UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~September~~June 30, ~~2016~~2017

Commission File Number: 001-36771

LendingClub Corporation

(Exact name of registrant as specified in its charter)



Delaware	51-0605731
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

71 Stevenson Street, Suite 300, San Francisco, CA 94105
(Address of principal executive offices and zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
Emerging growth company	¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act			¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~October~~July 31, ~~2016,~~2017, there were ~~394,289,150~~411,400,103 shares of the registrant’s common stock outstanding.

LENDINGCLUB CORPORATION

TABLE OF CONTENTS




PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Changes in Equity	6
	Condensed Consolidated Statements of Cash Flows	67
	Notes to Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3834
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7562
Item 4.	Controls and Procedures	7663

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	7963
Item 1A.	Risk Factors	7963
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8668
Item 3.	Defaults Upon Senior Securities	8668
Item 4.	Mine Safety Disclosures	8668
Item 5.	Other Information	8668
Item 6.	Exhibits	8769
Signatures		8870

LENDINGCLUB CORPORATION

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

LC Advisors, LLC and its wholly-owned subsidiaries (LCA), a wholly-owned registered investment advisor with the Securities and Exchange Commission (SEC) that acts as the general partner for certain private funds and as advisor to separately managed ~~accounts.~~accounts and funds of which LCA’s wholly-owned subsidiaries are the general partners.

Springstone Financial, LLC (Springstone), a wholly-owned company that facilitates education and patient finance loans.

~~RV MP Fund GP, LLC, a wholly-owned subsidiary of LCA that acts as the general partner for a private fund, while LCA acts as the investment manager of this private fund.~~

LC Trust I (the Trust) is, an independent Delaware business trust that acquires loans from the Company and holds them for the sole benefit of certain investors that have purchased a trust certificate (Certificate) issued by the Trust and that are related to specific underlying loans for the benefit of the investor.

As the sponsor of an asset-backed securities securitization transaction, LendingClub owns a 56% interest in a majority-owned affiliate (MOA), LendingClub Operated Aggregator Note (LOAN) NP I, LLC. The Company holds a controlling financial interest and is the primary beneficiary of the MOA.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section ~~29A~~27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. ~~All~~Forward-looking statements ~~other than statements of historical facts, included~~ in this Quarterly Report on Form 10-Q (Report) include, without limitation, statements regarding borrowers, credit scoring, our strategy, future operations, expected losses, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market ~~growth are~~growth. You can identify these forward-looking ~~statements. The~~statements by words such as “anticipate,” “appear,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “will,” or similar ~~expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.~~expressions.

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

~~the status of borrowers,~~ the ability of borrowers to repay loans and the plans of borrowers;

our ability to maintain investor confidence in the operation of our platform;

the likelihood of investors to continue to, directly or indirectly, invest through our platform;

our ability to secure additional sources of investor commitments for our ~~platform;~~

~~ability to secure additional investors without incentives to participate~~platform and the continued deployment of those investor commitments on the platform;

~~interest rates and origination fees on loans charged by issuing banks;~~

expected rates of return for investors;

the effectiveness of our platform’s credit scoring models;

the use or potential use of our own capital to purchase loans;

commitments or investments in loans to ~~support:~~support contractual obligations, such as to Springstone’s issuing bank for ~~Pool~~loans that Springstone facilitates and that are originated by the issuing bank partner but do not meet the credit criteria for purchase by the issuing bank partner (Pool B ~~loans~~loans) or repurchase obligations, securitizations, regulatory commitments, such as direct mail, short-term marketplace equilibrium, the testing or initial launch of alternative loan terms, programs or channels that we do not have sufficient performance data on, or customer accommodations;

transaction ~~fee~~fees or other revenue we expect to recognize after loans are issued by our issuing bank partners;

our financial condition and performance, including the impact that management’s estimates have on our financial performance and the relationship between the interim period and full year results;

capital expenditures;

the impact of new accounting standards;

investor, borrower, platform and loan performance-related factors that may affect our revenue;

the potential adoption rates and returns related to new products and services;

the potential impact of macro-economic developments that could impact the credit performance of our loans, notes and certificates, and influence borrower and investor behavior;

our ability to develop and maintain effective internal ~~controls, and to remediate a material weakness in our internal~~ controls;

LENDINGCLUB CORPORATION

our ability to recruit and retain quality employees to support future ~~growth in light of past events;~~growth;

our compliance with applicable local, state and Federal ~~laws;~~

~~our compliance with applicable~~laws, regulations and regulatory developments or court decisions affecting our ~~marketplace;~~business; and

other risk factors listed from time to time in reports we file with the SEC.

We caution you that the foregoing list may not contain all of the forward-looking statements in this Report. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. We have included important factors in the cautionary statements included in this Report ~~particularly in “Part II~~ – ~~Other Information~~ – ~~Item 1A~~ – ~~Risk Factors” in this Report~~ and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, that could, among other things, cause actual results or events to differ materially from forward-looking statements contained in this Report. Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LENDINGCLUB CORPORATION

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Assets
Cash and cash equivalents	$	520,767		$	623,531		$	538,444		$	515,602
Restricted cash	139,455			80,733			161,672			177,810
Securities available for sale	278,949			297,211
Loans at fair value (includes $2,675,002 and $3,022,001 from consolidated trust, respectively)	4,411,626			4,556,081
Loans held for sale	14,744			—
Accrued interest receivable (includes $24,741 and $24,477 from consolidated trust, respectively)	40,801			38,081
Securities available for sale at fair value (includes $17,536 and $0 in consolidated VIEs, respectively)							225,261			287,137
Loans at fair value (includes $2,145,465 and $2,600,422 in consolidated VIEs, respectively)							3,796,999			4,311,984
Loans held for sale at fair value							36,331			9,048
Accrued interest receivable (includes $19,552 and $24,037 in consolidated VIEs, respectively)							34,931			40,299
Property, equipment and software, net	82,556			55,930			97,943			89,263
Intangible assets, net	27,373			30,971			23,992			26,211
Goodwill	35,633			72,683			35,633			35,633
Other assets	55,833			38,413			78,232			69,644
Total assets	$	5,607,737		$	5,793,634		$	5,029,438		$	5,562,631
Liabilities and Stockholders’ Equity
Liabilities and Equity
Accounts payable	$	7,651		$	5,542		$	13,452		$	10,889
Accrued interest payable (includes $27,597 and $26,719 from consolidated trust, respectively)	44,080			40,244
Accrued interest payable (includes $22,308 and $26,839 in consolidated VIEs, respectively)							38,413			43,574
Accrued expenses and other liabilities	78,177			61,243			90,745			85,619
Payable to investors	81,376			73,162			97,218			125,884
Notes and certificates at fair value (includes $2,691,022 and $3,034,586 from consolidated trust, respectively)	4,419,911			4,571,583
Notes and certificates at fair value (includes $2,160,838 and $2,616,023 in consolidated VIEs, respectively)							3,805,582			4,320,895
Total liabilities	4,631,195			4,751,774			4,045,410			4,586,861
Stockholders’ Equity
Common stock, $0.01 par value; 900,000,000 shares authorized at both September 30, 2016 and December 31, 2015; 394,158,313 and 379,716,630 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	3,964			3,797
Equity
Common stock, $0.01 par value; 900,000,000 shares authorized; 413,009,296 and 400,262,472 shares issued, respectively; 410,726,596 and 397,979,772 shares outstanding, respectively							4,130			4,003
Additional paid-in capital	1,194,637			1,127,952			1,283,129			1,226,206
Accumulated deficit	(201,917		)	(88,218		)	(290,882		)	(234,187		)
Treasury stock, at cost; 2,282,700 and 0 shares at September 30, 2016 and December 31, 2015, respectively	(19,485		)	—
Treasury stock, at cost; 2,282,700 shares							(19,485		)	(19,485		)
Accumulated other comprehensive loss	(657		)	(1,671		)	(596		)	(767		)
Total stockholders’ equity	976,542			1,041,860
Total liabilities and stockholders’ equity	$	5,607,737		$	5,793,634
Total LendingClub stockholders’ equity							976,296			975,770
Noncontrolling interests							7,732			—
Total equity							984,028			975,770
Total liabilities and equity							$	5,029,438		$	5,562,631

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Operating revenue:
Net revenue:
Transaction fees	$	100,813		$	100,420		$	321,926		$	258,553		$	107,314		$	96,605		$	206,006		$	221,113
Servicing fees	16,513			8,999			45,058			20,870
Management fees	1,964			2,900			8,562			7,663
Other revenue (expense)	(6,681		)	2,743			(9,281		)	5,140
Total operating revenue	112,609			115,062			366,265			292,226
Net interest income:
Total interest income	171,868			145,833			529,432			389,831
Total interest expense	(169,444		)	(144,659		)	(523,723		)	(387,666		)
Investor fees ⁽¹⁾													21,116			14,656			42,296			35,143
Other revenue (expense) ⁽¹⁾													4,223			(9,910		)	6,444			(3,807		)
Interest income													157,260			179,685			318,256			357,564
Interest expense													(150,340		)	(177,596		)	(308,947		)	(354,279		)
Net interest income	2,424			1,174			5,709			2,165			6,920			2,089			9,309			3,285
Fair value adjustments - loans, loans held for sale, notes and certificates	(477		)	40			(1,684		)	34
Net interest income and fair value adjustments	1,947			1,214			4,025			2,199
Total net revenue	114,556			116,276			370,290			294,425			139,573			103,440			264,055			255,734
Operating expenses: ⁽¹⁾
Operating expenses:
Sales and marketing	44,901			44,018			161,213			117,989			55,582			49,737			110,165			116,312
Origination and servicing	16,332			16,732			56,464			43,639			21,274			20,934			41,723			40,132
Engineering and product development	29,428			21,063			82,835			53,175			35,718			29,209			71,478			53,407
Other general and administrative	58,940			32,280			150,432			86,937			52,495			53,457			96,069			91,492
Goodwill impairment	1,650			—			37,050			—			—			35,400			—			35,400
Total operating expenses	151,251			114,093			487,994			301,740			165,069			188,737			319,435			336,743
Income (loss) before income tax expense	(36,695		)	2,183			(117,704		)	(7,315		)	(25,496		)	(85,297		)	(55,380		)	(81,009		)
Income tax (benefit) expense	(209		)	1,233			(4,004		)	2,249			(52		)	(3,946		)	(92		)	(3,795		)
Net income (loss)	$	(36,486	)	$	950		$	(113,700	)	$	(9,564	)
Net income (loss) per share:
Consolidated net loss													(25,444		)	(81,351		)	(55,288		)	(77,214		)
Less: Income attributable to noncontrolling interests													10			—			10			—
LendingClub net loss													$	(25,454	)	(81,351		)	(55,298		)	(77,214		)
Net loss per share attributable to LendingClub:
Basic	$	(0.09	)	$	0.00		$	(0.30	)	$	(0.03	)	$	(0.06	)	$	(0.21	)	$	(0.14	)	$	(0.20	)
Diluted	$	(0.09	)	$	0.00		$	(0.30	)	$	(0.03	)	$	(0.06	)	$	(0.21	)	$	(0.14	)	$	(0.20	)
Weighted-average common shares - Basic	391,453,316			375,982,120			385,037,334			373,605,274			406,676,996			382,893,402			403,510,351			381,794,090
Weighted-average common shares - Diluted	391,453,316			401,934,880			385,037,334			373,605,274			406,676,996			382,893,402			403,510,351			381,794,090


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

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)

(In Thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Net income (loss)	$	(36,486	)	$	950		$	(113,700	)	$	(9,564	)
LendingClub net income (loss)													$	(25,454	)	$	(81,351	)	$	(55,298	)	$	(77,214	)
Other comprehensive income (loss), before tax:
Change in net unrealized gain (loss) on securities available for sale	111			(341		)	1,710			(1,172		)
Net unrealized gain on securities available for sale													49			796			285			1,599
Other comprehensive income (loss), before tax	111			(341		)	1,710			(1,172		)	49			796			285			1,599
Income tax effect	46			—			696			—			19			650			114			650
Other comprehensive income (loss), net of tax	65			(341		)	1,014			(1,172		)	30			146			171			949
Comprehensive income (loss)	$	(36,421	)	$	609		$	(112,686	)	$	(10,736	)
Less: Other comprehensive income attributable to noncontrolling interests													—			—			—			—
LendingClub other comprehensive income (loss), net of tax													30			146			171			949
LendingClub comprehensive income (loss)													(25,424		)	(81,205		)	(55,127		)	(76,265		)
Comprehensive income attributable to noncontrolling interests													—			—			—			—
Total comprehensive income (loss)													$	(25,424	)	$	(81,205	)	$	(55,127	)	$	(76,265	)

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Changes in Equity

(In Thousands, Except Share Data)

(Unaudited)



	LendingClub Corporation Stockholders
	Common Stock			Additional Paid-in Capital		Treasury Stock				Accumulated Other Comprehensive Income			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Non-controlling interest		Total Equity
	Shares	Amount		Additional Paid-in Capital		Shares	Amount			Accumulated Other Comprehensive Income			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Non-controlling interest		Total Equity
Balance at December 31, 2016	397,979,772	$	4,003	$	1,226,206	2,282,700	$	(19,485	)	$	(767	)	$	(234,187	)	$	975,770		$	—	$	975,770
Stock-based compensation and related tax effects	—	—		45,192		—	—			—			(1,397		)	43,795			—		43,795
Stock option exercises and other	12,181,123	122		8,881		—	—			—			—			9,003			—		9,003
ESPP purchase shares	565,701	5		2,850		—	—			—			—			2,855			—		2,855
Net unrealized gain on available for sale securities, net of tax	—	—		—		—	—			171			—			171			—		171
Excess tax benefit from share-based award activity	—	—		—		—	—			—			—			—			—		—
Contribution of interests in consolidated VIE	—	—		—		—	—			—			—			—			7,722		7,722
Net loss	—	—		—		—	—			—			(55,298		)	(55,298		)	10		(55,288		)
Balance at June 30, 2017	410,726,596	$	4,130	$	1,283,129	2,282,700	$	(19,485	)	$	(596	)	$	(290,882	)	$	976,296		$	7,732	$	984,028



	LendingClub Corporation Stockholders
	Common Stock				Additional Paid-in Capital			Treasury Stock				Accumulated Other Comprehensive Income			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Non-controlling interest		Total Equity
	Shares		Amount		Additional Paid-in Capital			Shares	Amount			Accumulated Other Comprehensive Income			Accumulated Deficit			Total LendingClub Stockholders’ Equity			Non-controlling interest		Total Equity
Balance at December 31, 2015	379,716,630		$	3,797	$	1,127,951		—	$	—		$	(1,671	)	$	(88,217	)	$	1,041,860		$	—	$	1,041,860
Stock-based compensation and related tax effects	—		—		33,611			—	—			—			—			33,611			—		33,611
Stock option exercises and other	7,367,772		74		5,748			—	—			—			—			5,822			—		5,822
Treasury stock	(2,282,700	)	—		—			2,282,700	(19,485		)	—			—			(19,485		)	—		(19,485		)
ESPP purchase shares	721,918		7		2,508			—	—			—			—			2,515			—		2,515
Net unrealized gain on available for sale securities, net of tax	—		—		—			—	—			949			—			949			—		949
Excess tax benefit from share-based award activity	—		—		(62		)	—	—			—			—			(62		)	—		(62		)
Net loss	—		—		—			—	—			—			(77,214		)	(77,214		)	—		(77,214		)
Balance at June 30, 2016	385,523,620		$	3,878	$	1,169,756		2,282,700	$	(19,485	)	$	(722	)	$	(165,431	)	$	987,996		$	—	$	987,996

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Cash Flows from Operating Activities:
Net loss	$	(113,700	)	$	(9,564	)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Net fair value adjustments of loans, notes and certificates	1,684			(33		)
Consolidated net loss							$	(55,288	)	$	(77,214	)
Adjustments to reconcile consolidated net loss to net cash used for operating activities:
Net fair value adjustments of loans, loans held for sale, notes and certificates							3,588			1,208
Change in fair value of loan servicing liabilities	(3,028		)	(3,919		)	(1,448		)	(2,301		)
Change in fair value of loan servicing assets	7,092			2,467			9,122			4,663
Stock-based compensation, net	46,434			37,558			38,586			28,468
Excess tax benefit from share-based awards	62			—			—			62
Goodwill impairment charge	37,050			—			—			35,400
Depreciation and amortization	21,374			15,525			21,099			13,746
Loss (gain) on sales of loans	(10,531		)	(2,136		)
(Gain) Loss on sales of loans							(14,762		)	5,748
Other, net	3,618			42			608			541
Purchase of whole loans to be sold	(3,653,191		)	(2,338,346		)
Purchase of loans held for sale							(2,561,796		)	(2,557,171		)
Principal payments received on loans held for sale							8,291			932
Proceeds from sales of whole loans	3,635,330			2,338,346			2,521,761			2,539,614
Purchase of loans held for sale by consolidated VIE							(263,158		)	—
Proceeds from sale of securities by consolidated VIE, net of underwriting fees and costs							260,829			—
Net change in operating assets and liabilities:
Accrued interest receivable	(2,720		)	(12,282		)	5,368			(2,208		)
Other assets	(1,570		)	(6,341		)	(4,022		)	(3,190		)
Due from related parties	120			(139		)	136			18
Accounts payable	1,888			(3,071		)	1,614			2,038
Accrued interest payable	3,835			12,893			(5,161		)	3,657
Accrued expenses and other liabilities	18,507			22,350			3,981			4,799
Net cash (used for) provided by operating activities	(7,746		)	53,350
Net cash used for operating activities							(30,652		)	(1,190		)
Cash Flows from Investing Activities:
Purchases of loans	(2,086,228		)	(2,736,698		)	(1,002,661		)	(1,441,716		)
Principal payments received on loans	1,783,763			1,280,005			1,265,892			1,180,096
Proceeds from recoveries and sales of charged-off loans	27,451			13,729			22,694			16,934
Proceeds from sale of loans repurchased	22,274			—
Proceeds from sales of whole loans							2,118			22,274
Purchases of securities available for sale	(40,123		)	(402,832		)	(56,210		)	(3,543		)
Proceeds from maturities, redemptions and paydowns of securities available for sale	59,735			63,198
Proceeds from maturities of securities available for sale							135,834			42,806
Investment in Cirrix Capital	(10,000		)	—			—			(10,000		)
Net change in restricted cash	(58,722		)	(112,453		)	16,138			(46,874		)
Purchases of property, equipment and software, net	(39,044		)	(25,867		)	(19,719		)	(26,905		)
Net cash used for investing activities	(340,894		)	(1,920,918		)
Cash Flows from Financing Activities:
Change in payable to investors	8,214			112,139
Proceeds from issuances of notes and certificates	2,041,746			2,736,667
Net cash provided by (used for) investing activities							364,086			(266,928		)

LENDINGCLUB CORPORATION

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Cash Flows from Financing Activities:
Change in payable to investors							(28,666		)	14,658
Proceeds from issuances of notes and certificates							995,986			1,400,505
Proceeds from secured borrowings	22,274			—			—			22,274
Repayments of secured borrowings	(22,274		)	—			—			(22,274		)
Principal payments on notes and certificates	(1,770,779		)	(1,268,622		)
Principal payments and retirements of notes and certificates							(1,260,992		)	(1,169,545		)
Payments on notes and certificates from recoveries/sales of related charged-off loans	(26,871		)	(13,654		)	(22,493		)	(16,916		)
Repurchases of common stock	(19,485		)	—
Repurchase of common stock							—			(19,485		)
Proceeds from stock option exercises and other	10,580			7,680			9,024			5,825
Proceeds from issuance of common stock for ESPP	2,516			2,694			2,856			2,516
Excess tax benefit from share-based awards	(62		)	—			—			(62		)
Purchase of noncontrolling interest in consolidated VIE							(6,307		)	—
Other financing activities	17			90			—			17
Net cash provided by financing activities	245,876			1,576,994
Net (Decrease) Increase in Cash and Cash Equivalents	(102,764		)	(290,574		)
Net cash (used for) provided by financing activities							(310,592		)	217,513
Net Increase (Decrease) in Cash and Cash Equivalents							22,842			(50,605		)
Cash and Cash Equivalents, Beginning of Period	623,531			869,780			515,602			623,531
Cash and Cash Equivalents, End of Period	$	520,767		$	579,206		$	538,444		$	572,926
Supplemental Cash Flow Information:
Cash paid for interest	$	519,690		$	374,760		$	313,976		$	350,490
Non-cash investing activity:
Accruals for property, equipment and software	$	2,610		$	3,466		$	2,070		$	3,135
Beneficial interests retained by consolidated VIE							$	17,536		$	—
Non-cash financing activity:
Noncontrolling interests’ contribution of beneficial interests in consolidated VIE							$	7,722		$	—

See Notes to Condensed Consolidated Financial Statements.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

1. Basis of Presentation

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

~~Although~~As the ~~Company's overall business model remains premised on~~sponsor of an asset-backed securities securitization transaction, LendingClub owns a 56% interest in a majority-owned affiliate (MOA). The Company holds a controlling financial interest and is the Company not using its balance sheet and not assuming credit risk for loans facilitated through our marketplace, the Company may use its capital to support contractual obligations (Pool B loans and repurchase obligations), regulatory commitments (direct mail), short-term marketplace equilibrium, customer accommodations, or other needs. The Company's use of its capital on the platform from time to time has been, and will be, on terms that are substantially similar to other investors. Additionally, the Company may use its capital to invest in loans associated with the testing or initial launch of new or alternative loan terms, programs or channels to establish a track record of performance prior to facilitating third-party investments in these loans.

~~With the announcement~~primary beneficiary of the ~~initial results of~~MOA and consolidates the ~~internal board review on May 9, 2016 and~~MOA in its financial statements. For additional findings disclosed on June 28, 2016, many investors paused or reduced their investment activity. The Company has been focused on working with these investors to resume their investment activity and on bringing new investors to the platform. During the second quarter of 2016 and the third quarter of 2016 through August 31, 2016 the Company offered incentives to investors in exchange for investment activity. The Company ended these incentives in August of 2016 and did not offer these incentives to investors for investments in loans in the month of September 2016. Additionally, the Company did not have to use a material amount of its own capital to purchase loans in the third quarter of 2016. The Company may enter into strategic arrangements, for example, agreements that involve larger or more long-term forms of committed capital. On November 7, 2016 the Company announced a new addition toinformation about the Company’s ~~investor capital mix through an arrangement with a subsidiary~~securitization activities, see “Note 6. Securitization of the National Bank of Canada which has approved up to $1.3 billion to be deployed on the Lending Club platform. Subject to certain terms and conditions, the first $325 million has been committed to be deployed on the platform over the next three months.

The failure of the Company to attract investor capital may result in the Company using a greater amount of its own capital to purchase loans on the platform compared to prior periods, or reduce origination volume which could have material adverse impacts on the Company's business, financial condition (including its liquidity), results of operations or ability to sustain and grow loan volume.

The Company believes, based on its projections and ability to reduce loan volume if needed, that its cash on hand, funds available from its line of credit, and its cash flow from operations are sufficient to meet its liquidity needs for the next twelve months.Personal Whole Loans.”

