LendingClub CORP (Form: 10-Q, Received: 11/06/2019 16:13:31)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM	10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

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.)



	595 Market Street, Suite 200,
	San Francisco,	CA	94105
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (415) 632-5600

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	LC	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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.:



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	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 ☒

As of October 31, 2019, there were 88,132,589 shares of the registrant’s common stock outstanding.

LENDINGCLUB CORPORATION

TABLE OF CONTENTS




PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Changes in Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	99
Item 4.	Controls and Procedures	102

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	102
Item 1A.	Risk Factors	102
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 3.	Defaults Upon Senior Securities	104
Item 4.	Mine Safety Disclosures	104
Item 5.	Other Information	104
Item 6.	Exhibits	105
Signatures		106

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 consolidated subsidiaries and consolidated variable interest entities (VIEs), including:


•	Various wholly-owned Delaware limited liability companies established to enter into warehouse credit agreements with certain lenders for secured credit facilities.


•	Various entities established to facilitate loan sale transactions under LendingClub’s Structured Program, including sponsoring asset-backed securities transactions and Certificate Program transactions, where certain accredited investors and qualified institutional buyers have the opportunity to invest in senior and subordinated securities backed by a pool of unsecured personal whole loans.


•	LC Trust I (the LC Trust), 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 issued by the LC Trust and that are related to specific underlying loans for the benefit of the investor.


•	Springstone Financial, LLC (Springstone), a wholly-owned Delaware limited liability company that facilitates the origination of education and patient finance loans by third-party issuing banks.

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, expected market growth and our ability to obtain a bank charter and the impact it would have on our business. You can identify these forward-looking statements by words such as “anticipate,” “appear,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “opportunity,” “plan,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or similar expressions.

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


•	our ability to attract and retain borrowers;


•	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 new or additional sources of investor commitments for our platform;


•	expected rates of return for investors;


•	the effectiveness of our platform’s credit scoring models;


•	our ability to innovate and the success of new product initiatives;


•	our ability to obtain or add bank functionality and a bank charter;


•	the use of our own capital to purchase loans;

•

maintaining liquidity and capital availability to support purchase of loans, contractual commitments and obligations (including repurchase obligations or other commitments to purchase loans), regulatory obligations to fund loans, and general strategic directives (such as with respect to product testing or supporting our Structured Program transactions, which include sponsoring asset-backed securitization transactions and Certificate Program transactions), and to support marketplace equilibrium across our platform;


•	the impact of holding loans on and our ability to sell loans off our balance sheet;


•	transaction fees or other revenue we expect to recognize after loans are issued by the issuing banks who originate loans facilitated through our platform;


•	interest income on our loans invested in by the Company and the negative fair value adjustments on associated loans;


•	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;


•	our ability, and that of third-party vendors, to maintain service and quality expectations;

LENDINGCLUB CORPORATION


•	capital expenditures;


•	interest rate risk and credit performance associated with the outstanding principal balance of loans and other securities and their impact to investor returns and demand for our products;


•	the impact of new accounting standards;


•	the impact of pending litigation and regulatory investigations and inquiries;


•	our compliance with applicable local, state and Federal laws, regulations and regulatory developments or court decisions affecting our business;


•	our compliance with contractual obligations or restrictions;


•	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, certificates and secured borrowings, and influence borrower and investor behavior;


•	the effectiveness of our cost structure simplification efforts and ability to control our cost structure;


•	our ability to develop and maintain effective internal controls;


•	our ability to recruit and retain quality employees to support current operations and future growth;


•	the impact of expense initiatives and review of our cost structure;


•	our ability to manage and repay our indebtedness; 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 “Risk Factors” section of this Report and our Annual Report on Form 10-K for the year ended December 31, 2018, as well as in our condensed consolidated financial statements, related notes, and other information appearing elsewhere in this Report and our other filings with the Securities and Exchange Commission, 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, actual results, future events or otherwise, other than as required by law.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LENDINGCLUB CORPORATION

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)



	September 30, 2019			December 31, 2018
Assets
Cash and cash equivalents	$	199,950		$	372,974
Restricted cash ⁽¹⁾	275,136			271,084
Securities available for sale (includes $51,342 and $53,611 pledged as collateral at fair value, respectively)	246,559			170,469
Loans held for investment at fair value ⁽¹⁾	1,237,479			1,883,251
Loans held for investment by the Company at fair value	4,211			2,583
Loans held for sale by the Company at fair value ⁽¹⁾	710,170			840,021
Accrued interest receivable ⁽¹⁾	14,171			22,255
Property, equipment and software, net	117,242			113,875
Intangible assets, net	15,396			18,048
Other assets ⁽¹⁾	229,346			124,967
Total assets	$	3,049,660		$	3,819,527
Liabilities and Equity
Accounts payable	$	15,490		$	7,104
Accrued interest payable ⁽¹⁾	10,449			19,241
Accrued expenses and other liabilities ⁽¹⁾	268,071			152,118
Payable to investors	117,698			149,052
Notes, certificates and secured borrowings at fair value ⁽¹⁾	1,240,958			1,905,875
Payable to securitization note holders ⁽¹⁾	—			256,354
Credit facilities and securities sold under repurchase agreements ⁽¹⁾	509,107			458,802
Total liabilities	2,161,773			2,948,546
Equity
Common stock, $0.01 par value; 180,000,000 shares authorized; 88,593,023 and 86,384,667 shares issued, respectively; 88,132,589 and 85,928,127 shares outstanding, respectively ⁽²⁾	886			864
Additional paid-in capital⁽²⁾	1,454,586			1,405,392
Accumulated deficit	(548,706		)	(517,727		)
Treasury stock, at cost; 460,434 shares⁽²⁾	(19,538		)	(19,485		)
Accumulated other comprehensive income	659			157
Total LendingClub stockholders’ equity	887,887			869,201
Noncontrolling interests	—			1,780
Total equity	887,887			870,981
Total liabilities and equity	$	3,049,660		$	3,819,527


⁽¹⁾	Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below.


⁽²⁾	Prior period share information and balances have been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.

The following table presents the assets and liabilities of consolidated VIEs, which are included in the Condensed Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.



	September 30, 2019		December 31, 2018
Assets of consolidated VIEs, included in total assets above
Restricted cash	$	66,088	$	43,918
Loans held for investment at fair value	253,395		642,094
Loans held for sale by the Company at fair value	599,954		739,216
Accrued interest receivable	4,971		10,438
Other assets	1,905		2,498
Total assets of consolidated variable interest entities	$	926,313	$	1,438,164
Liabilities of consolidated VIEs, included in total liabilities above
Accrued interest payable	$	3,644	$	7,594
Accrued expenses and other liabilities	253		1,627
Notes, certificates and secured borrowings at fair value	253,395		648,908
Payable to securitization note holders	—		256,354
Credit facilities and securities sold under repurchase agreements	405,264		306,790
Total liabilities of consolidated variable interest entities	$	662,556	$	1,221,273

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net revenue:

Transaction fees	$	161,205		$	137,781		$	448,809		$	384,889

Interest income	77,820			115,514			270,554			381,292
Interest expense	(55,060		)	(90,642		)	(197,336		)	(302,383		)
Net fair value adjustments	(31,628		)	(19,554		)	(102,331		)	(74,823		)
Net interest income and fair value adjustments	(8,868		)	5,318			(29,113		)	4,086
Investor fees	30,271			29,169			94,274			84,464
Gain on sales of loans	18,305			10,919			47,343			35,470
Net investor revenue ⁽¹⁾	39,708			45,406			112,504			124,020

Other revenue	3,983			1,458			8,808			4,382

Total net revenue	204,896			184,645			570,121			513,291
Operating expenses:
Sales and marketing	76,255			73,601			212,201			200,164
Origination and servicing	27,996			25,431			81,200			73,669
Engineering and product development	41,455			41,216			127,300			115,703
Other general and administrative	59,485			57,446			180,685			167,338
Goodwill impairment	—			—			—			35,633
Class action and regulatory litigation expense	—			9,738			—			35,500
Total operating expenses	205,191			207,432			601,386			628,007
Loss before income tax expense	(295		)	(22,787		)	(31,265		)	(114,716		)
Income tax expense (benefit)	97			(38		)	(341		)	25
Consolidated net loss	(392		)	(22,749		)	(30,924		)	(114,741		)
Less: (Loss) Income attributable to noncontrolling interests	(9		)	55			55			105
LendingClub net loss	$	(383	)	$	(22,804	)	$	(30,979	)	$	(114,846	)
Net loss per share attributable to LendingClub: ⁽²⁾
Basic	$	0.00		$	(0.27	)	$	(0.36	)	$	(1.36	)
Diluted	$	0.00		$	(0.27	)	$	(0.36	)	$	(1.36	)
Weighted-average common shares – Basic ⁽²⁾	87,588,495			84,871,828			86,849,388			84,261,301
Weighted-average common shares – Diluted ⁽²⁾	87,588,495			84,871,828			86,849,388			84,261,301


⁽¹⁾	See “Notes to Condensed Consolidated Financial Statements – Note 1. Basis of Presentation” for additional information.


⁽²⁾	All share and per share information has been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
LendingClub net loss	$	(383	)	$	(22,804	)	$	(30,979	)	$	(114,846	)
Other comprehensive income (loss), before tax:
Net unrealized gain (loss) on securities available for sale	(823		)	677			788			286
Other comprehensive income (loss), before tax	(823		)	677			788			286
Income tax effect	(130		)	70			308			50
Other comprehensive income (loss), net of tax	(693		)	607			480			236
Less: Other comprehensive income (loss) attributable to noncontrolling interests	(39		)	42			(22		)	59
LendingClub other comprehensive income (loss), net of tax	(654		)	565			502			177
LendingClub comprehensive income (loss)	(1,037		)	(22,239		)	(30,477		)	(114,669		)
Comprehensive income (loss) attributable to noncontrolling interests	(39		)	42			(22		)	59
Total comprehensive income (loss)	$	(1,076	)	$	(22,197	)	$	(30,499	)	$	(114,610	)

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Changes in Equity

(In Thousands, Except Share Data)

(Unaudited)



	LendingClub Corporation Stockholders
	Common Stock⁽¹⁾			Additional Paid-in Capital⁽¹⁾			Treasury Stock				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares	Amount		Additional Paid-in Capital⁽¹⁾			Shares	Amount			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at June 30, 2019	87,160,013	$	876	$	1,439,244		456,540	$	(19,485	)	$	1,313		$	(548,323	)	$	873,625		$	696		$	874,321
Stock-based compensation	—	—		19,491			—	—			—			—			19,491			—			19,491
Net issuances under equity incentive plans, net of tax⁽²⁾	972,576	10		(4,149		)	3,894	(53		)	—			—			(4,192		)	—			(4,192		)
Net unrealized gain (loss) on securities available for sale, net of tax	—	—		—			—	—			(654		)	—			(654		)	(37		)	(691		)
Dividends paid and return of capital to noncontrolling interests	—	—		—			—	—			—			—			—			(650		)	(650		)
Net loss	—	—		—			—	—			—			(383		)	(383		)	(9		)	(392		)
Balance at September 30, 2019	88,132,589	$	886	$	1,454,586		460,434	$	(19,538	)	$	659		$	(548,706	)	$	887,887		$	—		$	887,887

	LendingClub Corporation Stockholders
	Common Stock⁽¹⁾			Additional Paid-in Capital⁽¹⁾			Treasury Stock				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares	Amount		Additional Paid-in Capital⁽¹⁾			Shares	Amount			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2018	85,928,127	$	864	$	1,405,392		456,540	$	(19,485	)	$	157		$	(517,727	)	$	869,201		$	1,780		$	870,981
Stock-based compensation	—	—		61,878			—	—			—			—			61,878			—			61,878
Net issuances under equity incentive plans, net of tax ⁽²⁾	2,040,492	20		(15,094		)	3,894	(53		)	—			—			(15,127		)	—			(15,127		)
Employee stock purchase plan (ESPP) purchase shares	163,970	2		2,410			—	—			—			—			2,412			—			2,412
Net unrealized gain (loss) on securities available for sale, net of tax	—	—		—			—	—			502			—			502			(20		)	482
Dividends paid and return of capital to noncontrolling interests	—	—		—			—	—			—			—			—			(1,815		)	(1,815		)
Net loss	—	—		—			—	—			—			(30,979		)	(30,979		)	55			(30,924		)
Balance at September 30, 2019	88,132,589	$	886	$	1,454,586		460,434	$	(19,538	)	$	659		$	(548,706	)	$	887,887		$	—		$	887,887


⁽¹⁾	All share information and balances have been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.


⁽²⁾	Includes shares purchased by the Company in lieu of issuing fractional shares in connection with a 1-for-5 reverse stock split effective on July 5, 2019 and shares that were transferred to the Company to satisfy payment of all or a portion of the exercise price in connection with the exercise of stock options.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Changes in Equity

(In Thousands, Except Share Data)

(Unaudited)



	LendingClub Corporation Stockholders
	Common Stock⁽¹⁾			Additional Paid-in Capital⁽¹⁾			Treasury Stock				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares	Amount		Additional Paid-in Capital⁽¹⁾			Shares	Amount			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at June 30, 2018	84,636,824	$	851	$	1,371,504		456,540	$	(19,485	)	$	(393	)	$	(481,461	)	$	871,016		$	3,204		$	874,220
Stock-based compensation	—	—		21,906			—	—			—			—			21,906			—			21,906
Issuances under equity incentive plans, net of tax	593,555	6		(5,050		)	—	—			—			—			(5,044		)	—			(5,044		)
Net unrealized gain (loss) on securities available for sale, net of tax	—	—		—			—	—			565			—			565			41			606
Dividends paid and return of capital to noncontrolling interests	—	—		—			—	—			—			—			—			(847		)	(847		)
Net loss	—	—		—			—	—			—			(22,804		)	(22,804		)	55			(22,749		)
Balance at September 30, 2018	85,230,379	$	857	$	1,388,360		456,540	$	(19,485	)	$	172		$	(504,265	)	$	865,639		$	2,453		$	868,092


	LendingClub Corporation Stockholders
	Common Stock⁽¹⁾			Additional Paid-in Capital⁽¹⁾			Treasury Stock				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares	Amount		Additional Paid-in Capital⁽¹⁾			Shares	Amount			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2017	83,494,769	$	840	$	1,330,564		456,540	$	(19,485	)	$	(5	)	$	(389,419	)	$	922,495		$	5,262		$	927,757
Stock-based compensation	—	—		64,441			—	—			—			—			64,441			—			64,441
Issuances under equity incentive plans, net of tax	1,548,089	15		(9,416		)	—	—			—			—			(9,401		)	—			(9,401		)
ESPP purchase shares	187,521	2		2,771			—	—			—			—			2,773			—			2,773
Net unrealized gain (loss) on securities available for sale, net of tax	—	—		—			—	—			177			—			177			58			235
Dividends paid and return of capital to noncontrolling interests	—	—		—			—	—			—			—			—			(2,972		)	(2,972		)
Net loss	—	—		—			—	—			—			(114,846		)	(114,846		)	105			(114,741		)
Balance at September 30, 2018	85,230,379	$	857	$	1,388,360		456,540	$	(19,485	)	$	172		$	(504,265	)	$	865,639		$	2,453		$	868,092


⁽¹⁾	All share information and balances have been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Consolidated net loss	$	(30,924	)	$	(114,741	)
Adjustments to reconcile consolidated net loss to net cash used for operating activities:
Net fair value adjustments	102,331			74,823
Change in fair value of loan servicing assets and liabilities	39,882			21,576
Stock-based compensation, net	56,898			57,369
Goodwill impairment charge	—			35,633
Depreciation and amortization	44,034			39,927
Gain on sales of loans	(47,343		)	(39,493		)
Other, net	14,649			3,794
Purchase of loans held for sale	(5,174,909		)	(5,431,011		)
Principal payments received on loans held for sale	193,850			160,623
Proceeds from sales of whole loans	2,299,779			3,748,498
Purchase of loans held for sale by consolidated VIE	(107,191		)	(270,770		)
Proceeds from sale of securities by consolidated VIE, net of underwriting fees and costs	2,495,372			1,505,887
Net change in operating assets and liabilities:
Accrued interest receivable, net	(9,536		)	(2,010		)
Other assets	12,167			62,739
Accounts payable	6,998			(883		)
Accrued interest payable	(8,654		)	(10,563		)
Accrued expenses and other liabilities	(12,134		)	(103,561		)
Net cash used for operating activities	(124,731		)	(262,163		)
Cash Flows from Investing Activities:
Purchases of loans	(522,564		)	(778,931		)
Principal payments received on loans	950,607			1,379,712
Proceeds from recoveries and sales of charged-off loans	42,239			49,463
Purchases of securities available for sale	(116,753		)	(104,063		)
Proceeds from sales, maturities, redemptions and paydowns of securities available for sale	110,884			118,965
Proceeds from paydowns of asset-backed securities related to Structured Program transactions	64,056			31,557
Other investing activities	194			1,511
Purchases of property, equipment and software, net	(38,977		)	(37,881		)
Net cash provided by investing activities	489,686			660,333

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



	Nine Months Ended September 30,
	2019			2018
Cash Flows from Financing Activities:
Change in payable to investors	(35,957		)	(52,959		)
Proceeds from issuance of notes and certificates	522,249			775,441
Repayments of secured borrowings	(47,930		)	(116,065		)
Principal payments on and retirements of notes and certificates	(916,983		)	(1,261,918		)
Payments on notes and certificates from recoveries/sales of related charged-off loans	(42,634		)	(48,858		)
Principal payments on securitization notes	(56,707		)	(45,709		)
Proceeds from credit facilities and securities sold under repurchase agreements	1,851,738			1,493,305
Principal payments on credit facilities and securities sold under repurchase agreements	(1,801,600		)	(1,219,529		)
Payment for debt issuance costs	(1,356		)	(1,600		)
Proceeds from issuances under equity incentive plans, net of tax	715			1,921
Proceeds from issuance of common stock for ESPP	2,411			2,773
Net cash inflow (outflow) from consolidation (deconsolidation) of VIE	(5,951		)	(15,013		)
Other financing activities	(1,922		)	(2,972		)
Net cash used for financing activities	(533,927		)	(491,183		)
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(168,972		)	(93,013		)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period	644,058			644,289
Cash, Cash Equivalents and Restricted Cash, End of Period	$	475,086		$	551,276
Supplemental Cash Flow Information:
Cash paid for interest	$	206,332		$	309,641
Cash paid for operating leases included in the measurement of lease liabilities	$	12,568		$	—
Non-cash investing activity:
Accruals for property, equipment and software	$	3,299		$	1,657
Securities retained (sold) from Structured Program transactions	$	136,053		$	82,939
Non-cash investing and financing activity:
Transfer of whole loans to redeem certificates	$	122,330		$	—
Non-cash financing activity:
Derecognition of payable to securitization note and residual certificate holders held in consolidated VIE	$	200,881		$	269,151

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

The following presents cash, cash equivalents and restricted cash by category within the Condensed Consolidated Balance Sheets:



	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	199,950	$	372,974
Restricted cash	275,136		271,084
Total cash, cash equivalents and restricted cash	$	475,086	$	644,058

See Notes to Condensed Consolidated Financial Statements.

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 lending marketplace platform that connects borrowers and investors. Various wholly-owned subsidiaries of LendingClub have been established to enter into warehouse credit agreements with certain lenders for secured credit facilities. Additionally, LendingClub has established various entities to facilitate loan sale transactions, including sponsoring asset-backed securitization transactions and Certificate Program transactions (collectively referred to as Structured Program transactions), where certain accredited investors and qualified institutional buyers have the opportunity to invest in senior and subordinated securities backed by a pool of unsecured personal whole loans. Certificate Program transactions include CLUB Certificate and Levered Certificate transactions. LC Trust I (the LC 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 issued by the LC Trust that are related to specific underlying loans for the benefit of the investor. Springstone Financial, LLC (Springstone), is a wholly-owned subsidiary of LendingClub that facilitates education and patient finance loans originated by third-party issuing banks.

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 (VIEs). 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, in the opinion of management, 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. These estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. Results reported in interim periods are not necessarily indicative of results for the full year or any other interim period. Certain prior-period amounts have been reclassified to conform to the current period presentation.

A 1-for-5 reverse stock split of the Company’s common stock became effective on July 5, 2019. As a result, prior period share and per share amounts presented in the accompanying interim condensed consolidated financial statements and these related notes were retroactively adjusted accordingly. See “Note 4. Net Loss Per Share” for additional information.

In the first quarter of 2019, the Company presented a new sub-total caption called “Net investor revenue” on its Condensed Consolidated Statements of Operations and also reordered the presentation of certain of its existing captions. The Company believes this new presentation allows shareholders a view of net investor revenue and our capital markets activity, which includes net interest income and fair value adjustments of loans and securities available for sale, gain on sales of loans invested in by the Company and investor fees from servicing of loans. This change in presentation had no impact on prior period amounts presented.

The Company presents loans under a number of different captions to align the assets to their associated liabilities, if any. “Loans held for investment at fair value” are loans which are related to the Company’s retail notes, certificates and secured borrowings program. The Company is not exposed to market risk, interest rate risk or credit risk on these loans and all loan cash flows flow directly to the retail note, certificate and secured borrowing owners. The associated liability for this loan category is included in the caption “Notes, certificates and secured borrowings at fair value.” Loans included in “Loans held for investment by the Company at fair value” and “Loans held for sale by the Company at fair value” are loans which the Company has purchased and from which the Company earns interest income and records net fair value adjustments in earnings for changes in the valuation of loans.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

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, 2018 (Annual Report) filed on February 20, 2019.

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 changes to these significant accounting policies for the nine month period ended September 30, 2019, except as noted below.

Adoption of New Accounting Standards

The Company adopted the following accounting standards during the nine month period ended September 30, 2019:

Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), requires lessees to record on their balance sheets a lease liability for the obligation to make lease payments and a right-of-use (ROU) asset for the right to use the underlying asset for the lease term. The Company adopted Topic 842 as of January 1, 2019 and has elected not to restate comparative periods presented in the condensed consolidated financial statements. The Company has chosen not to elect the practical expedients permitted under the transition guidance within the new standard, which among other things, permits entities to carry forward their historical lease identification. The Company has made an accounting policy election to not recognize lease liabilities and ROU assets for short-term leases, which are leases with initial terms of 12 months or less and for which there is not a purchase option that is reasonably certain to be exercised. All leases within the Company’s portfolio are classified as operating leases.

Adoption of Topic 842 had an impact on the Company’s Condensed Consolidated Balance Sheets but did not have an impact on the Company’s Condensed Consolidated Statements of Operations or Condensed Consolidated Statements of Cash Flows. The most significant impact was the recognition of ROU assets and lease liabilities of $95.2 million and $110.1 million at the time of adoption, respectively, with no cumulative effect in retained earnings. The difference between the ROU assets and lease liabilities is the unamortized balance of deferred rent, which prior to January 1, 2019, was included as a separate liability within Accrued expenses and other liabilities. The operating lease expenses are included in Other general and administrative expense and sublease income is recorded in Other revenue in the Company’s Condensed Consolidated Statements of Operations. The Company included the disclosures required by ASU 2016-02 in “Note 17. Leases.”

In July 2019, the Financial Accounting Standards Board (FASB) issued ASU 2019-07, Codification Updates to SEC Sections. The ASU clarifies and/or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the Securities and Exchange Commission’s regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU became effective upon issuance and did not have a significant impact on the Company’s financial position, results of operations, and related disclosures.

New Accounting Standards Not Yet Adopted

Updates to new accounting standards issued and not yet adopted are as follows:

In June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. For loans accounted for at amortized cost, the guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. Because the Company has elected the fair value option for loans and

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

loans accounted for at fair value through net income are outside the scope of Topic 326, the Company expects no impact on its loan portfolios upon adoption.

For available for sale debt securities, Topic 326 requires recognition of expected credit losses by recognizing an allowance for credit losses when the fair value of the security is below amortized cost and the recognition of this allowance is limited to the difference between the security’s amortized cost basis and fair value. Upon adoption, the amendments in Topic 326 will be recognized through a cumulative-effect adjustment to retained earnings, except for debt securities with prior other-than-temporary impairment whereby Topic 326 is applied prospectively. The Company has created a working group consisting of key stakeholders from finance who are continuing to make progress in line with the established project plan. The Company does not expect the targeted amendments to the available for sale debt securities impairment model to have a material impact on the Company’s financial position, results of operations and disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures. The ASU eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and valuation processes for Level 3 fair value measurements. The ASU adds new disclosure requirements for Level 3 measurements. The new guidance is effective on January 1, 2020. The Company is evaluating the impact this ASU will have on its disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software – (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires a customer in a hosting arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The standard is effective on January 1, 2020. The amendments in this ASU can be applied either retrospectively or prospectively to all implementation costs after the date of adoption. The Company is in the process of identifying existing cloud computing arrangements that are service contracts. The Company is evaluating the impact this ASU will have on its financial position, results of operations, and cash flows.

3. Revenue from Contracts with Customers

The Company’s revenue from contracts with customers includes transaction fees and referral fees. Referral fees are presented as a component of “Other revenue” in the Condensed Consolidated Statements of Operations.

The following tables present the Company’s revenue from contracts with customers, disaggregated by revenue source for services transferred over time, for the third quarters and first nine months of 2019 and 2018:



	Three Months Ended September 30,
	2019		2018
Transaction fees	$	161,205	$	137,781
Referral fees	1,596		1,065
Total revenue from contracts with customers	$	162,801	$	138,846

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)



	Nine Months Ended September 30,
	2019		2018
Transaction fees	$	448,809	$	384,889
Referral fees	3,619		2,815
Total revenue from contracts with customers	$	452,428	$	387,704

Revenues are recognized when control of the promised services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. For the third quarters and first nine months of 2019 and 2018, the Company did not have any revenue from contracts with customers for services transferred at a point of time. For additional detail on the Company’s accounting policy regarding revenue recognition, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2. Summary of Significant Accounting Policies” in the Annual Report.

The Company recognizes transaction fees at the time it receives such fees. Referral fees are received after the Company satisfies its performance obligation. The Company had no bad debt expense for the third quarters and first nine months of 2019 and 2018. The Company had no contract assets, contract liabilities, or deferred contract costs recorded as of both September 30, 2019 and December 31, 2018. Additionally, the Company did not recognize any revenue from performance obligations related to prior periods (for example, due to changes in transaction price) for the third quarters and first nine months of 2019 and 2018.

4. Net Loss Per Share

The following table details the computation of the Company’s basic and diluted net loss per share:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
LendingClub net loss	$	(383	)	$	(22,804	)	$	(30,979	)	$	(114,846	)
Weighted-average common shares – Basic ⁽¹⁾	87,588,495			84,871,828			86,849,388			84,261,301
Weighted-average common shares – Diluted ⁽¹⁾	87,588,495			84,871,828			86,849,388			84,261,301
Net loss per share attributable to LendingClub ⁽¹⁾:
Basic	$	0.00		$	(0.27	)	$	(0.36	)	$	(1.36	)
Diluted	$	0.00		$	(0.27	)	$	(0.36	)	$	(1.36	)


⁽¹⁾	All share and per share information has been retroactively adjusted to reflect the reverse stock split discussed below.

