications. Prior to any of Backup Servicer’s employees, agents, representatives, or consultants (“Backup Servicer Personnel”) performing Backup Servicer’s obligations and duties under this Agreement, Backup Servicer shall perform a criminal background check on Backup Servicer Personnel and comply with applicable immigration laws. Backup Servicer shall be solely responsible for conducting all background checks necessary to comply with the foregoing. 11. Business Continuity Plans and Disaster Recovery Plans. Backup Servicer agrees to maintain a written business continuity plan and a written disaster recovery plan. Backup Servicer will update the business continuity plan and disaster recovery plan at least annually. Upon request by Client, Backup Servicer will provide Backup Servicer with a description of Backup Servicer’s business continuity plan and disaster recovery plan procedures as they relate to the recovery and resumption of its performance of its obligations under this Agreement. 12. Initial and Ongoing Due Diligence. The existence and terms of this Agreement shall be considered Confidential Information of each party, provided that Client may (i) in accordance with its risk management policies and procedures, furnish a copy of this Agreement to WebBank (and any successor party thereto or other originating bank); (ii) furnish a copy of this Agreement to the holder of an accountholder’s debt following a written request by such holder and (iii) include this Agreement in its public filings, provided that any terms concerning pricing and fees will be redacted. 13. Ownership and Use of Client Information. Backup Servicer agrees that Client is, and shall be the sole and exclusive owner of all right, title and interest in and to any information, documents, work product and materials (including, but not limited to Backup Servicing Information and Collateral Package Items) provided by Client to Backup Servicer pursuant to this Agreement, including all intellectual property rights therein. 14. Restrictions on Use of Client Information. Backup Servicer agrees to not use any information, documents, work product and materials (including, but not limited to Backup Servicing Information and Collateral Package Items) provided by Client to Backup Servicer under this Agreement for any

 
- 8 - purpose outside the scope of this Agreement. 15. Indemnity. Client agrees to defend, indemnify and hold Backup Servicer and any officers, managers, members, employees or agents of Backup Servicer harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, fees, and expenses (collectively, “Losses”) incurred by Backup Servicer and arising as a result of (i) the breach of this Agreement by Client, (ii) Client’s failure to comply in all material respects with requirements of applicable federal, state and local laws and regulations, in performing its obligations hereunder or in connection with the Loans, (iii) the gross negligence or willful misconduct of Client or (iv) any failure of the representations and warranties made by Client hereunder or in connection herewith to be true and correct in all material respects when made. The indemnities in this Section 15 shall survive the termination of this Agreement or the removal or resignation of Backup Servicer. 16. Limitation of Liability. (a) In conjunction with Backup Servicer’s obligations hereunder, Backup Servicer is authorized to accept and rely on all the accounting, records and work of Client. The degree of examination of such accounting, records, and work which Backup Servicer reasonably deems necessary to complete any conversion and portfolio transfer in connection with Backup Servicer becoming a Successor Servicer shall not be construed as a representation by Backup Servicer of the accuracy of such accounting, records, and work. (b) Backup Servicer shall defend, indemnify and hold Client and its respective affiliates, beneficiaries, trustees, members, managers, officers, employees, representatives, directors and agents harmless against any and all Losses incurred by Client and arising as a direct result of (i) the gross negligence or willful misconduct of, or action taken in bad faith by, Backup Servicer, (ii) Backup Servicer’s failure to comply with requirements of applicable federal, state and local laws and regulations, in performing its obligations hereunder, (iii) the breach of this Agreement by Backup Servicer, or (iv) any failure of the representations and warranties made by Backup Servicer hereunder or in connection herewith to be true and correct when made. Backup Servicer and any of its members, managers, officers, employees or agents may rely in good faith on any document of any kind prima facie properly executed and submitted by any person respecting any matters arising hereunder. Neither party will be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its responsibilities hereunder and that in its reasonable opinion may involve it in any expense or liability to be incurred under this Agreement. The indemnities in this Section 16(b) shall survive the removal or resignation of Backup Servicer. (c) Except for the obligations undertaken by Backup Servicer in this Agreement, Backup Servicer will have no obligation to take any action, or to perform any of the duties of Client until such time as Backup Servicer has become a Successor Servicer. (d) Backup Servicer offers no representations concerning, and shall have no liability hereunder with respect to, the collectability, enforceability or other characteristics of the Loans. Neither party shall have no responsibility and shall not be in default hereunder nor incur any liability for any failure, error, malfunction or any delay in carrying out any of its duties under this Agreement if any such failure or delay results from acts of God, war or terrorism, insurrection, strikes, stoppages of labor, power or equipment failure or malfunction (including that of any common carrier or transmission line), loss or malfunction of communications or computer (hardware or software) services, emergency conditions, tornado, flood, fire, earthquake or similar event, adverse weather conditions or any other any cause or circumstances, directly or indirectly, beyond Backup Servicer’s control or for information prepared or supplied by a person other than Backup Servicer as contemplated hereunder or the failure of any such person to prepare or provide such information.

 
- 9 - (e) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7 OF THIS AGREEMENT, THERE ARE NO WARRANTIES MADE BY BACKUP SERVICER HEREUNDER. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL BACKUP SERVICER OR CLIENT BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, PUNITIVE, INCIDENTAL OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO DAMAGES FOR LOSS OF CURRENCY, FUNDS, DATA, PROFITS OR GOODWILL, REGARDLESS OF WHETHER BACKUP SERVICER OR CLIENT HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. 17. Term. This Agreement shall commence as of the Effective Date and will continue for a period of two (2) years after the Effective Date (the “Initial Term”). The Initial Term may be extended for one (1) additional year upon mutual written agreement between the parties (the “Term Extension”). Upon expiration of the Term Extension, this Agreement shall be automatically renewed and shall continue in full force and effect until terminated as provided in Section 18. Notwithstanding the foregoing, this Agreement shall not expire pursuant to the terms of this Section 17 after the Appointment Effective Date and Backup Servicer has assumed its duties as Successor Servicer. Notwithstanding anything to the contrary in this Agreement, after the Appointment Effective Date, this Agreement shall only terminate once all Loans are fully paid and distributed in accordance with this Agreement and the Servicing Agreement, fully charged off or otherwise completely liquidated. 18. Termination. (a) Before the Appointment Effective Date, the parties may terminate this Agreement as follows: (i) Client may terminate this Agreement (i) upon written notice to Backup Servicer if Backup Servicer commits a material breach of this Agreement, which breach has not been cured within thirty (30) days of written notice of said breach being sent to Backup Servicer, (ii) upon the occurrence of the gross negligence or willful misconduct of Backup Servicer, or (iii) at any other time, with or without cause, upon ninety (90) days advance written notice to Backup Servicer. (ii) Client may terminate this Agreement for convenience during the Initial Term or the Term Extension, if applicable, by providing Backup Servicer with thirty (30) calendar days’ prior written notice (an “Early Termination Notice”) of its intention to terminate this Agreement. Backup Servicer shall continue to provide the services and shall be compensated per the terms of this Agreement during such thirty (30) day period. If Client terminates this Agreement pursuant to this Section 18(a)(ii) during the Initial Term, Client shall pay to Backup Servicer a fee equal to $15,000 (the “Early Termination Fee”). The Early Termination Fee is due and payable by Client upon the effectiveness of such termination. Such Early Termination Fee shall also be immediately due and payable by Client to Backup Servicer to the extent Backup Servicer terminates this Agreement in accordance with Section 18(b). (iii) Following the expiration of the Initial Term or the Term Extension, if applicable, Client may terminate this Agreement for convenience by providing Backup Servicer with sixty (60) calendar days’ prior written notice of its intention to terminate this Agreement. Backup Servicer shall continue to provide the services and shall be compensated per the terms of this Agreement during such sixty (60) day period. (iv) Following the expiration of the Initial Term or the Term Extension, if applicable, Backup Servicer may terminate this Agreement for convenience by providing Client with one hundred twenty (120) calendar days’ prior written notice of its intention to terminate this Agreement. Backup Servicer shall continue to provide the services and shall be compensated per

 
- 10 - the terms of this agreement during such one hundred twenty (120) day period. (b) Before the Appointment Effective Date, Backup Servicer may terminate this Agreement, by written notice to the other parties hereto, if it does not receive any payment required by a previously submitted invoice, to be made to it by Client under the terms of this Agreement, which failure continues unremedied for a period of thirty (30) days after written notice of such failure shall have been given to Client. (c) This Agreement will be automatically and immediately terminated upon the occurrence of any of the following conditions: (i) the entry with respect to Backup Servicer of a decree or order for relief by a court or agency or supervisory authority having jurisdiction under any present or future federal or state bankruptcy, insolvency or similar law; (ii) a conservator, receiver or liquidator is appointed with respect to Backup Servicer in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings; or (iii) Backup Servicer is unable to pay its debts generally as they become due or files a petition to take advantage of any applicable bankruptcy, insolvency or reorganization statute. 19. Backup Servicer Not to Resign. Backup Servicer shall not resign from the obligations and duties hereby imposed on it except by mutual written consent of Backup Servicer and Client or upon the determination that its duties hereunder are no longer permissible under Applicable Law. Any such determination permitting the resignation of Backup Servicer must be in the reasonable determination of Backup Servicer and must be accompanied by a certificate of an authorized officer of Backup Servicer and an opinion of outside counsel to Backup Servicer reasonably acceptable to Client certifying as to the basis of such impermissibility under Applicable Law. 20. Confidential Information. Backup Servicer will preserve the confidentiality of any non-public information obtained by it in connection with its performance of its responsibilities hereunder; provided, however, that nothing herein shall prevent Backup Servicer from disclosing such information to (a) Backup Servicer’s managers, officers, members, employees, agents, subservicers and professional consultants in connection with Backup Servicer’s obligations under this Agreement, provided that such persons are informed of the confidential nature of such information and instructed to keep such information confidential (provided that, in any event, Backup Servicer shall be responsible for any breach of this Agreement by such parties), (b) any federal or state regulatory agency having jurisdiction over Backup Servicer, (c) any federal or state regulatory agency or governmental authority to which such disclosure is required (1) to effect compliance with any law, rule, regulation or order applicable to Backup Servicer, (2) in response to any subpoena or legal process, (3) in connection with any litigation or adversary proceedings to which Backup Servicer or any other party hereto is a party, or (4) as required to execute and administer this Agreement, or (d) to the extent such information becomes public through no act or fault of Backup Servicer. In the case of any disclosure permitted by clause (b) or (c), Backup Servicer shall use commercially reasonable efforts to (x) provide Client with advance notice of any such disclosure and (y) cooperate with Client in limiting the extent or effect of any such disclosure. To the extent that any information provided to Backup Servicer in connection with this Agreement meets the definition of “non-public personal information” as that term is defined in Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. Section 6801 et seq. (the “GLB Act”) and/or is subject to protection under any federal or state statute, rule, regulation or guideline relating to privacy (including, but not limited to, the GLB Act and each federal or state rule, regulation or guideline implementing requirements of that statute) (“NPI Rules”), Backup Servicer shall treat such information as confidential and in accordance with the terms of the GLB Act and the NPI Rules, regulations and