The accompanying unaudited condensed consolidated financial statements include ~~Lending Club,~~LendingClub, its subsidiaries (collectively referred to as the Company, we, or us) and consolidated variable interest entities. Noncontrolling interests are reported as a separate component of consolidated equity from the ~~Trust.~~equity attributable to LendingClub’s stockholders for all periods presented. All intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the results and financial position for the periods presented. These accounting principles require management to make certain estimates and assumptions that affect the amounts in the

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

accompanying financial statements. These condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. These adjustments are of a normal recurring nature. Actual results may differ from those estimates, and results reported in the interim periods are not necessarily indicative of the results for the full year or any other interim period.

In the ~~fourth~~first quarter of ~~2015,~~2017, the Company ~~disaggregated~~simplified the ~~expense previously~~presentation of “Total net revenue” in the unaudited Condensed Consolidated Statements of Operations to present revenues from transactions with investors as a single line item reported as ~~“General~~“Investor fees ” by aggregating the revenues previously separately reported as “Servicing fees” and ~~administrative” into “Engineering and product development” and “Other general and administrative” expense.~~“Management fees.” Additionally, the Company ~~reclassified certain operating expenses between “Sales~~aggregated “Fair value adjustments - loans, loans held for sale, notes and ~~marketing,” “Origination and servicing,” “Engineering and product development” and~~certificates” into “Other ~~general and administrative” expense to align such classification and presentation with how the Company currently manages the operations and these expenses.~~revenue (expense).” These changes had no impact to “Total ~~operating expenses.~~net revenue.” Prior period amounts have been reclassified to conform to the current period presentation.

The accompanying interim condensed consolidated financial statements and these related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (Annual Report) ~~and Form 10-K/A~~ filed on ~~May 17, 2016. The Company's significant accounting policies are included in “Note 2 – Summary of Significant Accounting Policies.~~”February 28, 2017.

2. Summary of Significant Accounting Policies

The ~~Company's~~Company’s significant accounting policies are discussed in “Part II – Item 8 – Financial Statements and Supplementary Data – Note ~~2 –~~2. Summary of Significant Accounting Policies” in the Annual Report. There have been no significant changes to these significant accounting policies for the ~~nine~~six month period ended ~~September~~June 30, ~~2016,~~2017, except as noted below.

~~Transaction Fee Revenue~~

Transaction fees are paid by issuing banks or patient service providers to Lending Club for the work Lending Club performs through its platform and Springstone’s platform in facilitating loans for its issuing bank partners. These fees are recognized as a component of operating revenue at the time of loan issuance. Factors affecting the amount of fees paid to the issuing bank by the borrower and from the bank to the Company include initial loan amount, term, credit quality, and other factors.

Commencing with the origination fee increase announced in March 2016, in the event a borrower prepays a loan in full before maturity, the Company assumes the issuing bank partner's obligation under Utah law to refund the pro-rated amount of the fee received by the bank in excess of 5%. Additionally, the Company may provide refunds to patient finance borrowers when the borrower cancels the loan under certain conditions. Since Lending Club can estimate refunds based on loan cancellation or prepayment experience, the Company records transaction fee revenue net of estimated refunds at the time of loan issuance.

~~Restricted Cash~~

Restricted cash consists primarily of checking, money market and certificate of deposit accounts that are: (i) pledged to or held in escrow by the Company’s correspondent banks as security for transactions processed on or related to Lending Club’s platform or activities by certain investors; (ii) pledged through a credit support agreement with a certificate holder; (iii) held in a Rabbi Trust through a grantor trust agreement to satisfy obligations to participants under the Company’s 2016 Cash Retention Bonus Plan (“Cash Retention Plan”). See “~~Note 13 – Employee Incentive and Retirement Plans” for additional information, or (iv) received from investors but not yet applied to their accounts on the platform and transferred to segregated bank accounts that hold investors’ funds.~~

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

Investor cash balances (excluding transactions-in-process) are held in segregated bank or custodial accounts and are not commingled with the Company’s monies or held on the Company’s condensed consolidated balance sheet.

~~Loans Held for Sale~~

Loans held by the Company with the intent to sell are reflected on the balance sheet as loans held for sale. Loans held for sale are accounted for at fair value. The Company’s fair value methodology for the measurement of loans held for sale is consistent with that of loans not classified as held for sale. The fair valuation methodology considers projected prepayments and uses the historical actual defaults, losses and recoveries on our loans to project future losses and net cash flows on loans. The fair value adjustments related to loans held for sale are recorded in the period of the fair value changes.

~~Consolidation of Variable Interest Entities~~

A variable interest entity (VIE) is a legal entity that does not have sufficient equity at risk to finance its own operations, whose equity holders do not have the power to direct the activities most significantly affecting the economic outcome of those activities, or whose equity holders do not share proportionately in the losses or receive the residual returns of the entity. The determination of whether an entity is a VIE requires a significant amount of judgment. When the Company has a controlling financial interest in a VIE, it must consolidate the results of the VIE’s operations into its condensed consolidated financial statements. A controlling financial interest exists if the Company has both the power to direct the VIE’s activities that most significantly affect the VIE’s economic performance (power) and the obligation to absorb losses or receive benefits that could be potentially significant to the VIE (economics).

~~LC Trust I~~

The Company has determined that the Trust is a VIE and that the Company has a controlling financial interest in the Trust and therefore must consolidate the Trust in its condensed consolidated financial statements. The Company established the Trust in February 2011 and funded it with a nominal residual investment. The Company is the only residual investor in the Trust. The purpose of the Trust is to acquire and hold loans for the benefit of investors who have invested in certificates issued by the Trust. The Trust conducts no other business other than purchasing and retaining loans or portions thereof for the benefit of the investment funds and their underlying limited partners. The Trust holds loans, none of which are financed by the Company. The cash flows from the loans held by the Trust are used to repay obligations under the certificates. The Trust’s assets and liabilities were reflected in the Company's condensed consolidated financial statements at September 30, 2016 and December 31, 2015.

In connection with the formation of the investment funds, it was determined that in order to achieve success in raising investment capital, the assets to be invested in by the investment funds must be held by an entity that was separate and distinct from the Company (i.e. bankruptcy remote) in order to reduce this risk and uncertainty. In the event of the Company's insolvency, it is anticipated that the assets of the Trust would not become part of the bankruptcy estate, but that outcome is uncertain.

The Company's capital contributions, which are the only equity investments in the Trust, are insufficient to allow the Trust to finance the purchase of a significant amount of loans without the issuance of certificates to investors. Therefore, the Trust’s capitalization level qualifies the Trust as a VIE. The Company has a financial interest in the Trust because of its right to returns related to servicing fee revenue from the Trust, its right to reimbursement for expenses, and its obligation to repurchase loans from the Trust in certain instances. Additionally, the Company performs or directs activities that significantly affect the Trust’s economic performance through or by (i) operation of the platform that enables borrowers to apply for loans purchased by the Trust; (ii) credit underwriting and

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

servicing of loans purchased by the Trust; (iii) LCA's selection of the loans that are purchased by the Trust on behalf of advised Certificate holders; and (iv) LCA’s role to source investors that ultimately purchase limited partnership interests in a fund or Certificates, both of which supply the funds for the Trust to purchase loans. Collectively, the activities described above allow the Company to fund more loans than would be the case without the existence of the Trust, to collect the related loan transaction fees and for LCA to collect the management fees on the investors’ capital used to purchase certificates. Accordingly, the Company is deemed to have power to direct activities most significant to the Trust and economic interest in the activities because of loan funding and transaction and management fees. Therefore, the Company concluded that it is the primary beneficiary of the Trust and consolidated the Trust’s operations in its condensed consolidated financial statements.

~~Investment In Cirrix Capital~~

On April 1, 2016, the Company closed its $10.0 million investment, for an approximate ownership interest of 15% in Cirrix Capital (Investment Fund), a holding company to a family of funds that purchases loans and interests in loans from the Company. Per the partnership agreement, the family of funds can invest up to 20% of their assets outside of whole loans and interests in whole loans facilitated by the Company. At September 30, 2016, 100% of the family of funds' assets were comprised of whole loans and interests in loans facilitated by Lending Club's platform. At the time the Company made its investment, the Company's then Chief Executive Officer (former CEO) and a board member (together, the Related Party Investors) also had limited partnership interests in the Investment Fund that resulted in an aggregate ownership of approximately 29% in the Investment Fund by the Related Party Investors and the Company. As of September 30, 2016, the Company and a board member had an aggregate ownership interest of approximately 27% in the Investment Fund.

The Company's investment is deemed to be a variable interest in the Investment Fund because of the limited partnership interest shares in the expected returns and losses of the Investment Fund. The expected returns and losses of the Investment Fund result from the net returns of the family of funds owned by the Investment Fund, which are derived from interest income earned from loans and interests in whole loans that are purchased by the family of funds, which are owned by the Investment Fund. Such loans and interests in loans were facilitated by the Company. Additionally, the Investment Fund is considered a VIE.

The Investment Fund passes along credit risk to the limited partners. The Company did not design the Investment Fund’s investment strategy and cannot require the Investment Fund to purchase loans. Additionally, the Company reviewed whether it collectively, with the board member's investment, had power to control the Investment Fund and concluded that it did not based on the unilateral ability of the general partner to exercise power over the limited partnership and the inability of the limited partners to remove the general partner. The Company is not the primary beneficiary of the Investment Fund because the Company does not have the power to direct the activities that most significantly affect the Investment Fund’s economic performance. As a result, the Company does not consolidate the operations of the Investment Fund in the financial statements of the Company. The Company accounts for this investment under the equity method of accounting, which approximates its maximum exposure to loss as a result of its involvement in the Investment Fund. At September 30, 2016, the Company's investment was $10.1 million, which was recorded in other assets in the condensed consolidated balance sheet. See “~~Note 17 – Related Party Transactions” for additional information.~~

Separately, the Company is subject to a credit support agreement that requires it to pledge and restrict cash in support of its contingent obligation to reimburse the Investment Fund for net credit losses on loans underlying the interests in whole loans that are in excess of a specified, aggregate net loss threshold. This credit support agreement is deemed to be a variable interest in the Investment Fund because it exposes the Company to potential credit losses on the underlying interests in loans purchased by the Investment Fund. The board member and the Company are excluded from receiving any benefits, if provided, from this credit support agreement. As of September 30, 2016, the Company has not been required to nor does it anticipate recording losses under this agreement. The Company's

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

~~maximum exposure to loss under this credit support agreement was limited to $6.0 million and $34.4 million at September 30, 2016 and December 31, 2015, respectively.~~

~~LCA Managed or Advised Private Funds~~

In conjunction with the adoption of a new accounting standard that amends accounting for consolidations effective January 1, 2016, the Company reviewed its relationship with the private funds managed or advised by LCA and concluded that it does not have a variable interest in the private funds. As of September 30, 2016, the Company does not hold any investments in the private funds. Certain of the Company's related parties have investments in the private funds, as discussed in “~~Note 17 – Related Party Transactions.~~” The Company charges the limited partners in the private funds a management fee based on their account balance at month end for services performed as the general manager, including fund administration, and audit, accounting and tax preparation services. Accordingly, the Company's fee arrangements contain only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length. These fees are solely compensation for services provided and are commensurate with the level of effort required to provide those services. The Company does not have any other interests in the private funds and therefore does not have a variable interest in the private funds.

Management regularly reviews and reconsiders its previous conclusions regarding whether it holds a variable interest in potential VIEs, the status of an entity as a VIE, and whether the Company is required to consolidate such VIEs in the condensed consolidated financial statements.

~~Loan Servicing Rights~~

As a result of the nature of servicing rights on the sale of loans, the Company is a variable interest holder in certain entities that purchase these loans. For all of these entities, the Company either does not have the power to direct the activities that most significantly affect the VIE's economic performance or does not have a potentially significant economic interest in the VIE. In no case is the Company the primary beneficiary, and as a result, these entities are not consolidated in the Company's condensed consolidated financial statements.

~~Loan Trailing Fee Liability~~

In February 2016, the Company revised the agreement with its primary issuing bank to include an additional program fee (Loan Trailing Fee). The Loan Trailing Fee is dependent on the amount and timing of principal and interest payments made by borrowers of the underlying loans, and gives the issuing bank an ongoing financial interest in the performance of the loans it originates. This fee is paid by the Company to the issuing bank partner over the term of the respective loans and is a function of the principal and interest payments. In the event that principal and interest payments are not made, the Company is not required to make this Loan Trailing Fee payment. The Loan Trailing Fee is recorded at fair value with the initial establishment, and any changes, of this liability are netted against transaction fees on the Company's condensed consolidated statement of operations. The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee, which considers assumptions of expected prepayment rates and future credit losses.

~~Debt~~

The Company has elected to record certain costs directly related to its secured revolving credit facility as an asset included in other assets on the Company’s condensed consolidated balance sheets. These costs are amortized as interest expense over the contractual term of the secured revolving credit facility. Additionally, in instances where the Company transfers loans to investors that do not meet sale criteria for accounting purposes, such loan sales are accounted for as secured borrowings.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~Adoption~~Transfers of ~~New Accounting Standard~~Financial Assets

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

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

Goodwill and Intangible Assets

Goodwill represents the fair value of acquired businesses in excess of the aggregate fair value of the identified net assets acquired. Goodwill is not amortized but is tested for impairment annually or whenever indications of impairment exist. Impairment exists whenever the carrying value of a reporting unit with goodwill exceeds its estimated fair value. Our annual impairment testing date is April 1. In ~~February 2015,~~ the ~~Financial~~first quarter of 2017, the Company adopted Accounting Standards ~~Board (FASB) issued ASU 2015-02 Consolidation (Topic 810):~~ ~~Amendments to the Consolidation Analysis~~,Update (ASU) 2017-04, which was effective January 1, 2016. The guidance changes what an investor must consider in determining whether it is required to consolidate an entity in which it holds an interest. The adoption of this guidance did not have an impact on the Company's financial position, results of operations, earnings per share (EPS) or cash flows.

~~New Accounting Standards Not Yet Adopted~~

~~In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows -~~ ~~Classification of Certain Cash Receipts and Cash Payments~~, which will be effective January 1, 2018, and amends the existing accounting standards for the statement of cash flows. The amendments provide guidance on the following eight cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and, separately identifiable cash flows and application of the predominance principle. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the timing and impact of these amendments on its cash flows.

~~In June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments – Credit Losses (Topic 326):~~ ~~Measurement of Credit Losses on Financial Instruments~~, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. The Company is currently evaluating the impact of this new guidance on its financial position, results of operations, EPS and cash flows.

~~In March 2016, the FASB issued ASU 2016-09 Compensation – Stock Compensation (Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting, which will be effective January 1, 2017. The guidance~~ simplifies the accounting for ~~share-based payments related~~goodwill impairments by eliminating Step 2 of the goodwill impairment test. The Company amended its accounting policy for goodwill and intangible assets accordingly.

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

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

Intangible assets are amortized over their useful lives in a ~~company's financial statements,~~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 ~~estimating forfeitures~~whenever events or changes in circumstances indicate that the carrying amount of ~~awards.~~such assets may not be recoverable. The Company ~~is currently evaluating the impact of this new guidance on its financial position, results of operations, EPS and cash flows.~~does not have indefinite-lived intangible assets.

~~In February 2016,~~Noncontrolling Interests

Noncontrolling interests represent the ~~FASB issued ASU 2016-02 Leases (Topic 842) that amended guidance related to~~noncontrolling holders’ share of income or losses, and share of total equity, from a consolidated subsidiary or consolidated variable interest entity in which the lease accounting, which will be effective January 1, 2019. The guidance requires an entity to recognize a right-of-use asset and lease liability for most lease arrangements. The standard also requires additional disclosures related to lease arrangements. The Company ~~is currently evaluating the impact of this new guidance on its financial position, results of operations, EPS, and cash flows.~~holds less than 100% ownership.

~~In January 2016, the FASB issued ASU 2016-01 Financial Instruments - Overall (Subtopic: 825-10):~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which will be effective January 1, 2018. The amendment changes the accounting for equity investments, changes disclosure requirements related to instruments at amortized cost and fair value, and clarifies how entities should evaluate deferred tax assets for securities classified as available for sale. The Company is currently evaluating the impact of this new guidance on its financial position, results of operations, EPS, and cash flows.

~~In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements - Going Concern (Subtopic 205-40),~~ ~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern for each annual and interim reporting~~

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~period,~~Legal Expenses

Legal fees are expensed as incurred and ~~disclose~~are included in ~~its financial~~other general and administrative expenses in the consolidated statements ~~whether there is substantial doubt about~~of operations. Insurance recoveries associated with the ~~company’s ability to continue~~reimbursement of legal expenses incurred, if any, are included in other general and administrative expenses as a ~~going concern within one year after~~contra-expense in the ~~date that the financial~~consolidated statements ~~are issued. The new standard applies to all companies and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter.~~ of operations.

Adoption of New Accounting Standards

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

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

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

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

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

New Accounting Standards Not Yet Adopted

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

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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

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

3. Net ~~Income (Loss)~~Loss Per Share ~~and Net Income (Loss) Attributable to Common Stockholders~~

The following table details the computation of the ~~Company's~~Company’s basic and diluted net ~~income (loss)~~loss per share:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015		2016			2015			2017			2016			2017			2016
Net income (loss)	$	(36,486	)	$	950	$	(113,700	)	$	(9,564	)
LendingClub net loss												$	(25,454	)	$	(81,351	)	$	(55,298	)	$	(77,214	)
Weighted average common shares - Basic	391,453,316			375,982,120		385,037,334			373,605,274			406,676,996			382,893,402			403,510,351			381,794,090
Weighted average common shares - Diluted	391,453,316			401,934,880		385,037,334			373,605,274			406,676,996			382,893,402			403,510,351			381,794,090
Net income (loss) per share:
Net loss per share attributable to LendingClub:
Basic	$	(0.09	)	$	—	$	(0.30	)	$	(0.03	)	$	(0.06	)	$	(0.21	)	$	(0.14	)	$	(0.20	)
Diluted	$	(0.09	)	$	—	$	(0.30	)	$	(0.03	)	$	(0.06	)	$	(0.21	)	$	(0.14	)	$	(0.20	)

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

4. Securities Available for Sale

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, were as follows:


September 30, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2017										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate debt securities	$	190,008	$	128	$	(112	)	$	190,024	$	140,613	$	192	$	(60	)	$	140,745
Asset-backed securities	31,480		21		(2		)	31,499
U.S. agency securities	19,603		17		—			19,620		19,600		6		—			19,606
Certificates of deposit	17,502		—		—			17,502		18,624		—		—			18,624
Asset-backed securities										11,544		—		(4		)	11,540
Commercial paper	10,007		—		—			10,007		10,718		—		—			10,718
U.S. Treasury securities	2,492		22		—			2,514		2,495		—		(4		)	2,491
Asset-backed securities related to consolidated VIE										17,537		—		(1		)	17,536
Other securities	7,818		—		(35		)	7,783		4,001		—		—			4,001
Total securities available for sale	$	278,910	$	188	$	(149	)	$	278,949	$	225,132	$	198	$	(69	)	$	225,261

December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2016										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate debt securities	$	217,243	$	2	$	(1,494	)	$	215,751	$	181,359	$	63	$	(199	)	$	181,223
Certificates of deposit										27,501		—		—			27,501
Asset-backed securities	54,543		—		(134		)	54,409		25,369		4		(9		)	25,364
Commercial paper										20,164		—		—			20,164
U.S. agency securities	16,602		1		(25		)	16,578		19,602		21		—			19,623
U.S. Treasury securities	3,489		—		(4		)	3,485		2,493		3		—			2,496
Other securities	7,005		—		(17		)	6,988		10,805		—		(39		)	10,766
Total securities available for sale	$	298,882	$	3	$	(1,674	)	$	297,211	$	287,293	$	91	$	(247	)	$	287,137

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

A summary of securities available for sale with unrealized losses as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, aggregated by period of continuous unrealized loss, is as follows:


	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
September 30, 2016	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2017																Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities																$	56,198	$	(56	)	$	3,999	$	(4	)	$	60,197	$	(60	)
Asset-backed securities																6,250		(4		)	—		—			6,250		(4		)
U.S. Treasury securities																2,491		(4		)	—		—			2,491		(4		)
Asset-backed securities related to consolidated VIE																13,970		(1		)	—		—			13,970		(1		)
Total securities with unrealized losses⁽¹⁾																$	78,909	$	(65	)	$	3,999	$	(4	)	$	82,908	$	(69	)

																Less than 12 months					12 months or longer					Total
December 31, 2016																Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	64,078	$	(54	)	$	34,921	$	(58	)	$	98,999	$	(112	)	$	107,862	$	(185	)	$	11,682	$	(14	)	$	119,544	$	(199	)
Asset-backed securities	2,270		(1		)	2,648		(1		)	4,918		(2		)	6,628		(8		)	1,870		(1		)	8,498		(9		)
Other securities	3,816		(1		)	3,968		(34		)	7,784		(35		)	6,800		(3		)	3,966		(36		)	10,766		(39		)
Total securities with unrealized losses⁽¹⁾	$	70,164	$	(56	)	$	41,537	$	(93	)	$	111,701	$	(149	)	$	121,290	$	(196	)	$	17,518	$	(51	)	$	138,808	$	(247	)

	Less than 12 months					12 months or longer					Total
December 31, 2015	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	212,018	$	(1,494	)	$	—	$	—		$	212,018	$	(1,494	)
Asset-backed securities	54,409		(134		)	—		—			54,409		(134		)
U.S. agency securities	14,578		(25		)	—		—			14,578		(25		)
U.S. Treasury securities	3,485		(4		)	—		—			3,485		(4		)
Other securities	6,988		(17		)	—		—			6,988		(17		)
Total securities with unrealized losses⁽¹⁾	$	291,478	$	(1,674	)	$	—	$	—		$	291,478	$	(1,674	)


⁽¹⁾	The number of investment positions with unrealized losses at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 totaled 6349 and ~~141,~~72, respectively.

There were no impairment charges on securities available for sale recognized during the first ~~nine months~~half of ~~2016 and 2015.~~2017 or 2016.