A 1-for-5 reverse stock split of the Company’s common stock became effective on July 5, 2019 (the Reverse Stock Split). All share and per share information contained in these condensed consolidated financial statements has been retroactively adjusted to reflect the Reverse Stock Split. The par value per share of the Company’s common stock was not adjusted as a result of the Reverse Stock Split. Accordingly, the change in total par value was recorded in additional paid-in capital and has been retroactively adjusted for all periods in these condensed consolidated financial statements.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

5. Securities Available for Sale

The Company’s Structured Program transactions include i) asset-backed securitization transactions and ii) Certificate Program transactions. Certificate Program transactions include CLUB Certificate and Levered Certificate transactions.

In connection with asset-backed securitizations, the Company is the sponsor and establishes securitization trusts to ultimately purchase the loans from the Company and/or third-party whole loan investors. Securities issued from our asset-backed securitizations are senior or subordinated based on the waterfall criteria of loan payments to each security class. The subordinated residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria. The assets are transferred into a trust such that the assets are legally isolated from the creditors of the Company and are not available to satisfy obligations of the Company. These assets can only be used to settle obligations of the underlying securitization trusts. The asset-backed securitization senior securities and subordinated residual interests retained by the Company are presented as “Asset-backed senior securities” and “Asset-backed subordinated securities,” respectively, in the securities available for sale tables below.

In addition, the Company sponsors the sale of unsecured personal whole loans through the issuance of certificate securities under our Certificate Program. The certificate securities are collateralized by loans transferred to a series of a master trust and trade in the over-the-counter market with a CUSIP. The assets are transferred into a trust such that the assets are legally isolated from the creditors of the Company and are not available to satisfy obligations of the Company. These assets can only be used to settle obligations of the underlying Certificate Program trusts. The CLUB Certificate issued securities are pass-through securities of which each owner has an undivided and equal interest in the underlying loans of each transaction. The Levered Certificate issued securities include senior and subordinated securities based on the waterfall criteria of loan payments to each security class. The subordinated securities issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria. The CLUB Certificate issued securities retained by the Company are presented as “CLUB Certificate asset-backed securities” in the securities available for sale tables below.

The Levered Certificate issued senior and subordinated securities retained by the Company are presented in aggregate with securities from asset-backed securitizations as “Asset-backed senior securities” and “Asset-backed subordinated securities,” respectively, in the tables below. The “Other asset-backed securities” caption in the tables below primarily includes investment-grade rated bonds that are collateralized by automobile loan receivables.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of September 30, 2019 and December 31, 2018, were as follows:



September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
CLUB Certificate asset-backed securities ⁽¹⁾	$	88,867	$	159	$	(496	)	$	88,530
Asset-backed senior securities ⁽¹⁾⁽²⁾	82,733		730		—			83,463
Other asset-backed securities	18,301		6		—			18,307
Certificates of deposit	17,052		—		—			17,052
Corporate debt securities	14,821		21		(1		)	14,841
Asset-backed subordinated securities ⁽¹⁾	14,050		649		—			14,699
Commercial paper	9,667		—		—			9,667
Total securities available for sale	$	245,491	$	1,565	$	(497	)	$	246,559

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Asset-backed senior securities ⁽¹⁾⁽²⁾	$	56,363	$	188	$	(62	)	$	56,489
CLUB Certificate asset-backed securities ⁽¹⁾	48,505		150		(225		)	48,430
Corporate debt securities	17,339		1		(12		)	17,328
Certificates of deposit	14,929		—		—			14,929
Asset-backed subordinated securities ⁽¹⁾	11,602		249		(2		)	11,849
Other asset-backed securities	11,232		—		(7		)	11,225
Commercial paper	9,720		—		—			9,720
Other securities	499		—		—			499
Total securities available for sale	$	170,189	$	588	$	(308	)	$	170,469

⁽¹⁾

As of September 30, 2019 and December 31, 2018, $185.9 million and $115.1 million, respectively, of the asset-backed securities related to Structured Program transactions at fair value are subject to restrictions on transfer pursuant to the Company's obligations as a “sponsor” under the U.S. Risk Retention Rules (as more fully described in “Part I – Item 1A. Risk Factors – Risk retention rules may increase our compliance costs, impair our liquidity and otherwise adversely affect our operating results” in the Annual Report.).


⁽²⁾	Includes $51.3 million and $53.6 million of securities available for sale pledged as collateral at fair value as of September 30, 2019, and December 31, 2018, respectively.

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 September 30, 2019 and December 31, 2018, aggregated by period of continuous unrealized loss, is as follows:



	Less than 12 months					12 months or longer					Total
September 30, 2019	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Asset-backed securities related to Structured Program transactions	$	22,330	$	(360	)	$	1,577	$	(136	)	$	23,907	$	(496	)
Corporate debt securities	3,001		(1		)	—		—			3,001		(1		)
Total securities with unrealized losses ⁽¹⁾	$	25,331	$	(361	)	$	1,577	$	(136	)	$	26,908	$	(497	)


	Less than 12 months					12 months or longer					Total
December 31, 2018	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Asset-backed securities related to Structured Program transactions	$	49,047	$	(285	)	$	1,745	$	(4	)	$	50,792	$	(289	)
Corporate debt securities	14,538		(12		)	—		—			14,538		(12		)
Other asset-backed securities	11,208		(7		)	—		—			11,208		(7		)
Total securities with unrealized losses ⁽¹⁾	$	74,793	$	(304	)	$	1,745	$	(4	)	$	76,538	$	(308	)


⁽¹⁾	The number of investment positions with unrealized losses at September 30, 2019 and December 31, 2018 totaled 25 and 56, respectively.

During the third quarter and first nine months of 2019, the Company recognized $1.2 million and $2.5 million, respectively, in other-than-temporary impairment charges on its asset-backed securities related to Structured Program transactions. During the third quarter and first nine months of 2018, the Company recognized $0.2 million and $2.3 million, respectively, in other-than-temporary impairment charges on its asset-backed securities related to Structured Program transactions. There were no credit losses recognized into earnings for other-than-temporarily impaired securities held by the Company during the third quarters and first nine months of 2019 and 2018 for which a portion of the impairment was previously recognized in other comprehensive income.

The contractual maturities of securities available for sale at September 30, 2019, were as follows:



	Amortized Cost		Fair Value
Within 1 year:
Certificates of deposit	$	17,052	$	17,052
Corporate debt securities	14,821		14,841
Other asset-backed securities	13,039		13,040
Commercial paper	9,667		9,667
Total	54,579		54,600
After 1 year through 5 years:
Other asset-backed securities	5,262		5,267
Total	5,262		5,267
Asset-backed securities related to Structured Program transactions	185,650		186,692
Total securities available for sale	$	245,491	$	246,559

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 third quarter and first nine months of 2019, the Company and Consumer Loan Underlying Bond Depositor LLC (Depositor), a subsidiary of the Company, sold a combined $1.2 billion and $3.2 billion, respectively, in asset-backed securities related to Structured Program transactions. During the third quarter and first nine months of 2018, the Company and Consumer Loan Underlying Bond Depositor LLC (Depositor), a subsidiary of the Company, sold a combined $576.7 million and $1.5 billion, respectively, in asset-backed securities related to Structured Program transactions. There were no realized gains or losses related to such sales. For further information, see “Note 7. Securitizations and Variable Interest Entities.” Proceeds from other sales of securities available for sale during the third quarter and first nine months of 2019 were $4.0 million and $10.4 million, respectively. Proceeds from other sales of securities available for sale during the first nine months of 2018 were $0.5 million. There were no proceeds from other sales of securities available for sale during the third quarter of 2018.

6. Loans Held for Investment, Loans Held for Sale, Notes, Certificates and Secured Borrowings

Loans Held for Investment, Notes, Certificates and Secured Borrowings

The Company issues member payment dependent notes and the LC Trust issues certificates as a means to allow investors to invest in the corresponding loans. At September 30, 2019 and December 31, 2018, loans held for investment, notes, certificates and secured borrowings measured at fair value on a recurring basis were as follows:



	Loans Held for Investment						Notes, Certificates and Secured Borrowings
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
Aggregate principal balance outstanding	$	1,316,605		$	2,013,438		$	1,316,605		$	2,033,258
Net fair value adjustments	(79,126		)	(130,187		)	(75,647		)	(127,383		)
Fair value	$	1,237,479		$	1,883,251		$	1,240,958		$	1,905,875

At September 30, 2019 and December 31, 2018, a fair value of $27.4 million and $76.5 million included in “Loans Held for Investment at fair value” was pledged as collateral for secured borrowings, respectively. See “Note 14. Secured Borrowings” for additional information.

The following table provides the balances of notes, certificates and secured borrowings at fair value at the end of the periods indicated:



	September 30, 2019		December 31, 2018
Notes	$	956,680	$	1,176,333
Certificates	253,395		648,908
Secured borrowings	30,883		80,634
Total notes, certificates and secured borrowings	$	1,240,958	$	1,905,875

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Loans Invested in by the Company

At September 30, 2019 and December 31, 2018, loans invested in by the Company for which there were no associated notes, certificates or secured borrowings (with the exception of $286.3 million in loans at fair value in a consolidated securitization trust as of December 31, 2018) were as follows:



	Loans Invested in by the Company
	Loans Held for Investment						Loans Held for Sale						Total
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
Aggregate principal balance outstanding	$	5,596		$	3,518		$	735,351		$	869,715		$	740,947		$	873,233
Net fair value adjustments	(1,385		)	(935		)	(25,181		)	(29,694		)	(26,566		)	(30,629		)
Fair value	$	4,211		$	2,583		$	710,170		$	840,021		$	714,381		$	842,604

The net fair value adjustments of $(26.6) million and $(30.6) million represent net unrealized losses recorded in earnings on loans invested in by the Company at September 30, 2019 and December 31, 2018, respectively. Total fair value adjustments recorded in earnings on loans invested in by the Company of $(32.4) million and $(100.1) million during the third quarter and first nine months of 2019, respectively, include net realized losses and changes in net unrealized losses. Net interest income earned on loans invested in by the Company during the third quarter and first nine months of 2019 was $17.7 million and $59.3 million, respectively.

The Company used its own capital to purchase $1.5 billion in loans during the third quarter of 2019 and sold $1.2 billion in loans during the third quarter of 2019, of which $0.9 billion was securitized or sold to series trusts in connection with the Company’s Certificate Program and $0.3 billion was sold to whole loan investors. The Company used its own capital to purchase $3.6 billion in loans during the first nine months of 2019 and sold $3.5 billion in loans during the first nine months of 2019, of which $2.8 billion was securitized or sold to series trusts in connection with the Company’s Certificate Program and $0.7 billion was sold to whole loan investors. The fair value of loans invested in by the Company was $714.4 million at September 30, 2019, which was held for sale primarily for future anticipated Structured Program transactions and sales to loan investors. In May 2019, the Company deconsolidated a securitization trust, which resulted in the derecognition of $236.3 million in loans held for sale by the Company at fair value. See “Note 7. Securitizations and Variable Interest Entities” for further discussion on the Company’s consolidated securitization trust and “Note 8. Fair Value of Assets and Liabilities” for a fair value rollforward of loans invested in by the Company for the third quarters and first nine months of 2019 and 2018.

At September 30, 2019 and December 31, 2018, loans with a fair value of $600.0 million and $453.0 million included in “Loans held for sale by the Company at fair value” was pledged as collateral for the Company’s warehouse credit facilities, respectively. See “Note 13. Debt” for additional information related to these debt obligations.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Loans that were 90 days or more past due (including non-accrual loans) were as follows:



	September 30, 2019			December 31, 2018
Loans held for investment:
Outstanding principal balance	$	12,818		$	19,707
Net fair value adjustments	(10,380		)	(16,166		)
Fair value	$	2,438		$	3,541
Number of loans (not in thousands)	1,564			2,309

Loans invested in by the Company:
Outstanding principal balance	$	1,931		$	2,060
Net fair value adjustments	(1,603		)	(1,710		)
Fair value	$	328		$	350
Number of loans (not in thousands)	327			356

7. Securitizations and Variable Interest Entities

VIE Assets and Liabilities

The following tables provide the classifications of assets and liabilities on the Company’s Condensed Consolidated Balance Sheets for its transactions with consolidated and unconsolidated VIEs at September 30, 2019 and December 31, 2018. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated and unconsolidated VIEs only and exclude intercompany balances that eliminate in consolidation:



September 30, 2019	Consolidated VIEs		Unconsolidated VIEs		Total
Assets
Restricted cash	$	66,088	$	—	$	66,088
Securities available for sale at fair value	—		186,692		186,692
Loans held for investment at fair value	253,395		—		253,395
Loans held for sale by the Company at fair value	599,954		—		599,954
Accrued interest receivable	4,971		1,012		5,983
Other assets	1,905		45,455		47,360
Total assets	$	926,313	$	233,159	$	1,159,472
Liabilities
Accrued interest payable	$	3,644	$	—	$	3,644
Accrued expenses and other liabilities	253		—		253
Notes, certificates and secured borrowings at fair value	253,395		—		253,395
Payable to securitization note holders	—		—		—
Credit facilities and securities sold under repurchase agreements	405,264		—		405,264
Total liabilities	662,556		—		662,556
Total net assets	$	263,757	$	233,159	$	496,916

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, 2018	Consolidated VIEs		Unconsolidated VIEs		Total
Assets
Restricted cash	$	43,918	$	—	$	43,918
Securities available for sale at fair value	—		116,768		116,768
Loans held for investment at fair value	642,094		—		642,094
Loans held for sale by the Company at fair value	739,216		—		739,216
Accrued interest receivable	10,438		1,214		11,652
Other assets	2,498		29,206		31,704
Total assets	$	1,438,164	$	147,188	$	1,585,352
Liabilities
Accrued interest payable	$	7,594	$	—	$	7,594
Accrued expenses and other liabilities	1,627		—		1,627
Notes, certificates and secured borrowings at fair value	648,908		—		648,908
Payable to securitization note holders	256,354		—		256,354
Credit facilities and securities sold under repurchase agreements	306,790		57,012		363,802
Total liabilities	1,221,273		57,012		1,278,285
Total net assets	$	216,891	$	90,176	$	307,067

Consolidated VIEs

The Company consolidates VIEs when it is deemed to be the primary beneficiary. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2. Summary of Significant Accounting Policies” in the Annual Report for additional information.

LC Trust

The Company established the LC Trust for the purpose of acquiring and holding loans for the sole benefit of certain investors that have purchased trust certificates issued by the LC Trust. The Company is obligated to ensure that the LC Trust meets minimum capital requirements with respect to funding the administrative activities and maintaining the operations of the LC Trust.

Consolidated Securitizations

The Company establishes securitization trusts to facilitate the sale of loans and issuance of senior and subordinated securities. If the Company is the primary beneficiary of the trust it is a consolidated VIE and will reflect senior and subordinated securities held by third parties as a “Payable to securitization note holders” in the Company’s Condensed Consolidated Balance Sheets. If subsequently the Company is not the primary beneficiary of the trust, the Company will deconsolidate the VIE.

Warehouse Credit Facilities

The Company established certain entities (deemed to be VIEs) to enter into warehouse credit facilities for the purpose of purchasing loans from LendingClub. See “Note 13. Debt” for additional information.

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 a summary of financial assets and liabilities from the Company’s involvement with consolidated VIEs at September 30, 2019 and December 31, 2018:



September 30, 2019	Assets		Liabilities			Net Assets
LC Trust	$	257,748	$	(255,656	)	$	2,092
Warehouse credit facilities	668,565		(406,900		)	261,665
Total consolidated VIEs	$	926,313	$	(662,556	)	$	263,757



December 31, 2018	Assets		Liabilities			Net Assets
LC Trust	$	657,339	$	(656,088	)	$	1,251
Consolidated Securitizations	297,821		(256,901		)	40,920
Warehouse credit facility	483,004		(308,284		)	174,720
Total consolidated VIEs	$	1,438,164	$	(1,221,273	)	$	216,891

The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets.

Unconsolidated VIEs

The Company’s transactions with unconsolidated VIEs include asset-backed securitizations, Certificate Program transactions and loan sale transactions of unsecured personal loans. The Company has various forms of involvement with VIEs, including servicing of loans and holding senior or subordinated residual interests in the VIEs. The accounting for these transactions is based on a primary beneficiary analysis to determine whether the underlying VIEs should be consolidated. If the VIEs are not consolidated and the transfer of the loans from the Company to the VIE meets sale accounting criteria, then the Company will recognize a gain or loss on sales of loans. The Company considers continued involvement in an unconsolidated VIE insignificant if it is the sponsor and servicer and does not hold other significant variable interests. In these instances, the Company’s involvement with the VIE is in the role as an agent and without significant participation in the economics of the VIE. The Company enters into separate servicing agreements with the VIEs and holds at least 5% of the beneficial interests issued by the VIEs to comply with regulatory risk retention rules. The beneficial interests retained by the Company consist of senior securities and subordinated securities and are accounted for as securities available for sale. In connection with these transactions, we make certain customary representations, warranties and covenants. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2. Summary of Significant Accounting Policies” in the Annual Report for additional information.

Investment Fund

The Company has an equity investment in a private fund (Investment Fund) that participates in a family of funds with other unrelated third parties. This family of funds purchases whole loans and interests in loans from the Company, as well as other assets from third parties unrelated to the Company. As of September 30, 2019, the Company had an ownership interest of approximately 23% in the Investment Fund. The Company’s investment is deemed to be a variable interest in the Investment Fund because the Company shares in the expected returns and losses of the Investment Fund. At September 30, 2019, the Company’s investment was $7.9 million, which is recognized in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.

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 summarize unconsolidated VIEs with which the Company has significant continuing involvement, but is not the primary beneficiary at September 30, 2019 and December 31, 2018:



September 30, 2019			Carrying Value
	Total VIE Assets		Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Securities Sold Under Repurchase Agreements		Net Assets
Securitizations	$	1,760,518	$	88,243	$	456	$	17,650	$	—	$	—	$	106,349
Certificate Program	2,010,096		98,449		556		19,862		—		—		118,867
Investment Fund	35,219		—		—		7,943		—		—		7,943
Total unconsolidated VIEs	$	3,805,833	$	186,692	$	1,012	$	45,455	$	—	$	—	$	233,159



September 30, 2019	Maximum Exposure to Loss
	Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Securities Sold Under Repurchase Agreements		Total Exposure
Securitizations	$	88,243	$	456	$	17,650	$	—	$	—	$	106,349
Certificate Program	98,449		556		19,862		—		—		118,867
Investment Fund	—		—		7,943		—		—		7,943
Total unconsolidated VIEs	$	186,692	$	1,012	$	45,455	$	—	$	—	$	233,159



December 31, 2018			Carrying Value
	Total VIE Assets		Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Securities Sold Under Repurchase Agreements			Net Assets
Securitizations	$	1,359,367	$	68,338	$	958	$	11,838	$	—	$	(57,012	)	$	24,122
Certificate Program	973,815		48,430		256		9,115		—		—			57,801
Investment Fund	35,157		—		—		8,253		—		—			8,253
Total unconsolidated VIEs	$	2,368,339	$	116,768	$	1,214	$	29,206	$	—	$	(57,012	)	$	90,176



December 31, 2018	Maximum Exposure to Loss
	Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Securities Sold Under Repurchase Agreements		Total Exposure
Securitizations	$	68,339	$	958	$	11,838	$	—	$	—	$	81,135
Certificate Program	48,431		256		9,115		—		—		57,802
Investment Fund	—		—		8,253		—		—		8,253
Total unconsolidated VIEs	$	116,770	$	1,214	$	29,206	$	—	$	—	$	147,190

“Total VIE Assets” represents the remaining principal balance of loans held by unconsolidated VIEs with respect to securitizations, Certificate Program transactions, and the net assets held by the Investment Fund using the most current information available. “Securities Available for Sale,” “Accrued Interest Receivable,” “Other Assets” and “Accrued Expenses and Other Liabilities” are the balances in the Company’s Condensed Consolidated Balance Sheets related to its involvement with the unconsolidated VIEs. “Other Assets” includes the Company’s servicing

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

assets and servicing receivables and the Company’s equity investment with respect to the Investment Fund. “Total Exposure” refers to the Company’s maximum exposure to loss from its involvement with unconsolidated VIEs. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is extremely remote, such as where the value of interests and any associated collateral declines to zero. Accordingly, this required disclosure is not an indication of expected losses.

The following table summarizes activity related to the unconsolidated securitization trusts and Certificate Program trusts, with the transfers accounted for as a sale on the Company’s condensed consolidated financial statements for the third quarters and first nine months of 2019 and 2018:



Three Months Ended September 30,	2019				2018
	Unconsolidated Securitization Trusts		Unconsolidated Certificate Program Trusts		Unconsolidated Securitization Trusts		Unconsolidated Certificate Program Trusts
Principal derecognized from loans securitized or sold	$	328,173	$	772,734	$	299,348	$	309,037
Net gains (losses) recognized from loans securitized or sold	$	360	$	9,174	$	530	$	3,013
Fair value of senior securities and subordinated securities retained upon settlement ⁽¹⁾	$	15,464	$	37,803	$	14,869	$	15,481
Cash proceeds from loans securitized or sold	$	298,099	$	659,755	$	277,509	$	297,386
Cash proceeds from servicing and other administrative fees on loans securitized or sold	$	4,545	$	4,802	$	4,040	$	1,029
Cash proceeds for interest received on senior securities and subordinated securities	$	1,283	$	2,045	$	742	$	441


⁽¹⁾	For Structured Program transactions, the Company retained senior securities of $21.8 million and $13.5 million for the third quarters of 2019 and 2018, respectively, and subordinated securities of $4.3 million and $1.4 million for the third quarters of 2019 and 2018, respectively.



Nine Months Ended September 30,	2019				2018
	Unconsolidated Securitization Trusts		Unconsolidated Certificate Program Trusts		Unconsolidated Securitization Trusts		Unconsolidated Certificate Program Trusts
Principal derecognized from loans securitized or sold	$	1,180,048	$	1,797,174	$	1,300,838	$	667,582
Net gains (losses) recognized from loans securitized or sold	$	4,114	$	20,641	$	6,039	$	6,050
Fair value of senior securities and subordinated securities retained upon settlement ⁽¹⁾	$	57,379	$	88,371	$	65,653	$	33,307
Cash proceeds from loans securitized or sold	$	864,949	$	1,629,967	$	867,875	$	638,191
Cash proceeds from servicing and other administrative fees on loans securitized or sold	$	12,324	$	11,396	$	9,533	$	1,736
Cash proceeds for interest received on senior securities and subordinated securities	$	3,917	$	5,280	$	2,044	$	852


⁽¹⁾	For Structured Program transactions, the Company retained senior securities of $60.0 million and $57.3 million for the first nine months of 2019 and 2018, respectively, and subordinated securities of $8.1 million and $8.4 million for the first nine months of 2019 and 2018, respectively.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Off-Balance Sheet Loans

Off-balance sheet loans primarily relate to Structured Program transactions for which the Company has some form of continuing involvement, including as servicer. Delinquent loans are comprised of loans 31 days or more past due, including non-accrual loans. For loans related to structured program transactions where servicing is the only form of continuing involvement, the Company would only experience a loss if it was required to repurchase a loan due to a breach in representations and warranties associated with its loan sale or servicing contracts.

As of September 30, 2019, the aggregate unpaid principal balance of the off-balance sheet loans pursuant to structured program transactions was $3.8 billion, of which $133.4 million was attributable to off-balance sheet loans that were 31 days or more past due. As of December 31, 2018, the aggregate unpaid principal balance of the off-balance sheet loans pursuant to structured program transactions was $2.3 billion, of which $87.1 million was attributable to off-balance sheet loans that were 31 days or more past due.

Retained Interests from Unconsolidated VIEs

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

See “Note 8. Fair Value of Assets and Liabilities” for additional information on the fair value sensitivity of asset-backed securities related to Structured Program transactions.

8. Fair Value of Assets and Liabilities

For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Part II – Item 8. Financial Statements and Supplementary Data – 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.

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, Assets and Liabilities Recorded at Fair Value

The following tables present the fair value hierarchy for assets and liabilities measured at fair value at September 30, 2019 and December 31, 2018:



September 30, 2019	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Loans held for investment	$	—	$	—	$	1,237,479	$	1,237,479
Loans held for investment by the Company	—		—		4,211		4,211
Loans held for sale by the Company	—		—		710,170		710,170
Securities available for sale:
Asset-backed senior securities and subordinated securities	—		83,463		14,699		98,162
CLUB Certificate asset-backed securities	—		—		88,530		88,530
Other asset-backed securities	—		18,307		—		18,307
Certificates of deposit	—		17,052		—		17,052
Corporate debt securities	—		14,841		—		14,841
Commercial paper	—		9,667		—		9,667
Total securities available for sale	—		143,330		103,229		246,559
Servicing assets	—		—		83,250		83,250
Total assets	$	—	$	143,330	$	2,138,339	$	2,281,669

Liabilities:
Notes, certificates and secured borrowings	$	—	$	—	$	1,240,958	$	1,240,958
Loan trailing fee liability	—		—		10,583		10,583
Total liabilities	$	—	$	—	$	1,251,541	$	1,251,541

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, 2018	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Loans held for investment	$	—	$	—	$	1,883,251	$	1,883,251
Loans held for investment by the Company	—		—		2,583		2,583
Loans held for sale by the Company	—		—		840,021		840,021
Securities available for sale:
Asset-backed senior securities and subordinated securities	—		56,489		11,849		68,338
CLUB Certificate asset-backed securities	—		—		48,430		48,430
Corporate debt securities	—		17,328		—		17,328
Certificates of deposit	—		14,929		—		14,929
Other asset-backed securities	—		11,225		—		11,225
Commercial paper	—		9,720		—		9,720
Other securities	—		499		—		499
Total securities available for sale	—		110,190		60,279		170,469
Servicing assets	—		—		64,006		64,006
Total assets	$	—	$	110,190	$	2,850,140	$	2,960,330

Liabilities:
Notes, certificates and secured borrowings	$	—	$	—	$	1,905,875	$	1,905,875
Loan trailing fee liability	—		—		10,010		10,010
Total liabilities	$	—	$	—	$	1,915,885	$	1,915,885

The Company has elected the fair value option for notes, certificates, secured borrowings, and the loan trailing fee liability. Changes in the fair value of these financial liabilities caused by a change in the Company’s risk are reported in other comprehensive income (OCI). For the third quarter and first nine months of 2019, the amount reported in OCI is zero because these financial liabilities are either payable only upon receipt of cash flows from underlying loans or secured by cash collateral.

