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LC LendingClub

Filed: 7 May 21, 5:21pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
Commission File Number: 001-36771
 
LendingClub Corporation
(Exact name of registrant as specified in its charter)
Delaware51-0605731
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
595 Market Street, Suite 200,
San Francisco,CA94105
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (415) 632-5600
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.01 per shareLCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  
As of April 30, 2021, there were 97,228,126 shares of the registrant’s common stock outstanding.



LENDINGCLUB CORPORATION
TABLE OF CONTENTS




LENDINGCLUB CORPORATION

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

LendingClub Bank, National Association (the Bank)
Various entities established to facilitate loan sale transactions under LendingClub’s Structured Program, including sponsoring asset-backed securities transactions and Certificate Program transactions, where certain accredited investors and qualified institutional buyers have the opportunity to invest in senior and subordinated securities backed by a pool of unsecured personal whole loans.
LC Trust I (the LC Trust), an independent Delaware business trust that acquires loans from LendingClub and holds them for the sole benefit of certain investors that have purchased trust certificates issued by the LC Trust and that are related to specific underlying loans for the benefit of the investor.

Forward-Looking Statements

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

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

our ability to integrate the Bank and the timing and ability to realize the expected financial and strategic benefits of the acquisition;
our ability, following our acquisition of the Bank, to attract new members, to expand our product offerings, to improve revenue and generate recurring earnings, to capture expense benefits, to increase resiliency, and to enhance regulatory clarity;
our ability to address stricter or heightened regulatory or supervisory requirements and expectations;
our compliance with applicable local, state and Federal laws, regulations and regulatory developments or court decisions affecting our business;
the impact of COVID-19 and our ability to effectuate and the effectiveness of certain operational and strategy initiatives in light of COVID-19;
our ability to successfully navigate the current economic climate;
our ability to sustain the business under adverse circumstances;
the effects of natural disasters, public health crises, acts of war or terrorism and other external events on our customers and business;
the impact of changes in laws or the regulatory or supervisory environment, including as a result of legislation, regulation, policies or changes in government officials or other personnel;
the impact of changes in monetary, fiscal, or trade laws or policies, including as a result of actions by governmental agencies, central banks, or supranational authorities;
the impact of new accounting standards or policies, including the Current Expected Credit Loss (CECL) standard;
results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, increase our allowance for loan losses, increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits;
our ability to maintain an enterprise risk management framework that is effective in mitigating risk;
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LENDINGCLUB CORPORATION

our ability to effectively manage capital or liquidity to support our evolving business or operational needs, while remaining compliant with regulatory or supervisory requirements and appropriate risk-management standards;
our ability to attract and retain loan borrowers;
our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;
the impact of changes in consumer spending, borrowing and saving habits;
the impact of the continuation of or changes in the short-term and long-term interest rate environment;
the ability of borrowers to repay loans and the plans of borrowers;
our ability to maintain investor confidence in the operation of our platform;
our ability to retain existing and secure new or additional sources of investor commitments for our platform;
the performance of our loan products and expected rates of return for investors;
platform volume, pricing and balance;
the effectiveness of our platform’s credit scoring models;
our ability to innovate and the adoption and success of new products and services;
the adequacy of our corporate governance, risk-management framework, compliance programs;
the impact of and our ability to resolve pending litigation and governmental inquiries and investigations;
the use of our own capital to purchase loans, the impact of holding loans on and our ability to sell loans off our balance sheet;
our financial condition and performance, including the impact that management’s estimates have on our financial performance and the relationship between the interim period and full year results;
our ability, and that of third-party vendors, to maintain service and quality expectations;
capital expenditures;
our compliance with contractual obligations or restrictions;
the potential impact of macro-economic developments, including recessions or other adverse circumstances;
our ability to develop and maintain effective internal controls;
our ability to recruit and retain quality employees to support current operations and future growth;
changes in the effectiveness and reliability of our information technology and computer systems, including the impact of any security or privacy breach; the impact of expense initiatives and our ability to control our cost structure;
our ability to manage and repay our indebtedness; and
other risk factors listed from time to time in reports we file with the SEC.

We caution you that the foregoing list may not contain all of the forward-looking statements in this Report. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. We have included important factors in the “Risk Factors” section of this Report and our Annual Report on Form 10-K for the year ended December 31, 2020, as well as in our condensed consolidated financial statements, related notes, and other information appearing elsewhere in this Report and our other filings with the Securities and Exchange Commission, that could, among other things, cause actual results or events to differ materially from forward-looking statements contained in this Report. Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
LENDINGCLUB CORPORATION
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
March 31, 2021December 31, 2020
Assets (1)
Cash and due from banks$34,261 $5,197 
Interest-bearing deposits in banks797,539 519,766 
Total cash and cash equivalents831,800 524,963 
Restricted cash (2)
139,080 103,522 
Securities available for sale at fair value (includes $273,331 and $159,164 at amortized cost, respectively)274,419 142,226 
Loans held for sale at fair value (2)
166,623 121,902 
Loans and leases held for investment2,115,432 
Allowance for loan and lease losses(36,132)
Loans and leases held for investment, net2,079,300 
Retail and certificate loans held for investment at fair value (2)
507,157 636,686 
Other loans held for investment at fair value (2)
42,485 49,954 
Property, equipment and software, net95,313 96,641 
Goodwill75,717 
Other assets (2)
279,195 187,399 
Total assets$4,491,089 $1,863,293 
Liabilities and Equity (1)
Deposits:
Interest-bearing2,229,827 
Noninterest-bearing143,610 
Total deposits2,373,437 
Short-term borrowings90,091 104,989 
Advances from Paycheck Protection Program Liquidity Facility (PPPLF)370,086 
Retail notes, certificates and secured borrowings at fair value (2)
507,203 636,774 
Payable on Structured Program borrowings (2)
133,499 152,808 
Other long-term debt18,572 
Other liabilities (2)
265,066 244,551 
Total liabilities3,757,954 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; 97,228,126 and 88,149,510 shares issued and outstanding, respectively972 881 
Additional paid-in capital
1,563,865 1,508,020 
Accumulated deficit(833,298)(786,214)
Treasury stock, at cost; 4,251 and 0 shares, respectively(92)
Accumulated other comprehensive income1,688 1,484 
Total equity733,135 724,171 
Total liabilities and equity$4,491,089 $1,863,293 
(1)    Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies” for additional information.
(2)    Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below.
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The following table presents the assets and liabilities of consolidated VIEs, which are included in the Condensed Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.
March 31, 2021December 31, 2020
Assets of consolidated VIEs, included in total assets above
Restricted cash$17,536 $15,983 
Loans held for sale at fair value83,926 98,190 
 Retail and certificate loans held for investment at fair value36,277 52,620 
Other loans held for investment at fair value42,261 50,102 
Other assets936 1,270 
Total assets of consolidated variable interest entities$180,936 $218,165 
Liabilities of consolidated VIEs, included in total liabilities above
Retail notes, certificates and secured borrowings at fair value$36,277 $52,620 
Payable on Structured Program borrowings133,499 152,808 
Other liabilities522 729 
Total liabilities of consolidated variable interest entities$170,298 $206,157 

See Notes to Condensed Consolidated Financial Statements.
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LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
 20212020
Non-interest income (1):
Marketplace revenue$81,727 $102,477 
Other non-interest income5,607 4,511 
Total non-interest income87,334 106,988 
Interest income (1):
Interest on loans held for sale5,157 27,376 
Interest and fees on loans and leases held for investment15,301 
Interest on retail and certificate loans held for investment at fair value20,262 35,376 
Interest on other loans held for investment at fair value1,479 1,999 
Interest on securities available for sale2,235 3,779 
Other interest income156 881 
Total interest income44,590 69,411 
Interest expense (1):
Interest on deposits1,014 
Interest on short-term borrowings1,264 7,398 
Interest on retail notes, certificates and secured borrowings20,262 35,376 
Interest on Structured Program borrowings3,208 2,299 
Interest on other long-term debt336 140 
Total interest expense26,084 45,213 
Net interest income (1)
18,506 24,198 
Total net revenue (1)
105,840 131,186 
Provision for credit losses (1)
21,493 10,980 
Non-interest expense (1):
Compensation and benefits64,420 75,545 
Marketing19,545 39,081 
Equipment and software7,893 6,490 
Occupancy6,900 6,813 
Depreciation and amortization11,766 12,873 
Professional services11,603 14,141 
Other non-interest expense12,125 13,031 
Total non-interest expense134,252 167,974 
Loss before income tax expense(49,905)(47,768)
Income tax expense (benefit)(2,821)319 
Consolidated net loss$(47,084)$(48,087)
Net loss per share attributable to common stockholders – Basic and Diluted (2)
$(0.49)$(1.10)
Weighted-average common shares – Basic and Diluted (2)
92,666,169 86,505,560 
Net income (loss) per share attributable to preferred stockholders – Basic and Diluted (2)
$(0.49)$18.36 
Weighted-average common shares, as converted – Basic and Diluted (2)
2,648,758 2,579,710 
(1)    Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies” for additional information.
(2)    See “Notes to Condensed Consolidated Financial StatementsNote 4. Net Income (Loss) Per Share” for additional information.

See Notes to Condensed Consolidated Financial Statements.
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LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
20212020
Consolidated net loss$(47,084)$(48,087)
Other comprehensive income (loss), before tax:
Net unrealized gain (loss) on securities available for sale204 (20,681)
Other comprehensive income (loss), before tax204 (20,681)
Income tax effect(319)
Other comprehensive income (loss), net of tax204 (20,362)
Total comprehensive loss$(46,880)$(68,449)

See Notes to Condensed Consolidated Financial Statements.
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LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Changes in Equity
(In Thousands, Except Share Data)
(Unaudited)
 Preferred StockCommon StockAdditional
Paid-in
Capital
Treasury StockAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Equity
 SharesAmountSharesAmountSharesAmount
Balance at
December 31, 2020
43,000 $0 88,149,510 $881 $1,508,020 0 $0 $1,484 $(786,214)$724,171 
Stock-based compensation— — — — 15,765 — — — — 15,765 
Net issuances under equity incentive plans, net of tax (1)
— — 1,017,502 10 (1,301)4,251 (92)— — (1,383)
Net issuances of stock related to
  acquisition (2)
3,761,114 38 41,424 — — — — 41,462 
Exchange of preferred stock for common stock (3)
(43,000)— 4,300,000 43 (43)— — — 
Net unrealized gain on securities available for sale, net of tax— — — — — — — 204 — 204 
Net loss— — — — — — — — (47,084)(47,084)
Balance at
March 31, 2021
0 $0 97,228,126 $972 $1,563,865 4,251 $(92)$1,688 $(833,298)$733,135 
 Preferred StockCommon StockAdditional
Paid-in
Capital
Treasury StockAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Equity
 SharesAmountSharesAmountSharesAmount
Balance at
December 31, 2019
0 $0 88,757,406 $892 $1,467,882 461,391 $(19,550)$(565)$(548,472)$900,187 
Stock-based compensation— — — — 19,699 — — — — 19,699 
Net issuances under equity incentive plans, net of tax (1)
— — 674,689 (4,623)5,658 (71)— — (4,687)
Net issuances of preferred stock in exchange for common stock (3)
195,628 (19,562,881)(196)194 — — — (50,204)(50,204)
Retirement of treasury stock— — — (4)(19,617)(467,049)19,621 — — — 
Net unrealized loss on securities available for sale, net of tax— — — — — — — (20,362)— (20,362)
Net loss— — — — — — — — (48,087)(48,087)
Balance at
March 31, 2020
195,628 $2 69,869,214 $699 $1,463,535 0 $0 $(20,927)$(646,763)$796,546 
(1)    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.
(2)    Stock issued as part of the consideration paid related to the acquisition of Radius. See “Note 2. Business Acquisition.
(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, which would convert into common stock upon a sale by the preferred stockholder to a third party.

See Notes to Condensed Consolidated Financial Statements.

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LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
 20212020
Cash Flows from Operating Activities: (1)
Consolidated net loss$(47,084)$(48,087)
Adjustments to reconcile consolidated net loss to net cash used for operating activities:
Net fair value adjustments5,321 89,786 
Provision for credit losses21,493 10,980 
Change in fair value of loan servicing assets11,837 9,608 
Stock-based compensation, net14,801 18,129 
Depreciation, amortization, and accretion11,450 13,730 
Gain on sales of loans(8,323)(14,261)
Other, net2,548 1,455 
Net change to loans held for sale(42,786)(191,496)
Net change in operating assets and liabilities:
Other assets(10,290)(4,918)
Other liabilities(10,333)(101,373)
Net cash used for operating activities(51,366)(216,447)
Cash Flows from Investing Activities: (1)
Acquisition of company(145,344)
Cash received from acquisition668,236 
Net increase in loans and leases(502,387)(101,852)
Net decrease in retail and certificate loans138,288 228,057 
Purchases of securities available for sale(9,911)(34,909)
Proceeds from sales of securities available for sale106,192 2,396 
Proceeds from maturities and paydowns of securities available for sale34,239 61,038 
Purchases of property, equipment and software, net(6,365)(11,435)
Other investing activities4,960 100 
Net cash provided by investing activities287,908 143,395 
Cash Flows from Financing Activities: (1)
Net change in demand deposits and savings accounts343,787 
Principal payments on advances from PPPLF(50,876)
Proceeds from issuance of retail notes and certificates104,620 
Net decrease in retail notes and certificates(138,376)(229,002)
Principal payments on Structured Program borrowings(22,391)(6,911)
Proceeds from issuance of notes and certificates from Structured Program transactions186,190 
Proceeds from short-term borrowings979,539 
Principal payments on short-term borrowings(24,908)(946,038)
Deemed dividend paid to preferred stockholder(50,204)
Other financing activities(1,383)(18,672)
Net cash provided by financing activities105,853 19,522 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash$342,395 $(53,530)
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LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
 20212020
Cash, Cash Equivalents and Restricted Cash, Beginning of Period$628,485 $487,122 
Cash, Cash Equivalents and Restricted Cash, End of Period$970,880 $433,592 
Supplemental Cash Flow Information:
Cash paid for interest$22,645 $43,559 
Cash paid for operating leases included in the measurement of lease liabilities$4,291 $4,383 
Non-cash investing activity:
Net securities retained from Structured Program transactions$$44,260 
Accruals for property, equipment and software$$2,439 
Non-cash investing and financing activity:
Transfer of whole loans to redeem certificates$$17,414 
Net issuances of stock related to acquisition$41,462 $
Non-cash financing activity:
Exchange of common stock for preferred stock$$207,244 
(1)    Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies” for additional information.

