Item 7. 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 consolidated financial statements and related notes that appear in this Annual Report. In addition to historical 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 in this Annual Report, particularly in “Part I – Item 1A. Risk Factors.”
Overview
LendingClub is America’s leading digital marketplace bank. The Company was founded in 2006 and brought a traditional credit product – the installment loan – into the digital age by leveraging technology, data science, and a unique marketplace model. In doing so, we became one of the largest providers of unsecured personal loans in the United States. In February 2021, LendingClub completed the acquisition of an award-winning digital bank, Radius, becoming a bank holding company and forming LC Bank as its wholly-owned subsidiary. We operate the vast majority of our business through LC Bank, as a lender and originator of loans and as a regulated bank in the United States.
Executive Summary
•Loan originations: Total loan originations for the year ended December 31, 2021 were $10.4 billion, improving 139% compared to the prior year. The increase was primarily driven by the growth in unsecured personal loan origination volume.
•Total net revenue: Total net revenue for the year ended December 31, 2021 was $818.6 million, improving 157% compared to the prior year and outpacing origination growth of 139%. The increase was primarily due to the growth in marketplace revenue and increased net interest income.
◦Marketplace revenue: Marketplace revenue for the year ended December 31, 2021 was $578.6 million, improving 136% compared to the prior year. The increase was primarily driven by a higher volume of marketplace loans sold.
◦Net interest income: Net interest income for the year ended December 31, 2021 was $212.8 million, improving 259% compared to the prior year. The increase was primarily driven by an increase in unsecured personal loans retained in the HFI loan portfolio at amortized cost and low-cost deposit funding replacing higher-cost third-party warehouse funding.
•Provision for credit losses: Provision for credit losses for the year ended December 31, 2021 was $138.8 million compared to $3.4 million in the prior year. The increase was primarily due to the origination of unsecured personal loans retained as HFI at amortized cost and the impact from applying CECL to the HFI portfolio and to the Radius loans upon their acquisition.
•Total non-interest expense: Total non-interest expense for the year ended December 31, 2021 was $661.4 million, increasing 32% compared to the prior year. The increase was primarily driven by an increase in variable marketing expenses based on higher origination volume and an increase in headcount due to the Acquisition and hiring in key functions.
•Consolidated net income: Consolidated net income for the year ended December 31, 2021 was $18.6 million, compared to a loss of $(187.5) million in the prior year.
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 and leases held for investment: Loans and leases held for investment, net of allowance for loan and lease losses, were $2.8 billion at December 31, 2021.
•Deposits: Total deposits at December 31, 2021 were $3.1 billion and are in line with growth in loans and leases held for investment.
•Notable items: For the year ended December 31, 2021, consolidated net income of $18.6 million and diluted earnings per share of $0.18 were negatively impacted by $198.0 million of notable items (net of tax): $129.8 million of CECL provisioning, less net charge-offs, and $68.2 million of revenue deferrals, net of accretion, both driven by strong retained loan growth. These items reduced our diluted earnings per share by $1.94 in 2021.
The above summary should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety. For additional discussion related to our operating segments, see “Segment 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)
Financial Highlights
We regularly review several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The following presents select financial metrics for the periods presented:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Non-interest income
|
$
|
605,799
|
|
|
$
|
258,756
|
|
|
$
|
660,566
|
|
Net interest income
|
212,831
|
|
|
59,328
|
|
|
98,041
|
|
Total net revenue
|
$
|
818,630
|
|
|
$
|
318,084
|
|
|
$
|
758,607
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,690)
|
|
|
|
|
|
|
|
Basic EPS
|
$
|
0.19
|
|
|
$
|
(2.63)
|
|
|
$
|
(0.35)
|
|
Diluted EPS
|
$
|
0.18
|
|
|
$
|
(2.63)
|
|
|
$
|
(0.35)
|
|
|
|
|
|
|
|
LendingClub Bank Performance Metrics:
|
|
|
|
|
|
|
|
Efficiency ratio (1)
|
72.1
|
%
|
|
N/A
|
|
N/A
|
Return on Average Equity (ROE)
|
17.0
|
%
|
|
N/A
|
|
N/A
|
Return on Average Total Assets (ROA)
|
2.4
|
%
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
LendingClub Bank Capital Ratios:
|
|
|
|
|
|
CET1 1 Capital Ratio
|
16.7
|
%
|
|
N/A
|
|
N/A
|
Tier 1 Leverage Ratio
|
14.3
|
%
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
Consolidated LendingClub Corporation Performance Metrics:
|
|
Net interest margin
|
5.6
|
%
|
|
3.0
|
%
|
|
3.6
|
%
|
Efficiency ratio (1)
|
80.8
|
%
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing as a % of loan originations
|
1.5
|
%
|
|
1.2
|
%
|
|
1.9
|
%
|
|
|
|
|
|
|
Loan Originations (in millions):
|
|
|
|
|
|
Marketplace loans
|
$
|
8,099
|
|
|
$
|
4,343
|
|
|
$
|
12,290
|
|
Loan originations held for investment
|
2,282
|
|
|
—
|
|
|
—
|
|
Total loan originations
|
$
|
10,381
|
|
|
$
|
4,343
|
|
|
$
|
12,290
|
|
|
|
|
|
|
|
AUM (in millions) (2)
|
$
|
12,463
|
|
|
$
|
11,002
|
|
|
$
|
16,011
|
|
N/A – Not applicable
(1) Calculated as the ratio of non-interest expense to total net revenue.
(2) Assets under management (AUM) includes outstanding balances of unsecured personal loans and auto refinance loans serviced by the Company as of period end, including loans sold to investors as well as loans held for investment and held for sale by the Company.
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
Loans and leases held for investment, net, excluding PPP loans
|
$
|
2,486,440
|
|
|
$
|
—
|
|
|
|
|
|
PPP loans
|
268,297
|
|
|
—
|
|
|
|
|
|
Total loans and leases held for investment, net
|
$
|
2,754,737
|
|
|
$
|
—
|
|
|
|
|
|
Total assets
|
$
|
4,900,319
|
|
|
$
|
1,863,293
|
|
|
|
|
|
Total deposits
|
$
|
3,135,788
|
|
|
$
|
—
|
|
|
|
|
|
Total liabilities
|
$
|
4,050,077
|
|
|
$
|
1,139,122
|
|
|
|
|
|
Total equity
|
$
|
850,242
|
|
|
$
|
724,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance Ratios:
|
|
|
|
|
|
|
|
ALLL to total loans and leases held for investment
|
5.0
|
%
|
|
N/A
|
|
|
|
|
ALLL to total loans and leases held for investment, excluding PPP loans
|
5.5
|
%
|
|
N/A
|
|
|
|
|
ALLL to consumer loans and leases held for investment
|
6.4
|
%
|
|
N/A
|
|
|
|
|
ALLL to commercial loans and leases held for investment
|
1.8
|
%
|
|
N/A
|
|
|
|
|
ALLL to commercial loans and leases held for investment, excluding PPP loans
|
2.6
|
%
|
|
N/A
|
|
|
|
|
N/A – Not applicable
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
This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. For discussion related to 2019 items and year-over-year comparisons between 2020 and 2019, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2020.
The following table sets forth the Income Statement data for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Non-interest income:
|
|
|
|
|
|
Marketplace revenue
|
$
|
578,580
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
Other non-interest income
|
27,219
|
|
|
13,442
|
|
|
13,831
|
|
Total non-interest income
|
605,799
|
|
|
258,756
|
|
|
660,566
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
Interest on loans held for sale
|
29,540
|
|
|
72,876
|
|
|
109,493
|
|
Interest and fees on loans and leases held for investment
|
188,977
|
|
|
—
|
|
|
—
|
|
Interest on retail and certificate loans held for investment at fair value
|
57,684
|
|
|
115,952
|
|
|
214,395
|
|
Interest on other loans held for investment at fair value
|
4,436
|
|
|
7,688
|
|
|
1,104
|
|
Interest on securities available for sale
|
11,025
|
|
|
12,125
|
|
|
14,351
|
|
Other interest income
|
1,170
|
|
|
1,053
|
|
|
6,002
|
|
Total interest income
|
292,832
|
|
|
209,694
|
|
|
345,345
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
Interest on deposits
|
7,228
|
|
|
—
|
|
|
—
|
|
Interest on short-term borrowings
|
3,677
|
|
|
17,837
|
|
|
26,826
|
|
Interest on retail notes, certificates and secured borrowings
|
57,684
|
|
|
115,952
|
|
|
214,395
|
|
Interest on Structured Program borrowings
|
9,638
|
|
|
16,204
|
|
|
5,070
|
|
Interest on other long-term debt
|
1,774
|
|
|
373
|
|
|
1,013
|
|
Total interest expense
|
80,001
|
|
|
150,366
|
|
|
247,304
|
|
|
|
|
|
|
|
Net interest income
|
212,831
|
|
|
59,328
|
|
|
98,041
|
|
|
|
|
|
|
|
Total net revenue
|
818,630
|
|
|
318,084
|
|
|
758,607
|
|
|
|
|
|
|
|
Provision for credit losses
|
138,800
|
|
|
3,382
|
|
|
—
|
|
|
|
|
|
|
|
Non-interest expense:
|
|
|
|
|
|
Compensation and benefits
|
288,390
|
|
|
252,517
|
|
|
333,628
|
|
Marketing
|
156,142
|
|
|
51,518
|
|
|
235,337
|
|
Equipment and software
|
39,490
|
|
|
26,842
|
|
|
24,927
|
|
Occupancy
|
24,249
|
|
|
27,870
|
|
|
29,367
|
|
Depreciation and amortization
|
44,285
|
|
|
54,030
|
|
|
59,152
|
|
Professional services
|
47,572
|
|
|
41,780
|
|
|
43,010
|
|
Other non-interest expense
|
61,258
|
|
|
47,762
|
|
|
64,077
|
|
Total non-interest expense
|
661,386
|
|
|
502,319
|
|
|
789,498
|
|
|
|
|
|
|
|
Income (Loss) before income tax benefit
|
18,444
|
|
|
(187,617)
|
|
|
(30,891)
|
|
Income tax benefit
|
136
|
|
|
79
|
|
|
201
|
|
Consolidated net income (loss)
|
18,580
|
|
|
(187,538)
|
|
|
(30,690)
|
|
Less: Income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
55
|
|
LendingClub net income (loss)
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,745)
|
|
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)
Marketplace Revenue
Marketplace revenue consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
|
|
Change ($)
|
|
Change (%)
|
Origination fees
|
$
|
416,839
|
|
|
$
|
207,640
|
|
|
|
|
$
|
209,199
|
|
|
101
|
%
|
Servicing fees
|
87,639
|
|
|
111,864
|
|
|
|
|
(24,225)
|
|
|
(22)
|
%
|
Gain on sales of loans
|
70,116
|
|
|
30,812
|
|
|
|
|
39,304
|
|
|
128
|
%
|
Net fair value adjustments (1)
|
3,986
|
|
|
(105,002)
|
|
|
|
|
108,988
|
|
|
N/M
|
Total marketplace revenue
|
$
|
578,580
|
|
|
$
|
245,314
|
|
|
|
|
$
|
333,266
|
|
|
136
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
|
|
Change ($)
|
|
Change (%)
|
Origination fees
|
$
|
207,640
|
|
|
$
|
598,760
|
|
|
|
|
$
|
(391,120)
|
|
|
(65)
|
%
|
Servicing fees
|
111,864
|
|
|
124,532
|
|
|
|
|
(12,668)
|
|
|
(10)
|
%
|
Gain on sales of loans
|
30,812
|
|
|
67,716
|
|
|
|
|
(36,904)
|
|
|
(54)
|
%
|
Net fair value adjustments (1)
|
(105,002)
|
|
|
(144,273)
|
|
|
|
|
39,271
|
|
|
(27)
|
%
|
Total marketplace revenue
|
$
|
245,314
|
|
|
$
|
646,735
|
|
|
|
|
$
|
(401,421)
|
|
|
(62)
|
%
|
N/M Not meaningful.
(1) Certain prior period valuation adjustments on available for sale (AFS) securities and Structured Program transactions were reclassified from net fair value adjustments to provision for credit losses and interest expense, respectively, to conform to the current period presentation.
Origination Fees
Origination fees recorded as a component of marketplace revenue are primarily fees earned related to originating and issuing unsecured personal loans that are held for sale. In addition, origination fees include transaction fees that were paid to the Company by issuing bank partners or education and patient service providers for the work performed in facilitating the origination of loans by the issuing banks. Following the Acquisition, LC Bank became the originator and lender for the majority of unsecured personal loans and all auto refinance loans.
The following table presents loan origination volume during each of the periods set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Marketplace loans
|
$
|
8,099,109
|
|
|
$
|
4,343,411
|
|
|
$
|
12,290,093
|
|
Loan originations held for investment
|
2,282,206
|
|
|
—
|
|
|
—
|
|
Total loan originations
|
$
|
10,381,315
|
|
|
$
|
4,343,411
|
|
|
$
|
12,290,093
|
|
Origination fees were $416.8 million and $207.6 million for the years ended December 31, 2021 and 2020, respectively, an increase of 101%. The increase was due to higher origination volume of marketplace loans, partially offset by the deferral of origination fees on loans held for investment. Loan origination volume of marketplace loans increased to $8.1 billion for the year ended December 31, 2021 compared to $4.3 billion for the year ended December 31, 2020, an increase of 86%.
Servicing Fees
The Company receives servicing fees to compensate it for servicing loans on behalf of investors, including managing payments from borrowers, collections and payments to those investors. Servicing fee revenue related to loans sold also includes the change in fair value of servicing assets associated with the loans.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The table below illustrates AUM serviced on our platform by the method in which the loans were financed. Loans sold and subsequently serviced on behalf of the investor represent a key driver of our servicing fee revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
Change ($)
|
|
|
|
Change (%)
|
AUM (in millions):
|
Loans sold
|
$
|
10,124
|
|
|
$
|
10,139
|
|
|
$
|
(15)
|
|
|
|
|
—
|
%
|
Retail notes, certificates and secured borrowings
|
238
|
|
|
680
|
|
|
(442)
|
|
|
|
|
(65)
|
%
|
Loans HFI by LendingClub Bank
|
2,026
|
|
|
—
|
|
|
2,026
|
|
|
|
|
N/M
|
Other loans invested in by the Company
|
75
|
|
|
183
|
|
|
(108)
|
|
|
|
|
(59)
|
%
|
Total
|
$
|
12,463
|
|
|
$
|
11,002
|
|
|
$
|
1,461
|
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
Change ($)
|
|
|
|
Change (%)
|
AUM (in millions):
|
Loans sold
|
$
|
10,139
|
|
|
$
|
14,118
|
|
|
$
|
(3,979)
|
|
|
|
|
(28)
|
%
|
Retail notes, certificates and secured borrowings
|
680
|
|
|
1,149
|
|
|
(469)
|
|
|
|
|
(41)
|
%
|
|
|
|
|
|
|
|
|
|
|
Other loans invested in by the Company
|
183
|
|
|
744
|
|
|
(561)
|
|
|
|
|
(75)
|
%
|
Total
|
$
|
11,002
|
|
|
$
|
16,011
|
|
|
$
|
(5,009)
|
|
|
|
|
(31)
|
%
|
In addition to the loans serviced on our platform, the Company earns servicing fee revenue on $214.0 million in outstanding principal balance of commercial loans sold as of December 31, 2021.
Servicing fees were $87.6 million and $111.9 million for the years ended December 31, 2021 and 2020, respectively, a decrease of 22%. The decrease was due to lower average loan balances serviced in 2021 compared to the prior year, as origination volume was lower in 2020 as compared to 2019 due to the impact of COVID-19.
Gain on Sales of Loans
In connection with loan sales the Company recognizes a gain or loss on the sale of loans based on the level to which the contractual servicing fee is above or below an estimated market rate of servicing. Additionally, the Company recognizes any transaction costs, if any, as a loss on sale of loans.
Gain on sales of loans was $70.1 million and $30.8 million for the years ended December 31, 2021 and 2020, respectively, an increase of 128%. The increase was primarily due to an increase in the volume of marketplace loans sold.
Net Fair Value Adjustments
The Company records fair value adjustments on loans that are recorded at fair value, including gains or losses from sale prices in excess of or less than the loan principal amount sold.
Net fair value adjustments were $4.0 million and $(105.0) million for the years ended December 31, 2021 and 2020, respectively, an improvement of $109.0 million. The improvement was primarily associated with negative fair value adjustments recorded in the first quarter of 2020 due to COVID-19, which included an increase in estimated expected credit losses and an increase in liquidity premiums.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Other Non-interest Income
Other non-interest income primarily consists of referral revenue that relates to fees earned from third-party companies when customers referred by us consider or purchase products or services from such third-party companies. The table below illustrates the composition of other non-interest income for each period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
|
|
Change ($)
|
|
Change (%)
|
Referral revenue
|
$
|
14,234
|
|
|
$
|
5,011
|
|
|
|
|
$
|
9,223
|
|
|
184
|
%
|
Realized gains (losses) on sales of securities available for sale and other investments
|
(93)
|
|
|
11
|
|
|
|
|
(104)
|
|
|
N/M
|
Other
|
13,078
|
|
|
8,420
|
|
|
|
|
4,658
|
|
|
55
|
%
|
Other non-interest income
|
$
|
27,219
|
|
|
$
|
13,442
|
|
|
|
|
$
|
13,777
|
|
|
102
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
Change ($)
|
|
Change (%)
|
Referral revenue
|
$
|
5,011
|
|
|
$
|
5,474
|
|
|
$
|
(463)
|
|
|
(8)
|
%
|
Realized gains (losses) on sales of securities available for sale and other investments
|
11
|
|
|
(8)
|
|
|
19
|
|
|
N/M
|
Other
|
8,420
|
|
|
8,365
|
|
|
55
|
|
|
1
|
%
|
Other non-interest income
|
$
|
13,442
|
|
|
$
|
13,831
|
|
|
$
|
(389)
|
|
|
(3)
|
%
|
Net Interest Income
The table below presents net interest income information corresponding to interest-earning assets and interest-bearing funding sources on a consolidated basis for the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31(1),
|
|
2021
|
|
2020
|
|
2019
|
|
Average
Balance
|
|
Interest Income/
Expense
|
|
Average Yield/
Rate
|
|
Average
Balance
|
|
Interest Income/
Expense
|
|
Average Yield/
Rate
|
|
Average
Balance
|
|
Interest Income/
Expense
|
|
Average Yield/
Rate
|
Interest-earning assets (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
$
|
754,920
|
|
|
$
|
1,170
|
|
|
0.16
|
%
|
|
$
|
395,734
|
|
|
$
|
1,053
|
|
|
0.27
|
%
|
|
$
|
257,185
|
|
|
$
|
6,002
|
|
|
2.33
|
%
|
Securities available for sale at fair value
|
288,545
|
|
|
11,025
|
|
|
3.82
|
%
|
|
217,189
|
|
|
12,125
|
|
|
5.58
|
%
|
|
221,166
|
|
|
14,351
|
|
|
6.49
|
%
|
Loans held for sale
|
218,349
|
|
|
29,540
|
|
|
13.53
|
%
|
|
489,750
|
|
|
72,876
|
|
|
14.88
|
%
|
|
725,901
|
|
|
109,493
|
|
|
15.08
|
%
|
Loans and leases held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured personal loans
|
863,266
|
|
|
122,807
|
|
|
15.52
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Secured consumer loans
|
485,195
|
|
|
17,105
|
|
|
3.85
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Commercial loans and leases
|
617,483
|
|
|
30,731
|
|
|
5.43
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
PPP loans
|
487,435
|
|
|
18,334
|
|
|
4.10
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Loans and leases held for investment
|
2,453,379
|
|
|
188,977
|
|
|
8.40
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Retail and certificate loans held for investment at fair value
|
406,406
|
|
|
57,684
|
|
|
14.19
|
%
|
|
815,255
|
|
|
115,952
|
|
|
14.20
|
%
|
|
1,480,588
|
|
|
214,395
|
|
|
14.45
|
%
|
Other loans held for investment at fair value
|
34,938
|
|
|
4,436
|
|
|
12.70
|
%
|
|
60,093
|
|
|
7,688
|
|
|
12.79
|
%
|
|
10,788
|
|
|
1,104
|
|
|
10.23
|
%
|
Total interest-earning assets
|
4,156,537
|
|
|
292,832
|
|
|
7.46
|
%
|
|
1,978,021
|
|
|
209,694
|
|
|
10.59
|
%
|
|
2,695,628
|
|
|
345,345
|
|
|
12.79
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31(1),
|
|
2021
|
|
2020
|
|
2019
|
|
Average
Balance
|
|
Interest Income/
Expense
|
|
Average Yield/
Rate
|
|
Average
Balance
|
|
Interest Income/
Expense
|
|
Average Yield/
Rate
|
|
Average
Balance
|
|
Interest Income/
Expense
|
|
Average Yield/
Rate
|
Cash and due from banks and restricted cash
|
112,012
|
|
|
|
|
|
|
114,105
|
|
|
|
|
|
|
251,777
|
|
|
|
|
|
Allowance for loan and lease losses
|
(77,223)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
Other non-interest earning assets
|
426,323
|
|
|
|
|
|
|
339,746
|
|
|
|
|
|
|
376,252
|
|
|
|
|
|
Total assets
|
$
|
4,617,649
|
|
|
|
|
|
|
$
|
2,431,872
|
|
|
|
|
|
|
$
|
3,323,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking and money market accounts
|
2,071,640
|
|
|
5,954
|
|
|
0.31
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Savings accounts and certificates of deposit
|
383,447
|
|
|
1,274
|
|
|
0.36
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Interest-bearing deposits
|
2,455,087
|
|
|
7,228
|
|
|
0.32
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Short-term borrowings
|
68,032
|
|
|
3,677
|
|
|
5.40
|
%
|
|
387,958
|
|
|
17,837
|
|
|
4.60
|
%
|
|
461,183
|
|
|
26,826
|
|
|
5.82
|
%
|
Advances from PPPLF
|
365,976
|
|
|
1,183
|
|
|
0.35
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Retail notes, certificates and secured borrowings
|
407,471
|
|
|
57,684
|
|
|
14.16
|
%
|
|
816,010
|
|
|
115,952
|
|
|
14.21
|
%
|
|
1,486,715
|
|
|
214,395
|
|
|
14.45
|
%
|
Structured Program borrowings
|
110,579
|
|
|
9,638
|
|
|
8.72
|
%
|
|
162,688
|
|
|
16,204
|
|
|
9.96
|
%
|
|
100,747
|
|
|
5,070
|
|
|
5.03
|
%
|
Other long-term debt
|
16,355
|
|
|
591
|
|
|
3.61
|
%
|
|
6,824
|
|
|
373
|
|
|
5.47
|
%
|
|
20,777
|
|
|
1,013
|
|
|
4.88
|
%
|
Total interest-bearing liabilities
|
3,423,500
|
|
|
80,001
|
|
|
2.36
|
%
|
|
1,373,480
|
|
|
150,366
|
|
|
10.95
|
%
|
|
2,069,422
|
|
|
247,304
|
|
|
11.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits
|
126,982
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
Other liabilities
|
289,163
|
|
|
|
|
|
|
272,164
|
|
|
|
|
|
|
372,954
|
|
|
|
|
|
Total liabilities
|
$
|
3,839,645
|
|
|
|
|
|
|
$
|
1,645,644
|
|
|
|
|
|
|
$
|
2,442,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
$
|
778,004
|
|
|
|
|
|
|
$
|
786,228
|
|
|
|
|
|
|
$
|
881,281
|
|
|
|
|
|
Total liabilities and equity
|
$
|
4,617,649
|
|
|
|
|
|
|
$
|
2,431,872
|
|
|
|
|
|
|
$
|
3,323,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
5.10
|
%
|
|
|
|
|
|
(0.36)
|
%
|
|
|
|
|
|
0.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income and net interest margin
|
|
|
$
|
212,831
|
|
|
5.56
|
%
|
|
|
|
$
|
59,328
|
|
|
3.00
|
%
|
|
|
|
$
|
98,041
|
|
|
3.64
|
%
|
(1) Prior period amounts have been reclassified to conform to current period presentation and methodology, which includes non-interest earning assets, non-interest bearing liabilities and equity.
(2) Nonaccrual loans and any related income are included in their respective loan 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)
An analysis of the year-to-year changes in the categories of interest revenue and interest expense resulting from changes in volume and rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 Compared to 2020
|
|
2020 Compared to 2019
|
|
Increase (Decrease)
Due to Change in:
|
|
Increase (Decrease)
Due to Change in:
|
|
Average Volume(1)
|
Average Rate(1)
|
Total
|
|
Average Volume(1)
|
Average Rate(1)
|
Total
|
Interest-earning assets
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
$
|
682
|
|
$
|
(565)
|
|
$
|
117
|
|
|
$
|
2,150
|
|
$
|
(7,099)
|
|
$
|
(4,949)
|
|
Securities available for sale at fair value
|
3,342
|
|
(4,442)
|
|
(1,100)
|
|
|
(254)
|
|
(1,972)
|
|
(2,226)
|
|
Loans held for sale
|
(37,233)
|
|
(6,103)
|
|
(43,336)
|
|
|
(35,159)
|
|
(1,458)
|
|
(36,617)
|
|
Loans and leases held for investment
|
188,977
|
|
—
|
|
188,977
|
|
|
—
|
|
—
|
|
—
|
|
Retail and certificate loans held for investment at fair value
|
(58,194)
|
|
(74)
|
|
(58,268)
|
|
|
(94,827)
|
|
(3,616)
|
|
(98,443)
|
|
Other loans held for investment at fair value
|
(3,195)
|
|
(57)
|
|
(3,252)
|
|
|
6,242
|
|
342
|
|
6,584
|
|
Total increase (decrease) in interest income on interest-earning assets
|
$
|
94,379
|
|
$
|
(11,241)
|
|
$
|
83,138
|
|
|
$
|
(121,848)
|
|
$
|
(13,803)
|
|
$
|
(135,651)
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
Checking and money market accounts
|
$
|
5,954
|
|
$
|
—
|
|
$
|
5,954
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Savings accounts and certificates of deposit
|
1,274
|
|
—
|
|
1,274
|
|
|
—
|
|
—
|
|
—
|
|
Interest-bearing deposits
|
7,228
|
|
—
|
|
7,228
|
|
|
—
|
|
—
|
|
—
|
|
Short-term borrowings
|
(16,837)
|
|
2,677
|
|
(14,160)
|
|
|
(3,875)
|
|
(5,114)
|
|
(8,989)
|
|
Advances from PPPLF
|
1,183
|
|
—
|
|
1,183
|
|
|
—
|
|
—
|
|
—
|
|
Retail notes, certificates and secured borrowings
|
(57,838)
|
|
(430)
|
|
(58,268)
|
|
|
(94,932)
|
|
(3,511)
|
|
(98,443)
|
|
Structured Program borrowings
|
(4,723)
|
|
(1,843)
|
|
(6,566)
|
|
|
4,294
|
|
6,840
|
|
11,134
|
|
Other long-term debt
|
379
|
|
(161)
|
|
218
|
|
|
(750)
|
|
110
|
|
(640)
|
|
Total increase (decrease) in interest expense on interest-bearing liabilities
|
$
|
(70,608)
|
|
$
|
243
|
|
$
|
(70,365)
|
|
|
$
|
(95,263)
|
|
$
|
(1,675)
|
|
$
|
(96,938)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
$
|
164,987
|
|
$
|
(11,484)
|
|
$
|
153,503
|
|
|
$
|
(26,585)
|
|
$
|
(12,128)
|
|
$
|
(38,713)
|
|
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
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)
Provision for Credit Losses
The allowance for loan and lease losses (ALLL) for lifetime expected losses under CECL on HFI loans and leases is initially recognized as “Provision for credit losses” at the time of origination. The ALLL is estimated using a DCF approach, where effective interest rates are used to calculate the net present value of expected cash flows. The net present value from the DCF approach is then compared to the amortized cost basis of the loans and leases to derive expected credit losses. The provision for credit losses includes the credit loss expense for HFI loans and leases, AFS securities and unfunded lending commitments. The table below illustrates the composition of the provision for credit losses for each period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
|
|
|
Credit loss expense for Radius loans at acquisition
|
$
|
6,929
|
|
|
$
|
—
|
|
|
|
|
|
Credit loss expense for loans and leases held for investment
|
134,022
|
|
|
—
|
|
|
|
|
|
Credit loss expense for unfunded lending commitments
|
1,231
|
|
|
—
|
|
|
|
|
|
Total credit loss expense
|
142,182
|
|
|
—
|
|
|
|
|
|
(Reversal of) Impairment on securities available for sale
|
(3,382)
|
|
|
3,382
|
|
|
|
|
|
Total provision for credit losses
|
$
|
138,800
|
|
|
$
|
3,382
|
|
|
|
|
|
The provision for credit losses was $138.8 million and $3.4 million for the years ended December 31, 2021 and 2020, respectively. The increase was primarily due to the origination of unsecured personal loans retained as HFI at amortized cost and the impact from applying CECL to the HFI portfolio and to the Radius loans upon their acquisition, partially offset by reversal of impairment originally recorded in the AFS securities portfolio in the prior year.