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 held for investment and related notes, certificates, and secured borrowings, loans held for sale, loan servicing rights, asset-backed securities related to structured program transactions, 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 observable and unobservable inputs, respectively. The Company primarily uses a discounted cash flow model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. The Company did not transfer any assets or liabilities in or out of Level 3 during the first nine months of 2019 or the year ended December 31, 2018.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Fair valuation adjustments were recorded through earnings related to Level 3 instruments for the third quarters and first nine months of 2019 and 2018. Certain 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 valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input.

Loans Held for Investment, Notes, Certificates and Secured Borrowings

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for loans held for investment, notes, certificates and secured

borrowings at September 30, 2019 and December 31, 2018:



	Loans Held for Investment, Notes, Certificates and Secured Borrowings
	September 30, 2019						December 31, 2018
	Minimum		Maximum		Weighted- Average		Minimum		Maximum		Weighted- Average
Discount rates	6.4	%	13.9	%	8.3	%	6.3	%	16.4	%	9.1	%
Net cumulative expected loss rates⁽¹⁾	3.5	%	35.0	%	11.8	%	2.8	%	36.9	%	12.8	%
Cumulative expected prepayment rates ⁽¹⁾	28.2	%	38.7	%	31.2	%	27.8	%	40.3	%	31.2	%


⁽¹⁾	Expressed as a percentage of the original principal balance of the loan, note, certificate or secured borrowing.

Significant Recurring Level 3 Fair Value Input Sensitivity

At September 30, 2019 and December 31, 2018, the discounted cash flow methodology used to estimate the note, certificate and secured borrowings’ 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 held for investment and loans held for sale were largely offset by the fair value adjustments of the notes, certificates and secured borrowings due to the payment dependent design of the notes, certificates and secured borrowings and because the principal balances of the loans were close to the combined principal balances of the notes, certificates and secured borrowings.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Fair Value Reconciliation

The following tables present additional information about Level 3 loans held for investment, loans held for sale, and notes, certificates and secured borrowings measured at fair value on a recurring basis for the third quarters and first nine months of 2019 and 2018:



	Loans Held for Investment									Loans Held for Sale									Notes, Certificates and Secured Borrowings
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at June 30, 2019	$	1,605,257		$	(92,273	)	$	1,512,984		$	—		$	—		$	—		$	1,605,257		$	(87,306	)	$	1,517,951
Purchases	162,402			—			162,402			697,833			(9,080		)	688,753			—			—			—
Transfers (to) from loans held for investment and/or loans held for sale	(122,515		)	—			(122,515		)	122,330			—			122,330			—			—			—
Issuances	—			—			—			—			—			—			162,402			—			162,402
Sales	—			—			—			(820,163		)	8,814			(811,349		)	—			—			—
Principal payments and retirements	(286,106		)	—			(286,106		)	—			—			—			(408,621		)	—			(408,621		)
Charge-offs, net of recoveries	(42,433		)	29,029			(13,404		)	—			—			—			(42,433		)	27,347			(15,086		)
Change in fair value recorded in earnings	—			(15,882		)	(15,882		)	—			266			266			—			(15,688		)	(15,688		)
Balance at September 30, 2019	$	1,316,605		$	(79,126	)	$	1,237,479		$	—		$	—		$	—		$	1,316,605		$	(75,647	)	$	1,240,958

	Loans Held for Investment									Loans Held for Sale									Notes, Certificates and Secured Borrowings
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at June 30, 2018	$	2,538,256		$	(179,627	)	$	2,358,629		$	—		$	—		$	—		$	2,553,926		$	(176,846	)	$	2,377,080
Purchases	236,354			8			236,362			680,191			—			680,191			—			—			—
Issuances	—			—			—			—			—			—			236,463			—			236,463
Sales	—			—			—			(680,191		)	(981		)	(681,172		)	—			—			—
Principal payments and retirements	(419,933		)	—			(419,933		)	—			—			—			(419,898		)	7			(419,891		)
Charge-offs, net of recoveries	(69,833		)	53,054			(16,779		)	—			—			—			(69,832		)	53,054			(16,778		)
Change in fair value recorded in earnings	—			(24,450		)	(24,450		)	—			981			981			—			(24,558		)	(24,558		)
Balance at September 30, 2018	$	2,284,844		$	(151,015	)	$	2,133,829		$	—		$	—		$	—		$	2,300,659		$	(148,343	)	$	2,152,316

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)



	Loans Held for Investment									Loans Held for Sale									Notes, Certificates and Secured Borrowings
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at December 31, 2018	$	2,013,438		$	(130,187	)	$	1,883,251		$	—		$	—		$	—		$	2,033,258		$	(127,383	)	$	1,905,875
Purchases	522,248			(21		)	522,227			1,812,984			(9,548		)	1,803,436			—			—			—
Transfers (to) from loans held for investment and/or loans held for sale	(122,967		)	—			(122,967		)	122,330			—			122,330			—			—			—
Issuances	—			—			—			—			—			—			522,248			—			522,248
Sales	—			—			—			(1,935,314		)	8,034			(1,927,280		)	—			—			—
Principal payments and retirements	(944,469		)	—			(944,469		)	—			—			—			(1,087,256		)	14			(1,087,242		)
Charge-offs, net of recoveries	(151,645		)	110,705			(40,940		)	—			—			—			(151,645		)	109,012			(42,633		)
Change in fair value recorded in earnings	—			(59,623		)	(59,623		)	—			1,514			1,514			—			(57,290		)	(57,290		)
Balance at September 30, 2019	$	1,316,605		$	(79,126	)	$	1,237,479		$	—		$	—		$	—		$	1,316,605		$	(75,647	)	$	1,240,958

	Loans Held for Investment									Loans Held for Sale									Notes, Certificates and Secured Borrowings
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at December 31, 2017	$	3,141,391		$	(209,066	)	$	2,932,325		$	—		$	—		$	—		$	3,161,080		$	(206,312	)	$	2,954,768
Purchases	774,918			17			774,935			2,624,026			(3,318		)	2,620,708			—			—			—
Transfers (to) from loans held for investment and/or loans held for sale	(1,181		)	(22,152		)	(23,333		)	1,181			22,152			23,333			—			—			—
Issuances	—			—			—			—			—			—			775,441			—			775,441
Sales	—			—			—			(2,625,207		)	627			(2,624,580		)	—			—			—
Principal payments and retirements	(1,373,600		)	—			(1,373,600		)	—			—			—			(1,379,179		)	101			(1,379,078		)
Charge-offs, net of recoveries	(256,684		)	207,825			(48,859		)	—			—			—			(256,683		)	207,825			(48,858		)
Change in fair value recorded in earnings	—			(127,639		)	(127,639		)	—			(19,461		)	(19,461		)	—			(149,957		)	(149,957		)
Balance at September 30, 2018	$	2,284,844		$	(151,015	)	$	2,133,829		$	—		$	—		$	—		$	2,300,659		$	(148,343	)	$	2,152,316

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Loans Invested in by the Company

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for loans invested in by the Company at September 30, 2019 and December 31, 2018:



	Loans Invested in by the Company
	September 30, 2019						December 31, 2018
	Minimum		Maximum		Weighted- Average		Minimum		Maximum		Weighted- Average
Discount rates	6.1	%	13.8	%	8.0	%	5.9	%	16.7	%	9.4	%
Net cumulative expected loss rates⁽¹⁾	3.4	%	37.1	%	10.6	%	2.6	%	36.8	%	13.2	%
Cumulative expected prepayment rates ⁽¹⁾	26.9	%	40.8	%	31.2	%	27.0	%	45.5	%	32.5	%


⁽¹⁾	Expressed as a percentage of the original principal balance of the loan.

Significant Recurring Level 3 Fair Value Input Sensitivity

The fair value sensitivity of loans invested in by the Company to adverse changes in key assumptions as of September 30, 2019 and December 31, 2018, are as follows:



	September 30, 2019			December 31, 2018
Fair value of loans invested in by the Company	$	714,381		$	842,604
Expected weighted-average life (in years)	1.5			1.4
Discount rates
100 basis point increase	$	(9,424	)	$	(10,487	)
200 basis point increase	$	(18,650	)	$	(20,720	)
Expected credit loss rates on underlying loans
10% adverse change	$	(8,631	)	$	(11,304	)
20% adverse change	$	(17,254	)	$	(22,504	)
Expected prepayment rates
10% adverse change	$	(2,143	)	$	(2,422	)
20% adverse change	$	(4,201	)	$	(4,785	)

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Fair Value Reconciliation

The following tables present additional information about Level 3 loans invested in by the Company measured at fair value on a recurring basis for the third quarters and first nine months of 2019 and 2018:



	Loans Held for Investment by the Company									Loans Held for Sale by the Company									Total Loans Invested in by the Company
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at June 30, 2019	$	6,550		$	(1,523	)	$	5,027		$	457,787		$	(22,704	)	$	435,083		$	464,337		$	(24,227	)	$	440,110
Purchases	791			(632		)	159			1,531,916			—			1,531,916			1,532,707			(632		)	1,532,075
Transfers (to) from loans held for investment and/or loans held for sale	304			—			304			(119		)	—			(119		)	185			—			185
Sales	—			—			—			(1,181,739		)	24,093			(1,157,646		)	(1,181,739		)	24,093			(1,157,646		)
Principal payments and retirements	(840		)	—			(840		)	(65,814		)	—			(65,814		)	(66,654		)	—			(66,654		)
Charge-offs, net of recoveries	(1,209		)	697			(512		)	(6,680		)	5,922			(758		)	(7,889		)	6,619			(1,270		)
Change in fair value recorded in earnings	—			73			73			—			(32,492		)	(32,492		)	—			(32,419		)	(32,419		)
Balance at September 30, 2019	$	5,596		$	(1,385	)	$	4,211		$	735,351		$	(25,181	)	$	710,170		$	740,947		$	(26,566	)	$	714,381


	Loans Held for Investment by the Company									Loans Held for Sale by the Company									Total Loans Invested in by the Company
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at June 30, 2018	$	10,761		$	(1,140	)	$	9,621		$	535,910		$	(20,603	)	$	515,307		$	546,671		$	(21,743	)	$	524,928
Purchases	1,521			(256		)	1,265			1,189,737			(602		)	1,189,135			1,191,258			(858		)	1,190,400
Transfers (to) from loans held for investment and/or loans held for sale	3,011			—			3,011			(3,011		)	—			(3,011		)	—			—			—
Sales	—			—			—			(1,193,980		)	17,598			(1,176,382		)	(1,193,980		)	17,598			(1,176,382		)
Principal payments and retirements	(1,456		)	—			(1,456		)	(45,265		)	—			(45,265		)	(46,721		)	—			(46,721		)
Charge-offs, net of recoveries	(541		)	303			(238		)	(4,075		)	4,048			(27		)	(4,616		)	4,351			(265		)
Change in fair value recorded in earnings	—			(5		)	(5		)	—			(20,474		)	(20,474		)	—			(20,479		)	(20,479		)
Balance at September 30, 2018	$	13,296		$	(1,098	)	$	12,198		$	479,316		$	(20,033	)	$	459,283		$	492,612		$	(21,131	)	$	471,481

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)



	Loans Held for Investment by the Company									Loans Held for Sale by the Company									Total Loans Invested in by the Company
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at December 31, 2018	$	3,518		$	(935	)	$	2,583		$	869,715		$	(29,694	)	$	840,021		$	873,233		$	(30,629	)	$	842,604
Purchases	1,961			(1,626		)	335			3,564,467			—			3,564,467			3,566,428			(1,626		)	3,564,802
Transfers (to) from loans held for investment and/or loans held for sale	5,254			(1,471		)	3,783			(4,617		)	1,471			(3,146		)	637			—			637
Sales	—			—			—			(3,477,485		)	86,387			(3,391,098		)	(3,477,485		)	86,387			(3,391,098		)
Principal payments and retirements	(2,295		)	—			(2,295		)	(197,692		)	—			(197,692		)	(199,987		)	—			(199,987		)
Charge-offs, net of recoveries	(2,842		)	1,544			(1,298		)	(19,037		)	17,885			(1,152		)	(21,879		)	19,429			(2,450		)
Change in fair value recorded in earnings	—			1,103			1,103			—			(101,230		)	(101,230		)	—			(100,127		)	(100,127		)
Balance at September 30, 2019	$	5,596		$	(1,385	)	$	4,211		$	735,351		$	(25,181	)	$	710,170		$	740,947		$	(26,566	)	$	714,381


	Loans Held for Investment by the Company									Loans Held for Sale by the Company									Total Loans Invested in by the Company
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Balance at December 31, 2017	$	371,379		$	(10,149	)	$	361,230		$	242,273		$	(6,448	)	$	235,825		$	613,652		$	(16,597	)	$	597,055
Purchases	4,682			(685		)	3,997			3,172,818			(2,734		)	3,170,084			3,177,500			(3,419		)	3,174,081
Transfers (to) from loans held for investment and/or loans held for sale	(313,328		)	22,152			(291,176		)	313,328			(22,152		)	291,176			—			—			—
Sales	—			—			—			(3,119,245		)	62,477			(3,056,768		)	(3,119,245		)	62,477			(3,056,768		)
Principal payments and retirements	(45,770		)	—			(45,770		)	(120,964		)	—			(120,964		)	(166,734		)	—			(166,734		)
Charge-offs, net of recoveries	(3,667		)	3,062			(605		)	(8,894		)	8,843			(51		)	(12,561		)	11,905			(656		)
Change in fair value recorded in earnings	—			(15,478		)	(15,478		)	—			(60,019		)	(60,019		)	—			(75,497		)	(75,497		)
Balance at September 30, 2018	$	13,296		$	(1,098	)	$	12,198		$	479,316		$	(20,033	)	$	459,283		$	492,612		$	(21,131	)	$	471,481

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Asset-Backed Securities Related to Structured Program Transactions

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for asset-backed securities related to structured program transactions at September 30, 2019 and December 31, 2018:



	Asset-Backed Securities Related to Structured Program Transactions
	September 30, 2019						December 31, 2018
	Minimum		Maximum		Weighted- Average		Minimum		Maximum		Weighted- Average
Discount rates	4.4	%	40.0	%	10.3	%	3.2	%	19.6	%	8.8	%
Net cumulative expected loss rates⁽¹⁾	6.9	%	39.9	%	19.7	%	6.3	%	43.9	%	18.4	%
Cumulative expected prepayment rates ⁽¹⁾	19.3	%	34.1	%	29.1	%	21.0	%	33.0	%	30.1	%


⁽¹⁾	Expressed as a percentage of the outstanding collateral balance.

Significant Recurring Level 3 Fair Value Input Sensitivity

The following tables present adverse changes to the fair value sensitivity of asset-backed securities related to structured program transactions to changes in key assumptions at September 30, 2019 and December 31, 2018:



	September 30, 2019
	Asset-Backed Securities Related to Structured Program Transactions
	Senior Securities			Subordinated Securities			CLUB Certificates
Fair value of interests held	$	83,463		$	14,699		$	88,530
Expected weighted-average life (in years)	1.1			1.3			1.1
Discount rates
100 basis point increase	$	(786	)	$	(204	)	$	(851	)
200 basis point increase	$	(1,559	)	$	(373	)	$	(1,681	)
Expected credit loss rates on underlying loans
10% adverse change	$	—		$	(1,394	)	$	(2,144	)
20% adverse change	$	—		$	(2,826	)	$	(4,329	)
Expected prepayment rates
10% adverse change	$	—		$	(635	)	$	(657	)
20% adverse change	$	—		$	(1,259	)	$	(1,301	)

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, 2018
	Asset-Backed Securities Related to Structured Program Transactions
	Senior Securities			Subordinated Securities			CLUB Certificates
Fair value of interests held	$	56,489		$	11,849		$	48,430
Expected weighted-average life (in years)	1.0			1.3			1.2
Discount rates
100 basis point increase	$	(526	)	$	(149	)	$	(472	)
200 basis point increase	$	(1,032	)	$	(293	)	$	(932	)
Expected credit loss rates on underlying loans
10% adverse change	$	—		$	(1,573	)	$	(1,070	)
20% adverse change	$	—		$	(3,159	)	$	(2,112	)
Expected prepayment rates
10% adverse change	$	—		$	(786	)	$	(291	)
20% adverse change	$	—		$	(1,599	)	$	(562	)

Fair Value Reconciliation

The following table presents additional information about Level 3 asset-backed subordinated securities related to Company-sponsored Structured Program transactions measured at fair value on a recurring basis for the third quarters and first nine months of 2019 and 2018:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Fair value at beginning of period	$	95,821		$	28,727		$	60,279		$	10,029
Additions	31,597			16,836			85,944			41,641
Redemptions	(8,861		)	(417		)	(8,861		)	(2,742		)
Cash received	(13,385		)	(3,075		)	(31,791		)	(4,362		)
Change in unrealized gain (loss)	(768		)	718			140			347
Other-than-temporary impairment	(1,175		)	(165		)	(2,482		)	(2,289		)
Fair value at end of period	$	103,229		$	42,624		$	103,229		$	42,624

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Servicing Assets

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for servicing assets at September 30, 2019 and December 31, 2018:



	Servicing Assets
	September 30, 2019						December 31, 2018
	Minimum		Maximum		Weighted- Average		Minimum		Maximum		Weighted- Average
Discount rates	3.9	%	15.7	%	8.7	%	4.8	%	16.7	%	9.0	%
Net cumulative expected loss rates⁽¹⁾	3.6	%	36.5	%	12.2	%	2.8	%	38.7	%	12.5	%
Cumulative expected prepayment rates ⁽¹⁾	27.2	%	40.8	%	31.9	%	13.9	%	42.9	%	31.9	%
Total market servicing rates (% per annum on outstanding principal balance) ⁽²⁾	0.66	%	0.66	%	0.66	%	0.66	%	0.66	%	0.66	%


⁽¹⁾	Expressed as a percentage of the original principal balance of the loan.


⁽²⁾	Includes collection fees estimated to be paid to a hypothetical third-party servicer.

Significant Recurring Level 3 Fair Value Input Sensitivity

The Company’s selection of the most representative market servicing rates for servicing assets 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, calculated using different market servicing rate assumptions as of September 30, 2019 and December 31, 2018:



Servicing Assets	September 30, 2019			December 31, 2018
Weighted-average market servicing rate assumptions	0.66		%	0.66		%
Change in fair value from:
Servicing rate increase by 0.10%	$	(13,577	)	$	(10,878	)
Servicing rate decrease by 0.10%	$	13,579		$	10,886

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Fair Value Reconciliation

The following table presents additional information about Level 3 servicing assets measured at fair value on a recurring basis for the third quarters and first nine months of 2019 and 2018:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Fair value at beginning of period	$	78,714		$	50,984		$	64,006		$	33,676
Issuances ⁽¹⁾	21,042			16,308			55,588			44,476
Change in fair value, included in investor fees	(16,849		)	(9,194		)	(39,954		)	(22,253		)
Other net changes included in deferred revenue	343			2,062			3,610			4,261
Fair value at end of period	$	83,250		$	60,160		$	83,250		$	60,160


⁽¹⁾	Represents the gains or losses on sales of the related loans.

Loan Trailing Fee Liability

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for loan trailing fee liability at September 30, 2019 and December 31, 2018:



	Loan Trailing Fee Liability
	September 30, 2019						December 31, 2018
	Minimum		Maximum		Weighted- Average		Minimum		Maximum		Weighted- Average
Discount rates	3.9	%	15.7	%	9.5	%	4.8	%	16.7	%	9.5	%
Net cumulative expected loss rates ⁽¹⁾	3.5	%	36.4	%	14.3	%	2.8	%	38.7	%	14.0	%
Cumulative expected prepayment rates ⁽¹⁾	27.8	%	40.8	%	32.5	%	16.5	%	43.1	%	32.2	%


⁽¹⁾	Expressed as a percentage of the original principal balance of the loan.

Significant Recurring Level 3 Fair Value Input Sensitivity

The fair value sensitivity of the loan trailing fee liability to adverse changes in key assumptions would not result in a material impact on the Company’s financial position.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Fair Value Reconciliation

The following table presents additional information about Level 3 loan trailing fee liability measured at fair value on a recurring basis for the third quarters and first nine months of 2019 and 2018:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Fair value at beginning of period	$	10,224		$	9,388		$	10,010		$	8,432
Issuances	2,152			1,994			5,552			5,838
Cash payment of Loan Trailing Fee	(2,015		)	(1,769		)	(5,920		)	(4,974		)
Change in fair value, included in Origination and Servicing	222			243			941			560
Fair value at end of period	$	10,583		$	9,856		$	10,583		$	9,856

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 at September 30, 2019 and December 31, 2018:



September 30, 2019	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Cash and cash equivalents ⁽¹⁾	$	199,950	$	—	$	199,950	$	—	$	199,950
Restricted cash ⁽¹⁾	275,136		—		275,136		—		275,136
Servicer reserve receivable	120		—		120		—		120
Deposits	859		—		859		—		859
Total assets	$	476,065	$	—	$	476,065	$	—	$	476,065
Liabilities:
Accrued expenses and other liabilities	$	22,566	$	—	$	—	$	22,566	$	22,566
Accounts payable	15,490		—		15,490		—		15,490
Payables to investors	117,698		—		117,698		—		117,698
Credit facilities and securities sold under repurchase agreements	509,107		—		43,844		465,263		509,107
Total liabilities	$	664,861	$	—	$	177,032	$	487,829	$	664,861


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

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, 2018	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Cash and cash equivalents ⁽¹⁾	$	372,974	$	—	$	372,974	$	—	$	372,974
Restricted cash ⁽¹⁾	271,084		—		271,084		—		271,084
Servicer reserve receivable	669		—		669		—		669
Deposits	1,093		—		1,093		—		1,093
Total assets	$	645,820	$	—	$	645,820	$	—	$	645,820
Liabilities:
Accrued expenses and other liabilities	$	18,483	$	—	$	—	$	18,483	$	18,483
Accounts payable	7,104		—		7,104		—		7,104
Payables to investors	149,052		—		149,052		—		149,052
Payable to securitization note holders	256,354		—		256,354		—		256,354
Credit facilities and securities sold under repurchase agreements	458,802		—		57,012		401,790		458,802
Total liabilities	$	889,795	$	—	$	469,522	$	420,273	$	889,795


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

9. Property, Equipment and Software, Net

Property, equipment and software, net, consist of the following:



	September 30, 2019			December 31, 2018
Internally developed software ⁽¹⁾	$	152,103		$	141,233
Leasehold improvements	39,514			31,109
Computer equipment	25,854			24,204
Purchased software	11,280			10,139
Furniture and fixtures	9,876			8,468
Construction in progress	4,154			4,106
Total property, equipment and software	242,781			219,259
Accumulated depreciation and amortization	(125,539		)	(105,384		)
Total property, equipment and software, net	$	117,242		$	113,875


⁽¹⁾	Includes $20.4 million and $10.3 million of development in progress as of September 30, 2019 and December 31, 2018, respectively.

Depreciation and amortization expense on property, equipment and software was $12.8 million and $38.8 million for the third quarter and first nine months of 2019, respectively. Depreciation and amortization expense on property, equipment and software was $12.3 million and $33.8 million for the third quarter and first nine months of 2018, respectively. The Company recorded impairment expense on its internally developed software of $0.2 million and $2.5 million for the third quarter and first nine months of 2019, respectively. The Company recorded impairment expense on its internally developed software of $2.4 million and $3.2 million for the third quarter and first nine months of 2018, respectively. The Company records impairment expense on its internally developed software in “Engineering and product development” expense in the Condensed Consolidated Statements of Operations.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

10. Other Assets

Other assets consist of the following:



	September 30, 2019		December 31, 2018
Operating lease assets ⁽¹⁾	$	96,259	$	—
Loan servicing assets, at fair value ⁽²⁾	83,250		64,006
Accounts receivable	16,611		19,322
Prepaid expenses	16,136		25,598
Other investments	8,443		8,503
Deferred financing costs	2,066		2,117
Other	6,581		5,421
Total other assets	$	229,346	$	124,967


⁽¹⁾	The Company adopted ASU 2016-02, Leases, as of January 1, 2019 and has elected not to restate comparative periods presented in the condensed consolidated financial statements. For additional information, see “Note 2. Summary of Significant Accounting Policies” and “Note 17. Leases.”


⁽²⁾	Loans underlying loan servicing rights had a total outstanding principal balance of $13.5 billion and $10.9 billion as of September 30, 2019 and December 31, 2018, respectively.

11. Intangible Assets and Goodwill

Intangible Assets

Intangible assets net of accumulated amortization was $15.4 million and $18.0 million at September 30, 2019 and December 31, 2018, respectively. Amortization expense associated with intangible assets for the third quarter and first nine months of 2019 was $0.8 million and $2.7 million, respectively. Amortization expense associated with intangible assets for the third quarter and first nine months of 2018 was $0.9 million and $2.9 million, respectively.

Goodwill

During the annual testing for potential impairment of goodwill in 2018, management performed an assessment of the Company's education and patient finance reporting unit (PEF), which was the only reporting unit with goodwill. Upon completion of the annual impairment test, the Company recorded a goodwill impairment expense of $35.6 million during the second quarter of 2018, resulting in full impairment of the remaining goodwill of PEF.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

12. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:



	September 30, 2019		December 31, 2018
Operating lease liabilities ⁽¹⁾	$	114,957	$	—
Accrued expenses	54,955		42,507
Accrued compensation	28,590		36,105
Transaction fee refund reserve	23,015		19,543
Contingent liabilities ⁽²⁾	15,000		12,750
Deferred revenue	13,314		9,420
Loan trailing fee liability, at fair value	10,583		10,010
Payable to issuing banks	2,245		1,182
Deferred rent ⁽¹⁾	—		16,211
Other	5,412		4,390
Total accrued expenses and other liabilities	$	268,071	$	152,118


⁽¹⁾	The Company adopted ASU 2016-02, Leases, as of January 1, 2019 and elected not to restate comparative periods presented in the condensed consolidated financial statements. As such, effective January 1, 2019, deferred rent is included within operating lease liabilities. For additional information, see “Note 2. Summary of Significant Accounting Policies” and “Note 17. Leases.”


⁽²⁾	See “Note 18. Commitments and Contingencies” for further information.

13. Debt

Credit Facilities and Securities Sold Under Repurchase Agreements

The Company may enter into arrangements in the ordinary course of business pursuant to which the Company can incur indebtedness. Below is a description of certain of these arrangements:

Warehouse Credit Facilities

Through wholly-owned subsidiaries, the Company entered into four secured warehouse credit facilities (Warehouse Facilities I, II, III, and IV) with certain lenders during 2017, 2018 and 2019. Each subsidiary entered into a credit agreement and security agreement with a commercial bank as administrative agent and a national banking association as collateral trustee and paying agent, as further described below. The credit agreement for Warehouse Facility I was amended and restated in its entirety on March 25, 2019.