The following presents cash, cash equivalents and restricted cash by category within the Condensed Consolidated Balance Sheets:
 March 31, 2021December 31, 2020
Cash and cash equivalents$831,800 $524,963 
Restricted cash139,080 103,522 
Total cash, cash equivalents and restricted cash$970,880 $628,485 

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


1. Summary of Significant Accounting Policies

Basis of Presentation

LendingClub Corporation (LendingClub) was founded in 2006 to transform the banking industry by leveraging technology, data science and a marketplace model. LendingClub started by bringing a traditional credit product, the installment loan, into the digital age and became the largest provider of unsecured personal loans in the United States. On February 1, 2021, LendingClub completed the acquisition of Radius Bancorp, Inc. (Radius), whereby LendingClub became a bank holding company and formed LendingClub Bank, National Association (the Bank) as its wholly-owned subsidiary, through which it now operates the vast majority of its business. With the acquisition, LendingClub combined the complementary strengths of its digital lending capabilities with an award-winning digital bank.

The accompanying unaudited condensed consolidated financial statements include LendingClub, its subsidiaries (collectively referred to as the Company, we, or us) and consolidated variable interest entities (VIEs). All intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and, in the opinion of management, contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the results and financial position for the periods presented. These accounting principles require management to make certain estimates and assumptions that affect the amounts in the accompanying financial statements. These estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. Results reported in interim periods are not necessarily indicative of results for the full year or any other interim period.

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 SEC’s 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” for detail illustrating the reclassification adjustments made to align with the current presentation.

The accompanying interim condensed consolidated financial statements and these related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (Annual Report) filed on March 11, 2021.

Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Part II – Item 8 – Financial Statements and Supplementary Data – Note 2. Summary of Significant Accounting Policies” in the Annual Report. There have been no changes to these significant accounting policies for the three month period ended March 31, 2021, except as noted below.

Loans and Leases

The Company initially classifies loans and leases as either loans held for sale or loans held for investment based on management’s assessment of the Company’s 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 depending on a number of factors, for example economic, liquidity, and capital conditions. In order to reclassify loans to held for sale, management must have the intent to sell the loans and reasonably identify the specific loans to be sold.

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

Loans classified as held for investment are reported at their amortized cost basis, which includes the principal amount outstanding, net of unamortized deferred fees and costs on originated loans, unamortized premiums and discounts on purchased loans, unless the fair value option was elected, in which case those loans are carried at fair value. Leases are reported at their net investment in the lease which includes the gross lease receivable and residual value, net of unearned income, unamortized deferred fees and costs on originated leases, and unamortized premiums and discounts on purchased leases. Deferred origination fees and costs, and premiums and discounts on purchased loans, are amortized over the contractual life of the related loan and leases as interest income using the effective interest method. Accrued interest receivable on loans and leases is included in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.

For loans and leases held for investment at amortized cost, accrued interest income is calculated based on the contractual interest rate of the loan and recorded as interest income as earned. The accrual of interest and amortization of net deferred origination costs and fees is discontinued and the loan or lease is placed on nonaccrual status when the collectability of principal, interest or lease receivable is uncertain or payments of principal, interest or lease receivables have become past due 90 days or more. Past due status is based on the contractual terms. When a loan or lease held for investment is placed on nonaccrual status, all income previously accrued but not collected is reversed against the current period’s 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 expected credit losses on accrued interest receivable. Interest received on nonaccrual loans and leases is either applied against the principal balance or reported as income depending on management’s judgment as to the collectability of principal. 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.
The Company has elected the fair value option for loans originated and held for sale. Changes in the fair value of loans held for sale are recorded in “Marketplace revenue” in the Condensed Consolidated Statements of Operations in the period of the fair value changes. Origination fees are recognized in earnings within “Marketplace revenue” in the Condensed Consolidated Statements of Operations when received from the borrower at the time of origination. Accrued interest income on loans held for sale is calculated based on the contractual interest rate of the loan and recorded as interest income as earned. The Company places loans held for sale on nonaccrual status at 90 days past due. When a loan held for sale is placed on nonaccrual status, the Company stops accruing interest and reverses all accrued but unpaid interest as of such date. The Company charges off loans held for sale no later than 120 days past due.

Allowance for Expected Credit Losses

The allowance for expected credit losses for loans and leases, and reserve for unfunded lending commitments (collectively the allowance for expected credit losses (ACL)), are valuation reserves that represent the Company’s best estimate of expected credit losses (ECL) on the Company’s assets measured at amortized cost and unfunded lending commitments. The allowance for expected credit losses 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 Company evaluates its estimate of expected credit losses each reporting period and records any additions to the allowance on the Condensed Consolidated Statements of Operations as a provision for credit losses. Any write-offs of amounts determined to be uncollectible are charged to the allowance. Estimates of expected credit losses include expected recoveries of amounts previously written-off and expected to be written-off. There could be instances where including expected recoveries of previously written-off loans in the estimate of expected credit losses may result in a negative allowance.
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LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)


The allowance for expected credit losses is measured on a collective basis when loans share similar risk characteristics. Relevant risk characteristics for the consumer portfolio include product type, loan term, and monthly vintage. Relevant risk characteristics for the commercial portfolio include product type and purchased credit deteriorated (PCD) status. Loans measured on a collective basis generally have an allowance for expected credit losses which are made up of a quantitative, or modeled, component, and a qualitative component.

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 ECL on an individual, rather than on a collective basis. Loans measured on an individual basis generally have an allowance for expected credit losses which 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 ECL over the contractual term of its loans. The contractual term is adjusted for expected 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.

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 of default, loss given default and exposure at default, timing and amount of expected prepayments, timing and amount of expected draws (for unfunded lending commitments), and relevant risk characteristics. Certain of the Company’s portfolios have limited historical loss data available internally. For these portfolios, the Company uses external credit loss information from the FDIC Call Report and Small Business Administration (SBA) data, which includes historical charge-off and balance data for peer banking institutions.

The Company obtains historical macroeconomic data dating back to 2004 from the St. Louis Federal Reserve Economic Database (FRED) and Moody’s Analytics to inform its view of the long-term condition of the economy. Forward-looking macroeconomic factors considered in the Company’s statistical models include Gross Domestic Product (GDP), unemployment rate, 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. 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 discounted cash flow (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 expected credit loss models. These factors may include the impact of risk rating downgrades, changes in credit policies, problem loan trends,
12


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

identification of new risks not incorporated into the modeling framework, credit concentrations, changes in lending management 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, and those entities or agencies have a long history of no defaults and the highest credit ratings issued by rating agencies. Loans held for investment which meet this criterion do not have an allowance for expected credit losses.

Reserve for Unfunded Lending Commitments

The Company also estimates expected credit losses associated with off-balance sheet commitments such as 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 as a liability within “Other liabilities” on the Company’s Condensed Consolidated Balance Sheets.

Individually Assessed Loans

Loans whose terms have been modified in a troubled debt restructuring (TDR) and collateral-dependent financial assets are individually assessed for purposes of measuring expected credit losses. The allowance for expected credit losses on loans modified in a TDR is calculated using the discounted cash flow approach and is recorded as the difference between the amortized cost basis and the expected future cash flows. For purposes of discounting, the Company uses the original effective interest rate of the TDR loan.

For loans that are determined to be collateral dependent, the allowance for expected credit losses is determined using the fair value of the collateral method. Loans are considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially through sale or operation of the collateral. For such loans, the allowance 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, purchased credit impaired (PCI) status from prior acquisition, COVID-19 modification or industry 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 acquisition for PCD assets does not impact net income. Subsequent to the acquisition date, any changes in the ACL are recorded through the provision for credit losses on the income statement. 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 in the income statement.

13


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

Radius Acquisition

In connection with the Radius acquisition, the Company was required to record an allowance for non-PCD assets with a corresponding increase to the provision for credit losses. For acquired PCD loans, an allowance 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, the CECL allowance included as part of the grossed-up loan balance at acquisition was immediately written-off, resulting in a zero period-end allowance balance and no impact on the ACL rollforward. See “Note 2. Business Acquisition” for additional detail.

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.

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 CECL allowance 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 predecessor 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. See “Note 6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses” for additional detail.

Business Combinations

The Company accounts for business combinations using the acquisition method. The accounts of an acquired entity are included as of the date of acquisition, and any excess of purchase price over the fair value of the net assets acquired is capitalized as goodwill. See Note 2. Business Acquisition” for further discussion of the acquisition of Radius and its impact on the Company’s consolidated financial statements.

Goodwill and Other Intangible Assets

Goodwill is the purchase consideration of an acquired business in excess of the aggregate fair value of the identified net assets acquired. The Company allocates goodwill to the reporting unit(s) (generally defined as an operating segment or one level below an operating segment for which financial information is available and reviewed regularly by management) that are expected to benefit from the synergies of the business combination.

The goodwill of each reporting unit is reviewed for impairment annually or whenever events or circumstances indicate that it is more likely than not that the estimated fair value of a reporting unit is below its carrying value. Our annual impairment testing is completed in the fourth quarter. Impairment exists whenever 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.
14


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


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

Adoption of New Accounting Standards

The Company did not adopt any new accounting standards during the three month period ended March 31, 2021.

New Accounting Standards Not Yet Adopted

In March 2020, the FASB issued 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 the 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 will have 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 in an entity’s own equity. The guidance allows for either full or modified retrospective adoption for fiscal periods beginning after December 15, 2021 with early adoption permitted for fiscal periods beginning after December 15, 2020. The Company is evaluating the impact this ASU will have on its financial position, results of operations, cash flows, and disclosures.

15


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

2. Business Acquisition

On February 1, 2021, the Company completed the acquisition of Radius Bancorp, Inc. (Radius) in accordance with the Plan of Merger previously disclosed. The acquisition combined the Company’s complementary digital lending capabilities with those of a digital bank. Upon closing, LendingClub acquired all outstanding voting equity interests of Radius in exchange for total consideration as follows:
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. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Fair value estimates related to the acquired assets and liabilities are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available.

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:
Assets acquired:
Cash and due from banks$18,184 
Interest-bearing deposits in banks650,052 
Total cash and cash equivalents668,236 
Securities available for sale at fair value259,037 
Loans and leases held for investment1,610,054 
Allowance for loan and lease losses(12,440)
Loans and leases held for investment, net1,597,614 
Property, equipment and software, net1,926 
Goodwill75,717 
Other assets86,482 
Total assets2,689,012 
Liabilities assumed:
Non-interest bearing deposits167,187 
Interest-bearing deposits1,862,272 
Total deposits2,029,459 
Short-term borrowings9,870 
Advances from PPPLF420,962 
Other long-term debt18,630 
Other liabilities23,285 
Total liabilities2,502,206 
Total consideration paid$186,806 
16


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


The 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 held for investment; expense benefits by capturing the fees that were historically paid to our 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, securities available for sale, 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 allowance for expected credit losses 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 (CDI): This intangible asset represents the value of the relationships with certain deposit clients and is included in “Other assets” in the Company’s Condensed Consolidated Balance Sheets. 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 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” in the Company’s Condensed Consolidated Balance Sheets.

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.

17


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

Subordinated debt: The fair value of subordinated debt was determined by using a discounted cash flow method using a market participant discount rate for similar instruments. Subordinated debt is included in “Other long-term debt” in the Company’s Condensed Consolidated Balance Sheets.

The Company incurred approximately $16 million of expenses in connection with the acquisition.

The table below presents certain unaudited pro forma financial information for illustrative purposes only, for the first quarters of 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.
Three Months Ended
March 31,
20212020
Total net revenue$112,911 $144,593 
Consolidated net loss$(54,020)$(54,611)

For the first quarter of 2021, actual total net revenue of approximately $15 million and net loss of approximately $3 million from the Radius acquisition are included in the Company’s Condensed Consolidated Statements of Operations. The net loss included an ACL on non-PCD loans of $6.9 million, as described above.

18


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

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 generally expected to be used by the combined company under GAAP.