 
- 11 - guidelines implementing requirements thereof and the exchange, transfer and storage of such information shall be subject to the terms of Exhibit G attached hereto. This Section 20 shall survive the termination of this Agreement or the removal or resignation of Backup Servicer. 21. Counterparts. This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. The parties agree that this Agreement and signature pages may be transmitted between them by facsimile or by electronic mail and that faxed and PDF signatures may constitute original signatures and that a faxed or PDF signature page containing the signature (faxed, PDF or original) is binding upon the parties. 22. Subcontracting. If Backup Servicer outsources any activities in the delivery of services under this Agreement to any suppliers (subcontractors), Backup Servicer shall remain fully liable and responsible for the work to be performed by its subcontractors and shall be responsible for compliance and management by such subcontractors with this Agreement. Notwithstanding the foregoing, Backup Servicer agrees that all of Client’s data (including, but not limited to Confidential Information and Obligor Loan documentation) shall reside in the United States. 23. Governing Law; Jurisdiction. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. (b) EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE FOLLOWING PROVISIONS OF THIS SECTION 23(b): (i) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY CALIFORNIA STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE STATE OF CALIFORNIA, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. (ii) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF CALIFORNIA. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 
- 12 - (iii) EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR CLIENT ENTERING IN TO THIS AGREEMENT. (iv) EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SECTION 25 HEREOF. 24. Waiver. No term or provision of this Agreement may be waived except by a formal written instrument signed (and not by an email or series of emails) by duly authorized officers of the party against whom such waiver is sought. The failure by Client to insist at any time upon strict compliance with this agreement or with any of the terms of the agreement or any continued course of such conduct on its part will not constitute or be considered a waiver by Client, as applicable, of any of its rights or privileges. A waiver or consent, express or implied, of or to any breach or default by any party in the performance by that party of its obligations with respect to the agreement is not a waiver or consent of or to any other breach or default in the performance by that party of the same or any other obligations of that party. 25. Notices. (a) Subject to Section 25(c) below, all notices and other communications provided for herein shall be in writing and shall be delivered either by hand, by overnight courier service, by certified or registered mail, by telefacsimile or by email (in portable document format (“pdf”) or tagged image file format (“TIFF”)) as follows: (i) in the case of Client: LendingClub Corporation 71 Stevenson Street, Suite 300 San Francisco, CA 94105 Attention: Legal Department (ii) in the case of Backup Servicer: First Associates Loan Servicing, LLC 15373 Innovation Drive, Suite 300 San Diego, CA 92128 Attention: Laurence Chiavaro, Executive Vice President Facsimile No.: (858) 999-3064 Email: lchiavaro@1stassociates.com (b) Any party hereto may change its address, facsimile number or email address for notices and other communications hereunder by notice to all of the other parties hereto in accordance with Section 25(a) above. (c) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given (i) in the case of notices and other communications delivered by hand or overnight courier service, upon actual receipt thereof, (ii) in the case of notices and other communications delivered by certified or registered mail, upon the earlier of actual delivery and the third Business Day after the date deposited in the U.S. mail with postage prepaid

 
- 13 - and properly addressed, provided, that no notice or communication to either party shall be effective until actually received by either party, (iii) in th e case of notices and other communications delivered by telefacsimile, upon receipt by the sender of an acknowledgment or transmission report generated by the machine from which the telefacsimile was sent indicating that the telefacsimile was sent in its entirety to the recipient’s telefacsimile number and (iv) in the case of notices and other communications delivered by email, upon receipt by the sender of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, a return email or other written acknowledgement), provided, that no notice or communication to either party shall be effective until receipt by the sender of written confirmation of receipt affirmatively initiated by either party; provided, however, that in each case, if a notice or other communication would be deemed to have been given in accordance with the foregoing at any time other than during the recipient’s normal business hours on a Business Day for such recipient, such notice or other communication shall be deemed given on the next succeeding Business Day for such recipient; and provided, further, that no notice to either party shall be effective until delivered by at least two, not one, of the methods described in clauses (i) through (iv) above. (d) Each party acknowledges and agrees that the use of electronic transmission in general, and email in particular, is not necessarily secure and that there are risks associated with the use thereof, including risks of interception, disclosure and abuse, and each indicates it assumes and accepts such risks by hereby authorizing the use of electronic transmission. 26. Successors and Assigns. This Agreement shall inure to the benefit of the respective successors and permitted assigns of each party and their respective permitted successors and assigns and the obligations and liabilities assumed in this agreement by the parties hereto shall be binding upon their respective successors and permitted assignees. This Agreement shall not be assigned, pledged or hypothecated by any party without the prior written consent of the other parties, and any such assignment, pledge or hypothecation shall be void without such prior written consent. 27. Further Assurances. The parties hereto agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other parties hereto in order to effect more fully the purposes of this Agreement. 28. Integration. This Agreement contains the entire agreement of the parties with respect to the engagement of the Backup Servicer with respect to the Loans and supersedes all prior negotiations, agreements and understandings with respect thereto, both written and oral. This Agreement may not be contradicted or supplemented by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten or oral agreements between the parties. 29. Independent Contractor. No Joint Venture or Partnership. Backup Servicer is an independent contractor and shall perform the services called for under this Agreement as such, and not as the agent, employee or servant of any other party hereto. Each party (including any of its respective permitted successors and assigns) acknowledges and agrees that such party will not hold itself out as an agent, partner or joint venture of any other party, and that this Agreement and the transactions contemplated hereby are not intended and do not give rise now or in the future to an agency, partnership, joint venture or other type of relationship between the parties. 30. Severability. All provisions of this Agreement are severable, and the unenforceability or invalidity of any of the provisions of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement. Should any part of this Agreement be held invalid or unenforceable in any jurisdiction, the invalid or unenforceable portion or portions shall be removed (and no more) only in that jurisdiction, and the remainder shall be enforced as fully as possible (removing the minimum amount possible) in that jurisdiction. In lieu of such invalid or unenforceable provision, the parties hereto will negotiate in good faith to add automatically as a part of this Agreement a legal, valid and

 
- 14 - enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. 31. Survival. Sections 16, 17, 21, 24 and 26 through 33 shall survive the expiration, cancellation, or other termination of this Agreement. 32. No Publicity. Except as set forth in Section 12 of this Agreement, neither party shall issue or release any announcement, statement, press release or other publicity or marketing materials relating to the terms of this Agreement without the prior written consent of the other party. 33. Amendment. No modification, amendment, or waiver of any provision of, or consent required by, this Agreement, nor any consent to any departure herefrom, shall be effective unless it is in writing and signed by authorized officers of each of the parties hereto. Such modification, amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which given. (Signature page follows)

 
IN WITNESS WHEREOF, each of the parties has duly executed this Whole Loans Backup Servicing Agreement as of the date first written above. BACKUP SERVICER: CLIENT: First Associates Loan Servicing, LLC By: /s/ David Johnson Name: David Johnson Title: CEO LendingClub Corporation By: /s/ Sameer Gulati Name: Sameer Gulati Title: COO Signature Page to Whole Loans Back-Up Servicing Agreement

 
Exhibit A Backup Servicer Compensation The following fees shall be payable by Client to Backup Servicer prior to the Appointment Effective Date: (a) A one-time set-up fee of $[***]. (b) Ongoing monthly fees to be paid by Client, depending on the outstanding principal balance of all of the Loans, shall be: • For an outstanding portfolio value of up to $[***], the ongoing monthly fee to Backup Servicer shall be $[***] per month. If the outstanding portfolio value for the Loans exceeds $[***], the parties will negotiate pricing in good faith for such Loans in excess of $[***]. The fees and expenses set forth herein are stated in U.S. Dollars, and all Backup Servicer invoicing and Client payments hereunder shall also be in U.S. Dollars. Backup Servicer shall submit an invoice to Client for the following month’s fees, and Client shall pay outstanding invoices within thirty (30) days of receipt or incur interest charges of [***] on any outstanding balance owed. In the event of a servicing transfer and once Backup Servicer assumes Successor Servicer duties, any applicable fees hereunder will no longer accrue. All invoices shall specify that payments will be made with reference to “FACRN5850”.

 
Exhibit B Collateral Package Items 1. Loan Documents • Borrower Agreement • Credit Score Notice 2. Truth in Lending Disclosures (Estimated and Final) 3. Client Terms of Use and Consent to Electronic Transactions and Disclosures 4. Obligor Bank Account Verification & Debit Authorization 5. Promissory Note 6. Privacy Notice 7. Loan Agreement

 
EXHIBIT C ONE TIME SETUP ACTIVITIES Backup Servicer shall perform the following one-time setup activities within a reasonable time of execution of this Agreement:  Onsite review of Client’s loan servicing processes and procedures.  Review of Client’s loan servicing functions, including procedures for payment processing, collections, cash management and information systems.  Work with Client to define electronic CSV data transfer files for comprehensive daily data transfer.  Receive and archive all borrower ACH information and authorizations from Client as set forth in the Agreement.  Receive from Client and onboard the initial comprehensive daily data transfer.

 
EXHIBIT D BACKUP SERVICER ONGOING ACTIVITIES  Receive and onboard to data system comprehensive daily data transfer via CSV file.  Receive monthly servicer report from Client.  Reconcile and certify the monthly servicer report received from Client within five business days of the receipt of the month-end data file and the monthly servicer reports.  In the event of any discrepancy between the month-end file provided by Client and the related servicer report, promptly notify Client of such discrepancy.  Annual management meeting with Client to discuss items including, but not limited to servicing practices, policies, changes to platform.  Direct any of Client’s investors requesting verification of Obligor Loan documents to the Document Management Platform, as applicable. Receive and load Client’s Backup Servicing Information into Backup Servicer’s data system pursuant to Section 3(c) of the Agreement.

 
EXHIBIT E NOTICE OF DESIGNATION ____________, 20__ First Associates Loan Servicing, LLC 15373 Innovation Drive, Suite 300 San Diego, CA 92128 Attention: Laurence Chiavaro, Executive Vice President Dear First Associates Loan Servicing, LLC: Reference is made to that certain Whole Loans Backup Servicing Agreement, dated as of [_____________], 2016 (the “Agreement”), entered into by and between LendingClub Corporation, a Delaware corporation (“Client”), and First Associates Loan Servicing, LLC, a Delaware limited liability company (“Backup Servicer”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. Client hereby gives notice to Backup Servicer that ______________________ (“Designee”) is designated to appoint Backup Servicer as Successor Servicer of the Loans. Designee may send the notice of appointment attached as Exhibit F to the Agreement. Client may revoke this notice of designation solely by written notice to Backup Servicer as specified in the Agreement, received by Backup Servicer prior to Backup Servicer’s receipt of a notice of appointment attached as Exhibit F to the Agreement sent by Designee. Client has duly authorized, by all necessary action on its part, the execution and delivery of this notice of designation, and the signatory on behalf of Client represents and warrants that such signatory has been duly authorized to execute this notice of designation. Please contact ____________________ to discuss. Sincerely, LendingClub Corporation By: Name: Title: Acknowledged: DESIGNEE: By: Name: Title:

 
EXHIBIT F NOTICE OF APPOINTMENT ____________, 20__ First Associates Loan Servicing, LLC 15373 Innovation Drive, Suite 300 San Diego, CA 92128 Attention: Laurence Chiavaro, Executive Vice President Dear First Associates Loan Servicing, LLC: Reference is made to that certain Whole Loans Backup Servicing Agreement, dated as of [_____________], 2016 (the “Agreement”), entered into by and between LendingClub Corporation, a Delaware corporation (“Client”), and First Associates Loan Servicing, LLC, a Delaware limited liability company (“Backup Servicer”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. Client hereby gives notice to Backup Servicer that Backup Servicer is appointed to act as Successor Servicer of the Loans. Pursuant to the terms of Section 2(a) of the Agreement, Backup Servicer shall assume the obligations and duties as set forth in the Servicing Agreement. Client has duly authorized, by all necessary action on its part, the execution and delivery of this notice of appointment, and the signatory on behalf of Client represents and warrants that such signatory has been duly authorized to execute this notice of appointment. Please contact ____________________ to discuss. Sincerely, LendingClub Corporation By: Name: Title: _____________

 
EXHIBIT G 1. Definitions. For purposes of this Exhibit G: “Authorized Employees” means Backup Servicer employees. “Authorized Persons” means (i) Authorized Employees; and/or (ii) Backup Servicer’s contractors, agents, outsourcers and auditors who have access to Confidential Information or Highly Confidential Information, and who are bound in writing by confidentiality obligations sufficient to protect Confidential Information or Highly Confidential Information in accordance with the terms and conditions of this Agreement. "Confidential Information" means all non-public or proprietary information treated as confidential by a party that is not Highly Confidential Information, including but not limited to all information concerning a party’s past, present and future business affairs including finances, products, services, organizational structure, internal practices, forecasts and sales, corporate or departmental organizational charts, internal policies and procedures, information contained in intranet web pages, internal newsletters, training materials, business resumption plans, short-term business plans, security plans and policies, non-public corporate financial reports, internal audit reports, vendor contracts and bidding information. Confidential Information also includes all information that would be considered “Material Nonpublic Information” under the Securities Act of 1934 and the rules and regulations promulgated thereunder, (c) long-term business or marketing strategies or plans, (d) information with respect to proposed acquisitions, divestitures or joint ventures, (e) reports concerning significant exposures or risks, (f) security investigations or analyses, (g) documents labeled “Privileged” and/or “Confidential”, (h) non-public legal opinions or work product, (i) regulatory reports, (j) trade secrets, and (k) information with respect to a party’s workforce such as salaries, bonuses, performance reviews and contact or identification information "Disclosing Party" means a party that discloses Protected Information under this Agreement. “Highly Confidential Information” means all information with respect to a party’s customers (which, for the avoidance of doubt, with respect to Client, includes both borrowers and investors) or prospective customers meeting the definition of “Nonpublic personal information” under the Gramm-Leach-Bliley Act and the rules and regulations promulgated thereunder (including, without limitation, name, address, e-mail address, passwords, account numbers, personal financial information, personal preferences, demographic data, marketing data, other identification data, information that reflects use of or interaction with a party’s service including its websites and any data otherwise submitted in the process of registering for a party’s services). “Protected Information” means, collectively, Confidential Information and Highly Confidential Information. Protected Information shall not include information that: (a) is already known to the Receiving Party without restriction on use or disclosure prior to receipt of such information from the Disclosing Party; (b) is or becomes generally known by the public other than by breach of this Agreement by the Receiving Party; (c) is developed by the Receiving Party independently of, and without reference to, any Protected Information of the Disclosing Party; or (d) is received by the Receiving Party from a third party who is not under any obligation to the Disclosing Party to maintain the confidentiality of such information. "Receiving Party" means a party that receives or acquires Protected Information directly or indirectly under this Agreement.