Warehouse Facilities I, II, and IV have a combined borrowing capacity of $700.0 million on a revolving basis until October 10, 2020, March 23, 2020, and June 15, 2020, respectively, or an earlier event that constitutes a “Commitment Termination Date” under the respective credit agreements. Proceeds may only be used to purchase certain unsecured personal loans, including related assets, from the Company and to pay fees and expenses related to the applicable facilities. Warehouse Facility I matures on March 25, 2022, Warehouse Facility II matures on the earlier to occur of twelve months after the Commitment Termination Date or January 25, 2021, and Warehouse Facility IV matures on the earlier to occur of twelve months after the Commitment Termination Date or June 13, 2022, at which dates these particular Warehouse Facilities must repay all outstanding borrowings of the facilities.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Warehouse Facility III is a $34.2 million term loan that matures on June 29, 2021. Proceeds under Warehouse Facility III were used to purchase certain auto refinance loans, including related assets, from the Company and to pay fees and expenses related to the facility. The amount borrowed under Warehouse Facility III amortizes over time through regular principal and interest payments collected from the auto refinance loans. The entire amount of the outstanding debt may be prepaid at any time without penalty.

The creditors of the Warehouse Facilities have no recourse to the general credit of the Company. Borrowings under the Warehouse Facilities bear interest at an annual benchmark rate of LIBOR (London Inter-bank Offered Rate) plus a spread ranging from 1.85% to 2.50%, or at an alternative commercial paper rate (which is either (i) the per annum rate equivalent to the weighted-average of the per annum rates at which all commercial paper notes were issued by certain lenders to fund advances or maintain loans or (ii) the daily weighted-average of LIBOR, as set forth in the applicable credit agreement). Interest is payable monthly. Borrowings may be prepaid without penalty. In addition, Warehouse Facilities I, II, and IV require payment of a monthly unused commitment fee ranging from 0.375% to 1.25% per annum on the average undrawn portion available under such facilities.

The Warehouse Facilities contain certain covenants. As of September 30, 2019, the Company was in material compliance with all applicable covenants under the respective credit agreements.

As of September 30, 2019 and December 31, 2018, the Company had $405.3 million and $306.8 million in aggregate debt outstanding under the Warehouse Facilities, respectively, with collateral consisting of loans at fair value of $600.0 million and $453.0 million included in “Loans held for sale by the Company at fair value,” respectively, and restricted cash of $64.1 million and $25.2 million included in the Condensed Consolidated Balance Sheets, respectively.

Revolving Credit Facility

On December 17, 2015, the Company entered into a credit and guaranty agreement and pledge and security agreement with several lenders for an aggregate $120.0 million secured revolving credit facility (Revolving Facility). In connection with the credit agreement, the Company entered into a pledge and security agreement with a financial services company, as collateral agent.

The Company may borrow under the Revolving Facility until December 17, 2020. Repayment of any outstanding proceeds are payable on December 17, 2020, but may be prepaid without penalty.

Borrowings under the Revolving Facility bear interest, at the Company’s option, at an annual rate of LIBOR 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 the Company incurring expense to compensate the lenders for their funding costs through the end of the interest period. Interest is payable quarterly. Additionally, the Company is required to pay a quarterly commitment fee to the lenders of between 0.25% and 0.375% per annum, depending on the Company’s total net leverage ratio, on the average undrawn portion available under the Revolving Facility.

The Revolving Facility contains certain covenants. As of September 30, 2019, the Company was in material compliance with all applicable covenants in the credit and guaranty agreement.

The Company had $60.0 million and $95.0 million in debt outstanding under the Revolving Facility as of September 30, 2019 and December 31, 2018, respectively.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Repurchase Agreements

On August 8, 2018 and November 8, 2018, the Company entered into master repurchase agreements, pursuant to which the Company may sell securities (subject to an obligation to repurchase such securities at a specified future date and price) in exchange for cash. The Company is subject to margin calls based on the fair value of the collateral pledged. As of September 30, 2019 and December 31, 2018, the Company had $43.8 million and $57.0 million in aggregate debt outstanding under its repurchase agreements, respectively, with contractual repurchase dates ranging from November 20, 2019 to July 15, 2026, which correspond to either a set repurchase schedule or to the maturity dates of the underlying securities which have been sold, and which have a weighted-average estimated life of approximately one year. Such debt is included in “Credit facilities and securities sold under repurchase agreements” on the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, the Company had $51.3 million and $64.1 million, respectively, of underlying assets pledged as collateral.

Payable to Securitization Note Holders

On December 13, 2018, the Company sponsored an asset-backed securities securitization transaction consisting of approximately $300.0 million in unsecured personal whole loans facilitated through the Company’s platform. The Depositor sold 95% of the notes to third-party investors for $256.2 million in net proceeds. The residual certificates were retained by the Company. The securitization trust used to effect this transaction is a VIE that the Company consolidated because the Company was the primary beneficiary of the VIE.

As of December 31, 2018, the notes held by third-party investors and the respective unamortized debt issuance costs of $256.4 million were included in “Payable to securitization note holders” in the Condensed Consolidated Balance Sheets and were secured by loans held for sale by the Company at fair value of $286.3 million and restricted cash of $9.3 million included in the Condensed Consolidated Balance Sheets.

In May 2019, the Company sold a portion of the residual certificates and no longer holds significant variable interest in the securitization trust. As a result, the Company deconsolidated the securitization trust, including the derecognition of the payable to securitization note holders.

14. Secured Borrowings

In October 2017, LendingClub Asset Management, LLC (LCAM), a wholly-owned subsidiary of LendingClub that previously acted as the general partner for certain private funds, initiated the wind-down of six funds by redeeming the LC Trust certificates issued to the funds and transferring the loan participations underlying the redeemed certificates to third party investors. Certain of the loan participations for two of the funds transferred did not meet the definition of participating interests because the Company provided a credit support agreement under which the investor has a recourse to the Company for credit losses. The transfer of these loan participations from these two funds was accounted for as a secured borrowing and the underlying whole loans were not derecognized from the Company’s Condensed Consolidated Balance Sheets. The Company has elected the fair value option for the secured borrowings.

As of September 30, 2019, the fair value of the secured borrowings was $30.9 million, secured by loans at fair value of $27.4 million included in “Loans held for investment at fair value” in the Condensed Consolidated Balance Sheets. As of December 31, 2018, the fair value of the secured borrowings was $80.6 million, secured by loans at fair value of $76.5 million included in “Loans held for investment at fair value” in the Condensed Consolidated Balance Sheets. Changes in the fair value of the secured borrowings are partially offset by the associated loan participations, and the net effect results in changes in fair value of the credit support agreement through earnings. As of September 30, 2019 and December 31, 2018, the fair value of this credit support agreement was $3.5 million and $2.8 million. The fair value of the credit support agreement is equal to the present value of the probability-weighted

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

estimate of expected payments over a range of loss scenarios. See “Note 6. Loans Held for Investment, Loans Held for Sale, Notes, Certificates and Secured Borrowings” for additional information.

15. Employee Incentive Plans

The Company’s 2014 Equity Incentive Plan (EIP) provides for granting awards, including restricted stock units (RSUs), performance-based restricted stock units (PBRSUs) and stock options to employees, officers and directors.

Stock-based compensation expense was as follows for the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
RSUs and PBRSUs	$	17,543	$	17,758	$	54,587	$	49,924
Stock options	552		1,580		1,827		6,135
ESPP	—		433		484		1,310
Total stock-based compensation expense	$	18,095	$	19,771	$	56,898	$	57,369

The following table presents the Company’s stock-based compensation expense recorded in the Condensed Consolidated Statements of Operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Sales and marketing	$	1,505	$	1,791	$	4,616	$	5,674
Origination and servicing	852		1,104		2,622		3,278
Engineering and product development	4,737		5,332		15,443		16,075
Other general and administrative	11,001		11,544		34,217		32,342
Total stock-based compensation expense	$	18,095	$	19,771	$	56,898	$	57,369

The Company capitalized $1.4 million and $5.0 million of stock-based compensation expense associated with developing software for internal use during the third quarter and first nine months of 2019, respectively. The Company capitalized $2.2 million and $7.1 million of stock-based compensation expense associated with developing software for internal use during the third quarter and first nine months of 2018, respectively.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Restricted Stock Units

The following table summarizes the activities for the Company’s RSUs during the first nine months of 2019:



	Number of Units ⁽¹⁾		Weighted- Average Grant Date Fair Value ⁽¹⁾
Unvested at December 31, 2018	8,639,802		$	20.23
Granted	6,608,814		$	15.45
Vested	(2,606,317	)	$	20.84
Forfeited/expired	(2,469,504	)	$	18.70
Unvested at September 30, 2019	10,172,795		$	17.34


⁽¹⁾	Amounts have been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.

During the first nine months of 2019, the Company granted 6,608,814 RSUs with an aggregate fair value of $102.1 million.

As of September 30, 2019, there was $165.3 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 2.9 years.

Performance-based Restricted Stock Units

PBRSUs are equity awards that are earned, and eligible for time-based vesting, based upon the achievement of certain pre-established performance metrics over a specific performance period. Depending on the level of achievement of the pre-established performance metrics, the PBRSUs earned and eligible for time-based vesting can range from 0% to 200% of the target amount. PBRSUs granted under the Company’s EIP generally have a one-year performance period with the earned shares, if any, vesting over an additional approximately two-year 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 metrics.

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 first quarter of 2019, the Company expanded the use of its PBRSU program to nearly all of the executive team. The following table summarizes the activities for the Company’s PBRSUs during the first nine months of 2019:



	Number of Units ⁽¹⁾		Weighted- Average Grant Date Fair Value ⁽¹⁾
Unvested at December 31, 2018	254,643		$	18.54
Granted	373,810		$	16.42
Vested	(79,042	)	$	19.42
Forfeited/expired ⁽²⁾	(59,088	)	$	17.32
Unvested at September 30, 2019	490,323		$	16.93


⁽¹⁾	Amounts have been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.


⁽²⁾	Represents the portion of PBRSUs granted in 2018 that were unearned as a result of not achieving certain pre-established performance metrics during the performance period.

For the third quarter and first nine months of 2019, the Company recognized $1.0 million and $3.5 million in stock-based compensation expense related to PBRSUs, respectively. For the third quarter and first nine months of 2018, the Company recognized $0.7 million and $2.0 million in stock-based compensation expense related to PBRSUs, respectively.

As of September 30, 2019, there was $5.4 million of unrecognized compensation cost related to unvested PBRSUs, which is expected to be recognized over the next 1.9 years.

Employee Stock Purchase Plan

In connection with the Company’s cost structure simplification efforts, future purchases through the Company’s employee stock purchase plan (ESPP) were suspended effective upon the completion of the most recent offering period on May 10, 2019.

16. Income Taxes

For the third quarter and first nine months of 2019, the Company recorded an income tax expense of $97 thousand and an income tax benefit of $341 thousand, respectively. For the third quarter and first nine months of 2018, the Company recorded income tax benefit of $38 thousand and income tax expense of $25 thousand, respectively. The income tax expense in the third quarter of 2019 is comprised primarily of the tax effects of unrealized losses recorded to other comprehensive income associated with the Company’s available for sale portfolio. The income tax benefit in the first nine months of 2019 is comprised primarily of the tax effects of the year-to-date unrealized gains recorded to other comprehensive income associated with the Company's available for sale portfolio.

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

17. Leases

The Company has operating leases for its headquarters in San Francisco, California, as well as additional office space in the Salt Lake City area and Westborough, Massachusetts. As of September 30, 2019, the lease agreements have remaining lease terms ranging from two years to ten years. Some of the lease agreements include options to extend the lease term for up to an additional fifteen years and some of them include options to terminate the lease with six months’ prior notice. In addition, the Company is the sublessor of a portion of its office space in San Francisco, with lease terms ranging from two years to three years. As of September 30, 2019, the Company pledged $0.8 million of cash and $5.5 million in letters of credit as security deposits in connection with its lease agreements.

Supplemental balance sheet information as of September 30, 2019 related to leases was as follows:



ROU Assets and Lease Liabilities	Balance Sheet Classification	September 30, 2019
Operating lease assets	Other assets	$	96,259
Operating lease liabilities ⁽¹⁾	Accrued expenses and other liabilities	$	114,957


⁽¹⁾	The difference between operating lease assets and operating lease liabilities is the unamortized balance of deferred rent, which prior to January 1, 2019 was included as a separate liability within Accrued expenses and other liabilities.

Components of net lease costs for the third quarter and first nine months of 2019 and 2018 were as follows:



		Three Months Ended September 30,						Nine Months Ended September 30,
Net Lease Costs	Income Statement Classification	2019			2018			2019			2018
Operating lease costs ⁽¹⁾	Other general and administrative expense	$	(4,617	)	$	(4,284	)	$	(14,788	)	$	(12,871	)
Sublease revenue	Other revenue	1,175			77			3,198			232
Net lease costs		$	(3,442	)	$	(4,207	)	$	(11,590	)	$	(12,639	)


⁽¹⁾	Includes variable lease costs of $0.4 million and $0.2 million for the third quarters of 2019 and 2018, respectively. Includes variable lease costs of $1.2 million and $0.5 million for the first nine months of 2019 and 2018, respectively.

Supplemental cash flow information for the third quarter and first nine months of 2019 related to the Company’s operating leases was as follows:



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Non-cash operating activity:
Leased assets obtained in exchange for new operating lease liabilities ⁽¹⁾	$	—	$	15,277


⁽¹⁾	Represents non-cash activity and, accordingly, is not reflected in the Condensed Consolidated Statements of Cash Flows.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

The Company’s future minimum undiscounted lease payments under operating leases and anticipated sublease revenue as of September 30, 2019 were as follows:



	Operating Lease Payments		Sublease Revenue			Net
2019	$	4,323	$	(1,325	)	$	2,998
2020	18,219		(6,373		)	11,846
2021	18,649		(6,564		)	12,085
2022	15,010		(2,908		)	12,102
2023	11,663		—			11,663
Thereafter	86,499		—			86,499
Total lease payments	$	154,363	$	(17,170	)	$	137,193
Discount effect	39,406
Present value of future minimum lease payments	$	114,957

The weighted-average remaining lease term and discount rate used in the calculation of the Company’s operating lease assets and liabilities were as follows:



Lease Term and Discount Rate	September 30, 2019
Weighted-average remaining lease term (in years)	9.83
Weighted-average discount rate	5.74	%

18. Commitments and Contingencies

Operating Lease Commitments

For discussion regarding the Company’s operating lease commitments, see “Note 17. Leases.”

Loan Purchase Obligation

Under the Company’s loan account program with WebBank, which serves as the Company’s primary issuing bank for loans facilitated through the Company’s platform, WebBank retains ownership of the loans it originates for two business days after origination. As part of this arrangement, the Company is committed to purchase the loans at par plus accrued interest, at the conclusion of the two business days. As of September 30, 2019 and December 31, 2018, the Company was committed to purchase loans with an outstanding principal balance of $98.6 million and $55.9 million at par, respectively.

Loan Repurchase Obligations

The Company is generally required to repurchase loans or interests therein in the event of identity theft or certain other types of fraud on the part of the borrower. The Company may also repurchase loans or interests therein in connection with certain customer accommodations. In connection with certain whole loan and Certificate Program sales, as well as to facilitate access to securitization markets, the Company has agreed to repurchase loans if representations and warranties made with respect to such loans are breached under certain circumstances. In the case of certain securitization transactions, the Company has also agreed to repurchase or substitute loans for which a borrower fails to make the first payment due under a loan. The Company believes such provisions are customary and consistent with institutional loan and securitization market standards.

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 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 repurchases such loans or interests therein at par.

As a result of the loan repurchase obligations described above, the Company repurchased $4.2 million and $2.4 million in loans or interests therein during the first nine months of 2019 and 2018, respectively.

Purchase Commitments

As required by applicable regulations, the Company must make firm offers of credit with respect to prescreened direct mail it sends out to prospective applicants provided such applicants continue to meet the credit worthiness criteria which were used to screen them at the time of their application. If such loans are accepted by the applicants but not otherwise funded by investors on the platform, the Company is required to facilitate funding for the loans directly with its issuing bank partners. The Company was not required to purchase any such loans during the first nine months of 2019. Additionally, loans in the process of being facilitated through the Company’s platform and originated by the Company’s issuing bank partner at September 30, 2019, were substantially funded in October 2019. 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 the Company nor Springstone 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, the Company and Springstone are contractually committed to purchase these loans. As of both September 30, 2019 and December 31, 2018, 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 Condensed Consolidated Balance Sheets. During the first nine months of 2019, the Company was required to purchase $32.4 million of loans facilitated by Springstone. These purchased loans are held on the Company’s Condensed Consolidated Balance Sheets and have a fair value of $40.5 million and $26.6 million as of September 30, 2019 and December 31, 2018, respectively. The Company believes it will be required to purchase additional loans facilitated by Springstone in 2019 as it seeks to arrange for other investors to invest in or purchase these loans.

Credit Support Agreement

The Company is 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 cash in the amount of $0.2 million and $0.8 million as of September 30, 2019 and December 31, 2018, 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 September 30, 2019 and December 31, 2018, for which no liability was accrued as of September 30, 2019 or December 31, 2018.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Legal

The Company is subject to various claims brought in a litigation or regulatory context. These matters include lawsuits and federal regulatory actions relating to and arising from the internal board review described more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Board Review” contained in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (Board Review). Of these matters relating to and arising from the Board Review, the Company has settled certain significant class action and subsequent “opt-out” lawsuits and investigations conducted by the Securities and Exchange Commission and Department of Justice, leaving derivative lawsuits and litigation with the FTC outstanding. In addition to the Board Review related matters, the Company continues to cooperate in federal and state regulatory examinations, investigations, and actions relating to the Company’s business practices and licensing, and is a party to a number of routine litigation matters arising in the ordinary course of business. The majority of these claims and proceedings relate to or arise from alleged state or federal law and regulatory violations, or are alleged commercial disputes or consumer complaints. The Company accrues for costs related to contingencies when a loss from such claims is probable and the amount of loss can be reasonably estimated. In determining whether a loss from a claim is probable and the loss can be reasonably estimated, the Company reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If the Company determines an unfavorable outcome is not probable or the amount of loss cannot be reasonably estimated, the Company does not accrue for a potential litigation loss. In those situations, the Company discloses an estimate or range of the reasonably possible losses, if such estimates can be made. Except as otherwise specifically noted below, at this time, the Company does not believe that it is possible to estimate the reasonably possible losses or a range of reasonably possible losses related to the matters described below.

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, another 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. In addition, on August 18, 2017, another putative shareholder derivative action was filed in the Delaware Court of Chancery (Fink, et al. v. Laplanche, et al., C.A. No. 2017-0600). These matters arise from claims that the Board allegedly breached its fiduciary duty by failing to provide adequate oversight over the Company’s practices and procedures, and purport to plead derivative claims under Delaware law. The Court ultimately consolidated the cases, selecting the Steinberg plaintiffs as lead plaintiffs, and designating the Steinberg complaint as the operative complaint (consolidated Delaware matter). In June 2018, the Company and the individual defendants brought a motion to dismiss the consolidated Delaware matter on demand futility grounds or in the alternative to stay the matter. Defendants in the consolidated Delaware matter later consented to the filing of a supplemental consolidated complaint in the case, and the plaintiffs filed that supplemental complaint on January 11, 2019. The Company and individual defendants in the case filed motions to dismiss the supplemental complaint on February 22, 2019. A hearing on these motions was held on July 17, 2019. On October 31, 2019, the Court issued a ruling dismissing the supplemental complaint for failure to plead that a majority of the directors on the Company’s board would have been unable to impartially consider a pre-suit demand. As of the date of this Report, it is unclear whether plaintiffs will appeal this decision.

On November 6, 2017, another putative shareholder derivative action was filed in the U.S. District Court for the Northern District of California (Sawyer v. Sanborn, et al., No. 3:17-cv-06447) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. This action was based on allegations similar to those in a consolidated putative securities class action litigation (In re LendingClub

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Securities Litigation, No. 16-cv-02627 (N.D. Cal.)) that was successfully settled in 2018. The plaintiffs in the consolidated Delaware matter were permitted to join with the plaintiffs in the Sawyer action for the purposes of settlement. The Court in the Sawyer action concurrently ordered all parties (including the intervening consolidated Delaware matter plaintiffs) to participate in a mediation in May 2018, but that mediation did not result in a settlement.

In July 2018, the Company and the individual defendants brought a motion to dismiss the Sawyer matter on the grounds that the action was not filed within the applicable statute of limitations. The Court granted that motion and judgment was entered in favor of the defendants. The Sawyer plaintiff also attempted to intervene in a previously filed derivative action in the U.S. District Court for the Northern District of California (Stadnicki v. LaPlanche, et al., No. 3:16-cv-03072). The Company and the individual defendants opposed the intervention, and the original Stadnicki plaintiff moved to voluntarily dismiss the case. The motion to intervene was denied and the motion to voluntarily dismiss the Stadnicki action was granted. Notices of appeal were filed in both the Sawyer and Stadnicki actions. The appeal in the Sawyer matter has been dismissed at the Sawyer plaintiff’s request. The appeal in the Stadnicki matter remains pending. It is not possible for the Company to predict the outcome of the derivative litigation matters discussed above.

FTC Lawsuit

In 2016, the Company received a formal request for information from the Federal Trade Commission (FTC). The FTC commenced an investigation concerning certain of the Company’s policies and practices and related legal compliance.

On April 25, 2018, the FTC filed a complaint in the Northern District of California (FTC v. LendingClub Corporation, No. 3:18-cv-02454) alleging causes of action for violations of the FTC Act, including claims of deception in connection with disclosures related to the origination fee associated with loans available through the Company’s platform, and in connection with communications relating to the likelihood of loan approval during the application process, and a claim of unfairness relating to certain unauthorized charges to borrowers’ bank accounts. The FTC’s complaint also alleged a violation of the Gramm-Leach-Bliley Act regarding the Company’s practices in delivering its privacy notice. In June 2018, the Company brought a motion to dismiss the FTC’s complaint, which was heard on September 13, 2018. In an order dated October 3, 2018, the Court denied the motion in part and granted the motion in part, providing the FTC with leave to amend its pleadings. On October 22, 2018, the FTC filed an amended complaint which reasserted the same causes of action from the original complaint. On November 13, 2018, the Company filed an answer to the amended complaint. The FTC subsequently filed a motion seeking to strike certain affirmative defenses pled in the answer and the Company filed an opposition to the motion. On April 29, 2019, the Court issued a ruling denying the FTC’s motion in part and granting it in part and allowing the Company to replead certain of the affirmative defenses that were the subject of the FTC’s motion. The Company filed an amended answer in the case on May 29, 2019. Discovery in the case is ongoing. The Court has issued a pretrial scheduling order that sets various deadlines in the case, including a June 22, 2020 trial commencement date. The Company denies, and will continue to vigorously defend against, the claims asserted in this case. Notwithstanding the Company’s vigorous defense, the Company and the FTC have participated in voluntary settlement conferences and may engage in additional settlement discussions. No assurances can be given as to the timing, outcome or consequences of this matter.

Class Action Lawsuits Following Announcement of FTC Litigation

In May 2018, following the announcement of the FTC’s litigation against the Company, putative shareholder class action litigation was filed in the U.S. District Court of the Northern District of California (Veal v. LendingClub Corporation et.al., No. 5:18-cv-02599) against the Company and certain of its current and former officers and directors alleging violations of federal securities laws in connection with the Company’s description of fees and

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

compliance with federal privacy law in securities filings. The Court appointed lead plaintiffs and lead counsel for the litigation in November 2018. On January 7, 2019, the lead plaintiffs filed a consolidated amended class action complaint which asserts the same causes of action as the original complaint and adds additional allegations. On March 8, 2019, the Company and the individual defendants in the case filed motions to dismiss the consolidated amended class action complaint. A hearing on these motions was held on September 26, 2019. On November 4, 2019, the Court issued a written order granting defendants’ motions to dismiss with leave to amend. Any amended complaint must be filed by December 19, 2019. This lawsuit is in the early stages. The Company denies and will vigorously defend against the allegations. No assurances can be given as to the timing, outcome or consequences of this matter.

In July 2019, a putative class action lawsuit was filed against the Company in federal court in the State of New York (Shron v. LendingClub Corp., 1:19-cv-06718) alleging various claims including fraud, unjust enrichment, breach of contract, and violations of the federal Truth-in-Lending Act and New York General Business Law sections 349 and 350, et seq., based on allegations, among others, that the Company made misleading or inadequate statements or omissions in relation to the total cost and origination fee associated with loans available through the Company’s platform. The plaintiff seeks to represent classes of similarly situated individuals in the lawsuit. The Company has filed a motion to compel arbitration of plaintiff’s claims on an individual basis. The timing of a ruling on that motion is unclear. This matter is in the early stages. The Company denies and will vigorously defend against the allegations. No assurances can be given as to the timing, outcome or consequences of this matter.

Derivative Lawsuits Following FTC Litigation

In July 2018, a putative shareholder derivative action was filed in the U.S. District Court for the Northern District of California (Baron v. Sanborn, et al. No. 3:18-cv-04391) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. This action is based on allegations that the individuals breached their fiduciary duties to the Company and violated federal securities laws by, among other things, permitting the actions alleged in the FTC litigation and the description of fees and other practices in the Company’s securities filings. In January 2019, a second putative shareholder derivative action was filed in the U.S. District Court for the Northern District of California (Cheekatamarla v. Sanborn, et al., No. 3:19-cv-00563) against certain of the Company’s current officers and directors and naming the Company as a nominal defendant. Like the Baron action, this action is based on allegations that the individuals breached their fiduciary duties to the Company and violated federal securities laws by, among other things, permitting the actions alleged in the FTC litigation and the description of fees and other practices in the Company’s securities filings. Pursuant to a stipulation by the parties in both of these derivative cases, the Court consolidated the two cases and stayed the consolidated action pending further developments in Veal. In September 2019, co-lead counsel for plaintiffs in the consolidated action filed a notice and proposed order to lift the temporary stay and the Court issued an order lifting the stay. Subsequent to this order, the case was reassigned and the new Court issued an order staying the consolidated action pending resolution of the Veal action. No assurances can be given as to the timing, outcome or consequences of this consolidated matter.

In August 2019, a putative shareholder derivative action was filed in the Court of Chancery for the State of Delaware (Fisher v. Sanborn, et al., Case No. 2019-0631) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. This lawsuit advances allegations similar to those in the consolidated Baron/Cheekatamarla actions and the Veal action discussed above and accuses the individual defendants of breaching their fiduciary duties by failing to adequately monitor the Company and prevent it from engaging in the purported regulatory violations alleged by the FTC and by causing the Company to make allegedly false and misleading public statements (as alleged in the Veal action). The lawsuit also alleges that certain of the individual defendants breached their fiduciary duties by selling Company shares while in possession of material, non-public information. On October 11, 2019, the Company and the individual defendants filed a motion

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

to dismiss the complaint. A hearing on the motion is expected in January 2020. No assurances can be given as to the timing, outcome or consequences of this matter.