The contractual maturities of securities available for sale at ~~September~~June 30, ~~2016,~~2017, were as follows:


	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total		Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Corporate debt securities	$	67,134	$	122,890	$	—	$	—	$	190,024	$	101,323	$	39,422	$	—	$	—	$	140,745
Asset-backed securities	7,424		24,075		—		—		31,499
U.S. agency securities	14,609		5,011		—		—		19,620		19,606		—		—		—		19,606
Certificates of deposit	17,502		—		—		—		17,502		17,120		1,504		—		—		18,624
Asset-backed securities											6,438		5,102		—		—		11,540
Commercial paper	10,007		—		—		—		10,007		10,718		—		—		—		10,718
U.S. Treasury securities	—		2,514		—		—		2,514		—		2,491		—		—		2,491
Asset-backed securities related to consolidated VIE											—		—		17,536		—		17,536
Other securities	3,816		3,967		—		—		7,783		—		4,001		—		—		4,001
Total fair value	$	120,492	$	158,457	$	—	$	—	$	278,949	$	155,205	$	52,520	$	17,536	$	—	$	225,261
Total amortized cost	$	120,515	$	158,395	$	—	$	—	$	278,910	$	155,206	$	52,389	$	17,537	$	—	$	225,132

There were no sales of securities available for sale during the first nine months of 2016. Proceeds from the sales of securities available for sale during the first nine months of 2015 were $63.2 million resulting in an immaterial net gain.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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

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

Loans, Loans Held For Sale, Notes and Certificates

The Company sells loans and issues notes and the Trust issues certificates as a means to allow investors to invest in the ~~associated~~corresponding loans. At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, loans, loans held for sale, notes and certificates measured at fair value on a recurring basis were as follows:

Loans Notes and Certificates
September 30,
2016 December 31,
2015 September 30,
2016 December 31,
2015
Aggregate principal balance outstanding $ 4,677,055
$ 4,681,671
$ 4,684,038
$ 4,697,169
Net fair value adjustments (265,429 ) (125,590 ) (264,127 ) (125,586 )
Fair value $ 4,411,626
$ 4,556,081
$ 4,419,911
$ 4,571,583
Original term 12 - 84 months 12 - 60 months

Interest rates (fixed) 3.54% - 31.89% 4.99% - 29.90%
Maturity dates ≤ June 2023 ≤ December 2020



	Loans						Loans Held For Sale						Notes and Certificates
	June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016
Aggregate principal balance outstanding	$	4,041,550		$	4,565,653		$	37,287		$	9,345		$	4,048,717		$	4,572,912
Net fair value adjustments	(244,551		)	(253,669		)	(956		)	(297		)	(243,135		)	(252,017		)
Fair value	$	3,796,999		$	4,311,984		$	36,331		$	9,048		$	3,805,582		$	4,320,895

Loans invested in by the Company for which there was no associated note or certificate had an aggregate principal balance outstanding of ~~$34.2~~$57.2 million and a fair value of ~~$33.0~~$54.8 million at ~~September~~June 30, ~~2016.~~2017. Loans invested in by

~~At September 30, 2016~~ the Company for which there was no associated note or certificate had an aggregate principal balance outstanding of $27.9 million and a fair value of ~~the Company’s loans held for sale were $14.9~~$25.9 million ~~and $14.7 million, respectively.~~at December 31, 2016.

The Company places all loans ~~for all loan products~~ that are contractually past due by 120 days or more on non-accrual status. At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, loans that were 90 days or more past due (including non-accrual loans) were as follows:

September 30, 2016 December 31, 2015

> 90 days
past due
Non-accrual loans
> 90 days
past due
Non-accrual loans
Outstanding principal balance $ 42,643
$ 6,362
$ 30,094
$ 4,513
Net fair value adjustments (35,019 ) (5,192 ) (25,312 ) (3,722 )
Fair value $ 7,624
$ 1,170
$ 4,782
$ 791
# of loans (not in thousands) 3,620
562
2,606
382

For all standard and custom personal loan products, the Company's charge-off policy is to charge off loans after 120 days and no later than 150 days past due, or earlier in the event of notification of borrower bankruptcy.



	June 30, 2017						December 31, 2016
	> 90 days past due			Non-accrual loans			> 90 days past due			Non-accrual loans
Outstanding principal balance	$	36,357		$	1,375		$	45,718		$	5,055
Net fair value adjustments	(31,177		)	(1,154		)	(40,183		)	(4,392		)
Fair value	$	5,180		$	221		$	5,535		$	663
# of loans (not in thousands)	3,396			135			4,041			483

Loan Servicing Rights

~~At September 30, 2016, loans~~Loans underlying loan servicing rights had a total outstanding principal balance of ~~$6.24~~$7.08 billion ~~original terms between 12~~ and ~~84 months, monthly payments with interest rates ranging from 2.99% to 33.15%~~$6.54 billion as of June 30, 2017 and ~~maturity dates through May 2023. At~~ December 31, ~~2015,~~2016, respectively.

6. Securitization of Personal Whole Loans

On June 22, 2017, the Company sponsored the securitization of unsecured personal whole loans ~~underlying loan servicing rights had a total outstanding~~with an unpaid principal balance of ~~$4.29 billion, original terms between 3~~$336.6 million through an asset-backed securitization transaction. The loans were facilitated through the Company’s marketplace and ~~84 months, monthly payments~~originally sold to third-party whole loan investors. In connection with ~~interest rates ranging from 2.99%~~this securitization, the Company established a majority-owned affiliate (MOA) to ~~33.15% and maturity dates through December 2022.~~hold the risk retention interest

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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

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

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

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

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

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The fair value sensitivity of the senior securities and subordinated residual certificates to adverse changes in key assumptions are as follows:



	June 30, 2017
	Asset-Backed Securities
	Senior Securities			Subordinated Residual Certificates
Fair value of interests held	$	13,970		$	3,566
Expected weighted-average life (in years)	0.9			1.4
Discount rates
100 basis point increase	$	(124	)	$	(44	)
200 basis point increase	$	(245	)	$	(87	)
Expected credit loss rates on underlying loans
10% adverse change	$	—		$	(245	)
20% adverse change	$	—		$	(515	)
Expected prepayment rates
10% adverse change	$	—		$	(31	)
20% adverse change	$	—		$	(86	)

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

7. Fair Value of Assets and Liabilities

For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Note 2. Summary of

Significant Accounting Policies” in theAnnual Report.The Company records certain assets and liabilities at fair value as listed in the following tables.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Financial Instruments Recorded at Fair Value

The following tables present the fair value hierarchy for assets and liabilities measured at fair value:


September 30, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
June 30, 2017									Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Loans	$	—	$	—	$	4,411,626	$	4,411,626	$	—	$	—	$	3,796,999	$	3,796,999
Loans held for sale	—		—		14,744		14,744		—		—		36,331		36,331
Securities available for sale:
Corporate debt securities	—		190,024		—		190,024		—		140,745		—		140,745
Asset-backed securities	—		31,499		—		31,499
U.S. agency securities	—		19,620		—		19,620		—		19,606		—		19,606
Certificates of deposit	—		17,502		—		17,502		—		18,624		—		18,624
Asset-backed securities									—		11,540		—		11,540
Commercial paper	—		10,007		—		10,007		—		10,718		—		10,718
U.S. Treasury securities	—		2,514		—		2,514		—		2,491		—		2,491
Asset-backed securities related to consolidated VIE									—		13,969		3,567		17,536
Other securities	—		7,783		—		7,783		—		4,001		—		4,001
Total securities available for sale	—		278,949		—		278,949		—		221,694		3,567		225,261
Servicing assets	—		—		16,255		16,255		—		—		25,901		25,901
Total assets	$	—	$	278,949	$	4,442,625	$	4,721,574	$	—	$	221,694	$	3,862,798	$	4,084,492

Liabilities:
Notes and certificates	$	—	$	—	$	4,419,911	$	4,419,911	$	—	$	—	$	3,805,582	$	3,805,582
Servicing liabilities	—		—		3,397		3,397		—		—		1,711		1,711
Loan Trailing Fee liability	—		—		3,724		3,724
Loan trailing fee liability									—		—		6,788		6,788
Total liabilities	$	—	$	—	$	4,427,032	$	4,427,032	$	—	$	—	$	3,814,081	$	3,814,081

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, 2015	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
December 31, 2016									Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Loans	$	—	$	—	$	4,556,081	$	4,556,081	$	—	$	—	$	4,311,984	$	4,311,984
Loans held for sale									—		—		9,048		9,048
Securities available for sale:
Corporate debt securities	—		215,751		—		215,751		—		181,223		—		181,223
Certificates of deposit									—		27,501		—		27,501
Asset-backed securities	—		54,409		—		54,409		—		25,364		—		25,364
Commercial paper									—		20,164		—		20,164
U.S. agency securities	—		16,578		—		16,578		—		19,623		—		19,623
U.S. Treasury securities	—		3,485		—		3,485		—		2,496		—		2,496
Other securities	—		6,988		—		6,988		—		10,766		—		10,766
Total securities available for sale	—		297,211		—		297,211		—		287,137		—		287,137
Servicing assets	—		—		10,250		10,250		—		—		21,398		21,398
Total assets	$	—	$	297,211	$	4,566,331	$	4,863,542	$	—	$	287,137	$	4,342,430	$	4,629,567

Liabilities:
Notes and certificates	$	—	$	—	$	4,571,583	$	4,571,583	$	—	$	—	$	4,320,895	$	4,320,895
Loan trailing fee liability									—		—		4,913		4,913
Servicing liabilities	—		—		3,973		3,973		—		—		2,846		2,846
Total liabilities	$	—	$	—	$	4,575,556	$	4,575,556	$	—	$	—	$	4,328,654	$	4,328,654

AsFinancial instruments are categorized in the ~~Company's~~valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. Since the Company’s loans and related notes and certificates, loans held for sale, loan servicing rights, asset-backed securities related to consolidated VIEs, and ~~Loan Trailing Fee~~loan trailing fee liability do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. ~~Financial instruments are categorized in the valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement.~~ These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, changes in fair value for assets and liabilities within the Level 2 or Level 3 categories may include changes in fair value that were attributable to both observable and unobservable inputs. The Company did not transfer any assets or liabilities in or out of Level 3 during the first ~~nine months~~half of ~~2016~~2017 or the year ended December 31, ~~2015.~~2016.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs used for the ~~Company's~~Company’s Level 3 fair value measurements at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015:~~2016:


	September 30, 2016																									June 30, 2017
	Loans, Notes and Certificates ⁽⁴⁾						Servicing Asset/Liability						Loan Trailing Fee Liability													Loans, Notes and Certificates						Servicing Asset/Liability
	Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average									Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average
Discount rates	0.7	%	16.5	%	7.4	%	2.2	%	15.9	%	7.9	%	2.2	%	15.9	%	7.7	%								2.8	%	17.2	%	8.3	%	3.1	%	15.8	%	8.7	%
Net cumulative expected loss rates⁽¹⁾	0.3	%	32.6	%	13.9	%	0.3	%	32.6	%	12.2	%	0.3	%	32.6	%	12.9	%	Net cumulative expected loss rates⁽¹⁾							0.7	%	44.1	%	14.0	%	0.3	%	44.1	%	12.3	%
Cumulative expected prepayment rates ⁽¹⁾	8.0	%	39.9	%	30.8	%	8.0	%	39.9	%	30.8	%	8.0	%	39.9	%	30.4	%	Cumulative expected prepayment rates ⁽¹⁾							8.1	%	41.6	%	30.6	%	8.0	%	41.6	%	31.1	%
Total market servicing rates (% per annum on outstanding principal balance) ⁽²⁾	N/A		N/A		N/A		0.63	%	0.90	%	0.63	%	N/A		N/A		N/A		Total market servicing rates (% per annum on outstanding principal balance) ⁽²⁾							N/A		N/A		N/A		0.63	%	0.90	%	0.63	%

	December 31, 2015																									June 30, 2017
	Loans, Notes and Certificates ⁽⁴⁾						Servicing Asset/Liability						Loan Trailing Fee Liability													Loan Trailing Fee Liability						Asset-Backed Securities Related to Consolidated VIE
	Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average									Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average
Discount rates	2.9	%	17.5	%	9.0	%	3.5	%	16.3	%	9.4	%	N/A		N/A		N/A									3.1	%	15.8	%	8.7	%	14.0	%	14.0	%	14.0	%
Net cumulative expected loss rates^{(1) (3)}																			Net cumulative expected loss rates^{(1) (3)}							0.3	%	44.1	%	12.7	%	18.4	%	18.4	%	18.4	%
Cumulative expected prepayment rates^{(1) (3)}																			Cumulative expected prepayment rates^{(1) (3)}							8.0	%	41.6	%	30.6	%	23.5	%	23.5	%	23.5	%

																				December 31, 2016
																				Loans, Notes and Certificates						Servicing Asset/Liability						Loan Trailing Fee Liability
																				Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average		Minimum		Maximum		Weighted Average
Discount rates																				1.2	%	16.6	%	7.2	%	3.4	%	15.1	%	7.8	%	3.4	%	15.0	%	7.7	%
Net cumulative expected loss rates⁽¹⁾	0.3	%	22.0	%	9.9	%	0.3	%	22.0	%	8.8	%	N/A		N/A		N/A			0.3	%	33.9	%	14.6	%	0.3	%	33.9	%	12.8	%	0.3	%	33.9	%	13.5	%
Cumulative expected prepayment rates ⁽¹⁾	23.4	%	36.4	%	30.8	%	8.0	%	36.4	%	30.5	%	N/A		N/A		N/A			8.0	%	42.7	%	30.7	%	8.0	%	42.7	%	29.3	%	8.0	%	42.7	%	28.3	%
Total market servicing rates (% per annum on outstanding principal balance) ⁽³⁾	N/A		N/A		N/A		0.50	%	0.75	%	0.50	%	N/A		N/A		N/A
Total market servicing rates (% per annum on outstanding principal balance) ⁽²⁾																				N/A		N/A		N/A		0.63	%	0.90	%	0.63	%	N/A		N/A		N/A

N/A Not applicable


⁽¹⁾	Expressed as a percentage of the original principal balance of the loan, note or ~~certificate.~~certificate, except for asset-backed securities.


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


⁽³⁾	~~Excludes collection fees that would be passed on to~~For asset-backed securities, expressed as a ~~hypothetical third-party servicer. As~~percentage of ~~December 31, 2015,~~ the ~~market rate for collection fees was assumed to be 7 basis points for a weighted-average total market servicing rate of 57 basis points.~~


⁽⁴⁾	~~Includes loans held for sale.~~outstanding collateral balance.

At ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the discounted cash flow methodology used to estimate the ~~notes~~note and ~~certificates'~~certificates’ fair values used the same projected net cash flows as their related loans. As demonstrated by the following tables, ~~below,~~ the fair value adjustments for loans were largely offset by the fair value adjustments of the notes and certificates due to the payment dependent design of the notes and certificates and because the principal balances of the loans were ~~very~~ close to the combined principal balances of the notes and certificates.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following tables present additional information about Level 3 loans, loans held for sale, notes and certificates measured at fair value on a recurring basis for the ~~third~~second quarters and first ~~nine months~~halves of ~~2016~~2017 and ~~2015:~~2016:



	Loans									Loans Held For Sale									Notes and Certificates
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Beginning balance at March 31, 2017	$	4,312,252		$	(285,497	)	$	4,026,755		$	9,724		$	(315	)	$	9,409		$	4,318,302		$	(283,945	)	$	4,034,357
Purchases	478,250			(1		)	478,249			1,722,255			6,424			1,728,679			—			—			—
Issuances	—			—			—			—			—			—			472,681			—			472,681
Sales	—			—			—			(1,686,950		)	(5,687		)	(1,692,637		)	—			—			—
Principal payments and retirements	(625,744		)	—			(625,744		)	(7,541		)	—			(7,541		)	(619,889		)	—			(619,889		)
Charge-offs	(123,208		)	123,208			—			(201		)	201			—			(122,377		)	122,377			—
Recoveries	—			(11,805		)	(11,805		)	—			—			—			—			(11,703		)	(11,703		)
Change in fair value recorded in earnings	—			(70,456		)	(70,456		)	—			(1,579		)	(1,579		)	—			(69,864		)	(69,864		)
Ending balance at June 30, 2017	$	4,041,550		$	(244,551	)	$	3,796,999		$	37,287		$	(956	)	$	36,331		$	4,048,717		$	(243,135	)	$	3,805,582

	Loans									Loans Held For Sale									Notes and Certificates
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Beginning balance at March 31, 2016	$	4,932,346		$	(216,190	)	$	4,716,156		$	—		$	—		$	—		$	4,929,468		$	(216,019	)	$	4,713,449
Purchases	525,205			—			525,205			1,221,122			—			1,221,122			—			—			—
Transfers from loans to loans held for sale	(28,533		)	—			(28,533		)	28,533			—			28,533			—			—			—
Issuances	—			—			—			—			—			—			501,899			—			501,899
Sales	—			—			—			(1,231,151		)	—			(1,231,151		)	—			—			—
Principal payments and retirements	(592,992		)	—			(592,992		)	(1,877		)	—			(1,877		)	(588,216		)	—			(588,216		)
Charge-offs	(87,395		)	87,395			—			—			—			—			(87,305		)	87,305			—
Recoveries	—			(6,743		)	(6,743		)	—			—			—			—			(6,739		)	(6,739		)
Change in fair value recorded in earnings	—			(205,332		)	(205,332		)	—			(217		)	(217		)	—			(204,508		)	(204,508		)
Ending balance at June 30, 2016	$	4,748,631		$	(340,870	)	$	4,407,761		$	16,627		$	(217	)	$	16,410		$	4,755,846		$	(339,961	)	$	4,415,885

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Loans Notes and Certificates
Outstanding Principal Balance Valuation Adjustment Fair Value Outstanding Principal Balance Valuation Adjustment Fair Value
Beginning balance at June 30, 2016 $ 4,765,258
$ (341,087 ) $ 4,424,171
$ 4,755,846
$ (339,961 ) $ 4,415,885
Purchases of loans 1,740,531
—
1,740,531
—
—
—
Issuances of notes and certificates —
—
—
641,242
—
641,242
Whole loan sales (1,095,717 ) —
(1,095,717 ) —
—
—
Principal payments (605,595 ) —
(605,595 ) (601,234 ) —
(601,234 )
Charge-offs (112,517 ) 112,517
—
(111,816 ) 111,816
—
Recoveries —
(10,517 ) (10,517 ) —
(9,955 ) (9,955 )
Change in fair value recorded in earnings —
(26,503 ) (26,503 ) —
(26,027 ) (26,027 )
Ending balance at September 30, 2016 $ 4,691,960
$ (265,590 ) $ 4,426,370
$ 4,684,038
$ (264,127 ) $ 4,419,911
Loans held for sale at September 30, 2016 $ 14,905
$ (161 ) $ 14,744

Loans at fair value at September 30, 2016 $ 4,677,055
$ (265,429 ) $ 4,411,626

Loans Notes and Certificates
Outstanding Principal Balance Valuation Adjustment Fair Value Outstanding Principal Balance Valuation Adjustment Fair Value
Beginning balance at June 30, 2015 $ 3,694,823
$ (57,440 ) $ 3,637,383
$ 3,717,556
$ (57,432 ) $ 3,660,124
Purchases of loans 1,946,455
—
1,946,455
—
—
—
Issuances of notes and certificates —
—
—
991,926
—
991,926
Whole loan sales (954,770 ) —
(954,770 ) —
—
—
Principal payments (481,701 ) —
(481,701 ) (478,189 ) —
(478,189 )
Charge-offs (55,365 ) 55,365
—
(55,346 ) 55,346
—
Recoveries —
(5,919 ) (5,919 ) —
(5,867 ) (5,867 )
Change in fair value recorded in earnings —
(72,474 ) (72,474 ) —
(72,513 ) (72,513 )
Ending balance at September 30, 2015 $ 4,149,442
$ (80,468 ) $ 4,068,974
$ 4,175,947
$ (80,466 ) $ 4,095,481

Loans Notes and Certificates
Outstanding Principal Balance Valuation Adjustment Fair Value Outstanding Principal Balance Valuation Adjustment Fair Value
Beginning balance at December 31, 2015 $ 4,681,671
$ (125,590 ) $ 4,556,081
$ 4,697,169
$ (125,586 ) $ 4,571,583
Purchases of loans 5,739,419
—
5,739,419
—
—
—
Issuances of notes and certificates —
—
—
2,041,746
—
2,041,746
Whole loan sales (3,657,604 ) —
(3,657,604 ) —
—
—
Principal payments (1,786,623 ) —
(1,786,623 ) (1,770,779 ) —
(1,770,779 )
Charge-offs (284,903 ) 284,903
—
(284,098 ) 284,098
—
Recoveries —
(27,451 ) (27,451 ) —
(26,871 ) (26,871 )
Change in fair value recorded in earnings —
(397,452 ) (397,452 ) —
(395,768 ) (395,768 )
Ending balance at September 30, 2016 $ 4,691,960
$ (265,590 ) $ 4,426,370
$ 4,684,038
$ (264,127 ) $ 4,419,911
Loans held for sale at September 30, 2016 $ 14,905
$ (161 ) $ 14,744

Loans at fair value at September 30, 2016 $ 4,677,055
$ (265,429 ) $ 4,411,626



	Loans									Loans Held For Sale									Notes and Certificates
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Beginning balance at December 31, 2016	$	4,565,653		$	(253,669	)	$	4,311,984		$	9,345		$	(297	)	$	9,048		$	4,572,912		$	(252,017	)	$	4,320,895
Purchases	1,002,666			(5		)	1,002,661			2,898,410			6,423			2,904,833			—			—			—
Transfers from loans to loans held for sale	—			—			—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			995,986			—			995,986
Sales	—			—			—			(2,861,386		)	(5,530		)	(2,866,916		)	—			—			—
Principal payments and retirements	(1,265,463		)	—			(1,265,463		)	(8,721		)	—			(8,721		)	(1,260,994		)	2			(1,260,992		)
Charge-offs	(261,306		)	261,306			—			(361		)	361			—			(259,187		)	259,187			—
Recoveries	—			(22,694		)	(22,694		)	—			—			—			—			(22,493		)	(22,493		)
Change in fair value recorded in earnings	—			(229,489		)	(229,489		)	—			(1,913		)	(1,913		)	—			(227,814		)	(227,814		)
Ending balance at June 30, 2017	$	4,041,550		$	(244,551	)	$	3,796,999		$	37,287		$	(956	)	$	36,331		$	4,048,717		$	(243,135	)	$	3,805,582

	Loans									Loans Held For Sale									Notes and Certificates
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Beginning balance at December 31, 2015	$	4,681,671		$	(125,590	)	$	4,556,081		$	—		$	—		$	—		$	4,697,169		$	(125,586	)	$	4,571,583
Purchases	1,447,030			—			1,447,030			2,529,585			—			2,529,585			—			—			—
Transfers from loans to loans held for sale	(28,533		)	—			(28,533		)	28,533			—			28,533			—			—			—
Issuances	—			—			—			—			—			—			1,403,546			—			1,403,546
Sales	—			—			—			(2,539,614		)	—			(2,539,614		)	—			—			—
Principal payments and retirements	(1,179,151		)	—			(1,179,151		)	(1,877		)	—			(1,877		)	(1,172,587		)	—			(1,172,587		)
Charge-offs	(172,386		)	172,386			—			—			—			—			(172,282		)	172,282			—
Recoveries	—			(16,934		)	(16,934		)	—			—			—			—			(16,916		)	(16,916		)
Change in fair value recorded in earnings	—			(370,732		)	(370,732		)	—			(217		)	(217		)	—			(369,741		)	(369,741		)
Ending balance at June 30, 2016	$	4,748,631		$	(340,870	)	$	4,407,761		$	16,627		$	(217	)	$	16,410		$	4,755,846		$	(339,961	)	$	4,415,885

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

The following tables present additional information about Level 3 servicing assets and liabilities measured at fair value on a recurring basis for the third quarters and first nine months of 2016 and 2015:

Three Months Ended September 30, 2016 Three Months Ended September 30, 2015
Servicing Assets Servicing Liabilities Servicing Assets Servicing Liabilities
Fair value at beginning of period $ 16,126
$ 3,412
$ 5,225
$ 4,831
Issuances ⁽¹⁾
3,009
712
3,092
1,402
Change in fair value, included in servicing fees (2,429 ) (727 ) (1,436 ) (1,839 )
Other net changes included in deferred revenue (451 ) —
368
—
Fair value at end of period $ 16,255
$ 3,397
$ 7,249
$ 4,394

Nine Months Ended
September 30, 2016 Nine Months Ended
September 30, 2015
Servicing Assets Servicing Liabilities Servicing Assets Servicing Liabilities
Fair value at beginning of period $ 10,250
$ 3,973
$ 2,181
$ 3,973
Issuances ⁽¹⁾
12,984
2,452
6,476
4,340
Change in fair value, included in servicing fees (7,092 ) (3,028 ) (2,467 ) (3,919 )
Other net changes included in deferred revenue 113
—
1,059
—
Fair value at end of period $ 16,255
$ 3,397
$ 7,249
$ 4,394


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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The following tables present additional information about Level 3 servicing assets and liabilities measured at fair value on a recurring basis for the second quarters and first halves of 2017 and 2016:



	Three Months Ended June 30, 2017						Three Months Ended June 30, 2016
	Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities
Fair value at beginning of period	$	22,360		$	2,311		$	16,964		$	2,827
Issuances ⁽¹⁾	8,580			39			4,344			808
Change in fair value, included in investor fees	(5,075		)	(639		)	(4,895		)	(223		)
Other net changes included in deferred revenue	36			—			(287		)	—
Fair value at end of period	$	25,901		$	1,711		$	16,126		$	3,412

	Six Months Ended June 30, 2017						Six Months Ended June 30, 2016
	Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities
Fair value at beginning of period	$	21,398		$	2,846		$	10,250		$	3,973
Issuances ⁽¹⁾	13,897			313			9,975			1,740
Change in fair value, included in investor fees	(9,122		)	(1,448		)	(4,663		)	(2,301		)
Other net changes included in deferred revenue	(272		)	—			564			—
Fair value at end of period	$	25,901		$	1,711		$	16,126		$	3,412


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

The following table presents additional information about Level 3 ~~Loan Trailing Fee~~loan trailing fee liability measured at fair value on a recurring basis for the ~~third quarter~~second quarters and first ~~nine months~~halves of 2017 and 2016:


							Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016			2017			2016			2017			2016
Fair value at beginning of period	$	2,324		$	—		$	5,814		$	1,002		$	4,913		$	—
Issuances	1,682			4,180			1,811			1,496			3,474			2,498
Cash payment of Loan Trailing Fee	(395		)	(585		)
Cash payment of loan trailing fee							(998		)	(185		)	(1,824		)	(189		)
Change in fair value, included in origination and servicing	113			129			161			11			225			15
Fair value at end of period	$	3,724		$	3,724		$	6,788		$	2,324		$	6,788		$	2,324

Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity

~~Certain fair~~Fair valuation adjustments are recorded through earnings related to Level 3 instruments for the ~~third quarter~~second quarters and first ~~nine months~~halves of ~~2016~~2017 and ~~2015.~~2016. Generally, changes in the net cumulative expected loss rates, cumulative prepayment rates, and discount rates will have an immaterial net impact on the fair value of loans, notes and certificates, servicing assets and liabilities, and ~~Loan Trailing Fees.~~loan trailing fee liability.