 
“Security Breach” means (i) any unauthorized access to or disclosure or use of Highly Confidential Information under Backup Servicer’s control or in the possession of its Authorized Employees that requires notification under any applicable law; or (ii) any audit that indicates that the physical, technical, administrative or organizational safeguards put in place by Backup Servicer (or any Authorized Employees) that relate to the protection of the security, confidentiality or integrity of Highly Confidential Information are inadequate. 2. Standard of Care. (a) Backup Servicer acknowledges and agrees that, in the course of its engagement by Client, Backup Servicer may receive or have access to Highly Confidential Information. Backup Servicer shall comply with the terms and conditions set forth in this Agreement in its collection, receipt, access, transmission, storage, disposal, use and disclosure of such Highly Confidential Information and be responsible for the unauthorized collection, receipt, transmission, access, storage, disposal, use and disclosure of Highly Confidential Information under its control or in its possession by all Authorized Employees. Backup Servicer shall be responsible for, and remain liable to, Client for the actions and omissions of all Authorized Persons concerning the treatment of Highly Confidential Information as if they were Backup Servicer’s own actions and omissions. Backup Servicer shall require all its contractors, agents, outsourcers and auditors who have access to Confidential Information or Highly Confidential Information to execute a written agreement agreeing to comply with the terms and conditions of this Agreement relating to the treatment of Highly Confidential Information. (b) In the event of a conflict or inconsistency between this Section and the confidentiality sections of this Agreement, the terms and conditions set forth in this Section shall govern and control. (c) In recognition of the foregoing, Backup Servicer agrees and covenants that it shall: (i) keep and maintain all Highly Confidential Information in strict confidence, using such degree of care as is appropriate to avoid unauthorized access, use or disclosure; (ii) use and disclose Highly Confidential Information solely and exclusively for the purposes for which the Highly Confidential Information, or access to it, is provided pursuant to the terms and conditions of this Agreement, and not use, sell, rent, transfer, distribute, or otherwise disclose or make available Highly Confidential Information for Backup Servicer’s own purposes or for the benefit of anyone other than Client, in each case, without Client’s prior written consent; and (iii) not directly disclose Highly Confidential Information to any person other than its Authorized Persons with a need to access Highly Confidential Information for the purposes of enabling Backup Servicer to perform its obligations under this Agreement (each person other than an Authorized Person with a need to access Highly Confidential Information, an “Unauthorized Third Party”), without express written consent from Client unless and to the extent required by government authorities or as otherwise, to the extent expressly required, by applicable law, in which case, Backup Servicer shall (A) notify Client before such disclosure or as soon thereafter as reasonably possible; and (B) be responsible for and remain liable to Client for the actions and omissions of such Unauthorized Third Party concerning the treatment of such Highly Confidential Information as if they were Backup Servicer’s own actions and omissions; and (C) require the Unauthorized Third Party to whom Backup Servicer grants access to Highly Confidential Information to execute a written agreement agreeing to comply with the terms and conditions of this Agreement relating to the treatment of Highly Confidential Information. 3. Information Security.

 
(a) Backup Servicer represents and warrants that its collection, access, use, transmission, storage, disposal and disclosure of Highly Confidential Information does and will comply with all applicable federal, state, and relevant foreign privacy and data protection laws, as well as all other applicable regulations and directives. (b) Without limiting Backup Servicer’s obligations under Section 3(a), Backup Servicer shall implement administrative, physical and technical safeguards to protect Highly Confidential Information that are no less rigorous than accepted industry practices and shall ensure that all such safeguards, including the manner in which Highly Confidential Information is collected, accessed, used, transmitted, stored, processed, disposed of and disclosed, comply with applicable data protection and privacy laws, as well as the terms and conditions of this Agreement. (c) At a minimum, Backup Servicer’s safeguards for the protection of Highly Confidential Information shall include: (i) limiting access of Highly Confidential Information to Authorized Persons with a business need to know; (ii) securing business facilities, data centers, paper files, servers, back-up systems and computing equipment, including, but not limited to, all company owned mobile devices and other equipment with information storage capability; (iii) implementing network, device, application, database and platform security controls consistent with industry standards (e.g. SANS Information Security Policy Templates); (iv) securing information collection, access, use, transmission, storage and disposal of Highly Confidential Information; (v) implementing authentication and access controls to all systems containing Highly Confidential Information; (vi) encrypting Highly Confidential Information stored on any company owned mobile media including laptops, smartphones and tablets; (vii) encrypting Highly Confidential Information transmitted over public or wireless networks; (viii) strictly segregating Highly Confidential Information from information of Backup Servicer or its other customers so that Highly Confidential Information is not commingled with any other types of information; (ix) implementing appropriate personnel security and integrity procedures and practices, including, but not limited to, conducting background checks consistent with applicable law; (x) providing appropriate privacy and information security training to all Authorized Persons; (xi) maintaining comprehensive and updated malware detection capabilities including anti-virus software; (xii) maintaining an incident response program capable of detecting, responding and remediating security incidents upon discovery; and (xiii) ensuring that test environments are not exposed to production data. (d) During the term of each Authorized Person’s employment and/or engagement by Backup Servicer, Backup Servicer shall at all times cause such Authorized Persons to abide strictly by Backup Servicer’s obligations under this Agreement. Backup Servicer further agrees that it shall maintain a disciplinary process in line with Backup Servicer’s company policies and procedures to address any unauthorized access, use or disclosure of Highly Confidential Information by any of Backup Servicer’s officers, partners, principals, employees, agents or contractors. Upon Client’s written request, Backup Servicer shall promptly identify for Client in writing all Authorized Persons as of the date of such request. 4. Security Breach Procedures. (a) Security Provider shall: (i) provide Client with the name and contact information for an employee of Backup Servicer who shall serve as Client’s primary security contact and shall be available to assist Client 24 hours per day, 7 days per week as a contact in resolving obligations associated with a Security Breach; (ii) notify Client of a Security Breach as soon as practicable, but

 
no later than 48 hours after Backup Servicer becomes aware of it; and (iii) notify Client of any Security Breaches by e-mailing Client with a read receipt at security@lendingclub.com and with a copy by e-mail to Backup Servicer’s primary business contact within Client. (b) Immediately following Backup Servicer’s notification to Client of a Security Breach, the parties shall coordinate with each other to investigate the Security Breach. Backup Servicer agrees to fully cooperate with Client in Client’s handling of the matter, including, without limitation: (i) assisting with any investigation; (ii) providing Client with physical access to the facilities and operations affected; (iii) facilitating interviews with Backup Servicer’s employees and others involved in the matter; and (iv) making available all relevant records, logs, files, data reporting and other materials required to comply with applicable law, regulation, industry standards or as otherwise reasonably required by Client. (c) Backup Servicer shall use best efforts to immediately remedy any Security Breach and prevent any further Security Breach at Backup Servicer’s expense in accordance with applicable privacy rights, laws, regulations and standards. Backup Servicer shall (i) reimburse Client for actual out of pocket costs incurred by Client in responding to, and mitigating damages directly caused by, any Security Breach, including all costs of notice and/or remediation pursuant to Section 4(d) and (ii) upon Client’s request, provide to Client information on measures taken to prevent any further Security Breach. (d) Backup Servicer agrees to fully cooperate at its own expense with Client in any litigation or other formal action deemed necessary by Client to protect its rights relating to the use, disclosure, protection and maintenance of Highly Confidential Information in Backup Servicer’s control or possession. 5. Oversight of Security Compliance. At least once per year, Backup Servicer shall conduct site audits of the information technology and information security controls for all facilities used in complying with its obligations under this Agreement. Upon Client’s request, to confirm Backup Servicer’s compliance with this Agreement, as well as any applicable laws, regulations and industry standards, Backup Servicer grants Client or, upon Client’s election, a third party on Client’s behalf, permission to perform an assessment, audit, examination or review of all controls in Backup Servicer’s physical and/or technical environment in relation to all Highly Confidential Information being handled and/or services being provided to Client pursuant to this Agreement. Backup Servicer shall fully cooperate with such assessment by providing access to knowledgeable personnel, physical premises, documentation, infrastructure and application software that processes, stores or transports Highly Confidential Information for Client pursuant to this Agreement. Upon Client’s written request, Backup Servicer shall make available to Client for review all of the following, as applicable: Backup Servicer’s latest Payment Card Industry (PCI) Certification Report; SOC2 Report on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality or Privacy; and any reports relating to its ISO/ICE 27001 certification. Client shall treat such audit reports as Backup Servicer’s Confidential Information under this Agreement. Any exceptions noted on the SSAE report or other audit reports relating to Highly Confidential Information will be promptly addressed with the development and implementation of a corrective action plan by Backup Servicer’s management. 6. Return or Destruction of Confidential Information. At any time during the term of this Agreement at the Client’s request or upon the termination or expiration of this Agreement for any reason, Backup Servicer shall, and shall instruct all Authorized Persons to, promptly destroy all copies, whether in written, electronic or other form or media, of Highly Confidential Information in

 
its possession or the possession of such Authorized Persons, or securely dispose of all such copies, and certify in writing to the Client that such Highly Confidential Information has been returned to Client or disposed of securely, except for information retained pursuant to Backup Servicer’s document retention policies, which shall be retained subject to this Agreement. Backup Servicer shall comply with all commercially reasonable directions provided by Client with respect to the return or disposal of Highly Confidential Information.

 
EXHIBIT H Making Loan Payments / Authorization for Automatic Payments If your loan is funded, you hereby authorize LendingClub Corporation ("Lending Club"), as the loan servicer on your loan from WebBank, and its successors and assigns, to initiate electronic funds transfers from your designated account provided to Lending Club on the date of this agreement for monthly repayments on your loan. EACH MONTH, THE DEBIT AMOUNT MAY BE A RANGE OF PAYMENTS, WHICH WOULD INCLUDE YOUR MONTHLY PRINCIPAL AND INTEREST, AND FEES, IF ANY. ANY FEES AUTHORIZED TO BE CHARGED ON YOUR LOAN MAY BE COLLECTED USING ELECTRONIC FUNDS TRANSFERS INITIATED BY US FROM YOUR DESIGNATED ACCOUNT. With regard to payments made by automatic withdrawal, you have the right to receive notice of all transfers that will vary in amount from one month to the next. Lending Club will provide electronic notice of the upcoming transfer amount ten (10) calendar days ahead of the scheduled transfer. You may stop payment of automatic withdrawals or revoke your prior authorization for automatic withdrawals by notifying us at least three (3) banking days before the scheduled date of transfer. All payments are to be applied first to the payment of all fees, expenses and other amounts due (excluding principal and interest), then to accrued interest, and the balance on the account of outstanding principal; provided, however, that after an Event of Default, payments will be applied to your obligations as we determine in our sole discretion. You understand this authorization will remain in effect until your loan is paid in full or you notify us or your financial institution of its termination, taking into consideration the necessary time required by Lending Club and your financial institution to implement the change.