Regulatory Investigation by the State of Massachusetts

In June 2018, the Company received a civil investigative demand from the office of the Attorney General of the State of Massachusetts. The investigation relates to the advertisement, provision and servicing of personal loans to Massachusetts’ consumers facilitated by the Company. The Company is cooperating with the investigation. The Company and the Attorney General’s Office have recently communicated regarding questions and concerns the Attorney General’s Office has regarding the Company’s compliance with the Massachusetts Small Loan Law and the Small Loan Rate Order promulgated under it. The Attorney General’s Office has also sent additional information requests to the Company. The Company has reached a tentative resolution of this matter with the Attorney General’s Office, the terms of which are not material to the Company’s financial position or results of operations.

Regulatory Investigation by the Alaska Division of Banking and Securities

In the fourth quarter of 2018, the Company received a letter from the Alaska Division of Banking and Securities (Division) notifying it of an investigation by the Division into possible violations by the Company of the Alaska Small Loan Act. The Company has cooperated with the Division in connection with the investigation and has also notified the Division and the Alaska Department of Law of its position that the Company is not subject to the Alaska Small Loan Act. Although this matter is in the early stages, as of the date of this Report, the Company has not received any further communication since January 2019 from the Division on this matter. No assurances can be given as to the timing, outcome or consequences of this matter.

Regulatory Examinations and Actions Relating to the Company’s Business Practices and Licensing

The Company has been subject to periodic inquiries and enforcement actions brought by federal and state regulatory agencies relating to the Company’s business practices, the required licenses to operate its business, and its manner of operating in accordance with the requirements of its licenses. In the past, the Company has successfully resolved inquiries in a manner that was not material to its results of financial operations in any period and that did not materially limit the Company’s ability to conduct its business.

The Company has had discussions with the Colorado Department of Law (CDL) concerning the licenses required for the Company’s servicing operations and the structure of its offerings in the State of Colorado. No assurances can be given as to the timing or outcome of this matter. The Company is also in discussions with the CDL about entering into a terminable agreement to, among other things: (i) toll the statutes of limitations on any action the CDL might bring against the Company based on the rates and charges on loans the Company facilitates and (ii) refrain from making certain loans available for investment by certain investors. No assurances can be given as to the timing, outcome or consequences of this matter.

The Company is routinely subject to examination for compliance with applicable laws and regulations in the states in which it is licensed. As of the date of this Report, the Company is subject to examination by the New York Department of Financial Services (NYDFS). The Company periodically has discussions with various regulatory agencies regarding its business model and has recently engaged in similar discussions with the NYDFS. During the course of such discussions, which remain ongoing, the Company decided to voluntarily comply with certain rules and regulations of the NYDFS. No assurances can be given as to the timing, outcome or consequences of this matter.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Putative Class Actions

In December 2017, a putative class action lawsuit was filed against the Company in the State of Nevada (Moses v. LendingClub Corporation, 2:17-cv-03071-JAD-PAL) alleging violations of the federal Fair Credit Reporting Act. The complaint alleged that the Company improperly accessed the credit report of the plaintiff, who had formerly had a loan serviced by the Company. The complaint further alleged, on information and belief, that the Company improperly accessed credit reports of other similarly situated individuals. The Company filed a motion to compel arbitration on the grounds that the plaintiff waived the right to bring a class action and must individually arbitrate any claim. On February 6, 2019, the Court issued an order granting this motion, dismissed the putative class action without prejudice, and ordered the parties to arbitrate the plaintiff’s claim. As of the date of this Report, the plaintiff has not initiated arbitration. The Company denies the plaintiff’s claim and is prepared to vigorously defend against it in the event the plaintiff initiates an arbitration following the Court’s recent order. No assurances can be given as to the timing, outcome or consequences of this matter.

In March 2019, a putative class action lawsuit was filed against the Company in the State of Florida (Plouffe v. LendingClub Corporation, 0:19-cv-60715-FAM) alleging violations of the federal Fair Credit Reporting Act. The complaint alleged that the Company made unauthorized credit report inquiries relating to the plaintiff following the receipt of a bankruptcy discharge by the plaintiff. The plaintiff sought to represent a class of similarly situated individuals in the lawsuit. In May 2019, the parties agreed to submit all claims in the case to binding arbitration and to stay all court proceedings pending the outcome of the arbitration. The parties have reached a resolution of this matter, the terms of which are not material to the Company’s financial position or results of operations, and the case has been dismissed.

In September 2018, a lawsuit was filed against the Company in the State of New York (Accardo v. Lending Club, et al., 2:18-cv-05030-JS-AKT) asserting an individual claim under the federal Fair Credit Reporting Act against the Company. In early 2019, the plaintiff filed a motion for leave to amend his complaint in the case to assert a putative class claim under the Fair Credit Reporting Act. The plaintiff’s proposed amended complaint contends that LendingClub failed to conduct a reasonable investigation into plaintiff’s identity theft dispute and plaintiff seeks to represent a class of similarly situated individuals. The Company filed an opposition to plaintiff’s motion for leave to amend and also filed a motion to compel arbitration of plaintiff’s claim against the Company on an individual basis. The Court has denied the Company’s motion to compel arbitration and has ordered a trial on whether an arbitration agreement exists between the Company and Plaintiff. The Court also denied without prejudice Plaintiff’s motion for leave to amend. The parties are working to comply with the Court order. The Company denies and will vigorously defend against the allegations. No assurances can be given as to the timing, outcome or consequences of this matter.

California Private Attorneys General Lawsuit

In September 2018, a putative action under the California Private Attorney General Act was brought against the Company in the California Superior Court (Brott v. LendingClub Corporation, et al., CGC-18-570047) alleging violations of the California Labor Code. The complaint by a former employee alleges that the Company improperly failed to pay certain hourly employees for all wages owed, pay the correct rate of pay including overtime, and provide accurate wage statements. The lawsuit alleges that the plaintiff and aggrieved employees are entitled to recover civil penalties under the California Labor Code. On January 11, 2019, the Company filed a petition to compel arbitration of the plaintiff’s claims and stay the litigation pending a ruling on the motion and arbitration of the matter. Pursuant to the parties’ stipulation, in March 2019, the Court issued an order staying the lawsuit pending the parties’ participation in a mediation in September 2019. The parties have reached a resolution of this matter, the terms of which are not material to the Company’s financial position or results of operations. The resolution will require court approval and the parties will work to finalize a written settlement agreement and will thereafter seek the Court’s approval of the negotiated resolution.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

Certain Financial Considerations Relating to Litigation and Investigations

With respect to the matters discussed above, the Company had $15.0 million and $12.8 million in accrued contingent liabilities at September 30, 2019 and December 31, 2018, respectively. The increase in accrued contingent liabilities as of September 30, 2019 compared to December 31, 2018 was primarily related to litigation and regulatory matters of $3.0 million in the first nine months of 2019, which is included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations.

Class action and regulatory litigation expense related to significant governmental and regulatory investigations following the internal board review described more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Board Review” contained in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, was $9.7 million and $35.5 million for the third quarter and first nine months of 2018, respectively. This expense is included in “Class action and regulatory litigation expense” on the Company’s Condensed Consolidated Statements of Operations. The Company had no class action and regulatory litigation expense during the third quarter and first nine months of 2019.

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. No assurance can be given as to the timing, outcome or consequences of any of these matters.

19. 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 loan product types of personal, education and patient finance, and auto. These product types are individually reviewed as operating segments but are aggregated to represent one reportable segment because the education and patient finance and auto loan product types are immaterial both individually and in the aggregate. In the second quarter of 2019, the Company sold certain assets relating to its small business operating segment and announced that it will connect applicants looking for a small business loan with strategic partners and earn referral fees, instead of facilitating these loans on its platform.

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.

20. 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 lending marketplace or certificate investment program. Any material amendment or modification to an existing related party transaction is also subject to the review and approval of the Audit Committee. Related party transactions may include any transaction between entities under common control or with a related person that has occurred since the beginning of the Company’s latest fiscal year or is currently proposed. 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 person, 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 or interests therein or had investments in and distributions from private funds managed by LCAM. The Company believes all such transactions by related

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)

(Unaudited)

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.

As of September 30, 2019, the Company had a $7.9 million investment and an approximate 23% ownership interest in an Investment Fund, a private fund that participates in a family of funds with other unrelated third parties. This family of funds purchases whole loans and interests in loans from the Company, as well as other assets from third parties unrelated to the Company. The Company’s investment in the Investment Fund is recorded in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.

During the first nine months of 2019, the family of funds purchased $77 thousand of whole loans. During the first nine months of 2019, the Company earned $74 thousand in investor fees from this family of funds, and paid interest of $684 thousand on the funds’ interests in whole loans. The Company believes that the investor fees charged were on terms and conditions that were not more favorable than those obtained by other third-party investors.

21. Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to September 30, 2019, 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 no additional subsequent events were required to be recognized or disclosed.

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, and in “Part I – Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (Annual Report). The forward-looking statements included in this Report are made only as of the date hereof.

Overview

LendingClub operates America’s largest online lending marketplace platform that connects borrowers and investors. Qualified consumers borrow through LendingClub to generally lower the cost of their credit and enjoy a better experience than that provided by most traditional banks. The capital to invest in the loans enabled through our lending marketplace comes from a wide range of investors, including banks, managed accounts, institutional investors, and self-directed retail investors.

We generate revenue primarily from transaction fees from our lending marketplace’s role in marketing to customers, 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, gains on sales of whole loans sold, interest income earned net of interest expenses and fair value gains/losses from loans invested in by the Company and held on our balance sheet.

The transaction fees we receive from issuing banks in connection with our lending marketplace’s role in facilitating loan originations range from 0% to 6% of the initial principal amount of the loan. Alternatively, for education and patient finance loans, we collect fees from issuing banks and from the related education and patient service providers.

Investor fees paid to us vary based on investment channel. Whole loan purchasers pay a monthly fee of up to 1.3% per annum and Structured Program investors pay a monthly fee of up to 1%, which is generally based on the month-end principal balance of loans serviced by us. Note investors generally pay us a fee equal to 1% of payment amounts received from the borrower. Certificate holders generally pay a monthly fee of up to 1.2% per annum of the month-end balance of assets under management or the month-end balance of unpaid principal of the underlying certificate. Investor fees may also vary based on the delinquency status of the loan.

Loans facilitated through our lending marketplace are funded by the sale of whole loans to banks and other institutional investors, the sale of whole loans facilitated through our Structured Programs, the issuance of notes to our self-directed retail investors, or funded directly by the Company with its own capital. The Company’s Structured Program transactions include i) asset-backed securitization transactions and ii) Certificate Program transactions. Certificate Program transactions include CLUB Certificate and Levered Certificate transactions.

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)

only be used to settle obligations of the underlying securitization trusts. As the sponsor for securitization transactions, the Company manages the completion of the transaction and earns fees from third-party participants.

In addition, the Company sponsors the sale of unsecured personal whole loans through the issuance of certificate securities under our Certificate Program. The Certificate securities are collateralized by loans transferred to a series of a master trust and trade in the over-the-counter market with a CUSIP. The sale of certificates results in more liquidity and demand for our unsecured personal loans. The assets are transferred into a trust such that the assets are legally isolated from the creditors of the Company and are not available to satisfy the obligations of the Company. These assets can only be used to settle obligations of the underlying Certificate Program trusts. The CLUB Certificate issued securities are pass-through securities of which each owner has an undivided and equal interest in the underlying loans of each transaction. The Levered Certificate issued securities includes senior and subordinated securities based on the waterfall criteria of loan payments to each security class. The subordinated securities issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria.

We continue to use our own capital to fund the purchase of loans for future Structured Program transactions, and related risk retention requirements, as well as for whole loan sales. Additionally, at our discretion, we use our capital to fund the purchase of loans to support marketplace equilibrium when a matching third-party investor is not available at time of origination, to reflect changes in market value through loan pricing, to test new product offerings, and to make accommodations to customers. In situations where we use our own capital to invest in loans, we earn interest income and record fair value adjustments attributable to changes in actual and expected credit and prepayment performance, or any difference between sale price and carrying value.

Current Economic and Business Environment

Our online lending marketplace platform seeks to adapt to changing marketplace conditions and investors’ return on investment expectations. LendingClub monitors a variety of economic, credit and competitive indicators to propose changes to issuing banks’ credit policies and interest rates.

In the third quarter of 2019, our marketplace facilitated $3.3 billion of loan originations, of which $1.6 billion was issued through whole loan sales, $1.5 billion was purchased or pending purchase by the Company, $146.0 million was issued through member payment dependent notes and $15.9 million was issued through trust certificates. Loans held by the Company at quarter end are available loan inventory for future Structured Program transactions and whole loan sales, excluding loans held by the Company as a result of consolidated securitization trusts.

The following table shows the volume of loan originations facilitated through the Company’s platform, loans purchased or pending purchase by the Company, and the available loan inventory as of the end of each period presented (in millions):



	September 30, 2019			June 30, 2019			March 31, 2019
Loan originations	$	3,349.6		$	3,129.5		$	2,727.8
Loans purchased or pending purchase by the Company during the quarter	$	1,543.5		$	1,182.4		$	830.4
LendingClub inventory ⁽¹⁾	$	755.2		$	419.1		$	266.9
LendingClub inventory as a percentage of loan originations ⁽¹⁾	23		%	13		%	10		%


⁽¹⁾	LendingClub inventory reflects loans purchased or pending purchase by the Company during the period, excluding loans held by the Company through consolidated securitization trusts, if applicable, and not yet sold as of the period end.

LendingClub’s quarterly loan origination purchases were 23% of total loan originations during the third quarter of 2019. This increase in loan inventory purchased by LendingClub was due to higher volumes and mix of lower risk

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)

grade A and B loans facilitated on our marketplace and the timing of loan sales compared to prior periods. This loan inventory will be included in the Company’s future Structured Program transactions.

As market interest rates fluctuate, our investors’ cost of funding and expectations regarding return on investment changes. We have continued to take actions to reduce exposure to certain borrower segments that have had insufficient risk-adjusted returns, especially in lower loan grades and certain FICO bands where losses have historically been more volatile. We have seen a volume and mix increase of grade A and B loans in our standard loan program. As prevailing interest rates and market conditions change, we will continue to adjust interest rates and credit criteria on the platform accordingly. Separately, we periodically adjust products available on our marketplace to reflect investor demand. For example, as previously disclosed, we are no longer facilitating grade E loans due to lack of investor demand on our marketplace. Grade E loans have historically accounted for less than 5% of volume on our marketplace.

Because of timing differences between changes in market interest rates, interest rates on loans, credit performance and investor yield expectations, there may be a difference between the actual yield and the investor required yield on a loan. In these circumstances we continue to use our own capital to purchase loans from our issuing banks. This allows us to adjust the effective yield on a loan through its sale price, thereby maintaining marketplace equilibrium. Any discount to par will result in negative fair value adjustments.

In the third quarter of 2019, we launched a new Structured Program investor product – Levered Certificate transaction, and launched two new platforms – Select Plus platform and the LCX platform. The Select Plus platform opens up the LendingClub marketplace to sophisticated investors to identify opportunities to approve borrowers who fall outside the current credit criteria on the LendingClub platform. Finally, the LCX platform, a digital loan transaction platform, enables investors to bid for and purchase loans with same day settlement.

We have been reviewing our cost structure and have a number of expense initiatives underway with the goal of increasing our operating efficiency. As a result of our review, we signed a lease to establish a site in a more cost-effective location in the Salt Lake City area. We started to hire full-time employees in the first quarter of 2019 in the Salt Lake City area and we have increased the use of third-party business process outsource providers. We are on plan in relocating our origination and servicing operations from San Francisco, California to the Salt Lake City area by the end of 2019. In conjunction with this initiative, we have sublet office space in San Francisco, California, and may continue to do so in the future. Although historically we have internally developed our loan platform technology solutions, in an effort to reduce costs and improve the optimization of our engineering resources for higher value-add software development, we are increasing our usage of third-party technology for certain services. While we expect the implementation of these expense initiatives to increase expenses in the short-term, they are expected to result in overall increased operating efficiency for the Company.

In April 2019, we announced that we will connect applicants looking for a small business loan with strategic partners and earn referral fees, instead of facilitating these loans on our platform. In addition, we continue to evaluate strategic alternatives related to our portfolio. We are actively assessing paths to obtain a national bank charter which is subject to a number of requirements to obtain regulatory approval. We believe a national bank charter would enhance our ability to serve our members, grow our market opportunity, increase and diversify earnings, diversify the platform investor base, and provide both resilience and regulatory clarity.

Our issuing bank for unsecured personal and auto loans is WebBank, a Utah-chartered industrial bank that handles a variety of consumer financing programs. In July 2019, the loan account program agreement and the loan sale agreement that governs the terms and conditions between us and WebBank with respect to loans facilitated through our lending marketplace were amended to terminate in January 2023 (previously January 2020), with two additional automatic, one-year renewal terms, subject to certain early termination provisions set forth in the agreements.

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)

Factors That Can Affect Revenue

As an operator of a lending marketplace, we work to match the supply of loans facilitated through our platform and demand from investors 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, we have been increasingly utilizing our balance sheet to support our Structured Program transactions, manage marketplace equilibrium, hold loans for testing new or existing loan products and repurchase loans that did not meet an investor’s criteria. In some instances, we may subsequently sell those loans, recognizing a gain or loss on their sale.

Loan supply, which is partly driven by borrower-related activities within our business, combined with investor demand to purchase loans on our platform as well as our own loan purchases, can affect our revenue in any particular period. These drivers collectively affect transaction fees, investor fees earned by us related to these transactions, interest income, fair value adjustments and other revenue related to loans held on balance sheet, including the performance of such loans. 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 and terms of resolution of governmental inquiries or private litigation;


•	the mix of borrower products and corresponding transaction fees;


•	regulatory or market factors which limit products on our platform or loan interest rates borrowers can pay;


•	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, through changes in interest rates, transaction fees, terms, or risk profile;


•	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 quarter;


•	determination to hold loans for purposes of subsequently distributing the loans through sale or Structured Program transaction;


•	changes in the credit performance of loans or market interest rates;


•	the success of our models to predict borrower risk levels and related investor demand; and


•	other factors.

At any point in time we have loan applications in various stages from initial application through issuance. Depending upon the timing and impact of the factors described above, loans may not be issued by the issuing banks who originate loans facilitated through our marketplace 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

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)

that were initiated in the immediately prior period. Consistent with our revenue recognition accounting policy under GAAP, we do not recognize the transaction fee revenue associated with a loan until the loan is issued by the issuing bank and the proceeds are delivered to the borrower. Our transaction fees are generally paid by the issuing bank, or in the case of education and patient finance loans, may also be paid by the medical or education service provider, and are accordingly independent of who is investing in a loan or how a loan is invested in.

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									Nine Months Ended September 30,
	September 30, 2019			June 30, 2019			September 30, 2018			2019			2018
Loan originations	$	3,349,613		$	3,129,520		$	2,886,462		$	9,206,964		$	8,010,796
Sales and marketing expense as a percent of loan originations	2.28		%	2.22		%	2.55		%	2.30		%	2.50		%
Net revenue	$	204,896		$	190,807		$	184,645		$	570,121		$	513,291
Consolidated net loss	$	(392	)	$	(10,632	)	$	(22,749	)	$	(30,924	)	$	(114,741	)
Contribution ⁽¹⁾	$	105,789		$	99,556		$	88,453		$	291,033		$	248,305
Contribution margin ⁽¹⁾	51.6		%	52.2		%	47.9		%	51.0		%	48.4		%
Adjusted EBITDA ⁽¹⁾	$	40,021		$	33,181		$	28,052		$	95,791		$	69,055
Adjusted EBITDA margin ⁽¹⁾	19.5		%	17.4		%	15.2		%	16.8		%	13.5		%
Adjusted net income (loss) ⁽¹⁾	$	7,951		$	(1,232	)	$	(7,330	)	$	(4,799	)	$	(28,265	)
Adjusted EPS ^{(1) (2)}	$	0.09		$	(0.01	)	$	(0.09	)	$	(0.06	)	$	(0.34	)


⁽¹⁾	Represents non-GAAP financial measures. For more information regarding these measures and a reconciliation of these measures to the most comparable GAAP measures, see “Non-GAAP Financial Measures” below.


⁽²⁾	All share and per share information has been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.

Loan Originations

We believe the volume of loans facilitated through our platform and originated by our issuing banks is a key indicator of the attractiveness of our lending marketplace, growth of our brand, scale of our business, strength of our network effect, economic competitiveness of our products and future growth.

We classify the loans facilitated by our platform into three major loan products: standard program personal loans, custom program personal loans and other loans. The majority of the loans facilitated through our platform are standard program personal loans that represent loans made to prime borrowers that are available to both public investors (in the form of member payment dependent notes) and other private investors. Custom program personal loans include all other personal loans to borrowers who are not eligible for our standard program, including loans made to super-prime and near-prime borrowers, and are available only to private investors. Other loans are comprised of education and patient finance loans, auto refinance loans, and small business loans. In the second quarter of 2019, the Company announced that it will connect applicants looking for a small business loan with strategic partners and earn referral fees, instead of facilitating these loans on its platform. As a result, beginning in the third quarter of 2019 the “Other loans” category presented in the table below no longer includes small business loans.

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 origination volume and weighted-average transactions fees (as a percent of origination balance) by major loan products are as follows:



	Three Months Ended
	September 30, 2019				June 30, 2019				September 30, 2018
(in millions, except percentages)	Origination Volume		Weighted- Average Transaction Fee		Origination Volume		Weighted- Average Transaction Fee		Origination Volume		Weighted- Average Transaction Fee
Personal loans – standard program	$	2,343.2	5.00	%	$	2,174.3	5.03	%	$	2,063.1	4.81	%
Personal loans – custom program	820.6		4.68	%	750.1		4.77	%	621.2		4.83	%
Total personal loans	3,163.8		4.92	%	2,924.4		4.96	%	2,684.3		4.82	%
Other loans	185.8		3.01	%	205.1		3.63	%	202.2		4.22	%
Total	$	3,349.6	4.81	%	$	3,129.5	4.87	%	$	2,886.5	4.77	%

					Nine Months Ended
					September 30, 2019				September 30, 2018
(in millions, except percentages)					Origination Volume		Weighted-Average Transaction Fee		Origination Volume		Weighted-Average Transaction Fee
Personal loans – standard program					$	6,445.9	5.04	%	$	5,885.4	4.81	%
Personal loans – custom program					2,156.2		4.74	%	1,485.5		4.99	%
Total personal loans					8,602.1		4.96	%	7,370.9		4.84	%
Other loans					604.9		3.63	%	639.9		4.35	%
Total					$	9,207.0	4.87	%	$	8,010.8	4.80	%

The increase in the weighted-average transaction fee in our total personal loans program during the first nine months of 2019 compared to the first nine months of 2018 was primarily driven by higher average transaction fees within the standard program, driven by transaction fee optimization at the grade level.

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)

Personal loan origination volume for our standard loan program by loan grade were as follows:



	Three Months Ended												Nine Months Ended September 30,
(in millions)	September 30, 2019				June 30, 2019				September 30, 2018				2019				2018
Personal loan originations by loan grade – standard loan program:	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
A	$	757.4	32	%	$	705.6	33	%	$	607.0	29	%	$	2,071.3	32	%	$	1,527.6	26	%
B	738.3		32	%	650.8		30	%	563.3		27	%	1,963.6		30	%	1,698.0		29	%
C	523.3		22	%	509.2		23	%	506.1		25	%	1,485.0		23	%	1,556.3		26	%
D	324.2		14	%	308.1		14	%	286.9		14	%	875.8		14	%	831.2		14	%
E	—		—	%	0.6		—	%	72.7		4	%	50.0		1	%	206.3		4	%
F	—		—	%	—		—	%	21.7		1	%	0.2		—	%	54.1		1	%
G	—		—	%	—		—	%	5.4		—	%	—		—	%	11.9		—	%
Total	$	2,343.2	100	%	$	2,174.3	100	%	$	2,063.1	100	%	$	6,445.9	100	%	$	5,885.4	100	%

Credit and pricing policy changes made by the Company during 2019 resulted in a change in the mix of personal loan origination volume from higher risk grades E through G to lower risk A through D grades. These changes broadly focused on tightening credit to shift overall platform mix towards lower risk and higher credit quality borrowers.