The allowance for credit losses (ACL) totaled $145.6 million at December 31, 2021, comprised of an ALLL of $144.4 million and a reserve for unfunded lending commitments of $1.2 million. Unsecured personal loans are charged-off when a borrower is (i) contractually 120 days past due or (ii) two payments past due and has filed for bankruptcy or is deceased.
The activity in the ACL was as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2021
|
Allowance for loan and lease losses, beginning of period
|
|
$
|
—
|
|
Credit loss expense for loans and leases held for investment
|
|
140,951
|
|
Initial allowance for purchased credit deteriorated (PCD) loans acquired during the period(1)
|
|
12,440
|
|
Charge-offs
|
|
(10,452)
|
|
Recoveries
|
|
1,450
|
|
Allowance for loan and lease losses, end of period
|
|
$
|
144,389
|
|
|
|
|
Reserve for unfunded lending commitments, beginning of period
|
|
$
|
—
|
|
Credit loss expense for unfunded lending commitments
|
|
1,231
|
|
Reserve for unfunded lending commitments, end of period (2)
|
|
$
|
1,231
|
|
(1) For acquired PCD loans, an ACL of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, an ACL of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.
(2) Relates to $110.8 million of unfunded commitments.
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 ALLL represented 5.0% of total loans and leases HFI as of December 31, 2021, or 5.5% of total loans and leases HFI excluding PPP loans. Average loans and leases HFI were $2.5 billion during the year ended December 31, 2021. Net charge-offs represented 0.4% of average loans and leases HFI during the year ended December 31, 2021.
For additional information on the ACL, see“ Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” and “Note 6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses.”
The following table presents nonaccrual loans and leases (1):
|
|
|
|
|
|
|
December 31, 2021
|
Unsecured personal
|
$
|
1,676
|
|
Residential mortgages
|
1,373
|
|
Secured consumer
|
3,011
|
|
|
|
Total nonaccrual consumer loans held for investment
|
6,060
|
|
|
|
Equipment finance
|
603
|
|
Commercial real estate
|
989
|
|
Commercial and industrial
|
2,333
|
|
Total nonaccrual commercial loans and leases held for investment
|
3,925
|
|
|
|
Total nonaccrual loans and leases held for investment
|
$
|
9,985
|
|
(1) Excluding PPP loans, there were no loans that were 90 days or more past due and accruing as of December 31, 2021.
Nonaccrual loans and leases represented 0.3% of total loans and leases HFI, or 0.4% of total loans and leases HFI excluding PPP loans, as of December 31, 2021. The ALLL represented 1446% of nonaccrual loans and leases as of December 31, 2021.
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)
Non-interest Expense
Non-interest expense primarily consists of (i) compensation and benefits, which include salaries and wages, benefits and stock-based compensation expense, (ii) marketing, which includes costs attributable to borrower acquisition efforts and building general brand awareness, (iii) equipment and software, (iv) occupancy, which includes rent expense and all other costs related to occupying our office spaces, (v) depreciation and amortization and (vi) professional services, which primarily consist of legal and accounting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
Change ($)
|
|
Change (%)
|
Non-interest expense:
|
|
|
|
|
|
|
|
Compensation and benefits
|
$
|
288,390
|
|
|
$
|
252,517
|
|
|
$
|
35,873
|
|
|
14
|
%
|
Marketing
|
156,142
|
|
|
51,518
|
|
|
104,624
|
|
|
203
|
%
|
Equipment and software
|
39,490
|
|
|
26,842
|
|
|
12,648
|
|
|
47
|
%
|
Occupancy
|
24,249
|
|
|
27,870
|
|
|
(3,621)
|
|
|
(13)
|
%
|
Depreciation and amortization
|
44,285
|
|
|
54,030
|
|
|
(9,745)
|
|
|
(18)
|
%
|
Professional services
|
47,572
|
|
|
41,780
|
|
|
5,792
|
|
|
14
|
%
|
Other non-interest expense
|
61,258
|
|
|
47,762
|
|
|
13,496
|
|
|
28
|
%
|
Total non-interest expense
|
$
|
661,386
|
|
|
$
|
502,319
|
|
|
$
|
159,067
|
|
|
32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
Change ($)
|
|
Change (%)
|
Non-interest expense:
|
|
|
|
|
|
|
|
Compensation and benefits
|
$
|
252,517
|
|
|
$
|
333,628
|
|
|
$
|
(81,111)
|
|
|
(24)
|
%
|
Marketing
|
51,518
|
|
|
235,337
|
|
|
(183,819)
|
|
|
(78)
|
%
|
Equipment and software
|
26,842
|
|
|
24,927
|
|
|
1,915
|
|
|
8
|
%
|
Occupancy
|
27,870
|
|
|
29,367
|
|
|
(1,497)
|
|
|
(5)
|
%
|
Depreciation and amortization
|
54,030
|
|
|
59,152
|
|
|
(5,122)
|
|
|
(9)
|
%
|
Professional services
|
41,780
|
|
|
43,010
|
|
|
(1,230)
|
|
|
(3)
|
%
|
Other non-interest expense
|
47,762
|
|
|
64,077
|
|
|
(16,315)
|
|
|
(25)
|
%
|
Total non-interest expense
|
$
|
502,319
|
|
|
$
|
789,498
|
|
|
$
|
(287,179)
|
|
|
(36)
|
%
|
Compensation and benefits expense was $288.4 million and $252.5 million for the years ended December 31, 2021 and 2020, respectively, an increase of 14%. The increase was primarily due to an increase in headcount due to the Acquisition and hiring in key functions during 2021. In addition, compensation and benefits expense in 2020 was impacted by salary and headcount reductions resulting from the COVID-19 pandemic.
Marketing expense was $156.1 million and $51.5 million for the years ended December 31, 2021 and 2020, respectively, and increase of 203%. The increase was primarily due to an increase in variable marketing expenses based on higher origination volume, partially offset by the deferral of applicable marketing expenses for HFI loans.
Equipment and software expense was $39.5 million and $26.8 million for the years ended December 31, 2021 and 2020, respectively, an increase of 47%. The increase was primarily due to an increase in expenses associated with the integration of Radius.
Occupancy expense was $24.2 million and $27.9 million for the years ended December 31, 2021 and 2020, respectively, a decrease of 13%. The decrease was primarily due to lease impairment expenses in the prior year resulting from the impact of COVID-19.
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)
Depreciation and amortization expense was $44.3 million and $54.0 million for the years ended December 31, 2021 and 2020, respectively, a decrease of 18%. The decrease was primarily due to a decrease in internally-developed software impairment and depreciation expense in 2021 compared to 2020, partially offset by an increase in the amortization of intangible assets resulting from the Acquisition.
Professional services were $47.6 million and $41.8 million for the years ended December 31, 2021 and 2020, respectively, an increase of 14%. The increase was primarily due to an increase in professional fees associated with the Acquisition.
Income Taxes
For the year ended December 31, 2021, we recorded an income tax benefit of $136 thousand primarily related to a tax benefit associated with the Acquisition, partially offset by income tax expense for state jurisdictions that limit net operating loss utilization. For the year ended December 31, 2020, we recorded an income tax benefit of $79 thousand primarily attributable to current state income taxes.
We continue to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the future realization of all or some portion of these deferred tax assets. Our recent and forecast profitability are examples of positive evidence that we are assessing in determining the amount of the valuation allowance required. Changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions are recorded as current period income tax expense.
Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return. Differences between separate entity and consolidated tax returns are eliminated upon consolidation.
Segment Information
The Company defines operating segments to be components of the Company for which discrete financial information is evaluated regularly by the Company’s chief executive officer and chief financial officer to allocate resources and evaluate financial performance. This information is reviewed according to the legal organizational structure of the Company’s operations with products and services presented separately for the parent bank holding company and its wholly-owned subsidiary, LC Bank.
LendingClub Bank
The LC Bank operating segment represents the national bank legal entity and reflects post-Acquisition operating activities. This segment provides a full complement of financial products and solutions, including loans, leases and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to investors and manages relationships with deposit holders.
LendingClub Corporation (Parent Only)
The LendingClub Corporation (parent only) operating segment represents the holding company legal entity and predominately reflects the operations of the Company prior to the Acquisition. This activity includes, but is not limited to, the purchase and sale of loans and issuances of education and patient finance loans that were originated by issuing bank partners.
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)
Financial information for the segments is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub
Bank
|
|
LendingClub
Corporation
(Parent only)
|
|
Intercompany
Eliminations
|
|
Consolidated Total
|
|
Eleven Months Ended December 31,
|
|
Year Ended December 31,
|
|
Eleven Months Ended December 31,
|
|
Year Ended December 31,
|
|
2021
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2021
|
|
2020
|
|
2019
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplace revenue
|
$
|
462,821
|
|
|
$
|
115,759
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
|
$
|
—
|
|
|
$
|
578,580
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
Other non-interest income
|
94,953
|
|
|
16,718
|
|
|
13,442
|
|
|
13,831
|
|
|
(84,452)
|
|
|
27,219
|
|
|
13,442
|
|
|
13,831
|
|
Total non-interest income
|
557,774
|
|
|
132,477
|
|
|
258,756
|
|
|
660,566
|
|
|
(84,452)
|
|
|
605,799
|
|
|
258,756
|
|
|
660,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
210,739
|
|
|
82,093
|
|
|
209,694
|
|
|
345,345
|
|
|
—
|
|
|
292,832
|
|
|
209,694
|
|
|
345,345
|
|
Interest expense
|
(8,412)
|
|
|
(71,589)
|
|
|
(150,366)
|
|
|
(247,304)
|
|
|
—
|
|
|
(80,001)
|
|
|
(150,366)
|
|
|
(247,304)
|
|
Net interest income
|
202,327
|
|
|
10,504
|
|
|
59,328
|
|
|
98,041
|
|
|
—
|
|
|
212,831
|
|
|
59,328
|
|
|
98,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
760,101
|
|
|
142,981
|
|
|
318,084
|
|
|
758,607
|
|
|
(84,452)
|
|
|
818,630
|
|
|
318,084
|
|
|
758,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of (provision for) credit losses
|
(142,182)
|
|
|
3,382
|
|
|
(3,382)
|
|
|
—
|
|
|
—
|
|
|
(138,800)
|
|
|
(3,382)
|
|
|
—
|
|
Non-interest expense
|
(547,799)
|
|
|
(198,039)
|
|
|
(502,319)
|
|
|
(789,498)
|
|
|
84,452
|
|
|
(661,386)
|
|
|
(502,319)
|
|
|
(789,498)
|
|
Income (Loss) before income tax benefit (expense)
|
70,120
|
|
|
(51,676)
|
|
|
(187,617)
|
|
|
(30,891)
|
|
|
—
|
|
|
18,444
|
|
|
(187,617)
|
|
|
(30,891)
|
|
Income tax benefit (expense)
|
9,171
|
|
|
44,013
|
|
|
79
|
|
|
201
|
|
|
(53,048)
|
|
|
136
|
|
|
79
|
|
|
201
|
|
Consolidated net income (loss)
|
$
|
79,291
|
|
|
$
|
(7,663)
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,690)
|
|
|
$
|
(53,048)
|
|
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,690)
|
|
The Company integrated the Acquisition into its reportable segments in the first quarter of 2021. As the Company’s reportable segments are based on legal organizational structure and LC Bank was formed upon the Acquisition, an analysis of the Company’s results of operations and material trends for the year ended December 31, 2021 compared to the year ended December 31, 2020 is provided on a consolidated basis in “Results of Operations.”
Supervision and Regulatory Environment
We are regularly subject to claims, individual and class action lawsuits, lawsuits alleging regulatory violations. Further, we are subject to periodic exams, investigations, inquiries or requests, enforcement actions and other proceedings from federal and state regulatory agencies, including the federal banking regulators that directly regulate the Company and/or LC Bank. The number and significance of these claims, lawsuits, exams, investigations, inquiries, requests and proceedings have been increasing in part because our products and services have been increasing in scope and complexity and in part because we have become a bank holding company operating a national bank. Although historically the Company has generally resolved these matters in a manner that was not materially adverse to its financial results or business operations, no assurance can be given as to the timing, outcome or consequences of any of these matters in the future.
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)
Regulatory Actions Taken in Relation to COVID-19
Regulators and government officials at the federal government level and in states across the country have issued orders, passed laws or otherwise issued guidance in connection with COVID-19. Some of these orders and laws have placed restrictions on debt collection activity, all or certain types of communications with delinquent borrowers or others, required that borrowers be allowed to defer payments on outstanding debt, governed credit reporting and the use of credit reporting, and placed certain restrictions and requirements on operations in the workplace. We have taken steps to monitor regulatory developments relating to COVID-19 and to comply with orders and laws applicable to our business. Given the ongoing nature of the pandemic, it is possible that additional orders, laws, or regulatory guidance may still be issued. We are not able to predict the extent of the impact on our business from any regulatory activity relating to or resulting from COVID-19.
Federal Banking Regulator Supervision
Since our acquisition of Radius, we are subject to supervision, regulation, examination and enforcement by multiple federal banking regulatory bodies. Specifically, as a bank holding company, the Company is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the FRB. Further, as a national bank, LC Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the OCC. Accordingly, we have been and continue to invest in regulatory compliance and be subject to certain parameters, obligations and/or limitations set forth by the banking regulations and regulators with respect to the operation of our business.
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, penalties, or other monetary losses due to judgments, orders, or settlements, (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, (vi) be unable to execute on certain Company initiatives, or (vii) be required to obtain a license in such jurisdiction, which may have an adverse effect on our ability to operate and/or evolve our lending marketplace and other products and/or services; any of which may harm our business or financial results.
See “Part I – Item 1. Business – Regulation and Supervision,” “Part I – Item 1A. Risk Factors – Risks Related to Regulation, Supervision and Compliance,” and “Part I – Item 1A. Risk Factors – Risks Related to Operating Our Business” of this Annual Report for further discussion regarding our supervision and regulatory environment.
Capital Management
The prudent management of capital is fundamental to the successful achievement of our business initiatives. We actively manage capital through a process that continuously assesses and monitors the Company’s overall capital adequacy. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations.
The formation of LC Bank as a nationally chartered association and the organization of the Company as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and the FRB, including the requirement to maintain regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel III). As a U.S. Basel III standardized approach institution, we selected the one-time election to opt-out of the requirements to include all the components of accumulated other comprehensive income included in common stockholder’s equity. The minimum capital
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)
requirements under the U.S. Basel III capital framework are: a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. Additionally, a Capital Conservation Buffer (CCB) of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases, and certain discretionary bonus payments. In addition to these guidelines, the banking regulators may require a banking organization to maintain capital at levels higher than the minimum ratios prescribed under the U.S. Basel III capital framework. In this regard, and unless otherwise directed by the FRB and the OCC, we have made commitments for the Company and LC Bank (until February 2024) to maintain a CET1 risk-based capital ratio of 11.0%, a Tier 1 risk-based capital ratio above 11.0%, a total risk-based capital ratio above 13.0%, and a Tier 1 leverage ratio of 11.0%. See “Part I – Item 1. Business – Regulation and Supervision – Regulatory Capital Requirements and Prompt Corrective Action” and “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 20. Regulatory Requirements” of this Annual Report for additional information.
The following table summarizes LC Bank’s regulatory capital amounts and ratios (in millions):
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub Bank
|
|
Required Minimum plus Required CCB for
Non-Leverage Ratios
|
|
|
December 31, 2021
|
Amount
|
|
Ratio
|
|
|
CET1 capital (1)
|
$
|
523.7
|
|
|
16.7
|
%
|
|
7.0
|
%
|
|
|
Tier 1 capital
|
$
|
523.7
|
|
|
16.7
|
%
|
|
8.5
|
%
|
|
|
Total capital
|
$
|
563.7
|
|
|
18.0
|
%
|
|
10.5
|
%
|
|
|
Tier 1 leverage
|
$
|
523.7
|
|
|
14.3
|
%
|
|
4.0
|
%
|
|
|
Risk-weighted assets
|
$
|
3,130.4
|
|
|
N/A
|
|
N/A
|
|
|
Quarterly adjusted average assets
|
$
|
3,667.7
|
|
|
N/A
|
|
N/A
|
|
|
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
The following table presents the regulatory capital and ratios of the Company (in millions):
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub
|
|
Required Minimum plus Required CCB for
Non-Leverage Ratios
|
|
|
December 31, 2021
|
Amount
|
|
Ratio
|
|
|
CET1 capital (1)
|
$
|
710.0
|
|
|
21.3
|
%
|
|
7.0
|
%
|
|
|
Tier 1 capital
|
$
|
710.0
|
|
|
21.3
|
%
|
|
8.5
|
%
|
|
|
Total capital
|
$
|
767.9
|
|
|
23.0
|
%
|
|
10.5
|
%
|
|
|
Tier 1 leverage
|
$
|
710.0
|
|
|
16.5
|
%
|
|
4.0
|
%
|
|
|
Risk-weighted assets
|
$
|
3,333.2
|
|
|
N/A
|
|
N/A
|
|
|
Quarterly adjusted average assets
|
$
|
4,301.7
|
|
|
N/A
|
|
N/A
|
|
|
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
The higher risk-based capital ratios for the Company reflect generally lower risk-weights for assets held by LendingClub Corporation as compared with LC Bank.
In response to the COVID-19 pandemic, the FRB, OCC, and FDIC adopted a final rule related to the regulatory capital treatment of the allowance for credit losses under CECL. As permitted by the rule, the Company elected to
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)
delay the estimated impact of CECL on regulatory capital through 2021. As a result, a capital benefit of $35.5 million was included in the computation of the Company’s CET1 capital at December 31, 2021. Beginning on January 1, 2022, this benefit will be phased out over a three-year transition period at a rate of 25% each year through January 1, 2025.
Liquidity
We manage liquidity to meet our cash flow and collateral obligations in a timely manner at a reasonable cost. We must maintain operating liquidity to meet our expected daily and forecasted cash flow requirements, as well as contingent liquidity to meet unexpected funding requirements.
As our primary business at LC Bank involves taking deposits and making loans, a key role of liquidity management is to ensure that customers have timely access to funds from deposits and for loans. Liquidity management also involves maintaining sufficient liquidity to repay wholesale borrowings, pay operating expenses and support extraordinary funding requirements when necessary.
LendingClub Bank Liquidity
The primary sources of LC Bank short-term liquidity include cash, unencumbered AFS debt securities, and unused borrowing capacity with the Federal Home Loan Bank (FHLB). LC Bank also relies on our deposit base to generate liquidity over time. The primary uses of LC Bank liquidity include withdrawals and maturities of deposits; payment of interest on deposits; funding of loans and securities purchases; compensation and benefits expense; taxes; capital expenditures, including internally developed software, leasehold improvements and computer equipment; and costs associated with the continued development and support of our online lending marketplace platform.
Net capital expenditures were $34.4 million, or 4% of total net revenue, $31.1 million, or 10% of total net revenue and $50.7 million, or 7% of total net revenue, for the years ended December 31, 2021, 2020 and 2019, respectively. Capital expenditures in 2022 are expected to be approximately $50 million, primarily related to costs associated with the continued development and support of our online lending marketplace platform, including regulatory compliance costs.
As of December 31, 2021, cash and cash equivalents at LC Bank were $659.9 million and deposits were $3.2 billion. Outstanding PPPLF borrowings were $271.9 million at December 31, 2021 and are collateralized by PPP loans originated by the Company. In addition, LC Bank has available Federal Home Loan Bank of Des Moines secured borrowing capacity totaling $173.4 million. LC Bank also has secured borrowing capacity available under the FRB Discount Window totaling $75.2 million.
LendingClub Holding Company Liquidity
The primary source of liquidity at the holding company is $88.3 million in cash and cash equivalents as of December 31, 2021. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
Uses of cash at the holding company include the routine cash flow requirements as a bank holding company, such as interest and expenses (including those associated with our office leases), the needs of LC Bank for additional equity and, as required, its need for debt financing and support for extraordinary funding requirements when necessary.
Factors Impacting Liquidity
The Company’s liquidity could be adversely impacted by deteriorating financial and market conditions, the inability or unwillingness of a creditor to provide funding, an idiosyncratic event (e.g., a major loss, causing a perceived or
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)
actual deterioration in its financial condition), an adverse systemic event (e.g., default or bankruptcy of a significant capital markets participant), or others.
We believe, based on our projections, that our cash on hand, AFS securities, available funds, and cash flow from operations is sufficient to meet our liquidity needs for the next twelve months, as well as beyond the next twelve months. See “Item 8. Financial Statements and Supplementary Data – Consolidated Statements of Cash Flows” for additional detail regarding our cash flows.
Market Risk
Market risk represents the risk of potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices. The primary market risk to which we are exposed is interest rate risk. Interest rate risk arises from financial instruments including loans, securities and borrowings, all entered into for purposes other than trading.
Our net interest income is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, and the level and composition of deposits and liabilities.
Interest Rate Sensitivity
LendingClub Bank
Loans HFI at LC Bank are funded primarily through our deposit base, and the majority of loans on LC Bank’s balance sheet, at any point in time, are retained in the HFI portfolio and accounted for at amortized cost. As a result, the primary component of interest rate risk on our financial instruments at LC Bank arises from the impact of fluctuations in loan and deposit rates on our net interest income. Therefore, we measure this sensitivity by assessing the impact of hypothetical changes in interest rates on our net interest income results.
The following table presents the change in projected net interest income for the next twelve months due to a hypothetical instantaneous parallel change in interest rates relative to current rates as of December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 basis point increase
|
(0.8)
|
%
|
|
|
100 basis point decrease
|
(0.2)
|
%
|
|
|
The impact of these hypothetical interest rate changes are not significant to LC Bank’s net interest income. Non-maturity deposit rates at December 31, 2021 are significantly below the 100 basis point hypothetical interest rate reduction which results in an insignificant negative impact to net interest income.
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 the maturities of loans and leases held for investment as of December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in
1 Year or Less
|
|
Due After
1 Year Through
5 Years
|
|
Due After
5 Years
Through
15 Years
|
|
December 31, 2021
|
|
|
Unsecured personal
|
$
|
—
|
|
|
$
|
1,801,803
|
|
|
$
|
2,775
|
|
|
$
|
1,804,578
|
|
|
|
Residential mortgages
|
1,542
|
|
|
2,287
|
|
|
147,533
|
|
|
151,362
|
|
|
|
Secured consumer
|
10
|
|
|
32,630
|
|
|
33,336
|
|
|
65,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans held for investment
|
1,552
|
|
|
1,836,720
|
|
|
183,644
|
|
|
2,021,916
|
|
|
|
Equipment finance
|
10,791
|
|
|
100,970
|
|
|
37,394
|
|
|
149,155
|
|
|
|
Commercial real estate
|
18,949
|
|
|
68,271
|
|
|
223,179
|
|
|
310,399
|
|
|
|
Commercial and industrial
|
35,766
|
|
|
266,889
|
|
|
115,001
|
|
|
417,656
|
|
|
|
Total commercial loans and leases held for investment
|
65,506
|
|
|
436,130
|
|
|
375,574
|
|
|
877,210
|
|
|
|
Total loans and leases held for investment
|
$
|
67,058
|
|
|
$
|
2,272,850
|
|
|
$
|
559,218
|
|
|
$
|
2,899,126
|
|
|
|
Loans and leases due after one year at fixed interest rates
|
$
|
—
|
|
|
$
|
2,219,619
|
|
|
$
|
202,409
|
|
|
$
|
2,422,028
|
|
|
|
Loans and leases due after one year at variable interest rates
|
$
|
—
|
|
|
$
|
53,231
|
|
|
$
|
356,809
|
|
|
$
|
410,040
|
|
|
|
For the weighted-average yields on the Company’s AFS securities portfolio, see “Notes to Consolidated Financial Statements – Note 5. Securities Available for Sale.”
LendingClub Holding Company
At the holding company level, we continue to measure interest rate sensitivity by evaluating the change in fair value of certain assets and liabilities due to a hypothetical change in interest rates. Principal payments on our loans HFI continue to reduce the outstanding balance of this portfolio, and, as a result, the fair value impact from changes in interest rates continues to diminish.
Contingencies
For a comprehensive discussion of contingencies as of December 31, 2021, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 19. Commitments and Contingencies.”
Critical Accounting Estimates
Our significant accounting policies are described in “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies.” We consider certain of these policies to be critical accounting policies as they require significant judgments, assumptions and estimates which we believe are critical in understanding and evaluating our reported financial results. These judgments, estimates and assumptions are inherently subjective and actual results may differ from these estimates and assumptions, and the differences could be material.
Allowance for Credit Losses
We reserve for expected credit losses on our loan and lease portfolio through the ALLL and for expected credit losses in our unfunded lending commitments through “Other liabilities.” Changes in the ACL are reflected on the Income Statement through “Provision for credit losses.” Changes in the credit risk profile of our loans and leases result in changes in “Provision for credit losses” with a resulting change, net of charge-offs and recoveries, in the ACL balance.
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 ACL represents our estimate of expected lifetime credit losses over the contractual life of the loan and lease portfolios and on the unfunded lending commitments. Our determination of the ACL is based on periodic evaluation of the loan and lease portfolios and unfunded lending commitments that are not unconditionally cancellable considering a number of relevant underlying factors, including key assumptions and evaluation of quantitative and qualitative information. Estimates of expected future loan and lease losses are determined by using statistical models and management’s judgement. The models are designed to forecast probability and timing of default, exposure at default and loss rate and recovery by correlating certain macroeconomic forecast data to historical experience. The models are generally applied at the portfolio level to pools of loans with similar risk characteristics. The macroeconomic data used in the models is based on forecast variables for the reasonable and supportable period of two years. Beyond this forecast period the models gradually revert to long-term historical loss conditions over a one-year period. Expected losses are estimated through contractual maturity, giving appropriate consideration to estimated prepayments unless the borrower has a right to renew that is not cancellable or it is reasonably expected that the loan will be modified as a TDR.
A qualitative allowance which incorporates management’s judgement is also included in the estimation of expected future loan and lease losses, including qualitative adjustments in circumstances where the model output is inconsistent with management’s expectations with respect to expected credit losses. This allowance is used to adjust for limitations in modeled results related to the current economic conditions and capture risks in the portfolio such as considerations with respect to the impact of current economic events, the outcomes of which are uncertain. These events may include, but are not limited to, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical areas and industries in which the Company conducts business.
Loans and leases that do not share common risk characteristics and significant loans that are considered collateral-dependent are individually evaluated. For these loans, the ALLL is determined through review of data specific to the borrower and related collateral, if any. For TDRs, default expectations and estimated prepayment speeds that are specific to each of the restructured loan populations are incorporated in the determination of the ALLL. The evaluation of quantitative and qualitative information is performed through assessments of groups of assets that share similar risk characteristics and certain individual loans and leases that do not share similar risk characteristics with the collective group. Loans are grouped generally by product type and significant loan portfolios are assessed for credit losses using statistical models. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to change, sometimes materially and rapidly.
The methodology used to determine an estimate for the reserve for unfunded commitments is similar to that used to determine the funded component of the ALLL and is measured over the period there is a contractual obligation to extend credit that is not unconditionally cancellable. The reserve for unfunded commitments is adjusted for factors specific to binding commitments, including the probability of funding and exposure at default.
Valuation of Business Combination
Assets acquired and liabilities assumed as part of the Acquisition are recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, loans (including PCD loans) and liabilities acquired based on DCF analysis or other valuation techniques requires management to make estimates that are highly subjective in nature based on available information. The fair value of acquired loans from the Acquisition was based on a DCF methodology using contractual cash flows adjusted for key cash flow assumptions such as prepayment rate, default rate, loss severity rate, discount rate and market pricing. For additional information, see “Notes to Consolidated Financial Statements – Note 2. Business Acquisition.”
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
For a comprehensive discussion regarding quantitative and qualitative disclosures about market risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk.”
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of LendingClub Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of LendingClub Corporation and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 11, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
1) Loans acquired in the Radius Bank acquisition – Refer to “Note 2. Business Acquisition” to the consolidated financial statements
Critical Audit Matter Description
The Company completed the acquisition of Radius Bancorp, Inc. (Radius) on February 1, 2021. Total assets and liabilities acquired were approximately $2.7 billion and $2.5 billion respectively. The acquisition date fair value of the acquired loans (including Purchased Credit Deteriorated Assets (PCD) loans) was approximately $1.6 billion. These PCD assets are acquired financial assets (or groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer’s assessment.
The fair value of acquired loans portfolio was based on a discounted cash flow methodology using contractual cash flows adjusted for key cash flow assumptions such as prepayment rate, default rate, loss severity rate and discount rate as well as market loan sale data.
The assessment of the fair value estimates encompassed the evaluation of the fair value methodologies for acquired loans, including the identification of PCD loans and the methodologies used to estimate their key assumptions.