 
[***] Confidential Treatment Requested Exhibit 10.2 Execution Version FRACTIONAL LOANS BACKUP SERVICING AGREEMENT This FRACTIONAL LOANS BACKUP SERVICING AGREEMENT (this “Agreement”), dated as of July 27, 2017 (the “Effective Date”), is entered into by and between LendingClub Corporation, a Delaware corporation (“Client”), Millennium Trust Company, LLC, an Illinois limited liability company (“MTC”) and First Associates Loan Servicing, LLC, a Delaware limited liability company (“First Associates”). Each of MTC and First Associates shall be referred to herein as a “Backup Servicer” and collectively referred to as “Backup Servicers”). WHEREAS, Client is in the business of facilitating loans through its online marketplace and servicing such loans in its ordinary course of business; WHEREAS, First Associates is engaged in the business of providing backup loan servicing; WHEREAS, MTC is engaged in the business of providing certain asset custody solutions; WHEREAS, Client wishes to engage Backup Servicers to perform certain backup servicing duties on Loans in Client’s fractional loan channel program in accordance with the terms of this Agreement, and assume the role of Successor Servicer (as defined below and as applicable to each of MTC and First Associates) under the circumstances set forth in this Agreement; and WHEREAS, Backup Servicers are willing to cooperate with each other as set forth herein, perform their respective backup servicing duties specified herein and to assume the role of Successor Servicer (as defined below and as applicable to each of MTC and First Associates) pursuant to the conditions described herein. NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Client hereby agree as follows: 1. Definitions. All capitalized terms not otherwise defined herein shall have the meanings set forth in the applicable Servicing Agreement. “Bankruptcy Event” shall mean the voluntary commencement by Client of liquidation proceedings under 11 U.S. Code Chapter 7, as evidenced by a formal filing by Client in a United States federal bankruptcy court. “Business Day” means any day other than: (a) a Saturday or Sunday; (b) a legal or federal holiday; and (c) a day on which banking and savings and loan institutions in San Francisco, California, New York, New York, or the State of Utah are required or authorized by law or Regulatory Authority to be closed for business. “Collateral Package Items” shall mean, with respect to each Loan, the related Note Receivable and each of the other items listed in Exhibit B attached hereto, which are maintained by Client as transferable electronic records. “Document Management Platform” shall mean eOriginal, Inc., or any other third party document management platform holding Obligor Loan documentation. “Investor” shall mean a purchaser and beneficial owner of a Loan, evidenced by promissory notes

 
- 2 - and related Loan documentation. “Loan” means an unsecured, closed-end consumer loan facilitated by Client and sold to Investors as a fractional loan. Loans under this Agreement before the Appointment Effective Date shall only include those fractional consumer loans allocated, in Client’s sole discretion, to Backup Servicers as platform backups, and identified in each respective Monthly Backup Servicing File provided by Client to Backup Servicers, such Loan evidenced by a Note Receivable and identified by Client in the Collateral Package Items. Loans under this Agreement on and after the Appointment Effective Date shall include all fractional consumer loans in the last Monthly Backup Servicing File before the Appointment Effective Date or all fractional consumer loans for which Client intends for Backup Servicers to become Successor Servicers for, as evidenced by Client providing or making available to Backup Servicers the Collateral Package Items concerning such fractional consumer loans on or after the Appointment Effective Date. Any loans that have been sold by Client as part of a securitization shall not be considered a Loan for purposes of this Agreement. “Note Receivable” shall mean a promissory note executed electronically by an Obligor with respect to a Loan and maintained as an electronic record by Client. “Obligor” shall mean an obligor with respect to a Loan. “Servicing Agreement” means Client’s applicable standard master loan servicing agreement, as amended from time to time and filed as part of Client’s public securities filings. In the event that Backup Servicers are appointed to become Successor Servicers and Client is no longer publicly filing its standard master loan servicing agreement, the Servicing Agreement shall be the last publicly filed standard master loan servicing agreement. 2. Obligations as Backup Servicers. From and after the date hereof until the Appointment Effective Date (as defined below), Backup Servicers agree to perform the functions as set forth in this Section 2 with respect to the Loans. (a) (i) Client shall deliver to First Associates, and First Associates shall accept, the following information on a monthly basis for Loans that are to be allocated to Backup Servicers for a particular calendar month: (A) the status of each Loan and its outstanding principal balance; (B) transaction information posted to each Loan; and (C) current information regarding ownership of each Loan, payment processing information including all information reasonably required to initiate ACH transfers from Obligors’ bank accounts, and Obligor contact and account information with respect to each Loan (collectively, the “FA Backup Servicing Information”). (ii) Client shall deliver to MTC, and MTC shall accept, the following information on a monthly basis for Loans that are to be allocated to Backup Servicers for a particular calendar month: (A) the status of each Loan and its outstanding principal balance; (B) transaction information posted to each Loan; and (C) current information regarding ownership of each Loan, including Investor contact and account information with respect to each Loan, all information reasonably required to initiate ACH transfers to Investors’ bank accounts, and information reasonably required to perform tax withholding and reporting with respect to the Investors (collectively, the “MTC Backup Servicing Information” and together with the FA Backup Servicing Information, the “Backup Servicing Information”). (iii)The format and substance of the Backup Servicing Information and the means of providing the Backup Servicing Information shall be mutually agreed to between Client and Backup Servicers.

 
- 3 - (b) (i) Within five (5) Business Days of receipt of the FA Backup Servicing Information for any calendar month, First Associates shall store the FA Backup Servicing Information via secure file transfer protocol (SFTP) and send written confirmation of receipt and storage to Client. First Associates will provide Client with a certificate stating that the complete set of FA Backup Servicing Information has been received for such month (the “FA Monthly Backup Servicing File”), and that First Associates is able to begin servicing of the Loans within thirty (30) days of receipt of such FA Monthly Backup Servicing File. (ii) Within five (5) Business Days of receipt of the MTC Backup Servicing Information for any calendar month, MTC shall store the MTC Backup Servicing Information via secure file transfer protocol (SFTP) and send written confirmation of receipt and storage to Client. MTC will provide Client with a certificate stating that the complete set of MTC Backup Servicing Information has been received for such month (the “MTC Monthly Backup Servicing File”), and that MTC is able to begin servicing of the Investors within thirty (30) days of receipt of such MTC Monthly Backup Servicing File. (c) Backup Servicers shall, upon the execution of this Agreement, perform the one-time setup activities set forth on Exhibit C. (d) Backup Servicers shall, on an ongoing basis during the Term and after the Appointment Effective Date and until this Agreement is terminated in accordance with the terms of herein, perform the activities set forth on Exhibit D. 3. Appointment and Obligations as Successor Servicers. (a) During the Term, upon written notice from an authorized representative of Client or a party designated by Client pursuant to the form attached hereto as Exhibit E to each of First Associates and MTC, First Associates and MTC shall be appointed to act as successor servicers (the “Successor Servicers”) of the Loans and Investors, respectively. Client or an authorized representative of Client shall give written notices of such appointment in the form attached hereto as Exhibit F upon one of the following events (each, a “Triggering Event”): (i) Client’s inability to pay its debts and obligations as they become due, as determined by Client in its sole discretion, (ii) any event rendering Client unable to perform its loan servicing activities with respect to the Loans, as determined by Client in its sole discretion, or (iii) a Bankruptcy Event. Upon the occurrence of a Triggering Event, Client shall promptly give such written notice. Within three (3) business days of giving such written notice, Client shall provide or make available for retrieval or download, to the extent not already done so, the information necessary to enable First Associates to initiate automated clearing house (ACH) transfers from Obligor bank accounts for all Loans and shall provide or make available for retrieval, to the extent not already done so, all Collateral Package Items and Backup Servicing Information. Within twenty (20) business days of Backup Servicers’ receipt of the foregoing documentation, Backup Servicers shall assume their respective obligations and duties as set forth in the Servicing Agreement and as set forth in this Agreement. The date on which Backup Servicers assume these obligations and duties shall be the “Appointment Effective Date.” For the avoidance of doubt and notwithstanding anything to the contrary herein, Backup Servicers shall have no duty to assume the obligations and duties as set forth in the Servicing Agreement and as Successor Servicers under this Agreement until Backup Servicers have received the documentation as set forth above. If requested by Client in writing, Backup Servicers shall deliver at such time such written instruments of acceptance of appointment as Successor Servicers. On and after the Appointment Effective Date, Backup Servicers shall serve as Successor Servicers pursuant to the terms of this Agreement and the Servicing Agreement.

 
- 4 - (b) Upon the appointment of Backup Servicers as Successor Servicers, Client shall: (i) provide or make available for retrieval or download copies of all authentic Obligor Loan documentation in its possession to First Associates; (ii) use commercially reasonable efforts to assign at First Associate’s request, unless otherwise prohibited by applicable law or contract, all collections services agreements with third parties with respect to the Loans to First Associates in its capacity as Successor Servicer. (iii) direct Obligors and Investors to First Associates and MTC, as applicable, for servicing of the Loans and Investors. (c) Upon the appointment of Backup Servicers as Successor Servicers, First Associates and MTC will perform the following activities: (i) First Associates, in its role as a Successor Servicer, shall be ready, willing and able to assume, and shall assume, all obligations and duties required of “Servicer” under the Servicing Agreement, as such obligations and duties pertain to the collections of Obligor payments, and conduct such activities as Successor Servicer under this Agreement and “Servicer” under the Servicing Agreement using a standard of care and diligence customary in the consumer loan servicing industry. Such obligations of First Associates as Successor Servicer, include but are not limited to: (a) maintaining one bank account which it will instruct Obligors to send payments due under the terms of each Loan; (b) attempting to collect Obligor payments from the address listed in the applicable Obligor Loan documentation; (c) maintaining a toll free number (staffed between normal business hours during its regular business days) for Obligors and Investors to call with inquiries with respect to the Loans, and responding to such inquiries; (d) responding to inquiries by regulatory authorities with respect to the Loans; (e) investigating and maintaining collection procedures for delinquencies; (f) processing payments provided by Obligors on the Loans; (g) remitting payments made by Obligors on the Loans to MTC for final disbursement to Investors in the Loans. (ii) MTC, in its role as a Successor Servicer, shall be ready, willing and able to assume, and shall assume, all obligations and duties required of “Servicer” under the Servicing Agreement, as such obligations and duties pertain to the disbursement of Obligor payments to Investors in the Loans, and shall exercise diligence, prudence and reasonable care in carrying out its duties and obligations under this Agreement. Such obligations of MTC as Successor Servicer, include but are not limited to: (a) setting up accounts for each Investor holding a Loan being serviced by Successor Servicers hereunder; (b) receiving remittances of Obligor payments from First Associates; (c) disbursing Obligor payments, including principal, interest, liquidation proceeds and any other collections from Loans required to be deposited to the applicable Investor accounts or transferred to Investors pursuant to the Servicing Agreement; (d) maintaining a toll free number (staffed between normal business hours during its regular business days) for Obligors and Investors to call with inquiries with respect to the Loans, and responding to such inquiries; (e) responding to inquiries by regulatory authorities with respect to the Loans and (f) implementing tax reporting capabilities for Investors in accordance with applicable law. (iii) First Associates will remit funds from payments made by Obligors to MTC on a daily