As of December 31, 2020
LendingClub Historical PresentationReclassification AdjustmentsLendingClub Reclassified Amounts
Assets
Cash and cash equivalents$524,963 $(524,963)$
Cash and due from banks5,197 5,197 
Interest bearing deposits in banks519,766 519,766 
Total cash and cash equivalents524,963 524,963 
Restricted cash103,522 103,522 
Securities available for sale at fair value142,226 142,226 
Loans held for investment at fair value636,686 (636,686)
Loans held for investment by the Company at fair value49,954 (49,954)
Loans held for sale by the Company at fair value121,902 (121,902)
Loans held for sale at fair value121,902 121,902 
Retail and certificate loans held for investment at fair value636,686 636,686 
Other loans held for investment at fair value49,954 49,954 
Accrued interest receivable5,205 (5,205)
Property, equipment and software, net96,641 96,641 
Operating lease assets74,037 (74,037)
Intangible assets, net11,427 (11,427)
Other assets96,730 90,669 187,399 
Total assets$1,863,293 $$1,863,293 
Liabilities and Equity
Accounts payable$3,698 $(3,698)$
Accrued interest payable4,572 (4,572)
Operating lease liabilities94,538 (94,538)
Accrued expenses and other liabilities101,457 (101,457)
Payable to investors40,286 (40,286)
Credit facilities and securities sold under repurchase agreements104,989 (104,989)
Short-term borrowings104,989 104,989 
Retail notes, certificates and secured borrowings at fair value636,774 636,774 
Payable on Structured Program borrowings152,808 152,808 
Other liabilities244,551 244,551 
Total liabilities1,139,122 1,139,122 
Equity
Common stock881 881 
Additional paid-in capital1,508,020 1,508,020 
Accumulated deficit(786,214)(786,214)
Accumulated other comprehensive income1,484 1,484 
Total equity724,171 724,171 
Total liabilities and equity$1,863,293 $$1,863,293 
19


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

Three months ended March 31, 2020
LendingClub Historical PresentationReclassification AdjustmentsLendingClub Reclassified Amounts
Net Revenue
Transaction fees$136,243 $(136,243)$
Interest income69,411 (69,411)
Interest expense(44,241)44,241 — 
Net fair value adjustments(101,738)101,738 
Net interest income and fair value adjustments(76,568)76,568 — 
Investor fees41,759 (41,759)
Gain on sales of loans14,261 (14,261)
Net investor revenue(20,548)20,548 
Other revenue4,511 (4,511)
Total net revenue120,206 (120,206)
Non-interest income
Marketplace revenue (1)
102,477 102,477 
Other non-interest income4,511 4,511 
Total non-interest income106,988 106,988 
Interest income
Interest on loans held for sale27,376 27,376 
Interest on retail and certificate loans held for investment at fair value35,376 35,376 
Interest on other loans held for investment at fair value1,999 1,999 
Interest on securities available for sale3,779 3,779 
Other interest income881 881 
Total interest income69,411 69,411 
Interest expense
Interest on short-term borrowings7,398 7,398 
Interest on retail notes, certificates and secured borrowings35,376 35,376 
Interest on Structured Program borrowings2,299 2,299 
Interest on other long-term debt140 140 
Total interest expense(2)
— 45,213 45,213 
Net interest income— 24,198 24,198 
Total net revenue (3)
131,186 131,186 
Provision for credit losses (3)
10,980 10,980 
Operating expenses
Sales and marketing49,784 (49,784)
Origination and servicing20,994 (20,994)
Engineering and product development38,710 (38,710)
Other general and administrative58,486 (58,486)
Total operating expenses167,974 (167,974)
Non-interest expense
Compensation and benefits75,545 75,545 
Marketing39,081 39,081 
Equipment and software6,490 6,490 
Occupancy6,813 6,813 
Depreciation and amortization12,873 12,873 
Professional services14,141 14,141 
Other non-interest expense13,031 13,031 
Total non-interest expense167,974 167,974 
Loss before income tax expense(47,768)(47,768)
Income tax expense319 319 
Consolidated net loss$(48,087)$$(48,087)
(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 relates to credit valuation adjustments on securities available for sale reclassified from net fair value adjustments to provision for credit losses.
20


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

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. Origination fees are paid directly to the Company by borrowers upon the origination of the loan.

In addition, origination fees include transaction fees that are 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. Prior to the acquisition of Radius, the Company relied on third-party issuing banks to originate and fund loans initiated by borrowers. Following the acquisition, the Company became the originator and lender for all unsecured personal and auto loans. However, the Company continues to utilize issuing bank partners to fund education and patient finance loans, which originate and service such loans and from whom the Company receives transaction fees.

Servicing Fees: The Company receives servicing fees to compensate it for the costs incurred in servicing a loan, including managing payments from borrowers, collections and payments to 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. Servicing fee revenue related to whole loans sold also includes the change in fair value of servicing assets and liabilities associated with the loans. Servicing rights are recorded as either an asset or liability depending on the degree to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee.

Gain (Loss) on Sales of Loans: In connection with loan sales and in addition to servicing fees earned with respect to the corresponding loan, the Company recognizes a gain or loss on the sale of that loan based on the level to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee. Additionally, the Company recognizes transaction costs 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.

The following table presents components of marketplace revenue for the periods presented:
Three Months Ended
March 31,
20212020
Origination fees$55,559 $136,243 
Servicing fees23,166 41,759 
Gain on sales of loans8,323 14,261 
Net fair value adjustments (1)
(5,321)(89,786)
Total marketplace revenue$81,727 $102,477 
(1)    Certain prior period valuation adjustments on securities available for sale 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
21


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

origination fees in “Marketplace revenue” and referral fees are presented as a component of “Other non-interest income” in the Condensed Consolidated Statements of Operations.

Upon the acquisition of Radius, 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 custodial and other fees, service charges, gains and losses 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 first quarters of 2021 and 2020:
Three Months Ended
March 31,
20212020
Transaction fees$22,402 $136,243 
Referral fees2,594 1,614 
Total revenue from contracts with customers$24,996 $137,857 

The Company recognizes transaction and referral fees at each distinct instance after the Company satisfies its performance obligations. The Company had 0 bad debt expense for the first quarters of 2021 and 2020. Because revenue is recognized at the same time that payments are received, the Company had no contract assets, contract liabilities, or deferred contract costs recorded as of both March 31, 2021 and December 31, 2020. Additionally, the Company did not recognize any revenue from performance obligations related to prior periods (for example, due to changes in transaction price) for the first quarters of 2021 and 2020. For additional detail on the Company’s accounting policy regarding revenue recognition, see “Note 1. Summary of Significant Accounting Policies.

4. Net Income (Loss) Per Share

The following table details the computation of the Company’s basic and diluted net income (loss) per share of common stock and Series A preferred stock:
Three Months Ended March 31,20212020
Common Stock
Preferred Stock (1)(2)
Common Stock
Preferred Stock (1)(2)
Allocation of undistributed consolidated net loss$(45,776)$(1,308)$(45,240)$(2,847)
Deemed dividend(50,204)50,204 
Net income (loss) attributable to stockholders$(45,776)$(1,308)$(95,444)$47,357 
Weighted-average common shares – Basic and Diluted92,666,169 2,648,758 86,505,560 2,579,710 
Net income (loss) per share attributable to stockholders – Basic and Diluted$(0.49)$(0.49)$(1.10)$18.36 
(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, LendingClub preferred stock, series A (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 net income (loss) per share because it participates in earnings similar to common stock and does not receive any significant
22


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

preferences over the common stock. During the period that included the Company’s preferred stock, 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).

The following table summarizes the weighted-average common stock that were excluded from the Company’s diluted net income (loss) per share computation because their effect would have been anti-dilutive for the periods presented:
Three Months Ended
March 31,
20212020
Preferred stock2,648,758 2,579,710 
RSUs and PBRSUs1,468,191 30,852 
Stock options371,367 283,201 
Total4,488,316 2,893,763 

5. Securities Available for Sale

The Company’s securities available for sale portfolio includes debt securities obtained in the first quarter of 2021 upon its acquisition of Radius and asset-backed securities related to the Company’s Structured Program transactions. The Company’s Structured Program transactions included (i) asset-backed securitization transactions and (ii) Certificate Program transactions. Certificate Program transactions included CLUB Certificate and Levered Certificate transactions.

The Company sponsored the sale of unsecured personal loans through the issuance of certificate securities under our Certificate Program. The CLUB Certificate issued securities retained by the Company are presented as “CLUB Certificate asset-backed securities” in the securities available for sale tables below. The Levered Certificate issued senior and subordinated securities retained by the Company are presented in aggregate with securities from asset-backed securitizations as “Asset-backed senior securities” and “Asset-backed subordinated securities,” respectively, in the tables below. The “Other asset-backed securities” caption in the tables below primarily includes investment-grade rated bonds that are collateralized by student loan receivables and small business association loans.

23


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

The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of securities available for sale as of March 31, 2021 and December 31, 2020, were as follows:
March 31, 2021Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesFair
Value
U.S. agency residential mortgage-backed securities$72,348 $19 $(1,637)$$70,730 
Asset-backed senior securities(1)
62,894 59 62,953 
CLUB Certificate asset-backed securities (1)
40,741 1,515 (241)(48)41,967 
Other asset-backed securities29,858 79 (137)29,800 
Commercial mortgage-backed securities28,856 12 (428)28,440 
U.S. agency securities20,078 (799)19,284 
Asset-backed subordinated securities(1)
15,044 3,688 (79)(866)17,787 
Municipal securities3,312 (54)3,258 
Other securities200 200 
Total securities available for sale(2)
$273,331 $5,377 $(3,375)$(914)$274,419 

December 31, 2020Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesFair
Value
Asset-backed senior securities(1)
$75,332 $67 $(27)$$75,372 
CLUB Certificate asset-backed securities(1)
54,525 576 (772)(4,190)50,139 
Asset-backed subordinated securities(1)
29,107 2,128 (174)(14,546)16,515 
Other securities200 200 
Total securities available for sale(2)
$159,164 $2,771 $(973)$(18,736)$142,226 
(1)    As of March 31, 2021 and December 31, 2020, $91.9 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 March 31, 2021, and December 31, 2020, includes $238.3 million and $133.5 million, respectively, of securities pledged as collateral at fair value.

24


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

A summary of securities available for sale with unrealized losses for which an allowance for credit losses has not been recorded as of March 31, 2021 and December 31, 2020, aggregated by period of continuous unrealized loss, is as follows:
Less than
12 months
12 months
or longer
Total
March 31, 2021Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
U.S. agency residential mortgage-backed securities$63,011 $(1,637)$$$63,011 $(1,637)
Asset-backed securities related to Structured Program transactions722 (79)12,345 (241)13,067 (320)
Other asset-backed securities17,534 (137)17,534 (137)
Commercial mortgage-backed securities24,862 (428)24,862 (428)
U.S. agency securities10,098 (799)10,098 (799)
Municipal securities3,258 (54)3,258 (54)
Total securities with unrealized losses (1)
$119,485 $(3,134)$12,345 $(241)$131,830 $(3,375)
Less than
12 months
12 months
or longer
Total
December 31, 2020Fair
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 March 31, 2021 and December 31, 2020 totaled 124 and 55, respectively.

In the first quarter of 2020, the Company recorded an allowance for credit loss 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 due to the market dislocation related to COVID-19. In the first quarter of 2021, the Company deemed it not necessary to record unrealized losses as an allowance for credit loss for certain securities due to the nature of those securities and their investment grade quality.

During the first quarters of 2021 and 2020, the Company recognized $(2.5) million and $11.0 million in credit recovery and loss expense, respectively.

25


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

The following table presents the activity in the allowance for credit losses for securities available for sale, by major security type, for the first quarters of 2021 and 2020:
Allowance for Credit LossesCLUB Certificate asset-backed securitiesAsset-backed subordinated securitiesTotal
Beginning balance as of January 1, 2021$(4,190)$(14,546)$(18,736)
Reversal of securities available for sale188 2,282 2,470 
Charge-offs3,954 11,398 15,352 
Ending balance as of March 31, 2021$(48)$(866)$(914)
Allowance for Credit LossesCLUB Certificate asset-backed securitiesAsset-backed subordinated securitiesTotal
Beginning balance as of January 1, 2020$$$
Impairment on securities available for sale(4,684)(6,296)(10,980)
Allowance arising from PCD financial assets(3,954)(3,901)(7,855)
Ending balance as of March 31, 2020$(8,638)$(10,197)$(18,835)

Securities available for sale purchased with credit deterioration during the first quarter of 2020 were as follows:
Three Months Ended March 31, 2020
Purchase price of PCD securities at acquisition$23,043 
Allowance for credit losses on PCD securities at acquisition7,885 
Par value of acquired PCD securities at acquisition$30,928 

There were 0 securities available for sale purchased with credit deterioration during the first quarter of 2021.

26


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

The contractual maturities of securities available for sale at March 31, 2021, were as follows:
Amortized CostFair Value
Weighted-
average
Yield(1)
Due within 1 year:
Other securities200200
Total due within 1 year2002000.02 %
Due after 5 years through 10 years:
U.S. agency residential mortgage-backed securities449 446 
Other asset-backed securities1,084 1,084 
Commercial mortgage-backed securities3,503 3,403 
U.S. agency securities4,092 4,094 
Municipal securities471 463 
Total due after 5 years through 10 years9,599 9,490 0.97 %
Due after 10 years:
U.S. agency residential mortgage-backed securities71,899 70,284 
Other asset-backed securities28,774 28,716 
Commercial mortgage-backed securities25,353 25,037 
U.S. agency securities15,986 15,190 
Municipal securities2,841 2,795 
Total due after 10 years144,853 142,022 1.06 %
Asset-backed securities related to Structured Program transactions118,679 122,707 6.04 %
Total securities available for sale$273,331 $274,419 3.22 %
(1)    The weighted-average yield is computed using the amortized cost at March 31, 2021.

There were no Structured program transactions in the first quarter of 2021. During the first quarter of 2020, the Company and Consumer Loan Underlying Bond Depositor LLC (Depositor), a subsidiary of the Company, sold a combined $1.0 billion in asset-backed securities related to Structured Program transactions. There were 0 realized gains or losses related to such sales. For further information, see “Note 8. Fair Value of Assets and Liabilities.” Proceeds and gross realized gains and losses from other sales of securities available for sale were as follows:
Three Months Ended March 31,
20212020
Proceeds$106,192 $2,396 
Gross realized gains$708 $
Gross realized losses$(952)$(2)

6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses

As a result of the acquisition of Radius and becoming a bank holding company, LendingClub now records loans and leases held for investment at amortized cost, and, loans held for sale at fair value. Prior to the acquisition, all loans were recorded at fair value. Therefore, the following disclosures apply to loans and leases held for investment at amortized cost.

27


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

Accrued interest receivable is excluded from the amortized cost basis of loans and leases held for investment and is reported within “Other assets” on the Company’s Condensed Consolidated Balance Sheets. Accrued interest within that caption related to loans and leases held for investment was $9.0 million as of March 31, 2021.

Loans and Leases Held for Investment

The Company defines its loans and leases held for investment portfolio segments as (i) consumer and (ii) commercial. The following table presents the components of each portfolio segment by class of financing receivable:
March 31, 2021
Unsecured personal$321,104 
Residential mortgages164,002 
Secured consumer387,244 
Other consumer34 
Total consumer loans held for investment872,384 
Equipment finance (1)
145,885 
Commercial real estate302,445 
Commercial and industrial (2)
794,718 
Total commercial loans and leases held for investment1,243,048 
Total loans and leases held for investment2,115,432 
Allowance for loan and lease losses(36,132)
Loans and leases held for investment, net$2,079,300 
(1)    Comprised of sales-type leases for equipment. See “Note 17. Leases” for additional information.
(2)    Includes $664.4 million of Paycheck Protection Program (PPP) loans. The Company does not measure an allowance for expected credit losses on these loans.