Given the significance of the estimates and the subjective nature of the judgment applied by management, auditing the estimated fair values involved a high degree of auditor judgment and required specialized knowledge and significant effort, including the need to involve valuation specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the assessment of the fair value estimates of the acquired loans included the following, among others:
◦We evaluated the reasonableness of valuation techniques utilized by the Company and assessed if the techniques are appropriate in relation to the Company’s business, industry and environment.
◦We tested the effectiveness of internal controls over acquisition initial measurement, valuation assumptions, inputs and methods utilized by the Company.
◦We evaluated the Company’s process to develop the fair value estimates by testing certain sources of data and key assumptions and considered the accuracy and completeness of such data and assumptions.
◦We involved valuation specialists with industry knowledge and experience who assisted in:
•Reviewing the Company’s methodology to develop the fair value estimates for compliance with U.S. generally accepted accounting principles.
•Assessing reasonableness of the valuation assumptions used in the fair value analysis and whether the valuation assumptions were consistent with what market participants would use in pricing the acquired loans.
•Performing independent valuation for a selection of acquired loans.
•Evaluating whether the fair value model used was appropriate considering the circumstances and valuation premise identified (e.g., the assumptions, methods, and circumstances in aggregate form an appropriate model).
◦We tested the inputs into the fair value estimates including the reasonableness of the identification of PCD loans.
2) Allowance for loans and lease losses – Consumer Loans – Refer to “Note 6. Loans and Leases Held for Investment, Net of Allowance for Loan and Lease Losses,” to the consolidated financial statements
Critical Audit Matter Description
The allowance for credit losses (ACL) on consumer loans represents the Company’s estimate of expected lifetime credit losses over the contractual life of the loan. The determination of the ACL is based on periodic evaluation of the consumer loan portfolio considering a number of underlying factors, including key assumptions and evaluation of quantitative and qualitative information. Estimates of expected future loan losses are determined using statistical models and management’s judgement.
Expected credit losses are statistically modeled using a discounted cash flow approach and known and estimated data such as current probability and timing of default, loss rate and recovery exposure at default, timing and amount of estimated prepayments, and relevant risk characteristics to estimate the shortfall in contractual cash flows for each loan pool over the remaining life of the pools.
Qualitative adjustments to the modeled estimate of expected credit losses are also considered to address certain identified elements that are not directly captured by the statistically modeled expected credit loss.
We identified the allowance for loan losses relating to consumer loans as a critical audit matter given the subjective nature of estimating the losses, auditing the balance involved a high degree of auditor judgment and an increased extent of effort including the need to involve our credit specialists to evaluate the reasonableness of qualitative assumptions, management’s models and interpretation of results.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the models and assumptions used by management to estimate the allowance for loan losses included the following, among others:
◦We tested the effectiveness of the controls over the determination of the allowance for loan losses including those related to the models and significant management assumptions.
◦We evaluated the reasonableness of aggregation of the current loan data and historical loan data established by the Company and its appropriateness in supporting the Company’s estimate.
◦We assessed the reasonableness of qualitative adjustments considered based on market conditions and loan portfolio and significant assumptions in context of applicable financial reporting framework.
◦We evaluated the appropriateness of the Company’s accounting policies and methodologies involved in the application of the applicable accounting standards.
◦We involved an internal credit specialist to evaluate the reasonableness of significant assumptions and methods as utilized by the Company in their estimation for loan losses, including key assumptions, statistical models, and judgments.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
February 11, 2022
We have served as the Company’s auditor since 2013.
LENDINGCLUB CORPORATION
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Assets
|
|
|
|
Cash and due from banks
|
$
|
35,670
|
|
|
$
|
5,197
|
|
Interest-bearing deposits in banks
|
651,456
|
|
|
519,766
|
|
Total cash and cash equivalents
|
687,126
|
|
|
524,963
|
|
Restricted cash (1)
|
76,460
|
|
|
103,522
|
|
Securities available for sale at fair value ($256,170 and $159,164 at amortized cost, respectively)
|
263,530
|
|
|
142,226
|
|
Loans held for sale (includes $142,370 and $121,902 at fair value, respectively) (1)
|
391,248
|
|
|
121,902
|
|
Loans and leases held for investment
|
2,899,126
|
|
|
—
|
|
Allowance for loan and lease losses
|
(144,389)
|
|
|
—
|
|
Loans and leases held for investment, net
|
2,754,737
|
|
|
—
|
|
Retail and certificate loans held for investment at fair value (1)
|
229,719
|
|
|
636,686
|
|
Other loans held for investment at fair value (1)
|
21,240
|
|
|
49,954
|
|
Property, equipment and software, net
|
97,996
|
|
|
96,641
|
|
Goodwill
|
75,717
|
|
|
—
|
|
Other assets (1)
|
302,546
|
|
|
187,399
|
|
Total assets
|
$
|
4,900,319
|
|
|
$
|
1,863,293
|
|
Liabilities and Equity
|
|
|
|
Deposits:
|
|
|
|
Interest-bearing
|
$
|
2,919,203
|
|
|
$
|
—
|
|
Noninterest-bearing
|
216,585
|
|
|
—
|
|
Total deposits
|
3,135,788
|
|
|
—
|
|
Short-term borrowings
|
27,780
|
|
|
104,989
|
|
Advances from Paycheck Protection Program Liquidity Facility (PPPLF)
|
271,933
|
|
|
—
|
|
Retail notes, certificates and secured borrowings at fair value (1)
|
229,719
|
|
|
636,774
|
|
Payable on Structured Program borrowings (1)
|
65,451
|
|
|
152,808
|
|
Other long-term debt
|
15,455
|
|
|
—
|
|
Other liabilities (1)
|
303,951
|
|
|
244,551
|
|
Total liabilities
|
4,050,077
|
|
|
1,139,122
|
|
Equity
|
|
|
|
Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 0 and 43,000 shares issued and outstanding, respectively
|
—
|
|
|
—
|
|
Common stock, $0.01 par value; 180,000,000 shares authorized; 101,043,924 and 88,149,510 shares issued and outstanding, respectively
|
1,010
|
|
|
881
|
|
Additional paid-in capital
|
1,609,820
|
|
|
1,508,020
|
|
Accumulated deficit
|
(767,634)
|
|
|
(786,214)
|
|
Accumulated other comprehensive income
|
7,046
|
|
|
1,484
|
|
|
|
|
|
|
|
|
|
Total equity
|
850,242
|
|
|
724,171
|
|
Total liabilities and equity
|
$
|
4,900,319
|
|
|
$
|
1,863,293
|
|
(1) Includes amounts in variable interest entities (VIEs) presented separately in the table below.
LENDINGCLUB CORPORATION
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
The following table presents the assets and liabilities of consolidated VIEs, which are included on the Consolidated Balance Sheets (Balance Sheet) 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.
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Assets of consolidated VIEs, included in total assets above
|
|
|
|
Restricted cash
|
$
|
13,462
|
|
|
$
|
15,983
|
|
Loans held for sale at fair value
|
41,734
|
|
|
98,190
|
|
Retail and certificate loans held for investment at fair value
|
10,281
|
|
|
52,620
|
|
Other loans held for investment at fair value
|
20,929
|
|
|
50,102
|
|
Other assets
|
584
|
|
|
1,270
|
|
Total assets of consolidated VIEs
|
$
|
86,990
|
|
|
$
|
218,165
|
|
Liabilities of consolidated VIEs, included in total liabilities above
|
|
|
|
Retail notes, certificates and secured borrowings at fair value
|
$
|
10,281
|
|
|
$
|
52,620
|
|
Payable on Structured Program borrowings
|
65,451
|
|
|
152,808
|
|
Other liabilities
|
467
|
|
|
729
|
|
Total liabilities of consolidated VIEs
|
$
|
76,199
|
|
|
$
|
206,157
|
|
See Notes to Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Non-interest income (1):
|
|
|
|
|
|
Marketplace revenue
|
$
|
578,580
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
Other non-interest income
|
27,219
|
|
|
13,442
|
|
|
13,831
|
|
Total non-interest income
|
$
|
605,799
|
|
|
$
|
258,756
|
|
|
$
|
660,566
|
|
|
|
|
|
|
|
Interest income (1):
|
|
|
|
|
|
Interest on loans held for sale
|
29,540
|
|
|
72,876
|
|
|
109,493
|
|
Interest and fees on loans and leases held for investment
|
188,977
|
|
|
—
|
|
|
—
|
|
Interest on retail and certificate loans held for investment at fair value
|
57,684
|
|
|
115,952
|
|
|
214,395
|
|
Interest on other loans held for investment at fair value
|
4,436
|
|
|
7,688
|
|
|
1,104
|
|
Interest on securities available for sale
|
11,025
|
|
|
12,125
|
|
|
14,351
|
|
Other interest income
|
1,170
|
|
|
1,053
|
|
|
6,002
|
|
Total interest income
|
292,832
|
|
|
209,694
|
|
|
345,345
|
|
|
|
|
|
|
|
Interest expense (1):
|
|
|
|
|
|
Interest on deposits
|
7,228
|
|
|
—
|
|
|
—
|
|
Interest on short-term borrowings
|
3,677
|
|
|
17,837
|
|
|
26,826
|
|
Interest on retail notes, certificates and secured borrowings
|
57,684
|
|
|
115,952
|
|
|
214,395
|
|
Interest on Structured Program borrowings
|
9,638
|
|
|
16,204
|
|
|
5,070
|
|
Interest on other long-term debt
|
1,774
|
|
|
373
|
|
|
1,013
|
|
Total interest expense
|
80,001
|
|
|
150,366
|
|
|
247,304
|
|
|
|
|
|
|
|
Net interest income (1)
|
212,831
|
|
|
59,328
|
|
|
98,041
|
|
|
|
|
|
|
|
Total net revenue (1)
|
818,630
|
|
|
318,084
|
|
|
758,607
|
|
|
|
|
|
|
|
Provision for credit losses (1)
|
138,800
|
|
|
3,382
|
|
|
—
|
|
|
|
|
|
|
|
Non-interest expense (1):
|
|
|
|
|
|
Compensation and benefits
|
288,390
|
|
|
252,517
|
|
|
333,628
|
|
Marketing
|
156,142
|
|
|
51,518
|
|
|
235,337
|
|
Equipment and software
|
39,490
|
|
|
26,842
|
|
|
24,927
|
|
Occupancy
|
24,249
|
|
|
27,870
|
|
|
29,367
|
|
Depreciation and amortization
|
44,285
|
|
|
54,030
|
|
|
59,152
|
|
Professional services
|
47,572
|
|
|
41,780
|
|
|
43,010
|
|
Other non-interest expense
|
61,258
|
|
|
47,762
|
|
|
64,077
|
|
Total non-interest expense
|
661,386
|
|
|
502,319
|
|
|
789,498
|
|
|
|
|
|
|
|
Income (Loss) before income tax benefit
|
18,444
|
|
|
(187,617)
|
|
|
(30,891)
|
|
Income tax benefit
|
136
|
|
|
79
|
|
|
201
|
|
Consolidated net income (loss)
|
18,580
|
|
|
(187,538)
|
|
|
(30,690)
|
|
Less: Income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
55
|
|
LendingClub net income (loss)
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,745)
|
|
LENDINGCLUB CORPORATION
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Net income (loss) per share: (2)
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS – common stockholders
|
$
|
0.19
|
|
|
$
|
(2.63)
|
|
|
$
|
(0.35)
|
|
Diluted EPS – common stockholders
|
$
|
0.18
|
|
|
$
|
(2.63)
|
|
|
$
|
(0.35)
|
|
Weighted-average common shares – Basic
|
97,486,754
|
|
|
77,934,302
|
|
|
87,278,596
|
|
Weighted-average common shares – Diluted
|
102,147,353
|
|
|
77,934,302
|
|
|
87,278,596
|
|
|
|
|
|
|
|
Basic EPS – preferred stockholders
|
$
|
0.19
|
|
|
$
|
1.39
|
|
|
$
|
0.00
|
|
Diluted EPS – preferred stockholders
|
$
|
0.00
|
|
|
$
|
1.39
|
|
|
$
|
0.00
|
|
Weighted-average common shares, as converted – Basic
|
653,118
|
|
|
12,505,393
|
|
|
—
|
|
Weighted-average common shares, as converted – Diluted
|
—
|
|
|
12,505,393
|
|
|
—
|
|
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
(2) See “Notes to Consolidated Financial Statements – Note 4. Net Income (Loss) Per Share” for additional information.
See Notes to Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
LendingClub net income (loss)
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,745)
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
Net unrealized gain (loss) on securities available for sale
|
5,562
|
|
|
2,044
|
|
|
(526)
|
|
Other comprehensive income (loss), before tax
|
5,562
|
|
|
2,044
|
|
|
(526)
|
|
Income tax effect
|
—
|
|
|
(5)
|
|
|
216
|
|
Other comprehensive income (loss), net of tax
|
5,562
|
|
|
2,049
|
|
|
(742)
|
|
Less: Other comprehensive loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(20)
|
|
LendingClub other comprehensive income (loss), net of tax
|
5,562
|
|
|
2,049
|
|
|
(722)
|
|
LendingClub comprehensive income (loss)
|
24,142
|
|
|
(185,489)
|
|
|
(31,467)
|
|
Comprehensive loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(20)
|
|
Total comprehensive income (loss)
|
$
|
24,142
|
|
|
$
|
(185,489)
|
|
|
$
|
(31,487)
|
|
See Notes to Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Consolidated Statements of Changes in Stockholders’ Equity
(In Thousands, Except Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub Corporation Stockholders
|
|
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
LendingClub Stockholders’
Equity
|
|
Noncontrolling Interests
|
|
Total Equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
79,944
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
79,944
|
|
|
—
|
|
|
79,944
|
|
Net issuances under equity incentive plans, net of tax (1)(2)
|
—
|
|
|
—
|
|
|
2,665,309
|
|
|
26
|
|
|
(19,864)
|
|
|
4,851
|
|
|
(65)
|
|
|
—
|
|
|
—
|
|
|
(19,903)
|
|
|
—
|
|
|
(19,903)
|
|
ESPP purchase shares
|
—
|
|
|
—
|
|
|
163,970
|
|
|
2
|
|
|
2,410
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,412
|
|
|
—
|
|
|
2,412
|
|
Net unrealized loss on securities available for sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(722)
|
|
|
—
|
|
|
(722)
|
|
|
(20)
|
|
|
(742)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid and return of capital to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,815)
|
|
|
(1,815)
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,745)
|
|
|
(30,745)
|
|
|
55
|
|
|
(30,690)
|
|
Balance at
December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
88,757,406
|
|
|
$
|
892
|
|
|
$
|
1,467,882
|
|
|
461,391
|
|
|
$
|
(19,550)
|
|
|
$
|
(565)
|
|
|
$
|
(548,472)
|
|
|
$
|
900,187
|
|
|
$
|
—
|
|
|
$
|
900,187
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,626
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,626
|
|
|
—
|
|
|
66,626
|
|
Net issuances under equity incentive plans, net of tax (2)
|
—
|
|
|
—
|
|
|
3,692,185
|
|
|
36
|
|
|
(6,914)
|
|
|
5,658
|
|
|
(71)
|
|
|
—
|
|
|
—
|
|
|
(6,949)
|
|
|
—
|
|
|
(6,949)
|
|
Net issuances of preferred stock in exchange for common stock (3)
|
43,000
|
|
|
—
|
|
|
(4,300,081)
|
|
|
(43)
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50,204)
|
|
|
(50,204)
|
|
|
—
|
|
|
(50,204)
|
|
Retirement of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
(19,617)
|
|
|
(467,049)
|
|
|
19,621
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net unrealized gain on securities available for sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,049
|
|
|
—
|
|
|
2,049
|
|
|
—
|
|
|
2,049
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(187,538)
|
|
|
(187,538)
|
|
|
—
|
|
|
(187,538)
|
|
Balance at
December 31, 2020
|
43,000
|
|
|
$
|
—
|
|
|
88,149,510
|
|
|
$
|
881
|
|
|
$
|
1,508,020
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
1,484
|
|
|
$
|
(786,214)
|
|
|
$
|
724,171
|
|
|
$
|
—
|
|
|
$
|
724,171
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69,762
|
|
|
—
|
|
|
69,762
|
|
Net issuances under equity incentive plans, net of tax (2)
|
—
|
|
|
—
|
|
|
4,833,300
|
|
|
48
|
|
|
(9,343)
|
|
|
4,251
|
|
|
(92)
|
|
|
—
|
|
|
—
|
|
|
(9,387)
|
|
|
—
|
|
|
(9,387)
|
|
Net issuances of stock related to acquisition (4)
|
—
|
|
|
—
|
|
|
3,761,114
|
|
|
38
|
|
|
41,424
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,462
|
|
|
—
|
|
|
41,462
|
|
Exchange of preferred stock for common stock
|
(43,000)
|
|
|
—
|
|
|
4,300,000
|
|
|
43
|
|
|
(43)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Retirement of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,251)
|
|
|
92
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
—
|
|
|
92
|
|
Net unrealized gain on securities available for sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,562
|
|
|
—
|
|
|
5,562
|
|
|
—
|
|
|
5,562
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,580
|
|
|
18,580
|
|
|
—
|
|
|
18,580
|
|
Balance at
December 31, 2021
|
—
|
|
|
$
|
—
|
|
|
101,043,924
|
|
|
$
|
1,010
|
|
|
$
|
1,609,820
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
7,046
|
|
|
$
|
(767,634)
|
|
|
$
|
850,242
|
|
|
$
|
—
|
|
|
$
|
850,242
|
|
(1) 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.
(2) Includes 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.
(3) Includes a payment of $50.2 million that was recorded as a deemed dividend within accumulated deficit related to the beneficial conversion feature of the Series A Preferred Stock issued on March 20, 2020.
(4) Stock issued as part of the consideration paid related to the Acquisition. See “Notes to Consolidated Financial Statements – Note 2. Business Acquisition.”
See Notes to Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Consolidated Statements of Cash Flows
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Cash Flows from Operating Activities(1):
|
|
|
|
|
|
Consolidated net income (loss)
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,690)
|
|
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used for) operating activities:
|
|
|
|
|
|
Net fair value adjustments
|
(3,986)
|
|
|
105,002
|
|
|
144,273
|
|
Provision for credit losses
|
138,800
|
|
|
3,382
|
|
|
—
|
|
Change in fair value of loan servicing assets
|
54,108
|
|
|
58,730
|
|
|
58,172
|
|
Stock-based compensation, net
|
66,759
|
|
|
61,533
|
|
|
73,639
|
|
Depreciation, amortization, and accretion
|
5,575
|
|
|
56,526
|
|
|
62,151
|
|
Gain on sales of loans
|
(70,116)
|
|
|
(30,812)
|
|
|
(67,716)
|
|
Other, net
|
8,654
|
|
|
12,506
|
|
|
5,829
|
|
Net change to loans held for sale
|
4,856
|
|
|
435,245
|
|
|
(440,192)
|
|
Net change in operating assets and liabilities:
|
|
|
|
|
|
Other assets
|
(9,733)
|
|
|
34,483
|
|
|
1,499
|
|
Other liabilities
|
26,372
|
|
|
(131,026)
|
|
|
(77,609)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
239,869
|
|
|
418,031
|
|
|
(270,644)
|
|
Cash Flows from Investing Activities(1):
|
|
|
|
|
|
Acquisition of company
|
(145,344)
|
|
|
—
|
|
|
—
|
|
Cash received from acquisition
|
668,236
|
|
|
—
|
|
|
—
|
|
Net change in loans and leases
|
(1,517,132)
|
|
|
7,151
|
|
|
9,150
|
|
Net decrease in retail and certificate loans
|
437,870
|
|
|
411,428
|
|
|
602,678
|
|
Purchases of securities available for sale
|
(100,474)
|
|
|
(53,736)
|
|
|
(144,481)
|
|
Proceeds from sales of securities available for sale
|
106,192
|
|
|
6,217
|
|
|
12,548
|
|
Proceeds from maturities and paydowns of securities available for sale
|
143,402
|
|
|
225,458
|
|
|
223,980
|
|
Purchases of property, equipment and software, net
|
(34,413)
|
|
|
(31,147)
|
|
|
(50,668)
|
|
Other investing activities
|
(12,747)
|
|
|
400
|
|
|
561
|
|
|
|
|
|
|
|
Net cash (used for) provided by investing activities
|
(454,410)
|
|
|
565,771
|
|
|
653,768
|
|
Cash Flows from Financing Activities(1):
|
|
|
|
|
|
Net change in demand deposits and savings accounts
|
1,126,659
|
|
|
—
|
|
|
—
|
|
Proceeds from PPPLF
|
325,194
|
|
|
—
|
|
|
—
|
|
Repayment on PPPLF
|
(474,223)
|
|
|
—
|
|
|
—
|
|
Proceeds from issuance of retail notes and certificates
|
—
|
|
|
314,995
|
|
|
632,962
|
|
Principal payments on retail notes and certificates
|
(438,032)
|
|
|
(729,405)
|
|
|
(1,259,203)
|
|
Principal payments on Structured Program borrowings
|
(90,187)
|
|
|
(73,710)
|
|
|
(58,025)
|
|
Proceeds from issuance of notes and certificates from Structured Program transactions
|
—
|
|
|
186,190
|
|
|
42,500
|
|
Principal payments on short-term borrowings
|
(87,640)
|
|
|
(1,662,199)
|
|
|
(2,801,824)
|
|
Principal payments on long-term debt
|
(2,834)
|
|
|
(14,419)
|
|
|
(13,651)
|
|
Proceeds from short-term borrowings
|
—
|
|
|
1,195,261
|
|
|
2,943,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividend paid to preferred stockholder
|
—
|
|
|
(50,204)
|
|
|
—
|
|
Other financing activities
|
(9,295)
|
|
|
(8,948)
|
|
|
(26,767)
|
|
Net cash provided by (used for) financing activities
|
349,642
|
|
|
(842,439)
|
|
|
(540,060)
|
|
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
|
135,101
|
|
|
141,363
|
|
|
(156,936)
|
|
Cash, Cash Equivalents and Restricted Cash, Beginning of Period
|
628,485
|
|
|
487,122
|
|
|
644,058
|
|
Cash, Cash Equivalents and Restricted Cash, End of Period
|
$
|
763,586
|
|
|
$
|
628,485
|
|
|
$
|
487,122
|
|
|
|
|
|
|
|
LENDINGCLUB CORPORATION
Consolidated Statements of Cash Flows
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
Cash paid for interest
|
$
|
77,334
|
|
|
$
|
143,840
|
|
|
$
|
254,585
|
|
Cash paid for operating leases included in the measurement of lease liabilities
|
$
|
20,546
|
|
|
$
|
16,679
|
|
|
$
|
16,816
|
|
Non-cash investing activity(2):
|
|
|
|
|
|
Loans and leases held for investment transferred to loans held for sale
|
$
|
402,960
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net securities retained from Structured Program transactions
|
$
|
—
|
|
|
$
|
43,458
|
|
|
$
|
197,267
|
|
Accruals for property, equipment and software
|
$
|
—
|
|
|
$
|
686
|
|
|
$
|
1,745
|
|
Non-cash investing and financing activity:
|
|
|
|
|
|
Transfer of whole loans to redeem certificates
|
$
|
—
|
|
|
$
|
17,414
|
|
|
$
|
122,330
|
|
Net issuances of stock related to acquisition
|
$
|
41,462
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash financing activity:
|
|
|
|
|
|
Exchange of common stock for preferred stock
|
$
|
—
|
|
|
$
|
207,244
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derecognition of payable on Structured Program borrowings
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
200,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
(2) See “Notes to Consolidated Financial Statements – Note 8. Fair Value of Assets and Liabilities” for other non-cash investing activity.
The following presents cash, cash equivalents and restricted cash by category within the Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
Cash and cash equivalents
|
$
|
687,126
|
|
|
$
|
524,963
|
|
Restricted cash
|
76,460
|
|
|
103,522
|
|
Total cash, cash equivalents and restricted cash
|
$
|
763,586
|
|
|
$
|
628,485
|
|
See Notes to Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
1. Summary of Significant Accounting Policies
Basis of Presentation
On February 1, 2021, LendingClub Corporation (LendingClub) completed the acquisition of Radius Bancorp, Inc. (Radius), whereby LendingClub became a bank holding company and formed LendingClub Bank, National Association (LC Bank) as its wholly-owned subsidiary. The Company operates the vast majority of its business through LC Bank, as a lender and originator of loans and as a regulated bank in the United States.
All intercompany balances and transactions have been eliminated. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) 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.
The acquisition of Radius (the Acquisition) significantly changed the presentation of the Company’s financial statements, which are now structured according to the presentation requirements for bank holding companies under Article 9 of the United States Securities and Exchange Commission’s (SEC) Regulation S-X. Prior period amounts in the financial statements and related footnotes have been reclassified to conform to the current period presentation. See “Note 2. Business Acquisition” which illustrates the reclassification adjustments made to align with the current presentation.
Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents have original maturities of three months or less and include cash on hand, cash items in transit, and amounts due from or held with other depository institutions, primarily with the Federal Reserve Bank (FRB).
Restricted Cash
Cash items held with other depository institutions in which the ability to withdraw funds is restricted by contractual provisions is classified as restricted cash. Such amounts include: (i) cash pledged as security related to LendingClub’s issuing bank activities and transactions with certain investors; and (ii) cash received from borrowers on loans owned and not yet distributed to investors.
Securities
Debt securities purchased and asset-backed securities retained from the sale of loans are classified as available for sale (AFS) securities. AFS securities represent investment securities with readily determinable fair values that the Company: (i) does not hold for trading purposes and (ii) does not have the positive intent and ability to hold to maturity. AFS securities are measured at fair value, with unrealized gains and losses reported in “Accumulated other comprehensive income” within the equity section of the Balance Sheet. The amount reported in “Accumulated other comprehensive income” is net of any valuation allowance and applicable income taxes.
Management evaluates whether debt AFS securities with unrealized losses are impaired on a quarterly basis. For any security that has declined in fair value below its amortized cost basis, the Company recognizes an impairment loss in current period earnings if management has the intent to sell the security or if it is more likely than not it will
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
be required to sell the security before recovery of its amortized cost basis. The assessment of impairment also considers whether the decline in fair value below the security’s amortized cost basis is attributable to credit-related factors. If credit-related factors exist, credit-related impairment has occurred regardless of the Company’s intent to hold the security until it recovers. The credit-related portion of impairment is recognized as provision for credit loss expense in earnings with a corresponding valuation allowance for AFS securities on the Balance Sheet, to the extent the allowance does not reduce the value of the security below its fair value.
AFS securities where the expected cash flows are significantly lower than that of the contractual future cash flows at the time of acquisition are considered to be purchased with credit deterioration (PCD). The discounted differential in expected and contractual cash flows is included with the purchase price of the asset to determine amortized cost of the security with an equal and offsetting valuation allowance for credit losses.
Equity securities that do not have readily determinable fair values are generally recorded at cost adjusted for impairment, if any. These securities include FRB stock and Federal Home Loan Bank stock and are reported as “Nonmarketable equity investments” in “Other assets” on the Balance Sheet.
Loans and Leases
The Company initially classifies loans and leases as either held for sale (HFS) or held for investment (HFI) based on management’s assessment of its intent and ability to hold the loans for the foreseeable future or until maturity. Management’s intent and ability with respect to certain loans may change from time to time. In order to reclassify loans to HFS, management must have the intent to sell the loans and the ability to reasonably identify the specific loans to be sold.
HFI loans, with the exception of HFI loans accounted for under the fair value option, are measured at historical cost and reported at their outstanding principal balances net of any charge-offs, unamortized deferred fees and costs on originated loans, and for purchased loans, net of any unamortized premiums and discounts. Leases are recorded at the discounted amounts of lease payments receivable plus the estimated residual value of the leased asset, net of unearned income and unamortized deferred fees and costs. Lease payments receivable reflect contractual lease payments adjusted for renewal or termination options that the Company believes the customer is reasonably certain to exercise. Unearned income, deferred fees and costs, and discounts and premiums are accreted and amortized to interest income over the contractual life of the loan using its effective interest rate. HFI loans measured at fair value under the Company’s election of the fair value option include retail and certificate loans and the related notes and certificates. Fees and costs for loans accounted for under the fair value option are recognized in earnings at the inception of the loan and are not deferred. Due to the payment dependent feature of the notes and certificates, changes in the fair value of the notes and certificates are offset by changes in the fair values of related loans, resulting in no net effect on the Company’s earnings.
Loans initially classified as HFS are reported at their fair value with the Company’s election of the fair value option. Origination fees are recognized in earnings within “Marketplace revenue” on the Consolidated Statements of Operations (Income Statement) at the time of loan origination. Changes in the fair value are recorded in “Net fair value adjustments” included in “Marketplace revenue” on the Income Statement. In certain circumstances, the Company may transfer loans from HFI to HFS. At the time of transfer, these loans are valued at the lower of amortized cost or fair value.