 
- 5 - basis. Such remittances will be accompanied by a daily file identifying which Loans the funds apply to. MTC shall identify which Investors funds should be ultimately disbursed to. (iv) First Associates and MTC shall cooperate and communicate with one another as reasonably necessary in carrying out their obligations under clauses (i)-(iii) above. Each of First Associates and MTC will use its reasonable best efforts to fulfill its obligations as a Successor Servicer, as respectively described in clauses (i) and (ii) above. Each of First Associates and MTC will use its reasonable best efforts to direct Obligors and Investors to one another as is appropriate. (d) Additional Obligations. (i) Upon becoming Successor Servicer, First Associates shall enter into and maintain such NACHA agreements and other arrangements necessary to ensure that First Associates may initiate ACH transfers from Obligor bank accounts. First Associates shall maintain one bank account which it will use for all ACH payments from Obligors. First Associates hereby acknowledges that it has reviewed the form ACH authorization attached hereto as Exhibit H and agrees that such ACH authorizations provided by Client to First Associates are transferable to First Associates and would be valid upon such transfer or upon a transfer in connection with an Annual Test in accordance with Section 7 of this Agreement. (ii) In the execution of its duties hereunder, Backup Servicers shall obtain and maintain all appropriate licenses to conduct their business in compliance with all applicable legal and regulatory requirements. Except as provided herein, however: (a) Backup Servicers shall have no obligation to supervise, verify, monitor or administer the performance of Client and shall have no liability for any action taken or omitted by Client and (b) Backup Servicers shall have no liability for any losses incurred as a result of incomplete or inaccurate data provided to Backup Servicers by Client or any other prior servicer, any matter resulting from and relating to the origination of the Loans, errors made by prior vendors or servicers, or ACH authorizations executed by Client or other parties. All references to a “Purchaser Online Account” in the Servicing Agreement shall be eliminated and Backup Servicers shall have no obligations with respect to any “Purchaser Online Account.” Such elimination shall have no bearing on Backup Servicers’ responsibility to properly remit funds to purchasers or Investors of any Loans. Backup Servicers acknowledge that the Servicing Agreement may be subject to change by Client from time to time. Client shall promptly notify Backup Servicers of such changes. (iii) First Associates and MTC each agree to maintain at their sole expense the following insurance coverage during the term of this Agreement: (a) all insurance required by federal, state, or local law and statute, including worker’s compensation insurance; (b) employer’s general liability insurance of $2,000,000 per claim and in the aggregate; and (c) errors & omissions insurance of $2,000,000 per claim and in the aggregate. (iv) Client shall use commercially reasonable efforts to consult fully with MTC and First Associates as may be necessary from time to time for MTC and First Associates to perform or carry out its obligations hereunder, unless otherwise prohibited by law or contract. (v) Client hereby represents, warrants and covenants to Backup Service Providers that Client:

 
- 6 - A. is in compliance in all material respects with applicable provisions of the USA PATRIOT Act, including: maintaining an anti-money laundering compliance program (an “AML Program”) designed to detect and deter money-laundering activities; maintaining and implementing policies and procedures designed to screen and monitor Obligors and Investors against applicable regulatory and/or governmental agency control lists (i.e. Office of Foreign Asset Control); and obtaining an appropriate audit at least annually with respect to the AML Program and such policies and procedures; B. Client will not knowingly submit payment directions for any person or entity identified in any list of known or suspected terrorists published by any United States government agency (collectively, as such lists may be amended or supplemented from time to time, the “Blocked Persons Lists”) including, without limitation (a) the annex to Executive Order 13224 issued on September 23, 2001, and (b) the Specially Designated Nationals List published by the Office of Foreign Assets control; C. upon the reasonable request of a Backup Servicer, which request shall be made no more frequently than annually, Client shall provide a certificate, in a form mutually agreeable to Client and such Backup Servicer (provided that a third party attestation pertaining to such certificate will not be required), with respect to compliance with the AML Program and such policies and procedures; D. Client will cooperate with MTC with respect to any governmental inquiry or investigation relating to MTC’s services provided pursuant to this Agreement; and E. upon MTC’s determination that any Investor appears to match a person or entity on the Blocked Persons Lists (a “Potential Match”), Client acknowledges and agrees that MTC will not send payments to a Potential Match unless or until MTC is able to confirm that the Potential Match is not on the Blocked Persons Lists. 4. Backup Servicer’s Fees. Fees to be paid to First Associates shall be as set forth in the attached Exhibit A1. Fees to be paid to MTC shall be as set forth in the attached Exhibit A2. 5. Access to Records. (a) Each of the Backup Servicers shall afford to Client and its employees, agents, accountants, representatives, counsel and advisors, reasonable access during normal business hours to the books, records, documents and other information concerning the Loans and the conduct and performance of the Backup Servicers of their obligations hereunder. 6. Representations and Warranties. Each of the Backup Servicers hereby, separately and individually, make the following representations and warranties as of the date hereof: (a) Organization and Good Standing. First Associates is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Delaware. MTC is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Illinois. (b) Due Qualification. It is, and during the term of this Agreement shall be, duly qualified to do business and, where necessary, in good standing as a foreign limited liability company (or is exempt from such requirements)., and First Associates has obtained and will maintain all necessary licenses

 
- 7 - and approvals in each jurisdiction in which the servicing of the Loans requires such qualification except where the failure to so qualify or obtain such licenses and approvals would not have a material adverse effect on its ability to perform its obligations under this Agreement. (c) Due Authorization. It has duly authorized, by all necessary action on its part, the execution and delivery of this Agreement and the consummation of the transactions provided for or contemplated by this Agreement. (d) No Conflict. Its execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement and the fulfillment of the terms hereof applicable to it will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which it is a party or by which it or its properties are bound. (e) No Violation. Its execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement and its fulfillment of the terms hereof applicable to it will not conflict with or violate any law applicable to it. (f) No Proceedings. There are no proceedings pending or, to the best of its knowledge, threatened or investigations pending or threatened against it before or by any governmental authority (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, (iii) seeking any determination or ruling that would reasonably be expected to materially and adversely affect its performance of its obligations under this Agreement or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement. If such a proceeding is initiated against Backup Servicer during the Term, Backup Servicer shall promptly notify Client of such proceeding. (g) All Consents Required. All material authorizations, consents, orders, approvals, licenses or other actions of any governmental authority required to be obtained or effected by it in connection with its execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement and the fulfillment of the terms hereof applicable to it have been duly obtained or effected and are in full force and effect. (h) Enforceability. This Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms hereof, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect affecting the enforcement of creditors’ rights and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). (i) Preservation of Security Interests. First Associates will defend the Loans against all persons, claims, and demands whatsoever. First Associates shall not assign, sell, pledge, or exchange, or in any way encumber or otherwise dispose of the Loans, except as expressly permitted under this Agreement. (j) No Ownership Interest. Except as set forth in this Agreement, it does not have any ownership or other interest in the underlying assets, payment streams, equipment, legal documents, or other tangible or intangible assets of the Loans. (k) Compliance with Laws. It has complied, and at all times during the term of this Agreement shall comply, with all applicable federal, state and local laws, regulations and rules (“Applicable Law”). It is responsible for (i) monitoring, interpreting and complying with Applicable Law, (ii) determining the particular actions, disclosures, notices, formulas, calculations, and procedures required to ensure the services provided under this Agreement are provided in compliance with Applicable Law, and (iii)

 
- 8 - maintaining an ongoing program for compliance with Applicable Law. (l) FCPA. It is aware of and familiar with the provisions of the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and will act in compliance with and take no action and make no payment in violation of, or which might cause it or Servicer and each of their respective directors, officers, employees, or agents to be in violation of the FCPA. (m) Audit Report and Audit Rights. During the term of this Agreement, each of the Backup Servicers shall have an audit conducted by a reputable third-party accounting firm regularly servicing the books and records of such party or nationally-recognized independent third-party audit firm, that describes such party’s security and control policies and procedures and is in the form as described in the then- current Statement on Standards for Attestation Engagements 16 Report (the “SSAE 16 Report”), which audit report shall at all times be no more than one (1) year old and shall certify that such party is in compliance with the minimum servicing standards as described in the SSAE 16 Report. A copy of such audit report has been delivered by each of the Backup Servicers to Client. Each of the Backup Servicers shall deliver an updated SSAE 16 Report to Client on an annual basis. Each of the Backup Servicers further agree that during the Term, upon Client's written request and at Client’s expense, Client or Client's authorized representative shall be permitted to inspect and make copies of any and all records relating to each Backup Servicer’s performance of its duties hereunder; provided that any such inspection shall take place during regular business hours and Client provides Backup Servicers with reasonable advance written notice. 7. Annual Testing. Once per calendar year in the month of August, Client shall have the right to conduct a test (an “Annual Test”) of Backup Servicers’ abilities to assume their responsibilities as Successor Servicers. The Annual Test will consist of (i) a temporary test transfer of Obligor loan documentation for a sample of one hundred (100) Loans to Backup Servicers and (ii) a demonstration by each of Backup Servicers of their ability to successfully load such sample of Loans onto their systems. Client and each of the Backup Servicers shall agree on the date of the Annual Test no fewer than thirty (30) days prior to conducting an Annual Test and any testing activities shall take place during regular business hours. The parties shall work together to ensure that the Annual Test is conducted in a reasonable, efficient and timely manner. Upon the conclusion of the Annual Test, each of the Backup Servicers shall permanently delete or transfer back to Client all Obligor Loan documentation that was transferred for purposes of the Annual Test. 8. Online Capabilities for Borrowers. Within sixty (60) days of becoming and assuming the responsibilities of Successor Servicer, First Associates shall allow Obligors with outstanding Loans to securely log in to a website maintained by First Associates to view, at a minimum, their outstanding loan balances, Obligor Loan statements, interest rate, current amount due or overdue and date due. Such website will also allow Obligors the ability to securely make payments to their loans online. 9. Online Capabilities for Investors. Within sixty (60) days of becoming and assuming the responsibilities of Successor Servicer, MTC shall allow Investors in Loans to securely log into a website maintained by MTC to view, at a minimum, their current investments in Loans and details on each of their investments including interest rates, due dates and outstanding loan balances. Such website will also allow Investors the ability to change their bank accounts information for disbursements and address. 10. Background Checks and Verifications. Prior to any of Backup Servicers’ employees, agents, representatives, or consultants (“Backup Servicer Personnel”) performing Backup Servicers’ obligations and duties under this Agreement, each of the Backup Servicers shall provide Client with copies of its policies and procedures for the performance of criminal background checks on Backup Servicer Personnel and compliance with all applicable immigration and employment laws. Each of

 
- 9 - the Backup Servicers hereby represents, warrants and covenants to Client that it is in material compliance with such policies and procedures. 11. Business Continuity Plans and Disaster Recovery Plans. Each of the Backup Servicers agree to maintain a written business continuity plan and a written disaster recovery plan. Each of the Backup Servicers will update the business continuity plan and disaster recovery plan at least annually. Upon request by Client, each of the Backup Servicers will provide Client with a description of such party’s business continuity plan and disaster recovery plan procedures as they relate to the recovery and resumption of its performance of its obligations under this Agreement. 12. Initial and Ongoing Due Diligence. The existence and terms of this Agreement and any information shared among the parties hereto in connection with this Agreement shall be considered Confidential Information (as defined in Exhibit G hereto) of each party, provided that Client may (i) in accordance with its risk management policies and procedures, furnish a copy of this Agreement to WebBank (and any successor party thereto or other originating bank); (ii) furnish a copy of this Agreement to the holder of an accountholder’s debt following a written request by such holder and (iii) include this Agreement in its public filings, provided that any terms concerning pricing and fees will be redacted. 13. Ownership and Use of Client Information. Backup Servicers agree that Client is, and shall be the sole and exclusive owner of all right, title and interest in and to any information, documents, work product and materials (including, but not limited to Backup Servicing Information and Collateral Package Items) provided by Client to Backup Servicers pursuant to this Agreement, including all intellectual property rights therein. 14. Restrictions on Use of Client Information. Backup Servicers agree to not use any information, documents, work product and materials (including, but not limited to Backup Servicing Information and Collateral Package Items) provided by Client to Backup Servicers under this Agreement for any purpose outside the scope of this Agreement. 15. Indemnity by Client. Client agrees to defend, indemnify and hold Backup Servicers and their respective affiliates, officers, directors, managers, members, employees or agents harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, fees, and expenses (collectively, “Losses”) incurred by Backup Servicers and arising as a result of (i) the breach of this Agreement by Client, (ii) Client’s failure to comply in all material respects with requirements of applicable federal, state and local laws and regulations, in performing its obligations hereunder or in connection with the Loans or the Investors, (iii) the gross negligence or willful misconduct of, or action taken in bad faith by, Client or (iv) any failure of the representations and warranties made by Client hereunder or in connection herewith to be true and correct in all material respects when made. The indemnities in this Section 15 shall survive the termination of this Agreement or the removal or resignation of either Backup Servicer. 16. Limitation of Liability and Indemnification by Backup Servicers. (a) In conjunction with Backup Servicers’ obligations hereunder, Backup Servicers are authorized to accept and rely on all the accounting, records and work of Client. The degree of examination of such accounting, records, and work which Backup Servicers reasonably deem necessary to complete any conversion and portfolio transfer in connection with Backup Servicers becoming Successor Servicers shall not be construed as a representation by Backup Servicers of the accuracy of such accounting, records, and work. (b) Each of Backup Servicers shall defend, indemnify and hold Client and its affiliates, beneficiaries, trustees, members, managers, officers, employees, representatives, directors and agents harmless