The activity in the allowance for expected credit losses by portfolio segment for the quarter ended March 31, 2021 was as follows:
March 31, 2021
ConsumerCommercialTotal
Allowance for loan and lease losses, beginning of period$$$
Credit loss expense for loans and leases held for investment19,182 4,371 23,553 
Initial allowance for PCD loans acquired during the period (1)
603 11,837 12,440 
Charge-offs
Recoveries139 139 
Allowance for loan and lease losses, end of period$19,785 $16,347 $36,132 
Reserve for unfunded lending commitments, beginning of period$$$
Credit loss expense for unfunded lending commitments404 410 
Reserve for unfunded lending commitments, end of period$$404 $410 
(1)    For acquired PCD loans, an allowance 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, a CECL allowance 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.

28


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

The Company did not recognize an allowance for loan and lease losses as of December 31, 2020 because it did not carry loans held for investment at amortized cost as of that date. During the first quarter of 2021, as a result of the Radius acquisition, the Company acquired and began originating loans held for investment at amortized cost. The allowance for loan and lease losses balance as of March 31, 2021 relates to the recognition of expected credit losses on these purchased and originated loans.

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 as of March 31, 2021 and origination year:
March 31, 2021 Term Loans and Leases by Origination Year
20212020201920182017PriorWithin Revolving PeriodTotal
Unsecured personal
Current$321,104 $$$$$$$321,104 
30-59 days past due
60-89 days past due
90 or more days past due
Total unsecured personal321,104 321,104 
Residential mortgages
Current5,484 41,480 34,515 13,319 5,109 59,215 1,295 160,417 
30-59 days past due94 358 452 
60-89 days past due393 393 
90 or more days past due970 678 255 837 2,740 
Total residential mortgages5,484 41,480 35,878 13,997 5,458 60,410 1,295 164,002 
Secured consumer
Current55,457 139,010 77,488 62,528 22,299 25,688 382,470 
30-59 days past due
60-89 days past due
90 or more days past due1,203 2,655 916 4,774 
Total secured consumer55,457 139,010 78,691 65,183 23,215 25,688 387,244 
Other consumer
Current25 34 
30-59 days past due
60-89 days past due
90 or more days past due
Total other consumer25 34 
Total consumer loans held for investment$382,070 $180,490 $114,569 $79,180 $28,673 $86,098 $1,304 $872,384 

29


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

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 individually by classifying the loans 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:

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.

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.

30


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

The following table presents the classes of financing receivables within the commercial portfolio segment by risk rating as of March 31, 2021 and origination year:
March 31, 2021 Term Loans and Leases by Origination Year
20212020201920182017PriorWithin Revolving PeriodTotal
Equipment finance
Pass$14,126 $44,674 $38,224 $25,329 $8,434 $13,980 $$144,767 
Special mention257 861 1,118 
Substandard
Doubtful
Loss
Total equipment finance14,126 44,931 38,224 26,190 8,434 13,980 145,885 
Commercial real estate
Pass10,601 56,178 67,315 44,612 25,050 69,509 3,783 277,048 
Special mention8,325 276 822 9,423 
Substandard2,959 445 12,363 15,767 
Doubtful
Loss207 207 
Total commercial real estate10,601 64,503 67,591 47,571 25,495 82,901 3,783 302,445 
Commercial and industrial
Pass249,629 459,662 31,010 11,571 16,743 11,107 2,436 782,158 
Special mention2,352 704 1,064 110 4,230 
Substandard1,118 133 2,340 1,885 1,791 7,267 
Doubtful
Loss1,063 1,063 
Total commercial and industrial (1)
249,629 460,780 33,495 14,615 19,692 14,071 2,436 794,718 
Total commercial loans and leases held for investment274,356 570,214 139,310 88,376 53,621 110,952 6,219 1,243,048 
(1)    Includes $664.4 million of PPP loans. The Company does not measure an allowance for expected credit losses on these loans.

The following table presents an analysis of the past-due loans and leases held for investment within the commercial portfolio segment at March 31, 2021:
March 31, 2021Days Past Due
Current-2930-5960-8990 or moreTotal
Equipment finance$145,885 $$$$145,885 
Commercial real estate300,350 1,226 869 302,445 
Commercial and industrial (1)
792,647 1,008 1,063 794,718 
Total commercial loans and leases held for investment$1,238,882 $2,234 $$1,932 $1,243,048 
(1)    Includes $664.4 million of PPP loans. The Company does not measure an allowance for expected credit losses on these loans.

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.

31


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

The following table presents nonaccrual loans and leases as of March 31, 2021:
March 31, 2021
Nonaccrual(1)
Nonaccrual with no related ACL
Unsecured personal$$
Residential mortgages3,383 2,735 
Secured consumer4,774 3,858 
Other consumer
Total nonaccrual consumer loans held for investment8,157 6,593 
Equipment finance
Commercial real estate2,420 1,653 
Commercial and industrial1,360 1,063 
Total nonaccrual commercial loans and leases held for investment3,780 2,716 
Total nonaccrual loans and leases held for investment$11,937 $9,309 
(1)     There were no loans and leases that were 90 days or more past due and accruing as of March 31, 2021.

Troubled Debt Restructurings

TDRs are loan modifications where concessions were granted to borrowers experiencing financial difficulties. The Company may offer several types of assistance to aid customers, including payment extensions and reduction or forgiveness in amounts of principal and interest due.

TDRs identified by Radius prior to the acquisition are not disclosed because all such loans were recorded at fair value and a new accounting basis was established as of the acquisition date. Subsequent modifications, if any, are evaluated and recorded as TDRs in accordance with LendingClub’s accounting policies. See “Note 1. Summary of Significant Accounting Policies” for additional information.

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. See “Note 1. Summary of Significant Accounting Policies” for further detail.

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 expected credit losses. For acquired PCD loans for which all or a portion of the balance was previously written off, or was required to be written off under LendingClub’s charge-off policy upon acquisition, the expected credit loss included in the grossed-up loan balance was immediately charged off. Subsequent changes to the allowance for expected credit losses are recorded as additions to or reversals of credit losses on the Company’s Condensed Consolidated Statements of Operations.

32


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

Acquired PCD loans during the first quarter of 2021 were as follows:
Three Months Ended March 31, 2021
Purchase price$337,118 
Allowance for expected credit losses (1)
30,378 
Discount attributable to other factors12,204 
Par value$379,700 
(1)    For acquired PCD loans, an allowance 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, a CECL allowance 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

VIE Assets and Liabilities

The following tables provide the classifications of assets and liabilities on the Company’s Condensed Consolidated Balance Sheets for its transactions with consolidated and unconsolidated VIEs at March 31, 2021 and December 31, 2020. Additionally, the assets and liabilities in the table below exclude intercompany balances that eliminate in consolidation:
March 31, 2021Consolidated VIEsUnconsolidated VIEsTotal
Assets
Restricted cash$17,536 $$17,536 
Securities available for sale at fair value122,707 122,707 
Loans held for sale at fair value83,926 83,926 
Retail and certificate loans held for investment at fair value36,277 36,277 
Other loans held for investment at fair value42,261 42,261 
Other assets936 27,701 28,637 
Total assets$180,936 $150,408 $331,344 
Liabilities
Retail notes, certificates and secured borrowings at fair value$36,277 $$36,277 
Payable on Structured Program borrowings133,499 133,499 
Other liabilities522 522 
Total liabilities170,298 170,298 
Total net assets$10,638 $150,408 $161,046 

33


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

December 31, 2020Consolidated VIEsUnconsolidated VIEsTotal
Assets
Restricted cash$15,983 $$15,983 
Securities available for sale at fair value142,026 142,026 
Loans held for sale at fair value98,190 98,190 
Retail and certificate loans held for investment at fair value52,620 52,620 
Other loans held for investment at fair value50,102 50,102 
Other assets1,270 32,865 34,135 
Total assets$218,165 $174,891 $393,056 
Liabilities
Retail notes, certificates and secured borrowings at fair value$52,620 $$52,620 
Payable on Structured Program borrowings152,808 152,808 
Other liabilities729 729 
Total liabilities206,157 206,157 
Total net assets$12,008 $174,891 $186,899 

Consolidated VIEs

The Company consolidates VIEs when it is deemed to be the primary beneficiary. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies in the Annual Report for additional information.

LC Trust

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

Consolidated Trusts

The Company established trusts to facilitate the sale of loans and issuance of senior and subordinated securities. If the Company is the primary beneficiary of the trust, it is a consolidated VIE and will reflect senior and subordinated securities held by third parties within “Payable on Structured Program borrowings” in the Company’s Condensed Consolidated Balance Sheets. If subsequently the Company is not the primary beneficiary of the trust, the Company will deconsolidate the VIE. See “Note 13. Short-term Borrowings and Long-term Debt” for additional information.

Warehouse Credit Facilities

Prior to the acquisition of Radius, the Company established certain entities (deemed to be VIEs) to enter into warehouse credit facilities for the purpose of purchasing loans from LendingClub. In the fourth quarter of 2020, the Company fully repaid and terminated its credit facilities.

34


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

The following tables present a summary of financial assets and liabilities from the Company’s involvement with consolidated VIEs at March 31, 2021 and December 31, 2020:
March 31, 2021AssetsLiabilitiesNet Assets
LC Trust$38,965 $(36,554)$2,411 
Consolidated trusts141,971 (133,744)8,227 
Total consolidated VIEs$180,936 $(170,298)$10,638 

December 31, 2020AssetsLiabilitiesNet Assets
LC Trust$55,447 $(53,068)$2,379 
Consolidated trusts162,460 (153,089)9,371 
Warehouse credit facility258 258 
Total consolidated VIEs$218,165 $(206,157)$12,008 

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

Unconsolidated VIEs

The Company’s transactions with unconsolidated VIEs include asset-backed securitizations, Certificate Program transactions and loan sale transactions of unsecured personal loans. The Company has various forms of involvement with VIEs, including servicing of loans and holding senior or subordinated residual interests in the VIEs. The accounting for these transactions is based on a primary beneficiary analysis to determine whether the underlying VIEs should be consolidated. If the VIEs are not consolidated and the transfer of the loans from the Company to the VIE meets sale accounting criteria, then the Company will recognize a gain or loss on sales of loans. The Company considers continued involvement in an unconsolidated VIE insignificant if it is the sponsor and servicer and does not hold other significant variable interests. In these instances, the Company’s involvement with the VIE is in the role as an agent and without significant participation in the economics of the VIE. The Company enters into separate servicing agreements with the VIEs and holds at least 5% of the beneficial interests issued by the VIEs to comply with regulatory risk retention rules. The beneficial interests retained by the Company consist of senior securities and subordinated securities and are accounted for as securities available for sale. In connection with these transactions, we make certain customary representations, warranties and covenants. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies in the Annual Report for additional information.

Investment Fund

The Company has an equity investment in a private fund (Investment Fund) that participates in a family of funds with other unrelated third parties. This family of funds purchases assets from third parties unrelated to the Company and historically purchased whole loans and interests in loans from the Company. As of March 31, 2021, the Company had an ownership interest of approximately 22% in the Investment Fund. The Company’s investment is deemed to be a variable interest in the Investment Fund because the Company shares in the expected returns and losses of the Investment Fund. The Company has requested a full redemption of our investment in the Investment Fund. At March 31, 2021, the Company’s investment was $7.8 million, which is recognized in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.

35


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

The following tables summarize unconsolidated VIEs with which the Company has significant continuing involvement, but is not the primary beneficiary at March 31, 2021 and December 31, 2020:
March 31, 2021Carrying Value
Total VIE AssetsSecurities Available for SaleOther AssetsNet Assets
Unconsolidated Trusts$1,077,309 $51,273 $7,911 $59,184 
Certificate Program1,555,920 71,434 12,015 83,449 
Investment Fund35,369 7,775 7,775 
Total unconsolidated VIEs$2,668,598 $122,707 $27,701 $150,408 

March 31, 2021Maximum Exposure to Loss
Securities Available for SaleOther AssetsNet Assets
Unconsolidated Trusts$51,273 $7,911 $59,184 
Certificate Program71,434 12,015 83,449 
Investment Fund7,775 7,775 
Total unconsolidated VIEs$122,707 $27,701 $150,408 

December 31, 2020Carrying Value
Total VIE AssetsSecurities Available for SaleOther AssetsNet Assets
Unconsolidated Trusts$1,267,611 $57,511 $9,654 $67,165 
Certificate Program1,931,429 84,515 15,436 99,951 
Investment Fund34,376 7,775 7,775 
Total unconsolidated VIEs$3,233,416 $142,026 $32,865 $174,891 

December 31, 2020Maximum Exposure to Loss
Securities Available for SaleOther AssetsTotal Exposure
Unconsolidated Trusts$57,511 $9,654 $67,165 
Certificate Program84,515 15,436 99,951 
Investment Fund7,775 7,775 
Total unconsolidated VIEs$142,026 $32,865 $174,891 

“Total VIE Assets” represents the remaining principal balance of loans held by unconsolidated VIEs with respect to Unconsolidated Trusts, Certificate Program transactions, and the net assets held by the Investment Fund using the most current information available. “Securities Available for Sale” and “Other Assets” are the balances in the Company’s Condensed Consolidated Balance Sheets related to its involvement with the unconsolidated VIEs. “Other Assets” includes the Company’s servicing assets and servicing receivables and the Company’s equity investment with respect to the Investment Fund. “Total Exposure” refers to the Company’s maximum exposure to loss from its involvement with unconsolidated VIEs. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is extremely remote, such as where the value of interests and any associated collateral declines to zero. Accordingly, this required disclosure is not an indication of expected losses.