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 tables set forth the Condensed Consolidated Statements of Operations data for each of the periods presented:



	Three Months Ended									Change (%)
	September 30, 2019			June 30, 2019			September 30, 2018			Q3 2019 vs Q3 2018		Q3 2019 vs Q2 2019
Net revenue:

Transaction fees	$	161,205		$	152,207		$	137,781		17	%	6	%

Interest income	77,820			92,562			115,514			(33	)%	(16	)%
Interest expense	(55,060		)	(66,916		)	(90,642		)	(39	)%	(18	)%
Net fair value adjustments	(31,628		)	(35,974		)	(19,554		)	62	%	(12	)%
Net interest income and fair value adjustments	(8,868		)	(10,328		)	5,318			N/M		(14	)%
Investor fees	30,271			32,272			29,169			4	%	(6	)%
Gain on sales of loans	18,305			13,886			10,919			68	%	32	%
Net investor revenue ⁽¹⁾	39,708			35,830			45,406			(13	)%	11	%

Other revenue	3,983			2,770			1,458			173	%	44	%

Total net revenue	204,896			190,807			184,645			11	%	7	%
Operating expenses: ⁽²⁾
Sales and marketing	76,255			69,323			73,601			4	%	10	%
Origination and servicing	27,996			24,931			25,431			10	%	12	%
Engineering and product development	41,455			43,299			41,216			1	%	(4	)%
Other general and administrative	59,485			64,324			57,446			4	%	(8	)%
Class action and regulatory litigation expense	—			—			9,738			(100	)%	—	%
Total operating expenses	205,191			201,877			207,432			(1	)%	2	%
Loss before income tax expense	(295		)	(11,070		)	(22,787		)	(99	)%	(97	)%
Income tax expense (benefit)	97			(438		)	(38		)	N/M		(122	)%
Consolidated net loss	$	(392	)	$	(10,632	)	$	(22,749	)	(98	)%	(96	)%
Less: (Loss) Income attributable to noncontrolling interests	(9		)	29			55			(116	)%	(131	)%
LendingClub net loss	$	(383	)	$	(10,661	)	$	(22,804	)	(98	)%	(96	)%
N/M – Not meaningful
⁽¹⁾See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 1. Basis of Presentation” for additional information.
⁽²⁾Includes stock-based compensation expense as follows:
	Three Months Ended									Change (%)
	September 30, 2019			June 30, 2019			September 30, 2018			Q3 2019 vs Q3 2018		Q3 2019 vs Q2 2019
Sales and marketing	$	1,505		$	1,540		$	1,791		(16	)%	(2	)%
Origination and servicing	852			846			1,104			(23	)%	1	%
Engineering and product development	4,737			5,475			5,332			(11	)%	(13	)%
Other general and administrative	11,001			12,690			11,544			(5	)%	(13	)%
Total stock-based compensation expense	$	18,095		$	20,551		$	19,771		(8	)%	(12	)%

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)



	Nine Months Ended September 30,
	2019			2018			Change (%)
Net revenue:

Transaction fees	$	448,809		$	384,889		17	%

Interest income	270,554			381,292			(29	)%
Interest expense	(197,336		)	(302,383		)	(35	)%
Net fair value adjustments	(102,331		)	(74,823		)	37	%
Net interest income and fair value adjustments	(29,113		)	4,086			N/M
Investor fees	94,274			84,464			12	%
Gain on sales of loans	47,343			35,470			33	%
Net investor revenue ⁽¹⁾	112,504			124,020			(9	)%

Other revenue	8,808			4,382			101	%

Total net revenue	570,121			513,291			11	%
Operating expenses: ⁽²⁾
Sales and marketing	212,201			200,164			6	%
Origination and servicing	81,200			73,669			10	%
Engineering and product development	127,300			115,703			10	%
Other general and administrative	180,685			167,338			8	%
Goodwill impairment	—			35,633			(100	)%
Class action settlement and regulatory litigation expense	—			35,500			(100	)%
Total operating expenses	601,386			628,007			(4	)%
Loss before income tax expense	(31,265		)	(114,716		)	(73	)%
Income tax (benefit) expense	(341		)	25			N/M
Consolidated net loss	$	(30,924	)	$	(114,741	)	(73	)%
Less: Income attributable to noncontrolling interests	55			105			(48	)%
LendingClub net loss	$	(30,979	)	$	(114,846	)	(73	)%

N/M – Not meaningful
⁽¹⁾See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 1. Basis of Presentation” for additional information.
⁽²⁾Includes stock-based compensation expense as follows:
	Nine Months Ended September 30,
	2019			2018			Change (%)
Sales and marketing	$	4,616		$	5,674		(19	)%
Origination and servicing	2,622			3,278			(20	)%
Engineering and product development	15,443			16,075			(4	)%
Other general and administrative	34,217			32,342			6	%
Total stock-based compensation expense	$	56,898		$	57,369		(1	)%

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 (%)
	September 30, 2019			June 30, 2019			September 30, 2018			Q3 2019 vs Q3 2018		Q3 2019 vs Q2 2019
Net revenue:

Transaction fees	$	161,205		$	152,207		$	137,781		17	%	6	%

Interest income	77,820			92,562			115,514			(33	)%	(16	)%
Interest expense	(55,060		)	(66,916		)	(90,642		)	(39	)%	(18	)%
Net fair value adjustments	(31,628		)	(35,974		)	(19,554		)	62	%	(12	)%
Net interest income and fair value adjustments	(8,868		)	(10,328		)	5,318			N/M		(14	)%
Investor fees	30,271			32,272			29,169			4	%	(6	)%
Gain on sales of loans	18,305			13,886			10,919			68	%	32	%
Net investor revenue	39,708			35,830			45,406			(13	)%	11	%

Other revenue	3,983			2,770			1,458			173	%	44	%

Total net revenue	$	204,896		$	190,807		$	184,645		11	%	7	%



	Nine Months Ended September 30,
	2019			2018			Change (%)
Net revenue:

Transaction fees	$	448,809		$	384,889		17	%

Interest income	270,554			381,292			(29	)%
Interest expense	(197,336		)	(302,383		)	(35	)%
Net fair value adjustments	(102,331		)	(74,823		)	37	%
Net interest income and fair value adjustments	(29,113		)	4,086			N/M
Investor fees	94,274			84,464			12	%
Gain on sales of loans	47,343			35,470			33	%
Net investor revenue	112,504			124,020			(9	)%

Other revenue	8,808			4,382			101	%

Total net revenue	$	570,121		$	513,291		11	%

N/M – Not meaningful

The analysis below is presented for the following periods: Third quarter of 2019 compared to the third quarter of 2018 (Quarter Over Quarter), third quarter of 2019 compared to the second quarter of 2019 (Sequential), and the first nine months of 2019 compared to the first nine months of 2018 (Nine Months Over Nine Months).

Our personal loan volume is generally lower in the first quarter of the year, primarily due to seasonality of borrower behavior. Additionally, in the fourth quarter of the year, we typically observe fluctuations in marketing effectiveness

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)

and borrower behavior due to the holidays, also impacting origination volume. These seasonal trends contribute to fluctuations in our operating results and operating cash flow.

Transaction Fees

Transaction fees are fees paid by issuing banks or education and patient service providers to us for the work we perform in facilitating the origination of loans by our issuing bank partners. The amount of these fees is based upon the terms of the loan, including grade, rate, term, channel and other factors. As of September 30, 2019, these fees ranged from 0% to 6% of the initial principal amount of a loan. With respect to all unsecured personal loans and auto loans for which WebBank acts as the issuing bank, we record transaction fee revenue net of program fees paid to WebBank.

Transaction fees were $161.2 million and $137.8 million for the third quarters of 2019 and 2018, respectively, an increase of 17%. The increase was primarily due to higher loan origination volume and an increase in the average transaction fees earned in our standard personal loans program. Loans facilitated through our lending marketplace increased to $3.3 billion for the third quarter of 2019 compared to $2.9 billion for the third quarter of 2018, an increase of 16%. The average transaction fee as a percentage of the initial principal balance of the loan was 4.81% for the third quarter of 2019 compared to 4.77% for the third quarter of 2018.

Transaction fees were $161.2 million and $152.2 million for the third and second quarters of 2019, respectively, an increase of 6%. The increase was primarily due to higher loan origination volume. Loans facilitated through our lending marketplace increased to $3.3 billion for the third quarter of 2019 compared to $3.1 billion in the second quarter of 2019, an increase of 7%. The average transaction fee as a percentage of the initial principal balance of the loan was 4.81% for the third quarter of 2019 compared to 4.87% for the second quarter of 2019.

Transaction fees were $448.8 million and $384.9 million for the first nine months of 2019 and 2018, respectively, an increase of 17%. The increase was primarily due to higher loan origination volume and an increase in the average transaction fees earned in our standard personal loans program. Loans facilitated through our lending marketplace increased to $9.2 billion for the first nine months of 2019 compared to $8.0 billion for the first nine months of 2018, an increase of 15%. The average transaction fee as a percentage of the initial principal balance of the loan was 4.87% for the first nine months of 2019 compared to 4.80% for the first nine months of 2018.

In October 2019, we recognized approximately $5.1 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 third quarter of 2019. In October 2018, we recognized approximately $7.2 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 third quarter of 2018.

Net Interest Income and Fair Value Adjustments

Loans Invested in by the Company: In the second quarter of 2017, the Company began to invest in loans to support Structured Program transactions. We earn interest income and assume principal and interest rate risk on loans during the period we own the loans. We have financed a portion of the purchase of these loans with draws on our credit facilities and the associated interest expense reduces net interest income. Fair value adjustments on loans invested in by the Company are generally negative due to interest cash flow receipts and if there are expected increases and any acceleration in the timing of expected charge-offs and prepayments. As we continue to use our own capital to invest in loans for strategic business purposes, we expect the net negative fair value adjustments on loans to fluctuate due to the impact of discounts offered to meet yield expectations of our loan investors and the holding period of the loans.

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)

Loans, Notes, Certificates and Secured Borrowings: We do not assume principal or interest rate risk on loans facilitated through our lending marketplace that are funded by notes, certificates and certain secured borrowings because loan balances, interest rates and maturities are matched and offset by an equal balance of notes, certificates or secured borrowings with the exact same interest rates and maturities. The changes in fair value of loans, notes, certificates and secured borrowings are shown on our Condensed Consolidated Statements of Operations on a net basis. Due to the payment dependent feature of the notes, certificates and secured borrowings, fair value adjustments on loans funded with notes, certificates and secured borrowings result in no net effect on our earnings, except for changes in fair value of any applicable credit support agreements relating to secured borrowings.

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 tables provide additional detail related to net interest income and fair value adjustments for assets invested in by the Company, assets with equal and offsetting liabilities, and total interest income, interest expenses and net fair value adjustments:



	Three Months Ended									Change (%)
	September 30, 2019			June 30, 2019			September 30, 2018			Q3 2019 vs Q3 2018		Q3 2019 vs Q2 2019
Loans invested in by the Company, securities available for sale, cash, cash equivalents and restricted cash, and debt:
Interest income:
Loans held for investment and held for sale by the Company at fair value	$	24,441		$	28,229		$	27,056		(10	)%	(13	)%
Securities available for sale	4,033			3,475			1,931			109	%	16	%
Cash, cash equivalents and restricted cash	1,523			1,660			1,020			49	%	(8	)%
Total	29,997			33,364			30,007			—	%	(10	)%
Interest expense:
Credit facilities and securities sold under repurchase agreements	(7,046		)	(6,366		)	(5,135		)	37	%	11	%
Securitization notes	(191		)	(1,352		)	—			—	%	(86	)%
Total	(7,237		)	(7,718		)	(5,135		)	41	%	(6	)%
Net interest income	$	22,760		$	25,646		$	24,872		(8	)%	(11	)%
Net fair value adjustments	(31,628		)	(35,974		)	(19,554		)	62	%	(12	)%
Net interest income and fair value adjustments	$	(8,868	)	$	(10,328	)	$	5,318		N/M		(14	)%

Loans, notes, certificates and secured borrowings:
Interest income:
Loans held for investment at fair value	$	47,823		$	59,198		$	85,507		(44	)%	(19	)%
Interest expense:
Notes, certificates and secured borrowings	(47,823		)	(59,198		)	(85,507		)	(44	)%	(19	)%
Net interest income	$	—		$	—		$	—		—	%	—	%

Total net interest income and fair value adjustments:
Interest income	$	77,820		$	92,562		$	115,514		(33	)%	(16	)%
Interest expense	(55,060		)	(66,916		)	(90,642		)	(39	)%	(18	)%
Net fair value adjustments	(31,628		)	(35,974		)	(19,554		)	62	%	(12	)%
Net interest income and fair value adjustments	$	(8,868	)	$	(10,328	)	$	5,318		N/M		(14	)%

N/M – Not meaningful

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)



	Nine Months Ended September 30,
	2019			2018			Change (%)
Loans invested in by the Company, securities available for sale, cash, cash equivalents and restricted cash, and debt:
Interest income:
Loans held for investment and held for sale by the Company at fair value	$	81,455		$	86,720		(6	)%
Securities available for sale	10,604			4,958			114	%
Cash, cash equivalents and restricted cash	4,967			2,568			93	%
Total	97,026			94,246			3	%
Interest expense:
Credit facilities and securities sold under repurchase agreements	(19,691		)	(12,138		)	62	%
Securitization notes	(4,117		)	(3,199		)	29	%
Total	(23,808		)	(15,337		)	55	%
Net interest income	$	73,218		$	78,909		(7	)%
Net fair value adjustments	(102,331		)	(74,823		)	37	%
Net interest income and fair value adjustments	$	(29,113	)	$	4,086		N/M

Loans, notes, certificates and secured borrowings:
Interest income:
Loans held for investment at fair value	$	173,528		$	287,046		(40	)%
Interest expense:
Notes, certificates and secured borrowings	(173,528		)	(287,046		)	(40	)%
Net interest income	$	—		$	—		—	%

Total net interest income and fair value adjustments:
Interest income	$	270,554		$	381,292		(29	%)
Interest expense	(197,336		)	(302,383		)	(35	%)
Net fair value adjustments	(102,331		)	(74,823		)	37	%
Net interest income and fair value adjustments	$	(29,113	)	$	4,086		N/M

N/M – Not meaningful

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 tables provide the outstanding average balances, which are key drivers of interest income and interest expense in the periods presented:



	Outstanding Average Balances for Three Months Ended						Change (%)
	September 30, 2019		June 30, 2019		September 30, 2018		Q3 2019 vs Q3 2018		Q3 2019 vs Q2 2019
Loans held for investment by the Company	$	6,095	$	7,978	$	11,019	(45	)%	(24	)%
Loans held for sale by the Company	$	659,877	$	637,768	$	584,219	13	%	3	%
Securities available for sale	$	236,724	$	205,293	$	151,801	56	%	15	%
Credit facilities and securities sold under repurchase agreements	$	472,411	$	365,488	$	373,611	26	%	29	%
Securitization notes	$	4,224	$	113,805	$	—	N/M		(96	)%
Loans held for investment	$	1,458,732	$	1,701,856	$	2,408,965	(39	)%	(14	)%
Notes, certificates and secured borrowings	$	1,458,732	$	1,701,856	$	2,426,301	(40	)%	(14	)%



	Outstanding Average Balances for Nine Months Ended September 30,
	2019		2018		Change (%)
Loans held for investment by the Company	$	6,102	$	179,949	(97	)%
Loans held for sale by the Company	$	717,797	$	485,368	48	%
Securities available for sale	$	209,010	$	135,206	55	%
Credit facilities and securities sold under repurchase agreements	$	419,268	$	241,054	74	%
Securitization notes	$	122,709	$	132,570	(7	)%
Loans held for investment	$	1,685,684	$	2,694,461	(37	)%
Notes, certificates and secured borrowings	$	1,689,072	$	2,716,121	(38	)%

Interest income associated with loans invested in by the Company, securities available for sale, and cash, cash equivalents and restricted cash remained flat at $30.0 million for both of the third quarters of 2019 and 2018.

Interest income associated with loans invested in by the Company, securities available for sale, and cash, cash equivalents and restricted cash was $30.0 million and $33.4 million for the third and second quarters of 2019, respectively, a decrease of 10%. The decrease was primarily due to a shift in overall platform mix towards lower risk and higher credit quality borrowers.

Interest income associated with loans invested in by the Company, securities available for sale, and cash, cash equivalents and restricted cash was $97.0 million and $94.2 million for the first nine months of 2019 and 2018, respectively, an increase of 3%. The increase was primarily due to an increase in the average outstanding balances of loans invested in by the Company and securities available for sale.

Interest expense associated with credit facilities, securities sold under repurchase agreements and securitization notes was $7.2 million and $5.1 million for the third quarters of 2019 and 2018, respectively, an increase of 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)

The increase was primarily due to an increase in the average outstanding balances of credit facilities and an increase in LIBOR (London Inter-bank Offered Rate).

Interest expense associated with credit facilities, securities sold under repurchase agreements and securitization notes was $7.2 million and $7.7 million for the third and second quarters of 2019, respectively, a decrease of 6%. The decrease was primarily due to lower cost of funding under our credit facilities.

Interest expense associated with credit facilities, securities sold under repurchase agreements and securitization notes was $23.8 million and $15.3 million for the first nine months of 2019 and 2018, respectively, an increase of 55%. The increase was primarily due to an increase in the average outstanding balances of credit facilities and an increase in LIBOR, partially offset by a decrease in the average outstanding balances of securitization notes.

Net fair value adjustments were $(31.6) million and $(19.6) million for the third quarters of 2019 and 2018, respectively, an increase of 62%. The increase was primarily due to increases in the average outstanding balances and investor required yields related to certain loans invested in by the Company to support structured program transactions and whole loan sales, partially offset by a shift in overall platform mix towards lower risk and higher credit quality borrowers.

Net fair value adjustments were $(31.6) million and $(36.0) million for the third and second quarters of 2019, respectively, a decrease of 12%. The decrease was primarily due to a shift in overall platform mix towards lower risk and higher credit quality borrowers, partially offset by increases in the average outstanding balances.

Net fair value adjustments were $(102.3) million and $(74.8) million for the first nine months of 2019 and 2018, respectively, an increase of 37%. The increase was primarily due to increases in the average outstanding balances and investor required yields related to certain loans invested in by the Company to support Structured Program transactions and whole loan sales as well as fair value expense related to the dissolution of certain private funds managed by LCAM, partially offset by a shift in overall platform mix towards lower risk and higher credit quality borrowers.

Interest income from loans held for investment and the offsetting interest expense from notes, certificates and secured borrowings were both $47.8 million and $85.5 million for the third quarters of 2019 and 2018, respectively, a decrease of 44%. The decrease was primarily due to a decrease in the average outstanding balances of loans held for investment and notes, certificates and secured borrowings, due to a larger portion of loans originated being sold to whole loan investors and purchases by the Company for Structured Program transactions.

Interest income from loans held for investment and the offsetting interest expense from notes, certificates and secured borrowings were both $47.8 million and $59.2 million for the third and second quarters of 2019, respectively, a decrease of 19%. The decrease was primarily due to a decrease in the average outstanding balances of loans held for investment and notes, certificates and secured borrowings, due to a larger portion of loans originated being sold to whole loan investors and purchases by the Company for Structured Program transactions.

Interest income from loans held for investment and the offsetting interest expense from notes, certificates and secured borrowings were both $173.5 million and $287.0 million for the first nine months of 2019 and 2018, respectively, a decrease of 40%. The decrease was primarily due to a decrease in the average outstanding balances of loans held for investment and notes, certificates and secured borrowings, due to a larger portion of loans originated being sold to whole loan investors and purchases by the Company for Structured Program transactions.

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 Fees

The table below illustrates the composition of investor fees and the outstanding principal balance of loans serviced, which is a key driver of investor fees, by the method in which the loans were financed for each period presented:



	Three Months Ended						Change (%)
	September 30, 2019		June 30, 2019		September 30, 2018		Q3 2019 vs Q3 2018		Q3 2019 vs Q2 2019
Investor Fees:
Whole loans sold	$	24,318	$	25,898	$	20,951	16	%	(6	)%
Notes, certificates and secured borrowings	5,953		6,374		8,192		(27	)%	(7	)%
Funds and separately managed accounts⁽¹⁾	—		—		26		(100	)%	—	%
Total	$	30,271	$	32,272	$	29,169	4	%	(6	)%

Outstanding Principal Balance of Loans Serviced On Our Platform(in millions)⁽²⁾:
Whole loans sold	$	13,509	$	12,777	$	10,475	29	%	6	%
Notes, certificates and secured borrowings	1,317		1,605		2,285		(42	)%	(18	)%
Total excluding loans invested in by the Company	$	14,826	$	14,382	$	12,760	16	%	3	%
Loans invested in by the Company	696		426		464		50	%	63	%
Total	$	15,522	$	14,808	$	13,224	17	%	5	%



	Nine Months Ended September 30,
	2019		2018		Change (%)
Investor Fees:
Whole loans sold	$	74,829	$	59,644	25	%
Notes, certificates and secured borrowings	19,445		24,716		(21	)%
Funds and separately managed accounts⁽¹⁾	—		104		(100	)%
Total	$	94,274	$	84,464	12	%

Outstanding Principal Balance of Loans Serviced On Our Platform (in millions)⁽²⁾:
Whole loans sold	$	13,509	$	10,475	29	%
Notes, certificates and secured borrowings	1,317		2,285		(42	)%
Total excluding loans invested in by the Company	$	14,826	$	12,760	16	%
Loans invested in by the Company	696		464		50	%
Total	$	15,522	$	13,224	17	%


⁽¹⁾	Funds are the private funds for which LendingClub Asset Management, LLC (LCAM), or its subsidiaries acted as general partner. In March 2019, we completed the dissolution of those funds. The Company does not expect to earn investor fees from private funds and separately managed accounts in the future.


⁽²⁾	As of the end of each respective period.

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, providing information, and issuing monthly statements. The amount of investor fee revenue earned is predominantly affected by the servicing rates paid by investors, the outstanding principal balance of loans and the amount of principal and interest collected from borrowers and remitted to 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 in “Gain on sales of loans” in the Company’s Condensed Consolidated Statements of Operations 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 $24.3 million and $21.0 million for the third quarters of 2019 and 2018, respectively, an increase of 16%. The increase was primarily due to a higher balance of whole loans serviced, an increase in weighted-average servicing rate, and increases in delinquent loan collections and charged-off loan sales, partially offset by the change in fair value of servicing rights.

Investor fee revenue related to the servicing of whole loans sold was $24.3 million and $25.9 million for the third and second quarters of 2019, respectively, a decrease of 6%. The decrease was primarily due to the change in fair value of servicing rights and a decrease in charged-off loan sales, partially offset by a higher balance of whole loans serviced and an increase in delinquent loan collections.

Investor fee revenue related to the servicing of whole loans sold was $74.8 million and $59.6 million for the first nine months of 2019 and 2018, respectively, an increase of 25%. The increase was primarily due to a higher balance of whole loans serviced, an increase in weighted-average servicing rate, and increases in delinquent loan collections and charged-off loan sales, partially offset by the change in fair value of servicing rights.

Investor fees – notes, certificates and secured borrowings: Investor fee revenue related to the servicing of loans underlying notes, certificates and secured borrowings was $6.0 million and $8.2 million for the third quarters of 2019 and 2018, respectively, a decrease of 27%. The decrease was primarily due to a lower principal balance of loans serviced and a decrease in charged-off loan sales.

Investor fee revenue related to the servicing of loans underlying notes, certificates and secured borrowings was $6.0 million and $6.4 million for the third and second quarters of 2019, respectively, a decrease of 7%. The decrease was primarily due to a lower principal balance of loans serviced and a decrease in charged-off loan sales.

Investor fee revenue related to the servicing of loans underlying notes, certificates and secured borrowings was $19.4 million and $24.7 million for the first nine months of 2019 and 2018, respectively, a decrease of 21%. The decrease was primarily due to a lower principal balance of loans serviced and charged-off loan sales, partially offset by an increase in delinquent loan collections.

Gain (Loss) on Sales of Loans

In connection with loan sales and Structured Program transactions, 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 level to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee. Additionally, we recognize program fees, net of transaction costs, as a gain or loss on sale of loans contributed to Structured Program transactions.

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)

Gain on sales of loans was $18.3 million and $10.9 million for the third quarters of 2019 and 2018, respectively, an increase of 68%. The increase was primarily due to increases in the volume of loans sold and increases in the weighted-average contractual loan servicing fee that resulted in higher gains on sales of loans.

Gain on sales of loans was $18.3 million and $13.9 million for the third and second quarters of 2019, respectively, an increase of 32%. The increase was primarily due to increases in the volume of loans sold and lower transaction costs associated with additional Structured Program transactions in the third quarter of 2019.

Gain on sales of loans was $47.3 million and $35.5 million for the first nine months of 2019 and 2018, respectively, an increase of 33%. The increase was primarily due to increases in the volume of loans sold and increases in the weighted-average contractual loan servicing fee that resulted in higher gains on sales of loans, partially offset by higher transaction costs associated with Structured Program transactions in the first nine months of 2019.

Other Revenue

Other revenue primarily consists of referral revenue that relates to fees earned from third-party companies when customers referred by us complete specified actions with such third-party companies and sublease revenue from our sublet office space in San Francisco, California. The tables below illustrate the composition of other revenue for each period presented:



	Three Months Ended						Change (%)
	September 30, 2019		June 30, 2019		September 30, 2018		Q3 2019 vs Q3 2018			Q3 2019 vs Q2 2019
Referral revenue	1,596		1,328		1,065		50		%	20	%
Sublease revenue	1,175		1,016		77		N/M			16	%
Other ⁽¹⁾	1,212		426		316		N/M			185	%
Other revenue	$	3,983	$	2,770	$	1,458	173		%	44	%


					Nine Months Ended September 30,
					2019		2018			Change (%)
Referral revenue					3,619		2,815			29	%
Sublease revenue					3,198		232			N/M
Other ⁽¹⁾					1,991		1,335			49	%
Other revenue					$	8,808	$	4,382		101	%

N/M – Not meaningful


⁽¹⁾	Beginning in the first quarter of 2019, the Company separately reported “Sublease revenue” from “Other” in the tables above. Prior period amounts have been reclassified to conform to the current period presentation.

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 facilitated through the platform we operate. This

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)

includes costs of building general brand awareness, and salaries, benefits and stock-based compensation expense related to our sales and marketing team.

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 facilitating the origination of loans 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, amortization and impairment 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.



	Three Months Ended						Change (%)
	September 30, 2019		June 30, 2019		September 30, 2018		Q3 2019 vs Q3 2018			Q3 2019 vs Q2 2019
Sales and marketing	$	76,255	$	69,323	$	73,601	4		%	10	%
Origination and servicing	27,996		24,931		25,431		10		%	12	%
Engineering and product development	41,455		43,299		41,216		1		%	(4	)%
Other general and administrative	59,485		64,324		57,446		4		%	(8	)%
Class action and regulatory litigation expense	—		—		9,738		(100		)%	—	%
Total operating expenses	$	205,191	$	201,877	$	207,432	(1		)%	2	%


					Nine Months Ended September 30,
					2019		2018			Change (%)
Sales and marketing					$	212,201	$	200,164		6	%
Origination and servicing					81,200		73,669			10	%
Engineering and product development					127,300		115,703			10	%
Other general and administrative					180,685		167,338			8	%
Goodwill impairment					—		35,633			(100	)%
Class action and regulatory litigation expense					—		35,500			(100	)%
Total operating expenses					$	601,386	$	628,007		(4	)%

Sales and marketing: Sales and marketing expense was $76.3 million and $73.6 million for the third quarters of 2019 and 2018, respectively, an increase of 4%. The increase was primarily due to increases in variable marketing expenses based on higher loan origination volume and cost structure simplification expense resulting from establishing a site in the Salt Lake City area, partially offset by a decrease in personnel-related expense for full-time employees. Sales and marketing expense as a percent of loan originations decreased to 2.3% in the third quarter of

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)

2019 from 2.5% in the third quarter of 2018 as a result of the Company’s cost structure simplification efforts as well as improvements in customer acquisition targeting models and improved throughput.

Sales and marketing expense was $76.3 million and $69.3 million for the third and second quarters of 2019, respectively, an increase of 10%. The increase was primarily due to an increase in variable marketing expenses based on higher loan origination volume, partially offset by a decrease in personnel-related expenses for full-time employees. Sales and marketing expense as a percent of loan originations increased to 2.3% in the third quarter of 2019 from 2.2% in the second quarter of 2019.

Sales and marketing expense was $212.2 million and $200.2 million for the first nine months of 2019 and 2018, respectively, an increase of 6%. The increase was primarily due to increases in variable marketing expenses based on higher loan origination volume and cost structure simplification expense resulting from establishing a site in the Salt Lake City area, partially offset by a decrease in personnel-related expense for full-time employees and lower spend on media advertising. Sales and marketing expense as a percent of loan originations decreased to 2.3% in the first nine months of 2019 from 2.5% in the first nine months of 2018 as a result of the Company’s cost structure simplification efforts as well as improvements in customer acquisition targeting models and improved throughput.

Origination and servicing: Origination and servicing expense was $28.0 million and $25.4 million for the third quarters of 2019 and 2018, respectively, an increase of 10%. The increase was primarily due to an increase in cost structure simplification expense resulting from establishing a site in the Salt Lake City area. Outsourced service provider expense increased from the third quarter of 2018, which was offset by a decrease in personnel-related expenses for full-time employees.

Origination and servicing expense was $28.0 million and $24.9 million for the third and second quarters of 2019, respectively, an increase of 12%. The increase was primarily due to increases in cost structure simplification expense resulting from establishing a site in the Salt Lake City area, personnel-related expenses for full-time employees and loan processing and servicing costs resulting from a higher volume of loan originations.

Origination and servicing expense was $81.2 million and $73.7 million for the first nine months of 2019 and 2018, respectively, an increase of 10%. The increase was primarily due to increases in cost structure simplification expense resulting from establishing a site in the Salt Lake City area and loan processing and servicing costs resulting from a higher volume of loan originations. Outsourced service provider expense increased from the first nine months of 2018, which was partially offset by a decrease in personnel-related expenses for full-time employees.