 
- 10 - against any and all Losses incurred by Client and arising as a direct result of (i) the gross negligence or willful misconduct of, or action taken in bad faith by, such Backup Servicer, (ii) such Backup Servicer’s failure to comply in all material respects with requirements of applicable federal, state and local laws and regulations, in performing its obligations hereunder, (iii) the breach of this Agreement by such Backup Servicer, or (iv) any failure of the representations and warranties made by such Backup Servicer hereunder or in connection herewith to be true and correct when made. Each Backup Servicer and any of its members, managers, officers, employees or agents may rely in good faith on any document of any kind prima facie properly executed and submitted by any person respecting any matters arising hereunder. Neither party will be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its responsibilities hereunder and that in its reasonable opinion may involve it in any expense or liability to be incurred under this Agreement. The indemnities in this Section 16(b) shall survive the removal or resignation of either Backup Servicer. (c) Except for the obligations undertaken by Backup Servicers in this Agreement, Backup Servicers will have no obligation to take any action, or to perform any of the duties of Client until such time as Backup Servicer has become a Successor Servicer. (d) Backup Servicers offer no representations concerning, and shall have no liability hereunder with respect to, the collectability, enforceability or other characteristics of the Loans. The parties shall have no responsibility and shall not be in default hereunder nor incur any liability for any failure, error, malfunction or any delay in carrying out any of its duties under this Agreement if any such failure or delay results from acts of God, war or terrorism, insurrection, strikes, stoppages of labor, power or equipment failure or malfunction (including that of any common carrier or transmission line), loss or malfunction of communications or computer (hardware or software) services, emergency conditions, tornado, flood, fire, earthquake or similar event, adverse weather conditions or any other any cause or circumstances, directly or indirectly, beyond Backup Servicers’ control or for information prepared or supplied by any party other than the Backup Servicers as contemplated hereunder or the failure of any such person to prepare or provide such information. (e) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT, THERE ARE NO WARRANTIES MADE BY ANY BACKUP SERVICER HEREUNDER. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL BACKUP SERVICER OR CLIENT BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, PUNITIVE, INCIDENTAL OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO DAMAGES FOR LOSS OF CURRENCY, FUNDS, DATA, PROFITS OR GOODWILL, REGARDLESS OF WHETHER ANY BACKUP SERVICER OR CLIENT HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. 17. Term. This Agreement shall commence as of the Effective Date and will continue for a period of two (2) years after the Effective Date (the “Initial Term”). The Initial Term may be extended for one (1) additional year upon mutual written agreement between the parties (the “Term Extension”). Upon expiration of the Term Extension, this Agreement shall be automatically renewed and shall continue in full force and effect until terminated as provided in Section 18. Notwithstanding the foregoing, this Agreement shall not expire pursuant to the terms of this Section 17 after the Appointment Effective Date and Backup Servicer has assumed its duties as Successor Servicer. After the Appointment Effective Date, this Agreement shall only terminate once all Loans are fully paid and distributed in accordance with this Agreement and the Servicing Agreement, fully charged off or otherwise completely liquidated. 18. Termination.

 
- 11 - (a) Before the Appointment Effective Date, the parties may terminate this Agreement as follows: (i) Client may terminate this Agreement (i) upon written notice to Backup Servicers if either Backup Servicer commits a material breach of this Agreement, which breach has not been cured within thirty (30) days of written notice of said breach being sent to such Backup Servicer, (ii) upon the occurrence of the gross negligence or willful misconduct of either Backup Servicer, or (iii) at any other time, with or without cause, upon ninety (90) days advance written notice to Backup Servicers. (ii) Client may terminate this Agreement for convenience during the Initial Term or the Term Extension, if applicable, by providing Backup Servicers with thirty (30) calendar days’ prior written notice of its intention to terminate this Agreement. Backup Servicers shall continue to provide the services and shall be compensated per the terms of this Agreement during such thirty (30) day period. (iii) Following the expiration of the Initial Term or the Term Extension, if applicable, Client may terminate this Agreement for convenience by providing Backup Servicers with sixty (60) calendar days’ prior written notice of its intention to terminate this Agreement. Backup Servicers shall continue to provide the services and shall be compensated per the terms of this Agreement during such sixty (60) day period. (iv) Following the expiration of the Initial Term or the Term Extension, if applicable, either Backup Servicer may terminate this Agreement for convenience by providing the other parties with one hundred twenty (120) calendar days’ prior written notice of its intention to terminate this Agreement. Backup Servicers shall continue to provide the services and shall be compensated per the terms of this agreement during such one hundred twenty (120) day period. (b) Before the Appointment Effective Date, either Backup Servicer may terminate this Agreement, by written notice to the other parties hereto, if it does not receive any payment required by a previously submitted invoice, to be made to it by Client under the terms of this Agreement, which failure continues unremedied for a period of thirty (30) days after written notice of such failure shall have been given to Client. (c) This Agreement will be automatically and immediately terminated upon the occurrence of any of the following conditions: (i) the entry with respect to either Backup Servicer of a decree or order for relief by a court or agency or supervisory authority having jurisdiction under any present or future federal or state bankruptcy, insolvency or similar law; (ii) a conservator, receiver or liquidator is appointed with respect to either Backup Servicer in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings; or (iii) Either Backup Servicer is unable to pay its debts generally as they become due, or files a petition to take advantage of any applicable bankruptcy, insolvency or reorganization statute. 19. Backup Servicer Not to Resign. Backup Servicers shall not resign from the obligations and duties hereby imposed on it except by mutual written consent of both Backup Servicers and Client or upon the determination that its duties hereunder are no longer permissible under Applicable Law. Any such determination permitting the resignation of a Backup Servicer must be in the reasonable determination of such Backup Servicer and must be accompanied by a certificate of an authorized officer of such Backup Servicer and an opinion of outside counsel to such Backup Servicer

 
- 12 - reasonably acceptable to Client certifying as to the basis of such impermissibility under Applicable Law. 20. Confidential Information. Backup Servicers will preserve the confidentiality of any non-public information obtained by it in connection with its performance of its responsibilities hereunder; provided, however, that nothing herein shall prevent a Backup Servicer from disclosing such information to (a) such Backup Servicer’s managers, officers, members, employees, agents, subservicers and professional consultants in connection with such Backup Servicer’s obligations under this Agreement, provided that such persons are informed of the confidential nature of such information and instructed to keep such information confidential (provided that, in any event, such Backup Servicer shall be responsible for any breach of this Agreement by such parties), (b) any federal or state regulatory agency having jurisdiction over such Backup Servicer, (c) any federal or state regulatory agency or governmental authority to which such disclosure is required (1) to effect compliance with any law, rule, regulation or order applicable to such Backup Servicer, (2) in response to any subpoena or legal process, (3) in connection with any litigation or adversary proceedings to which such Backup Servicer or any other party hereto is a party, or (4) as required to execute and administer this Agreement, (d) to the extent such information becomes public through no act or fault of such Backup Servicer or (e) to each other to allow each Backup Servicer to carry out their duties under this Agreement. In the case of any disclosure permitted by clause (b) or (c), such Backup Servicer shall use commercially reasonable efforts to (x) provide Client with advance notice of any such disclosure and (y) cooperate with Client in Client’s efforts to limit the extent or effect of any such disclosure. To the extent that any information provided to either Backup Servicer in connection with this Agreement meets the definition of “non-public personal information” as that term is defined in Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. Section 6801 et seq. (the “GLB Act”) and/or is subject to protection under any federal or state statute, rule, regulation or guideline relating to privacy (including, but not limited to, the GLB Act and each federal or state rule, regulation or guideline implementing requirements of that statute) (“NPI Rules”), Backup Servicers shall treat such information as confidential and in accordance with the terms of the GLB Act and the NPI Rules, regulations and guidelines implementing requirements thereof and the exchange, transfer and storage of such information shall be subject to the terms of Exhibit G attached hereto. This Section 20 shall survive the termination of this Agreement or the removal or resignation of either Backup Servicer. 21. Counterparts. This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. The parties agree that this Agreement and signature pages may be transmitted between them by facsimile or by electronic mail and that faxed and PDF signatures may constitute original signatures and that a faxed or PDF signature page containing the signature (faxed, PDF or original) is binding upon the parties. 22. Subcontracting. If either Backup Servicer outsources any activities in the delivery of services under this Agreement to any suppliers (subcontractors), such Backup Servicer shall remain fully liable and responsible for the work to be performed by its subcontractors and shall be responsible for compliance and management by such subcontractors with this Agreement. Notwithstanding the foregoing, Backup Servicers each agree that all of Client’s data (including, but not limited to Confidential Information and Obligor Loan documentation) shall reside in the United States. 23. Governing Law; Jurisdiction. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. (b) EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND

 
- 13 - ITS PROPERTY, TO THE FOLLOWING PROVISIONS OF THIS SECTION 23(b): (i) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY CALIFORNIA STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE STATE OF CALIFORNIA, AND ANY APPELLATE COURT THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. (ii) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF CALIFORNIA. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (iii) EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR CLIENT ENTERING IN TO THIS AGREEMENT. (iv) EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SECTION 25 HEREOF. 24. Waiver. No term or provision of this Agreement may be waived except by a formal written instrument signed (and not by an email or series of emails) by duly authorized officers of the party against whom such waiver is sought. The failure by Client to insist at any time upon strict compliance with this agreement or with any of the terms of the agreement or any continued course of such conduct on its part will not constitute or be considered a waiver by Client, as applicable, of any of its rights or privileges. A waiver or consent, express or implied, of or to any breach or default by any party in the performance by that party of its obligations with respect to the agreement is not a waiver or consent of or to any other breach or default in the performance by that party of the same or any other obligations of that party. 25. Notices. (a) Subject to Section 25(c) below, all notices and other communications provided for herein shall be in writing and shall be delivered either by hand, by overnight courier service, by certified or

 
- 14 - registered mail, by telefacsimile or by email (in portable document format (“pdf”) or tagged image file format (“TIFF”)) as follows: (i) in the case of Client: LendingClub Corporation 71 Stevenson Street, Suite 300 San Francisco, CA 94105 Attention: Legal Department (ii) in the case of First Associates: First Associates Loan Servicing, LLC 15373 Innovation Drive, Suite 300 San Diego, CA 92128 Attention: Laurence Chiavaro, Executive Vice President Facsimile No.: (858) 999-3064 Email: lchiavaro@1stassociates.com (iii) in the case of MTC: Millennium Trust Company, LLC 2001 Spring Road, Suite 700 Oak Brook, IL 60523 Attn: General Counsel Facsimile No.: (630) 368-5612 Email: jperugini@mtrustcompany.com (b) Any party hereto may change its address, facsimile number or email address for notices and other communications hereunder by notice to all of the other parties hereto in accordance with Section 25(a) above. (c) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given (i) in the case of notices and other communications delivered by hand or overnight courier service, upon actual receipt thereof, (ii) in the case of notices and other communications delivered by certified or registered mail, upon the earlier of actual delivery and the third Business Day after the date deposited in the U.S. mail with postage prepaid and properly addressed, provided, that no notice or communication to either party shall be effective until actually received by either party, (iii) in the case of notices and other communications delivered by telefacsimile, upon receipt by the sender of an acknowledgment or transmission report generated by the machine from which the telefacsimile was sent indicating that the telefacsimile was sent in its entirety to the recipient’s telefacsimile number and (iv) in the case of notices and other communications delivered by email, upon receipt by the sender of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, a return email or other written acknowledgement), provided, that no notice or communication to either party shall be effective until receipt by the sender of written confirmation of receipt affirmatively initiated by either party; provided, however, that in each case, if a notice or other communication would be deemed to have been given in accordance with the foregoing at any time other than during the recipient’s normal business hours on a Business Day for such recipient, such notice or other communication shall be deemed given on the next succeeding Business Day for such recipient; and provided, further, that no notice to either party shall be effective until delivered by at least two, not one, of the methods described in clauses (i) through (iv) above.