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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

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

The ~~Company's~~Company’s selection of the most representative market servicing rates for servicing assets and servicing liabilities is inherently judgmental. The Company ~~reviewed estimated~~reviews third-party servicing rates for its loans, ~~and~~ loans in similar credit sectors, ~~as well as~~and market servicing benchmarking analyses provided by third-party valuation ~~firms.~~firms, when available. The table below shows the impact on the estimated fair value of servicing assets and liabilities, calculated using different market servicing rate assumptions as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015:~~

2016:


	September 30, 2016						December 31, 2015						June 30, 2017						December 31, 2016
	Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities
Weighted-average market servicing rate assumptions⁽¹⁾	0.63		%	0.63		%	0.50		%	0.50		%	0.63		%	0.63		%	0.63		%	0.63		%
Change in fair value from:
Servicing rate increase by 0.10%	$	(4,931	)	$	1,410		$	(3,504	)	$	1,589		$	(6,512	)	$	541		$	(5,673	)	$	964
Servicing rate decrease by 0.10%	$	5,347		$	(994	)	$	3,610		$	(1,483	)	$	6,587		$	(466	)	$	5,812		$	(825	)

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

The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value:



June 30, 2017	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Cash and cash equivalents ⁽¹⁾	$	538,444	$	—	$	538,444	$	—	$	538,444
Restricted cash	161,672		—		161,672		—		161,672
Servicer reserve receivable	10,379		—		10,379		—		10,379
Deposits	855		—		855		—		855
Total assets	$	711,350	$	—	$	711,350	$	—	$	711,350
Liabilities:
Accrued expenses and other liabilities	$	14,562	$	—	$	—	$	14,562	$	14,562
Accounts payable	13,452		—		13,452		—		13,452
Payables to investors	97,218		—		97,218		—		97,218
Total liabilities	$	125,232	$	—	$	110,670	$	14,562	$	125,232

⁽¹⁾

~~Represents total market servicing rates, which include collection fees, at September 30, 2016, and base market servicing rates, which exclude collection fees, at December 31, 2015. As~~Carrying amount approximates fair value due to the short maturity of ~~December 31, 2015, the market rate for collection fees was assumed to be 7 basis points for a weighted-average total market servicing rate of 57 basis points.~~these financial instruments.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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



December 31, 2016	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Cash and cash equivalents ⁽¹⁾	$	515,602	$	—	$	515,602	$	—	$	515,602
Restricted cash	177,810		—		177,810		—		177,810
Servicer reserve receivable	4,938		—		4,938		—		4,938
Deposits	855		—		855		—		855
Total assets	$	699,205	$	—	$	699,205	$	—	$	699,205
Liabilities:
Accrued expenses and other liabilities	$	10,981	$	—	$	—	$	10,981	$	10,981
Accounts payable	10,889		—		10,889		—		10,889
Payables to investors	125,884		—		125,884		—		125,884
Total liabilities	$	147,754	$	—	$	136,773	$	10,981	$	147,754


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

~~The following tables present the fair value hierarchy for financial instruments not recorded at fair value:~~

September 30, 2016 Carrying Amount Level 1 Inputs Level 2 Inputs Level 3 Inputs
Balance at
Fair Value
Assets:
Cash and cash equivalents $ 520,767
$ —
$ 520,767
$ —
$ 520,767
Restricted cash 139,455
—
139,455
—
139,455
Servicer reserve receivable 2,565
—
2,565
—
2,565
Deposits 865
—
865
—
865
Goodwill 35,633
—
—
35,633
35,633
Total assets $ 699,285
$ —
$ 663,652
$ 35,633
$ 699,285
Liabilities:
Accrued expenses and other liabilities $ 6,051
$ —
$ —
$ 6,051
$ 6,051
Accounts payable 7,651
—
7,651
—
7,651
Payables to investors 81,376
—
81,376
—
81,376
Total liabilities $ 95,078
$ —
$ 89,027
$ 6,051
$ 95,078

December 31, 2015 Carrying Amount Level 1 Inputs Level 2 Inputs Level 3 Inputs
Balance at
Fair Value
Assets:
Cash and cash equivalents $ 623,531
$ —
$ 623,531
$ —
$ 623,531
Restricted cash 80,733
—
80,733
—
80,733
Deposits 871
—
871
—
871
Total assets $ 705,135
$ —
$ 705,135
$ —
$ 705,135
Liabilities:
Accounts payable $ 5,542
$ —
$ 5,542
$ —
$ 5,542
Payables to investors 73,162
—
73,162
—
73,162
Total liabilities $ 78,704
$ —
$ 78,704
$ —
$ 78,704

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

7.8. Property, Equipment and Software, Net

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


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Internally developed software(1)	$	69,739		$	40,709		$	98,278		$	75,202
Leasehold improvements							23,069			22,637
Computer equipment	16,965			14,076			19,118			18,080
Leasehold improvements	18,382			11,559
Purchased software	7,615			5,336			7,856			7,598
Furniture and fixtures	6,394			5,086			6,832			6,827
Construction in progress	4,526			2,870			2,713			707
Total property, equipment and software	123,621			79,636			157,866			131,051
Accumulated depreciation and amortization	(41,065		)	(23,706		)	(59,923		)	(41,788		)
Total property, equipment and software, net	$	82,556		$	55,930		$	97,943		$	89,263


⁽¹⁾	Includes $11.8 million and $7.4 million in development in progress as of June 30, 2017 and December 31, 2016, respectively.

Depreciation and amortization expense on property, equipment and software was ~~$6.5~~$9.8 million and ~~$17.8~~$18.9 million for the ~~third~~second quarter and first ~~nine months~~half of ~~2016,~~2017, respectively. Depreciation and amortization expense on property, equipment and software was ~~$4.5~~$5.9 million and ~~$11.4~~$11.3 million for the ~~third~~second quarter and first ~~nine months~~half of ~~2015,~~2016, respectively.

~~8. Other Assets~~

~~Other assets consist of the following:~~

September 30,
2016 December 31,
2015
Loan servicing assets, at fair value $ 16,255
$ 10,250
Prepaid expenses 14,704
16,283
Other investments 10,329
250
Accounts receivable 6,719
4,976
Servicer reserve receivable 2,565
—
Receivable from investors 1,279
1,117
Deferred financing cost 1,097
1,296
Deferred acquisition compensation 642
1,521
Due from related parties ⁽¹⁾
535
655
Deposits 865
871
Tenant improvement receivable 181
778
Other 662
416
Total other assets $ 55,833
$ 38,413

⁽¹⁾ ~~Represents management fees due to LCA from certain private funds for which LCA acts as the general partner.~~

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

9. Other Assets

Other assets consist of the following:



	June 30, 2017		December 31, 2016
Loan servicing assets, at fair value	$	25,901	$	21,398
Prepaid expenses	19,699		16,960
Other investments	10,570		10,372
Servicer reserve receivable	10,379		4,938
Accounts receivable	7,810		7,572
Receivable from investors	1,369		1,566
Due from related parties ⁽¹⁾	340		476
Tenant improvement receivable	137		3,290
Other	2,027		3,072
Total other assets	$	78,232	$	69,644


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

10. Intangible Assets and Goodwill

Intangible Assets

The ~~Company's~~Company’s intangible asset balance was ~~$27.4~~$24.0 million and ~~$31.0~~$26.2 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. Amortization expense associated with intangible assets for the ~~third~~second quarter and first ~~nine months~~half of ~~2016~~2017 was ~~$1.2~~$1.1 million and ~~$3.6~~$2.2 million, respectively. Amortization expense associated with intangible assets for the ~~third~~second quarter and first ~~nine months~~half of ~~2015~~2016 was ~~$1.3~~$1.2 million and ~~$4.1~~$2.4 million, respectively.

Goodwill

The ~~Company's~~Company’s goodwill balance was $35.6 million at June 30, 2017 and December 31, 2016, respectively. The Company’s annual goodwill impairment testing date is April 1. In testing for potential impairment of goodwill, management performed an assessment of each of the ~~Company's~~Company’s reporting units (generally defined as the ~~Company's~~Company’s businesses for which financial information is available and reviewed regularly by management). Only the education and patient finance reporting unit contains goodwill. ~~Due to the complexity and effort required to estimate the fair value~~Upon completion of the reporting unit in the second step of the analysis, the fair value estimates were based on preliminary analysis and assumptions as of the end of the second quarter of 2016. Accordingly, we recorded our best estimate of the impairment of $35.4 million during the second quarter of 2016. The Company completed its annual goodwill impairment analysis in the third quarter of 2016 and recorded an additional impairment of $1.7 million for a total charge of $37.1 million for the first nine months of 2016.

~~In the second quarter of 2016, in conjunction with~~ the annual impairment test the Company decreased its estimates of future earnings for the education and patient finance reporting unit, observed decreases in valuation multiples (i.e. enterprise value to revenue, and enterprise value to earnings before interest, taxes, depreciation, and amortization (EBITDA)) for peer group companies, and observed a marked decrease in the Company's overall market capitalization due, in substantial part to the resignation of Renaud Laplanche as CEO and Chairman and the events leading up to his resignation. In addition, the Company is subject to litigation and other inquiries related to the events surrounding the resignation of Mr. Laplanche. The publicity resulting from these events has adversely affected the Company’s brand. These factors were a contributor to the determination that the fair value of the reporting unit was less than its carrying value.

The first step of the analysis is to compare the reporting unit’s estimate fair value to its carrying value. Estimating the fair value of the education and patient finance reporting unit was a subjective process involving the use of estimates and judgments, particularly related to future cash flows, discount rates (including market risk premiums) and market valuation multiples, which as discussed above were impacted by a series of events in the second quarter of 2016. The fair value of the reporting unit was determined using the income approach and the market approach, each a commonly used valuation technique. The Company gave consideration to each valuation technique, as either technique can be an indicator of fair value. For the income approach,2017, the Company estimated future cash flows and used such cash flows in a discounted cash flow model (“DCF model”). A DCF model was selected to be comparable to what would be used by market participants to estimate fair value. The DCF model incorporated expected future growth rates, terminal value amounts, and the applicable weighted-average cost of capital to discount estimated cash flows. The projections used in the estimate of fair value are consistent with the Company’s current forecast and long-range plans for this reporting unit. For the market approach, the valuation of the reporting unit was based on an analysis of enterprise value to revenue and enterprise value to EBITDA valuation multiples. The peer group valuation multiples used in the analysis were selected based on management’s judgment.did not record any goodwill impairment expense.

The ~~second step~~Company recorded a goodwill impairment expense of ~~the analysis includes allocating the estimated fair value (determined~~$35.4 million in the ~~first step)~~second quarter of the reporting unit to its assets and liabilities to determine an implied fair value of goodwill. The implied fair value of goodwill was determined in the same manner as the amount of goodwill recognized in an acquisition. That is, the estimated fair value of the reporting unit was allocated to all of the assets and liabilities of the unit (including2016.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~unrecognized intangibles such as provider relationships) as if the reporting unit had been acquired and the estimated fair value was the purchase price paid.~~

~~The Company did not record any goodwill impairment expense in either the third quarter or first nine months of 2015.~~

~~10.~~11. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:


	September 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Accrued expenses	$	18,491	$	14,054	$	23,171	$	19,734
Accrued compensation(1)	25,709		28,780		21,351		27,009
Investor incentives payable	529		—
Deferred rent	8,489		4,615		14,201		11,638
Transaction fee refund reserve	6,860		578		12,190		9,098
Loan trailing fee liability, at fair value					6,788		4,913
Credit loss coverage reserve					2,973		2,529
Deferred revenue	2,665		2,551		2,284		2,556
Loan servicing liabilities, at fair value	3,397		3,973		1,711		2,846
Loan Trailing Fee liability, at fair value	3,724		—
Contingent liabilities					1,570		—
Reimbursement payable to limited partners of LCA private funds					1,520		2,313
Payable to issuing banks	3,454		955		966		1,658
Deferred tax liability	—		3,446
Early stock option exercise and other equity-related liabilities	51		83
Contingent liabilities	—		700
Reimbursement payable to limited partners of private funds	1,013		—
Other	3,795		1,508		2,020		1,325
Total accrued expenses and other liabilities	$	78,177	$	61,243	$	90,745	$	85,619

~~11. Accumulated Other Comprehensive Income (Loss)~~

~~Accumulated other comprehensive income (loss) represents other cumulative gains and losses that are not reflected in earnings. The components of other comprehensive income (loss) were as follows:~~

Three Months Ended September 30, 2016 2015
Before Tax Tax Effect Net of Tax Before Tax Tax Effect Net of Tax
Change in net unrealized income (loss) on securities available for sale $ 111
$ 46
$ 65
$ (341 ) $ —
$ (341 )
Other comprehensive income (loss) $ 111
$ 46
$ 65
$ (341 ) $ —
$ (341 )

Nine Months Ended September 30, 2016 2015
Before Tax Tax Effect Net of Tax Before Tax Tax Effect Net of Tax
Change in net unrealized income (loss) on securities available for sale $ 1,710
$ 696
$ 1,014
$ (1,172 ) $ —
$ (1,172 )
Other comprehensive income (loss) $ 1,710
$ 696
$ 1,014
$ (1,172 ) $ —
$ (1,172 )

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

~~Accumulated other comprehensive loss balances were as follows:~~

Total
Accumulated Other Comprehensive Loss
Balance at December 31, 2015 $ (1,671 )
Change in net unrealized loss on securities available for sale 1,014
Balance at September 30, 2016 $ (657 )


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

12. Secured Borrowings

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

13. Employee Incentive ~~and Retirement~~ Plans

The Company’s equity incentive plans provide for granting stock options and restricted stock units (RSUs) to employees, consultants, officers and directors. ~~In addition, the Company offers a retirement plan and an employee stock purchase plan (ESPP) to eligible employees.~~

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2016 2015 2016 2015
Stock options $ 6,208
$ 8,101
$ 17,632
$ 23,314
RSUs 11,143
3,037
25,044
5,262
ESPP 438
491
1,273
1,416
Stock issued related to acquisition 133
1,850
2,441
7,566
Total stock-based compensation expense $ 17,922
$ 13,479
$ 46,390
$ 37,558

~~The following table presents the Company's stock-based compensation expense recorded in the condensed consolidated statements of operations:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2016
2015 ⁽¹⁾
2016
2015⁽¹⁾
Sales and marketing $ 1,699
$ 2,283
$ 5,016
$ 5,504
Origination and servicing 1,013
662
2,722
1,987
Engineering and product development 4,931
3,145
13,134
7,886
Other general and administrative 10,279
7,389
25,518
22,181
Total stock-based compensation expense $ 17,922
$ 13,479
$ 46,390
$ 37,558


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

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

The Company capitalized $2.2 million and $1.3 million of stock-based compensation expense associated with developing software for internal use during the third quarters of 2016 and 2015, respectively. The Company capitalized $6.2 million and $3.1 million of stock-based compensation expense associated with developing software for internal use during the first nine months of 2016 and 2015, respectively.

In addition, the Company recognized $0 and $62 thousand in tax deficits from exercised stock options and RSUs during the third quarter and first nine months of 2016. There was no net income tax benefit recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options and RSUs due to the full valuation allowance during the third quarter and first nine months of 2015.

In the second quarter of 2016, the board of directors or the compensation committee of the board of directors, as appropriate, approved incentive retention awards to certain members of the executive management team and other key personnel. These incentive awards consisted of an aggregate of $16.3 million of RSUs and $18.6 million of cash. These incentive retention awards will be recognized as compensation expense ratably through May 2017.

The cash retention awards were granted under the Cash Retention Plan. Under the terms of the Cash Retention Plan, employees who received an award will be eligible to earn a cash retention bonus on the terms and in the amounts specified in their respective cash retention bonus award agreement, subject to continued services and other vesting requirements set forth in such agreement.

~~Equity Incentive Plans~~

The Company has two equity incentive plans: the 2007 Stock Incentive Plan (2007 Plan) and the 2014 Equity Incentive Plan (2014 Plan). Upon the Company’s IPO in 2014, the 2007 Plan was terminated and all shares that remained available for future issuance under the 2007 Plan at that time were transferred to the 2014 Plan. As of September 30, 2016, 26,642,089 options to purchase common stock granted under the 2007 Plan remain outstanding. As of September 30, 2016, the total number of shares reserved for future grants under the 2014 Plan was 26,525,701 shares, including shares transferred from the 2007 Plan.

~~Stock Options~~

~~The following table summarizes the activities for the Company's stock options during the first nine months of 2016:~~

Number of Options Weighted-
Average
Exercise Price Per Share Weighted-Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2015 48,208,911
$ 3.60

Granted 7,482,011
$ 7.22

Exercised (14,041,282 ) $ 0.78

Forfeited/Expired (8,686,702 ) $ 6.61

Outstanding at September 30, 2016 32,962,938
$ 4.83
7.0 $ 81,007
Vested and expected to vest at September 30, 2016 32,837,306
$ 4.83
7.0 $ 80,920
Exercisable at September 30, 2016 19,488,544
$ 3.52
6.1 $ 67,646


⁽¹⁾	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $6.18 as reported on the New York Stock Exchange on September 30, 2016.

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

For the first nine months of 2016, the Company granted service-based stock options to purchase 7,482,011 shares of common stock with a weighted average exercise price of $7.22 per option share, a weighted average grant date fair value of $3.61 per option share and an aggregate estimated fair value of $27.0 million. Stock options granted during the first nine months of 2016 included 265,987 shares of fully vested stock options granted in lieu of cash bonuses to be paid to certain employees for the 2015 performance period. In the third quarter of 2016, a portion of these options were modified and the cash bonuses were paid.

For the first nine months of 2015, the Company granted service-based stock options to purchase 1,164,929 shares of common stock with a weighted average exercise price of $20.00 per option share, a weighted average grant date fair value of $9.80 per option share and an aggregate estimated fair value of $11.4 million.

The aggregate intrinsic value of options exercised was $71.0 million and $75.3 million for the first nine months of 2016 and 2015, respectively. The total fair value of stock options vested for the first nine months of 2016 and 2015 was $25.4 million and $26.0 million, respectively.

As of September 30, 2016, the total unrecognized compensation cost, net of forfeitures, related to outstanding stock options was $50.4 million, which is expected to be recognized over the next 2.5 years.

~~The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted with the following assumptions:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2016 2015 2016 2015
Expected dividend yield —
—
—
—
Weighted-average assumed stock price volatility 51.0 % 48.7 % 51.6 % 49.4 %
Weighted-average risk-free interest rate 1.28 % 1.67 % 1.34 % 1.61 %
Weighted-average expected life (in years) 6.25
6.25
6.15
6.25

~~Restricted Stock Units~~

~~The following table summarizes the activities for the Company's RSUs during the first nine months of 2016:~~

Number of RSUs Weighted-
Average
Grant Date
Fair Value
Unvested at December 31, 2015 4,443,399
$ 15.23
RSUs granted 35,556,344
$ 6.12
RSUs vested (1,917,809 ) $ 11.44
RSUs forfeited/expired (4,003,552 ) $ 9.13
Unvested at September 30, 2016 34,078,382
$ 6.66
Expected to vest after September 30, 2016 33,386,970
$ 9.47

~~For the first nine months of 2016, the Company granted 35,556,344 RSUs with an aggregate fair value of $217.7 million.~~

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~As of September 30, 2016, there was $212.5 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 3.3 years.~~

~~Employee Stock Purchase Plan~~

The Company’s ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions, subject to plan limitations. Payroll deductions are accumulated during six-month offering periods. The purchase price for each share of common stock is 85% of the lower of the fair market value of the common stock on the first business day of the offering period or on the last business day of the offering period.

The Company's employees purchased 721,918 shares of common stock under the ESPP during the first nine months of 2016. No shares were purchased during the third quarter of 2016. As of September 30, 2016, a total of 6,195,036 shares remain reserved for future issuance. The Company's employees purchased 211,256 shares under the ESPP during the third quarter and first nine months of 2015.