36


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

The following table summarizes activity related to the Unconsolidated Trusts and Certificate Program trusts, with the transfers accounted for as a sale on the Company’s financial statements for the first quarters of 2021 and 2020:
Three Months Ended March 31,20212020
Unconsolidated TrustsUnconsolidated Certificate Program
Trusts
Unconsolidated TrustsUnconsolidated Certificate Program
Trusts
Principal derecognized from loans securitized or sold$$$255,203 $637,637 
Net gains (losses) recognized from loans securitized or sold$$$(20)$5,596 
Fair value of asset-backed senior and subordinated securities, and CLUB Certificate asset-backed securities retained upon settlement (1)
$$$12,707 $31,423 
Cash proceeds from loans securitized or sold$$$237,764 $598,515 
Cash proceeds from servicing and other administrative fees on loans securitized or sold$3,017 $4,918 $5,121 $6,992 
Cash proceeds for interest received on senior securities and subordinated securities$608$1,258$1,040$2,273
(1)    For Structured Program transactions, the Company retained asset-backed senior securities of $23.0 million, CLUB Certificate asset-backed securities of $18.3 million, and asset-backed subordinated securities of $2.9 million for the first quarter of 2020. The Company did not retain asset-backed securities related to Structured Program transactions during the first quarter of 2021.

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. For loans related to Structured Program transactions where servicing is the only form of continuing involvement, the Company would only experience a loss if it was required to repurchase a loan due to a breach in representations and warranties associated with its loan sale or servicing contracts.

As of March 31, 2021, the aggregate unpaid principal balance of the off-balance sheet loans related to Structured Program transactions was $2.6 billion, of which $66.0 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.

Retained Interests from Unconsolidated VIEs

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 whole loans.

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

37


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

8. Fair Value of Assets and Liabilities

For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Part II – Item 8. Financial Statements and Supplementary Data – Note 1. Summary of Significant Accounting Policies in the Annual Report. The Company records certain assets and liabilities at fair value as listed in the following tables.

Financial Instruments Recorded at Fair Value

The following tables present the fair value hierarchy for assets and liabilities measured at fair value at March 31, 2021 and December 31, 2020:
March 31, 2021Level 1 InputsLevel 2 InputsLevel 3 InputsBalance at
Fair Value
Assets:
Loans held for sale at fair value$$$166,623 166,623 
Retail and certificate loans held for investment at fair value507,157 507,157 
Other loans held for investment at fair value42,485 42,485 
Securities available for sale:
Asset-backed senior securities and subordinated securities62,953 17,787 80,740 
U.S. agency residential mortgage-backed securities70,730 70,730 
CLUB Certificate asset-backed securities41,967 41,967 
Other asset-backed securities29,800 29,800 
Commercial mortgage-backed securities28,440 28,440 
U.S. agency securities19,284 19,284 
Municipal securities3,258 3,258 
Other securities200 200 
Total securities available for sale214,665 59,754 274,419 
Servicing assets54,113 54,113 
Other assets4,235 5,202 9,437 
Total assets$$218,900 $835,334 $1,054,234 
Liabilities:
Retail notes, certificates and secured borrowings$$$507,203 $507,203 
Payable on Structured Program borrowings133,499 133,499 
Other liabilities22,276 22,276 
Total liabilities$$$662,978 $662,978 

38


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

December 31, 2020Level 1 InputsLevel 2 InputsLevel 3 InputsBalance at
Fair Value
Assets:
Loans held for sale at fair value$$$121,902 $121,902 
Retail and certificate loans held for investment at fair value636,686 636,686 
Other loans held for investment at fair value49,954 49,954 
Securities available for sale:
Asset-backed senior securities and subordinated securities75,372 16,515 91,887 
CLUB Certificate asset-backed securities50,139 50,139 
Other securities200 200 
Total securities available for sale75,572 66,654 142,226 
Servicing assets56,347 56,347 
Total assets$$75,572 $931,543 $1,007,115 
Liabilities:
Retail notes, certificates and secured borrowings$$$636,774 $636,774 
Payable on Structured Program borrowings152,808 152,808 
Other liabilities12,270 12,270 
Total liabilities$$$801,852 $801,852 

Changes in the fair value of financial liabilities presented in the tables above, caused by a change in the Company’s risk are reported in other comprehensive income (OCI). For the first quarters of 2021 and 2020, the amount reported in OCI is zero because these financial liabilities are either payable only upon receipt of cash flows from underlying loans or secured by cash collateral.

Financial instruments are categorized in the valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. Since the financial instruments listed in the tables above do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, changes in fair value for assets and liabilities within the Level 2 or Level 3 categories may include changes in fair value that were attributable to observable and unobservable inputs, respectively. The Company primarily uses a discounted cash flow model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. The Company did 0t transfer any assets or liabilities in or out of Level 3 during the first quarters of 2021 or 2020.

Fair valuation adjustments are recorded through earnings related to Level 3 instruments for the first quarters of 2021 and 2020. Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input.

39


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

Loans Held for Sale at Fair Value

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 loans held for sale at fair value at March 31, 2021 and December 31, 2020:
Loans Held for Sale at Fair Value
March 31, 2021December 31, 2020
MinimumMaximumWeighted-
Average
MinimumMaximumWeighted-
Average
Discount rates5.2 %15.5 %8.3 %7.6 %16.0 %8.5 %
Net cumulative expected loss rates (1)
2.5 %22.8 %6.6 %5.0 %28.0 %8.2 %
Cumulative expected prepayment rates (1)
28.2 %46.2 %31.9 %27.2 %41.2 %30.4 %
(1)     Expressed as a percentage of the original principal balance of the loan.

Significant Recurring Level 3 Fair Value Input Sensitivity

The sensitivity of loans held for sale at fair value to adverse changes in key assumptions as of March 31, 2021 and December 31, 2020, are as follows:
March 31, 2021December 31, 2020
Loans held for sale at fair value$166,623 $121,902 
Expected weighted-average life (in years)1.21.1
Discount rates
100 basis point increase$(1,706)$(1,151)
200 basis point increase$(3,382)$(2,282)
Expected credit loss rates on underlying loans
10% adverse change$(1,486)$(1,099)
20% adverse change$(3,003)$(2,220)
Expected prepayment rates
10% adverse change$(514)$(273)
20% adverse change$(1,027)$(556)

40


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

Fair Value Reconciliation

The following tables present additional information about Level 3 loans held for sale at fair value on a recurring basis for the first quarters of 2021 and 2020:
Loans Held for Sale at Fair Value
Outstanding Principal BalanceValuation AdjustmentFair Value
Balance at December 31, 2020$132,600 $(10,698)$121,902 
Originations and purchases941,945 (1,629)940,316 
Transfers (to) from loans held for investment and/or loans held for sale(63)(63)
Sales(873,672)7,037 (866,635)
Principal payments and retirements(22,821)(22,821)
Charge-offs, net of recoveries(3,859)3,186 (673)
Change in fair value recorded in earnings(5,403)(5,403)
Balance at March 31, 2021$174,130 $(7,507)$166,623 
Loans Held for Sale at Fair Value
Outstanding Principal BalanceValuation AdjustmentFair Value
Balance at December 31, 2019$747,394 $(25,039)$722,355 
Purchases1,379,094 1,379,094 
Transfers (to) from loans held for investment and/or loans held for sale(43,123)(43,123)
Sales(1,171,407)19,909 (1,151,498)
Principal payments and retirements(70,103)(70,103)
Charge-offs, net of recoveries(6,298)5,779 (519)
Change in fair value recorded in earnings(94,502)(94,502)
Balance at March 31, 2020$835,557 $(93,853)$741,704 

Retail and Certificate Loans Held for Investment at Fair Value and Retail Notes, Certificates and Secured Borrowings

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for retail and certificate loans held for investment at fair value and the related retail notes, certificates and secured borrowings at March 31, 2021 and December 31, 2020:
Retail and Certificate Loans Held for Investment at Fair Value,
and Retail Notes, Certificates and Secured Borrowings
March 31, 2021December 31, 2020
MinimumMaximumWeighted-
Average
MinimumMaximumWeighted-
Average
Discount rates7.6 %15.2 %9.4 %7.6 %15.0 %9.4 %
Net cumulative expected loss rates (1)
3.7 %20.6 %9.7 %4.3 %28.1 %11.2 %
Cumulative expected prepayment rates (1)
28.3 %36.3 %31.5 %27.3 %35.7 %30.4 %
(1)     Expressed as a percentage of the original principal balance of the loan, note, certificate or secured borrowing.

Significant Recurring Level 3 Fair Value Input Sensitivity

At March 31, 2021 and December 31, 2020, the discounted cash flow methodology used to estimate the retail note, certificate and secured borrowings’ fair values used the same projected net cash flows as their related retail loans. As demonstrated by the following tables, the fair value adjustments for retail and certificate loans held for
41


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

investment were largely offset by the corresponding fair value adjustments due to the payment dependent design of the retail notes, certificates and secured borrowings.

Fair Value Reconciliation

The following tables present additional information about Level 3 retail and certificate loans held for investment at fair value and retail notes, certificates and secured borrowings measured at fair value on a recurring basis for the first quarters of 2021 and 2020:
Retail and Certificate Loans Held for
 Investment at Fair Value
Retail Notes, Certificates and Secured Borrowings
Outstanding Principal BalanceValuation AdjustmentFair ValueOutstanding Principal BalanceValuation AdjustmentFair Value
Balance at December 31, 2020$679,903 $(43,217)$636,686 $679,903 $(43,129)$636,774 
Principal payments and retirements(131,020)(131,020)(131,020)(131,020)
Charge-offs, net of recoveries(12,008)4,740 (7,268)(12,008)4,652 (7,356)
Change in fair value recorded in earnings8,759 8,759 8,805 8,805 
Balance at March 31, 2021$536,875 $(29,718)$507,157 $536,875 $(29,672)$507,203 
Retail and Certificate Loans Held for
 Investment at Fair Value
Retail Notes, Certificates and Secured Borrowings
Outstanding Principal BalanceValuation AdjustmentFair ValueOutstanding Principal BalanceValuation AdjustmentFair Value
Balance at December 31, 2019$1,148,888 $(69,573)$1,079,315 $1,148,888 $(67,422)$1,081,466 
Purchases104,620 104,620 
Transfers (to) from retail and certificate loans held for investment and/or loans held for sale(17,478)(17,478)
Issuances104,620 104,620 
Principal payments and retirements(215,748)(215,748)(233,226)(233,226)
Charge-offs, net of recoveries(29,620)17,311 (12,309)(29,620)16,431 (13,189)
Change in fair value recorded in earnings(52,987)(52,987)(52,831)(52,831)
Balance at March 31, 2020$990,662 $(105,249)$885,413 $990,662 $(103,822)$886,840 

Other Loans Held for Investment at Fair Value

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 other loans held for investment at fair value at March 31, 2021 and December 31, 2020:
Other Loans Held for Investment at Fair Value
March 31, 2021December 31, 2020
MinimumMaximumWeighted-
Average
MinimumMaximumWeighted-
Average
Discount rates5.2 %15.4 %8.8 %7.5 %16.1 %8.8 %
Net cumulative expected loss rates (1)
2.5 %20.2 %8.3 %5.0 %26.3 %10.3 %
Cumulative expected prepayment rates (1)
27.7 %42.6 %31.8 %26.8 %39.7 %30.7 %
(1)     Expressed as a percentage of the original principal balance of the loan.

42


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

Significant Recurring Level 3 Fair Value Input Sensitivity

The sensitivity of other loans held for investment at fair value to adverse changes in key assumptions as of March 31, 2021 and December 31, 2020, are as follows:
March 31, 2021December 31, 2020
Other loans held for investment at fair value$42,485 $49,954 
Expected weighted-average life (in years)1.01.1
Discount rates
100 basis point increase$(428)$(541)
200 basis point increase$(849)$(1,073)
Expected credit loss rates on underlying loans
10% adverse change$(447)$(640)
20% adverse change$(906)$(1,295)
Expected prepayment rates
10% adverse change$(164)$(181)
20% adverse change$(342)$(368)

Fair Value Reconciliation

The following tables present additional information about Level 3 other loans held for investment at fair value on a recurring basis for the first quarters of 2021 and 2020:
Other Loans Held for Investment at Fair Value
Outstanding Principal BalanceValuation AdjustmentFair Value
Balance at December 31, 2020$56,388 $(6,434)$49,954 
Purchases116 (98)18 
Principal payments and retirements(8,324)(8,324)
Charge-offs, net of recoveries(1,025)574 (451)
Change in fair value recorded in earnings1,288 1,288 
Balance at March 31, 2021$47,155 $(4,670)$42,485 
Other Loans Held for Investment at Fair Value
Outstanding Principal BalanceValuation AdjustmentFair Value
Balance at December 31, 2019$47,042 $(3,349)$43,693 
Purchases727 (693)34 
Transfers (to) from other loans held for investment and/or loans held for sale43,188 43,188 
Principal payments and retirements(5,684)(5,684)
Charge-offs, net of recoveries(1,623)134 (1,489)
Change in fair value recorded in earnings(8,739)(8,739)
Balance at March 31, 2020$83,650 $(12,647)$71,003 

43


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

Asset-Backed Securities Related to Structured Program Transactions

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for asset-backed securities related to Structured Program transactions at March 31, 2021 and December 31, 2020:
Asset-Backed Securities Related to Structured Program Transactions
March 31, 2021December 31, 2020
MinimumMaximumWeighted-
Average
MinimumMaximumWeighted-
Average
Discount rates2.2 %25.1 %8.7 %2.2 %25.1 %8.4 %
Net cumulative expected loss rates (1)
5.1 %23.8 %14.9 %5.4 %28.9 %18.8 %
Cumulative expected prepayment rates (1)
10.1 %31.8 %26.9 %6.3 %30.5 %24.8 %
(1)    Expressed as a percentage of the outstanding collateral balance.