Accrued Interest Income and Non-Accrual Policy
Interest income is accrued as earned. The accrual of interest income is discontinued, and the loan or lease is placed on nonaccrual status at 90 days past due or when reasonable doubt exists as to timely collection. Past due status is based on the contractual terms of the loan or lease. When a loan or lease is placed on nonaccrual status, all income previously accrued but not collected is reversed against the current period’s interest income. Because the Company has a nonaccrual policy which results in the timely reversal of past-due accrued interest, it does not record an allowance for credit losses (ACL) on accrued interest receivable. Interest collections on nonaccrual loans and leases
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
for which the ultimate collectability of principal is uncertain are applied as principal reductions; otherwise, such collections are credited to income when received. Nonaccrual loans and leases are returned to accrual status when there no longer exists concern over collectability, the borrower has demonstrated, over time, both the intent and ability to repay and the loan or lease has been brought current and future payments are reasonably assured. HFI loans accounted for under the fair value option and HFS loans are not reported as nonaccrual.
Allowance for Credit Losses
The ACL represents management’s estimate of expected credit losses in the loan and lease portfolio, excluding loans accounted for under the fair value option. The ACL is measured based on a lifetime expected loss model, which does not require a loss event to occur before a credit loss is recognized. Under the lifetime expected credit loss model, the Company estimates the allowance based on relevant available information related to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. The ACL is estimated using a discounted cash flow (DCF) approach where effective interest rates are used to calculate the net present value of expected cash flows. The effective interest rate is calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and costs, to provide a constant rate of return over the term.
The Company evaluates its estimate of expected credit losses each reporting period and records any additions to the allowance on the Income Statement as “Provision for credit losses.” Amounts determined to be uncollectible are charged-off to the allowance. Estimates of expected credit losses include expected recoveries of amounts previously charged-off and amounts expected to be charged-off. If amounts previously charged off are subsequently expected to be collected, the Company may recognize a negative allowance, which is limited to the amount that was previously charged off.
Under applicable accounting guidance, for reporting purposes, the loan and lease portfolio is categorized by portfolio segment. A portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine the ACL. The Company’s two portfolio segments are consumer and commercial. The Company further disaggregates its portfolio segments into various classes of financing receivables based on their underlying risk characteristics. The classes within the consumer portfolio segment are unsecured consumer, secured consumer and residential mortgages. The classes within the commercial portfolio segment are commercial and industrial, commercial real estate, and equipment finance.
The ACL is measured on a collective basis when loans share similar risk characteristics. Relevant risk characteristics for the consumer portfolio include product type, risk rating, loan term, and monthly vintage. Relevant risk characteristics for the commercial portfolio include product type, risk rating and PCD status. Loans measured on a collective basis generally have an ACL comprised of a quantitative, or modeled, component that is supplemented by a framework of qualitative factors, as discussed below.
The Company will continue to monitor its loan pools on an ongoing basis and adjust accordingly as the risk characteristics of the financial assets may change over time. If a given financial asset does not share similar risk characteristics with other financial assets, the Company shall measure expected credit losses on an individual, rather than on a collective basis. Loans evaluated on an individual basis generally have an ACL that is measured in reference to any collateral securing the loan and/or expected cash flows which are specific to the borrower.
Allowance Calculation Methodology
The Company generally estimates expected credit losses over the contractual term of its loans. The contractual term is adjusted for estimated prepayments when appropriate. Expected renewals and extensions do not adjust the contractual term unless the extension or renewal option is through a troubled debt restructuring (TDR) that is reasonably expected to occur or represents an unconditionally cancellable option held by the borrower.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The quantitative, or modeled, component of the ACL is primarily based on statistical models that use known or estimated data as of the balance sheet date and forecasted data over the reasonable and supportable period. Known and estimated data include current probability and timing of default, loss rate and recovery exposure at default, timing and amount of estimated prepayments, timing and amount of expected draws (for unfunded lending commitments), and relevant risk characteristics. Certain of the Company’s commercial portfolios have limited internal historical loss data and use external credit loss information, including historical charge-off and balance data for peer banking institutions.
The Company obtains historical and forecast macroeconomic information to inform its view of the long-term condition of the economy. Forward-looking macroeconomic factors considered in the Company’s macroeconomic variable integrated statistical models include gross domestic product (GDP), unemployment rate, unemployment insurance claims, housing prices, and retail sales. Forward-looking macroeconomic factors are incorporated into the Company’s models for a two-year reasonable and supportable economic forecast period followed by a one-year reversion period during which expected credit losses are expected to revert back on a straight-line basis to historical losses unadjusted for economic conditions. The reasonable and supportable economic forecast period and reversion methodology are accounting estimates which may change in future periods as a result of changes to the current macroeconomic environment.
The Company’s statistical models produce expected cash flows, which are then discounted at the effective interest rate to derive net present value. The effective interest rate is calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and costs, to provide a constant rate of return over the term. This net present value is then compared to the amortized cost basis to derive the expected credit losses. As a result, the quantitative, or modeled, portion of ACL is estimated using a DCF approach.
The Company also considers the need for qualitative adjustments to the modeled estimate of expected credit losses. For this purpose, the Company established a qualitative factor framework to periodically assess qualitative adjustments to address certain identified elements that are not directly captured by the statistically modeled expected credit loss. These factors may include the impact of risk rating downgrades, changes in credit policies, problem loan trends, identification of new risks not incorporated into the modeling framework, credit concentrations, changes in lending management, non-modeled macroeconomic outlook and other external factors.
Zero Credit Loss Expectation Exception
The Company has a zero loss expectation when the loans, or portions thereof, are issued or guaranteed by certain U.S. government entities or agencies, as those entities or agencies have a long history of no defaults and the highest credit ratings issued by rating agencies. Loans held for investment, or portions thereof, which meet this criterion do not have an ACL.
Reserve for Unfunded Lending Commitments
The ACL includes an estimate for expected credit losses on off-balance sheet commitments to extend credit and unused lines of credit. The Company estimates these expected credit losses for the unfunded portion of the commitments that are not unconditionally cancellable depending on the likelihood that funding will occur. The reserve for unfunded lending commitments is reported in “Other liabilities” on the Balance Sheet.
Individually Assessed Loans
Loans that do not share similar risk characteristics with other financial assets, including those whose terms have been modified in a TDR and collateral-dependent loans, are individually assessed for purposes of measuring expected credit losses using the DCF approach.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
For loans that are determined to be collateral dependent, the ACL is determined based on the fair value of the collateral. Loans are considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially satisfied through sale or operation of the collateral. For such loans, the ACL is calculated as the difference between the amortized cost basis and the fair value of the underlying collateral less costs to sell, if applicable.
Purchased Credit Deteriorated Assets
PCD assets are acquired financial assets (or groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer’s assessment. The Company considers indicators such as loan rating, FICO score, days past due status, nonaccrual status, TDR status, charge-off status, bankruptcy, modifications or risk rating to determine whether an acquired asset meets the definition of PCD.
PCD assets are recorded on the acquisition date at their purchase price plus any related initial ACL, which results in a “gross-up” of the asset’s initial amortized cost basis. Recognition of the initial ACL upon the acquisition of PCD assets does not impact net income. Changes in estimates of expected credit losses after acquisition are recognized through the provision for credit losses. Acquired non-PCD assets are accounted for in a manner similar to originated financial assets, whereby any initial ACL is recorded through the “Provision for credit losses” on the Income Statement.
Charge-Offs
Charge-offs are recorded when the Company determines that a loan balance is uncollectible or a loss-confirming event has occurred. Loss confirming events usually involve the receipt of specific adverse information about the borrower and may include borrower delinquency status, bankruptcy, foreclosure, or receipt of an asset valuation indicating a shortfall between the value of the collateral and the book value of the loan when that collateral asset is the sole source of repayment. A full or partial charge-off reduces the amortized cost basis of the loan and the related ACL. Unsecured personal loans are charged-off when a borrower is (i) contractually 120 days past due or (ii) two payments past due and has filed for bankruptcy or is deceased.
For acquired PCD loans where all or a portion of the loan balance had been charged off prior to acquisition, and for which active collection efforts are still underway, the ACL included as part of the grossed-up loan balance at acquisition is immediately charged off if required by the Company’s existing charge off policy. Additionally, the Company is required to consider its existing policies in determining whether to charge off any financial assets, regardless of whether a charge-off was recorded by the predecessor company. The initial ACL recognized on PCD assets includes the gross-up of the loan balance reduced by immediate charge-offs for loans previously charged off by the acquired company or which meet the Company’s charge-off policy on the date of acquisition. Charge-offs against the allowance related to such acquired PCD loans do not result in an income statement impact.
Servicing Assets
Servicing assets are capitalized as separate assets when loans are sold and servicing is retained. The Company records servicing assets at their estimated fair values. Servicing asset fair value is based on the excess of the contractual servicing fee over an estimated market servicing rate. When servicing assets are recognized from the sale of loans originated by the Company, the fair value of the servicing asset is included as a component of the gain or loss on the loan sale and reported within “Marketplace revenue” on the Income Statement. Subsequent changes in fair value are reported within “Servicing fees” in “Marketplace revenue” during the period in which the changes occur. Servicing assets are reported in “Other assets” on the Balance Sheet.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Fair Value of Assets and Liabilities
Fair value is defined as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. Fair value is based on an exit price notion that maximizes the use of observable inputs and minimizes the use of unobservable inputs.
The Company measures certain assets and liabilities at fair value when permitted or mandated by accounting standards, when the Company has elected the fair value option, and to fulfill fair value disclosure requirements. Assets and liabilities are recorded at fair value on a recurring or nonrecurring basis. Assets and liabilities that are recorded at fair value on a recurring basis require a fair value measurement at each reporting period. Such assets include AFS securities, HFS and HFI loans in which the Company has elected the fair value option, and servicing assets.
The Company has elected the fair value option for certain loans and servicing assets and uses fair value measurements to record the assets on a recurring basis. The Company also uses fair value measurements for AFS securities.
The fair value hierarchy includes a three-level hierarchy that assigns the highest priority to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs.
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|
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|
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Level 1
|
—
|
Quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
Level 2
|
—
|
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
|
|
|
|
Level 3
|
—
|
Unobservable inputs.
|
Unobservable inputs require greater judgment in measuring fair value. In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are based primarily upon the Company’s own estimates, and the measurements reflect information and assumptions that management believes a market participant would use in pricing the asset or liability.
Property, Equipment and Software, net
Property, equipment and software are carried at cost less accumulated depreciation and amortization. The Company uses the straight-line method of depreciation and amortization. Estimated useful lives range from three years to five years for furniture and fixtures, computer equipment, and software. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life.
Internally developed software is capitalized when preliminary development efforts are successfully completed and it is probable that the project will be completed, and the software will be used as intended. Capitalized costs consist of salaries and compensation costs for employees, fees paid to third-party consultants who are directly involved in development efforts, and costs incurred for upgrades and enhancements to add functionality of the software. Other costs are expensed as incurred.
The Company evaluates impairments of its property, equipment and software whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the asset is not recoverable, measurement of an impairment loss is based on the fair value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Goodwill and Other Intangible Assets
Goodwill is recorded when the purchase price of an acquired business exceeds the fair value of the net assets acquired. Goodwill is assigned to the Company’s reporting units at the acquisition date according to the expected economic benefits that the acquired business will provide to the reporting unit. A reporting unit is a business operating segment or a component of a business operating segment. The Company identifies its reporting units based on how the operating segments and reporting units are managed. Accordingly, the Company allocated goodwill to the LC Bank operating segment.
The goodwill of each reporting unit is tested for impairment annually or more frequently in certain circumstances. The Company’s annual impairment testing is performed in the fourth quarter of each calendar year. Impairment exists when the carrying value of goodwill exceeds its estimated fair value. Adverse changes in impairment indicators such as lower than forecast financial performance, increased competition, increased regulatory oversight, or unplanned changes in operations could result in impairment.
The Company can elect to either qualitatively assess goodwill for impairment, or bypass the qualitative test and proceed directly to a quantitative test. If the Company performs a qualitative assessment of goodwill to test for impairment and concludes it is more likely than not that the estimated fair value of a reporting unit is greater than its carrying value, a quantitative test is not required. However, if we determine it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a quantitative assessment is performed to determine if goodwill impairment exists. Under the quantitative impairment assessment, the fair values of the Company’s reporting units are determined using a combination of income and market-based approaches.
Other intangible assets with determinable lives are recorded at their fair value upon completion of a business acquisition or certain other transactions, and generally represent the value of customer contracts or relationships. Such assets are amortized over their useful lives in a manner that best reflects their economic benefit, which may include straight-line or accelerated methods of amortization. Other intangible assets are reviewed for impairment quarterly and when events or changes in circumstances indicate that their carrying amount may not be recoverable. The Company does not have indefinite-lived intangible assets other than goodwill. Intangible assets are reported in “Other assets” on the Balance Sheet.
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities in “Other liabilities” on the Balance Sheet. Associated legal expense is recorded in “Other non-interest expense” for the losses associated with the securities class action lawsuits, as described in “Note 19. Commitments and Contingencies,” on the Income Statement. Such liabilities and associated expenses are recorded when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company will also disclose a range of exposure to incremental loss when such amounts can be estimated and are reasonably possible to occur in future periods. In estimating the Company’s exposure to loss contingencies, if an amount within the estimated range of loss is the best estimate, that amount will be accrued. However, if there is no amount within the estimated range of loss that is the best estimate, the Company will accrue the minimum amount within the range, and disclose the amount up to the high end of the range as an exposure to incremental loss, if such amount is considered reasonably possible. Such estimates are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability and records an adjustment to its estimate in the period in which the adjustment is probable and an amount or range can be reasonably estimated. The determination of an expected contingent liability and associated litigation expense requires the Company to make assumptions related to the outcome of these matters. Due to the inherent uncertainties of loss contingencies, the Company’s estimates may be different than the actual outcomes. Legal fees, including legal fees associated with loss contingencies, are recognized as incurred and included in “Professional services” expense on the Income Statement.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Stock-based Compensation
Stock-based compensation includes expense primarily associated with restricted stock units (RSUs) and performance-based restricted stock units (PBRSUs), as well as expense associated with stock issued related to acquisitions. Stock-based compensation expense is based on the grant date fair value of the award. The cost is generally recognized over the vesting period on a straight-line basis. Forfeitures are recognized as incurred.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers the available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. If the Company determines that it is able to realize its deferred tax assets in the future in excess of the net recorded amount, the Company decreases the deferred tax asset valuation allowance, which reduces the provision for income taxes.
Uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company recognizes interest and penalties, if any, related to uncertain tax positions in “Income tax expense (benefit)” on the Income Statement.
Net Income (Loss) Per Share
Basic net income (loss) per share (Basic EPS) attributable to common stockholders is computed by dividing net income (loss) attributable to LendingClub by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share (Diluted EPS) is computed by dividing net income (loss) attributable to LendingClub by the weighted-average number of common shares outstanding during the period, adjusted for the effects of dilutive issuances of shares of common stock, which predominantly include incremental shares issued for outstanding RSUs, PBRSUs, and stock options. PBRSUs are included in dilutive shares to the extent the pre-established performance targets have been or are estimated to be satisfied as of the reporting date. The dilutive potential common shares are computed using the treasury stock method. The effects of outstanding RSUs, PBRSUs, and stock options are excluded from the computation of Diluted EPS in periods in which the effect would be antidilutive. For periods with more than one class of common shares, the Company computes Basic and Diluted EPS using the two-class method, which is an allocation of net income (loss) among the holders of each class of common shares.
Beneficial Conversion Feature
The Company accounts for the beneficial conversion feature (BCF) on its Series A Preferred Stock in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company accretes the BCF discount from the date of issuance to the earliest conversion date, which was March 20, 2020. All of the BCF discount was accreted and recognized as a deemed dividend in “Accumulated deficit” on the Balance Sheet.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Consolidation of Variable Interest Entities
A VIE is a legal entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. The Company’s variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the fair value of the entity’s net assets. A VIE is consolidated by its primary beneficiary, the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates a VIE when it is deemed to be the primary beneficiary. The Company assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis.
Transfers of Financial Assets
The Company accounts for transfers of financial assets as sales when it has surrendered control over the transferred assets. Control is generally considered to have been surrendered when the transferred assets have been legally isolated from the Company, the transferee has the right to pledge or exchange the assets without any significant constraints, and the Company has not entered into a repurchase agreement, does not hold unconditional call options and has not written put options on the transferred assets. In assessing whether control has been surrendered, the Company considers whether the transferee would be a consolidated affiliate and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of the transfer, even if they were not entered into at the time of transfer. The Company measures gain or loss on sale of financial assets as the net proceeds received on the sale less the carrying amount of the loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to servicing assets, retained securities, and recourse obligations.
Transfers of financial assets that do not qualify for sale accounting are reported as secured borrowings. Accordingly, the related assets remain on the Company’s Balance Sheet and continue to be reported and accounted for as if the transfer had not occurred. Cash proceeds from these transfers are reported as liabilities, with related interest expense recognized over the life of the related assets.
Adoption of New Accounting Standards
The Company did not adopt any new accounting standards during the year ended December 31, 2021.
New Accounting Standards Not Yet Adopted
In March 2020, the FASB issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which, if certain criteria are met, provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. The provisions of the new standard may be adopted as of the beginning of the reporting period when the election is made until December 31, 2022. The Company is evaluating the impact this ASU and is not expected to have a material impact on its financial position, results of operations, cash flows and disclosures. The Company has not elected an adoption date.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity including convertible instruments and contracts on an entity’s own equity. The guidance allows for either full or modified retrospective adoption for fiscal periods beginning after December 15, 2021. The Company plans to adopt this ASU in the first quarter of 2022 under the
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
modified retrospective approach. As a result of the adoption, the deemed dividend recorded in 2020 related to the beneficial conversation feature of the convertible preferred stock will be reclassified from accumulated deficit to additional paid in capital within equity. The Company is evaluating its disclosure around this transaction under the ASU. This ASU is not expected to have a material impact on its financial position, results of operations and cash flows.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
2. Business Acquisition
On February 1, 2021, the Company completed the Acquisition. Upon closing, LendingClub acquired all outstanding voting equity interests of Radius in exchange for total consideration as follows:
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|
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|
|
Cash paid
|
$
|
140,256
|
|
Fair value of common stock issued (1)
|
40,808
|
|
Consideration related to share-based payments (2)
|
5,742
|
|
Total consideration paid
|
$
|
186,806
|
|
(1) Calculated using the closing stock price of $10.85 on January 29, 2021, the most recent trading day preceding the Acquisition, multiplied by 3,761,114 shares issued pursuant to the Plan of Merger.
(2) In connection with the Acquisition, LendingClub agreed to convert equity awards held by Radius employees into cash and LendingClub awards pursuant to the Plan of Merger.
The Acquisition was accounted for as a purchase business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values determined as of the Acquisition date. Determining fair value of identifiable assets, particularly intangibles, loans (including PCD loans), and liabilities acquired and assumed based on DCF analysis or other valuation techniques requires management to make estimates that are highly subjective in nature based on available information. The fair value of acquired loans was based on a DCF methodology using contractual cash flows adjusted for key cash flow assumptions such as prepayment rate, default rate, loss severity rate, discount rate and market pricing.
The following table presents an allocation of the total consideration paid to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed:
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|
Assets acquired:
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|
Cash and due from banks
|
$
|
18,184
|
|
Interest-bearing deposits in banks
|
650,052
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|
Total cash and cash equivalents
|
668,236
|
|
Securities available for sale at fair value
|
259,037
|
|
Loans and leases held for investment
|
1,589,054
|
|
Allowance for loan and lease losses
|
(12,440)
|
|
Loans and leases held for investment, net
|
1,576,614
|
|
Property, equipment and software
|
1,926
|
|
Goodwill
|
75,717
|
|
Other assets
|
86,482
|
|
Total assets
|
2,668,012
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|
|
|
Liabilities assumed:
|
|
Non-interest bearing deposits
|
146,187
|
|
Interest-bearing deposits
|
1,862,272
|
|
Total deposits
|
2,008,459
|
|
Short-term borrowings
|
9,870
|
|
Advances from PPPLF
|
420,962
|
|
Other long-term debt
|
18,630
|
|
Other liabilities
|
23,285
|
|
Total liabilities
|
2,481,206
|
|
|
|
Total consideration paid
|
$
|
186,806
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The purchase price exceeded the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed and, as a result of the purchase allocation, the Company recorded goodwill of $75.7 million, which is not deductible for tax purposes. The goodwill recognized is attributable primarily to strategic and financial benefits of the Acquisition, including increased resiliency with access to stable, low-cost deposit funding replacing higher-cost and more volatile third-party warehouse funding; increased and more stable revenue driven by increased net interest income from loans HFI; expense benefits by capturing the fees that were historically paid to the Company’s third-party issuing banks; and the ability to attract new members and deepen relationships with existing members through the addition of banking services.
The carrying amounts of cash, AFS securities, short-term borrowings, advances from PPPLF, and certain other assets and liabilities were determined to be a reasonable estimate of the fair value of such items. The following is a description of the methods used to determine the fair values of significant assets and liabilities.
Securities available for sale: The Company acquired a debt securities portfolio containing U.S. agency residential mortgage-backed securities, municipal securities, U.S. agency securities, commercial mortgage-backed securities and other asset-backed securities. The Acquisition date fair value of the securities was based on third-party dealer quotes which reflect exit prices pursuant to the guidance on fair value measurement.
Loans and leases held for investment: Fair values for loans and leases were primarily based on a discounted cash flow methodology that considered contractual terms, credit loss expectations, market interest rates, and other market factors such as liquidity from the perspective of a market participant. Loan portfolios were pooled together according to similar characteristics such as product type, lien position, risk grade, credit deterioration status, FICO score, and collateral type. Loan pools were treated in the aggregate when applying various valuation techniques. The contractual terms, default rates, loss given default rates, loss severity and recovery lag, and prepayment rates were the key assumptions embedded into the estimated cash flow valuation. These assumptions were informed by internal data on loan characteristics, historical loss experience, and current and forecasted economic conditions. The discount rates used are based on current market rates for new originations of comparable loans and include adjustments for liquidity. All of the merged loans were marked to fair value as of the Acquisition date and, therefore, there was no carryover of the ACL that had previously been recorded by Radius. Immediately following the Acquisition, the Company recorded an ACL on non-PCD loans of $6.9 million through an increase to the provision for credit losses. The initial ACL for PCD loans of $12.4 million was recorded through an adjustment to the amortized cost basis of the loans.
Core deposit intangible: This intangible asset represents the value of the relationships with certain deposit clients and is included in “Other assets” on the Balance Sheet. The fair value was estimated based on an after-tax cost savings method of the income approach. Under this method, fair value is equal to the present value of the after-tax cost savings or differential cash flows generated by the acquired deposit base. Cost savings is defined as the difference between the effective cost of funds on deposits and the cost of an equal amount of funds from an alternative source. Deposits were pooled by product type and channel. The discount rates used for Core Deposit Intangible (CDI) assets are based on current market participant rates. The CDI is being amortized over 10 years based upon the estimated economic benefits received.
Other Investments: The fair value of an investment in a private entity that was sold after the Acquisition was determined based upon the price expected to be received in the subsequent sale. This investment was included in “Other assets” on the Balance Sheet.
Interest-bearing deposits: In determining the fair value of certificates of deposit, the cash flows of the contractual interest payments during the specific period of the certificates of deposit and scheduled principal payout were discounted to present value at market-based interest rates.
Subordinated debt: The fair value of subordinated debt was determined by using a DCF method using a market participant discount rate for similar instruments. Subordinated debt is included in “Other long-term debt” on the Balance Sheet.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The Company incurred approximately $16 million of expenses, primarily included in “Professional services” on the Income Statement, in connection with the Acquisition.
The table below presents certain unaudited pro forma financial information for illustrative purposes only, for the years ended December 31, 2021 and 2020, as if the Acquisition took place on January 1, 2020. The pro forma information combines the historical results of Radius with the Company’s, adjusting for the estimated impact of certain fair value adjustments for the respective periods. The pro forma information does not reflect changes to the provision for credit losses resulting from recording loan assets as fair value, cost savings, or business synergies. As a result, actual amounts would have differed from the unaudited pro forma information presented and the differences could be significant.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
Total net revenue
|
$
|
825,701
|
|
|
$
|
392,377
|
|
Consolidated net income (loss)
|
$
|
11,644
|
|
|
$
|
(190,120)
|
|
For the year ended December 31, 2021, total net revenue of $73.6 million from the Acquisition is included on the Income Statement.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Summary of Reclassification Adjustments
The classification of the items presented by the Company in its consolidated financial statements under GAAP has been adjusted to align with the presentation requirements under Article 9 of the SEC’s Regulation S-X for bank holding companies. The presentation shown below is reflective of what is used by the combined company under GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
LendingClub Historical Presentation
|
|
Reclassification Adjustments
|
|
LendingClub Reclassified Amounts
|
Assets
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
524,963
|
|
|
$
|
(524,963)
|
|
|
$
|
—
|
|
Cash and due from banks
|
—
|
|
|
5,197
|
|
|
5,197
|
|
Interest bearing deposits in banks
|
—
|
|
|
519,766
|
|
|
519,766
|
|
Total cash and cash equivalents
|
—
|
|
|
524,963
|
|
|
524,963
|
|
Restricted cash
|
103,522
|
|
|
—
|
|
|
103,522
|
|
Securities available for sale at fair value
|
142,226
|
|
|
—
|
|
|
142,226
|
|
Loans held for investment at fair value
|
636,686
|
|
|
(636,686)
|
|
|
—
|
|
Loans held for investment by the Company at fair value
|
49,954
|
|
|
(49,954)
|
|
|
—
|
|
Loans held for sale by the Company at fair value
|
121,902
|
|
|
(121,902)
|
|
|
—
|
|
Loans held for sale at fair value
|
—
|
|
|
121,902
|
|
|
121,902
|
|
Retail and certificate loans held for investment at fair value
|
—
|
|
|
636,686
|
|
|
636,686
|
|
Other loans held for investment at fair value
|
—
|
|
|
49,954
|
|
|
49,954
|
|
Accrued interest receivable
|
5,205
|
|
|
(5,205)
|
|
|
—
|
|
Property, equipment and software, net
|
96,641
|
|
|
—
|
|
|
96,641
|
|
Operating lease assets
|
74,037
|
|
|
(74,037)
|
|
|
—
|
|
Intangible assets, net
|
11,427
|
|
|
(11,427)
|
|
|
—
|
|
Other assets
|
96,730
|
|
|
90,669
|
|
|
187,399
|
|
Total assets
|
$
|
1,863,293
|
|
|
$
|
—
|
|
|
$
|
1,863,293
|
|
Liabilities and Equity
|
|
|
|
|
|
Accounts payable
|
$
|
3,698
|
|
|
$
|
(3,698)
|
|
|
$
|
—
|
|
Accrued interest payable
|
4,572
|
|
|
(4,572)
|
|
|
—
|
|
Operating lease liabilities
|
94,538
|
|
|
(94,538)
|
|
|
—
|
|
Accrued expenses and other liabilities
|
101,457
|
|
|
(101,457)
|
|
|
—
|
|
Payable to investors
|
40,286
|
|
|
(40,286)
|
|
|
—
|
|
Credit facilities and securities sold under repurchase agreements
|
104,989
|
|
|
(104,989)
|
|
|
—
|
|
Short-term borrowings
|
—
|
|
|
104,989
|
|
|
104,989
|
|
Retail notes, certificates and secured borrowings at fair value
|
636,774
|
|
|
—
|
|
|
636,774
|
|
Payable on Structured Program borrowings
|
152,808
|
|
|
—
|
|
|
152,808
|
|
Other liabilities
|
—
|
|
|
244,551
|
|
|
244,551
|
|
Total liabilities
|
1,139,122
|
|
|
—
|
|
|
1,139,122
|
|
Equity
|
|
|
|
|
|
Common stock
|
881
|
|
|
—
|
|
|
881
|
|
Additional paid-in capital
|
1,508,020
|
|
|
—
|
|
|
1,508,020
|
|
Accumulated deficit
|
(786,214)
|
|
|
—
|
|
|
(786,214)
|
|
Accumulated other comprehensive income
|
1,484
|
|
|
—
|
|
|
1,484
|
|
Total equity
|
724,171
|
|
|
—
|
|
|
724,171
|
|
Total liabilities and equity
|
$
|
1,863,293
|
|
|
$
|
—
|
|
|
$
|
1,863,293
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
LendingClub Historical Presentation
|
|
Reclassification Adjustments
|
|
LendingClub Reclassified Amounts
|
Net Revenue
|
|
|
|
|
|
Transaction fees
|
$
|
207,640
|
|
|
$
|
(207,640)
|
|
|
$
|
—
|
|
Interest income
|
209,694
|
|
|
(209,694)
|
|
|
—
|
|
Interest expense
|
(141,503)
|
|
|
141,503
|
|
|
—
|
|
Net fair value adjustments
|
(117,247)
|
|
|
117,247
|
|
|
—
|
|
Net interest income and fair value adjustments
|
(49,056)
|
|
|
49,056
|
|
|
—
|
|
Investor fees
|
111,864
|
|
|
(111,864)
|
|
|
—
|
|
Gain on sales of loans
|
30,812
|
|
|
(30,812)
|
|
|
—
|
|
Net investor revenue
|
93,620
|
|
|
(93,620)
|
|
|
—
|
|
Other revenue
|
13,442
|
|
|
(13,442)
|
|
|
—
|
|
Total net revenue
|
314,702
|
|
|
(314,702)
|
|
|
—
|
|
Non-interest income
|
|
|
|
|
|
Marketplace revenue (1)
|
—
|
|
|
245,314
|
|
|
245,314
|
|
Other non-interest income
|
—
|
|
|
13,442
|
|
|
13,442
|
|
Total non-interest income
|
—
|
|
|
258,756
|
|
|
258,756
|
|
Interest income
|
|
|
|
|
|
Interest on loans held for sale
|
—
|
|
|
72,876
|
|
|
72,876
|
|
|
|
|
|
|
|
Interest on retail and certificate loans held for investment at fair value
|
—
|
|
|
115,952
|
|
|
115,952
|
|
Interest on other loans held for investment at fair value
|
—
|
|
|
7,688
|
|
|
7,688
|
|
Interest on securities available for sale
|
—
|
|
|
12,125
|
|
|
12,125
|
|
Other interest income
|
—
|
|
|
1,053
|
|
|
1,053
|
|
Total interest income
|
—
|
|
|
209,694
|
|
|
209,694
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
Interest on short-term borrowings
|
—
|
|
|
17,837
|
|
|
17,837
|
|
Interest on retail notes, certificates and secured borrowings
|
—
|
|
|
115,952
|
|
|
115,952
|
|
Interest on Structured Program borrowings
|
—
|
|
|
16,204
|
|
|
16,204
|
|
Interest on other long-term debt
|
—
|
|
|
373
|
|
|
373
|
|
Total interest expense (2)
|
—
|
|
|
150,366
|
|
|
150,366
|
|
Net interest income
|
—
|
|
|
59,328
|
|
|
59,328
|
|
Total net revenue (3)
|
—
|
|
|
318,084
|
|
|
318,084
|
|
Provision for credit losses (3)
|
—
|
|
|
3,382
|
|
|
3,382
|
|
Operating expenses
|
|
|
|
|
|
Sales and marketing
|
79,055
|
|
|
(79,055)
|
|
|
—
|
|
Origination and servicing
|
71,193
|
|
|
(71,193)
|
|
|
—
|
|
Engineering and product development
|
139,050
|
|
|
(139,050)
|
|
|
—
|
|
Other general and administrative
|
213,021
|
|
|
(213,021)
|
|
|
—
|
|
Total operating expenses
|
502,319
|
|
|
(502,319)
|
|
|
—
|
|
Non-interest expense
|
|
|
|
|
|
Compensation and benefits
|
—
|
|
|
252,517
|
|
|
252,517
|
|
Marketing
|
—
|
|
|
51,518
|
|
|
51,518
|
|
Equipment and software
|
—
|
|
|
26,842
|
|
|
26,842
|
|
Occupancy
|
—
|
|
|
27,870
|
|
|
27,870
|
|
Depreciation and amortization
|
—
|
|
|
54,030
|
|
|
54,030
|
|
Professional services
|
—
|
|
|
41,780
|
|
|
41,780
|
|
Other non-interest expense
|
—
|
|
|
47,762
|
|
|
47,762
|
|
Total non-interest expense
|
—
|
|
|
502,319
|
|
|
502,319
|
|
Loss before income tax expense
|
(187,617)
|
|
|
—
|
|
|
(187,617)
|
|
Income tax benefit
|
(79)
|
|
|
—
|
|
|
(79)
|
|
Consolidated net loss
|
$
|
(187,538)
|
|
|
$
|
—
|
|
|
$
|
(187,538)
|
|
(1) See “Note 3. Marketplace Revenue” for additional detail.