Engineering and product development: Engineering and product development expense was $41.5 million and $41.2 million for the third quarters of 2019 and 2018, respectively, an increase of 1%. The increase was primarily due to an increase in outsourced service provider expense, partially offset by a decrease in personnel-related expenses for full-time employees and contractors and depreciation and impairment expense.

We capitalized $8.0 million and $10.9 million in software development costs for the third quarters of 2019 and 2018, respectively.

Engineering and product development expense was $41.5 million and $43.3 million for the third and second quarters of 2019, respectively, a decrease of 4%. The decrease was primarily due to decreases in personnel-related expenses for full-time employees, depreciation and impairment expense, and equipment and software expense, partially offset by an increase in outsourced service provider expense.

We capitalized $8.0 million and $9.0 million in software development costs for the third and second quarters of 2019, respectively.

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)

Engineering and product development expense was $127.3 million and $115.7 million for the first nine months of 2019 and 2018, respectively, an increase of 10%. 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 increases in depreciation and impairment expense and equipment and software expense. Outsourced service provider expense increased from the first nine months of 2018, partially offset by a decrease in personnel-related expenses for full-time employees and contractors.

We capitalized $27.7 million and $36.2 million in software development costs for the first nine months of 2019 and 2018, respectively.

Other general and administrative expense: Other general and administrative expense was $59.5 million and $57.4 million for the third quarters of 2019 and 2018, respectively, an increase of 4%. The increase was primarily due to increases in personnel-related expenses for full-time employees and contractors and cost structure simplification expense associated with establishing a site in the Salt Lake City area.

Other general and administrative expense was $59.5 million and $64.3 million for the third and second quarters of 2019, respectively, a decrease of 8%. The decrease was primarily due to an expense related to the termination of a legacy contract in the second quarter of 2019 and a decrease in personnel-related expenses for full-time employees, partially offset by a gain on the sale of the Company’s small business operating segment in the second quarter of 2019.

Other general and administrative expense was $180.7 million and $167.3 million for the first nine months of 2019 and 2018, respectively, an increase of 8%. The increase was primarily due to an increase in personnel-related expenses for full-time employees and contractors, an expense related to the termination of a legacy contract in the second quarter of 2019 and an increase in facilities and cost structure simplification expense associated with establishing a site in the Salt Lake City area, partially offset by a gain on the sale of the Company’s small business operating segment in the second quarter of 2019.

Class Action and Regulatory Litigation Expense

Class action and regulatory litigation expense for the third quarter and first nine months of 2018 was $9.7 million and $35.5 million, respectively, which is included in “Class action and regulatory litigation expense” on the Company’s Condensed Consolidated Statements of Operations. This expense was related to significant governmental and regulatory investigations following the internal board review described more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Board Review” contained in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (Board Review). There was no class action and regulatory litigation expense related to legacy issues for the third quarter and first nine months of 2019.

Income Taxes

For the third quarter and first nine months of 2019, the Company recorded an income tax expense of $97 thousand and an income tax benefit of $341 thousand, respectively. For the third quarter and first nine months of 2018, the Company recorded income tax benefit of $38 thousand and income tax expense of $25 thousand, respectively. The income tax expense in the third quarter of 2019 is comprised of the tax effects of unrealized losses recorded to other comprehensive income associated with the Company’s available for sale portfolio. The income tax benefit in the first nine months of 2019 is comprised primarily of the tax effects of the year-to-date unrealized gains recorded to other comprehensive income associated with the Company's available for sale portfolio.

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)

We continue to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of 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 and Supplemental Financial Information

We use certain non-GAAP financial measures in evaluating our operating results. We believe that Contribution, Contribution Margin, Adjusted Net Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Earnings (Loss) Per Share (Adjusted EPS) and Net Cash and Other Financial Assets 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 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 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.


•	Although depreciation, impairment and amortization are non-cash charges, the assets being depreciated, impaired 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.


•	These measures 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 Condensed Consolidated Statements of Operations, adjusted to exclude cost structure simplification and non-cash stock-based compensation expenses within these captions and income or loss attributable to noncontrolling interests. These costs represent the costs that are most directly related to generating such revenue. The adjustment for cost structure simplification expense relates to a review of our cost structure and a number of expense initiatives underway, including the establishment of a site in the Salt Lake City area. The expense includes incremental and excess personnel-related expenses associated with establishing our Salt Lake City area site and external advisory fees. 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.

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 shows the calculation of Contribution and Contribution Margin:



	Three Months Ended									Nine Months Ended
	September 30, 2019			June 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Total net revenue	$	204,896		$	190,807		$	184,645		$	570,121		$	513,291
Sales and marketing expense	76,255			69,323			73,601			212,201			200,164
Origination and servicing expense	27,996			24,931			25,431			81,200			73,669
Total direct expenses	104,251			94,254			99,032			293,401			273,833
Cost structure simplification expense ⁽¹⁾	2,778			646			—			7,130			—
Stock-based compensation ⁽²⁾	2,357			2,386			2,895			7,238			8,952
(Income) Loss attributable to noncontrolling interests	9			(29		)	(55		)	(55		)	(105		)
Contribution	$	105,789		$	99,556		$	88,453		$	291,033		$	248,305
Contribution margin	51.6		%	52.2		%	47.9		%	51.0		%	48.4		%


⁽¹⁾	Contribution excludes the portion of personnel-related expense associated with establishing a site in the Salt Lake City area that is included in the “Sales and marketing” and “Origination and servicing” expense categories.


⁽²⁾	Contribution excludes stock-based compensation expense included in the “Sales and marketing” and “Origination and servicing” expense categories.

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 LendingClub net loss to Contribution for each of the periods indicated:



	Three Months Ended									Nine Months Ended
	September 30, 2019			June 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
LendingClub net loss	$	(383	)	$	(10,661	)	$	(22,804	)	$	(30,979	)	$	(114,846	)
Engineering and product development expense	41,455			43,299			41,216			127,300			115,703
Other general and administrative expense	59,485			64,324			57,446			180,685			167,338
Cost structure simplification expense ⁽¹⁾	2,778			646			—			7,130			—
Goodwill impairment expense	—			—			—			—			35,633
Class action and regulatory litigation expense	—			—			9,738			—			35,500
Stock-based compensation expense ⁽²⁾	2,357			2,386			2,895			7,238			8,952
Income tax expense (benefit)	97			(438		)	(38		)	(341		)	25
Contribution	$	105,789		$	99,556		$	88,453		$	291,033		$	248,305
Total net revenue	$	204,896		$	190,807		$	184,645		$	570,121		$	513,291
Contribution margin	51.6		%	52.2		%	47.9		%	51.0		%	48.4		%


⁽¹⁾	Contribution excludes the portion of personnel-related expense associated with establishing a site in the Salt Lake City area that is included in the “Sales and marketing” and “Origination and servicing” expense categories.


⁽²⁾	Contribution excludes stock-based compensation expense included in the “Sales and marketing” and “Origination and servicing” expense categories.

Adjusted Net Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS

Adjusted Net Income (Loss) is a non-GAAP financial measure defined as net income (loss) attributable to LendingClub adjusted to exclude certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) expenses related to our cost structure simplification as discussed above, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, and (4) other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets), net of tax. In the second quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) and Adjusted EBITDA for other items to adjust for expenses or gains that are not part of our core operating results. We believe Adjusted Net Income (Loss) is an important measure because it directly reflects the financial performance of our business operations.

Adjusted EBITDA is a non-GAAP financial measure defined as net income (loss) attributable to LendingClub adjusted to exclude certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) cost structure simplification expense, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) other items, (5) depreciation, impairment and amortization expense, (6) stock-based compensation expense, (7) income tax expense (benefit), and (8) acquisition related expenses. Adjusted EBITDA Margin is a non-GAAP financial measure calculated by dividing Adjusted EBITDA by total net revenue.

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)

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 expenses related to our cost structure simplification, legacy issues that result in elevated legal and other costs, other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets), the impact of depreciation, impairment and amortization in our asset base, stock-based compensation, income tax effects, and other non-operating expenses. Legacy items are generally those expenses that arose from the decisions of legacy management prior to the board review initiated in 2016 and resulted in the resignation of our former CEO, including legal and other costs associated with ongoing regulatory and government investigations, indemnification obligations, litigation, and termination of certain legacy contracts. Additionally, we utilize Adjusted EBITDA as an input into the Company’s calculation of the annual bonus plan.

Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income (Loss) by the weighted-average diluted common shares outstanding. We believe Adjusted EPS is an important measure because it directly reflects the financial performance of our business operations.

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 LendingClub net loss to Adjusted Net Income (Loss) and Adjusted EBITDA and a calculation of Adjusted EPS for each of the periods indicated:



	Three Months Ended									Nine Months Ended
	September 30, 2019			June 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
LendingClub net loss	$	(383	)	$	(10,661	)	$	(22,804	)	$	(30,979	)	$	(114,846	)
Cost structure simplification expense ⁽¹⁾	3,443			1,934			—			9,649			—
Goodwill impairment	—			—			—			—			35,633
Legal, regulatory and other expense related to legacy issues⁽²⁾	4,142			6,791			15,474			15,078			50,948
Other items ⁽³⁾	749			704			—			1,453			—
Adjusted net income (loss)	7,951			(1,232		)	(7,330		)	(4,799		)	(28,265		)
Depreciation and impairment expense:
Engineering and product development	11,464			11,838			13,221			36,675			32,665
Other general and administrative	1,569			1,596			1,488			4,707			4,327
Amortization of intangible assets	845			866			940			2,651			2,934
Stock-based compensation expense	18,095			20,551			19,771			56,898			57,369
Income tax expense (benefit)	97			(438		)	(38		)	(341		)	25
Adjusted EBITDA	$	40,021		$	33,181		$	28,052		$	95,791		$	69,055
Total net revenue	$	204,896		$	190,807		$	184,645		$	570,121		$	513,291
Adjusted EBITDA margin	19.5		%	17.4		%	15.2		%	16.8		%	13.5		%

Weighted-average common shares – diluted ⁽⁴⁾	87,588,495			86,719,049			84,871,828			86,849,388			84,261,301
Weighted-average other dilutive equity awards	—			—			—			—			—
Non-GAAP diluted shares ⁽⁴⁾	87,588,495			86,719,049			84,871,828			86,849,388			84,261,301

Adjusted EPS – diluted ⁽⁴⁾	$	0.09		$	(0.01	)	$	(0.09	)	$	(0.06	)	$	(0.34	)

⁽¹⁾

Includes personnel-related expenses associated with establishing a site in the Salt Lake City area which are included in “Sales and marketing,” “Origination and servicing,” “Engineering and product development” and “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. In the fourth quarter of 2018 and first quarter of 2019, also includes external advisory fees which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations.

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⁾

For the second quarter, third quarter and first nine months of 2019, includes legacy legal expenses which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations and expense related to the dissolution of certain private funds managed by LCAM, which is included in “Net fair value adjustments” on the Company’s Condensed Consolidated Statements of Operations. For the second quarter and first nine months of 2019, also includes expense related to the termination of a legacy contract which is included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. The third quarter and first nine months of 2018 includes class action and regulatory litigation expense related to legacy issues of $9.7 million and $35.5 million, respectively, which is included in “Class action and regulatory litigation expense” on the Company’s Condensed Consolidated Statements of Operations. The third quarter and first nine months of 2018 also includes legacy legal expenses of $5.7 million and $16.4 million, respectively, which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations.


⁽³⁾	For the second quarter, third quarter and first nine months of 2019, includes expenses related to certain non-legacy litigation and regulatory matters, which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment.


⁽⁴⁾	All share and per share information has been retroactively adjusted to reflect a reverse stock split. See “Note 4. Net Loss Per Share” for additional information.

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)

Supplemental Financial Information

The following table is provided to delineate between the assets and liabilities belonging to our member payment dependent self-directed retail program (Retail Program) note holders and certain VIEs that we are required to consolidate in accordance with GAAP. Such assets are not legally ours and the associated liabilities are payable only from the cash flows generated by those assets (i.e. Pass-throughs). As such, these debt holders do not have a secured interest in any other assets of LendingClub. We believe this is a useful measure because it illustrates the overall financial stability and operating leverage of the Company.



	September 30, 2019								December 31, 2018
	Retail Program ⁽¹⁾		Consolidated VIEs ⁽²⁾		All Other LendingClub ⁽³⁾		Condensed Consolidated Balance Sheet		Retail Program ⁽¹⁾		Consolidated VIEs ⁽²⁾		All Other LendingClub ⁽³⁾		Condensed Consolidated Balance Sheet
Assets
Cash and cash equivalents	$	—	$	—	$	199,950	$	199,950	$	—	$	—	$	372,974	$	372,974
Restricted cash	—		—		275,136		275,136		15,551		17,660		237,873		271,084
Securities available for sale	—		—		246,559		246,559		—		—		170,469		170,469
Loans held for investment at fair value	984,084		253,395		—		1,237,479		1,241,157		642,094		—		1,883,251
Loans held for investment by the Company at fair value	—		—		4,211		4,211		—		—		2,583		2,583
Loans held for sale by the Company at fair value	—		—		710,170		710,170		—		245,345		594,676		840,021
Accrued interest receivable	6,725		2,197		5,249		14,171		8,914		7,242		6,099		22,255
Property, equipment and software, net	—		—		117,242		117,242		—		—		113,875		113,875
Intangible assets, net	—		—		15,396		15,396		—		—		18,048		18,048
Other assets	—		—		229,346		229,346		—		530		124,437		124,967
Total assets	$	990,809	$	255,592	$	1,803,259	$	3,049,660	$	1,265,622	$	912,871	$	1,641,034	$	3,819,527
Liabilities and Equity
Accounts payable	$	—	$	—	$	15,490	$	15,490	$	—	$	—	$	7,104	$	7,104
Accrued interest payable	6,725		2,197		1,527		10,449		11,484		7,594		163		19,241
Accrued expenses and other liabilities	—		—		268,071		268,071		—		15		152,103		152,118
Payable to investors	—		—		117,698		117,698		—		—		149,052		149,052
Notes, certificates and secured borrowings at fair value	984,084		253,395		3,479		1,240,958		1,254,138		648,908		2,829		1,905,875
Payable to securitization note holders	—		—		—		—		—		256,354		—		256,354
Credit facilities and securities sold under repurchase agreements	—		—		509,107		509,107		—		—		458,802		458,802
Total liabilities	990,809		255,592		915,372		2,161,773		1,265,622		912,871		770,053		2,948,546
Total equity	—		—		887,887		887,887		—		—		870,981		870,981
Total liabilities and equity	$	990,809	$	255,592	$	1,803,259	$	3,049,660	$	1,265,622	$	912,871	$	1,641,034	$	3,819,527

⁽¹⁾ Represents loans held for investment at fair value that are funded directly by our Retail Program notes. The liabilities are only payable from the cash flows generated by the associated assets. We do not assume principal or interest rate risk on loans facilitated through our lending marketplace that are funded by our Retail Program

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)

because loan balances, interest rates and maturities are matched and offset by an equal balance of notes with the exact same interest rates and maturities. We do not retain any economic interests from our Retail Program. Interest expense on Retail Program notes of $116.2 million was equally matched and offset by interest income from the related loans of $116.2 million for the first nine months of 2019, resulting in no net effect on our Net interest income and fair value adjustments.

⁽²⁾ Represents assets and equal and offsetting liabilities of certain VIEs that we are required to consolidate in accordance with GAAP, but which are not legally ours. The liabilities are only payable from the cash flows generated by the associated assets. The creditors of the VIEs have no recourse to the general credit of the Company. This includes LC Trust (which issues certificates backed by loans held by the trust) and any consolidated securitization trusts. Interest expense on these liabilities owned by third parties of $61.5 million and net fair value adjustments of $12.7 million for the first nine months of 2019 were equally matched and offset by interest income on the loans of $74.2 million, resulting in no net effect on our Net interest income and fair value adjustments. Economic interests held by LendingClub, including retained interests, residuals and equity of the VIEs, are reflected in “Loans held for sale by the Company at fair value” and “Restricted cash,” respectively, within the “All Other LendingClub” column.

⁽³⁾ Represents all other assets and liabilities of LendingClub, other than those related to our Retail Program and certain consolidated VIEs, but includes any retained interests, residuals and equity of those consolidated VIEs.

Net Cash and Other Financial Assets

The following table provides additional detail related to components of our net cash and other financial assets:



	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
Cash and loans held for investment by the Company
Cash and cash equivalents ⁽¹⁾	$	199,950		$	334,713		$	402,311		$	372,974		$	348,018
Loans held for investment by the Company at fair value	4,211			5,027			8,757			2,583			12,198
Total	204,161			339,740			411,068			375,557			360,216

Other financial assets partially secured by credit facilities
Securities available for sale	246,559			220,449			197,509			170,469			165,442
Loans held for sale by the Company at fair value	710,170			435,083			552,166			840,021			459,283
Restricted cash committed for loan purchases ⁽²⁾	84,536			31,945			24,632			31,118			27,778
Payable to securitization note holders	—			—			(233,269		)	(256,354		)	—
Credit facilities and securities sold under repurchase agreements	(509,107		)	(324,426		)	(263,863		)	(458,802		)	(305,336		)
Total	$	532,158		$	363,051		$	277,175		$	326,452		$	347,167

Net cash and other financial assets ⁽³⁾	$	736,319		$	702,791		$	688,243		$	702,009		$	707,383


⁽¹⁾	Variations in cash and cash equivalents are primarily due to variations in the amount and timing of loan purchases invested in by the Company.


⁽²⁾	In the third quarter of 2019, we added a new line item called “Restricted cash committed for loan purchases,” which represents cash and cash equivalents that are transferred to restricted cash for loans that are pending purchase by the Company. We believe this is a more complete representation of the Company’s net cash and

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 financial assets position as of each period presented in the table above. Prior period amounts have been reclassified to conform to the current period presentation.


⁽³⁾	Comparable GAAP measure cannot be provided as not practicable.

Investments in Quarterly Originations by Investment Channel and Investor Concentration

Our investment channels consist of (1) Banks, which are deposit taking institutions or their affiliates, (2) LendingClub inventory, which includes loan originations purchased by the Company during the period and not yet sold as of the period end, (3) Other institutional investors and Managed accounts, which primarily include other non-bank investors, dedicated third-party funds, and public and private funds managed by third-party asset managers, and (4) self-directed retail investors.

The following table shows the percentage of loan origination volume issued in the period and purchased or pending purchase by each investment channel as of the end of each period presented:



	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Investor Type:
Banks	38	%	45	%	49	%	41	%	38	%
LendingClub inventory ⁽¹⁾	23	%	13	%	10	%	18	%	15	%
Other institutional investors	20	%	21	%	18	%	19	%	19	%
Managed accounts	15	%	16	%	17	%	16	%	21	%
Self-directed retail investors	4	%	5	%	6	%	6	%	7	%
Total	100	%	100	%	100	%	100	%	100	%

⁽¹⁾

The total loan activity during a period and loans purchased or pending purchase by LendingClub at each period end is discussed in “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 6. Loans Held for Investment, Loans Held for Sale, Notes, Certificates and Secured Borrowings” and “Note 8. Fair Value of Assets and Liabilities.” LendingClub inventory percentage reflects all securitizations during the period as sold loans for the portion of securities sold to third parties.

The following table provides the percentage of loans invested in by the ten largest external investors and by the largest single investor during each of the previous five quarters (by dollars invested):



	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Percentage of loans invested in by ten largest investors	55	%	62	%	65	%	58	%	56	%
Percentage of loans invested in by largest single investor	29	%	33	%	36	%	29	%	22	%

The composition of the top ten investors may vary from period to period. The decrease in the percentage of loans invested in by a single investor since the first quarter of 2019 was primarily due to higher origination volumes and mix of lower risk grade A and B loans facilitated on our marketplace, which were purchased by LendingClub and will be included in the Company’s future Structured Program transactions.

Effectiveness of Scoring Models

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

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)

Our online lending marketplace platform’s credit decisioning and scoring models are evaluated on a regular basis and the additional data on loan history experience, borrower behavior and prepayment trends that we accumulate are leveraged to continually improve our underwriting models. We believe we have the experience to effectively evaluate a borrower’s creditworthiness and likelihood of default. If our lending marketplace’s credit decisioning and scoring models ultimately prove to be ineffective or fail to appropriately account for a decline in future macroeconomic environment, investors may experience higher than expected losses.

Our current underwriting model leverages a number of custom attributes developed by LendingClub. We work with our primary issuing bank partner to modify their credit and pricing policies, leveraging insights on current market conditions and recent vintage performance.

The charts provided below display the historical lifetime cumulative net charge-off rates (expressed as a percent of original loan balances) through September 30, 2019, by booking year, for all grades and 36- or 60-month terms of standard program loans for each of the years shown. These charts display lifetime cumulative net charge-off rates using months on book for each annual vintage presented. Each annual vintage’s lifetime cumulative net charge-offs vary based on the maturity of each loan’s month on book. For the third quarter of 2019, standard program loans accounted for 70% of all loan origination volume.

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 Portfolio Information and Credit Metrics

Fair Value and Delinquencies

For loans held for investment that are backed by notes, certificates and secured borrowings on our Condensed Consolidated Balance Sheets, the outstanding principal balance, fair value and percentage of loans that are delinquent, by loan product, are as follows:



	September 30, 2019						December 31, 2018
(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	$	1,310.3	94.0	%	3.4	%	$	1,994.1	93.5	%	3.5	%
Personal loans – custom program	6.3		93.7		6.7		19.2		92.8		7.1
Other loans ⁽¹⁾	—		—		—		0.1		96.0		10.6
Total	$	1,316.6	94.0	%	3.4	%	$	2,013.4	93.5	%	3.5	%


⁽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.

Increases in the fair value of loans as a percent of outstanding principal balance from December 31, 2018 to September 30, 2019 were primarily due to a shift in the mix of personal loans toward lower risk grades.

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 loans invested in directly by the Company for which there were no associated notes, certificate or secured borrowings, the outstanding principal balance, fair value and percentage of loans that are delinquent, by loan product, are as follows:



	September 30, 2019						December 31, 2018
(in millions, except percentages)	Outstanding Principal Balance ⁽²⁾		Fair Value ⁽³⁾		Delinquent Loans ⁽³⁾		Outstanding Principal Balance ⁽²⁾		Fair Value ⁽³⁾		Delinquent Loans ⁽³⁾
Personal loans – standard program	$	598.0	96.5	%	0.9	%	$	706.1	96.5	%	0.7	%
Personal loans – custom program	49.1		98.3		1.1		89.4		98.5		0.7
Other loans ⁽¹⁾	93.9		94.7		2.8		77.7		93.9		0.2
Total	$	741.0	96.4	%	1.1	%	$	873.2	96.5	%	0.7	%


⁽¹⁾	Components of other loans are less than 10% of the total outstanding principal balance if presented individually.


⁽²⁾	Includes both loans held for investment and loans held for sale.


⁽³⁾	Expressed as a percent of outstanding principal balance.

The fair value of total loans invested in by the Company as a percent of outstanding principal balance from December 31, 2018 to September 30, 2019 remained relatively unchanged as a result of a shift in portfolio mix to higher fair value prices on lower risk grades, offset by lower fair value prices on certain higher risk grades.

Net Annualized Charge-Off Rates

The following tables show annualized net charge-off rates, which are a measure of the performance of the loans facilitated by our platform. In contrast to the graphs above, these tables show the annualized charged-off balance of loans in a specific period as a percentage of the average outstanding balance for such period.

Net annualized charge-off rates are affected by the average age and grade distribution of the loans outstanding for a given quarter and the credit performance of those loans. 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 parameters used to originate new loans.

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 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⁾	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Personal Loans – Standard Program:
Annualized net charge-off rate	6.4	%	6.4	%	7.0	%	7.0	%	6.2	%
Weighted-average age in months	12.3		12.3		12.4		12.3		12.3

Personal Loans – Custom Program:
Annualized net charge-off rate	10.9	%	10.8	%	12.8	%	12.4	%	11.0	%
Weighted-average age in months	9.3		9.9		9.7		9.5		9.6


⁽¹⁾	Total platform comprises all loans facilitated through our lending marketplace, including whole loans sold and loans financed by notes, certificates and secured borrowings, but excluding education and patient finance loans, auto refinance loans and small business loans.

The increase in the annualized net charge-off rate in the third quarter of 2019 compared to the third quarter of 2018 for the total platform standard personal loan program primarily reflects the effect of higher outstanding loan balances and an increase in actual net charge-offs. The decrease in the annualized net charge-off rate in the third quarter of 2019 compared to the third quarter of 2018 for the total platform custom personal loan program primarily reflects the effect of a greater increase in outstanding loan balances proportionate to the increase in actual net charge-offs. The annualized net charge-off rates in the third quarter of 2019 compared to the second quarter of 2019 for both the standard and custom personal loan programs remained relatively flat.

The annualized net charge-off rates for personal loans for both standard and custom programs for loans retained on our Condensed Consolidated Balance Sheets for the last five quarters are as follows:



Loans Retained on Balance Sheet ⁽¹⁾	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Personal Loans – Standard Program:
Annualized net charge-off rate	6.8	%	7.1	%	8.2	%	9.0	%	7.9	%
Weighted-average age in months	12.7		15.9		15.5		14.3		15.7

Personal Loans – Custom Program:
Annualized net charge-off rate	2.5	%	1.6	%	4.9	%	5.9	%	2.7	%
Weighted-average age in months	6.9		6.4		13.4		6.9		9.2


⁽¹⁾	Loans retained on balance sheet include loans invested in by the Company as well as loans held for investment that are funded directly by member payment dependent notes related to our Retail Program and certificates.

The decrease in annualized net charge-off rates for the standard personal loan program in the third quarter of 2019 compared to the third quarter of 2018 for the loans retained on our Condensed Consolidated Balance Sheets reflects

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 effect of lower outstanding loan balances and a decrease in actual net charge-offs. The decrease in the annualized net charge-off rate in the third quarter of 2019 compared to the second quarter of 2019 for the standard personal loan program is primarily due the effect of lower outstanding loan balances and a decrease in actual net charge-offs.

The annualized net charge-off rates and weighted-average age in months for custom program loans retained on our Condensed Consolidated Balance Sheets reflect the change in outstanding principal balance period-over-period based on purchase and sale activity of recently issued near-prime loans.

The annualized net charge-off rates for standard program loans are higher for loans retained on our Condensed Consolidated Balance Sheets compared to loans reflected at the total platform level for each quarter because of, among other reasons, a difference in grade distribution for the two portfolios. The proportion of grade A and B loans is 50% of the retained loan portfolio compared to 55% for the total platform level as of September 30, 2019. This difference in loan grade distribution results in higher net charge-off rates for the loans on the Condensed Consolidated Balance Sheets compared to the total platform, as grade A and B loans have lower expected and actual credit losses.