Significant Recurring Fair Value Input Sensitivity

The following tables present adverse changes to the fair value sensitivity of Level 2 and Level 3 asset-backed securities related to Structured Program transactions to changes in key assumptions at March 31, 2021 and December 31, 2020:
March 31, 2021
Asset-Backed Securities Related to
Structured Program Transactions
Senior SecuritiesSubordinated SecuritiesCLUB Certificates
Fair value of interests held$62,953 $17,787 $41,967 
Expected weighted-average life (in years)0.81.30.9
Discount rates
100 basis point increase$(434)$(164)$(324)
200 basis point increase$(859)$(350)$(642)
Expected credit loss rates on underlying loans
10% adverse change$$(1,286)$(1,019)
20% adverse change$$(2,630)$(2,089)
Expected prepayment rates
10% adverse change$$(712)$(561)
20% adverse change$$(1,666)$(1,168)

44


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

December 31, 2020
Asset-Backed Securities Related to
Structured Program Transactions
Senior SecuritiesSubordinated SecuritiesCLUB Certificates
Fair value of interests held$75,372 $16,515 $50,139 
Expected weighted-average life (in years)0.91.40.9
Discount rates
100 basis point increase$(579)$(161)$(405)
200 basis point increase$(1,145)$(343)$(800)
Expected credit loss rates on underlying loans
10% adverse change$$(1,831)$(1,528)
20% adverse change$$(3,718)$(3,095)
Expected prepayment rates
10% adverse change$$(791)$(659)
20% adverse change$$(1,736)$(1,343)

45


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

Fair Value Reconciliation

The following table presents additional information about Level 3 asset-backed securities related to Structured Program transactions measured at fair value on a recurring basis for the first quarters of 2021 and 2020:
Three Months Ended
March 31,
20212020
Fair value at beginning of period$66,654 $110,796 
Additions578 23,585 
Cash received(14,194)(16,266)
Change in unrealized gain (loss)3,125 (5,256)
Accrued interest1,121 1,632 
Reversal of (impairment on) securities available for sale2,470 (10,980)
Fair value at end of period$59,754 $103,511 

Servicing Assets

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for servicing assets at March 31, 2021 and December 31, 2020:
Servicing Assets
March 31, 2021December 31, 2020
MinimumMaximumWeighted-
Average
MinimumMaximumWeighted-
Average
Discount rates4.8 %16.4 %9.9 %4.8 %16.4 %9.9 %
Net cumulative expected loss rates (1)
2.6 %26.9 %10.7 %4.5 %26.3 %12.5 %
Cumulative expected prepayment rates (1)
28.1 %46.2 %32.7 %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.

46


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

Significant Recurring Level 3 Fair Value Input Sensitivity

The Company’s selection of the most representative market servicing rates for servicing assets is inherently judgmental. The Company reviews third-party servicing rates for its loans, loans in similar credit sectors, and market servicing benchmarking analyses provided by third-party valuation firms, when available. The table below shows the impact on the estimated fair value of servicing assets, calculated using different market servicing rate assumptions as of March 31, 2021 and December 31, 2020:
Servicing Assets
March 31, 2021December 31, 2020
Weighted-average market servicing rate assumptions0.62 %0.62 %
Change in fair value from:
Servicing rate increase by 0.10%$(7,757)$(7,379)
Servicing rate decrease by 0.10%$7,757 $7,379 

The following table presents the fair value sensitivity of servicing assets to adverse changes in key assumptions as of March 31, 2021 and December 31, 2020:
Servicing Assets
March 31, 2021December 31, 2020
Fair value of servicing assets$54,113 $56,347 
Discount rates
100 basis point increase$(437)$(455)
200 basis point increase$(875)$(911)
Expected loss rates
10% adverse change$(598)$(346)
20% adverse change$(1,196)$(691)
Expected prepayment rates
10% adverse change$(2,277)$(1,596)
20% adverse change$(4,554)$(3,192)

Fair Value Reconciliation

The following table presents additional information about Level 3 servicing assets measured at fair value on a recurring basis for the first quarters of 2021 and 2020:
Three Months Ended
March 31,
20212020
Fair value at beginning of period$56,347 $89,680 
Issuances (1)
7,235 17,581 
Change in fair value, included in Marketplace revenue(11,837)(9,608)
Other net changes included in Deferred revenue2,368 (4,828)
Fair value at end of period$54,113 $92,825 
(1)    Represents the gains or losses on sales of the related loans.
47


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


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

The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value at March 31, 2021 and December 31, 2020:
March 31, 2021Carrying AmountLevel 1 InputsLevel 2 InputsLevel 3 InputsBalance at
Fair Value
Assets:
Loans and leases held for investment, net$2,079,300 $$$2,126,840 $2,126,840 
Servicing assets2,859 2,921 2,921 
Other assets9,023 9,023 
Total assets$2,082,159 $$9,023 $2,129,761 $2,138,784 
Liabilities:
Deposits$98,547 $$$98,547 $98,547 
Short-term borrowings90,091 54,088 36,003 90,091 
Advances from PPPLF370,086 370,086 370,086 
Other long-term debt18,572 18,572 18,572 
Other liabilities50,755 35,063 15,692 50,755 
Total liabilities$628,051 $$89,151 $538,900 $628,051 

December 31, 2020Carrying AmountLevel 1 InputsLevel 2 InputsLevel 3 InputsBalance 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 assets914 914 914 
Total assets$629,399 $$629,399 $$629,399 
Liabilities:
Short-term borrowings$104,989 $$65,121 $39,868 $104,989 
Other liabilities57,536 43,984 13,552 57,536 
Total liabilities$162,525 $$109,105 $53,420 $162,525 
(1)    Carrying amount approximates fair value due to the short maturity of these financial instruments.

48


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

9. Property, Equipment and Software, Net

Property, equipment and software, net, consist of the following:
March 31, 2021December 31, 2020
Internally developed software (1)
$108,414 $101,953 
Leasehold improvements36,387 35,140 
Computer equipment27,896 27,030 
Purchased software19,327 19,004 
Furniture and fixtures8,252 8,203 
Construction in progress3,046 2,761 
Total property, equipment and software203,322 194,091 
Accumulated depreciation and amortization(108,009)(97,450)
Total property, equipment and software, net$95,313 $96,641 
(1)     Includes $14.7 million and $13.9 million of development in progress as of March 31, 2021 and December 31, 2020, respectively.

Depreciation and amortization expense on property, equipment and software was $10.2 million and $11.8 million for the first quarters of 2021 and 2020, respectively. The Company recorded impairment expense on its internally developed software of $0.3 million and $0.2 million for the first quarters of 2021 and 2020, respectively. The Company records impairment expense on its internally developed software in “Depreciation and amortization” expense in the Condensed Consolidated Statements of Operations.

10. Goodwill and Intangible Assets

Goodwill

In connection with its acquisition of Radius in the first quarter of 2021, the Company recognized Goodwill of $75.7 million, which is fully allocated to the LendingClub Bank operating segment. Goodwill is not amortized, but will be subject to annual impairment tests. See “Note 2. Business Acquisition.

Intangible Assets

Intangible assets consist of customer relationships, which include the core deposit intangible acquired during the first quarter of 2021 as part of the acquisition of Radius. Intangible assets, net of accumulated amortization, are included in “Other assets” on the Company’s Condensed Consolidated Balance Sheets. The gross and net carrying values and accumulated amortization are as follows for the periods presented:
March 31, 2021December 31, 2020
Gross carrying value$54,500 $39,500 
Accumulated amortization(29,280)(28,073)
Net carrying value$25,220 $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 first quarters of 2021 and 2020 was $1.2 million and $0.8 million, respectively. There was 0 impairment loss for the first quarters of 2021 and 2020.

49


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

The expected future amortization expense for intangible assets as of March 31, 2021, is as follows:
2021$4,039 
20224,847 
20234,198 
20243,549 
20252,901 
Thereafter5,686 
Total$25,220 

11. Other Assets

Other assets consist of the following:
March 31, 2021December 31, 2020
Operating lease assets$84,931 $74,037 
Servicing assets (1)
56,972 56,347 
Bank-owned life insurance31,623 
Intangible assets, net (2)
25,220 11,427 
Prepaid expenses17,163 16,455 
Accounts receivable14,194 10,243 
Other investments13,871 8,275 
Accrued interest receivable13,792 5,205 
Other21,429 5,410 
Total other assets$279,195 $187,399 
(1)    As of March 31, 2021 and December 31, 2020, loans underlying loan servicing rights had a total outstanding principal balance of $9.4 billion and $10.1 billion, respectively.
(2)    See “Note 10. Goodwill and Intangible Assets” for additional detail.

12. Deposits

Deposits consist of the following:
March 31, 2021
Interest-bearing deposits:
Checking accounts$1,653,254 
Savings and money market accounts478,026 
Certificates of deposit (1)
98,547 
Total$2,229,827 
Noninterest-bearing deposits143,610 
Total deposits$2,373,437 
(1)    Includes $93.4 million in denominations of $100 thousand or more and $33.8 million in denominations in excess of $250 thousand federal insurance limits.

50


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

Total certificates of deposit at March 31, 2021 are scheduled to mature as follows:
2021$69,001 
202225,062 
20233,861 
202457 
2025231 
Thereafter335 
Total certificates of deposit$98,547 

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 March 31, 2021 and December 31, 2020, the Company had $90.1 million and $105.0 million in aggregate debt outstanding under its repurchase agreements, respectively, which is primarily amortized over time through regular principal and interest payments collected from the pledged securities. At March 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 from 0.8 to 1.3 years. At March 31, 2021 and December 31, 2020, these repurchase agreements bore interest rates ranging from 3.08% and 6.33% and 3.05% to 4.00%, respectively, which are either fixed or based on a benchmark of the three-month LIBOR rate or the weighted-average interest rate of the securities sold plus a spread. Underlying securities retained and pledged as collateral under repurchase agreements were $114.9 million and $133.5 million, respectively, at March 31, 2021 and December 31, 2020.

Other Short-term Borrowings

The Company had a Federal Funds unsecured borrowing facility of $7.5 million at March 31, 2021. As of March 31, 2021 there were no borrowings outstanding under this line. The interest rate for the Federal Funds is determined by the lender based on market conditions per transaction.

Long-term Debt:

Advances from PPPLF

As of March 31, 2021, outstanding PPPLF borrowings were $370.1 million. The borrowings are collateralized by the 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%. No further advances may be made without authorization from the Board of Governs of the Federal Reserve System (FRB).

51


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

Retail Notes, Certificates, and Secured Borrowings

The Company issued member payment dependent notes (Retail Notes) and the LC Trust issued certificates as a means to allow investors to invest in the corresponding loans. Prior to the acquisition of Radius, investors were able to purchase Retail Notes, which were securities for which cash flows to investors were dependent upon principal and interest payments made by borrowers of certain 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. See “Note 8. Fair Value of Assets and Liabilities” for information about the outstanding principal balance and net fair value adjustments for retail notes, certificates, and secured borrowings.

The following table provides the balances of retail notes, certificates and secured borrowings at fair value at the end of the periods indicated:
March 31, 2021December 31, 2020
Retail notes$470,720 $583,219 
Certificates36,277 52,620 
Secured borrowings (1)
206 935 
Total retail notes, certificates and secured borrowings$507,203 $636,774 
(1)    At March 31, 2021 and December 31, 2020, a fair value of $0.2 million and $0.8 million included in “Retail and certificate loans held for investment at fair value” was pledged as collateral for secured borrowings, respectively.

Payable on Structured Program Borrowings

The Company consolidated certain sponsored Structured Program transactions through master trusts comprised of unsecured personal whole loans. The Company is the primary beneficiary of the trusts, which are consolidated. As of March 31, 2021 and December 31, 2020, the certificate participations and securities held by third-party investors of $133.5 million and $152.8 million are included in “Payable on Structured Program borrowings” in the Condensed Consolidated Balance Sheets and were secured by “Other loans held for investment at fair value” and “Loans held for sale at fair value” of $126.2 million and $148.3 million and restricted cash of $15.2 million and $13.5 million included in the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.

Other Long-term Debt

With the acquisition of Radius, the Company assumed subordinated notes of $15.8 million, at a 6.5% fixed to floating rate, due June 30, 2027. Fixed interest payments are due semiannually in arrears on June 30 and December 30 through June 30, 2022. Subsequent to June 30, 2022, the rate resets quarterly at a rate equal to 3-month 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 27, 2022 at the option of the Company. The carrying amount of the subordinated notes was $15.3 million, including a purchase premium of $0.4 million as of March 31, 2021.

In addition, the Company assumed advances from the Federal Home Loan Bank of Boston (FHLBB) of $2.8 million as of March 31, 2021, which were subsequently fully paid.

52


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

14. Other Liabilities

Other liabilities consist of the following:
March 31, 2021December 31, 2020
Operating lease liabilities$104,220 $94,538 
Payable to investors35,063 40,286 
Accrued expenses26,176 14,382 
Contingent liabilities (1)
21,988 21,592 
Accrued compensation16,319 28,805 
Transaction fee refund reserve15,692 14,119 
Accounts payable10,742 3,698 
Deferred revenue7,615 4,923 
Loan trailing fee liability, at fair value6,499 7,494 
Other20,752 14,714 
Total other liabilities$265,066 $244,551 
(1)    See “Note 18. Commitments and Contingencies” for further information.

15. Employee Incentive Plans

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

Stock-based Compensation

Stock-based compensation expense, included in “Compensation and benefits” expense on the Company’s Condensed Consolidated Statements of Operations, was as follows for the periods presented:
Three Months Ended
March 31,
20212020
RSUs and PBRSUs$14,743 $17,706 
Stock options (1)
450 423 
Total stock-based compensation expense$15,193 $18,129 
(1)    In the first quarter of 2021, includes common stock issued and consideration related to share-based payments in connection with the acquisition of Radius. See “Note 2. Business Acquisition” for additional information.

The Company capitalized $1.0 million and $1.6 million of stock-based compensation expense associated with developing software for internal use during the first quarters of 2021 and 2020, respectively.