(2) The increase in total interest expense relates to valuation adjustments on Structured Program borrowings reclassified from net fair value adjustments to interest expense.
(3) The increase in total net revenue from the historical presentation relates to credit valuation adjustments on AFS securities reclassified from net fair value adjustments to provision for credit losses.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
LendingClub Historical Presentation
|
|
Reclassification Adjustments
|
|
LendingClub Reclassified Amounts
|
Net Revenue
|
|
|
|
|
|
Transaction fees
|
$
|
598,760
|
|
|
$
|
(598,760)
|
|
|
$
|
—
|
|
Interest income
|
345,345
|
|
|
(345,345)
|
|
|
—
|
|
Interest expense
|
(246,587)
|
|
|
246,587
|
|
|
—
|
|
Net fair value adjustments
|
(144,990)
|
|
|
144,990
|
|
|
—
|
|
Net interest income and fair value adjustments
|
(46,232)
|
|
|
46,232
|
|
|
—
|
|
Investor fees
|
124,532
|
|
|
(124,532)
|
|
|
—
|
|
Gain on sales of loans
|
67,716
|
|
|
(67,716)
|
|
|
—
|
|
Net investor revenue
|
146,016
|
|
|
(146,016)
|
|
|
—
|
|
Other revenue
|
13,831
|
|
|
(13,831)
|
|
|
—
|
|
Total net revenue
|
758,607
|
|
|
(758,607)
|
|
|
—
|
|
Non-interest income
|
|
|
|
|
|
Marketplace revenue (1)
|
—
|
|
|
646,735
|
|
|
646,735
|
|
Other non-interest income
|
—
|
|
|
13,831
|
|
|
13,831
|
|
Total non-interest income
|
—
|
|
|
660,566
|
|
|
660,566
|
|
Interest income
|
|
|
|
|
|
Interest on loans held for sale
|
—
|
|
|
109,493
|
|
|
109,493
|
|
|
|
|
|
|
|
Interest on retail and certificate loans held for investment at fair value
|
—
|
|
|
214,395
|
|
|
214,395
|
|
Interest on other loans held for investment at fair value
|
—
|
|
|
1,104
|
|
|
1,104
|
|
Interest on securities available for sale
|
—
|
|
|
14,351
|
|
|
14,351
|
|
Other interest income
|
—
|
|
|
6,002
|
|
|
6,002
|
|
Total interest income
|
—
|
|
|
345,345
|
|
|
345,345
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
Interest on short-term borrowings
|
—
|
|
|
26,826
|
|
|
26,826
|
|
Interest on retail notes, certificates and secured borrowings
|
—
|
|
|
214,395
|
|
|
214,395
|
|
Interest on Structured Program borrowings
|
—
|
|
|
5,070
|
|
|
5,070
|
|
Interest on other long-term debt
|
—
|
|
|
1,013
|
|
|
1,013
|
|
Total interest expense (2)
|
—
|
|
|
247,304
|
|
|
247,304
|
|
Net interest income
|
—
|
|
|
98,041
|
|
|
98,041
|
|
Total net revenue
|
—
|
|
|
758,607
|
|
|
758,607
|
|
Provision for credit losses
|
—
|
|
|
—
|
|
|
—
|
|
Operating expenses
|
|
|
|
|
|
Sales and marketing
|
279,423
|
|
|
(279,423)
|
|
|
—
|
|
Origination and servicing
|
103,403
|
|
|
(103,403)
|
|
|
—
|
|
Engineering and product development
|
168,380
|
|
|
(168,380)
|
|
|
—
|
|
Other general and administrative
|
238,292
|
|
|
(238,292)
|
|
|
—
|
|
Total operating expenses
|
789,498
|
|
|
(789,498)
|
|
|
—
|
|
Non-interest expense
|
|
|
|
|
|
Compensation and benefits
|
—
|
|
|
333,628
|
|
|
333,628
|
|
Marketing
|
—
|
|
|
235,337
|
|
|
235,337
|
|
Equipment and software
|
—
|
|
|
24,927
|
|
|
24,927
|
|
Occupancy
|
—
|
|
|
29,367
|
|
|
29,367
|
|
Depreciation and amortization
|
—
|
|
|
59,152
|
|
|
59,152
|
|
Professional services
|
—
|
|
|
43,010
|
|
|
43,010
|
|
Other non-interest expense
|
—
|
|
|
64,077
|
|
|
64,077
|
|
Total non-interest expense
|
—
|
|
|
789,498
|
|
|
789,498
|
|
Loss before income tax expense
|
(30,891)
|
|
|
—
|
|
|
(30,891)
|
|
Income tax benefit
|
(201)
|
|
|
—
|
|
|
(201)
|
|
Consolidated net loss
|
(30,690)
|
|
|
—
|
|
|
(30,690)
|
|
Less: Income attributable to noncontrolling interests
|
55
|
|
|
—
|
|
|
55
|
|
LendingClub net loss
|
$
|
(30,745)
|
|
|
$
|
—
|
|
|
$
|
(30,745)
|
|
(1) See “Note 3. Marketplace Revenue” for additional detail.
(2) The increase in total interest expense relates to valuation adjustments on Structured Program borrowings reclassified from net fair value adjustments to interest expense.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
3. Marketplace Revenue
Marketplace revenue consists of (i) origination fees, (ii) servicing fees, (iii) gain (loss) on sales of loans and (iv) net fair value adjustments, as described below.
Origination Fees: Origination fees are primarily fees earned related to originating and issuing unsecured personal loans that are held for sale.
Servicing Fees: The Company receives servicing fees to compensate it for servicing loans on behalf of investors, including managing payments and collections from borrowers and payments to those investors. The amount of servicing fee revenue earned is predominantly affected by the servicing rates paid by investors and the outstanding principal balance of loans serviced for investors. Servicing fee revenue related to loans sold also includes the associated change in fair value of servicing assets.
Gain (Loss) on Sales of Loans: In connection with loan sales the Company recognizes a gain or loss on the sale of loans based on the level to which the contractual servicing fee is above or below an estimated market rate of servicing. Additionally, the Company recognizes transaction costs, if any, as a loss on sale of loans.
Net Fair Value Adjustments: The Company records fair value adjustments on loans that are recorded at fair value,
including gains or losses from sale prices in excess of or less than the loan principal amount sold.
The following table presents components of marketplace revenue for the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Origination fees
|
$
|
416,839
|
|
|
$
|
207,640
|
|
|
$
|
598,760
|
|
Servicing fees
|
87,639
|
|
|
111,864
|
|
|
124,532
|
|
Gain on sales of loans
|
70,116
|
|
|
30,812
|
|
|
67,716
|
|
Net fair value adjustments (1)
|
3,986
|
|
|
(105,002)
|
|
|
(144,273)
|
|
Total marketplace revenue
|
$
|
578,580
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
(1) Certain prior period valuation adjustments on AFS securities and Structured Program borrowings were reclassified from net fair value adjustments to provision for credit losses and interest expense, respectively, to conform to the current period presentation.
Revenue from Contracts with Customers
The Company’s revenue from contracts with customers includes (i) transaction fees received from issuing bank partners and (ii) referral fees from third-party companies. Transaction fees are presented as a component of “Origination fees” in “Marketplace revenue” and referral fees are presented as a component of “Other non-interest income” on the Income Statement.
Transaction Fees: The Company has a single performance obligation to provide customers access to the Company’s platform. Transaction fees are considered revenue from contracts with customers, including issuing banks and education and patient service providers. The Company recognizes transaction fee revenue each time a loan is facilitated by the Company, who provides loan application processing and loan facilitation services, resulting in a loan issued by the customers.
Transaction fees are based on the initial principal amount of the loans facilitated by the Company and paid by the issuing banks and education and patient service providers each time a loan is issued by the issuing banks. Transaction fees to which the Company expects to be entitled are variable consideration because loan volume originated over the contractual term is not known at the contract’s inception.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Referral Fees: The Company is entitled to receive referral fees from third-party companies when customers referred by the Company consider or purchase products or services from such third-party companies. Referral contracts contain a single performance obligation. The Company recognizes referral fees for each distinct instance when the criteria for receiving the referral fee has been satisfied.
Upon the Acquisition, the Company’s principal sources of revenue are marketplace revenue and interest income on loans, which are outside the scope of ASC 606, Revenue from Contracts with Customers. The remainder of the Company’s revenue is classified as non-interest income and is earned from a variety of sources, such as referral revenue and other non-interest income.
The following table presents the Company’s revenue from contracts with customers, disaggregated by revenue source for services transferred over time, for the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Transaction fees
|
$
|
32,673
|
|
|
$
|
207,640
|
|
|
$
|
598,760
|
|
Referral fees
|
14,234
|
|
|
5,011
|
|
|
5,474
|
|
Total revenue from contracts with customers
|
$
|
46,907
|
|
|
$
|
212,651
|
|
|
$
|
604,234
|
|
4. Net Income (Loss) Per Share
The following table details the computation of the Company’s basic and diluted EPS of common stock and Series A Preferred Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
|
Common Stock
|
Preferred
Stock(1)
|
|
Common Stock
|
Preferred
Stock(1)
|
|
Common Stock
|
Basic EPS:
|
|
|
|
|
|
|
|
Allocation of undistributed LendingClub net income (loss)
|
$
|
18,456
|
|
$
|
124
|
|
|
$
|
(154,664)
|
|
$
|
(32,874)
|
|
|
$
|
(30,745)
|
|
Deemed dividend
|
—
|
|
—
|
|
|
(50,204)
|
|
50,204
|
|
|
—
|
|
Net income (loss) attributable to stockholders
|
$
|
18,456
|
|
$
|
124
|
|
|
$
|
(204,868)
|
|
$
|
17,330
|
|
|
$
|
(30,745)
|
|
Weighted-average common shares – Basic
|
97,486,754
|
|
653,118
|
|
|
77,934,302
|
|
12,505,393
|
|
|
87,278,596
|
|
Basic EPS
|
$
|
0.19
|
|
$
|
0.19
|
|
|
$
|
(2.63)
|
|
$
|
1.39
|
|
|
$
|
(0.35)
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
Allocation of undistributed LendingClub net income (loss)
|
$
|
18,580
|
|
$
|
—
|
|
|
$
|
(154,664)
|
|
$
|
(32,874)
|
|
|
$
|
(30,745)
|
|
Deemed dividend
|
—
|
|
—
|
|
|
(50,204)
|
|
50,204
|
|
|
—
|
|
Net income (loss) attributable to stockholders
|
$
|
18,580
|
|
$
|
—
|
|
|
$
|
(204,868)
|
|
$
|
17,330
|
|
|
$
|
(30,745)
|
|
Weighted-average common shares – Diluted
|
102,147,353
|
|
—
|
|
|
77,934,302
|
|
12,505,393
|
|
|
87,278,596
|
|
Diluted EPS
|
$
|
0.18
|
|
$
|
0.00
|
|
|
$
|
(2.63)
|
|
$
|
1.39
|
|
|
$
|
(0.35)
|
|
(1) Presented on an as-converted basis.
In February 2020, the Company entered into an exchange agreement with its largest stockholder, Shanda Asset Management Holdings Limited and its affiliates (Shanda), pursuant to which, on March 20, 2020, Shanda exchanged all of 19,562,881 shares of LendingClub common stock, par value of $0.01 per share, held by it for (i) 195,628 newly issued shares of mandatorily convertible, non-voting, Series A Preferred Stock, par value of $0.01 per share, and (ii) a one-time cash payment of $50.2 million. The Series A Preferred Stock is considered a separate class of common shares for purposes of calculating EPS because it participates in earnings similar to
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
common stock and does not receive any significant preferences over the common stock. As a result of the preferred stock outstanding during 2020 and the first quarter of 2021, Basic and Diluted EPS were computed using the two-class method, which is a net income (loss) allocation that determines EPS for each class of common stock according to dividends declared and participation rights in undistributed income (loss). Shanda sold the remainder of its preferred stock during the first quarter of 2021 and, therefore, there were no shares of preferred stock outstanding as of March 31, 2021.
The following table summarizes the weighted-average common shares that were excluded from the Company’s diluted EPS computation because their effect would have been anti-dilutive for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Preferred stock
|
—
|
|
|
12,505,393
|
|
|
—
|
|
Stock options
|
—
|
|
|
221,949
|
|
|
455,627
|
|
RSUs and PBRSUs
|
—
|
|
|
299,747
|
|
|
59,812
|
|
Total
|
—
|
|
|
13,027,089
|
|
|
515,439
|
|
5. Securities Available for Sale
The amortized cost, gross unrealized gains and losses, credit valuation allowance, and fair value of AFS securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Credit ValuationAllowance
|
|
Fair
Value
|
U.S. agency residential mortgage-backed securities
|
$
|
125,985
|
|
|
$
|
—
|
|
|
$
|
(2,286)
|
|
|
$
|
—
|
|
|
$
|
123,699
|
|
Asset-backed senior securities
|
28,057
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
28,129
|
|
U.S. agency securities
|
26,902
|
|
|
1
|
|
|
(731)
|
|
|
—
|
|
|
26,172
|
|
Other asset-backed securities
|
26,112
|
|
|
151
|
|
|
(130)
|
|
|
—
|
|
|
26,133
|
|
Commercial mortgage-backed securities
|
26,649
|
|
|
1
|
|
|
(552)
|
|
|
—
|
|
|
26,098
|
|
CLUB Certificate asset-backed securities
|
15,049
|
|
|
3,236
|
|
|
—
|
|
|
—
|
|
|
18,285
|
|
Asset-backed subordinated securities
|
4,119
|
|
|
7,643
|
|
|
—
|
|
|
—
|
|
|
11,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
3,297
|
|
|
—
|
|
|
(45)
|
|
|
—
|
|
|
3,252
|
|
Total securities available for sale (1)(2)
|
$
|
256,170
|
|
|
$
|
11,104
|
|
|
$
|
(3,744)
|
|
|
$
|
—
|
|
|
$
|
263,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Credit ValuationAllowance
|
|
Fair
Value
|
Asset-backed senior securities
|
$
|
75,332
|
|
|
$
|
67
|
|
|
$
|
(27)
|
|
|
$
|
—
|
|
|
$
|
75,372
|
|
CLUB Certificate asset-backed securities
|
54,525
|
|
|
576
|
|
|
(772)
|
|
|
(4,190)
|
|
|
50,139
|
|
Asset-backed subordinated securities
|
29,107
|
|
|
2,128
|
|
|
(174)
|
|
|
(14,546)
|
|
|
16,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
200
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200
|
|
Total securities available for sale (1)(2)
|
$
|
159,164
|
|
|
$
|
2,771
|
|
|
$
|
(973)
|
|
|
$
|
(18,736)
|
|
|
$
|
142,226
|
|
(1) As of December 31, 2021 and 2020, $13.3 million and $119.3 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.
(2) As of December 31, 2021 and 2020, includes $236.8 million and $133.5 million, respectively, of securities pledged as collateral at fair value.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The Company’s AFS portfolio includes debt securities primarily obtained in the first quarter of 2021 upon the Acquisition and asset-backed securities related to the Company’s Structured Program transactions.
A summary of AFS securities with unrealized losses for which a credit valuation allowance has not been recorded aggregated by period of continuous unrealized loss, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
12 months
|
|
12 months
or longer
|
|
Total
|
December 31, 2021
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
U.S. agency residential mortgage-backed securities
|
$
|
123,668
|
|
|
$
|
(2,286)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
123,668
|
|
|
$
|
(2,286)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. agency securities
|
24,175
|
|
|
(731)
|
|
|
—
|
|
|
—
|
|
|
24,175
|
|
|
(731)
|
|
Other asset-backed securities
|
13,224
|
|
|
(130)
|
|
|
—
|
|
|
—
|
|
|
13,224
|
|
|
(130)
|
|
Commercial mortgage-backed securities
|
25,927
|
|
|
(552)
|
|
|
—
|
|
|
—
|
|
|
25,927
|
|
|
(552)
|
|
Municipal securities
|
3,252
|
|
|
(45)
|
|
|
—
|
|
|
—
|
|
|
3,252
|
|
|
(45)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities with unrealized losses (1)
|
$
|
190,246
|
|
|
$
|
(3,744)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
190,246
|
|
|
$
|
(3,744)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
12 months
|
|
12 months
or longer
|
|
Total
|
December 31, 2020
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Asset-backed securities related to Structured Program transactions
|
$
|
26,678
|
|
|
$
|
(855)
|
|
|
$
|
6,052
|
|
|
$
|
(118)
|
|
|
$
|
32,730
|
|
|
$
|
(973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities with unrealized losses (1)
|
$
|
26,678
|
|
|
$
|
(855)
|
|
|
$
|
6,052
|
|
|
$
|
(118)
|
|
|
$
|
32,730
|
|
|
$
|
(973)
|
|
(1) The number of investment positions with unrealized losses at December 31, 2021 and 2020 totaled 145 and 55, respectively.
During 2020, the Company recorded a credit valuation allowance on those securities where there was a deterioration in future estimated cash flows. The Company also recorded unrealized losses on securities with fair value price reductions due to higher liquidity premiums observed as a result of market dislocation related to COVID-19.
The following tables present the activity in the credit valuation allowance for AFS securities, by major security type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Valuation Allowance
|
CLUB Certificate asset-backed securities
|
|
Asset-backed subordinated securities
|
|
Total
|
|
|
|
|
Beginning balance as of December 31, 2020
|
$
|
(4,190)
|
|
|
$
|
(14,546)
|
|
|
$
|
(18,736)
|
|
|
|
|
|
Reversal of credit loss expense
|
236
|
|
|
3,146
|
|
|
3,382
|
|
|
|
|
|
Reversal of allowance arising from PCD financial assets
|
3,954
|
|
|
11,400
|
|
|
15,354
|
|
|
|
|
|
Ending balance as of December 31, 2021
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Valuation Allowance
|
CLUB Certificate asset-backed securities
|
|
Asset-backed subordinated securities
|
|
Total
|
|
|
|
|
Beginning balance as of January 1, 2020
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Provision for credit loss expense
|
(236)
|
|
|
(3,146)
|
|
|
(3,382)
|
|
|
|
|
|
Allowance arising from PCD financial assets
|
(3,954)
|
|
|
(11,400)
|
|
|
(15,354)
|
|
|
|
|
|
Ending balance as of December 31, 2020
|
$
|
(4,190)
|
|
|
$
|
(14,546)
|
|
|
$
|
(18,736)
|
|
|
|
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
AFS securities purchased with credit deterioration were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Purchase price of PCD securities at acquisition
|
|
|
$
|
27,034
|
|
Credit valuation allowance on PCD securities at acquisition
|
|
|
15,354
|
|
Par value of acquired PCD securities at acquisition
|
|
|
$
|
42,388
|
|
There were no AFS securities purchased with credit deterioration during the year ended December 31, 2021.
The contractual maturities of AFS securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Amortized Cost
|
|
Fair Value
|
|
Weighted-
average
Yield(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after 5 years through 10 years:
|
|
|
|
|
|
U.S. agency residential mortgage-backed securities
|
$
|
710
|
|
|
$
|
703
|
|
|
|
Other asset-backed securities
|
1,092
|
|
|
1,109
|
|
|
|
Commercial mortgage-backed securities
|
4,204
|
|
|
4,092
|
|
|
|
U.S. agency securities
|
1,998
|
|
|
1,992
|
|
|
|
Municipal securities
|
627
|
|
|
620
|
|
|
|
Total due after 5 years through 10 years
|
8,631
|
|
|
8,516
|
|
|
1.59
|
%
|
Due after 10 years:
|
|
|
|
|
|
U.S. agency residential mortgage-backed securities
|
125,275
|
|
|
122,996
|
|
|
|
Other asset-backed securities
|
25,020
|
|
|
25,024
|
|
|
|
Commercial mortgage-backed securities
|
22,445
|
|
|
22,006
|
|
|
|
U.S. agency securities
|
24,904
|
|
|
24,180
|
|
|
|
Municipal securities
|
2,670
|
|
|
2,632
|
|
|
|
Total due after 10 years
|
200,314
|
|
|
196,838
|
|
|
1.57
|
%
|
Asset-backed securities related to Structured Program transactions
|
47,225
|
|
|
58,176
|
|
|
18.89
|
%
|
Total securities available for sale
|
$
|
256,170
|
|
|
$
|
263,530
|
|
|
4.76
|
%
|
(1) The weighted-average yield is computed using the amortized cost at December 31, 2021.
Proceeds and gross realized gains and losses from AFS securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Proceeds
|
$
|
106,192
|
|
|
$
|
6,217
|
|
|
$
|
12,548
|
|
Gross realized gains
|
$
|
708
|
|
|
$
|
14
|
|
|
$
|
9
|
|
Gross realized losses
|
$
|
(952)
|
|
|
$
|
(3)
|
|
|
$
|
(1)
|
|
6. Loans and Leases Held for Investment, Net of Allowance for Loan and Lease Losses
LendingClub records certain loans and leases HFI at amortized cost, whereas loans initially classified as HFS are recorded at fair value. Prior to the Acquisition and becoming a bank holding company, all loans were recorded at fair value. Therefore, the following disclosures apply to loans and leases HFI at amortized cost.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Accrued interest receivable is excluded from the amortized cost basis of loans and leases HFI and is reported within “Other assets” on the Balance Sheet. Accrued interest within that caption related to loans and leases HFI was $15.6 million as of December 31, 2021.
Loans and Leases Held for Investment
The Company defines its loans and leases HFI portfolio segments as (i) consumer and (ii) commercial. The following table presents the components of each portfolio segment by class of financing receivable:
|
|
|
|
|
|
|
December 31, 2021
|
Unsecured personal
|
$
|
1,804,578
|
|
Residential mortgages
|
151,362
|
|
Secured consumer
|
65,976
|
|
|
|
Total consumer loans held for investment
|
2,021,916
|
|
Equipment finance (1)
|
149,155
|
|
Commercial real estate
|
310,399
|
|
Commercial and industrial (2)
|
417,656
|
|
Total commercial loans and leases held for investment
|
877,210
|
|
Total loans and leases held for investment
|
2,899,126
|
|
Allowance for loan and lease losses
|
(144,389)
|
|
Loans and leases held for investment, net (3)
|
$
|
2,754,737
|
|
(1) Comprised of sales-type leases for equipment. See “Note 18. Leases” for additional information.
(2) Includes $268.3 million of pledged loans under the Paycheck Protection Program (PPP).
(3) As of December 31, 2021, the Company had $149.2 million in loans pledged as collateral under the FRB Discount Window.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Gross
|
ALLL
|
Net
|
Allowance Ratios (1)
|
Total consumer loans held for investment
|
$
|
2,021,916
|
|
$
|
128,812
|
|
$
|
1,893,104
|
|
6.4
|
%
|
Total commercial loans and leases held for investment (2)
|
877,210
|
|
15,577
|
|
861,633
|
|
1.8
|
%
|
Total loans and leases held for investment (2)
|
$
|
2,899,126
|
|
$
|
144,389
|
|
$
|
2,754,737
|
|
5.0
|
%
|
(1) Calculated as the ratio of allowance for loan and lease losses (ALLL) to loans and leases HFI.
(2) Excluding the $268.3 million of PPP loans, the ALLL represented 2.6% of commercial loans and leases HFI and 5.5% of total loans and leases HFI. PPP loans are guaranteed by the Small Business Administration (SBA) and, therefore, the Company determined no ACL is required on these loans.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The activity in the ACL by portfolio segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021
|
Consumer
|
|
Commercial
|
|
Total
|
Allowance for loan and lease losses, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Credit loss expense for loans and leases held for investment (1)
|
136,789
|
|
|
4,162
|
|
|
140,951
|
|
Initial allowance for PCD loans acquired during the period (2)
|
603
|
|
|
11,837
|
|
|
12,440
|
|
Charge-offs (3)
|
(8,789)
|
|
|
(1,663)
|
|
|
(10,452)
|
|
Recoveries
|
209
|
|
|
1,241
|
|
|
1,450
|
|
Allowance for loan and lease losses, end of period
|
$
|
128,812
|
|
|
$
|
15,577
|
|
|
$
|
144,389
|
|
|
|
|
|
|
|
Reserve for unfunded lending commitments, beginning of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Credit loss expense for unfunded lending commitments
|
—
|
|
|
1,231
|
|
|
1,231
|
|
Reserve for unfunded lending commitments, end of period (4)
|
$
|
—
|
|
|
$
|
1,231
|
|
|
$
|
1,231
|
|
(1) Includes $6.9 million of credit loss expense for Radius loans at acquisition.
(2) For acquired PCD loans, an ACL of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, an ACL of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.
(3) Unsecured personal loans are charged-off when a borrower is (i) contractually 120 days past due or (ii) two payments past due and has filed for bankruptcy or is deceased.