Regulatory Environment

We are regularly subject to claims, individual and class action lawsuits, lawsuits alleging regulatory violations, government (including state agencies) and regulatory exams, investigations, inquiries or requests, and other proceedings. The number and significance of these claims, lawsuits, exams, investigations, inquiries, requests and proceedings have increased in part because our business has expanded in scope and geographic reach, and our products and services have increased in complexity. For example, we have been subject to and experienced, and will likely continue to be subject to and experience, exams from state regulators and our legal, compliance and other costs related to such proceedings may elevate from current levels. See “Part I – Item 1. Business – Regulatory and Compliance Framework,” “Part I – Item 1A. Risk Factors – Risks Related to Our Business and Regulation” including the risk factors titled “We are regularly subject to litigation, and government and regulatory investigations, inquiries and requests, including matters related to our legacy management and the resignation of our former Chief Executive Officer,” “If the loans facilitated through our lending marketplace were found to violate a state’s usury laws, and/or we were found to be the true lender (as opposed to our issuing bank(s)), we may have to alter our business model and our business could be harmed” and “The regulatory framework for our business is evolving and uncertain as federal and state governments consider new laws to regulate online lending marketplaces such as ours. New laws and regulations, including uncertainty as to how the actions of any federal or state regulator could impact our business or that of our issuing bank(s)” in our Annual Report for more information, additional discussion and disclosure, including the potential adverse outcomes and consequences from such proceedings.

Board Review

As a result of the Board Review and resignation of our former CEO, we have received inquiries from governmental entities, and we continue to cooperate. In particular, an inquiry by the Federal Trade Commission (FTC) led to an action brought against the Company by the FTC. Responding to inquiries of this nature and defending the allegations in the FTC’s complaint, is costly and time consuming, can generate negative publicity, and could have a material and adverse effect on our business. See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 18. Commitments and Contingencies” for further discussion regarding the FTC litigation and related matters.

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)

Third-party Litigation

In addition, there has been (and may continue to be) an increase in inquiries, regulatory proceedings, including exams by state regulators, and litigation challenging, among other things, licensing requirements, the application of state usury rates and 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 or servicing of a loan.

For example, in January 2017, the Colorado Administrator (Administrator) of the Uniform Consumer Credit Code filed suit against Avant, Inc., a company that operates an online consumer loan platform. The Administrator asserts that loans to Colorado residents facilitated through Avant’s 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 WebBank, the federally regulated issuing bank who originates loans through Avant’s platform, as well as through our platform. Although Avant removed its case to federal court in March 2017, the United States District Court for the District of Colorado issued an order in March 2018 remanding the case to the District Court for the City and County of Denver. In March 2018, the United States District Court for the District of Colorado also issued an order dismissing a parallel case brought by WebBank that sought a declaratory judgment regarding the applicability of preemption to Colorado usury laws and permanent injunctions against the Administrator that would prevent the Administrator from enforcing Colorado usury laws against WebBank and certain parties associated with loans originated by it. Avant thereafter filed a Motion to Dismiss in District Court for the State of Colorado and WebBank moved to intervene in the case. In August 2018, the Court granted WebBank’s motion but denied Avant’s motion. In November 2018, the Administrator added as defendants certain securitization trusts that had acquired Avant loans. The Administrator is seeking a penalty of ten times the amount of the “excess” finance charges.

As another example, in June 2019, certain Capital One and Chase credit card holders filed putative class actions in U.S. District Court in New York against certain non-bank Capital One and Chase special purpose entities and trusts, and the trustees thereof, that purchased and/or played a role in facilitating the securitization of Capital One and Chase credit card receivables. The plaintiffs allege that the preemption of New York usury laws by the National Bank Act (NBA) ceased once the credit card receivables were purchased and securitized by or via the non-bank defendants and therefore any interest being charged on the securitized receivables in excess of New York’s usury limits violates New York law. The plaintiffs seek to recoup the allegedly excessive interest payments and an order requiring the defendants to cease their allegedly wrongful conduct, among other relief. The plaintiffs in these lawsuits aim to leverage the Second Circuit’s decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the NBA and held that a non-bank debt collector that purchased a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury.

Also, in October 2019, a putative class action was filed in federal court in New York alleging Kabbage entered into an illegal “rent-a-bank” scheme to evade state usury laws. Kabbage facilitates business loans made by a Utah-chartered bank, Celtic Bank, but, according to the complaint, Kabbage is the “true lender,” holds itself out as the direct lender, and Celtic Bank has no ownership or monetary interest in the receivables related to the loans issued and therefore has no economic risk of loss stemming from borrower non-payment or default. Plaintiffs in the case advance various claims, including claims alleging violations of usury and other laws in California, New York, Colorado, and Massachusetts law and violations of the federal RICO statute.

In September 2019, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) filed an amicus brief in U.S. District Court in Colorado supporting a bankruptcy court’s rejection of the Madden case in a case before it. In re Rent-Rite Super Kegs West Ltd., Case No. 1:19-cv-015520-REB (D. Colo.), Dkt.11. It is unclear what impact the position of these federal regulators on the Madden decision will have in existing or future litigation or regulatory proceedings involving arguments of federal preemption of state usury laws.

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)

Although we believe that our program is factually distinguishable from the Madden case, an extension of the application of the Second Circuit's decision, either within or outside the states in the Second Circuit, could challenge the federal preemption of state laws setting interest rate limitations for loans made by issuing bank partners in those states.

State Inquiries and Licensing

The Company has had discussions with the Colorado Department of Law (CDL) concerning the licenses required for the Company’s servicing operations and the structure of its offerings in the State of Colorado. While we believe that our program with WebBank has been structured in accordance with governing federal law, the Administrator has identified alleged “exceptions” to our compliance with provisions of the Colorado Uniform Consumer Credit Code, including with respect to permitted rates and charges. We believe that our model differs in important respects from Avant’s business model as alleged in the litigation involving Avant in Colorado. We are also in discussions with the CDL about entering into a terminable agreement with the CDL to, among other things: (i) toll the statutes of limitations on any action the CDL might bring against the Company based on the rates and charges on loans the Company facilitates and (ii) refrain from facilitating certain loans to borrowers located in Colorado available for investment by certain investors. No assurance can be given as to the timing or outcome of the CDL inquiry or any other related matters.

We are routinely subject to examination for compliance with applicable laws and regulations in the states in which we are licensed. As of the date of this Report, we are subject to examination by the New York Department of Financial Services (NYDFS). In July 2018, the NYDFS issued an Online Lending Report (Lending Report). The Lending Report included, among other things, an analysis of the online lenders operating in New York including their methods of operations, lending practices, interest rates and costs, products offered and complaints and investigations relating to online lenders. The Lending Report also included information and recommendations regarding protecting New York’s markets and consumers. For example, although the Lending Report noted that the rapid growth of online lending demonstrates there is value to new technologies that allow financial institutions to connect with borrowers in new ways, it noted that in many cases an online lender is the “true lender” and that lending in New York, whether through banks, credit unions or online lenders, should be subject to applicable usury limits. We periodically have discussions with various regulatory agencies regarding our business model and have recently engaged in similar discussions with the NYDFS. During the course of such discussions, which remain ongoing, we decided to voluntarily comply with certain rules and regulations of the NYDFS.

The Company has undertaken a review of its portfolio of licenses. We are in the process of seeking additional licenses and are letting other licenses lapse. To date, updating our licenses has not had a material impact on the Company’s operations.

Consequences

If we are found to not have complied with applicable laws, regulations or requirements, we could: (i) lose one or more of our licenses or authorizations, (ii) become subject to a consent order or administrative enforcement action, (iii) face lawsuits (including class action lawsuits), sanctions or penalties, (iv) be in breach of certain contracts, which may void or cancel such contracts, (v) decide or be compelled to modify or suspend certain of our business practices (including limiting the maximum interest rate on certain loans facilitated through our platform and/or refraining from making certain loans available for investment by certain investors), or (vi) be required to obtain a license in such jurisdiction, which may have an adverse effect on our ability to continue to facilitate loans through our lending marketplace, perform our servicing obligations or make our lending marketplace available to borrowers in particular states; any of which may harm our business.

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

Our short-term liquidity needs generally relate to our working capital requirements, including the purchase of loans invested in by the Company. These liquidity needs are generally met through cash generated from the operations of facilitating loan originations, servicing fee revenue, proceeds from the sales of loans (both as whole loan sales and through Structured Program transactions), use of existing cash and cash equivalents, and draws on our credit facilities.

Given the member payment dependent structure of the notes, certificates and secured borrowings, principal and interest payments on notes, certificates and secured borrowings are paid only when received from borrowers on the corresponding retained loans, resulting in no material impact to our liquidity. During the first nine months of 2019 we purchased $2.3 billion in loans which were contemporaneously funded by whole loan sales and by the issuance of notes and certificates. We may use our own capital and available credit facilities to purchase loans for future Structured Program transactions, whole loan sales and if we experience a reduction in available investor capital to fund loans on our marketplace. During the first nine months of 2019, we used our own capital to purchase $3.6 billion in loans and sold $3.5 billion in loans, of which $2.8 billion was contributed to Structured Program transactions and $0.7 billion was sold to whole loan investors. As of September 30, 2019, the fair value of loans invested in by the Company was $714.4 million, of which $600.0 million were pledged as collateral under our credit facilities.

We may use our cash, cash equivalents and securities available for sale as additional sources of liquidity. Cash, cash equivalents and securities available for sale were $446.5 million (which included $51.3 million of securities pledged as collateral) and $543.4 million (which included $53.6 million of securities pledged as collateral) as of September 30, 2019 and December 31, 2018, respectively. Our 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. Our securities available for sale consist of asset-backed securities related to Structured Program transactions, corporate debt securities, other asset-backed securities, commercial paper, certificates of deposit and other securities. Changes in the balance of cash and cash equivalents are generally a result of timing related to working capital requirements, purchase or sale of loans and securities available for sale, changes in debt outstanding under our credit facilities, and changes in restricted cash and other investments. Changes in the balance of securities available for sale are generally a result of activity related to our Structured Program transactions. Future cash requirements include certain contingent liabilities, including litigations and ongoing regulatory and government investigations primarily related to outstanding legacy issues. As of September 30, 2019 and December 31, 2018, we had $15.0 million and 12.8 million in accrued contingent liabilities, respectively, but actual cash payments may vary if outcomes of legal actions or settlements are different. See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 18. Commitments and Contingencies” for further information.

Our credit facilities and securities sold under repurchase agreements are comprised of four secured warehouse credit facilities (Warehouse Facilities), a Revolving Facility and repurchase agreements. The Warehouse Facilities have an aggregated credit limit of $734.2 million, with $405.3 million of debt outstanding secured by $600.0 million of loans at fair value as of September 30, 2019. The Revolving Facility has a credit limit of $120.0 million, with $60.0 million of debt outstanding as of September 30, 2019. We have two master repurchase agreements with counterparties where we may sell securities (subject to an obligation to repurchase such securities at a specified future date and price) in exchange for cash. As of September 30, 2019, we had $43.8 million in aggregate debt outstanding under our repurchase agreements secured by $51.3 million of underlying assets pledged as collateral.

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)

We believe based on our projections that our cash on hand, securities available for sale, funds available from our lines of credit, and our cash flow from operations to be sufficient to meet our liquidity needs for the next twelve months.

The following table sets forth certain cash flow information for the periods presented:



	Nine Months Ended September 30,
Condensed Cash Flow Information:	2019			2018
Cash used for loan operating activities	$	(293,099	)	$	(286,773	)
Cash provided by all other operating activities	168,368			24,610
Net cash used for operating activities⁽¹⁾	$	(124,731	)	$	(262,163	)

Cash provided by loan investing activities ⁽²⁾	$	470,282		$	650,244
Cash provided by all other investing activities	19,404			10,089
Net cash provided by investing activities	$	489,686		$	660,333

Cash used for note, certificate and secured borrowings financing ⁽²⁾	$	(485,298	)	$	(651,400	)
Cash (used for) provided by issuance of securitization notes and residual certificates, credit facilities and securities sold under repurchase agreements	(6,569		)	228,067
Cash used for all other financing activities	(42,060		)	(67,850		)
Net cash used for financing activities	$	(533,927	)	$	(491,183	)
Net decrease in cash, cash equivalents and restricted cash	$	(168,972	)	$	(93,013	)


⁽¹⁾	Cash used for operating activities primarily includes the purchase and sale of loans held for sale by the Company.

⁽²⁾

Cash provided by loan investing activities includes the purchase of and repayment of loans held for investment. Cash used for note, certificate and secured borrowings financing activities includes the issuance of notes, certificates and secured borrowings to investors and the repayment of those notes, certificates and secured borrowings. These amounts generally correspond to and offset each other.

Operating Activities. Net cash used for operating activities was $(124.7) million and $(262.2) million during the first nine months of 2019 and 2018, respectively. Net cash used for loan operating activities relates to proceeds from sales of loans held for sale offset by the purchase of loans held for sale. The timing of the purchases and sales of loans held for sale can vary between periods and can therefore impact the amount of cash provided by or used for operating activities. In periods where we accumulate loans held for sale that are sold in a subsequent period, cash flow from operating activities will be negatively affected.

Investing Activities. Net cash provided by investing activities was $489.7 million and $660.3 million during the first nine months of 2019 and 2018, respectively. Net cash provided by loan investing activities was primarily driven by purchases of loans held for investment offset by the repayment of such loans. Net cash provided by all other investing activities was primarily driven by purchases of securities available for sale and purchases of property, equipment and software, offset by proceeds from securities available for sale.

Financing Activities. Net cash used for financing activities was $(533.9) million and $(491.2) million during the first nine months of 2019 and 2018, respectively. Net cash used for financing activities was primarily driven by principal payments on our credit facilities and principal payments on and retirements of notes and certificates, offset by proceeds from our credit facilities, the issuance of notes and certificates, and proceeds from securities sold under repurchase agreements.

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 Resources

Net capital expenditures were $39.0 million, or 6.8%, of total net revenue, and $37.9 million, or 7.4%, of total net revenue, for the first nine months of 2019 and 2018, respectively. Capital expenditures generally consist of internally developed software, computer equipment, and construction in progress. Capital expenditures in 2019 are expected to be approximately $45.0 million, primarily related to costs associated with the continued development and support of our online lending marketplace platform, implementation of a third-party loan servicing system, and the build-out of our Salt Lake City area site. In the future, we expect our capital expenditures related to enhancing our platform to increase as we support the growth in our business.

Off-Balance Sheet Arrangements

At both September 30, 2019 and December 31, 2018, a total of $5.5 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.

In the ordinary course of business, we engage in other activities that are not reflected on our Condensed Consolidated Balance Sheets, generally referred to as off-balance sheet arrangements. These activities involve transactions with unconsolidated variable interest entities including Company sponsored securitizations and Certificate Program transactions. These transactions are used frequently by the Company to provide a source of liquidity to finance our business and to diversify our investor base. The Company retains at least 5% of securities and residual interests from these transactions and enters into a servicing arrangement with the unconsolidated variable interest entity. We are exposed to market risk in the securitization market. We provide additional information regarding transactions with unconsolidated variable interest entities in “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 7. Securitizations and Variable Interest Entities.”

Contingencies

For a comprehensive discussion of contingencies as of September 30, 2019, see “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 18. 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 Operations – Critical Accounting Policies and Estimates” in the Annual Report. There have been no significant changes to these critical accounting estimates during the first nine months of 2019.

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 discount rates and servicing rates, interest rates and credit performance of loans. We are exposed to market risk directly through loans and securities held on our balance sheet, access to the securitization markets, investor demand for our loans, current and future debt under our credit facilities, and our servicing assets.

Market Rate Sensitivity

Market rate sensitivity refers to the risk of loss to future earnings, values or future cash flows that may result from changes in market discount rates and servicing rates.

Loans Invested in by the Company. As of September 30, 2019 and December 31, 2018, we were exposed to market rate risk on $714.4 million and $842.6 million of loans invested in by the Company at fair value, respectively, which have fixed interest rates. 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. Any realized or unrealized losses from market rate changes on loans invested in by the Company are recorded in earnings.

The Company’s continued facilitation of loan originations depends on an active liquid market, third-party investor demand for loans and successful Structured Program transactions and loan sales. The Company could respond to disruptions in ongoing investor demand due to changes in yield expectations, availability and yield of alternative investments, and liquidity in capital markets with reductions in origination facilitations or sales of loans at discounts, thereby negatively impacting revenue.

The following table presents the impact to the fair value of loans invested in by the Company due to a hypothetical change in discount rates as of September 30, 2019 and December 31, 2018:



	Loans Invested in by the Company
	September 30, 2019			December 31, 2018
Fair value	$	714,381		$	842,604
Discount rates
100 basis point increase	$	(9,424	)	$	(10,487	)
100 basis point decrease	$	9,627		$	10,749

Servicing Assets. As of September 30, 2019 and December 31, 2018, we were exposed to market servicing rate risk on $83.3 million and $64.0 million of servicing assets, respectively. Our selection of the most representative market servicing rates is inherently judgmental. The following table presents the impact to the fair value of servicing assets due to a hypothetical change in the weighted-average market servicing rate assumption as of September 30, 2019 and December 31, 2018:



	Servicing Assets
	September 30, 2019			December 31, 2018
Fair value	$	83,250		$	64,006
Weighted-average market servicing rate assumption	0.66		%	0.66		%
Change in fair value from:
Servicing rate increase by 10 basis points	$	(13,577	)	$	(10,878	)
Servicing rate decrease by 10 basis points	$	13,579		$	10,886

LENDINGCLUB CORPORATION

Interest Rate Sensitivity

The fair values of certain of our assets and liabilities are sensitive to changes in interest rates. Fixed rates may adversely affect market value due to a rise in interest rates, while floating rates may produce less income than expected if interest rates fall. The impact of changes in interest rates would be reduced by the fact that increases or decreases in fair values of assets would be partially offset by corresponding changes in fair values of liabilities.

Loans Invested in by the Company. As of September 30, 2019 and December 31, 2018, we were exposed to interest rate risk on $714.4 million and $842.6 million of loans invested in by the Company at fair value, respectively, which have fixed interest rates. Any realized or unrealized losses from interest rate changes are recorded in earnings. The following table presents the impact to the fair value of loans invested in by the Company due to a hypothetical change in interest rates as of September 30, 2019 and December 31, 2018:



	Loans Invested in by the Company
	September 30, 2019			December 31, 2018
Fair value	$	714,381		$	842,604
Interest rates
100 basis point increase	$	(9,424	)	$	(9,945	)
100 basis point decrease	$	9,627		$	10,163

Securities Available for Sale. As of September 30, 2019, we were exposed to interest rate risk on $246.6 million of securities available for sale, including $186.7 million of asset-backed securities related to Structured Program transactions and $59.9 million of certificates of deposit, other asset-backed securities, corporate debt securities and commercial paper. As of December 31, 2018, we were exposed to interest rate risk on $170.5 million of securities available for sale, including $116.8 million of asset-backed securities related to Structured Program transactions and $53.7 million of certificates of deposit, other asset-backed securities, corporate debt securities, commercial paper and other securities. To manage this risk, we limit and monitor maturities, credit ratings, performance of loans underlying Structured Program transactions and concentrations within the investment portfolio. Any unrealized gains or losses resulting from such interest rate changes would only be recorded in earnings if we sold the securities prior to maturity or if the securities were considered other-than-temporarily impaired and we intended to sell such securities or it was more likely than not that we would have to sell such securities prior to anticipated recovery.

The following table presents the impact to the fair value of securities available for sale due to a hypothetical change in interest rates as of September 30, 2019 and December 31, 2018:



	Securities Available for Sale
	September 30, 2019			December 31, 2018
Fair value	$	246,559		$	170,469
Interest rates
100 basis point increase	$	(2,026	)	$	(1,259	)
100 basis point decrease	$	2,004		$	1,259

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LENDINGCLUB CORPORATION

Credit Facilities and Securities Sold Under Repurchase Agreements. As of September 30, 2019 and December 31, 2018, we were exposed to interest rate risk on $405.3 million and $306.8 million of funding under the Warehouse Facilities, $60.0 million and $95.0 million of funding under the Revolving Facility, and $43.8 million and $57.0 million of funding under our repurchase agreements, respectively. Future funding activities may increase our exposure to interest rate risk, as the interest rates payable on such funding are tied to LIBOR or other short-term market rates. The following table presents the impact to the annualized interest expense related to our credit facilities and securities sold under repurchase agreements due to a hypothetical change in the one-month LIBOR rate as of September 30, 2019 and December 31, 2018:



	Credit Facilities and Securities Sold Under Repurchase Agreements
	September 30, 2019			December 31, 2018
Carrying value	$	509,107		$	458,802
One-month LIBOR
100 basis point increase	$	5,091		$	4,588
100 basis point decrease	$	(5,091	)	$	(4,588	)

Cash and Cash Equivalents. As of September 30, 2019 and December 31, 2018, we had cash and cash equivalents of $200.0 million and $373.0 million, respectively. 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. 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.

Credit Performance Sensitivity

Credit performance sensitivity refers to the risk of loss arising from default when borrowers are unable or unwilling to meet their financial obligations. We invest in loans and asset-backed securities (including residual interests) related to Structured Program transactions. The performance of these loans and asset-backed securities is dependent on the credit performance of loans facilitated by us. To manage this risk, we monitor borrower payment performance and how it may impact the valuation of our investments. The valuation of these investments is based on a discounted cash flow analysis and includes Level 3 assumptions. Any unrealized losses on asset-backed securities (including residual interests) are evaluated for other-than-temporary impairment and any impairment is recorded in earnings. All other unrealized gains and losses are recorded in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Loans Invested in by the Company. As of September 30, 2019 and December 31, 2018, we were exposed to credit performance risk on $714.4 million and $842.6 million of loans invested in by the Company at fair value, respectively, which have fixed interest rates. The following table presents the impact to the fair value of loans invested in by the Company due to a hypothetical change in credit loss rates as of September 30, 2019 and December 31, 2018:



	Loans Invested in by the Company
	September 30, 2019			December 31, 2018
Fair value	$	714,381		$	842,604
Credit loss rates
10 percent increase	$	(8,631	)	$	(11,304	)
10 percent decrease	$	8,563		$	11,526

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LENDINGCLUB CORPORATION

Asset-backed Securities Related to Structured Program Transactions. As of September 30, 2019 and December 31, 2018, we were exposed to credit performance risk on $186.7 million and $116.8 million of asset-backed securities related to Structured Program transactions, including securities pledged as collateral. The following table presents the impact to the fair value of asset-backed securities related to Structured Program transactions due to a hypothetical change in credit loss rates as of September 30, 2019 and December 31, 2018:



	Asset-backed Securities Related to Structured Program Transactions
	September 30, 2019			December 31, 2018
Fair value	$	186,692		$	116,768
Credit loss rates
10 percent increase	$	(3,538	)	$	(2,643	)
10 percent decrease	$	3,511		$	2,643

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 amended) as of September 30, 2019. 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 September 30, 2019, 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) occurred during the third quarter of 2019, 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 comprehensive discussion of legal proceedings, see “Part I. Financial Information – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 18. 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, could materially and adversely affect our business, financial condition, operating results and prospects, and the trading price of our common stock could

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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 the Annual Report remains current in all material respects, with the exception of the below.

We are evaluating various strategies to obtain or add bank functionality, including various forms of a bank charter, which could subject us to significant new regulation and we may be unable to, or decide not to, pursue such strategies.

We are evaluating various strategies to obtain or add bank functionality, including various forms of a bank charter, to add additional benefits, products and/or functionality to the LendingClub platform which may, among other things, facilitate our ability to develop and maintain a longer-term relationship with our customers. Additionally, we believe a bank charter could add a new source of relatively lower cost funding to our marketplace and give our business greater resilience and regulatory certainty. However, some of our strategies to obtain or add bank functionality may require, or be deemed to require, additional consents, procedures, partnerships, licenses, regulatory approvals and/or capabilities that we have not yet obtained, developed, or for which timing to develop or obtain is uncertain or could be longer than anticipated. Regulatory approval is subject to a number of requirements including sufficient bank capitalization, ownership and control of stockholders, permissible investments and activities, deposit insurance provided by the FDIC, sales practices and other factors. For example, if we were to acquire or establish a bank subsidiary, we may become subject to the Bank Holding Company Act and its restrictions and requirements, including capital requirements and shareholder requirements. A bank subsidiary could be subject to various additional limitations and restrictions on its activities, as well as capital requirements. In addition, we may become subject to supervision and regulation by the Federal Reserve as well as the chartering authority of the bank subsidiary and possibly other Federal bank regulators. We may also need to develop a financial and bank capitalization plan and ensure our governance and management infrastructure is ready before we would be able to execute on these strategies. For these and other reasons, we may ultimately decide not to pursue any of these strategies. Should we fail or decide not to pursue any of these strategies, including obtaining a bank charter, or should these strategies, or new regulations or interpretations of existing regulations, impose requirements on us that are impractical or that we cannot satisfy, our business, including our ability to offer a broader range of products and services, may be adversely affected.

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

Issuer Purchases of Equity Securities

The table below summarizes purchases made by or on behalf of LendingClub of its common stock for each calendar month in the third quarter of 2019:



Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
July 1 - July 31 ⁽¹⁾	994	$	15.35	—	$	—
August 1 - August 31⁽²⁾	2,900	$	13.25	—	$	—
September 1 - September 30	—	$	—	—	$	—
Total	3,894	$	13.79	—	$	—


⁽¹⁾	Represents shares purchased by the Company in lieu of issuing fractional shares in connection with a 1-for-5 reverse stock split effective on July 5, 2019.


⁽²⁾	Represents shares that were transferred to the Company to satisfy payment of all or a portion of the exercise price in connection with the exercise of stock options.

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LENDINGCLUB CORPORATION

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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LENDINGCLUB CORPORATION

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
4.1	Form of Common Stock Certificate					X
10.1	Marketing and Program Agreement dated July 23, 2019*	8-K	001-36771	10.1	July 29, 2019
10.2	Loan and Servicing Amendment dated July 23, 2019*	8-K	001-36771	10.1	July 29, 2019
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
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*	Certain information in the exhibit was omitted pursuant to Item 601(b)(2) of Regulation S-K because it is both not material and would be competitively harmful if publicly disclosed. The Company undertakes to furnish, supplementally, a copy of the unredacted exhibit to the SEC upon request.


†	The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

105

LENDINGCLUB CORPORATION

SIGNATURES

Pursuant to the requirements 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:	November 6, 2019	/s/ SCOTT SANBORN
		Scott Sanborn
		Chief Executive Officer

Date:	November 6, 2019	/s/ THOMAS W. CASEY
		Thomas W. Casey
		Chief Financial Officer

106

Exhibit 4.1

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: November 6, 2019

/s/ SCOTT SANBORN

Scott Sanborn

Chief Executive Officer

(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: November 6, 2019

/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 September 30, 2019, 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
	(Principal Executive Officer)

	/s/ THOMAS W. CASEY
	Thomas W. Casey
	Chief Financial Officer


	Dated:	November 6, 2019