~~The fair value of stock purchase rights granted to employees under the ESPP is measured on the grant date using the~~

~~Black-Scholes option pricing model. The~~Stock-based compensation expense ~~related to ESPP purchase rights is recognized on a~~

~~straight-line basis, net of estimated forfeitures, over~~was as follows for the 6-month requisite service period. On May 11, 2016 and June 11, 2015, we used the following assumptions in estimating the fair value of the grant under the ESPP which are derived using the same methodology applied to stock option assumptions:

periods presented:

Nine Months Ended
September 30,
2016 2015
Expected dividend yield —
—
Weighted-average assumed stock price volatility 58.9 % 38.8 %
Weighted-average risk-free interest rate 0.4 % 0.1 %
Weighted-average expected life (in years) 0.50
0.42

~~Share Repurchases~~



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Stock options	$	4,147	$	3,767	$	8,492	$	11,424
RSUs	14,522		8,775		29,156		13,901
ESPP	394		447		779		835
Stock issued related to acquisition	25		458		159		2,308
Total stock-based compensation expense	$	19,088	$	13,447	$	38,586	$	28,468

~~On February 9, 2016, the board of directors approved a share repurchase program under which Lending Club may repurchase up to $150.0 million of the Company’s common shares~~ ~~in open market or privately negotiated transactions in compliance with Securities and Exchange Act Rule 10b-18~~. This repurchase plan is valid for one year and does not obligate the Company to acquire any particular amount of common stock, and may be suspended at any time at Lending Club’s discretion. In the first quarter of ~~2016, the Company repurchased 2,282,720 shares of its common stock at a~~ ~~weighted average purchase price of $8.52 per share for an aggregate purchase price of $19.5 million. There were~~ no ~~shares repurchased during the second quarter or~~ ~~third quarter of 2016 and the Company does not currently intend to repurchase additional shares in the near term.~~

~~Retirement Plan~~

Upon completing 90 days of service, employees may participate in the Company’s qualified retirement plan that is governed by section 401(k) of the IRS Code. Participants may elect to contribute a portion of their annual compensation up to the maximum limit allowed by federal tax law. In the first quarter of 2016, the Company approved an employer match of up to 4% ~~of an employee’s eligible compensation with a maximum annual match of~~ ~~$5,000~~ ~~per employee. The total expense for the employer match for the third quarters of 2016 and 2015 was~~ ~~$0.8 million~~ ~~and~~ ~~$0.5 million, respectively. The total expense for the employer match for the first nine months of 2016 and 2015 was $3.2 million and $1.5 million, respectively.~~

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

~~Severance Costs~~

On June 22, 2016, the Board of Directors (the "Board") of the Company approved a plan to reduce the number of employees, which includes payment of severance benefits to certain employees whose positions were affected. The plan authorized the reduction of up to 179 positions, or approximately 12% of the Company's workforce. The purpose of the action was to reduce costs, streamline operations and more closely align staffing with anticipated loan volumes. As a result, the Company recorded $2.7 million in severance costs, which were comprised predominately of cash severance, and paid $0.1 million during the second quarter of 2016. All of the remaining $2.6 million of severance costs was paid in the third quarter of 2016. No such costs were recorded in the third quarters of 2016 and 2015 and first nine months of 2015.

The following table presents the ~~Company's severance~~Company’s stock-based compensation expense recorded in the condensed consolidated statements of operations:


			Three Months Ended June 30,				Six Months Ended June 30,
	Nine Months Ended September 30, 2016		2017		2016		2017		2016
Sales and marketing	$	772	$	1,967	$	1,413	$	4,266	$	3,317
Origination and servicing	1,174		1,354		963		2,770		1,709
Engineering and product development	134		5,773		4,480		12,361		8,203
Other general and administrative	650		9,994		6,591		19,189		15,239
Total severance expense	$	2,730
Total stock-based compensation expense			$	19,088	$	13,447	$	38,586	$	28,468

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

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

Performance-based Restricted Stock Units

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

14. Income Taxes

For the third quarter and first nine months of 2016, the Company recorded income tax benefit of $0.2 million and $4.0 million, respectively. For the third quarter and first nine months of 2015, the Company recorded income tax expense of $1.2 million and $2.2 million, respectively. The income tax benefit in the third quarter and first nine months of 2016 included the recognition of a full valuation allowance against deferred tax assets and the tax effects of unrealized gains credited to other comprehensive income associated with the Company's available for sale portfolio. In addition, the income tax benefit in the first nine months of 2016 included the tax effect of the impairment of tax deductible goodwill, which occurred during the second quarter of 2016.

The Company continues to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. ~~As of September 30, 2016 and December 31, 2015, the valuation allowance was $35.4 million and $25.3 million, respectively.~~

~~15. Commitments and Contingencies~~

~~Operating Lease Commitments~~

The Company's corporate headquarters are located in San Francisco, California, and consist of approximately 169,000 square feet of space under lease agreements, the longest of which is expected to expire in June 2022. Under these lease agreements, the Company has an option to extend nearly all of the space for five years.

In April 2015, the Company entered into a lease agreement for approximately 112,000 square feet of additional office space in San Francisco, California. The lease agreement commenced in the second quarter of 2015 with

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

delivery of portions of the leased space to occur in stages through March 2017. The lease agreement expires on March 31, 2026, with the right to renew the lease term for two consecutive renewal terms of five years each.

15. Commitments and Contingencies

~~The Company has additional leased office space of approximately 26,000 square feet in Westborough, Massachusetts, under a lease agreement that expires in July 2021.~~Operating Lease Commitments

Total facilities rental expense for the ~~third~~second quarter and first ~~nine months~~half of ~~2016~~2017 was ~~$3.7~~$4.0 million and ~~$10.5~~$7.8 million, respectively. Total facilities rental expense for the ~~third~~second quarter and first ~~nine months~~half of ~~2015~~2016 was ~~$2.0~~$3.6 million and ~~$5.0~~$6.8 million, respectively. Minimum lease payments for the ~~third~~second quarter and first ~~nine months~~half of ~~2016 was~~2017 were $3.4 million and ~~$8.3~~$7.0 million, respectively. Minimum lease payments for the ~~third~~second quarter and first ~~nine months~~half of ~~2015 was $1.5~~2016 were $2.6 million and ~~$4.1~~$4.9 million, respectively.

As of ~~September~~June 30, ~~2016,~~2017, the Company pledged $0.8 million of cash and $4.7 million in letters of credit as security deposits in connection with its lease agreements.

The ~~Company's~~Company’s future minimum payments under non-cancelable operating leases in excess of one year and anticipated sublease income as of ~~September~~June 30, ~~2016,~~2017, were as follows:


	Minimum Rental Payments		Operating Leases		Subleases		Net
2016	$	3,661
2017	15,092		$	8,067	$	151	$	7,916
2018	16,053		16,065		310		15,755
2019	15,621		15,633		39		15,594
2020	16,523		16,534		—		16,534
2021			16,790		—		16,790
Thereafter	57,201		41,223		—		41,223
Total	$	124,151	$	114,312	$	500	$	113,812

Loan Purchase Obligation

Under the ~~Company's~~Company’s loan account program with WebBank, ~~a Utah-chartered industrial bank that~~which serves as the ~~Company's~~Company’s primary issuing bank, WebBank retains ownership of the loans facilitated through ~~Lending Club's~~LendingClub’s marketplace for two business days after origination. As part of this arrangement, the Company has committed to purchase the loans at par plus accrued interest, at the conclusion of the two business days. As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the Company was committed to purchase loans with an outstanding principal balance of ~~$55.5~~$69.0 million and ~~$77.6~~$32.2 million at par, respectively.

Loan Repurchase Obligations

The Company has historically limited its loan or note repurchase obligations to events of verified identity theft or in connection with certain customer accommodations. ~~As institutional investors seek to securitize loans purchased through the marketplace,~~In connection with securitizations, the Company has ~~increased the circumstances and the required burden of proof of economic harm under which the Company is obligated~~agreed to repurchase ~~loans from these investors. We believe these repurchase~~ obligations that are customary and consistent with institutional loan and securitization market standards.

In addition to and distinct from the repurchase obligations described in the preceding paragraph, the Company performs certain administrative functions for a variety of retail and institutional investors, including executing, without discretion, loan investments as directed by the investor. To the extent loans do not meet the ~~investor's~~

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

investor’s investment criteria at the time of issuance, or are transferred to the investor as a result of a system error by the Company, the Company is obligated to repurchase such loans at par. As a result of ~~these~~the loan repurchase obligations wedescribed above, the Company repurchased ~~$39.5~~$1.1 million in loans during the first ~~nine months~~half of ~~2016.~~2017.

~~Loan Funding~~

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~During the second quarter of 2016, the Company purchased a total of $134.9 million in loans to fulfill regulatory requirements~~

Purchase Commitments and to support short-term market place equilibrium as discussed below. The Company purchased $0.4 million in loans in the third quarter of 2016 to fulfill regulatory requirements or to support short-term market place equilibrium.Loan Funding

As required by applicable regulations, the Company is ~~required~~obligated to purchase loans resulting from direct marketing efforts if such loans are not otherwise invested in by investors on the platform. ~~During the third quarter of 2016, the~~The Company ~~did~~was not required to purchase any such ~~loans.~~loans during the first half of 2017. Additionally, loans in the process of being facilitated and originated by the ~~Company's~~Company’s issuing bank partner at ~~September~~June 30, ~~2016,~~2017, were substantially funded in ~~October 2016.~~July 2017. As of the date of this report, no loans remained without investor commitments and the Company was not required to purchase any of these loans.

~~Following the events of May 9, 2016, the Company opted to use its own capital to support short-term marketplace equilibrium and purchased $99.5 million in loans during the second quarter of 2016.~~

~~As of September 30, 2016, the Company held $34.2 million of loans on its balance sheet.~~

In addition, if neither Springstone nor the Company can arrange for other investors to invest in or purchase ~~Pool B~~ loans that Springstone facilitates and that are originated by an issuing bank partner but do not meet the credit criteria for

purchase by the issuing bank partner (Pool B loans), Springstone and the Company are contractually committed to purchase these loans.

~~The Company and the issuing bank have entered into purchase agreements with three investors to purchase Pool B loans or participation interests in Pool B loans.~~ As of ~~January 5, 2016, any contractual minimum purchase requirements by these three investors had expired. During the first nine months of 2016,~~June 30, 2017, the Company ~~was not required to purchase any Pool B loans or interests in such loans. In connection with these purchase agreements, the Company has deposited~~had a $9.0 million ~~into an~~deposit in a bank account ~~at the bank~~ to secure potential future purchases of these loans, if ~~any.~~necessary. The funds are recorded as restricted cash on the Company’s consolidated balance sheets. During the first half of 2017, the Company was required to purchase $9.1 million of Pool B loans. Pool B loans are held on the Company’s balance sheet and have an outstanding principal balance and fair value of $8.5 million and $8.3 million as of June 30, 2017, respectively. The Company believes it will be required to purchase additional Pool B loans in the second half of 2017 as it seeks to arrange for other investors to invest in or purchase these loans.

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

Credit Support ~~Agreement~~Agreements

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

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

~~As of September 30, 2016 and~~Legal

Securities Class Actions. During the year ended December 31, ~~2015,~~2016, several putative class action lawsuits alleging violations of federal securities laws were filed in California Superior Court, naming as defendants the net credit losses pertaining to the Investment Fund's certificates have not exceeded the specified threshold, nor are future net credit losses expected to exceed the specified threshold, and thus no liability has been recorded. The Company, currently does not anticipate recording losses under this credit support agreement. If losses related to the credit support agreement are later determined to be likely to occur and are estimable, results of operations could be affected in the period in which such losses are recorded.

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~Legal~~

~~Securities Class Actions.~~ During the first nine months of 2016, five putative class action lawsuits alleging violations of federal securities laws were filed in California Superior Court, San Mateo County, naming as defendants the Company, current and former directors, certain officers, and the underwriters in the December 2014 initial public offering (the IPO). All of these actions were consolidated into a single action (Consolidated State Court Action), entitled In re LendingClub Corporation Shareholder Litigation, No. CIV537300. In August 2016, plaintiffs filed ~~a First Amended Consolidated Complaint ("FACC")~~an amended complaint alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (Securities Act) based on allegedly false and misleading statements in the IPO registration statement and prospectus. ~~Plaintiffs seek to represent~~The Company filed a class of persons who purchased or otherwise acquired the Company’s securities pursuant and/or traceable to the IPO registration statement and prospectus, and seek unspecified compensatory damages, costs and expenses, including attorneys’ fees, and other further relief asdemurrer requesting the Court ~~may deem just and proper. Defendants demurred to~~dismiss certain of the ~~FACC, and~~claims alleged in ~~September 2016,~~ the ~~Court overruled those demurrers with respect to~~amended complaint, which was granted in part in the ~~Section 11 and 15 claims, and sustained the demurrers with leave to amend as the Section 12(a)(2) claim.~~fourth quarter of 2016. The ~~Court has not yet set~~plaintiffs then filed a ~~date for plaintiffs to file their~~ Second Amended Consolidated ~~Complaint.~~Complaint which the Company responded to with a new demurrer seeking to dismiss certain claims. The Court granted in part and denied in part this new demurrer. The Plaintiffs then amended their complaint again in light to comply with this Order, setting the operative complaint. In early April 2017 the plaintiffs filed their motion for class certification, which the Company opposed. The motion was granted in part in a June 2017 Order. Discovery is continuing. The Company believes that the plaintiffs’ allegations are without merit, and intends to vigorously defend against the claims.

In May 2016, two related putative securities class actions (entitled Evellard v. LendingClub Corporation, et al., No. 16-CV-2627-WHA, and Wertz v. LendingClub Corporation, et al., No. 16-CV-2670-WHA) were filed in the United States District Court for the Northern District of California, naming as defendants the Company and certain of its officers and directors. Both actions asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and one of them asserted claims under Sections 11 and 15 of the Securities Act similar to those alleged in the Consolidated State Court Action. In mid-August 2016, the two actions were consolidated into a single action. ~~Plaintiffs seek unspecified compensatory damages, costs~~The Company moved to dismiss the amended complaint filed in the fourth quarter of 2016. The Court held a hearing on this motion in the first quarter of 2017 and ~~expenses, including attorneys’ fees,~~ultimately granted in part and ~~other further relief as~~denied in part the motion. The plaintiffs thereafter amended their complaint consistent with the Order and the parties have now begun discovery. The Court ~~may deem just~~has set a schedule which includes a mediation in September 2017, a hearing for motion for class certification for October 2017, and ~~proper. Plaintiffs’ deadline to file a consolidated complaint is December 9, 2016.~~trial for September 2018. The Company believes that the plaintiffs’ allegations are without merit, and intends to vigorously defend against the claims.

Derivative Lawsuits. In May 2016 and August 2016, respectively, two putative shareholder derivative actions were filed ~~in California Superior Court~~ (Avila v. Laplanche, et al., No. CIV538758 and Dua v. Laplanche, et al., CGC-16-553731) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. ~~These~~Both actions were voluntarily dismissed without ~~prejudice by plaintiffs in October 2016.. In June~~prejudice. On December 14, 2016, ~~another~~a new putative shareholder derivative action ~~entitled~~ ~~Stadnicki v. Laplanche, et al., No. 16-CV-3072-WHA,~~ was filed in the ~~United States District~~Delaware Court ~~for the Northern District~~ of ~~California~~Chancery (Steinberg, et al. v. Morris, et al., C.A. No. 12984-CB), against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. ~~This~~The action ~~was voluntarily dismissed without prejudice by plaintiff~~is based on allegations similar to those in ~~August 2016.~~the securities class action litigation described above. The defendants are moving to stay this matter in light of the other pending proceedings.

Federal Consumer Class Action. In April 2016, a putative class action lawsuit was filed in federal court in New York (Bethune v. LendingClub Corporation et al. (16 Civ. 2778)(NRB)), alleging that persons received loans, through the ~~Company's~~Company’s platform, that exceeded ~~states'~~states’ usury limits in violation of state usury and consumer protection laws, and the federal RICO statute. The ~~defendants, in addition to the~~ Company are WebBank, Steel Partners Holdings, L.P. and the Lending Club Members Trust. The Company has agreed to indemnify WebBank and Steel Partners Holdings, L.P. against certain liabilities in connection with this matter. The plaintiff seeks treble damages, attorneys' fees, and injunctive relief. The Company has filed a motion to compel arbitration on an individual basis, which iswas granted in February 2017. The plaintiff has now ~~pending.~~filed an arbitration demand seeking relief on an individual basis. The Company believes that the ~~plaintiff's~~plaintiff’s allegations are without merit, and intends to defend this matter vigorously.

On February 23, 2016, Phoenix Licensing, L.L.C. and LPL Licensing, L.L.C. filed a complaint for patent infringement against the Company in the U.S. District Court for the Eastern District of Texas. The complaint alleges infringement of U.S. Patent Nos. 8,234,184, 6,999,938, 5,987,434, 8,352,317, and 7,860,744 by generating

~~LENDINGCLUB CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(Unaudited)~~

~~customized marketing materials, replies, and offers to client responses. The Company believes the plaintiffs allegations are without merit, and intends to defend this matter vigorously.~~

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

In addition to the foregoing, the Company is subject to, and may continue to be subject to legal proceedings and regulatory actions in the ordinary course of business, including inquiries by state regulatory bodies related to the ~~Company's~~Company’s marketplace lending model. These include inquiries from the California Department of Business Oversight, ~~the~~Colorado Department of Law, New York Department of Financial Services, and ~~the~~ West Virginia Attorney ~~General's~~General’s office. ~~Based on~~No assurance can be given as to the ~~early stages of the matters above, the Company cannot provide a reasonable estimate of any potential liability arising from any such matter.~~timing or outcome.

16. Segment Reporting

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

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

17. Related Party Transactions

Related party transactions must be reviewed and approved by the Audit Committee of the Company’s board of directors when not conducted in the ordinary course of business subject to the standard terms of the Company’s online marketplace or certificate investment program. Related party transactions may include any transaction between entities under common control or with a related person occurring since the beginning of the Company’s latest fiscal year, or any currently proposed ~~transaction involving the Company where the amount involved exceeds~~ ~~$120,000~~.transaction. This review also includes any material amendment or modification to an existing related party transaction. The Company has defined related persons as members of the board of directors, executive officers, principal owners of the Company’s outstanding stock and any immediate family members of each such related persons, as well as any other person or entity with significant influence over the Company’s management or operations.

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

~~At December 31, 2015, Mr. Laplanche,~~On April 1, 2016, the ~~Company's former CEO and Chairman, and a board member owned approximately 2.0% and 10%, respectively,~~Company closed its $10.0 million investment, for an approximate ownership interest of ~~limited partnership interests~~15% in the Investment Fund, a holding company that participates in a family of funds with other unrelated third parties and purchases whole loans and interests in loans from the Company. As of June 30, 2017, the Company and a board member had an aggregate ownership interest of approximately 27% in the Investment Fund.

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

LENDINGCLUB CORPORATION

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

~~company that participates in a family of funds with other unrelated third parties and purchases whole loans and interests in loans from the Company.~~

During the first nine months of 2016, this family of funds purchased $212.0 million of whole loans and interests in whole loans. During the first nine months of 2016, the Company earned $1.3 million in servicing fees and $51 thousand in management fees from this family of funds, and paid interest of $6.2 million to the family of funds. The Company believes that the sales of whole loans and interests in whole loans, and the servicing and management fees charged were on terms and conditions that were not more favorable than those obtained by other third-party investors.

On April 1, 2016, the Company closed its $10.0 million investment, for an approximate ownership interest of 15% in the Investment Fund. At the time the Company made its investment, the Company's Related Party Investors also had limited partnership interests in the Investment Fund that resulted in an aggregate ownership of approximately 29% in the Investment Fund. As of September 30, 2016, the Company and a board member had an aggregate ownership interest of approximately 27% in the Investment Fund.

18. Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to ~~September~~June 30, ~~2016,~~2017, through the date the condensed consolidated financial statements were filed with the SEC. Based on this evaluation, other than as recorded or disclosed within these condensed consolidated financial statements and related notes, the Company has determined none of these events were required to be recognized or disclosed.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (Report). In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly in “Part II – Other Information – Item 1A – Risk Factors” in this Report and “Part I – Item 1A – Risk Factors” in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (Annual Report). The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof.

Overview

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

Investors use ~~Lending Club~~LendingClub to earn ~~attractive~~solid risk-adjusted returns from an asset class that has generally been closed to many investors and only available on a limited basis to institutional investors. The capital to invest in the loans enabled through our marketplace comes directly from a wide range of investors, including retail investors, high-net-worth individuals and family offices, banks and finance companies, insurance companies, hedge funds, foundations, pension plans and university endowments, and through a variety of investment channels. ~~Although the Company's overall business model remains premised on the Company not using its balance sheet and assuming credit risk for~~

As a general matter, loans that are facilitated through our marketplace are funded by the issuance of Notes to our retail investors and the issuance of certificates or whole loan sales to institutional investors without the use of the Company’s capital. However, to expand the Company’s investor base, the Company ~~may use~~has recently developed capabilities to support securitization of loans. In the second quarter of 2017, the Company used its own capital to ~~support~~purchase loans to leverage this newly developed securitization capability and sponsored its first securitization. We intend to use more of our capital to purchase loans for future securitizations or loan sales. We also use our own capital to fulfill contractual purchase obligations ~~(Pool B~~for loans ~~and repurchase obligations), regulatory commitments (direct mail), support short-term marketplace equilibrium, customer accommodations, or other needs. The Company's use of its capital on the platform~~funded without a matched third-party investor, from time to ~~time has been, and will be, on terms that are substantially similar to other investors.~~time. Additionally, ~~the Company~~we may use ~~its~~our own capital to invest in loans ~~associated with the testing~~to fulfill regulatory obligations, support short-term marketplace equilibrium, offer customer accommodations, or ~~initial launch~~to test and establish a track record of performance for new or alternative loan terms, programs, or ~~channels to establish a track record of performance prior to facilitating third-party investments in these loans.~~channels.

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

~~Generally, the~~The transaction fees we receive from issuing banks in connection with our marketplace’s role in facilitating loan originations range from 1% to 7% of the initial principal amount of the ~~loan as of September 30, 2016.~~loan. In addition, for education and patient finance loans, ~~transaction fees may exceed 7% as they include~~we also collect fees earned from issuing banks and service providers. ~~Servicing~~Investor fees paid to us vary based on investment channel. Note investors generally pay us a ~~servicing~~ fee equal to 1% of payment amounts received from the borrower. Whole loan purchasers pay a monthly ~~servicing~~ fee of up to 1.3% per annum, which is generally based on the month-end principal balance of loans serviced. Certificate holders ~~do not~~generally pay a ~~servicing fee, but pay a~~ monthly ~~management~~ fee of up to 1.5% per annum of the month-end balance of assets under ~~management.~~management or the month-end balance of unpaid principal of the underlying Certificate.

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Since beginning operations in 2007, our marketplace has facilitated ~~approximately $22.7~~$28.8 billion in loan originations. These loans were facilitated through the following investment channels: (i) the issuance of member payment dependent notes, (ii) the sale of trust certificates, or (iii) the sale of whole loans directly to qualified ~~investors. Approximately $4.3~~investors or through an asset-backed securitization transaction. Since our inception $5.1 billion of our loan originations ~~since inception~~ were invested in through member payment dependent notes, ~~$6.6~~$7.4 billion were invested in through trust certificates and ~~$11.8~~$16.3 billion were invested in through

~~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)~~

whole loan sales. In the ~~third~~second quarter of ~~2016,~~2017, our marketplace facilitated ~~approximately $2.0~~$2.15 billion of loan originations, of which approximately ~~$0.3 billion~~$270 million were invested in through member payment dependent notes, ~~$0.4 billion~~$200 million were invested in through trust certificates and ~~$1.3~~$1.68 billion were invested in through whole loan sales.