(4) Relates to $110.8 million of unfunded commitments.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Consumer Lending Credit Quality Indicators
The Company evaluates the credit quality of its consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is based upon borrower payment activity relative to the contractual terms of the loan. The following table presents the classes of financing receivables within the consumer portfolio segment by credit quality indicator based on delinquency status and origination year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
Term Loans and Leases by Origination Year
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Within Revolving Period
|
|
Total
|
Unsecured personal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
1,796,678
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,796,678
|
|
30-59 days past due
|
|
3,624
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,624
|
|
60-89 days past due
|
|
2,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,600
|
|
90 or more days past due
|
|
1,676
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,676
|
|
Total unsecured personal
|
|
1,804,578
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,804,578
|
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
36,732
|
|
|
37,620
|
|
|
26,798
|
|
|
7,277
|
|
|
2,682
|
|
|
37,685
|
|
|
1,265
|
|
|
150,059
|
|
30-59 days past due
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
142
|
|
60-89 days past due
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
—
|
|
|
—
|
|
|
92
|
|
90 or more days past due
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
251
|
|
|
818
|
|
|
—
|
|
|
1,069
|
|
Total residential mortgages
|
|
36,732
|
|
|
37,620
|
|
|
26,798
|
|
|
7,277
|
|
|
3,025
|
|
|
38,645
|
|
|
1,265
|
|
|
151,362
|
|
Secured consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
62,731
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
62,741
|
|
30-59 days past due
|
|
171
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
171
|
|
60-89 days past due
|
|
53
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
90 or more days past due
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,629
|
|
|
382
|
|
|
—
|
|
|
—
|
|
|
3,011
|
|
Total secured consumer
|
|
62,955
|
|
|
—
|
|
|
—
|
|
|
2,629
|
|
|
382
|
|
|
—
|
|
|
10
|
|
|
65,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans held for investment
|
|
$
|
1,904,265
|
|
|
$
|
37,620
|
|
|
$
|
26,798
|
|
|
$
|
9,906
|
|
|
$
|
3,407
|
|
|
$
|
38,645
|
|
|
$
|
1,275
|
|
|
$
|
2,021,916
|
|
Commercial Lending Credit Quality Indicators
The Company evaluates the credit quality of its commercial loan portfolio based on regulatory risk ratings. The Company categorizes loans and leases into risk ratings based on relevant information about the quality and realizable value of collateral, if any, and the ability of borrowers to service their debts, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans and leases based on their associated credit risk and performs this analysis whenever credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans. Risk rating classifications consist of the following:
Pass – Loans and leases that the Company believes will fully repay in accordance with the contractual loan terms.
Special Mention – Loans and leases with a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date.
Substandard – Loans and leases that are inadequately protected by the current sound worth and paying capacity of the obligator or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Normal payment from the borrower is in jeopardy, although loss of principal, while still possible, is not imminent.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Doubtful – Loans and leases that have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
Loss – Loans and leases that are considered uncollectible and of little value.
The following table presents the classes of financing receivables within the commercial portfolio segment by risk rating and origination year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
Term Loans and Leases by Origination Year
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Within Revolving Period
|
|
Total
|
Equipment finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
52,440
|
|
|
$
|
35,398
|
|
|
$
|
26,918
|
|
|
$
|
15,457
|
|
|
$
|
6,184
|
|
|
$
|
8,814
|
|
|
$
|
—
|
|
|
$
|
145,211
|
|
Special mention
|
|
1,531
|
|
|
—
|
|
|
1,810
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,341
|
|
Substandard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
603
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
603
|
|
Doubtful
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total equipment finance
|
|
53,971
|
|
|
35,398
|
|
|
28,728
|
|
|
16,060
|
|
|
6,184
|
|
|
8,814
|
|
|
—
|
|
|
149,155
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
55,613
|
|
|
55,202
|
|
|
54,460
|
|
|
39,981
|
|
|
22,366
|
|
|
57,235
|
|
|
—
|
|
|
284,857
|
|
Special mention
|
|
—
|
|
|
8,397
|
|
|
—
|
|
|
1,366
|
|
|
1,018
|
|
|
7,242
|
|
|
—
|
|
|
18,023
|
|
Substandard
|
|
—
|
|
|
—
|
|
|
277
|
|
|
2,496
|
|
|
—
|
|
|
4,179
|
|
|
—
|
|
|
6,952
|
|
Doubtful
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
567
|
|
|
—
|
|
|
567
|
|
Total commercial real estate
|
|
55,613
|
|
|
63,599
|
|
|
54,737
|
|
|
43,843
|
|
|
23,384
|
|
|
69,223
|
|
|
—
|
|
|
310,399
|
|
Commercial and industrial
|
Pass
|
|
241,368
|
|
|
108,574
|
|
|
24,106
|
|
|
7,874
|
|
|
14,756
|
|
|
8,058
|
|
|
599
|
|
|
405,335
|
|
Special mention
|
|
—
|
|
|
—
|
|
|
2,207
|
|
|
463
|
|
|
1,467
|
|
|
40
|
|
|
—
|
|
|
4,177
|
|
Substandard
|
|
—
|
|
|
1,122
|
|
|
862
|
|
|
1,858
|
|
|
1,525
|
|
|
1,571
|
|
|
87
|
|
|
7,025
|
|
Doubtful
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|
4
|
|
|
1,063
|
|
|
—
|
|
|
1,119
|
|
Total commercial and industrial (1)
|
|
241,368
|
|
|
109,696
|
|
|
27,175
|
|
|
10,247
|
|
|
17,752
|
|
|
10,732
|
|
|
686
|
|
|
417,656
|
|
Total commercial loans and leases held for investment
|
|
$
|
350,952
|
|
|
$
|
208,693
|
|
|
$
|
110,640
|
|
|
$
|
70,150
|
|
|
$
|
47,320
|
|
|
$
|
88,769
|
|
|
$
|
686
|
|
|
$
|
877,210
|
|
(1) Includes $268.3 million of PPP loans.
The following table presents an analysis of the past due loans and leases HFI within the commercial portfolio segment (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
30-59
Days
|
|
60-89
Days
|
|
90 or More
Days
|
|
Total Days Past Due
|
|
|
|
|
Equipment finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Commercial real estate
|
104
|
|
|
—
|
|
|
609
|
|
|
713
|
|
|
|
|
|
Commercial and industrial (1)
|
—
|
|
|
—
|
|
|
1,410
|
|
|
1,410
|
|
|
|
|
|
Total commercial loans and leases held for investment
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
2,019
|
|
|
$
|
2,123
|
|
|
|
|
|
(1) Past due PPP loans are excluded from the table.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Nonaccrual Assets
Nonaccrual loans and leases are those for which accrual of interest has been suspended. Loans and leases are generally placed on nonaccrual status when contractually past due 90 days or more, or earlier if management believes that the probability of collection does not warrant further accrual.
The following table presents nonaccrual loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Nonaccrual(1)
|
|
Nonaccrual with no related ACL(2)
|
|
|
|
|
|
|
Unsecured personal
|
$
|
1,676
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Residential mortgages
|
1,373
|
|
|
1,373
|
|
|
|
|
|
|
|
Secured consumer
|
3,011
|
|
|
3,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual consumer loans held for investment
|
6,060
|
|
|
4,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment finance
|
603
|
|
|
—
|
|
|
|
|
|
|
|
Commercial real estate
|
989
|
|
|
989
|
|
|
|
|
|
|
|
Commercial and industrial
|
2,333
|
|
|
1,061
|
|
|
|
|
|
|
|
Total nonaccrual commercial loans and leases held for investment
|
3,925
|
|
|
2,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans and leases held for investment
|
$
|
9,985
|
|
|
$
|
6,434
|
|
|
|
|
|
|
|
(1) There were no loans that were 90 days or more past due and accruing as of December 31, 2021.
(2) Subset of total nonaccrual loans and leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Nonaccrual
|
Nonaccrual Ratios (1)
|
|
|
|
|
|
|
Total nonaccrual consumer loans held for investment
|
$
|
6,060
|
|
0.3
|
%
|
|
|
|
|
|
|
Total nonaccrual commercial loans and leases held for investment
|
3,925
|
|
0.4
|
%
|
|
|
|
|
|
|
Total nonaccrual loans and leases held for investment (2)(3)
|
$
|
9,985
|
|
0.3
|
%
|
|
|
|
|
|
|
(1) Calculated as the ratio of nonaccruing loans and leases to loans and leases HFI.
(2) The ALLL represented 1446% of nonaccrual loans and leases as of December 31, 2021.
(3) Nonaccruing loans and leases represented 0.4% of total loans and leases HFI, excluding PPP loans.
Collateral-Dependent Assets
Certain loans on non-accrual status and certain TDR loans may be considered collateral-dependent loans if the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially through sale or operation of the collateral. Expected credit losses for the Company’s collateral-dependent loans are calculated as the difference between the amortized cost basis and the fair value of the underlying collateral less costs to sell, if applicable.
Purchased Financial Assets with Credit Deterioration
Acquired loans are recorded at their fair value, which may result in the recognition of a discount or premium. In addition, the purchase price of PCD loans is grossed-up upon acquisition for the initial estimate of ACL. Subsequent changes to the ACL are recorded as additions to or reversals of credit losses on the Income Statement.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Acquired PCD loans were as follows:
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Purchase price
|
$
|
337,118
|
|
Allowance for credit losses (1)
|
30,378
|
|
Discount attributable to other factors
|
12,204
|
|
Par value
|
$
|
379,700
|
|
(1) For acquired PCD loans, an ACL of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, an ACL of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.
7. Securitizations and Variable Interest Entities
For additional information regarding the consolidation of VIEs, see “Note 1. Summary of Significant Accounting Policies.”
VIE Assets and Liabilities
The following tables provide the classifications of assets and liabilities on the Balance Sheet for its transactions with consolidated and unconsolidated VIEs. Additionally, the assets and liabilities in the tables below exclude intercompany balances that eliminate in consolidation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Consolidated VIEs
|
|
Unconsolidated VIEs
|
|
Total
|
Assets
|
|
|
|
|
|
Restricted cash
|
$
|
13,462
|
|
|
$
|
—
|
|
|
$
|
13,462
|
|
Securities available for sale at fair value
|
—
|
|
|
58,177
|
|
|
58,177
|
|
Loans held for sale at fair value
|
41,734
|
|
|
—
|
|
|
41,734
|
|
Retail and certificate loans held for investment at fair value
|
10,281
|
|
|
—
|
|
|
10,281
|
|
Other loans held for investment at fair value
|
20,929
|
|
|
—
|
|
|
20,929
|
|
Other assets
|
584
|
|
|
17,156
|
|
|
17,740
|
|
Total assets
|
$
|
86,990
|
|
|
$
|
75,333
|
|
|
$
|
162,323
|
|
Liabilities
|
|
|
|
|
|
Retail notes, certificates and secured borrowings at fair value
|
$
|
10,281
|
|
|
$
|
—
|
|
|
$
|
10,281
|
|
Payable on Structured Program borrowings
|
65,451
|
|
|
—
|
|
|
65,451
|
|
Other liabilities
|
467
|
|
|
—
|
|
|
467
|
|
Total liabilities
|
76,199
|
|
|
—
|
|
|
76,199
|
|
Total net assets
|
$
|
10,791
|
|
|
$
|
75,333
|
|
|
$
|
86,124
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Consolidated VIEs
|
|
Unconsolidated VIEs
|
|
Total
|
Assets
|
|
|
|
|
|
Restricted cash
|
$
|
15,983
|
|
|
$
|
—
|
|
|
$
|
15,983
|
|
Securities available for sale at fair value
|
—
|
|
|
142,026
|
|
|
142,026
|
|
Loans held for sale at fair value
|
98,190
|
|
|
—
|
|
|
98,190
|
|
Retail and certificate loans held for investment at fair value
|
52,620
|
|
|
—
|
|
|
52,620
|
|
Other loans held for investment at fair value
|
50,102
|
|
|
—
|
|
|
50,102
|
|
Other assets
|
1,270
|
|
|
32,865
|
|
|
34,135
|
|
Total assets
|
$
|
218,165
|
|
|
$
|
174,891
|
|
|
$
|
393,056
|
|
Liabilities
|
|
|
|
|
|
Retail notes, certificates and secured borrowings at fair value
|
$
|
52,620
|
|
|
$
|
—
|
|
|
$
|
52,620
|
|
Payable on Structured Program borrowings
|
152,808
|
|
|
—
|
|
|
152,808
|
|
Other liabilities
|
729
|
|
|
—
|
|
|
729
|
|
Total liabilities
|
206,157
|
|
|
—
|
|
|
206,157
|
|
Total net assets
|
$
|
12,008
|
|
|
$
|
174,891
|
|
|
$
|
186,899
|
|
Unconsolidated VIEs
The Company’s transactions with unconsolidated VIEs include Structured Program transactions. The Company has various forms of involvement with VIEs, including servicing of loans and holding senior or subordinated residual interests in the VIEs.
The following tables present total unconsolidated VIEs with which the Company has significant continuing involvement, but is not the primary beneficiary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Total VIE Assets
|
|
Securities Available for Sale
|
|
Other Assets
|
|
|
|
|
|
Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
$
|
1,386,279
|
|
|
$
|
58,177
|
|
|
$
|
17,156
|
|
|
|
|
|
|
$
|
75,333
|
|
Total exposure
|
N/A
|
|
$
|
58,177
|
|
|
$
|
17,156
|
|
|
|
|
|
|
$
|
75,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Total VIE Assets
|
|
Securities Available for Sale
|
|
Other Assets
|
|
|
|
|
|
Net Assets
|
Carrying value
|
$
|
3,233,416
|
|
|
$
|
142,026
|
|
|
$
|
32,865
|
|
|
|
|
|
|
$
|
174,891
|
|
Total exposure
|
N/A
|
|
$
|
142,026
|
|
|
$
|
32,865
|
|
|
|
|
|
|
$
|
174,891
|
|
N/A – Not applicable
“Total VIE Assets” represents the remaining principal balance of loans held by unconsolidated VIEs. “Net Assets” continue to decline due to the ongoing paydown of loan balances from prior Structured Program transactions. “Securities Available for Sale” and “Other Assets” are the balances on the Balance Sheet related to its involvement with the unconsolidated VIEs. “Other Assets” primarily includes the Company’s servicing assets and servicing receivables. “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.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The following table summarizes activity related to the Unconsolidated Trusts and Certificate Program trusts, with the transfers accounted for as a sale on the Company’s consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
Unconsolidated Trusts
|
|
Unconsolidated Certificate
Program
Trusts
|
|
Unconsolidated Trusts
|
|
Unconsolidated Certificate
Program
Trusts
|
Principal derecognized from loans securitized or sold (1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
255,203
|
|
|
$
|
971,738
|
|
Net gains (losses) recognized from loans securitized or sold
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(20)
|
|
|
$
|
7,897
|
|
Fair value of asset-backed senior and subordinated securities, and CLUB Certificate asset-backed securities retained upon settlement (2)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,707
|
|
|
$
|
35,836
|
|
Cash proceeds from loans securitized or sold
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
237,764
|
|
|
$
|
598,694
|
|
|
|
|
|
|
|
|
|
Cash proceeds from servicing and other administrative fees on loans securitized or sold
|
$
|
9,141
|
|
|
$
|
14,445
|
|
|
$
|
17,684
|
|
|
$
|
26,822
|
|
Cash proceeds for interest received on senior securities and subordinated securities
|
$
|
2,978
|
|
|
$
|
6,158
|
|
|
$
|
4,559
|
|
|
$
|
8,251
|
|
(1) Includes non-cash purchase and sale of loans requested by investors to facilitate a Structured Program transaction during the third quarter of 2020.
(2) For Structured Program transactions, the Company retained asset-backed senior securities of $26.3 million, CLUB Certificate asset-backed securities of $18.3 million, and asset-backed subordinated securities of $4.0 million for the year ended December 31, 2020.
The Company and other investors in the subordinated interests issued by trusts and Certificate Program trusts have rights to cash flows only after the investors holding the senior securities issued by the trusts have first received their contractual cash flows. The investors and the trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the trusts can look only to the assets of the securitization trusts that issued their securities for payment. The beneficial interests held by the Company are subject principally to the credit and prepayment risk stemming from the underlying unsecured personal loans.
Off-Balance Sheet Loans
Off-balance sheet loans pursuant to unconsolidated VIE’s primarily relate to Structured Program transactions for which the Company has some form of continuing involvement, including as servicer.
As of December 31, 2021, the aggregate unpaid principal balance of the off-balance sheet loans related to Structured Program transactions was $1.3 billion, of which $35.0 million was attributable to off-balance sheet loans that were 31 days or more past due. As of December 31, 2020, the aggregate unpaid principal balance of the off-balance sheet loans related to Structured Program transactions was $3.2 billion, of which $94.8 million was attributable to off-balance sheet loans that were 31 days or more past due. For such loans, 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.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
8. Fair Value of Assets and Liabilities
For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Note 1. Summary of Significant Accounting Policies.” The Company records certain assets and liabilities at fair value as listed in the tables below.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Level 1 Inputs
|
|
Level 2 Inputs
|
|
Level 3 Inputs
|
|
Balance at
Fair Value
|
Assets:
|
|
|
|
|
|
|
|
Loans held for sale at fair value
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
142,370
|
|
|
$
|
142,370
|
|
Retail and certificate loans held for investment at fair value
|
—
|
|
|
—
|
|
|
229,719
|
|
|
229,719
|
|
Other loans held for investment at fair value
|
—
|
|
|
—
|
|
|
21,240
|
|
|
21,240
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
U.S. agency residential mortgage-backed securities
|
—
|
|
|
123,699
|
|
|
—
|
|
|
123,699
|
|
Asset-backed senior securities and subordinated securities
|
—
|
|
|
28,129
|
|
|
11,762
|
|
|
39,891
|
|
U.S. agency securities
|
—
|
|
|
26,172
|
|
|
—
|
|
|
26,172
|
|
Other asset-backed securities
|
—
|
|
|
26,133
|
|
|
—
|
|
|
26,133
|
|
Commercial mortgage-backed securities
|
—
|
|
|
26,098
|
|
|
—
|
|
|
26,098
|
|
CLUB Certificate asset-backed securities
|
—
|
|
|
—
|
|
|
18,285
|
|
|
18,285
|
|
Municipal securities
|
—
|
|
|
3,252
|
|
|
—
|
|
|
3,252
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
—
|
|
|
233,483
|
|
|
30,047
|
|
|
263,530
|
|
Servicing assets
|
—
|
|
|
—
|
|
|
67,726
|
|
|
67,726
|
|
Other assets
|
—
|
|
|
2,812
|
|
|
3,312
|
|
|
6,124
|
|
Total assets
|
$
|
—
|
|
|
$
|
236,295
|
|
|
$
|
494,414
|
|
|
$
|
730,709
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Retail notes, certificates and secured borrowings
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
229,719
|
|
|
$
|
229,719
|
|
Payable on Structured Program borrowings
|
—
|
|
|
—
|
|
|
65,451
|
|
|
65,451
|
|
Other liabilities
|
—
|
|
|
—
|
|
|
12,911
|
|
|
12,911
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
308,081
|
|
|
$
|
308,081
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Level 1 Inputs
|
|
Level 2 Inputs
|
|
Level 3 Inputs
|
|
Balance at Fair Value
|
Assets:
|
|
|
|
|
|
|
|
Loans held for sale at fair value
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
121,902
|
|
|
$
|
121,902
|
|
Retail and certificate loans held for investment at fair value
|
—
|
|
|
—
|
|
|
636,686
|
|
|
636,686
|
|
Other loans held for investment at fair value
|
—
|
|
|
—
|
|
|
49,954
|
|
|
49,954
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
Asset-backed senior securities and subordinated securities
|
—
|
|
|
75,372
|
|
|
16,515
|
|
|
91,887
|
|
CLUB Certificate asset-backed securities
|
—
|
|
|
—
|
|
|
50,139
|
|
|
50,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
Total securities available for sale
|
—
|
|
|
75,572
|
|
|
66,654
|
|
|
142,226
|
|
Servicing assets
|
—
|
|
|
—
|
|
|
56,347
|
|
|
56,347
|
|
Total assets
|
$
|
—
|
|
|
$
|
75,572
|
|
|
$
|
931,543
|
|
|
$
|
1,007,115
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Retail notes, certificates and secured borrowings
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
636,774
|
|
|
$
|
636,774
|
|
Payable on Structured Program borrowings
|
—
|
|
|
—
|
|
|
152,808
|
|
|
152,808
|
|
Other liabilities
|
—
|
|
|
—
|
|
|
12,270
|
|
|
12,270
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
801,852
|
|
|
$
|
801,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments are categorized in the valuation hierarchy based on the significance of observable or unobservable factors in the overall fair value measurement. For the financial instruments listed in the tables above that 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 DCF 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 the Company’s best estimates of the assumptions a market participant would use to calculate fair value. Due to changes in the availability of market observable inputs, the Company transferred $517 thousand of asset-backed securities related to Structured Program transactions out of Level 3 during the year ended December 31, 2020. The Company did not transfer any other assets or liabilities in or out of Level 3 during the year ended December 31, 2021.
Loans Held for Sale at Fair Value
As of December 31, 2021, the majority of loans HFS were sold shortly after origination and at committed prices. Therefore, the Company is generally not exposed to fair value fluctuations as a result of adverse changes in key assumptions.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Significant Recurring Level 3 Fair Value Input Sensitivity
The sensitivity of loans held for sale at fair value to adverse changes in key assumptions are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
Loans held for sale at fair value
|
$
|
142,370
|
|
|
$
|
121,902
|
|
Expected weighted-average life (in years)
|
1.3
|
|
1.1
|
Discount rates
|
|
|
|
100 basis point increase
|
$
|
(1,540)
|
|
|
$
|
(1,151)
|
|
200 basis point increase
|
$
|
(3,055)
|
|
|
$
|
(2,282)
|
|
Expected credit loss rates on underlying loans
|
|
|
|
10% adverse change
|
$
|
(608)
|
|
|
$
|
(1,099)
|
|
20% adverse change
|
$
|
(1,236)
|
|
|
$
|
(2,220)
|
|
Expected prepayment rates
|
|
|
|
10% adverse change
|
$
|
(1,450)
|
|
|
$
|
(273)
|
|
20% adverse change
|
$
|
(2,997)
|
|
|
$
|
(556)
|
|
Fair Value Reconciliation
The following tables present additional information about Level 3 loans held for sale at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Principal Balance
|
|
Valuation Adjustment
|
|
Fair Value
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
|
|
|
|
$
|
747,394
|
|
|
$
|
(25,039)
|
|
|
$
|
722,355
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
1,568,844
|
|
|
(6)
|
|
|
1,568,838
|
|
|
|
|
|
|
|
Transfers to loans held for investment
|
|
|
|
|
|
|
(41,431)
|
|
|
—
|
|
|
(41,431)
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
(1,907,446)
|
|
|
87,723
|
|
|
(1,819,723)
|
|
|
|
|
|
|
|
Principal payments and retirements
|
|
|
|
|
|
|
(207,483)
|
|
|
—
|
|
|
(207,483)
|
|
|
|
|
|
|
|
Charge-offs, net of recoveries
|
|
|
|
|
|
|
(27,278)
|
|
|
25,627
|
|
|
(1,651)
|
|
|
|
|
|
|
|
Change in fair value recorded in earnings
|
|
|
|
|
|
|
—
|
|
|
(99,003)
|
|
|
(99,003)
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
|
|
|
|
$
|
132,600
|
|
|
$
|
(10,698)
|
|
|
$
|
121,902
|
|
|
|
|
|
|
|
Originations and purchases
|
|
|
|
|
|
|
7,507,695
|
|
|
(1,629)
|
|
|
7,506,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
(7,386,633)
|
|
|
5,124
|
|
|
(7,381,509)
|
|
|
|
|
|
|
|
Principal payments and retirements
|
|
|
|
|
|
|
(98,530)
|
|
|
—
|
|
|
(98,530)
|
|
|
|
|
|
|
|
Charge-offs, net of recoveries
|
|
|
|
|
|
|
(7,939)
|
|
|
3,441
|
|
|
(4,498)
|
|
|
|
|
|
|
|
Change in fair value recorded in earnings
|
|
|
|
|
|
|
—
|
|
|
(1,061)
|
|
|
(1,061)
|
|
|
|
|
|
|
|
Balance at December 31, 2021
|
|
|
|
|
|
|
$
|
147,193
|
|
|
$
|
(4,823)
|
|
|
$
|
142,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and Certificate Loans and Related Notes, Certificates and Secured Borrowings
The Company does not assume principal or interest rate risk on loans that were funded by its member payment dependent self-directed retail program (Retail Program) 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. At December 31, 2021 and 2020, the DCF methodology used to estimate the retail note, certificate and secured borrowings’ fair values used the same projected net cash flows as their related loans. Therefore, the fair value adjustments for retail loans held for investment were largely offset by the corresponding fair value adjustments due to the payment dependent design of the retail notes, certificates and secured borrowings.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
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 relating to loans sold to investors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
Minimum
|
|
Maximum
|
|
Weighted-
Average
|
|
Minimum
|
|
Maximum
|
|
Weighted-Average
|
Discount rates
|
|
7.5
|
%
|
|
16.4
|
%
|
|
10.0
|
%
|
|
4.8
|
%
|
|
16.4
|
%
|
|
9.9
|
%
|
Net cumulative expected loss rates (1)
|
|
2.4
|
%
|
|
26.4
|
%
|
|
10.2
|
%
|
|
4.5
|
%
|
|
26.3
|
%
|
|
12.5
|
%
|
Cumulative expected prepayment rates (1)
|
|
32.1
|
%
|
|
45.9
|
%
|
|
38.4
|
%
|
|
27.0
|
%
|
|
38.9
|
%
|
|
31.2
|
%
|
Total market servicing rates (% per annum on outstanding principal balance) (2)
|
|
0.62
|
%
|
|
0.62
|
%
|
|
0.62
|
%
|
|
0.62
|
%
|
|
0.62
|
%
|
|
0.62
|
%
|
(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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
Weighted-average market servicing rate assumptions
|
0.62
|
%
|
|
|
0.62
|
%
|
|
|
Change in fair value from:
|
|
|
|
|
|
|
Servicing rate increase by 0.10%
|
$
|
(9,495)
|
|
|
|
$
|
(7,379)
|
|
|
|
Servicing rate decrease by 0.10%
|
$
|
9,495
|
|
|
|
$
|
7,379
|
|
|
|
The following table presents the fair value of servicing assets to adverse changes in key assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
Fair value of Servicing Assets
|
$
|
67,726
|
|
|
|
$
|
56,347
|
|
|
|
Discount rates
|
|
|
|
|
|
|
100 basis point increase
|
$
|
(558)
|
|
|
|
$
|
(455)
|
|
|
|
200 basis point increase
|
$
|
(1,115)
|
|
|
|
$
|
(911)
|
|
|
|
Expected loss rates
|
|
|
|
|
|
|
10% adverse change
|
$
|
(693)
|
|
|
|
$
|
(346)
|
|
|
|
20% adverse change
|
$
|
(1,386)
|
|
|
|
$
|
(691)
|
|
|
|
Expected prepayment rates
|
|
|
|
|
|
|
10% adverse change
|
$
|
(2,401)
|
|
|
|
$
|
(1,596)
|
|
|
|
20% adverse change
|
$
|
(4,802)
|
|
|
|
$
|
(3,192)
|
|
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Fair Value Reconciliation
The following table presents additional information about Level 3 servicing assets measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2019
|
$
|
89,680
|
|
|
|
Issuances (1)
|
33,990
|
|
|
|
Change in fair value, included in Marketplace Revenue
|
(58,730)
|
|
|
|
Other net changes included in Deferred Revenue
|
(8,593)
|
|
|
|
Fair value at December 31, 2020
|
$
|
56,347
|
|
|
|
Issuances (1)
|
69,075
|
|
|
|
Change in fair value, included in Marketplace Revenue
|
(56,561)
|
|
|
|
Other net changes included in Deferred Revenue
|
(1,135)
|
|
|
|
Fair value at December 31, 2021
|
$
|
67,726
|
|
|
|
(1) Represents the gains or losses on sales of the related loans.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
Carrying Amount
|
|
Level 1 Inputs
|
|
Level 2 Inputs
|
|
Level 3 Inputs
|
|
Balance at
Fair Value
|
Assets:
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
$
|
248,878
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
251,101
|
|
|
$
|
251,101
|
|
Loans and leases held for investment, net
|
2,754,737
|
|
|
—
|
|
|
—
|
|
|
2,964,691
|
|
|
2,964,691
|
|
Other assets
|
18,274
|
|
|
—
|
|
|
15,630
|
|
|
2,644
|
|
|
18,274
|
|
Total assets
|
$
|
3,021,889
|
|
|
$
|
—
|
|
|
$
|
15,630
|
|
|
$
|
3,218,436
|
|
|
$
|
3,234,066
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits (1)
|
$
|
68,405
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
68,405
|
|
|
$
|
68,405
|
|
Short-term borrowings
|
27,780
|
|
|
—
|
|
|
17,595
|
|
|
10,185
|
|
|
27,780
|
|
Advances from PPPLF
|
271,933
|
|
|
—
|
|
|
—
|
|
|
271,933
|
|
|
271,933
|
|
Other long-term debt
|
15,455
|
|
|
—
|
|
|
—
|
|
|
15,455
|
|
|
15,455
|
|
Other liabilities
|
51,655
|
|
|
—
|
|
|
22,187
|
|
|
29,468
|
|
|
51,655
|
|
Total liabilities
|
$
|
435,228
|
|
|
$
|
—
|
|
|
$
|
39,782
|
|
|
$
|
395,446
|
|
|
$
|
435,228
|
|
(1) Excludes deposit liabilities with no defined or contractual maturities.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Carrying Amount
|
|
Level 1 Inputs
|
|
Level 2 Inputs
|
|
Level 3 Inputs
|
|
Balance at
Fair Value
|
Assets:
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents (1)
|
$
|
524,963
|
|
|
$
|
—
|
|
|
$
|
524,963
|
|
|
$
|
—
|
|
|
$
|
524,963
|
|
Restricted cash (1)
|
103,522
|
|
|
—
|
|
|
103,522
|
|
|
—
|
|
|
103,522
|
|
Other assets
|
914
|
|
|
—
|
|
|
914
|
|
|
—
|
|
|
914
|
|
Total assets
|
$
|
629,399
|
|
|
$
|
—
|
|
|
$
|
629,399
|
|
|
$
|
—
|
|
|
$
|
629,399
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
$
|
104,989
|
|
|
$
|
—
|
|
|
$
|
65,121
|
|
|
$
|
39,868
|
|
|
$
|
104,989
|
|
Other liabilities
|
57,536
|
|
|
—
|
|
|
43,984
|
|
|
13,552
|
|
|
57,536
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
162,525
|
|
|
$
|
—
|
|
|
$
|
109,105
|
|
|
$
|
53,420
|
|
|
$
|
162,525
|
|
(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:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Internally developed software (1)
|
$
|
96,171
|
|
|
$
|
101,953
|
|
Leasehold improvements
|
36,556
|
|
|
35,140
|
|
Computer equipment
|
29,598
|
|
|
27,030
|
|
Purchased software
|
22,403
|
|
|
19,004
|
|
Furniture and fixtures
|
8,346
|
|
|
8,203
|
|
Construction in progress
|
3,319
|
|
|
2,761
|
|
Total property, equipment and software
|
196,393
|
|
|
194,091
|
|
Accumulated depreciation and amortization
|
(98,397)
|
|
|
(97,450)
|
|
Total property, equipment and software, net
|
$
|
97,996
|
|
|
$
|
96,641
|
|
(1) Includes $14.7 million and $13.9 million of software development in progress as of December 31, 2021 and 2020, respectively.