 
- 15 - (d) Each party acknowledges and agrees that the use of electronic transmission in general, and email in particular, is not necessarily secure and that there are risks associated with the use thereof, including risks of interception, disclosure and abuse, and each indicates it assumes and accepts such risks by hereby authorizing the use of electronic transmission. 26. Successors and Assigns. This Agreement shall inure to the benefit of the respective successors and permitted assigns of each party and their respective permitted successors and assigns and the obligations and liabilities assumed in this agreement by the parties hereto shall be binding upon their respective successors and permitted assignees. This Agreement shall not be assigned, pledged or hypothecated by any party without the prior written consent of the other parties, and any such assignment, pledge or hypothecation shall be void without such prior written consent. 27. Further Assurances. The parties hereto agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other parties hereto in order to effect more fully the purposes of this Agreement. 28. Integration. This Agreement contains the entire agreement of the parties with respect to the engagement of the Backup Servicers with respect to the Loans and supersedes all prior negotiations, agreements and understandings with respect thereto, both written and oral. This Agreement may not be contradicted or supplemented by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten or oral agreements between the parties. 29. Independent Contractor. No Joint Venture or Partnership. Each of Backup Servicers are independent contractors and shall perform the services called for under this Agreement as such, and not as the agent, employee or servant of any other party hereto. Each party (including any of its respective permitted successors and assigns) acknowledges and agrees that such party will not hold itself out as an agent, partner or joint venture of any other party, and that this Agreement and the transactions contemplated hereby are not intended and do not give rise now or in the future to an agency, partnership, joint venture or other type of relationship between the parties. 30. Severability. All provisions of this Agreement are severable, and the unenforceability or invalidity of any of the provisions of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement. Should any part of this Agreement be held invalid or unenforceable in any jurisdiction, the invalid or unenforceable portion or portions shall be removed (and no more) only in that jurisdiction, and the remainder shall be enforced as fully as possible (removing the minimum amount possible) in that jurisdiction. In lieu of such invalid or unenforceable provision, the parties hereto will negotiate in good faith to add automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. 31. Survival. Sections 15, 16, 20, 23 and 25 through 33 shall survive the expiration, cancellation, or other termination of this Agreement. 32. No Publicity. Except as set forth in Section 12 of this Agreement, Neither party shall issue or release any announcement, statement, press release or other publicity or marketing materials relating to the terms of this Agreement without the prior written consent of the other party. 33. Amendment. No modification, amendment, or waiver of any provision of, or consent required by, this Agreement, nor any consent to any departure herefrom, shall be effective unless it is in writing and signed by authorized officers of each of the parties hereto. Such modification, amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

 
- 16 - (Signature page follows)

 
IN WITNESS WHEREOF, each of the parties has duly executed this Fractional Loans Backup Servicing Agreement as of the date first written above. FIRST ASSOCIATES: CLIENT: First Associates Loan Servicing, LLC By: /s/ David Johnson Name: David Johnson Title: CEO LendingClub Corporation By: /s/ Sameer Gulati Name: Sameer Gulati Title: COO MTC: Millennium Trust Company, LLC By: /s/ Meg Zwick Name: Meg Zwick Title: Sr. Vice President Signature Page to Fractional Loans Back-Up Servicing Agreement

 
Exhibit A1 First Associates Fees Up and until the Appointment Effective Date, the following fees shall be payable by Client to First Associates as follows: For an outstanding Loan portfolio value of up to $[***] in principal balance, the ongoing monthly fee to First Associates shall be $[***]. If the outstanding portfolio value for the Loans exceeds $[***], the parties will negotiate pricing in good faith for such Loans in excess of $[***]. After the Appointment Effective Date: First Associates will charge an ongoing servicing fee of $[***] to be paid by the respective Investors of each Loan, provided, that if First Associates is unable to charge the foregoing respective amounts, First Associates shall not be required to perform the servicing activities set forth in this Agreement with respect to such Loan. In such a circumstance, Client shall not be held responsible and First Associates shall not be entitled to terminate or claim a breach of this Agreement by Client on such basis. The fees set forth herein are stated in U.S. Dollars, and all invoicing by First Associates and Client payments hereunder shall also be in U.S. Dollars. First Associates shall submit an invoice to Client for the following month’s fees, and Client shall pay outstanding invoices within thirty (30) days of receipt or incur interest charges of [***] on any outstanding balance owed. In the event of a servicing transfer and once First Associates assumes Successor Servicer duties, any applicable fees hereunder will no longer accrue. The terms of this Exhibit A1 shall be considered Client’s Confidential Information, as defined in Exhibit G of the Agreement, and First Associates shall not be permitted to disclose any portion of this Exhibit A1 to any third party (including but not limited to MTC).

 
Exhibit A2 MTC Fees Up and until the Appointment Effective Date, the following fees shall be payable by Client to MTC as follows: For an outstanding Loan portfolio value of up to $[***] in principal balance, the ongoing monthly fee to MTC shall be $[***]. If the outstanding portfolio value for the Loans exceeds $[***], the parties will negotiate pricing in good faith for such Loans in excess of $[***]. After the Appointment Effective Date: MTC will charge an ongoing servicing fee of $[***] to be paid by the respective Investors of each Loan, provided, that if MTC is unable to charge the foregoing respective amounts, MTC shall not be required to perform the servicing activities set forth in this Agreement with respect to such Loan. In such a circumstance, Client shall not be held responsible and MTC shall not be entitled to terminate or claim a breach of this Agreement by Client on such basis. The fees set forth herein are stated in U.S. Dollars, and all invoicing by MTC and Client payments hereunder shall also be in U.S. Dollars. MTC shall submit an invoice to Client for the following month’s fees, and Client shall pay outstanding invoices within thirty (30) days of receipt or incur interest charges of [***] on any outstanding balance owed. In the event of a servicing transfer and once MTC assumes Successor Servicer duties, any applicable fees hereunder will no longer accrue. The terms of this Exhibit A2 shall be considered Client’s Confidential Information, as defined in Exhibit G of the Agreement, and MTC shall not be permitted to disclose any portion of this Exhibit A2 to any third party (including but not limited to First Associates).

 
Exhibit B Collateral Package Items 1. Loan Documents • Borrower Agreement • Credit Score Notice 2. Truth in Lending Disclosures (Estimated and Final) 3. Client Terms of Use and Consent to Electronic Transactions and Disclosures 4. Obligor Bank Account Verification & Debit Authorization 5. Promissory Note 6. Privacy Notice 7. Loan Agreement

 
EXHIBIT C ONE TIME SETUP ACTIVITIES First Associates shall perform the following one-time setup activities within a reasonable time of execution of this Agreement:  Onsite review of Client’s loan servicing processes and procedures.  Review of Client’s loan servicing functions, including procedures for payment processing, collections, cash management and information systems.  Work with Client to define electronic CSV data transfer files for comprehensive daily data transfer.  Receive and archive all borrower ACH information and authorizations from Client as set forth in the Agreement.  Receive from Client and onboard the initial comprehensive daily data transfer. MTC shall perform the following one-time setup activities within a reasonable time of execution of this Agreement:  Work with Client to define electronic CSV data transfer files for comprehensive daily data transfer.  Receive from Client and onboard the initial comprehensive daily data transfer.

 
EXHIBIT D BACKUP SERVICER ONGOING ACTIVITIES  Receive and onboard to data system comprehensive daily data transfer via CSV file.  Receive monthly servicer report from Client.  Reconcile and certify the monthly servicer report received from Client within five business days of the receipt of the month-end data file and the monthly servicer reports.  In the event of any discrepancy between the month-end file provided by Client and the related servicer report, promptly notify Client of such discrepancy.  Annual management meeting with Client to discuss items including, but not limited to servicing practices, policies, changes to platform.  Direct any of Client’s Investors requesting verification of Obligor Loan documents to the Document Management Platform, as applicable.  Receive and load Client’s Backup Servicing Information into Backup Servicers’ data systems pursuant to Section 2(b) of the Agreement.

 
EXHIBIT E NOTICE OF DESIGNATION ____________, 20__ [Address] Dear [_________________]: Reference is made to that certain Fractional Loans Backup Servicing Agreement, dated as of [_____________], 2017 (the “Agreement”), entered into by and between LendingClub Corporation, a Delaware corporation (“Client”), Millennium Trust Company, LLC, an Illinois limited liability company (“MTC”) and First Associates Loan Servicing, LLC, a Delaware limited liability company (“First Associates”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. Client hereby gives notice to [_____________] that [______________________] (“Designee”) is designated to appoint [_________] as Successor Servicer of the Loans. Designee may send the notice of appointment attached as Exhibit F to the Agreement. Client may revoke this notice of designation solely by written notice to [_________] as specified in the Agreement, received by [___________] prior to [____________]’s receipt of a notice of appointment attached as Exhibit F to the Agreement sent by Designee. Client has duly authorized, by all necessary action on its part, the execution and delivery of this notice of designation, and the signatory on behalf of Client represents and warrants that such signatory has been duly authorized to execute this notice of designation. Please contact ____________________ to discuss. Sincerely, LendingClub Corporation By: Name: Title: Acknowledged: DESIGNEE: By: Name: Title:

 
EXHIBIT F NOTICE OF APPOINTMENT ____________, 20__ [Address] Dear [___________________]: Reference is made to that certain Fractional Loans Backup Servicing Agreement, dated as of [_____________], 2017 (the “Agreement”), entered into by and between LendingClub Corporation, a Delaware corporation (“Client”), Millennium Trust Company, LLC, an Illinois limited liability company (“MTC”) and First Associates Loan Servicing, LLC, a Delaware limited liability company (“First Associates”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. Client hereby gives notice to [__________] that [___________] is appointed to act as Successor Servicer of the Loans. Pursuant to the terms of Section 3(a) of the Agreement, [_________] shall assume the obligations and duties as set forth in the Agreement and the Servicing Agreement. Client has duly authorized, by all necessary action on its part, the execution and delivery of this notice of appointment, and the signatory on behalf of Client represents and warrants that such signatory has been duly authorized to execute this notice of appointment. Please contact ____________________ to discuss. Sincerely, LendingClub Corporation By: Name: Title: _____________

 
EXHIBIT G 1. Definitions. For purposes of this Exhibit G: “Authorized Employees” means Backup Servicer employees. “Authorized Persons” means (i) Authorized Employees; and/or (ii) Backup Servicer’s contractors, agents, outsourcers and auditors who have access to Confidential Information or Highly Confidential Information, and who are bound in writing by confidentiality obligations sufficient to protect Confidential Information or Highly Confidential Information in accordance with the terms and conditions of this Agreement. "Confidential Information" means all non-public or proprietary information treated as confidential by a party that is not Highly Confidential Information, including but not limited to all information concerning a party’s past, present and future business affairs including finances, products, services, organizational structure, internal practices, forecasts and sales, corporate or departmental organizational charts, internal policies and procedures, information contained in intranet web pages, internal newsletters, training materials, business resumption plans, short-term business plans, security plans and policies, non-public corporate financial reports, internal audit reports, vendor contracts and bidding information. Confidential Information also includes all information that would be considered “Material Nonpublic Information” under the Securities Act of 1934 and the rules and regulations promulgated thereunder, (c) long-term business or marketing strategies or plans, (d) information with respect to proposed acquisitions, divestitures or joint ventures, (e) reports concerning significant exposures or risks, (f) security investigations or analyses, (g) documents labeled “Privileged” and/or “Confidential”, (h) non-public legal opinions or work product, (i) regulatory reports, (j) trade secrets, and (k) information with respect to a party’s workforce such as salaries, bonuses, performance reviews and contact or identification information "Disclosing Party" means a party that discloses Protected Information under this Agreement. “Highly Confidential Information” means all information with respect to a party’s customers (which, for the avoidance of doubt, with respect to Client, includes both borrowers and investors) or prospective customers meeting the definition of “Nonpublic personal information” under the Gramm-Leach-Bliley Act and the rules and regulations promulgated thereunder (including, without limitation, name, address, e-mail address, passwords, account numbers, personal financial information, personal preferences, demographic data, marketing data, other identification data, information that reflects use of or interaction with a party’s service including its websites and any data otherwise submitted in the process of registering for a party’s services). “Protected Information” means, collectively, Confidential Information and Highly Confidential Information. Protected Information shall not include information that: (a) is already known to the Receiving Party without restriction on use or disclosure prior to receipt of such information from the Disclosing Party; (b) is or becomes generally known by the public other than by breach of this Agreement by the Receiving Party; (c) is developed by the Receiving Party independently of, and without reference to, any Protected Information of the Disclosing Party; or (d) is received by the Receiving Party from a third party who is not under any obligation to the Disclosing Party to maintain the confidentiality of such information. "Receiving Party" means a party that receives or acquires Protected Information directly or indirectly under this Agreement.