~~Board Review~~

~~As previously disclosed~~ See “Item 1A – Risk Factors – A decline in ~~the Company’s Form 10-Q for the quarter ended March 31, 2016~~economic conditions may adversely affect our customers, which may negatively impact our business and ~~the Company's Form 10-Q for the quarter ended June 30, 2016,~~ results of operations” in light of the circumstances relating to $22.3 million of near-prime loan sales in private transactions with a single institutional investor, as described below, and related issues involving data integrity and contract approval monitoring and review processes, we conducted a review under the supervision of an independent sub-committee of the board of directors and with the assistance of independent outside counsel and other advisors. The review also focused on investment transactions in the Investment Fund by us and two related persons and the other matters described below.

~~We believe that this review and the review of the additional items discussed below, which were previously disclosed in the Company's current report~~our Annual Report on Form ~~8-K filed on June 28, 2016, are substantially complete, although it is possible that additional issues may arise as part of the Company’s response to ongoing government requests for information.~~

After the end of the first quarter, we became aware that approximately $15.1 million and $7.2 million in near-prime loans were sold to a single institutional investor in March and April 2016, respectively. The loans in question failed to conform to the investor's express instructions as to a non-credit, non-pricing element. Certain personnel apparently were aware that the sale did not meet the investor's criteria. In one case, involving $3.0 million in loans, an application date was changed in a live Company database in an attempt to appear to meet the investor's requirement, and the balance of the loans were sold in direct contravention of the investor's direction. The change in application date was promptly remediated. The financial impact of the sales of these $22.3 million in near-prime loans would have been to increase reported gains on sales of loans by approximately $150,000, and to derecognize the loans from the condensed consolidated balance sheet.

In April 2016, we repurchased these loans at par. As the original transfers to the investor did not meet sale criteria for accounting purposes, the transactions in March 2016 were recorded as secured borrowings and the loans sold to the investor in March were included in loans at fair value on our condensed consolidated balance sheet as of March 31, 2016. In April 2016, we resold these loans at par to a different investor who was aware of the reason for the original repurchase.

In connection with this review, the Company concluded that, as of June 30, 2016, the Company’s internal control over financial reporting was ineffective due to a material weakness and, therefore, the Company’s disclosure controls and procedures were also ineffective. The Company made a similar conclusion with respect to its internal control over financial reporting as of March 31, 2016, as disclosed in our Form 10-Q for the quarter ended March 31, 2016 and its internal control over financial reporting as of December 31, 2015, as disclosed in our Form 10-K/A10-K for the year ended December 31, ~~2015. For more information about our material weakness and these control issues and proposed remediation steps, see “~~2016.~~Item 4 - Controls and Procedures~~.”

As a further part of this review, an additional independent advisor was retained. The advisor analyzed certain loan data elements from whole loans issued and sold during the second quarter of 2014 through the first quarter of 2016. Excluding the $3.0 million of loans noted above, the advisor observed that 99.99% of the remaining loans display either no changes or changes explained by the normal course of business. We took various control remediation steps, including termination or resignation of senior managers in May 2016 involved in these non-compliant loan sales, and intend to take additional control and other remediation steps in the coming months.

~~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)~~

Subsequent to this review, on May 6, 2016, the board of directors accepted the resignation of Renaud Laplanche, our Chairman and CEO. The Company initially appointed Scott Sanborn, its President, as acting CEO and John C. (Hans) Morris, a director, as Executive Chairman. On June 28, 2016, the Company announced that the board of directors appointed Scott Sanborn as the Company's Chief Executive Officer and President, effective June 27, 2016, and that Hans Morris would step down from his temporary role as Executive Chairman. On that date the Company also announced that Mr. Morris had been appointed the independent Chairman of the Board.

The board’s review also discovered that the investment parameters of one of the funds advised by LC Advisors ("LCA"), specifically with respect to the allocation of 60-month loans held by the fund, was out of tolerance. Although the portfolio composition of the fund was disclosed monthly to the investors of the fund, it was not disclosed to our board. The board review also noted that our former CEO and our former Chief Financial Officer (CFO) had pledged some of their Company shares to secure personal loans from a third-party financial institution, which was not disclosed to the board during subsequent deliberations, prior to the discussion referred to below. In January 2016, the reduction in the Company’s share price forced them to refinance. In order to avoid selling shares, the former CEO requested temporary financing, secured by real estate, from an entity related to a director of the Company. Separately, the former CEO then offered to lend an amount to the former CFO to also permit her to refinance her loan. These temporary financing arrangements were discussed with the members of the Audit Committee. The officers obtained new financing from unrelated third parties within three weeks to pay off their temporary financing arrangements. In the opinion of the Company these lending arrangements were executed on normal market terms and, because the Company had no financial involvement in them, did not require approval under the Company’s policy on related party transactions.

As disclosed in the Company’s current report on Form 8-K filed on June 28, 2016, the Company identified two items that necessitated additional review. The two items identified as part of this additional review were:

The first item was a review of methodologies used to determine the net asset values and monthly return figures reported for six private investment funds (the "Funds") managed by the Company’s subsidiary, LCA. The investment assets held by the Funds are essentially loans facilitated through the Company’s platform and are “level 3 assets”, for which no quoted market price is available and whose fair value is therefore subjective and is determined by LCA estimates and calculations.

The Company determined that adjustments were made to the valuation of the Funds' assets that were not consistent with generally accepted accounting principles. These adjustments affected the direction and the specific returns reported in monthly statements sent to limited partners. We will reimburse limited partners who, during the life of any fund, entered or exited the funds and who were adversely impacted by these adjustments. This reimbursement is expected to cost approximately $1.0 million in total, covering the period from inception of the Funds (the earliest of which was March 2011) through May 31, 2016. At September 30, 2016, the Funds had aggregate total assets of $888.0 million. LCA is providing each Fund’s respective limited partners revised return figures that exclude prior adjustments.

~~The Company and LCA engaged an independent valuation firm, with specific expertise in the valuation of marketplace assets, to provide valuation services to the Funds.~~

In addition, as discussed above, the investment parameters of one of the LCA Funds, with respect to the allocation of 60-month loans, were exceeded. The Company’s review also found that this was due to non-adherence to the fund’s investment strategy, including in part due to the purchase of loans in the first quarter of 2016 that were about to expire on the Lending Club platform.

The Company and LCA have made several changes to improve the governance and the operations of the Funds as a result of this additional review. In June 2016, LCA established a majority independent Governing Board (the "LCA

~~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)~~

Board") for the Funds. The LCA Board will provide fiduciary oversight and make binding determinations for certain actions and activities of the Funds including approval of valuation policies and procedures, and review and adherence to respective investment strategies. Further, we are realigning responsibilities for accounting and financial reporting for the Funds within the Company.

In the second item, the Company identified 32 loans made in the second half of December 2009 through the Lending Club platform, totaling approximately $722,800 in originations and $25,000 in revenue, to the Company’s former CEO, Renaud Laplanche, and three of his family members. All but three of these loans were repaid in full in January and February of 2010, with the remaining three loans held to maturity and paid in full. The Company’s review has found that these loans were issued in order to help increase reported platform loan volume for December 2009. Based on the review, the Company is confident that there are no other situations in which Mr. Laplanche inappropriately originated loans in his or his family’s name during periods after December 2009.

~~Effectiveness of Scoring Models~~

Our ability to attract borrowers and investors to our marketplace is significantly dependent on our platform’s ability to effectively evaluate a borrower’s credit profile and likelihood of default. The loans facilitated through our marketplace are originated by our issuing bank partners using proprietary risk algorithms to analyze an applicant’s risk profile that are based upon the issuing bank’s underwriting guidelines and credit policy. Additionally, loan applications are evaluated against and must comply with the underwriting standards of the originating banks.

Our marketplace’s credit decisioning and scoring models are evaluated on a regular basis and the additional data on loan history experience, borrower behavior, economic factors and prepayment trends that we accumulate are leveraged to continually improve the models. If the platform is unable to effectively evaluate borrowers’ credit worthiness, borrowers and investors may lose confidence in our marketplace. Additionally, our ability to effectively segment borrowers into relative risk profiles impacts our ability to offer attractive interest rates for borrowers as well as our ability to offer investors attractive risk-adjusted returns, both of which directly relate to our users’ confidence in our marketplace. Our marketplace’s credit decisioning and scoring models assign each loan offered on our marketplace a corresponding interest rate and origination fee. Our investors’ returns are a function of the assigned interest rates for each particular loan invested in less any defaults over the term of the applicable loan. We believe we have a history of effectively evaluating borrower’s credit worthiness and likelihood of defaults, as evidenced by the performance of various loan vintages facilitated through our marketplace. The following charts display the historical lifetime cumulative net charge-off rates (expressed as a percent of original loan balances) through September 30, 2016, by booking year, for all grades and 36 or 60 month terms of standard program loans for each of the years shown.

~~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)~~

~~LENDINGCLUB CORPORATION~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

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

~~Loan Portfolio Information and Credit Metrics~~

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

~~Fair Value and Delinquencies~~

~~The outstanding principal balance, fair value and percentage of these loans that are delinquent, by loan product are as follows:~~

September 30, 2016 December 31, 2015
(in millions, except percentages) Outstanding Principal Balance
Fair
Value ⁽²⁾
Delinquent Loans ⁽²⁾
Outstanding Principal Balance
Fair
Value ⁽²⁾
Delinquent Loans ⁽²⁾
Personal loans - standard program $ 4,378.4
94.6 % 3.0 % $ 4,376.7
97.4 % 2.2 %
Personal loans - custom program
291.2
90.4
5.3
271.2
95.8
2.4
Other loans ⁽¹⁾
22.4
96.1
4.4
33.8
98.2
2.4
Total
$ 4,692.0
94.3 % 3.1 % $ 4,681.7
97.3 % 2.2 %

⁽¹⁾ ~~Components of other loans are each less than 10% of the outstanding loan balance presented individually and in the aggregate.~~

⁽²⁾~~Expressed as a percent of outstanding principal balance.~~

Declines in the fair value of loans from December 31, 2015 to September 30, 2016 were primarily due to increases in the yields required by investors to purchase the Company’s loans, notes and certificates, and an increase in expected credit losses.

~~Net Annualized Charge-Off Rates~~

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

~~The annualized net charge-off rates for personal loans for both standard and custom programs in total for the last completed quarters below, are as follows:~~

~~LENDINGCLUB CORPORATION~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

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

Total Platform ⁽¹⁾
September 30, 2015 December 31, 2015 March 31, 2016 June 30, 2016 September 30, 2016
Personal Loans-Standard Program:
Annualized net charge-off rate 4.2 % 4.7 % 5.0 % 4.9 % 6.1 %
Weighted average age in months 9.2
9.3
9.5
10.3
11.3

Personal Loans-Custom Program:
Annualized net charge-off rate 5.9 % 7.0 % 8.2 % 8.6 % 11.0 %
Weighted average age in month 6.6
6.9
7.3
8.4
9.1

Loans retained on balance sheet September 30, 2015 December 31, 2015 March 31, 2016 June 30, 2016 September 30, 2016
Personal Loans-Standard Program:
Annualized net charge-off rate 5.0 % 5.4 % 6.2 % 6.5 % 8.2 %
Weighted average age in months 10.2
10.3
10.9
12.1
12.9

Personal Loans-Custom Program:
Annualized net charge-off rate 3.9 % 4.4 % 5.6 % 8.2 % 14.0 %
Weighted average age in month 4.8
5.1
5.8
8.4
10.9

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

The increase in the annualized net charge-off rate in the third quarter of 2016 is due to an increase in the average age of the loans and higher observed actual charge-offs. We generally expect charge-off rates to increase with loan age, as new loans generally have fewer credit losses than seasoned loans. Prior to 2016, the Company’s loan portfolio grew significantly as the volume of loans facilitated increased. As a result, the average age of the portfolio, and with it the average charge-off rate, stayed low during that period. In 2016, loan originations have grown at a slower rate, causing average loan age to increase thereby driving an increase in the aggregate annualized charge-off rate metric.

Additionally, we have also observed higher delinquencies and charge-offs in populations characterized by high indebtedness, an increased propensity to accumulate debt, and lower credit scores. Starting in the third quarter of 2016, this trend can now be observed across grades, although it is less notable in lower risk grades and more notable in higher risk grades, particularly grade E, F, and G. In the third quarter of 2016, we also observed higher delinquencies in 2015 and early 2016 vintages, which coincides with an increase in consumer indebtedness in the U.S.

The annualized net charge-off rates for standard program loans are higher for the retained loans compared to the total platform level for each period because of a difference in grade distribution for the two portfolios. The proportion of grade A and B loans is about 30% of the retained loan portfolio compared to about 42% for the total platform level. This difference in loan grade distribution results in higher net charge-off rates for the loans on the balance sheet, as grade A and B loans have lower expected and actual credits losses.

~~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)~~

~~Product Innovation~~

We have made substantial investments and incur expenses to research and develop or otherwise acquire new financial products for borrowers and investors. Our revenue growth to date has been a function of, and our future success will depend in part on, successfully meeting borrower and investor demand with new and innovative loan and investment options. For investors, we have introduced automated investing, application programming interface (API), investment funds and separately managed accounts that make investing in loans easier. Failure to invest in and successfully develop and offer innovative products could adversely affect our operating results and we may not recoup the costs of new products.

~~Marketing Effectiveness and Strategic Relationships~~

We have dedicated significant resources to our marketing and brand advertising efforts and strategic relationships. Our marketing efforts are designed to build awareness of Lending Club and attract borrowers and investors to our marketplace. We use a diverse array of marketing channels and are constantly seeking to improve and optimize our experience both on- and offline to achieve efficiency and a high level of borrower and investor satisfaction. We also continue to invest in our strategic relationships to raise awareness of our platform and attract borrowers and investors to our marketplace. Our operating results and ability to sustain and grow loan volume will depend, in part, on our ability to continue to make effective investments in marketing and the effectiveness of our strategic relationships. As a result of our recent events and reduced investor confidence, it may be more difficult for us to attract additional strategic relationships. We recently made investments in compliance and programs to improve investor confidence and anticipate that we will continue such investments as we continue to build our compliance infrastructure and invest in reputational risk management.

From time to time, we may enter into strategic relationships that may impact whether certain standard program loans are made available for investing through our marketplace. For example, we have a strategic partnership relationship with a consortium of community banks for our marketplace to offer co-branded personal loans to the participating banks’ customers. As part of this partnership, each community bank is provided initial access to invest in loans sought by their own customers, which may include standard program loans. The customer loans that do not meet the community bank’s investment criteria are then made available for investment through the marketplace. All other loans will continue to be available on our marketplace and accessible on an equal basis and are originated by our issuing banks.

~~Regulatory Environment~~

The regulatory environment for credit and online marketplaces such as ours is complex, evolving and uncertain, creating both challenges and opportunities that could affect our financial performance. We and the loans facilitated through our marketplace are subject to extensive and complex rules and regulations, licensing and examination by various federal, state and local government authorities designed to, among other things, protect borrowers (such as truth in lending, equal credit opportunity, fair credit reporting and fair debt collection practices) and investors. Our primary issuing bank, WebBank, is subject to oversight by the FDIC and the State of Utah. The other two issuing banks are NBT Bank and Comenity Capital Bank. NBT Bank is subject to oversight by the OCC and the New York Department of Financial Services, and Comenity Capital Bank is subject to oversight by the FDIC and the Utah Department of Financial Institutions. These authorities impose obligations and restrictions on our activities and the loans facilitated through our marketplace. For example, these rules limit the fees that may be assessed on the loans, require extensive disclosure to, and consents from, the borrowers and lenders, prohibit discrimination and unfair and deceptive acts or practices and may impose multiple qualification and licensing obligations on our activities.

We expect to continue to spend significant resources to comply with these and other federal and state laws and various licensing requirements. Our marketplace incorporates a number of automated features to help comply with

~~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)~~

these laws in an efficient and cost effective manner. While new laws and regulations or changes under existing laws and regulations could make facilitating loans or investment opportunities more difficult to achieve on acceptable terms, or at all, these events could also provide new product and market opportunities.

In May 2015, the U.S. Court of Appeals for the Second Circuit issued its decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the National Bank Act and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. The Second Circuit’s decision is binding on federal courts located in Connecticut, New York, and Vermont, but the decision could also be adopted by other courts. The defendant petitioned the U.S. Supreme Court to review the decision and in March 2016, the Court invited the Solicitor General to file a brief expressing the views of the U.S. on the petition. The Solicitor General filed an amicus brief that stated the Second Circuit decision was incorrect, but that the case was not yet ready to be heard by the Supreme Court. In June 2016, the Supreme Court declined to hear the case. The Federal District Court is now hearing the case in regards to Midland’s alternative claim regarding choice of law, which if successful, could allow Midland to prevail and the loan to be enforceable as issued.

While we believe that our program is factually distinguishable from the case, we have revised our agreement with our primary issuing bank to further distinguish the operation of the program from the court’s analysis of the facts in Madden. Under the revised program structure, an additional component of the program fee arrangement was created. This additional program fee component is dependent on the amount and timing of principal and interest payments made by borrowers of the underlying loans. Under this revised program structure the majority of the bank's revenue is therefore tied to the terms and performance of the loans. The bank also maintains an ongoing contractual relationship with borrowers, who may seek additional credit through the Lending Club program in the future.

In August 2016, a federal district court in the Central District of California considered a case brought by the Consumer Finance Protection Bureau (“CFPB”) against CashCall, Inc. In that case, CashCall had an arrangement with a tribal lender associated with the Cheyenne River Sioux Tribe in which loans were offered to borrowers at APR’s that could exceed 300 percent. The district court ruled that, under the facts presented in the case, CashCall should be deemed the “true lender” and could not charge interest rates in excess of state usury laws. A few weeks later, in September 2016 in ~~Bethune v. National Solutions, Inc.~~, also in the federal district court in the Central District of California, the court considered a program in which a national bank had a bank partnership with a non-bank, the Student Loan Marketing Association, in which borrowers could receive loans originated by the bank through the SMLA. The court in ~~Bethune~~ rejected the argument that the SMLA was the “true lender,” holding that the face of the borrower transactions showed that the bank had originated the loans and any further analysis to look behind the face of the transaction was inappropriate. We believe that our program is factually distinguishable from the CashCall situation.

Recognizing the growth in online marketplaces such as ours, in July 2015 the U.S. Treasury Department issued a request for information (RFI) to study the various business models and products offered by online marketplace lenders, the potential for online marketplace lending to expand access to credit to historically underserved borrowers and how the financial regulatory framework should evolve to support the safe growth of the industry. We, along with many other interested groups, submitted responses to the Treasury’s RFI by the September 30, 2015 deadline.

On May 10, 2016, the U.S. Treasury Department released a white paper on the online marketplace lending industry to continue the work initiated by the RFI. The white paper includes several recommendations to the federal government and private sector participants to encourage safe growth and access to credit. We cannot predict whether any legislation or proposed rulemaking will actually be introduced or how any legislation or rulemaking will impact our business and results of operations going forward. In September 2016, representatives of the Office of the Comptroller of the Currency (the “OCC”) stated that the agency intends to complete work on a framework by which

~~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)~~

it will consider innovative financial platforms such as marketplace lenders. In October 2016, the OCC announced the creation of a separate Office of Innovation within the OCC to assist banks and non-banks in considering innovative financial products, services and platforms.

In December 2015, the California Department of Business Oversight (DBO) sent an online survey to fourteen marketplace lenders, including us, requesting information about our business model, online platform, loan performance and investor funding process. In May 2016, the DBO requested additional information from us and other survey participants.

While we are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (CFPB), as a facilitator, servicer or acquirer of consumer credit, the CFPB has recently announced that it intends to expand its supervisory authority, through the use of “larger participant rules,” to cover larger marketplace lenders, non-bank installment lenders and auto lenders. The CFPB has announced larger participant rules for auto lenders but has not yet announced specifics regarding its proposed rulemaking for installment loan lenders and, consequently, there continues to be uncertainty as to how the CFPB’s strategies and priorities, including any final rules, will impact our unsecured installment loan business and our results of operations going forward.

In addition, as a result of events surrounding the resignation of our CEO, we have received inquiries from governmental entities, and we continue to cooperate fully. Responding to inquiries of this nature are costly and time consuming, can generate negative publicity, and could have a material and adverse effect on our business.

Current Economic and Business Environment

~~Lending Club~~LendingClub monitors a variety of economic, credit and competitive indicators so that borrowers can benefit from meaningful savings compared to alternatives, and investors can continue to find attractive risk-adjusted returns compared to other fixed income investments or investment alternatives.in connection with operating its online marketplace lending platform.

Our approach to risk-management is a data-driven, continuous and proactive process that runs against a constantly shifting set of conditions. Our online marketplace ~~has a number of levers at its disposal~~lending platform seeks to ~~adjust~~adapt to changing market conditions, including by leveraging market and loan performance data to propose changes to underwriting or pricing models for the ~~ability to quickly adapt underwriting models and dynamically increase or decrease pricing to provide an appropriate level~~related issuing bank’s approval.

During the first half of ~~loss coverage to investors. Consistent with observations earlier this year,~~2016, we ~~have continued~~began to observe pockets of underperformance in higher ~~delinquencies in populations characterized by high indebtedness, an increased propensity to accumulate debt, and lower credit scores. Starting~~risk segments. This trend was subsequently observed across all loan grades in the third quarter of 2016, ~~this trend can now be observed across grades,~~ although it iswas less notable in lower risk grades and more notable in higher risk grades, particularly grades E, F and G. InWe responded to these observations by implementing changes to optimize the ~~third quarter~~credit model several times in 2016, and again in January and May of ~~2016, standard program personal loan grades E, F,~~2017. While we have observed stable credit performance more recently, we will continue to monitor credit performance on new vintages as data becomes available and ~~G accounted for approximately 8% of platform volume. Additionally,~~any impact from the broader macroeconomic environment. This information will assist us in assessing if and when to implement further changes to the ~~third quarter of 2016, we observed higher delinquencies~~credit model or interest rates. We have also invested in ~~2015 and early 2016 vintages, which coincides with an uptick in consumer indebtedness in the U.S.~~

~~In response~~our multifaceted collections capabilities to further mitigate risk to our ~~observations of borrower performance,~~existing loan portfolio, including adding new recovery strategies, and taking into account a cautious economic outlook from our platform investors and ourselves, platform interest rates were raised by a weighted average of approximately 135 basis points from November 2015 to June 2016, primarily in more economically sensitive loan grades D through G. Effective October 14, 2016, the Company increased interest rates by a weighted average total of 26 basis points. These interest rate increases were concentrated in Grades F and G with marginal changes in other grades.augmenting collections team capacity.

In addition, to the increased interest rates, the origination fee paid by borrowers was also increased in March of 2016. These combined rates and fee increases may negatively impact the volume of loans facilitated through our marketplace.