Depreciation and amortization expense on property, equipment and software was $38.2 million, $45.2 million and $51.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The Company recorded impairment expense on its leasehold improvements and furniture and fixtures of $1.9 million for the year ended December 31, 2020. No impairment expense was recorded in 2021 and 2019.
The Company recorded impairment expense on its internally developed software of $0.8 million, $5.7 million and $3.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The Company records the above expenses in “Depreciation and amortization” expense on the Income Statement.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
10. Goodwill and Intangible Assets
Goodwill
In connection with the Acquisition in the first quarter of 2021, the Company recognized Goodwill of $75.7 million, which is fully allocated to the LC Bank operating segment. Goodwill is not amortized, but will be subject to annual impairment tests. For additional detail, see “Note 1. Summary of Significant Accounting Policies.”
Intangible Assets
Intangible assets consist of customer relationships. Intangible assets, net of accumulated amortization, are included in “Other assets” on the Balance Sheet. The gross and net carrying values and accumulated amortization were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Gross Carrying Value
|
$
|
54,500
|
|
|
$
|
39,500
|
|
Accumulated Amortization
|
(33,319)
|
|
|
(28,073)
|
|
Net Carrying Value
|
$
|
21,181
|
|
|
$
|
11,427
|
|
The customer relationship intangible assets are amortized on an accelerated basis from ten to fourteen years. Amortization expense associated with intangible assets for the years ended December 31, 2021, 2020 and 2019 was $5.2 million, $3.1 million and $3.5 million, respectively. There was no impairment loss for the years ended December 31, 2021, 2020 and 2019.
The expected future amortization expense for intangible assets as of December 31, 2021, is as follows:
|
|
|
|
|
|
2022
|
$
|
4,847
|
|
2023
|
4,198
|
|
2024
|
3,549
|
|
2025
|
2,901
|
|
2026
|
2,252
|
|
Thereafter
|
3,434
|
|
Total
|
$
|
21,181
|
|
11. Other Assets
Other assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Operating lease assets
|
$
|
77,316
|
|
|
$
|
74,037
|
|
Servicing assets (1)
|
70,370
|
|
|
56,347
|
|
Nonmarketable equity investments
|
31,726
|
|
|
8,275
|
|
Intangible assets, net (2)
|
21,181
|
|
|
11,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
101,953
|
|
|
37,313
|
|
Total other assets
|
$
|
302,546
|
|
|
$
|
187,399
|
|
(1) Loans underlying servicing assets had a total outstanding principal balance of $10.3 billion and $10.1 billion as of December 31, 2021 and 2020, respectively.
(2) See “Note 10. Goodwill and Intangible Assets” for additional detail.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
12. Deposits
Deposits consist of the following:
|
|
|
|
|
|
|
|
|
December 31,
2021
|
|
|
Interest-bearing deposits:
|
|
|
|
Checking accounts
|
$
|
1,993,809
|
|
|
|
Savings and money market accounts
|
856,989
|
|
|
|
Certificates of deposit
|
68,405
|
|
|
|
Total
|
$
|
2,919,203
|
|
|
|
Noninterest-bearing deposits
|
216,585
|
|
|
|
Total deposits
|
$
|
3,135,788
|
|
|
|
Total certificates of deposit at December 31, 2021 are scheduled to mature as follows:
|
|
|
|
|
|
2022
|
$
|
53,740
|
|
2023
|
13,579
|
|
2024
|
462
|
|
2025
|
178
|
|
2026
|
446
|
|
|
|
Total certificates of deposit
|
$
|
68,405
|
|
The following table presents the amount of certificates of deposit with denominations exceeding the Federal Deposit Insurance Corporation (FDIC) limit of $250 thousand, segregated by time remaining until maturity, as of December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months or less
|
|
Over 3 months through
6 months
|
|
Over 6 months through
12 months
|
|
Over
12 months
|
|
Total
|
Certificates of deposit
|
$
|
12,338
|
|
|
$
|
806
|
|
|
$
|
250
|
|
|
$
|
588
|
|
|
$
|
13,982
|
|
13. Short-term Borrowings and Long-term Debt
Short-term Borrowings:
Repurchase Agreements
The Company entered into repurchase agreements pursuant to which the Company sold securities (subject to an obligation to repurchase such securities at a specified future date and price) in exchange for cash. As of December 31, 2021 and 2020, the Company had $27.8 million and $105.0 million in aggregate debt outstanding under its repurchase agreements, respectively, which is amortized over time through regular principal and interest payments collected from the pledged securities. At December 31, 2021, a majority of the Company’s repurchase agreements have contractual repurchase dates ranging from September 2022 to March 2028. These contractual repurchase dates correspond to either a set repurchase schedule or to the maturity dates of the underlying securities, which have a remaining weighted-average estimated life of less than one year. At December 31, 2021 and 2020, the repurchase agreements bore interest rates ranging from 3.12% to 6.72% and 3.05% to 4.00%, respectively, which are either fixed or based on a benchmark of the weighted-average interest rate of the securities sold plus a spread.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Underlying securities retained and pledged as collateral under repurchase agreements were $50.5 million and $133.5 million at December 31, 2021 and 2020, respectively.
Long-term Debt:
Advances from PPPLF
As of December 31, 2021, outstanding PPPLF borrowings were $271.9 million and are collateralized by SBA PPP loans originated by the Company. The maturity date of the PPPLF borrowings matches the maturity date of the SBA PPP loans. When loans are forgiven by the SBA, the corresponding PPPLF advance is paid by the Company. The interest rate on the PPPLF borrowings is fixed at 0.35%.
Retail Notes, Certificates, and Secured Borrowings
The Company issued Retail Notes and LC Trust I issued certificates as a means to allow investors to invest in the corresponding loans. Investors were able to purchase Retail Notes, where the cash flows to investors were dependent upon principal and interest payments made by borrowers of the underlying unsecured personal loans. As of December 31, 2020, LendingClub ceased offering and selling Retail Notes. The total balance of outstanding Retail Notes will continue to decline as underlying borrower payments are made. The Company does not assume principal or interest rate risk on loans that were funded by Retail Notes because loan balances, interest rates and maturities were matched and offset by an equal balance of notes with the exact same interest rates and maturities.
The following table provides the balances of retail notes, certificates and secured borrowings at fair value as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Retail notes
|
$
|
219,435
|
|
|
$
|
583,219
|
|
Certificates
|
10,281
|
|
|
52,620
|
|
Secured borrowings
|
3
|
|
|
935
|
|
Total retail notes, certificates and secured borrowings
|
$
|
229,719
|
|
|
$
|
636,774
|
|
Payable on Structured Program Borrowings
As of December 31, 2021 and 2020, the certificate participations and securities of certain consolidated VIEs held by third-party investors of $65.5 million and $152.8 million, respectively, are included in “Payable on Structured Program borrowings” on the Balance Sheet and were secured by “Other loans held for investment at fair value” and “Loans held for sale” of $62.7 million and $148.3 million and restricted cash of $11.2 million and $13.5 million, respectively.
Other Long-term Debt
The Company has subordinated notes with an outstanding amount of $15.3 million as of December 31, 2021. The subordinated notes are at a 6.5% fixed to floating rate and are due June 30, 2027. Fixed interest payments are due semiannually in arrears on June 30 and December 30. Subsequent to June 30, 2022, the rate resets quarterly at a rate equal to 3-month London Interbank Offered Rate (LIBOR) plus 4.64%. The subordinated notes are junior in right to the repayment in full of all existing claims of creditors and depositors of the Company. The subordinated notes may be redeemed, in whole or in part, at par plus accrued unpaid interest after June 2022 at the option of the Company.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
14. Other Liabilities
Other liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Accounts payable and accrued expenses
|
$
|
100,972
|
|
|
$
|
46,885
|
|
Operating lease liabilities
|
91,588
|
|
|
94,538
|
|
|
|
|
|
Payable to investors
|
22,187
|
|
|
40,286
|
|
|
|
|
|
|
|
|
|
Other
|
89,204
|
|
|
62,842
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
$
|
303,951
|
|
|
$
|
244,551
|
|
15. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) represents other cumulative gains and losses that are not reflected in earnings. The components of other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Change in net unrealized gain (loss) on securities available for sale
|
$
|
5,562
|
|
|
$
|
—
|
|
|
$
|
5,562
|
|
Other comprehensive income (loss)
|
$
|
5,562
|
|
|
$
|
—
|
|
|
$
|
5,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Change in net unrealized gain (loss) on securities available for sale
|
$
|
2,044
|
|
|
$
|
(5)
|
|
|
$
|
2,049
|
|
Other comprehensive income (loss)
|
$
|
2,044
|
|
|
$
|
(5)
|
|
|
$
|
2,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2019
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Change in net unrealized gain (loss) on securities available for sale
|
$
|
(526)
|
|
|
$
|
216
|
|
|
$
|
(742)
|
|
Other comprehensive income (loss)
|
$
|
(526)
|
|
|
$
|
216
|
|
|
$
|
(742)
|
|
Accumulated other comprehensive income (loss) balances were as follows:
|
|
|
|
|
|
|
Total
Accumulated Other Comprehensive Income (Loss)
|
Balance at December 31, 2019
|
$
|
(565)
|
|
Change in net unrealized gain (loss) on securities available for sale
|
2,049
|
|
Balance at December 31, 2020
|
$
|
1,484
|
|
Change in net unrealized gain (loss) on securities available for sale
|
5,562
|
|
Balance at December 31, 2021
|
$
|
7,046
|
|
16. Employee Incentive Plans
The Company’s equity incentive plans provide for granting awards, including RSUs, PBRSUs, cash awards and stock options to employees, officers and directors.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Common Stock Reserved for Future Issuance
Shares of common stock reserved for future issuance was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Available for future RSU, PBRSU and stock option grants
|
15,172,055
|
|
|
12,552,761
|
|
Unvested RSUs, PBRSUs and stock options outstanding
|
13,029,414
|
|
|
14,631,526
|
|
Available for ESPP
|
5,161,860
|
|
|
4,134,033
|
|
Total reserved for future issuance
|
33,363,329
|
|
|
31,318,320
|
|
Stock-based Compensation
Stock-based compensation expense was as follows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
RSUs and PBRSUs
|
$
|
66,552
|
|
|
$
|
60,745
|
|
|
$
|
70,772
|
|
Stock options
|
599
|
|
|
788
|
|
|
2,383
|
|
ESPP (1)
|
—
|
|
|
—
|
|
|
484
|
|
Total stock-based compensation expense
|
$
|
67,151
|
|
|
$
|
61,533
|
|
|
$
|
73,639
|
|
(1) Purchases through the Company’s employee stock purchase plan (ESPP) were suspended effective upon the completion of the offering period on May 10, 2019.
The Company capitalized $4.4 million, $5.1 million and $6.3 million of stock-based compensation expense associated with developing software for internal use during the years ended December 31, 2021, 2020 and 2019, respectively.
Restricted Stock Units
The following table summarizes the activities for the Company’s RSUs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Units
|
|
Weighted-
Average
Grant Date
Fair Value
|
Unvested at December 31, 2020
|
11,395,112
|
|
|
$
|
11.26
|
|
Granted
|
5,792,679
|
|
|
$
|
14.39
|
|
Vested
|
(5,033,976)
|
|
|
$
|
11.98
|
|
Forfeited/expired
|
(2,450,064)
|
|
|
$
|
12.58
|
|
Unvested at December 31, 2021
|
9,703,751
|
|
|
$
|
12.44
|
|
|
|
|
|
During the year ended December 31, 2021, the Company granted 5,792,679 RSUs with an aggregate fair value of $83.4 million.
As of December 31, 2021, there was $109.7 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 2.1 years.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Performance-based Restricted Stock Units
PBRSUs are restricted stock unit awards that are earned and eligible for vesting (if applicable) based upon the achievement of certain pre-established performance metrics over a specific performance period. The Company’s PBRSU awards have a separate market-based component and/or a performance-based component. Certain of the Company’s PBRSU awards have additional time-based vesting for any earned shares. With respect to PBRSU awards with market-based metrics, the compensation expense of the award is fixed at the time of grant (incorporating the probability of achieving the market-based metrics) and expensed over the performance and vesting period. With respect to PBRSU awards with performance-based metrics, the compensation expense of the award is set at the time of grant (assuming a target level of achievement), adjusted for actual performance during the performance period and expensed over the performance and vesting period.
The following table summarizes the activities for the Company’s PBRSUs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Units
|
|
Weighted-
Average
Grant Date
Fair Value
|
Unvested at December 31, 2020
|
1,441,311
|
|
|
$
|
5.31
|
|
Granted
|
568,285
|
|
|
$
|
22.54
|
|
Vested
|
(79,604)
|
|
|
$
|
22.59
|
|
Forfeited/expired
|
(158,123)
|
|
|
$
|
12.41
|
|
Unvested at December 31, 2021
|
1,771,869
|
|
|
$
|
9.72
|
|
|
|
|
|
For the years ended December 31, 2021, 2020 and 2019, the Company recognized $7.0 million, $2.8 million and $3.9 million in stock-based compensation expense related to PBRSUs, respectively.
As of December 31, 2021, there was $10.5 million of unrecognized compensation cost related to unvested PBRSUs, which is expected to be recognized over the next 1.5 years.
Stock Options
The following table summarizes the activities for the Company’s stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
Weighted-Average
Exercise
Price Per
Share
|
|
Weighted-Average
Remaining
Contractual Life (in years)
|
|
Aggregate
Intrinsic
Value (1)
(in thousands)
|
Outstanding at December 31, 2020
|
1,795,116
|
|
|
$
|
29.99
|
|
|
|
|
|
Granted
|
188,626
|
|
|
$
|
5.32
|
|
|
|
|
|
Exercised
|
(264,826)
|
|
|
$
|
9.22
|
|
|
|
|
|
Forfeited/Expired
|
(165,109)
|
|
|
$
|
15.12
|
|
|
|
|
|
Outstanding at December 31, 2021
|
1,553,807
|
|
|
$
|
32.12
|
|
|
3.06
|
|
$
|
6,913
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2021
|
1,511,469
|
|
|
$
|
32.87
|
|
|
2.96
|
|
$
|
6,115
|
|
(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $24.18 as reported on the New York Stock Exchange on December 31, 2021.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
As part of the Acquisition, the Company granted service-based stock options to purchase 188,626 shares of common stock with a weighted-average exercise price of $5.32 per option share, a weighted-average grant date fair value of $6.25 per option share and an aggregate estimated fair value of $1.2 million.
The aggregate intrinsic value of options exercised was $5.1 million, $1.8 million and $5.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. The total fair value of stock options vested for the years ended December 31, 2021, 2020 and 2019 was $0.3 million, $1.0 million and $2.8 million, respectively.
As of December 31, 2021, there was $38.0 thousand in unrecognized compensation cost related to outstanding stock options.
There were no stock options granted during the years ended December 31, 2020 and 2019.
17. Income Taxes
Income tax benefit consisted of the following for the periods shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Current:
|
|
|
|
|
|
Federal
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
(141)
|
|
State
|
3,541
|
|
|
(78)
|
|
|
(60)
|
|
Total current tax expense (benefit)
|
$
|
3,541
|
|
|
$
|
(79)
|
|
|
$
|
(201)
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
Federal
|
$
|
(2,066)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
(1,611)
|
|
|
—
|
|
|
—
|
|
Total deferred benefit
|
$
|
(3,677)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income tax benefit
|
$
|
(136)
|
|
|
$
|
(79)
|
|
|
$
|
(201)
|
|
Income tax benefit for the year ended December 31, 2021 was primarily related to a tax benefit associated with the Acquisition, partially offset by income tax expense for state jurisdictions that limit net operating loss utilization. Income tax benefit for the year ended December 31, 2020 was primarily attributable to current state income taxes. Income tax benefit for the year ended December 31, 2019 was primarily attributable to the tax effects of unrealized gains recorded to other comprehensive income associated with the Company’s available for sale portfolio.
A reconciliation of the income taxes expected at the statutory federal income tax rate and income tax benefit is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Tax at federal statutory rate
|
$
|
3,873
|
|
|
$
|
(39,399)
|
|
|
$
|
(6,499)
|
|
|
|
State tax, net of federal tax benefit
|
1,524
|
|
|
(81)
|
|
|
(60)
|
|
|
|
Stock-based compensation expense
|
(11,839)
|
|
|
8,044
|
|
|
4,773
|
|
|
|
Research and development tax credits
|
(4,354)
|
|
|
(994)
|
|
|
(2,336)
|
|
|
|
Change in valuation allowance
|
7,867
|
|
|
29,728
|
|
|
(802)
|
|
|
|
Change in unrecognized tax benefit
|
2,177
|
|
|
497
|
|
|
1,168
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
742
|
|
|
2,278
|
|
|
3,250
|
|
|
|
Other
|
(126)
|
|
|
(152)
|
|
|
305
|
|
|
|
Income tax benefit
|
$
|
(136)
|
|
|
$
|
(79)
|
|
|
$
|
(201)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The significant components of the Company’s deferred tax assets and liabilities were:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
2020
|
Deferred tax assets:
|
|
|
|
Net operating loss (NOL) carryforwards
|
$
|
144,510
|
|
|
$
|
163,381
|
|
Allowance for loan and lease losses
|
41,170
|
|
|
—
|
|
Stock-based compensation
|
11,721
|
|
|
10,218
|
|
Reserves and accruals
|
13,051
|
|
|
15,652
|
|
Operating lease liabilities
|
25,807
|
|
|
28,032
|
|
Goodwill
|
14,737
|
|
|
17,375
|
|
Intangible assets
|
—
|
|
|
3,151
|
|
Tax credit carryforwards
|
19,339
|
|
|
18,215
|
|
Other
|
3,492
|
|
|
868
|
|
Total deferred tax assets
|
273,827
|
|
|
256,892
|
|
Valuation allowance
|
(223,367)
|
|
|
(211,228)
|
|
Deferred tax assets – net of valuation allowance
|
$
|
50,460
|
|
|
$
|
45,664
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Internally developed software
|
$
|
(17,431)
|
|
|
$
|
(16,956)
|
|
Servicing fees
|
(2,452)
|
|
|
(2,780)
|
|
|
|
|
|
Operating lease assets
|
(21,614)
|
|
|
(22,048)
|
|
Leases
|
(6,961)
|
|
|
—
|
|
Intangible assets
|
(440)
|
|
|
—
|
|
Change in tax method
|
—
|
|
|
(1,769)
|
|
Other
|
(1,562)
|
|
|
(2,111)
|
|
Total deferred tax liabilities
|
$
|
(50,460)
|
|
|
$
|
(45,664)
|
|
Deferred tax asset (liability) – net
|
$
|
—
|
|
|
$
|
—
|
|
The Company continues to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. As of December 31, 2021 and 2020, the valuation allowance was $223.4 million and $211.2 million, respectively.
As of December 31, 2021, the Company had federal and state NOL carryforwards (prior to the application of statutory tax rates) of approximately $464.8 million and $620.0 million. Federal and state NOLs of approximately $211.6 million and $36.8 million carry forward indefinitely and the remainder start expiring in 2026 and 2025, respectively. Additionally, as of December 31, 2021, the Company had federal and state research and development credit carryforwards of $21.7 million and $15.8 million, respectively. The federal research credit carryforwards will expire beginning in 2026 and the state research credits may be carried forward indefinitely.
In general, a corporation’s ability to utilize its NOL and research and development credit carryforwards may be substantially limited due to the ownership change limitations as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. The federal and state Section 382 and 383 limitations may limit the use of a portion of the Company’s domestic NOL and tax credit carryforwards. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Beginning balance
|
$
|
17,626
|
|
|
$
|
15,998
|
|
|
$
|
13,377
|
|
Gross increase for tax positions related to prior years
|
1,272
|
|
|
—
|
|
|
—
|
|
Gross increase for tax positions related to the current year
|
3,614
|
|
|
1,628
|
|
|
2,621
|
|
Ending balance
|
$
|
22,512
|
|
|
$
|
17,626
|
|
|
$
|
15,998
|
|
If the unrecognized tax benefit as of December 31, 2021 is recognized, there will be no effect on the Company’s effective tax rate as the tax benefit would increase a deferred tax asset, which is currently offset with a full valuation allowance. As of December 31, 2021, the Company had no accrued interest and penalties related to unrecognized tax benefits. The Company does not expect any significant increases or decreases to its unrecognized benefits within the next twelve months.
The Company files income tax returns in the United States and various state jurisdictions. As of December 31, 2021, the Company’s federal tax returns for 2017 and earlier, and the state tax returns for 2016 and earlier were no longer subject to examination by the taxing authorities. However, tax periods closed in a prior period may be subject to audit and re-examination by tax authorities for which tax carryforwards are utilized in subsequent years.
18. Leases
Lessor Arrangements
The Company has lessor arrangements which consist of sales-type leases for equipment (Equipment Finance). Such arrangements may include options to renew or to purchase the leased equipment at the end of the lease term. For the year ended December 31, 2021, interest earned on Equipment Finance was $10.8 million and is included in “Interest and fees on loans and leases held for investment” on the Income Statement.
The components of Equipment Finance assets are as follows:
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
|
Lease receivables
|
$
|
122,927
|
|
|
|
Unguaranteed residual asset values
|
36,837
|
|
|
|
Unearned income
|
(10,989)
|
|
|
|
Deferred fees
|
380
|
|
|
|
Total
|
$
|
149,155
|
|
|
|
Future minimum lease payments based on maturity of the Company’s lessor arrangements as of December 31, 2021 were as follows:
|
|
|
|
|
|
2022
|
$
|
43,907
|
|
2023
|
35,803
|
|
2024
|
27,374
|
|
2025
|
16,235
|
|
2026
|
9,084
|
|
Thereafter
|
4,382
|
|
Total lease payments
|
$
|
136,785
|
|
Discount effect
|
(13,858)
|
|
Present value of future minimum lease payments
|
$
|
122,927
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Lessee Arrangements
The Company has operating leases for its headquarters in San Francisco, California, as well as additional office space in the Salt Lake City, Utah, and Boston, Massachusetts areas. As of December 31, 2021, the lease agreements have remaining lease terms ranging from approximately one year to nine years. Some of the lease agreements include options to extend the lease term for up to an additional fifteen years. In addition, the Company is the sublessor of a portion of its office space in San Francisco, with remaining lease terms of less than one year. As of December 31, 2021, the Company pledged $0.9 million of cash and $5.5 million in letters of credit as security deposits in connection with its lease agreements.
The Company reviewed operating lease right-of-use (ROU) assets for impairment. For the year ended December 31, 2021, the Company recognized an impairment expense of $1.0 million on operating lease assets, included in “Occupancy expense.” For the year ended December 31, 2020, the Company recognized an impairment expense of $3.6 million on operating lease assets.
Balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROU Assets and Lease Liabilities
|
Balance Sheet Classification
|
December 31, 2021
|
December 31, 2020
|
|
|
Operating lease assets
|
Other assets
|
$
|
77,316
|
|
$
|
74,037
|
|
|
|
Operating lease liabilities (1)
|
Other liabilities
|
$
|
91,588
|
|
$
|
94,538
|
|
|
|
(1) The difference between operating lease assets and operating lease liabilities is the unamortized balance of deferred rent.
Components of net lease costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Net Lease Costs
|
Income Statement Classification
|
2021
|
|
2020
|
|
2019
|
Operating lease costs (1)
|
Occupancy
|
$
|
(18,773)
|
|
$
|
(17,346)
|
|
$
|
(19,502)
|
Sublease revenue
|
Other non-interest income
|
6,149
|
|
|
6,146
|
|
|
4,637
|
|
Net lease costs
|
|
$
|
(12,624)
|
|
|
$
|
(11,200)
|
|
|
$
|
(14,865)
|
|
(1) Includes variable lease costs of $1.3 million, $1.5 million and $1.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Supplemental cash flow information related to the Company’s operating leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
2020
|
2019
|
|
|
Non-cash operating activity:
|
|
|
|
|
|
Leased assets obtained in exchange for new and amended operating lease liabilities (1)
|
$
|
12,914
|
|
$
|
84
|
|
$
|
15,277
|
|
|
|
(1) Represents non-cash activity and, accordingly, is not reflected on the Consolidated Statements of Cash Flows. Amount includes noncash remeasurements of the operating lease ROU asset.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The Company’s future minimum undiscounted lease payments under operating leases and anticipated sublease revenue as of December 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease
Payments
|
|
Sublease
Revenue
|
|
Net
|
2022
|
$
|
15,947
|
|
|
$
|
(2,918)
|
|
|
$
|
13,029
|
|
2023
|
12,465
|
|
|
—
|
|
|
12,465
|
|
2024
|
12,810
|
|
|
—
|
|
|
12,810
|
|
2025
|
13,163
|
|
|
—
|
|
|
13,163
|
|
2026
|
13,375
|
|
|
—
|
|
|
13,375
|
|
Thereafter
|
48,975
|
|
|
—
|
|
|
48,975
|
|
Total lease payments
|
$
|
116,735
|
|
|
$
|
(2,918)
|
|
|
$
|
113,817
|
|
Discount effect
|
25,147
|
|
|
|
|
|
Present value of future minimum lease payments
|
$
|
91,588
|
|
|
|
|
|
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
|
December 31, 2021
|
|
|
|
|
Weighted-average remaining lease term (in years)
|
8.43
|
|
|
|
|
Weighted-average discount rate
|
5.42
|
%
|
|
|
|
|
19. Commitments and Contingencies
Operating Lease Commitments
For discussion regarding the Company’s operating lease commitments, see “Note 18. Leases.”
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 or education and patient service providers. The Company may also repurchase loans or interests therein in connection with certain customer accommodations. In connection with certain loan sales, the Company agreed to repurchase loans if representations and warranties made with respect to such loans were breached under certain circumstances. In the case of certain securitization transactions, the Company also agreed to repurchase or substitute loans for which a borrower failed 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.
As a result of loan repurchase obligations, the Company repurchased $1.0 million, $3.3 million and $5.5 million in loans or interests therein during 2021, 2020 and 2019 respectively.
Unfunded Loan Commitments
As of December 31, 2021, the contractual amount of unfunded loan commitments was $110.8 million. See “Note 6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses” for additional detail related to the reserve for unfunded lending commitments.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Legal
The Company is subject to various claims brought in a litigation or regulatory context. These matters include lawsuits, including but not limited to, putative class action lawsuits and routine litigation matters arising in the ordinary course of business. In addition, the Company, and its business practices and compliance with licensing and other regulatory requirements, is subject to periodic exams, investigations, inquiries or requests, enforcement actions and other proceedings from federal and state regulatory agencies, including from the federal banking regulators that directly regulate the Company and/or LC Bank. 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.