53


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

Restricted Stock Units

The following table summarizes the activities for the Company’s RSUs during the first quarter of 2021:
Number
of Units
Weighted-
Average
Grant Date
Fair Value
Unvested at December 31, 202011,395,112 $11.26 
Granted4,415,391 $11.15 
Vested(1,011,815)$13.57 
Forfeited/expired(496,946)$12.21 
Unvested at March 31, 202114,301,742 $11.03 

During the first quarter of 2021, the Company granted 4,415,391 RSUs with an aggregate fair value of $49.2 million.

As of March 31, 2021, there was $148.7 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 2.7 years.

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. Our PBRSU awards have a separate market-based component and/or a performance-based component. Certain of our 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), not adjusted for actual performance 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 during the first quarter of 2021:
Number
of Units
Weighted-
Average
Grant Date
Fair Value
Unvested at December 31, 20201,441,311 $5.31 
Granted568,285 $22.54 
Vested(20,285)$22.59 
Unvested at March 31, 20211,989,311 $10.12 

During the first quarters of 2021 and 2020, the Company recognized $1.2 million and $0.8 million in stock-based compensation expense related to PBRSUs, respectively.

As of March 31, 2021, there was $17.2 million of unrecognized compensation cost related to unvested PBRSUs, which is expected to be recognized over the next 2.1 years.

54


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

16. Income Taxes

For the first quarter of 2021, the Company recorded an income tax benefit of $2.8 million primarily related to changes in the deferred tax asset valuation allowance resulting from a deferred tax liability assumed with the acquisition of Radius. For the first quarter of 2020, the Company recorded an income tax expense of $319 thousand primarily attributable to the tax effects of other comprehensive income associated with the Company’s available for sale portfolio.

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

17. Leases

Lessor Arrangements

Upon the acquisition of Radius, the Company assumed 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 first quarter of 2021, interest earned on Equipment Finance was $1.9 million and is included in “Interest and fees on loans and leases held for investment” in the Company’s Condensed Consolidated Statements of Operations.

The components of Equipment Finance assets are as follows:
March 31, 2021
Lease receivables$111,571 
Unguaranteed residual asset values36,646 
Unearned income(2,455)
Deferred fees123 
Total (1)
$145,885 
(1)    See “Note 6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses” for additional information.

Future minimum lease payments based on maturity of the Company’s lessor arrangements at March 31, 2021 were as follows:
2021$32,252 
202237,073 
202327,303 
202417,568 
20259,393 
Thereafter8,772 
Total lease payments$132,361 
Discount effect(20,790)
Present value of future minimum lease payments$111,571 

The Company did not have any lessor arrangements with related parties or any deferred selling profits as of March 31, 2021.
55


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


Lessee Arrangements

The Company has operating leases for its headquarters in San Francisco, California, as well as additional office space for its origination and servicing operations in the Salt Lake City area, Utah, and Westborough, Massachusetts. In addition, the Company assumed operating leases in Boston, Massachusetts upon the acquisition of Radius. As of March 31, 2021, the lease agreements have remaining lease terms ranging from approximately one year to ten 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 lease terms of approximately one year. As of March 31, 2021, the Company pledged $0.8 million of cash and $5.5 million in letters of credit as security deposits in connection with its lease agreements.

The right-of-use (ROU) assets and related liabilities recorded for the leases assumed upon acquisition were both approximately $5.0 million. The ROU assets were adjusted to reflect favorable terms of the lease, when compared to market terms, which resulted in an increase to the acquired ROU of approximately $1.7 million. Lease liabilities assumed were measured based on the net present value of remaining future lease payments on the date of acquisition, with consideration given for options to extend or renew each lease. Remaining future lease payments were discounted at the Company’s estimated incremental borrowing rate on the date of acquisition.

The Company reviewed operating lease ROU assets for impairment. For the first quarter of 2021, the Company recognized impairment expense of $1.0 million, net, on operating lease assets, included in “Occupancy expense” on the Company’s Condensed Consolidated Statement of Operations. NaN impairment expense was recorded during the first quarter of 2020.

Balance sheet information as of March 31, 2021 and December 31, 2020 related to leases was as follows:
ROU Assets and Lease LiabilitiesMarch 31, 2021December 31, 2020
Operating lease assets$84,931 $74,037 
Operating lease liabilities (1)
$104,220 $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 for the first quarters of 2021 and 2020 were as follows:
Three Months Ended
March 31,
Net Lease CostsIncome Statement Classification20212020
Operating lease costs (1)
Occupancy$(4,977)$(4,620)
Sublease revenueOther non-interest income1,537 1,534 
Net lease costs$(3,440)$(3,086)
(1)    Includes variable lease costs of $0.1 million and $0.4 million for the first quarters of 2021 and 2020, respectively.

56


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

Supplemental cash flow information related to the Company’s operating leases for the first quarters of 2021 and 2020 was as follows:
Three Months Ended
March 31,
20212020
Non-cash operating activity:
Leased assets obtained in exchange for new and amended operating lease liabilities (1)
$12,914 $
(1)    Represents non-cash activity and, accordingly, is not reflected in the Condensed Consolidated Statements of Cash Flows. Amount includes noncash remeasurements of the operating lease ROU asset.

The Company’s future minimum undiscounted lease payments under operating leases and anticipated sublease revenue as of March 31, 2021 were as follows:
Operating Lease
Payments
Sublease
Revenue
Net
2021$16,148 $(5,079)$11,069 
202215,947 (2,918)13,029 
202312,465 12,465 
202412,810 12,810 
202513,163 13,163 
Thereafter62,350 62,350 
Total lease payments$132,883 $(7,997)$124,886 
Discount effect28,663 
Present value of future minimum lease payments$104,220 

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 RateMarch 31, 2021
Weighted-average remaining lease term (in years)8.69
Weighted-average discount rate5.40 %

18. Commitments and Contingencies

Operating Lease Commitments

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

Loan Purchase Obligation

Prior to the acquisition of Radius, under the Company’s loan account program with WebBank, which served as the Company’s primary issuing bank for loans facilitated through the Company’s platform, WebBank retained ownership of the loans it originated for two business days after origination. As part of this arrangement, the Company was committed to purchase any loans that have been fully approved at par plus accrued interest, at the conclusion of the two business days. As of December 31, 2020, the Company was committed to purchase loans with
57


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

an outstanding principal balance of $13.8 million at par. The Company was not committed to purchase any such loans as of March 31, 2021 as it now originates loans and no longer has a loan account program with WebBank.

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 whole loan and Certificate Program sales, as well as to facilitate access to securitization markets, 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.

In addition to and distinct from the repurchase obligations described in the preceding paragraph, the Company performed certain administrative functions for a variety of retail and institutional investors, including executing, without discretion, loan investments as directed by the investor. To the extent loans did not meet the investor’s investment criteria at the time of issuance, or were transferred to the investor as a result of a system error by the Company, the Company repurchased such loans or interests therein at par.

As a result of the loan repurchase obligations described above, the Company repurchased $0.2 million and $1.1 million in loans or interests therein during the first quarters of 2021 and 2020, respectively.

Purchase Commitments

If the Company could not arrange for other investors to invest in or purchase loans that the Company facilitated and that were originated by an issuing bank partner but did not meet the credit criteria for purchase by the issuing bank partner, the Company was contractually committed to purchase those loans. As of both March 31, 2021 and December 31, 2020, the Company had a $9.0 million deposit in a bank account to secure potential future purchases of these loans, if necessary. The funds are recorded as restricted cash on the Company’s Condensed Consolidated Balance Sheets. During the first quarters of 2021 and 2020, the Company was required to purchase $7.1 million and $13.2 million of loans facilitated by the Company or Springstone Financial LLC (a previously held wholly-owned subsidiary of LendingClub), respectively. These purchased loans are held on the Company’s Condensed Consolidated Balance Sheets and have a fair value of $9.2 million and $4.5 million as of March 31, 2021 and December 31, 2020, respectively.

Unfunded Loan Commitments

Unfunded commitments and unused lines of credit at their contractual amounts were as follows:
March 31, 2021
FixedVariableTotal
Commitments to extend credit$$57,853 $57,853 
Lines of credit$3,338 $37,129 $40,467 

Legal

The Company is subject to various claims brought in a litigation or regulatory context. These matters include lawsuits and federal regulatory litigation, including but not limited to putative class action lawsuits, derivative lawsuits, and litigation with the FTC. In addition, the Company is subject to federal or state regulatory
58


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

examinations, investigations, or actions relating to the Company’s business practices or licensing. It is also party to a number of routine litigation matters arising in the ordinary course of business. The majority of these claims and proceedings relate to or arise from alleged state or federal law and regulatory violations, or are alleged commercial disputes or consumer complaints. The Company accrues for costs related to contingencies when a loss from such claims is probable and the amount of loss can be reasonably estimated. In determining whether a loss from a claim is probable and the loss can be reasonably estimated, the Company reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If the Company determines an unfavorable outcome is not probable or the amount of loss cannot be reasonably estimated, the Company does not accrue for a potential litigation loss. In those situations, the Company discloses an estimate or range of the reasonably possible losses, if such estimates can be made. Except as otherwise specifically noted below, at this time, the Company does not believe that it is possible to estimate the reasonably possible losses or a range of reasonably possible losses related to the matters described below.

FTC Lawsuit

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

On April 25, 2018, the FTC filed a complaint in the Northern District of California (FTC v. LendingClub Corporation, No. 3:18-cv-02454) alleging causes of action for violations of the FTC Act, including claims of deception in connection with disclosures related to the origination fee associated with loans available through the Company’s platform, and in connection with communications relating to the likelihood of loan approval during the application process, and a claim of unfairness relating to certain unauthorized charges to borrowers’ bank accounts. The FTC’s complaint also alleged a violation of the Gramm-Leach-Bliley Act regarding the Company’s practices in delivering its privacy notice. 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 our 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 our matter with the FTC . The Court in our case will need to apply the Supreme Court’s order. The Company
59


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

denies, and will continue to vigorously defend against, the claims remaining in this case. Notwithstanding the Company’s vigorous defense, the Company and the FTC have participated in voluntary settlement conferences and may engage in additional settlement discussions. No assurances can be given as to the timing, outcome or consequences of this matter.

Class Action Lawsuit Following Announcement of FTC Litigation

In May 2018, following the announcement of the FTC’s litigation against the Company, putative shareholder class action litigation was filed in the U.S. District Court of the Northern District of California (Veal v. LendingClub Corporation et.al., No. 5:18-cv-02599) against the Company and certain of its current and former officers and directors alleging violations of federal securities laws in connection with the Company’s description of fees and compliance with federal privacy law in securities filings. On January 7, 2019, the lead plaintiffs filed a consolidated amended class action complaint which asserts the same causes of action as the original complaint and adds additional allegations. That complaint was subsequently dismissed by the Court with leave to amend. Plaintiff 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 Court issued an order granting a motion to dismiss by 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 Court indicating their intention not to file a Third Amended Complaint in this case and requesting that the Court enter judgment. The Court entered judgment and dismissed all claims in the case the same day. The lead plaintiffs have appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. The timing of a ruling in the appeal is uncertain. The Company denies and will vigorously defend against the allegations in the case. No assurances can be given as to the timing, outcome or consequences of this matter.

Derivative Litigation Following FTC Lawsuit

In August 2019, a putative shareholder derivative action was filed in the Court of Chancery for the State of Delaware (Fisher v. Sanborn, et al., Case No. 2019-0631) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. This lawsuit accuses the individual defendants of breaching their fiduciary duties by failing to adequately monitor the Company and prevent it from engaging in the purported regulatory violations alleged by the FTC and by causing the Company to make allegedly false and misleading public statements (as alleged in the Veal action). The lawsuit also alleges that certain of the individual defendants breached their fiduciary duties by selling Company shares while in possession of material, non-public information. The defendants filed a motion to dismiss the operative complaint in the case, which was granted by the Court. The plaintiff has now appealed this ruling. The timing of a ruling in this appeal is uncertain. No assurances can be given as to the timing, outcome or consequences of this matter.

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

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

The Company is routinely subject to examination for compliance with applicable laws and regulations in the states in which it is licensed. As of the date of this Report, the Company is subject to examination by the New York Department of Financial Services (NYDFS) 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
60


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

comply with certain rules and regulations of the NYDFS. No assurances can be given as to the timing, outcome or consequences of this matter or others if or as they arise.

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. 3:20-cv-01153). The lawsuit alleges violations of California and Massachusetts law based on allegations that LendingClub 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 LendingClub without their knowledge and consent. LendingClub 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, dismissing with prejudice plaintiff’s claim under Massachusetts law, and denying the Company’s motion to strike plaintiff’s nationwide class allegations. The California Supreme Court has issued a decision in a case involving the California Invasion of Privacy Act which the Court in our matter will need to apply. 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. No assurances can be given as to the timing, outcome or consequences of this matter.

California Private Attorneys General Lawsuit

In September 2018, a putative action under the California Private Attorney General Act was brought against the Company in the California Superior Court (Brott v. LendingClub Corporation, et al., CGC-18-570047) alleging violations of the California Labor Code. The complaint by a former employee alleges that the Company improperly failed to pay certain hourly employees for all wages owed, pay the correct rate of pay including overtime, and provide accurate wage statements. The lawsuit alleges that the plaintiff and aggrieved employees are entitled to recover civil penalties under the California Labor Code. The parties have reached a resolution of this matter, the terms of which are not material to the Company’s financial position or results of operations. The resolution will require court approval. The parties have finalized a written settlement agreement and have a hearing with the Court in May 2021 to seek the Court’s approval of the negotiated resolution. It remains unclear when the Court will consider approving the settlement or issuing a ruling in connection with the same.

Certain Financial Considerations Relating to Litigation and Investigations

With respect to the matters discussed above, the Company had $22.0 million and $21.6 million in accrued contingent liabilities at March 31, 2021 and December 31, 2020, respectively.

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.
61


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


19. Regulatory Requirements

LendingClub, a bank holding company, and LendingClub Bank, a nationally chartered association, are subject to comprehensive supervision, examination and enforcement, and regulation by the FRB and the Office of the Comptroller of the Currency (OCC). The Company and the Bank are each subject to 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’s financial statements.