In April 2016 and again in June 2016, we eliminated underperforming populations from the platform's credit policy that was mainly characterized by high indebtedness, an increased propensity to accumulate debt and lower credit scores. Together, these actions accounted for eliminating approximately 9% of total loan volume on an annualized

~~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)~~

basis. In line with actions taken throughout 2016, on October 12, 2016, the credit underwriting criteria was tightened to no longer approve loans for certain sub-segments of borrowers who meet a combination of several risk factors such as high revolving debt, multiple recently opened installment loans, and higher risk scores on our proprietary scorecard. As a result of this credit underwriting change, we believe that approximately 1% of borrowers who previously would have been able to obtain a loan under prior underwriting criteria will no longer be approved.

As a result of the circumstances surrounding the loan sales noted above under "Board Review", a number of investors that, in the aggregate, have contributed a significant amount of funding on the platform, paused their investments in loans through the platform as they perform audit and validation tests on their portfolios, or are otherwise reluctant to invest. The Company saw existing investors re-engage and commence investing in loans late in the second quarter of 2016 and that engagement continued into the third quarter of 2016 as total loan originations in the third quarter of 2016 were $2.0 billion. The Company's incentives provided to whole loan investors previously disclosed continued in the third quarter of 2016, however, such incentives ceased effective September 1, 2016. The Company may enter into strategic arrangements, for example, agreements that involve larger or more long-term forms of committed capital. On November 7, 2016 the Company announced a new addition to the Company’s investor capital mix through an arrangement with a subsidiary of the National Bank of Canada which has approved up to $1.3 billion to be deployed on the Lending Club platform. Subject to certain terms and conditions, the first $325 million has been committed to be deployed on the platform over the next three months.

We believe it is uncertain whether the trend of returning investors will continue or what impact it may have on our business, results of operations, financial condition or our stockholders. It is possible that these investors may not all return to our platform or may not return at their previous scale. We continue to meet with current and prospective platform investors in order to increase the amount of capital committed to the platform.

~~Additionally,~~ we continue to actively explore ways to ~~increase~~diversify our investor ~~engagement in our platform~~base and obtain additional investment capital for the platform loans.

~~The~~ This could include the strategic use of ~~the Company's~~our balance sheet ~~as a source of initial funding was significantly reduced in the third quarter of 2016 compared~~ to the second quarter of 2016. The Company purchased a total of $0.4 million in loans to fulfill regulatory requirements or to support short-term marketplace equilibrium in the third quarter of 2016, down from $134.9 million in the second quarter of 2016. The Company was able to find additionalaccess new investors, ~~in these~~monetize excess demand for loans, or ~~previously funded loans, and resold $135.5 million in the second quarter of 2016.~~

~~The outstanding principal balance of loans for which the Company remained invested in as of September 30, 2016 amounted~~support capital market transactions to ~~$34.2 million.~~provide liquidity to our existing investors.

Factors That Can Affect Revenue

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

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

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

~~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)~~

market confidence in our data, controls, and processes,

announcements of governmental inquiries or private litigation,

the mix of ~~loans,~~

~~cost,~~borrower products and corresponding transaction fees,

availability or the timing of the deployment of investment capital by investors,

the availability and amount of new capital from pooled investment vehicles and managed accounts that typically deploy their capital at the start of a period,

the amount of purchase limitations we can impose on larger investors as a way to maintain investor balance and fairness,

the attractiveness of alternative opportunities for borrowers or investors,

the responsiveness of applicants to our marketing efforts,

expenditures on marketing initiatives in a period,

the sufficiency of operational staff to process any manual portion of the loan applications in a timely manner,

the responsiveness of borrowers to satisfy additional income or employment verification requirements related to their application,

borrower withdrawal rates,

the percentage distribution of loans between the whole and fractional loan platforms,

platform system performance,

seasonality in demand for our platform and services, which is generally lower in the first and fourth quarters,

determination to hold loans for purposes of subsequently distributing the loans through sale or securitization;

changes in the credit performance of our loans or market interest rates,

and other factors.

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

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Key Operating and Financial Metrics

We regularly review ~~a number of~~several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The following presents our key operating and financial metrics:


	Three Months Ended									Nine Months Ended September 30,						Three Months Ended									Six Months Ended June 30,
	September 30, 2016			June 30, 2016			September 30, 2015			2016			2015			June 30, 2017			March 31, 2017			June 30, 2016			2017			2016
Loan originations	$	1,972,034		$	1,955,401		$	2,235,647		$	6,677,468		$	5,782,496		$	2,147,335		$	1,958,749		$	1,955,401		$	4,106,084		$	4,705,434
Operating revenue⁽¹⁾	$	112,609		$	102,391		$	115,062		$	366,265		$	292,226
Net loss⁽²⁾	$	(36,486	)	$	(81,351	)	$	950		$	(113,700	)	$	(9,564	)
Net revenue																$	139,573		$	124,482		$	103,440		$	264,055		$	255,734
Consolidated net loss																$	(25,444	)	$	(29,844	)	$	(81,351	)	$	(55,288	)	$	(77,214	)
Contribution⁽⁴⁾⁽²⁾	$	54,088		$	34,096		$	57,257		$	156,326		$	138,089		$	66,038		$	53,165		$	35,145		$	119,203		$	104,316
Contribution margin⁽⁴⁾⁽²⁾	48.0		%	33.3		%	49.8		%	42.7		%	47.3		%	47.3		%	42.7		%	34.0		%	45.1		%	40.8		%
Adjusted EBITDA⁽³⁾⁽²⁾	$	(11,147	)	$	(30,116	)	$	21,157		$	(16,035	)	$	45,202		$	4,493		$	161		$	(29,067	)	$	4,654		$	(2,810	)
Adjusted EBITDA margin⁽³⁾⁽²⁾	(9.9		)%	(29.4		)%	18.4		%	(4.4		)%	15.5		%	3.2		%	0.1		%	(28.1		)%	1.8		%	(1.1		)%


⁽¹⁾	~~See “Factors That Can Affect Revenue” for more information regarding operating revenue.~~


⁽²⁾	~~See “Results of Operations” for more information regarding operating revenue and net loss.~~


⁽³⁾	Contribution, Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding these measures and a reconciliation of these measures to the most comparable GAAP measure, see “~~Reconciliations of~~ Non-GAAP Financial Measures.”


⁽⁴⁾⁽²⁾	Prior period amounts have been reclassified to conform to the current period presentation. See “~~Results of Operations – Operating Expenses~~“Non-GAAP Financial Measures”” for additional information.

Loan Originations

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

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

~~The Company's~~Loan originations and weighted average transactions fees (as a percent of origination balance) by its major ~~and material~~ loan products are as follows:


	Three Months Ended												Three Months Ended
	September 30, 2016				June 30, 2016				September 30, 2015				June 30, 2017				March 31, 2017				June 30, 2016
(in millions, except percentages)	Origination Volume		Weighted Average Transaction Fees		Origination Volume		Weighted Average Transaction Fees		Origination Volume		Weighted Average Transaction Fees		Origination Volume		Weighted- Average Transaction Fees		Origination Volume		Weighted- Average Transaction Fees		Origination Volume		Weighted- Average Transaction Fees
Personal loans - standard program	$	1,404.6	5.1	%	$	1,443.4	4.9	%	$	1,701.8	4.4	%	$	1,538.4	4.9	%	$	1,438.0	5.0	%	$	1,443.4	4.9	%
Personal loans - custom program	353.2		5.5		295.7		5.4		345.1		4.9		391.2		5.5		300.9		5.6		295.7		5.4
Other loans ⁽¹⁾	214.2		4.4		216.3		4.4		188.7		4.7
Other loans													217.8		4.5		219.8		4.5		216.3		4.4
Total	$	1,972.0	5.1	%	$	1,955.4	4.9	%	$	2,235.6	4.5	%	$	2,147.4	5.0	%	$	1,958.7	5.0	%	$	1,955.4	4.9	%

																	Six Months Ended
																	June 30, 2017				June 30, 2016
(in millions, except percentages)																	Origination Volume		Weighted Average Transaction Fees		Origination Volume		Weighted Average Transaction Fees
Personal loans - standard program																	$	2,976.4	5.0	%	$	3,530.6	4.7	%
Personal loans - custom program																	692.1		5.5		754.9		5.1
Other loans																	437.6		4.5		419.9		4.4
Total																	$	4,106.1	5.0	%	$	4,705.4	4.7	%

⁽¹⁾ ~~Components of other loans are less than 10% of the origination volume presented individually.~~

Nine Months Ended
September 30, 2016 September 30, 2015
(in millions, except percentages) Origination Volume Weighted Average Transaction Fees Origination Volume Weighted Average Transaction Fees
Personal loans - standard program $ 4,935.2
4.8 % $ 4,444.2
4.4 %
Personal loans - custom program 1,108.1
5.2
826.5
4.9
Other loans ⁽¹⁾
634.2
4.4
511.8
4.4
Total $ 6,677.5
4.8 % $ 5,782.5
4.5 %

⁽¹⁾ ~~Components of other loans are less than 10% of the origination volume presented individually.~~

Loans Serviced On Our Platform

The following table provides the outstanding principal balance of loans serviced at the end of the periods indicated, by the method ~~that~~in which the loans were financed (in millions):


	September 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Notes	$	1,818	$	1,573	$	1,740	$	1,795
Certificates	2,840		3,105		2,281		2,752
Whole loans sold	6,242		4,289		7,081		6,542
Other⁽¹⁾	34		3		49		28
Total	$	10,934	$	8,970	$	11,151	$	11,117


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

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Results of Operations

The following table sets forth the condensed consolidated statements of operations data for each of the periods presented:

Three Months Ended Change (%)

September 30,
2016

June 30,
2016

September 30,
2015

Q3 2016
vs
Q3 2015

Q3 2016
vs
Q2 2016
Operating revenues:
Transaction fees $ 100,813
$ 96,605
$ 100,420
— % 4 %
Servicing fees 16,513
11,603
8,999
83 % 42 %
Management fees 1,964
3,053
2,900
(32 )% (36 )%
Other revenue (6,681 ) (8,870 ) 2,743
N/M
N/M
Total operating revenue 112,609
102,391
115,062
(2 )% 10 %
Net interest income and fair value adjustments 1,947
1,049
1,214
60 % 86 %
Total net revenue 114,556
103,440
116,276
(1 )% 11 %
Operating expenses ⁽¹⁾:

Sales and marketing 44,901
49,737
44,018
2 % (10 )%
Origination and servicing 16,332
20,934
16,732
(2 )% (22 )%
Engineering and product development 29,428
29,209
21,063
40 % 1 %
Other general and administrative 58,940
53,457
32,280
83 % 10 %
Goodwill impairment 1,650
35,400
—
N/M
N/M
Total operating expenses 151,251
188,737
114,093
33 % (20 )%
Income (loss) before income tax expense (36,695 ) (85,297 ) 2,183
N/M
N/M
Income tax (benefit) expense (209 ) (3,946 ) 1,233
N/M
N/M
Net income (loss) $ (36,486 ) $ (81,351 ) $ 950
N/M
N/M

~~N/M - Not meaningful.~~


⁽¹⁾	~~Prior period amounts have been reclassified to conform to the current period presentation. See “Results of~~

~~Operations – Operating Expenses” for additional information.~~



	Three Months Ended									Change (%)
	June 30, 2017			March 31, 2017			June 30, 2016			Q2 2017 vs Q2 2016		Q2 2017 vs Q1 2017
Net revenue:
Transaction fees	$	107,314		$	98,692		$	96,605		11	%	9	%
Investor fees ⁽¹⁾	21,116			21,180			14,656			44	%	—	%
Other revenue (expense) ⁽¹⁾	4,223			2,221			(9,910		)	(143	)%	90	%
Interest income	157,260			160,996			179,685			(12	)%	(2	)%
Interest expense	(150,340		)	(158,607		)	(177,596		)	(15	)%	(5	)%
Net interest income	6,920			2,389			2,089			231	%	190	%
Total net revenue	139,573			124,482			103,440			35	%	12	%
Operating expenses: ⁽²⁾
Sales and marketing	55,582			54,583			49,737			12	%	2	%
Origination and servicing	21,274			20,449			20,934			2	%	4	%
Engineering and product development	35,718			35,760			29,209			22	%	—	%
Other general and administrative	52,495			43,574			53,457			(2	)%	20	%
Goodwill impairment	—			—			35,400			(100	)%	—	%
Total operating expenses	165,069			154,366			188,737			(13	)%	7	%
Income (loss) before income tax expense	(25,496		)	(29,884		)	(85,297		)	(70	)%	(15	)%
Income tax (benefit) expense	(52		)	(40		)	(3,946		)	99	%	30	%
Consolidated net loss	$	(25,444	)	$	(29,844	)	$	(81,351	)	(69	)%	(15	)%
Less: Income attributable to noncontrolling interests	10			—			—			N/M		N/M
LendingClub net loss	$	(25,454	)	$	(29,844	)	$	(81,351	)	(69	)%	(15	)%
^N/MNot meaningful. ⁽¹⁾Prior period amounts have been reclassified to conform to the current period presentation. See “Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation” for additional information. ⁽²⁾Includes stock-based compensation expense as follows:
	Three Months Ended									Change (%)
	June 30, 2017			March 31, 2017			June 30, 2016			Q2 2017 vs Q2 2016		Q2 2017 vs Q1 2017
Sales and marketing	$	1,967		$	2,299		$	1,413		39	%	(14	)%
Origination and servicing	1,354			1,416			963			41	%	(4	)%
Engineering and product development	5,773			6,588			4,480			29	%	(12	)%
Other general and administrative	9,994			9,195			6,591			52	%	9	%
Total stock-based compensation expense	$	19,088		$	19,498		$	13,447		42	%	(2	)%

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Nine Months Ended
September 30,
2016 2015 Change (%)
Operating revenues:
Transaction fees $ 321,926
$ 258,553
25 %
Servicing fees 45,058
20,870
116 %
Management fees 8,562
7,663
12 %
Other revenue (9,281 ) 5,140
N/M
Total operating revenue 366,265
292,226
25 %
Net interest income and fair value adjustments 4,025
2,199
83 %
Total net revenue 370,290
294,425
26 %
Operating expenses ⁽¹⁾:

Sales and marketing 161,213
117,989
37 %
Origination and servicing 56,464
43,639
29 %
Engineering and product development 82,835
53,175
56 %
Other general and administrative 150,432
86,937
73 %
Goodwill impairment 37,050
—
N/M
Total operating expenses 487,994
301,740
62 %
Loss before income tax expense (117,704 ) (7,315 ) N/M
Income tax (benefit) expense (4,004 ) 2,249
N/M
Net loss $ (113,700 ) $ (9,564 ) N/M


⁽¹⁾	~~Prior period amounts have been reclassified to conform to the current period presentation. See “Results of~~

~~Operations – Operating Expenses” for additional information.~~



	Six Months Ended June 30,
	2017			2016			Change (%)
Net revenue:
Transaction fees	$	206,006		$	221,113		(7	)%
Investor fees ⁽¹⁾	42,296			35,143			20	%
Other revenue (expense) ⁽¹⁾	6,444			(3,807		)	N/M
Interest income	318,256			357,564			(11	)%
Interest expense	(308,947		)	(354,279		)	(13	)%
Net interest income	9,309			3,285			183	%
Total net revenue	264,055			255,734			3	%
Operating expenses ⁽¹⁾:
Sales and marketing	110,165			116,312			(5	)%
Origination and servicing	41,723			40,132			4	%
Engineering and product development	71,478			53,407			34	%
Other general and administrative	96,069			91,492			5	%
Goodwill impairment	—			35,400			(100	)%
Total operating expenses	319,435			336,743			(5	)%
Income (loss) before income tax expense	(55,380		)	(81,009		)	(32	)%
Income tax (benefit) expense	(92		)	(3,795		)	(98	)%
Consolidated net loss	$	(55,288	)	$	(77,214	)	(28	)%
Less: Income attributable to noncontrolling interests	10			—			N/M
LendingClub net loss	$	(55,298	)	$	(77,214	)	(28	)%
^N/MNot meaningful. ⁽¹⁾Prior period amounts have been reclassified to conform to the current period presentation. See “Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation” for additional information. ⁽²⁾Includes stock-based compensation expense as follows:
	Six Months Ended June 30,
	2017			2016			Change (%)
Sales and marketing	$	4,266		$	3,317		29	%
Origination and servicing	2,770			1,709			62	%
Engineering and product development	12,361			8,203			51	%
Other general and administrative	19,189			15,239			26	%
Total stock-based compensation expense	$	38,586		$	28,468		36	%

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Total Net Revenue

Three Months Ended Change (%)

September 30,
2016
June 30,
2016
September 30,
2015
Q3 2016 vs Q3 2015 Q3 2016 vs Q2 2016
Transaction fees $ 100,813
$ 96,605
$ 100,420
— % 4 %
Servicing fees 16,513
11,603
8,999
83 % 42 %
Management fees 1,964
3,053
2,900
(32 )% (36 )%
Other revenue (6,681 ) (8,870 ) 2,743
N/M
N/M
Total operating revenue 112,609
102,391
115,062
(2 )% 10 %
Net interest income and fair value adjustments 1,947
1,049
1,214
60 % 86 %
Total net revenue $ 114,556
$ 103,440
$ 116,276
(1 )% 11 %

Nine Months Ended September 30,
2016 2015 Change (%)
Transaction fees $ 321,926
$ 258,553
25 %
Servicing fees 45,058
20,870
116 %
Management fees 8,562
7,663
12 %
Other revenue (9,281 ) 5,140
N/M
Total operating revenue 366,265
292,226
25 %
Net interest income and fair value adjustments 4,025
2,199
83 %
Total net revenue $ 370,290
$ 294,425
26 %



	Three Months Ended									Change (%)
	June 30, 2017			March 31, 2017			June 30, 2016			Q2 2017 vs Q2 2016		Q2 2017 vs Q1 2017
Net Revenue
Transaction fees	$	107,314		$	98,692		$	96,605		11	%	9	%
Investor fees ⁽¹⁾	21,116			21,180			14,656			44	%	—	%
Other revenue (expense) ⁽¹⁾	4,223			2,221			(9,910		)	(143	)%	90	%
Interest income	157,260			160,996			179,685			(12	)%	(2	)%
Interest expense	(150,340		)	(158,607		)	(177,596		)	(15	)%	(5	)%
Net interest income	6,920			2,389			2,089			231	%	190	%
Total net revenue	$	139,573		$	124,482		$	103,440		35	%	12	%

~~N/M - Not meaningful.~~



	Six Months Ended June 30,
	2017			2016			Change (%)
Net Revenue
Transaction fees	$	206,006		$	221,113		(7	)%
Investor fees ⁽¹⁾	42,296			35,143			20	%
Other revenue (expense) ⁽¹⁾	6,444			(3,807		)	N/M
Interest income	318,256			357,564			(11	)%
Interest expense	(308,947		)	(354,279		)	(13	)%
Net interest income	9,309			3,285			183	%
Total net revenue	$	264,055		$	255,734		3	%


N/M	Not meaningful.


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

~~Our primary sources of revenue consist of fees received for transactions through or related to our marketplace and include transaction, servicing and management fees.~~ The analysis below is presented for the following periods: ~~Third~~Second quarter of ~~2016 compared to the third quarter of 2015 (Quarter Over Quarter), third quarter of 2016~~2017 compared to the second quarter of 2016 (Quarter Over Quarter), second quarter of 2017 compared to the first quarter of 2017 (Sequential), and the first ~~nine months~~half of ~~2016~~2017 compared to the first ~~nine months~~half of ~~2015 (Nine~~2016 (Six Months Over ~~Nine~~Six Months).

Transaction Fees

Transaction fees are fees paid by issuing banks or education and patient service providers to us for the work we perform through our ~~marketplace's~~marketplace’s role in facilitating ~~loan originations.~~loans for our issuing bank partners. The amount of these fees is based upon the terms of the loan, including grade, rate, term and other factors. As of ~~September~~June 30, ~~2016,~~2017, these fees ranged from 1% to 7% of the initial principal amount of a loan. In addition, for education and patient finance loans, ~~transaction fees may exceed 7% as they include~~we also collect fees earned from issuing banks and ~~the~~ service providers. We record transaction fee revenue net of program fees paid to WebBank, our primary issuing bank partner.

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

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

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

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

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

~~In October 2016, we recognized approximately $3.9 million in transaction fee revenue associated with~~

Investor Fees

The table below illustrates the ~~issuance~~composition of ~~loans in which the loan application process had commenced prior to the end of the third quarter of 2016. In~~investor fees by investment channel for each period presented:



	Three Months Ended						Change (%)
	June 30, 2017		March 31, 2017		June 30, 2016		Q2 2017 vs Q2 2016			Q2 2017 vs Q1 2017
Investor fees – whole loans sold	$	12,216	$	12,210	$	6,721	82		%	—	%
Investor fees – notes, certificates, and self-directed accounts	7,783		7,812		6,257		24		%	—	%
Investor fees – Funds and separately managed accounts⁽¹⁾	1,117		1,158		1,678		(33		)%	(4	)%
Total investor fees	$	21,116	$	21,180	$	14,656	44		%	—	%

					Six Months Ended June 30,
					2017		2016			Change (%)
Investor fees – whole loans sold					$	24,426	$	18,530		32	%
Investor fees – notes, certificates, and self-directed accounts					15,595		12,774			22	%
Investor fees – Funds and separately managed accounts ⁽¹⁾					2,275		3,839			(41	)%
Total investor fees					$	42,296	$	35,143		20	%


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

LENDINGCLUB CORPORATION

~~Management's~~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)

~~October 2015, we recognized approximately $11.7 million in transaction fee revenue associated with~~For each investment channel, the ~~issuance of loans in which the loan application process had commenced prior~~Company receives fees to ~~the end of the third quarter of 2015~~.

~~Quarter Over Quarter~~: Transaction fees were $100.8 million and $100.4 million for the third quarters of 2016 and 2015, respectively. Higher average transactions fees in the third quarter of 2016 resulting from the March 2016 fee increases discussed above were offset by lower origination volume in the comparative quarters. The average transaction fee as a percentage of the initial principal balance of the loan was 5.1% and 4.5% for the third quarters of 2016 and 2015, respectively, driven by a change in the mix of loans issued and the increase in transaction fees noted above. This was offset by a 12% decrease in loan origination volume during the third quarter of 2016 compared to the same quarter of 2015.

~~Sequential~~: Transaction fees were $100.8 million and $96.6 million for the third and second quarter of 2016, respectively, an increase of 4%. The increase was primarily driven by higher average transaction fees in the third quarter of 2016 as a result of a change in the mix of loan originations towards lower grades that carry higher transaction fees. The average transaction fee as a percentage of the initial principal balance of the loan was 5.1% and 4.9% for the third and second quarter of 2016, respectively.

~~Nine Months Over Nine Months~~: Transaction fees were $321.9 million and $258.6 million for the first nine months of 2016 and 2015, respectively, an increase of 25%. The increase was due to an increase in loans facilitated through our marketplace from $5.8 billion for the first nine months of 2015 to approximately $6.7 billion for the first nine months of 2016, an increase of 15%, as well as higher average transaction fees in the first nine months of 2016 resulting from the March 2016 fee increases discussed above. The average transaction fee as a percentage of the initial principal balance of the loan was 4.8% and 4.5% for the first nine months of 2016 and 2015, respectively.