Regulatory Examinations and Actions Relating to the Company’s Business Practices and Licensing
The Company is and 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 and the regulatory framework applicable to its business.
The Company is routinely subject to examination for compliance with applicable laws and regulations in the states in which it is licensed. The Company is subject to examination by the New York Department of Financial Services (NYDFS) and other regulators. The Company periodically has discussions with various regulatory agencies regarding its business model and has engaged in similar discussions with the NYDFS. During the course of such discussions with the NYDFS, which remain ongoing, the Company decided to voluntarily comply with certain rules and regulations of the NYDFS while it was not a bank holding company operating a national bank.
In the past, the Company has successfully resolved such matters 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. However, no assurances can be given as to the timing, outcome or consequences of these matters or other similar matters if or as they arise.
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
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
delivering its privacy notice. Following the Court’s ruling on a motion to dismiss filed by the Company, the FTC filed an amended complaint on October 22, 2018, which reasserted the same causes of action from the original complaint. On November 13, 2018, the Company filed an answer to the amended complaint. Following a motion by the FTC to strike certain affirmative defenses in the answer, the Company filed an amended answer in the case on May 29, 2019. The discovery period in the case is closed.
On February 27, 2020, both the Company and the FTC filed various motions with the Court, including motions to exclude expert testimony and motions for summary judgment as to some or all of the claims in the case. The FTC also filed a motion for partial judgment on the pleadings in the case. These motions were heard by the Court on April 27, 2020. On June 1, 2020, the Court issued an order granting in part and denying in part both the Company’s and the FTC’s motions for summary judgment. The Court also denied the motions to exclude expert testimony and granted in part and denied in part the FTC’s motion for partial judgment on the pleadings. The FTC’s Gramm-Leach-Bliley Act claim has been dismissed from the case, but issues relating to the FTC’s three other claims will need to be tried. On July 30, 2020, the Company filed a motion to stay the litigation pending the U.S. Supreme Court’s decisions in two cases (F.T.C. v. Credit Bureau Center and AMG Capital Management, LLC v. F.T.C.) that raise the issue whether the FTC is entitled to seek monetary relief under Section 13(b) of the FTC Act. On August 20, 2020, the Court issued an order granting the Company’s motion to stay proceedings in the case until the U.S. Supreme Court issues its decision in the Credit Bureau Center and AMG Capital Management cases. As a result of this order, the trial that was scheduled for October 19, 2020 will need to be rescheduled at a later date following the Supreme Court’s ruling. The Supreme Court has vacated its prior grant of review in the Credit Bureau Center case but heard oral argument in the AMG Capital Management case on January 13, 2021. The impact of the Supreme Court decision could impact the Company’s case which is why the trial was stayed pending the Supreme Court decision. On April 22, 2021, the Supreme Court ruled in favor of AMG Capital Management ordering that the FTC does not currently have the authority to obtain equitable monetary relief under the statute that is also applicable in the Company’s matter with the FTC. On July 14, 2021, the Company entered into an agreement with the FTC to conclude the FTC’s investigation and litigation (the Settlement). Pursuant to the terms of the Settlement, LendingClub made an $18 million payment for consumer remediation. The Settlement does not include any admission of liability, and LendingClub does not expect that the Settlement will impact its current operations. On July 19, 2021, the Court approved the Settlement and this matter is now concluded.
Class Action Lawsuit Following Announcement of FTC Litigation
In May 2018, following the announcement of litigation by the FTC 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 compliance with federal privacy law in securities filings. On January 7, 2019, the lead plaintiffs filed a consolidated amended class action complaint which asserted the same causes of action as the original complaint and added additional allegations. That complaint was subsequently dismissed by the District Court with leave to amend. The lead plaintiffs filed a Second Amended Complaint on December 19, 2019, which modified and added certain allegations and dropped one of the former officer defendants as a defendant in the case, but otherwise advanced the same causes of action. On June 12, 2020, the District Court issued an order granting a motion to dismiss by the defendants without leave to amend, in part, and with leave to amend, in part. On July 27, 2020, the lead plaintiffs filed a notice with the District Court indicating their intention not to file a Third Amended Complaint and requesting that the District Court enter judgment. The District Court entered judgment and dismissed all claims in the case the same day. The lead plaintiffs appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit (Veal et al. v. LendingClub Corporation, et al., No. 20-16603). The Court of Appeals held oral arguments for the appeal on September 2, 2021. On September 21, 2021, the Court of Appeals affirmed the District Court’s dismissal of all claims against the defendants and the period for the U.S. Supreme Court to grant certiorari expired in December 2021. Accordingly, this matter is now concluded.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Putative Class Actions
In February 2020, a putative class action lawsuit was filed against the Company in the U.S. District Court for the Northern District of California (Erceg v. LendingClub Corporation, No. 4:20-cv-01153). The lawsuit alleges violations of California and Massachusetts law based on allegations that the Company recorded a call with plaintiff without notifying him that it would be recorded. Plaintiff seeks to represent a purported class of similarly situated individuals who had phone calls recorded by the Company without their knowledge and consent. The Company filed a motion to dismiss certain of plaintiff’s claims, strike nationwide class allegations, and, alternatively, to stay the litigation. Rather than oppose that motion, plaintiff filed an amended complaint. The Company again filed a motion to stay, or alternatively to dismiss certain of the claims in the amended complaint and to strike nationwide class allegations. That motion was heard by the Court on July 9, 2020. On July 28, 2020, the Court entered an order granting the Company’s motion to stay plaintiff’s California claims pending a decision by the California Supreme Court in a case involving the California Invasion of Privacy Act (Smith v. LoanMe, Inc.), dismissing with prejudice plaintiff’s claim under Massachusetts law, and denying the Company’s motion to strike plaintiff’s nationwide class allegations. In April 2021, the California Supreme Court issued a decision in the LoanMe case in a manner that permits plaintiff’s claims in the Company’s case to continue. The Company then filed its answer to plaintiff’s complaint and discovery began. The parties have since reached a tentative settlement, the terms of which are not material to the Company. No assurances can be given as to the timing, outcome or consequences of this matter.
In February 2021, a putative class action lawsuit was filed against the Company in the U.S. District Court for the Southern District of Texas (Bradford v. Lending Club Corporation, No. 4:21-cv-00588). The lawsuit asserts a cause of action under the Fair Credit Reporting Act (FCRA) based on allegations that the Company obtained plaintiff’s credit report without his consent or authorization and without a permissible purpose under the FCRA. Plaintiff seeks to represent a class of allegedly similarly situated persons in the case and seeks monetary, injunctive, and declaratory relief, among other relief. Plaintiff has amended the complaint to assert additional allegations regarding the Company’s purported requests for plaintiff’s credit report from another credit reporting agency. The Company has since filed its answer to plaintiff’s complaint and discovery has begun. The Court has scheduled this matter for trial in September 2022. No assurances can be given as to the timing, outcome or consequences of this matter.
Certain Financial Considerations Relating to Litigation and Investigations
The Company had $2.5 million and $21.6 million in accrued contingent liabilities as of December 31, 2021 and 2020, respectively. The decrease in accrued contingent liabilities was primarily due to the $18 million settlement with the FTC in 2021.
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.
20. Regulatory Requirements
LendingClub and LC Bank are subject to comprehensive supervision, examination and enforcement, and regulation by the FRB and the Office of the Comptroller of the Currency (OCC), including generally similar capital adequacy requirements adopted by the FRB and the OCC, respectively. These requirements establish required minimum ratios for Common Equity Tier 1 (CET1) risk-based capital, Tier 1 risk-based capital, total risk-based capital and a Tier 1 leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; and define what qualifies as capital for purposes of meeting the capital requirements. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The minimum capital requirements under the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel III) capital framework are: a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. Additionally, a Capital Conservation Buffer (CCB) of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases, and certain discretionary bonus payments. In addition to these guidelines, the regulators assess any particular institution’s capital adequacy based on numerous factors and may require a particular banking organization to maintain capital at levels higher than the generally applicable minimums prescribed under the U.S. Basel III capital framework. In this regard, and unless otherwise directed by the FRB and the OCC, we have made commitments for the Company and LC Bank (until February 2024) to maintain a CET1 risk-based capital ratio of 11.0%, a Tier 1 risk-based capital ratio above 11.0%, a total risk-based capital ratio above 13.0%, and a Tier 1 leverage ratio of 11.0%.
The following table summarizes LC Bank’s regulatory capital amounts and ratios (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub Bank
|
|
Required Minimum plus Required CCB for
Non-Leverage Ratios
|
|
|
December 31, 2021
|
Amount
|
|
Ratio
|
|
|
CET1 capital (1)
|
$
|
523.7
|
|
|
16.7
|
%
|
|
7.0
|
%
|
|
|
Tier 1 capital
|
$
|
523.7
|
|
|
16.7
|
%
|
|
8.5
|
%
|
|
|
Total capital
|
$
|
563.7
|
|
|
18.0
|
%
|
|
10.5
|
%
|
|
|
Tier 1 leverage
|
$
|
523.7
|
|
|
14.3
|
%
|
|
4.0
|
%
|
|
|
Risk-weighted assets
|
$
|
3,130.4
|
|
|
N/A
|
|
N/A
|
|
|
Quarterly adjusted average assets
|
$
|
3,667.7
|
|
|
N/A
|
|
N/A
|
|
|
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
The following table presents the regulatory capital and ratios of the Company (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub
|
|
Required Minimum plus Required CCB for
Non-Leverage Ratios
|
|
|
December 31, 2021
|
Amount
|
|
Ratio
|
|
|
CET1 capital (1)
|
$
|
710.0
|
|
|
21.3
|
%
|
|
7.0
|
%
|
|
|
Tier 1 capital
|
$
|
710.0
|
|
|
21.3
|
%
|
|
8.5
|
%
|
|
|
Total capital
|
$
|
767.9
|
|
|
23.0
|
%
|
|
10.5
|
%
|
|
|
Tier 1 leverage
|
$
|
710.0
|
|
|
16.5
|
%
|
|
4.0
|
%
|
|
|
Risk-weighted assets
|
$
|
3,333.2
|
|
|
N/A
|
|
N/A
|
|
|
Quarterly adjusted average assets
|
$
|
4,301.7
|
|
|
N/A
|
|
N/A
|
|
|
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
In response to the COVID-19 pandemic, the FRB, OCC, and FDIC adopted a final rule related to the regulatory capital treatment of the allowance for credit losses under CECL. As permitted by the rule, the Company elected to delay the estimated impact of CECL on regulatory capital through 2021. As a result, a capital benefit of $35.5 million was included in the computation of the Company’s CET1 capital at December 31, 2021. Beginning on January 1, 2022, this benefit will be phased out over a three-year transition period at a rate of 25% each year through January 1, 2025.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (PCA). The PCA regime provides for capitalization categories ranging from “well-capitalized” to “critically undercapitalized.” An institution’s PCA category is determined primarily by its regulatory capital ratios. The PCA requires remedial actions and imposes limitations that become increasingly stringent as its PCA capitalization category declines, including the ability to accept and/or rollover brokered deposits. At December 31, 2021, the Company’s and LC Bank’s regulatory capital ratios exceeded the thresholds required to be regarded as well-capitalized institutions and met all capital adequacy requirements to which they are subject. There have been no events or conditions since December 31, 2021 that management believes would change the Company’s categorization.
Federal laws and regulations limit the dividends that a national bank may pay. Dividends that may be paid by a national bank without the express approval of the OCC are limited to that bank’s retained net profits for the preceding two calendar years plus retained net profits up to the date of any dividend declaration in the current calendar year. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. Additionally, under the OCC Operating Agreement, LC Bank is required to obtain a written determination of non-objection from the OCC before declaring any dividend. No dividends were declared by LC Bank in 2021.
Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. These covered transactions may not exceed 10% of the bank’s capital and surplus (which for this purpose represents tier 1 and tier 2 capital, as calculated under the risk-based capital rules, plus the balance of the ACL excluded from tier 2 capital) with any single nonbank affiliate and 20% of the bank’s capital and surplus with all its nonbank affiliates. Covered transactions that are extensions of credit may require collateral to be pledged to provide added security to the bank.
21. Other Non-interest Income and Other Non-interest Expense
Other non-interest income consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Referral revenue
|
$
|
14,234
|
|
|
$
|
5,011
|
|
|
$
|
5,474
|
|
Realized losses on sales of securities available for sale and other investments
|
(93)
|
|
|
11
|
|
|
(8)
|
|
Other
|
13,078
|
|
|
8,420
|
|
|
8,365
|
|
Total other non-interest income
|
$
|
27,219
|
|
|
$
|
13,442
|
|
|
$
|
13,831
|
|
Other non-interest expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
2020
|
|
2019
|
Consumer credit services
|
$
|
16,214
|
|
|
$
|
13,229
|
|
|
$
|
26,707
|
|
Other
|
45,044
|
|
|
34,533
|
|
|
37,370
|
|
Total other non-interest expense
|
$
|
61,258
|
|
|
$
|
47,762
|
|
|
$
|
64,077
|
|
22. 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 chief executive officer and chief financial officer to allocate resources and evaluate financial performance. This information is reviewed according to the legal organizational structure of the Company’s operations with products and services presented separately for the parent bank holding company and its wholly-owned subsidiary, LC Bank. Taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return. Differences between separate entity and consolidated tax returns are eliminated upon consolidation.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
LendingClub Bank
The LC Bank operating segment represents the national bank legal entity and reflects post-Acquisition operating activities. This segment provides a full complement of financial products and solutions, including loans, leases and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to investors and manages relationships with deposit holders.
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.
LendingClub Corporation (Parent Only)
The LendingClub Corporation (parent only) operating segment represents the holding company legal entity and predominately reflects the operations of the Company prior to the Acquisition. This activity includes, but is not limited to, the purchase and sale of loans and issuances of education and patient finance loans that were originated by issuing bank partners.
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Financial information for the segments is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub
Bank
|
|
LendingClub
Corporation
(Parent only)
|
|
Intercompany
Eliminations
|
|
Consolidated Total
|
|
Eleven Months Ended December 31,
|
|
Year Ended December 31,
|
|
Eleven Months Ended December 31,
|
|
Year Ended December 31,
|
|
2021
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2021
|
|
2020
|
|
2019
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplace revenue
|
$
|
462,821
|
|
|
$
|
115,759
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
|
$
|
—
|
|
|
$
|
578,580
|
|
|
$
|
245,314
|
|
|
$
|
646,735
|
|
Other non-interest income
|
94,953
|
|
|
16,718
|
|
|
13,442
|
|
|
13,831
|
|
|
(84,452)
|
|
|
27,219
|
|
|
13,442
|
|
|
13,831
|
|
Total non-interest income
|
557,774
|
|
|
132,477
|
|
|
258,756
|
|
|
660,566
|
|
|
(84,452)
|
|
|
605,799
|
|
|
258,756
|
|
|
660,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
210,739
|
|
|
82,093
|
|
|
209,694
|
|
|
345,345
|
|
|
—
|
|
|
292,832
|
|
|
209,694
|
|
|
345,345
|
|
Interest expense
|
(8,412)
|
|
|
(71,589)
|
|
|
(150,366)
|
|
|
(247,304)
|
|
|
—
|
|
|
(80,001)
|
|
|
(150,366)
|
|
|
(247,304)
|
|
Net interest income
|
202,327
|
|
|
10,504
|
|
|
59,328
|
|
|
98,041
|
|
|
—
|
|
|
212,831
|
|
|
59,328
|
|
|
98,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
760,101
|
|
|
142,981
|
|
|
318,084
|
|
|
758,607
|
|
|
(84,452)
|
|
|
818,630
|
|
|
318,084
|
|
|
758,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of (provision for) credit losses
|
(142,182)
|
|
|
3,382
|
|
|
(3,382)
|
|
|
—
|
|
|
—
|
|
|
(138,800)
|
|
|
(3,382)
|
|
|
—
|
|
Non-interest expense
|
(547,799)
|
|
|
(198,039)
|
|
|
(502,319)
|
|
|
(789,498)
|
|
|
84,452
|
|
|
(661,386)
|
|
|
(502,319)
|
|
|
(789,498)
|
|
Income (Loss) before income tax benefit (expense)
|
70,120
|
|
|
(51,676)
|
|
|
(187,617)
|
|
|
(30,891)
|
|
|
—
|
|
|
18,444
|
|
|
(187,617)
|
|
|
(30,891)
|
|
Income tax benefit (expense)
|
9,171
|
|
|
44,013
|
|
|
79
|
|
|
201
|
|
|
(53,048)
|
|
|
136
|
|
|
79
|
|
|
201
|
|
Consolidated net income (loss)
|
$
|
79,291
|
|
|
$
|
(7,663)
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,690)
|
|
|
$
|
(53,048)
|
|
|
$
|
18,580
|
|
|
$
|
(187,538)
|
|
|
$
|
(30,690)
|
|
Capital expenditures
|
$
|
32,602
|
|
|
$
|
1,811
|
|
|
$
|
31,147
|
|
|
$
|
50,668
|
|
|
$
|
—
|
|
|
$
|
34,413
|
|
|
$
|
31,147
|
|
|
$
|
50,668
|
|
Depreciation and amortization
|
$
|
4,569
|
|
|
$
|
39,716
|
|
|
$
|
54,030
|
|
|
$
|
59,152
|
|
|
$
|
—
|
|
|
$
|
44,285
|
|
|
$
|
54,030
|
|
|
$
|
59,152
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendingClub Bank
|
|
LendingClub Corporation
(Parent only)
|
|
Intercompany
Eliminations
|
|
Consolidated Total
|
|
December 31, 2021
|
|
December 31, 2020
|
|
December 31, 2021
|
|
December 31, 2020
|
|
December 31, 2021
|
|
December 31, 2020
|
|
December 31, 2021
|
|
December 31, 2020
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
$
|
659,919
|
|
|
$
|
—
|
|
|
$
|
88,268
|
|
|
$
|
524,963
|
|
|
$
|
(61,061)
|
|
|
$
|
—
|
|
|
$
|
687,126
|
|
|
$
|
524,963
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
76,540
|
|
|
103,522
|
|
|
(80)
|
|
|
—
|
|
|
76,460
|
|
|
103,522
|
|
Securities available for sale at fair value
|
205,730
|
|
|
—
|
|
|
57,800
|
|
|
142,226
|
|
|
—
|
|
|
—
|
|
|
263,530
|
|
|
142,226
|
|
Loans held for sale
|
335,449
|
|
|
—
|
|
|
55,799
|
|
|
121,902
|
|
|
—
|
|
|
—
|
|
|
391,248
|
|
|
121,902
|
|
Loans and leases held for investment, net
|
2,754,737
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,754,737
|
|
|
—
|
|
Retail and certificate loans held for investment at fair value
|
—
|
|
|
—
|
|
|
229,719
|
|
|
636,686
|
|
|
—
|
|
|
—
|
|
|
229,719
|
|
|
636,686
|
|
Other loans held for investment at fair value
|
—
|
|
|
—
|
|
|
21,240
|
|
|
49,954
|
|
|
—
|
|
|
—
|
|
|
21,240
|
|
|
49,954
|
|
Property, equipment and software, net
|
36,424
|
|
|
—
|
|
|
61,572
|
|
|
96,641
|
|
|
—
|
|
|
—
|
|
|
97,996
|
|
|
96,641
|
|
Investment in subsidiary
|
—
|
|
|
—
|
|
|
557,577
|
|
|
—
|
|
|
(557,577)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Goodwill
|
75,717
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,717
|
|
|
—
|
|
Other assets
|
254,075
|
|
|
—
|
|
|
168,042
|
|
|
187,399
|
|
|
(119,571)
|
|
|
—
|
|
|
302,546
|
|
|
187,399
|
|
Total assets
|
4,322,051
|
|
|
—
|
|
|
1,316,557
|
|
|
1,863,293
|
|
|
(738,289)
|
|
|
—
|
|
|
4,900,319
|
|
|
1,863,293
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
3,196,929
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61,141)
|
|
|
—
|
|
|
3,135,788
|
|
|
—
|
|
Short-term borrowings
|
165
|
|
|
—
|
|
|
27,615
|
|
|
104,989
|
|
|
—
|
|
|
—
|
|
|
27,780
|
|
|
104,989
|
|
Advances from PPPLF
|
271,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
271,933
|
|
|
—
|
|
Retail notes, certificates and secured borrowings at fair value
|
—
|
|
|
—
|
|
|
229,719
|
|
|
636,774
|
|
|
—
|
|
|
—
|
|
|
229,719
|
|
|
636,774
|
|
Payable on Structured Program borrowings
|
—
|
|
|
—
|
|
|
65,451
|
|
|
152,808
|
|
|
—
|
|
|
—
|
|
|
65,451
|
|
|
152,808
|
|
Other long-term debt
|
—
|
|
|
—
|
|
|
15,455
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,455
|
|
|
—
|
|
Other liabilities
|
218,775
|
|
|
—
|
|
|
150,727
|
|
|
244,551
|
|
|
(65,551)
|
|
|
—
|
|
|
303,951
|
|
|
244,551
|
|
Total liabilities
|
3,687,802
|
|
|
—
|
|
|
488,967
|
|
|
1,139,122
|
|
|
(126,692)
|
|
|
—
|
|
|
4,050,077
|
|
|
1,139,122
|
|
Total equity
|
634,249
|
|
|
—
|
|
|
827,590
|
|
|
724,171
|
|
|
(611,597)
|
|
|
—
|
|
|
850,242
|
|
|
724,171
|
|
Total liabilities and equity
|
$
|
4,322,051
|
|
|
$
|
—
|
|
|
$
|
1,316,557
|
|
|
$
|
1,863,293
|
|
|
$
|
(738,289)
|
|
|
$
|
—
|
|
|
$
|
4,900,319
|
|
|
$
|
1,863,293
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
23. LendingClub Corporation – Parent Company-Only Financial Statements
Upon the Acquisition in 2021, the Company became a bank holding company and formed LC Bank. Prior to the Acquisition, the consolidated financial results of the Company were the LendingClub Corporation (Parent Company) financial results. See “Item 8. Financial Statements and Supplementary Data – Consolidated Financial Statements of LendingClub Corporation” for the 2020 and 2019 comparative results. Investment in the LC Bank subsidiary is accounted for by the Parent Company using the equity method for this presentation. Results of operations of the Parent Company’s bank subsidiary is therefore classified in the Parent Company’s investment in subsidiary account. VIEs in which the Parent Company is the primary beneficiary are included in the Parent Company-only financial statements.
Statement of Operations
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
|
|
|
Non-interest income:
|
|
|
|
|
|
Marketplace revenue
|
$
|
115,759
|
|
|
|
|
|
Other non-interest income
|
16,718
|
|
|
|
|
|
Total non-interest income
|
132,477
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
Interest on loans held for sale at fair value
|
11,025
|
|
|
|
|
|
Interest on retail and certificate loans held for investment at fair value
|
57,684
|
|
|
|
|
|
Interest on other loans held for investment at fair value
|
4,436
|
|
|
|
|
|
Interest on securities available for sale
|
8,922
|
|
|
|
|
|
Other interest income
|
26
|
|
|
|
|
|
Total interest income
|
82,093
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
Interest on short-term borrowings
|
3,676
|
|
|
|
|
|
Interest on retail notes, certificates and secured borrowings
|
57,684
|
|
|
|
|
|
Interest on Structured Program borrowings
|
9,638
|
|
|
|
|
|
Interest on other long-term debt
|
591
|
|
|
|
|
|
Total interest expense
|
71,589
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
10,504
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
142,981
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of credit losses
|
(3,382)
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense:
|
|
|
|
|
|
Compensation and benefits
|
31,010
|
|
|
|
|
|
Marketing
|
5,460
|
|
|
|
|
|
Equipment and software
|
2,459
|
|
|
|
|
|
Occupancy
|
17,751
|
|
|
|
|
|
Depreciation and amortization
|
39,716
|
|
|
|
|
|
Professional services
|
14,666
|
|
|
|
|
|
Other non-interest expense
|
86,977
|
|
|
|
|
|
Total non-interest expense
|
198,039
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax benefit
|
(51,676)
|
|
|
|
|
|
Income tax benefit
|
44,013
|
|
|
|
|
|
Loss before undistributed earnings of subsidiary
|
(7,663)
|
|
|
|
|
|
Equity in undistributed earnings of subsidiary
|
79,291
|
|
|
|
|
|
Net income
|
$
|
71,628
|
|
|
|
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
In accordance with federal laws and regulations, dividends paid by LC Bank to the Company are subject to certain restrictions. See “Note 20. Regulatory Requirements” for more information.
Statement of Comprehensive Income
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
Net income
|
$
|
71,628
|
|
Other comprehensive income, net of tax:
|
|
Net unrealized gain on securities available for sale
|
9,153
|
|
Equity in other comprehensive loss of subsidiary
|
(2,619)
|
|
Other comprehensive income, net of tax
|
6,534
|
|
Total comprehensive income
|
$
|
78,162
|
|
Balance Sheet
|
|
|
|
|
|
|
|
December 31,
|
2021
|
|
|
Assets
|
|
|
|
Cash and due from banks
|
$
|
58,284
|
|
|
|
Interest-bearing deposits in banks
|
29,984
|
|
|
|
Total cash and cash equivalents
|
88,268
|
|
|
|
Restricted cash
|
76,540
|
|
|
|
Securities available for sale at fair value ($47,225 at amortized cost)
|
57,800
|
|
|
|
Loans held for sale at fair value
|
55,799
|
|
|
|
Retail and certificate loans held for investment at fair value
|
229,719
|
|
|
|
Other loans held for investment at fair value
|
21,240
|
|
|
|
Property, equipment and software, net
|
61,572
|
|
|
|
Investment in subsidiary
|
634,249
|
|
|
|
Other assets
|
168,042
|
|
|
|
Total assets
|
$
|
1,393,229
|
|
|
|
Liabilities and Equity
|
|
|
|
Short-term borrowings
|
27,615
|
|
|
|
Retail notes, certificates and secured borrowings at fair value
|
229,719
|
|
|
|
Payable on Structured Program borrowings
|
65,451
|
|
|
|
Other long-term debt
|
15,455
|
|
|
|
Other liabilities
|
150,727
|
|
|
|
Total liabilities
|
488,967
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 180,000,000 shares authorized; 101,043,924 shares issued and outstanding
|
1,010
|
|
|
|
Additional paid-in capital
|
1,609,820
|
|
|
|
Accumulated deficit
|
(714,586)
|
|
|
|
Accumulated other comprehensive income
|
8,018
|
|
|
|
Total equity
|
904,262
|
|
|
|
Total liabilities and equity
|
$
|
1,393,229
|
|
|
|
LENDINGCLUB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2021
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
Parent company net income
|
$
|
71,628
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Equity in undistributed earnings of subsidiary
|
(79,291)
|
|
|
|
|
|
Income tax benefit
|
(44,013)
|
|
|
|
|
|
Net fair value adjustments
|
(5,936)
|
|
|
|
|
|
Reversal of credit losses
|
(3,382)
|
|
|
|
|
|
Change in fair value of loan servicing assets
|
37,138
|
|
|
|
|
|
Stock-based compensation, net
|
14,506
|
|
|
|
|
|
Depreciation, amortization, and accretion
|
39,935
|
|
|
|
|
|
Gain on sales of loans
|
(3,372)
|
|
|
|
|
|
Other, net
|
9,107
|
|
|
|
|
|
Net change to loans held for sale
|
90,609
|
|
|
|
|
|
Net change in operating assets and liabilities:
|
|
|
|
|
|
Other assets
|
(29,556)
|
|
|
|
|
|
Other liabilities
|
(95,737)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
1,636
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
Acquisition of company
|
(145,344)
|
|
|
|
|
|
Payments for investments in and advances to subsidiary
|
(250,001)
|
|
|
|
|
|
Cash received from Acquisition
|
658
|
|
|
|
|
|
Net change in loans and leases
|
1,360
|
|
|
|
|
|
Net decrease in retail and certificate loans
|
437,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities and paydowns of securities available for sale
|
103,258
|
|
|
|
|
|
Purchases of property, equipment and software, net
|
(1,811)
|
|
|
|
|
|
Other investing activities
|
8,146
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
154,136
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on Structured Program borrowings
|
(90,187)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on retail notes and certificates
|
(438,032)
|
|
|
|
|
|
Principal payments on short-term borrowings
|
(81,935)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financing activities
|
(9,295)
|
|
|
|
|
|
Net cash used for financing activities
|
(619,449)
|
|
|
|
|
|
Net Decrease in Cash, Cash Equivalents and Restricted Cash
|
(463,677)
|
|
|
|
|
|
Cash, Cash Equivalents and Restricted Cash, Beginning of Period
|
628,485
|
|
|
|
|
|
Cash, Cash Equivalents and Restricted Cash, End of Period
|
$
|
164,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|