 
“Security Breach” means (i) any unauthorized access to or disclosure or use of Highly Confidential Information under Backup Servicer’s control or in the possession of its Authorized Employees that requires notification under any applicable law; or (ii) any audit that indicates that the physical, technical, administrative or organizational safeguards put in place by Backup Servicer (or any Authorized Employees) that relate to the protection of the security, confidentiality or integrity of Highly Confidential Information are inadequate. 2. Standard of Care. (a) Backup Servicer acknowledges and agrees that, in the course of its engagement by Client, Backup Servicer may receive or have access to Highly Confidential Information. Backup Servicer shall comply with the terms and conditions set forth in this Agreement in its collection, receipt, access, transmission, storage, disposal, use and disclosure of such Highly Confidential Information and be responsible for the unauthorized collection, receipt, transmission, access, storage, disposal, use and disclosure of Highly Confidential Information under its control or in its possession by all Authorized Employees. Backup Servicer shall be responsible for, and remain liable to, Client for the actions and omissions of all Authorized Persons concerning the treatment of Highly Confidential Information as if they were Backup Servicer’s own actions and omissions. Backup Servicer shall require all its contractors, agents, outsourcers and auditors who have access to Confidential Information or Highly Confidential Information to execute a written agreement agreeing to comply with the terms and conditions of this Agreement relating to the treatment of Highly Confidential Information. (b) In the event of a conflict or inconsistency between this Section and the confidentiality sections of this Agreement, the terms and conditions set forth in this Section shall govern and control. (c) In recognition of the foregoing, Backup Servicer agrees and covenants that it shall: (i) keep and maintain all Highly Confidential Information in strict confidence, using such degree of care as is appropriate to avoid unauthorized access, use or disclosure; (ii) use and disclose Highly Confidential Information solely and exclusively for the purposes for which the Highly Confidential Information, or access to it, is provided pursuant to the terms and conditions of this Agreement, and not use, sell, rent, transfer, distribute, or otherwise disclose or make available Highly Confidential Information for Backup Servicer’s own purposes or for the benefit of anyone other than Client, in each case, without Client’s prior written consent; and (iii) not directly disclose Highly Confidential Information to any person other than its Authorized Persons with a need to access Highly Confidential Information for the purposes of enabling Backup Servicer to perform its obligations under this Agreement (each person other than an Authorized Person with a need to access Highly Confidential Information, an “Unauthorized Third Party”), without express written consent from Client unless and to the extent required by government authorities or as otherwise, to the extent expressly required, by applicable law, in which case, Backup Servicer shall (A) notify Client before such disclosure or as soon thereafter as reasonably possible; and (B) be responsible for and remain liable to Client for the actions and omissions of such Unauthorized Third Party concerning the treatment of such Highly Confidential Information as if they were Backup Servicer’s own actions and omissions; and (C) require the Unauthorized Third Party to whom Backup Servicer grants access to Highly Confidential Information to execute a written agreement agreeing to comply with the terms and conditions of this Agreement relating to the treatment of Highly Confidential Information. 3. Information Security.

 
(a) Backup Servicer represents and warrants that its collection, access, use, transmission, storage, disposal and disclosure of Highly Confidential Information does and will comply with all applicable federal, state, and relevant foreign privacy and data protection laws, as well as all other applicable regulations and directives. (b) Without limiting Backup Servicer’s obligations under Section 3(a), Backup Servicer shall implement administrative, physical and technical safeguards to protect Highly Confidential Information that are no less rigorous than accepted industry practices and shall ensure that all such safeguards, including the manner in which Highly Confidential Information is collected, accessed, used, transmitted, stored, processed, disposed of and disclosed, comply with applicable data protection and privacy laws, as well as the terms and conditions of this Agreement. (c) At a minimum, Backup Servicer’s safeguards for the protection of Highly Confidential Information shall include: (i) limiting access of Highly Confidential Information to Authorized Persons with a business need to know; (ii) securing business facilities, data centers, paper files, servers, back-up systems and computing equipment, including, but not limited to, all company owned mobile devices and other equipment with information storage capability; (iii) implementing network, device, application, database and platform security controls consistent with industry standards (e.g. SANS Information Security Policy Templates); (iv) securing information collection, access, use, transmission, storage and disposal of Highly Confidential Information; (v) implementing authentication and access controls to all systems containing Highly Confidential Information; (vi) encrypting Highly Confidential Information stored on any company owned mobile media including laptops, smartphones and tablets; (vii) encrypting Highly Confidential Information transmitted over public or wireless networks; (viii) strictly segregating Highly Confidential Information from information of Backup Servicer or its other customers so that Highly Confidential Information is not commingled with any other types of information; (ix) implementing appropriate personnel security and integrity procedures and practices, including, but not limited to, conducting background checks consistent with applicable law; (x) providing appropriate privacy and information security training to all Authorized Persons; (xi) maintaining comprehensive and updated malware detection capabilities including anti-virus software; (xii) maintaining an incident response program capable of detecting, responding and remediating security incidents upon discovery; and (xiii) ensuring that test environments are not exposed to production data. (d) During the term of each Authorized Person’s employment and/or engagement by Backup Servicer, Backup Servicer shall at all times cause such Authorized Persons to abide strictly by Backup Servicer’s obligations under this Agreement. Backup Servicer further agrees that it shall maintain a disciplinary process in line with Backup Servicer’s company policies and procedures to address any unauthorized access, use or disclosure of Highly Confidential Information by any of Backup Servicer’s officers, partners, principals, employees, agents or contractors. Upon Client’s written request, Backup Servicer shall promptly identify for Client in writing all Authorized Persons as of the date of such request. 4. Security Breach Procedures. (a) Backup Servicer shall: (i) provide Client with the name and contact information for an employee of Backup Servicer who shall serve as Client’s primary security contact and shall be available to assist Client 24 hours per day, 7 days per week as a contact in resolving obligations associated with a Security Breach; (ii) notify Client of a Security Breach as soon as practicable, but

 
no later than 48 hours after Backup Servicer becomes aware of it; and (iii) notify Client of any Security Breaches by e-mailing Client with a read receipt at security@lendingclub.com and with a copy by e-mail to Backup Servicer’s primary business contact within Client. (b) Immediately following Backup Servicer’s notification to Client of a Security Breach, the parties shall coordinate with each other to investigate the Security Breach. Backup Servicer agrees to fully cooperate with Client in Client’s handling of the matter, including, without limitation: (i) assisting with any investigation; (ii) providing Client with physical access to the facilities and operations affected; (iii) facilitating interviews with Backup Servicer’s employees and others involved in the matter; and (iv) making available all relevant records, logs, files, data reporting and other materials required to comply with applicable law, regulation, industry standards or as otherwise reasonably required by Client. (c) Backup Servicer shall use best efforts to immediately remedy any Security Breach and prevent any further Security Breach at Backup Servicer’s expense in accordance with applicable privacy rights, laws, regulations and standards. Backup Servicer shall (i) reimburse Client for actual out of pocket costs incurred by Client in responding to, and mitigating damages directly caused by, any Security Breach, including all costs of notice and/or remediation pursuant to Section 4(d) and (ii) upon Client’s request, provide to Client information on measures taken to prevent any further Security Breach. (d) Backup Servicer agrees to fully cooperate at its own expense with Client in any litigation or other formal action deemed necessary by Client to protect its rights relating to the use, disclosure, protection and maintenance of Highly Confidential Information in Backup Servicer’s control or possession. 5. Oversight of Security Compliance. At least once per year, Backup Servicer shall conduct site audits of the information technology and information security controls for all facilities used in complying with its obligations under this Agreement. Upon Client’s request, to confirm Backup Servicer’s compliance with this Agreement, as well as any applicable laws, regulations and industry standards, Backup Servicer grants Client or, upon Client’s election, a third party on Client’s behalf, permission to perform an assessment, audit, examination or review of all controls in Backup Servicer’s physical and/or technical environment in relation to all Highly Confidential Information being handled and/or services being provided to Client pursuant to this Agreement. Backup Servicer shall fully cooperate with such assessment by providing access to knowledgeable personnel, physical premises, documentation, infrastructure and application software that processes, stores or transports Highly Confidential Information for Client pursuant to this Agreement. Upon Client’s written request, Backup Servicer shall make available to Client for review all of the following, as applicable: Backup Servicer’s latest Payment Card Industry (PCI) Certification Report; SOC2 Report on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality or Privacy; and any reports relating to its ISO/ICE 27001 certification. Client shall treat such audit reports as Backup Servicer’s Confidential Information under this Agreement. Any exceptions noted on the SSAE report or other audit reports relating to Highly Confidential Information will be promptly addressed with the development and implementation of a corrective action plan by Backup Servicer’s management. 6. Return or Destruction of Confidential Information. At any time during the term of this Agreement at the Client’s request or upon the termination or expiration of this Agreement for any reason, Backup Servicer shall, and shall instruct all Authorized Persons to, promptly destroy all copies, whether in written, electronic or other form or media, of Highly Confidential Information in

 
its possession or the possession of such Authorized Persons, or securely dispose of all such copies, and certify in writing to the Client that such Highly Confidential Information has been returned to Client or disposed of securely, except for information retained pursuant to Backup Servicer’s document retention policies, which shall be retained subject to this Agreement. Backup Servicer shall comply with all commercially reasonable directions provided by Client with respect to the return or disposal of Highly Confidential Information.

 
EXHIBIT H Making Loan Payments / Authorization for Automatic Payments If your loan is funded, you hereby authorize LendingClub Corporation ("Lending Club"), as the loan servicer on your loan from WebBank, and its successors and assigns, to initiate electronic funds transfers from your designated account provided to Lending Club on the date of this agreement for monthly repayments on your loan. EACH MONTH, THE DEBIT AMOUNT MAY BE A RANGE OF PAYMENTS, WHICH WOULD INCLUDE YOUR MONTHLY PRINCIPAL AND INTEREST, AND FEES, IF ANY. ANY FEES AUTHORIZED TO BE CHARGED ON YOUR LOAN MAY BE COLLECTED USING ELECTRONIC FUNDS TRANSFERS INITIATED BY US FROM YOUR DESIGNATED ACCOUNT. With regard to payments made by automatic withdrawal, you have the right to receive notice of all transfers that will vary in amount from one month to the next. Lending Club will provide electronic notice of the upcoming transfer amount ten (10) calendar days ahead of the scheduled transfer. You may stop payment of automatic withdrawals or revoke your prior authorization for automatic withdrawals by notifying us at least three (3) banking days before the scheduled date of transfer. All payments are to be applied first to the payment of all fees, expenses and other amounts due (excluding principal and interest), then to accrued interest, and the balance on the account of outstanding principal; provided, however, that after an Event of Default, payments will be applied to your obligations as we determine in our sole discretion. You understand this authorization will remain in effect until your loan is paid in full or you notify us or your financial institution of its termination, taking into consideration the necessary time required by Lending Club and your financial institution to implement the change.

 


Exhibit 31.1
CERTIFICATION

I, Scott Sanborn, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of LendingClub Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 8, 2017
 
/s/ SCOTT SANBORN
Scott Sanborn
Chief Executive Officer and President
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATION

I, Thomas W. Casey, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of LendingClub Corporation; 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  Date: August 8, 2017  
/s/ THOMAS W. CASEY
Thomas W. Casey
Chief Financial Officer
 




Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of LendingClub Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2017 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
/s/ SCOTT SANBORN
 
Scott Sanborn
 
Chief Executive Officer and President
 
(Principal Executive Officer)
 
 
 
 
/s/ THOMAS W. CASEY
 
Thomas W. Casey
 
Chief Financial Officer
 
 
 
 
 
 
Dated:
August 8, 2017