The minimum capital 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 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 the Bank (for a minimum of three years following its formation) to maintain a CET1 risk-based capital ratio of 11%, a Tier 1 risk-based capital ratio above 11%, a total risk-based capital ratio above 13%, and a Tier 1 leverage ratio of 11%.

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 an institution’s condition deteriorates and its PCA capitalization category declines. Among other things, institutions that are less than well-capitalized become
subject to increasingly stringent restrictions on their ability to accept and/or rollover brokered deposits. At March 31, 2021, the Company’s and the 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 March 31, 2021 that management believes would change the Company’s categorization.

62


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

The following table presents the regulatory capital and ratios of the Company as of March 31, 2021 (in millions):
LendingClub
Required Minimum plus Required CCB for
Non-Leverage Ratios
March 31, 2021AmountRatio
CET1 capital$578.1 26.0 %7.0 %
Tier 1 capital$578.1 26.0 %8.5 %
Total capital$611.8 27.5 %10.5 %
Tier 1 leverage$578.1 14.5 %4.0 %
Risk-weighted assets$2,224.0 N/AN/A
Quarterly adjusted average assets$3,974.3 N/AN/A
N/A – Not applicable

The following table summarizes the Bank’s regulatory capital amounts and ratios at March 31, 2021 (in millions):
LendingClub Bank
Required Minimum plus Required CCB for
Non-Leverage Ratios
March 31, 2021AmountRatio
CET1 capital$338.9 20.9 %7.0 %
Tier 1 capital$338.9 20.9 %8.5 %
Total capital$356.9 22.1 %10.5 %
Tier 1 leverage$338.9 12.9 %4.0 %
Risk-weighted assets$1,617.9 N/AN/A
Quarterly adjusted average assets$2,626.3 N/AN/A
N/A – Not applicable

At March 31, 2021, $6.1 million of this capital benefit was applied to the computation of common equity Tier 1 capital.

20. Other Non-interest Income and Non-interest Expense

Other non-interest income consists of the following:
Three Months Ended
March 31,
20212020
Referral revenue$2,594 $1,614 
Sublease revenue1,537 1,534 
Realized gains (losses) on sales of securities available for sale(244)
Other1,720 1,362 
Total other non-interest income$5,607 $4,511 

63


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

Other non-interest expense consists of the following:
Three Months Ended
March 31,
20212020
Consumer credit services$3,292 $5,507 
Third-party collection fees1,749 2,609 
Insurance expense1,347 1,164 
Other5,737 3,751 
Total other non-interest expense$12,125 $13,031 

21. 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, LendingClub Bank.

LendingClub Corporation (Parent Only)

The LendingClub Corporation (parent only) operating segment represents the holding company legal entity and predominately reflects the historical operations of the Company. This activity includes, but is not limited to, the purchase and sale of loans prior to February 1, 2021 and ongoing issuances of education and patient finance loans that are originated by banking partners.

LendingClub Bank

The LendingClub 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 the acquired business 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.

64


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

Financial information for the segments is presented in the following tables:
LendingClub
Corporation
(Parent only)
LendingClub
Bank
Intercompany
Eliminations
Total
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
 20212020202120202021202020212020
Non-interest income:
Marketplace revenue$45,665 $102,477 $36,062 $$$$81,727 $102,477 
Other non-interest income4,098 4,511 19,700 (18,191)5,607 4,511 
Total non-interest income49,763 106,988 55,762 (18,191)87,334 106,988 
Interest income:
Interest income27,092 69,411 17,498 44,590 69,411 
Interest expense(24,837)(45,213)(1,247)(26,084)(45,213)
Net interest income2,255 24,198 16,251 18,506 24,198 
Total net revenue52,018 131,186 72,013 (18,191)105,840 131,186 
Provision for credit losses2,470 (10,980)(23,963)(21,493)(10,980)
Non-interest expense(76,944)(167,974)(75,499)18,191 (134,252)(167,974)
Loss before income tax expense$(22,456)$(47,768)$(27,449)$$$$(49,905)$(47,768)
Capital expenditures$1,811 $11,435 $4,554 $$$$6,365 $11,435 
Depreciation and amortization$11,150 $12,873 $616 $$$$11,766 $12,873 

65


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

LendingClub
Corporation
(Parent only)
LendingClub
Bank
Intercompany
Eliminations
Total
 March 31, 2021December 31, 2020March 31, 2021December 31, 2020March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Assets
Total cash and cash equivalents$75,950 $524,963 $792,701 $$(36,851)$$831,800 $524,963 
Restricted cash139,080 103,522 139,080 103,522 
Securities available for sale at fair value122,766 142,226 151,653 274,419 142,226 
Loans held for sale at fair value105,792 121,902 60,831 166,623 121,902 
Loans and leases held for investment, net2,079,300 2,079,300 
Retail and certificate loans held for investment at fair value507,157 636,686 507,157 636,686 
Other loans held for investment at fair value42,485 49,954 42,485 49,954 
Property, equipment and software, net88,364 96,641 6,949 95,313 96,641 
Investment in subsidiary458,917 (458,917)
Goodwill75,717 75,717 
Other assets206,756 187,399 123,227 (50,788)279,195 187,399 
Total assets1,747,267 1,863,293 3,290,378 (546,556)4,491,089 1,863,293 
Liabilities and Equity
Total deposits2,410,288 (36,851)2,373,437 
Short-term borrowings87,347 104,989 2,744 90,091 104,989 
Advances from PPPLF370,086 370,086 
Retail notes, certificates and secured borrowings at fair value507,203 636,774 507,203 636,774 
Payable on Structured Program borrowings133,499 152,808 133,499 152,808 
Other long-term debt15,738 2,834 18,572 
Other liabilities240,486 244,551 75,875 (51,295)265,066 244,551 
Total liabilities984,273 1,139,122 2,861,827 (88,146)3,757,954 1,139,122 
Total equity762,994 724,171 428,551 (458,410)733,135 724,171 
Total liabilities and equity$1,747,267 $1,863,293 $3,290,378 $$(546,556)$$4,491,089 $1,863,293 

22. Related Party Transactions

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

Several of the Company’s executive officers and directors (including immediate family members) have made deposits and withdrawals to their investor accounts and purchased loans or interests therein. The Company believes all such transactions by related persons were made in the ordinary course of business and were transacted on terms and conditions that were not more favorable than those obtained by similarly situated third-party investors.
66


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


In February 2020, the Company entered into an exchange agreement with its largest stockholder, Shanda, pursuant to which, in March 2020, Shanda exchanged all of 19,562,881 shares of LendingClub common stock held by it for (i) 195,628 newly issued shares of mandatorily convertible, non-voting, LendingClub preferred stock, series A, both with a par value of $0.01 per share, and (ii) a one-time cash payment of $50.2 million.

As of March 31, 2021, the Company had a $7.8 million investment and an approximate 22% ownership interest in an Investment Fund, a private fund that participates in a family of funds with other unrelated third parties. This family of funds purchases assets from third parties unrelated to the Company and, prior to 2020, purchased whole loans and interests in loans from the Company. The Company has requested a full redemption of its investment in the Investment Fund. The Company’s investment in the Investment Fund is recorded in “Other assets” on the Company’s Condensed Consolidated Balance Sheets. The Company believes all arrangements were on terms and conditions that were not more favorable than those obtained by other third-party investors. The Investment Fund provides audited financial statements annually and periodic investment statements throughout each calendar year on a delayed basis, which are used by the Company to evaluate performance and recoverability of its investment.

23. Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to March 31, 2021, through the date the condensed consolidated financial statements were filed with the SEC. Based on this evaluation, other than as recorded or disclosed within these condensed consolidated financial statements and related notes, the Company has determined no additional subsequent events were required to be recognized or disclosed.

67


LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (Report). In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in “Part I – Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (Annual Report) as modified by “Part II – Item 1A. Risk Factors” in this Report. The forward-looking statements included in this Report are made only as of the date hereof.

Overview

LendingClub was founded in 2006 to transform the banking industry by leveraging technology, data science and a marketplace model. We started by bringing a traditional credit product, the installment loan, into the digital age and became the largest provider of unsecured personal loans in the United States. On February 1, 2021, LendingClub completed the acquisition of Radius Bancorp, Inc. (Radius), whereby LendingClub became a bank holding company and formed LendingClub Bank, National Association (the Bank) as its wholly-owned subsidiary, through which we now operate the vast majority of our business. With the acquisition, we combined the complementary strengths of the Company’s digital lending capabilities with an award-winning digital bank.

We anticipate that additional strategic and financial benefits of the Radius acquisition will include:
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 consumer loans held for investment;
Expense benefits by capturing the fees that were historically paid to our third-party issuing banks; and
Ability to attract new members and deepen relationships with existing members through the addition of banking services that leverage LendingClub’s marketing and brand strengths.

We fund our consumer loan originations through the Company’s marketplace by either selling loans directly to third-party purchasers or investing our own capital in originated loans and holding those loans for investment. The mix of loans held for investment and originated for sale depend on a number of factors, including origination volumes, bank capital availability and demand from third-party loan investors.

As the originator of consumer loans, origination fees from loans held for sale (HFS) are recorded as a component of marketplace revenue. Marketplace revenue also includes servicing revenue associated with loan sales. Origination fees and costs from loans held for investment (HFI) are amortized through interest income over the life of the loans, and the expected credit losses reflected as a charge through earnings. The lifetime estimated credit losses on HFI loans are initially recognized through earnings when such loans are originated or otherwise acquired, while the interest received is recognized according to the loan’s contractual payment terms. Due to this timing difference between credit losses taken through earnings and actual charge-offs, we expect earnings to be disproportionately impacted in the near term from the expected organic growth in our HFI loan portfolio before benefiting from higher levels of interest income in later periods.

The change in our business model to being an originating lender with a stable deposit base also diversifies our funding strategy. As we expand our product offerings and grow our loan originations and HFI loan portfolio, we will increasingly rely on funding from customer deposits to prudently manage reliance on wholesale funding
68


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)
sources that tend to be more susceptible to market dislocations during periods of economic stress. We did not share in any interest rate or credit risk on the loans facilitated through our lending marketplace that were funded by Member Payment Dependent Notes (Retail Notes), certificates and certain secured borrowings because loan balances, interest rates and maturities were matched and offset by an equal balance of notes, certificates or secured borrowings with the exact same interest rates and maturities. 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 formation of the Bank as a nationally chartered association and the organization of our Parent as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and FRB, including the requirement to maintain minimum regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel III). In addition to these guidelines and as part of our regulatory approvals, we have made various commitments to the regulators in order to demonstrate that we will operate the bank in a safe and sound manner. See “Capital Management” for additional information.

The acquisition significantly changed the presentation of our financial statements, which are now structured according to the presentation requirements for bank holding companies under Article 9 of the SEC’s Regulation S-X. Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 2. Business Acquisition” for detail illustrating the reclassification adjustments made to align with the current presentation.

Key Operating and Financial Metrics

We regularly review several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The following presents our key operating and financial metrics:
Three Months Ended
March 31, 2021December 31,
2020
March 31, 2020
Loan originations (1)
$1,483,150 $912,022 $2,521,497 
Total net revenue$105,840 $75,914 $120,206 
Consolidated net loss$(47,084)$(26,655)$(48,087)
Diluted EPS attributable to common stockholders (2)
$(0.49)$(0.29)$(1.10)
(1)    Includes unsecured personal loans, auto loans, and education and patient finance loans.
(2)    See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 4. Net Income (Loss) Per Share” for additional information.

69


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

Our investment channels consist of (1) managed accounts and other institutional investors, which primarily include other non-bank investors, dedicated third-party funds, and public and private funds managed by third-party asset managers, (2) banks (excluding LendingClub Bank) which are deposit taking institutions or their affiliates, (3) LendingClub Bank, which includes loan originations held for investment by the Company, (4) LendingClub inventory, which includes loan originations remaining as held for sale and not yet sold by the Company, and (5) self-directed retail investors.

The following table shows the percentage of loan origination volume originated in the period by investor type as of the end of each period presented:
March 31, 2021December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Managed accounts and other institutional investors43 %58 %44 %10 %33 %
Banks29 %33 %41 %68 %43 %
LendingClub Bank23 %— %— %— %— %
LendingClub inventory%%%%20 %
Self-directed retail investors (1)
— %%13 %17 %%
Total100 %100 %100 %100 %100 %
(1)     As of December 31, 2020, LendingClub ceased offering and selling Retail Notes.

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LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Results of Operations
The following tables set forth the Condensed Consolidated Statements of Operations data for each of the periods presented:
Three Months EndedChange (%)
March 31, 2021December 31,
2020
March 31, 2020Q1 2021
vs
Q1 2020
Q1 2021
vs
Q4 2020
Non-interest income:
Marketplace revenue$81,727 $69,322 $102,477 (20)%18 %
Other non-interest income5,607 3,276 4,511 24 %71 %
Total non-interest income87,334 72,598 106,988 (18)%20 %
Interest income:
Interest on loans held for sale5,157 5,297 27,376 (81)%(3)%
Interest and fees on loans and leases held for investment15,301 — — N/MN/M
Interest on retail and certificate loans held for investment at fair value20,262 23,759 35,376 (43)%(15)%
Interest on other loans held for investment at fair value1,479 1,666 1,999 (26)%(11)%
Interest on securities available for sale2,235 2,194 3,779 (41)%%
Other156 34 881 (82)%N/M
Total interest income44,590 32,950 69,411 (36)%35 %
Interest expense:
Interest on deposits1,014 — — N/MN/M
Interest on short-term borrowings1,264 1,506 7,398 (83)%(16)%
Interest on retail notes, certificates and secured borrowings20,262 23,759 35,376 (43)%(15)%
Interest on Structured Program borrowings3,208 4,786 2,299 40 %(33)%
Interest on other long-term debt336 — 140 N/MN/M
Total interest expense26,084 30,051 45,213 (42)%(13)%