~~Servicing Fees~~

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

Investor fee revenue related to whole loans sold also includes the change in fair value of our servicing assets and liabilities associated with ~~loans that we sell.~~

the loans. Servicing rights are recorded as either an asset or liability depending on the degree to which the contractual loan servicing fee is above or below, respectively, an estimated market rate loan servicing fee. During the second quarter of 2016, the Company increased its assumption of the market rate of loan servicing from 57 basis points per annum to 63 basis points per annum, based on review of estimated third party servicing rates and market servicing benchmarking analyses provided by two third party valuation firms. The ~~increase in the assumption of a market rate of loan servicing caused the value of the Company’s servicing rights to decrease. The recording of the~~ change in fair value of servicing rights does not affect the contractual ~~servicing rates~~fees that ~~the Company collects~~we collect monthly from the whole loan ~~investors on a monthly basis.~~investors.

~~Quarter Over Quarter~~Investor Fees – whole loans sold: ~~Servicing~~Investor fee revenue related to the servicing of whole loans sold was ~~$16.5~~$12.2 million and ~~$9.0~~$6.7 million for the ~~third~~second quarters of ~~2016~~2017 and ~~2015,~~2016, respectively, an increase of ~~83%~~82%. The increase in revenue was ~~primarily~~ due to ~~increases in both the balances~~a higher balance of whole loans ~~sold~~serviced and increase in collection fees in the ~~loan balances that underlie the notes and certificates. Additionally, servicing fee revenue increased due to higher contractual collection fees.~~

~~Sequential: Servicing fee revenue increased by $4.9 million during the third~~second quarter of ~~2016~~2017 compared to the second quarter of ~~2016 due~~2016. Investor fee revenue related to ~~increased~~the servicing ~~fees related to~~of whole loans sold was $12.2 million for both the second and first quarters of 2017, respectively.

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

Investor fees –notes, certificates, and self-directed: Investor fee revenue related to the servicing of ~~$1.9~~underlying notes, certificates, and self-directed accounts was $7.8 million ~~plus~~and $6.3 million for the second quarters of 2017 and 2016, respectively, an increase of 24%. The increase in revenue was due to an increase in the principal and interest payments processed on notes, increase in collection fees and an increase in self-directed fees in the second quarter of 2017 compared to the second quarter of 2016. Investor fee revenue related to the servicing of loans underlying notes, certificates, and self-directed accounts was $7.8 million for both the second and first quarters of 2017.

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

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

LENDINGCLUB CORPORATION

~~Management's~~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)

~~$3.0~~Investor fee revenue related to the Funds and separately managed accounts was $2.3 million ~~lower decrease~~and $3.8 million in the ~~fair value~~first halves of ~~servicing assets~~2017 and ~~liabilities. The fair value decrease in the second quarter of~~ 2016, ~~resulted from an increase in the assumption of the market rate of loan servicing. There was no such adjustment in the third quarter of 2016.~~

~~Nine Months Over Nine Months~~: Servicing fee revenue was $45.1 million and $20.9 million for the first nine months of 2016 and 2015, respectively, an increase of 116%. The increase was due to increases in both the balances of whole loans sold and the loan balances that underlie the notes and certificates.

~~The table below illustrates the composition of servicing fees by source for each period presented:~~

Three Months Ended Change (%)
September 30,
2016 June 30,
2016 September 30,
2015
Q3 2016
vs
Q3 2015

Q3 2016
vs
Q2 2016
Servicing fees related to whole loans sold $ 12,980
$ 11,392
$ 4,935
N/M
14 %
Note servicing fees 5,236
4,883
3,661
43 % 7 %
Servicing fees before change in fair value of servicing assets and liabilities 18,216
16,275
8,596
112 % 12 %
Change in fair value of servicing assets and liabilities, net (1,703 ) (4,672 ) 403
N/M
N/M
Total servicing fees $ 16,513
$ 11,603
$ 8,999
83 % 42 %

Nine Months Ended September 30,
2016 2015 Change (%)
Servicing fees related to whole loans sold $ 33,872
$ 11,022
N/M
Note servicing fees 15,251
8,396
82 %
Servicing fees before change in fair value of servicing assets and liabilities 49,123
19,418
153 %
Change in fair value of servicing assets and liabilities, net (4,065 ) 1,452
N/M
Total servicing fees $ 45,058
$ 20,870
116 %

~~Management Fees~~

Investors in funds managed by LCA, pay a monthly management fee based on the month-end balance of their assets under management, up to 1.5% per annum. LCA does not earn any carried interest from the investment funds. For managed account certificate holders, LCA earns a management fee of up to 1.2% per annum of the month-end balance of their assets under management. Any of these fees may be waived or reduced at the discretion of LCA. A significant portion of the management fees is earned from the funds that are managed by LCA. We currently anticipate that the assets under management associated with these funds will decrease as a result of a significant amount of redemption requests received. This potential reduction will negatively affect management fee revenue. At September 30, 2016, the aggregate assets of these funds were $0.9 billion and outstanding aggregate redemption requests totaled $588.2 million.

~~Quarter Over Quarter: Management fees were $2.0 million and $2.9 million for the third quarters of 2016 and 2015,~~ respectively, a decrease of ~~32%~~41%. ~~The~~This decrease ~~in management fees~~ was primarily due to a ~~reimbursement~~38% decrease in the average assets underlying these investment channels as a result of ~~prior management fees to some investors.~~

~~LENDINGCLUB CORPORATION~~

~~Management's Discussion~~the redemption requests and ~~Analysis of Financial Condition and Results of Operations~~

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

contribution gate discussed above.

~~Sequential: Management fees were $2.0 million and $3.1 million for the third and second quarter of 2016, respectively, a decrease of 36% due to a reimbursement of management fees overages.~~

~~Nine Months Over Nine Months~~: Management fees were $8.6 million and $7.7 million for the first nine months of 2016 and 2015, respectively, an increase of 12%. The increase in management fees was primarily due to an increase in the total assets under management and outstanding certificate balances.

Other Revenue (Expense)

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

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

The table below illustrates the composition of other revenue for each period presented:


	Three Months Ended								Change (%)					Three Months Ended									Change (%)
	September 30, 2016			June 30, 2016			September 30, 2015		Q3 2016 vs Q3 2015		Q3 2016 vs Q2 2016			June 30, 2017			March 31, 2017			June 30, 2016			Q2 2017 vs Q2 2016			Q2 2017 vs Q1 2017
Gain (loss) on sales of loans(1)	$	(11,519	)	$	(10,447	)	$	1,685	N/M		10	%		$	4,445		$	1,892		$	(10,447	)	143		%	135	%
Referral revenue	1,548			1,510			987		57	%	3	%		1,637			1,406			1,510			8		%	16	%
Net fair value adjustments on Loans, Notes and Certificates														(2,171		)	(1,417		)	(1,040		)	(109		)%	(53	)%
Other	3,290			67			71		N/M		N/M			312			340			67			N/M			(8	)%
Other revenue (loss)	$	(6,681	)	$	(8,870	)	$	2,743	N/M		(25	)%
Other revenue (expense) ⁽²⁾														$	4,223		$	2,221		$	(9,910	)	143		%	90	%

																				Six Months Ended June 30,
																				2017			2016			Change (%)
Gain (loss) on sales of loans ⁽¹⁾													Gain (loss) on sales of loans ⁽¹⁾							$	6,337		$	(5,748	)	N/M
Referral revenue													Referral revenue							3,043			3,042			—	%
Net fair value adjustments on Loans, Notes and Certificates													Net fair value adjustments on Loans, Notes and Certificates							(3,588		)	(1,207		)	(197	)%
Other													Other							652			106			N/M
Other revenue (expense) ⁽²⁾													Other revenue (expense) ⁽²⁾							$	6,444		$	(3,807	)	N/M


N/M	Not meaningful.


⁽¹⁾	Presented net of credit support agreement expense in the second and first quarters of 2017 and first half of 2017.


⁽²⁾	Prior period amounts have been reclassified to conform to the current period presentation. See “Part I – Financial Information – Item 1 – Financial Statements – Note 1. Basis of Presentation” for additional information.

Nine Months Ended September 30,
2016 2015 Change (%)
Gain (loss) on sales of loans $ (17,267 ) $ 2,140
N/M
Referral revenue 4,590
2,906
58 %
Other 3,396
94
N/M
Other revenue (loss) $ (9,281 ) $ 5,140
N/M

~~Quarter Over Quarter~~: Other revenue (loss) was $(6.7) million and $2.7 million for the third quarters of 2016 and 2015, respectively. The sale of loans in the third quarter of 2016 resulted in approximately $10.7 million of incentives provided to investors. Prior to the second quarter of 2016 the Company had not historically provided such incentives.

~~Sequential: Other revenue (loss) was $(6.7) million and $(8.9) million for the third and second quarter of 2016, respectively.~~

~~Nine Months Over Nine Months~~: Other revenue (loss) was $(9.3) million and $5.1 million for the first nine months of 2016 and 2015, respectively. As noted above, incentives were provided to investors commencing in the second quarter of 2016 resulting in approximately $14.0 million and $10.7 million of incentives provided in the second and third quarters of 2016, respectively.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

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

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

Net Interest Income ~~and Fair Value Adjustments~~(Expense)

Three Months Ended
September 30, 2016 June 30,
2016 September 30, 2015
Net interest income $ 2,424
$ 2,089
$ 1,174
Net fair value adjustments (477 ) (1,040 ) 40
Net interest income and fair value adjustments $ 1,947
$ 1,049
$ 1,214

Nine Months Ended September 30,
2016 2015
Net interest income $ 5,709
$ 2,165
Net fair value adjustments (1,684 ) 34
Net interest income and fair value adjustments $ 4,025
$ 2,199

~~Except as set forth below, we generally~~We do not assume principal or interest rate risk on loans facilitated through our marketplace that are funded by notes and certificates because loan balances, interest rates and maturities are matched and offset by an equal balance of notes or certificates with the exact same interest rates and maturities. ~~We only make principal and~~The interest ~~payments on~~expense related to the notes and certificates tois completely offset with interest income on the ~~extent that we receive borrower payments on corresponding loans. As a servicer, we are only required to deliver borrower payments to the extent that we actually receive them. As a result,~~associated loans on our statement of operations for any period and balance sheet as of any date, (i) interest income on loans corresponds to the interest expense on notes and certificates and (ii) loan balances correspond to note and certificate balances with variations resulting from timing differences between the crediting of principal and interest payments on loans and the disbursement of those payments to note and certificate holders.operations. Interest income on loans ~~the Company purchased~~not funded by a note or certificate is recorded in the condensed consolidated statement of operations without corresponding interest expense.

~~During~~ We expect net interest income to increase as we expand the ~~second quarter of 2016, the Company purchased a total of $134.9 million~~use our capital for strategic business purposes, such as investing in and holding loans to fulfill regulatory requirements and to support short-term marketplace equilibrium. The Company was able to find additional investors in these loans, or previously funded loans, and resold $135.5 million of these loans before June 30, 2016. The Company purchased $0.4 million in loans in the third quarter of 2016 to fulfill regulatory requirements or to support short-term market place equilibrium.

~~The outstanding principal~~on balance ~~of loans~~sheet for which the Company remained invested in as of September 30, 2016 amounted to $34.2 million. The Company recorded a negative fair valuation adjustment on the loans it had remained invested in as of September 30, 2016 of approximately $1.0 million and $0.5 million during the second and third quarter of 2016, respectively. See “~~Part I – Financial Information – Item 1 – Financial Statements – Note 12 – Secured Borrowings” for additional information.~~future sponsored securitization transactions.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Additionally, interest income includes interest income earned on cash and cash equivalents and the securities available for sale portfolio. Our investment policy and strategy is focused first on the preservation of capital and supporting our liquidity requirements, and then maximizing returns. The following ~~table provides~~tables provide additional detail related to net interest income ~~and fair value adjustments:~~(expense):

Three Months Ended Change (%)
September 30, 2016 June 30,
2016 September 30, 2015 Q3 2016 vs Q3 2015
Interest income:
Loans $ 170,627
$ 178,452
$ 144,663
18 %
Securities available for sale 810
750
899
(10 )%
Cash and cash equivalents 431
483
271
59 %
Total interest income 171,868
179,685
145,833
18 %
Interest expense:
Notes and certificates (169,444 ) (177,596 ) (144,659 ) 17 %
Total interest expense (169,444 ) (177,596 ) (144,659 ) 17 %
Net interest income $ 2,424
$ 2,089
$ 1,174
106 %
Average outstanding balances:
Loans $ 4,728,934
$ 4,836,993
$ 3,930,221
20 %
Notes and certificates $ 4,720,781
$ 4,832,056
$ 3,951,541
19 %


	Nine Months Ended September 30,									Three Months Ended									Change (%)
	2016			2015			Change (%)			June 30, 2017			March 31, 2017			June 30, 2016			Q2 2017 vs Q2 2016			Q2 2017 vs Q1 2017
Interest income:
Loans	$	525,723		$	387,697		36	%
Loans and loans held for sale										$	155,545		$	159,488		$	178,452		(13		)%	(2	)%
Securities available for sale	2,302			1,447			59	%		1,008			940			750			34		%	7	%
Cash and cash equivalents	1,407			687			105	%		707			568			483			46		%	24	%
Total interest income	529,432			389,831			36	%		157,260			160,996			179,685			(12		)%	(2	)%
Interest expense:
Notes and certificates	(523,723		)	(387,666		)	35	%		(150,340		)	(158,607		)	(177,596		)	(15		%)	(5	)%
Total interest expense	(523,723		)	(387,666		)	35	%		(150,340		)	(158,607		)	(177,596		)	(15		%)	(5	)%
Net interest income	$	5,709		$	2,165		N/M			$	6,920		$	2,389		$	2,089		231		%	190	%
Average outstanding balances:
Loans	$	4,791,999		$	3,512,666		36	%		$	4,127,408		$	4,393,061		$	4,836,993		(15		)%	(6	)%
Loans held for sale										$	67,722		$	8,122		$	—		N/M			N/M
Notes and certificates	$	4,794,868		$	3,530,424		36	%		$	4,138,136		$	4,410,812		$	4,832,056		(14		)%	(6	)%

																Six Months Ended June 30,
																2017			2016			Change (%)
Interest income:									Interest income:
Loans and loans held for sale									Loans and loans held for sale							$	315,033		$	355,096		(11	)%
Securities available for sale									Securities available for sale							1,948			1,492			31	%
Cash and cash equivalents									Cash and cash equivalents							1,275			976			31	%
Total interest income									Total interest income							318,256			357,564			(11	)%
Interest expense:									Interest expense:
Notes and certificates									Notes and certificates							(308,947		)	(354,279		)	(13	%)
Total interest expense									Total interest expense							(308,947		)	(354,279		)	(13	%)
Net interest income									Net interest income							$	9,309		$	3,285		183	%
Average outstanding balances:									Average outstanding balances:
Loans									Loans							$	4,260,235		$	4,847,973		(12	)%
Loans held for sale									Loans held for sale							$	37,922		$	—		N/M
Notes and certificates									Notes and certificates							$	4,274,474		$	4,854,039		(12	)%

N/M - Not meaningful.

Quarter Over Quarter: Interest income from loans and loans held for sale was ~~$170.6~~$155.5 million and ~~$144.7~~$178.5 million for the ~~third~~second quarters of ~~2016~~2017 and ~~2015,~~2016, respectively. The ~~increase~~decrease in interest income on loans was primarily due to ~~the increase~~a decrease in the average outstanding ~~balances~~balance of ~~loans. Interest income from~~ loans, ~~was $525.7 million and $387.7 million for the first nine months~~driven by a larger portion of ~~2016 and 2015, respectively. The increase in interest income was primarily due~~current quarter loans originated being sold to ~~the increase in the outstanding balances of loans.~~whole loan investors.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Interest expense for notes and certificates was ~~$169.4~~$150.3 million and ~~$144.7~~$177.6 million for the ~~third~~second quarters of 2017 and 2016, respectively. The decrease in interest expense was primarily due to a decrease in the average outstanding balances of notes and ~~2015,~~certificates, driven by a larger portion of current quarter loans originated being sold to whole loan investors.

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

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

Interest expense for notes and certificates was ~~$523.7~~$150.3 million and ~~$387.7~~$158.6 million for the second and first ~~nine months~~quarters of ~~2016~~2017, respectively. The decrease in interest expense was primarily due to a decrease in the average outstanding balances of notes and ~~2015,~~certificates, driven by a larger portion of current quarter loans originated being sold to whole loan investors.

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

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

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

~~Fair Value Adjustments on Loans, Notes~~Net interest income was $9.3 million and ~~Certificates:~~ The changes in fair value of loans, notes and certificates are shown on our condensed consolidated statement of operations on a net basis. Due to the payment dependent feature of the notes and certificates, fair value adjustments on loans that are invested in by third-parties through the marketplace are offset by the fair value adjustments on the notes and certificates, resulting in no net effect on our earnings. Fair value adjustments on loans the Company purchases have an effect on earnings. In$3.3 million for the first ~~quarters~~halves of ~~2016~~2017 and 2015, fair value adjustments on such loans were immaterial. We estimate the fair value of loans and their related notes and certificates using a discounted cash flow valuation methodology that is described2016, respectively. The increase in “~~Part II – Item 8 – Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies” in the Annual Report.~~

~~The~~ net fair value adjustments were immaterial for the third quarters of and first nine months of 2016 and 2015. The losses from fair value adjustments on loans were largely offset by the gains from fair value adjustments on notes and certificatesinterest income was primarily due to the ~~borrower payment dependent design of~~increase in the ~~notes and certificates and due to the principal~~average outstanding balances of loans held on the ~~loans being similar~~Company’s balance sheet during the second quarter of 2017 to ~~the combined principal balances of the notes~~support securitization partners and ~~certificates.~~upcoming securitization transactions, as discussed above.

Operating Expenses

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

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

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

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

Other General and Administrative: Other general and administrative expense consists primarily of salaries, benefits and stock-based compensation expense for our accounting, finance, legal, risk, compliance, human resources and facilities teams, ~~and~~ professional services ~~fees. Other general~~fees and ~~administrative expense also includes~~ facilities ~~and compensation expenses related to the acquisition of Springstone.~~expense.

InAfter announcing the ~~fourth quarter~~findings of ~~2015, we disaggregated~~ the ~~expense previously reported as “General~~internal board review, and administrative” into “Engineering and product development” and “Other general and administrative” expense. Additionally, we reclassified certain operating expenses between “Sales and marketing,” “Origination and servicing,” “Engineering and product development” and “Other general and administrative” expense to align such classifications and

~~LENDINGCLUB CORPORATION~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

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

presentations with how we currently manage the operations and these expenses. These changes had no impact to “Total operating expenses.” Prior period amounts have been reclassified to conform to the current presentation.

~~In light of~~ the significant decrease in the trading price of our common stock in May 2016, we ~~began offering~~offered incentive retention awards to certain members of the executive management team and other key personnel that totaled $34.9 million that ~~will be~~were recognized as compensation expense ratably through May 2017. In addition, we have incurred and expect to continue to incur significant legal and other expenses in connection with the inquiries and private litigation that ~~has risen~~have arisen and may continue to arise from the internal board review, ~~of the sub-committee of the board of directors discussed above.~~and our response to ongoing governmental requests for information.

Three Months Ended Change %
September 30, 2016
June 30,
2016

September 30,
2015⁽¹⁾
Q3 2016 vs Q3 2015 Q3 2016 vs Q2 2016
Sales and marketing $ 44,901
$ 49,737
$ 44,018
2 % (10 )%
Origination and servicing 16,332
20,934
16,732
(2 )% (22 )%
Engineering and product development 29,428
29,209
21,063
40 % 1 %
Other general and administrative 58,940
53,457
32,280
83 % 10 %
Goodwill impairment 1,650
35,400
—
N/M
N/M
Total operating expenses $ 151,251
$ 188,737
$ 114,093
33 % (20 )%

~~N/M - Not meaningful.~~



	Three Months Ended						Change (%)
	June 30, 2017		March 31, 2017		June 30, 2016		Q2 2017 vs Q2 2016			Q2 2017 vs Q1 2017
Sales and marketing	$	55,582	$	54,583	$	49,737	12		%	2	%
Origination and servicing	21,274		20,449		20,934		2		%	4	%
Engineering and product development	35,718		35,760		29,209		22		%	—	%
Other general and administrative	52,495		43,574		53,457		(2		)%	20	%
Goodwill impairment	—		—		35,400		N/M			N/M
Total operating expenses	$	165,069	$	154,366	$	188,737	(13		)%	7	%

					Six Months Ended June 30,
					2017		2016			Change (%)
Sales and marketing					$	110,165	$	116,312		(5	)%
Origination and servicing					41,723		40,132			4	%
Engineering and product development					71,478		53,407			34	%
Other general and administrative					96,069		91,492			5	%
Goodwill impairment					—		35,400			N/M
Total operating expenses					$	319,435	$	336,743		(5	)%


⁽¹⁾ N/M	~~Prior period amounts have been reclassified to conform to the current period presentation.~~Not meaningful.

Sales and marketing: Sales and marketing expense was ~~$44.9~~$55.6 million and ~~$44.0~~$49.7 million for the ~~third~~second quarters of ~~2016~~2017 and ~~2015,~~2016, respectively, an increase of 2%12%. The increase was primarily due to a ~~$1.1~~$9.2 million increase in

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

On a sequential basis, sales and marketing expense was ~~$44.9~~$55.6 million and ~~$49.7~~$54.6 million for the ~~third quarter~~second and first quarters of ~~2016 compared to~~2017, respectively, an increase of 2%. As a percent of originations, sales and marketing expense was 2.6% in the second quarter of 2017 compared to 2.8% in the first quarter of 2017.

Sales and marketing expense was $110.2 million and $116.3 million for the first halves of 2017 and 2016, respectively, a decrease of ~~10%~~5%. The decrease was primarily due to a ~~$3.1~~$3.3 million decrease in variable marketing expenses and a $2.8 million decrease due to a non-recurring advisory fee in the first half of 2016. Sales and marketing expense as a ~~$1.2 million decrease~~percent of loan originations was 2.7% in ~~personnel-related expenses associated with lower headcount levels, and severance costs.~~the first half of 2017 compared to 2.5% in the first half of 2016.

Origination and servicing: Origination and servicing expense ~~was $16.3~~remained relatively flat at $21.3 million and ~~$16.7~~$20.9 million for the ~~third~~second quarters of 2017 and 2016, respectively.

On a sequential basis, origination and ~~2015,~~servicing expense was $21.3 million and $20.4 million for the second and first quarters of 2017, respectively, ~~a decrease~~an increase of 2%4%. The ~~decrease~~increase was primarily due to a ~~$0.5~~$0.7 million ~~decrease~~increase in loan processing costs ~~partially offset~~driven by higher loan originations and a ~~$0.3~~$0.2 million increase in personnel-related expenses associated with higher headcount levels. ~~On a sequential basis, origination~~

Origination and servicing expense was ~~$16.3~~$41.7 million and ~~$20.9~~$40.1 million for the ~~third quarter~~first halves of ~~2016 compared to the second quarter of~~2017 and 2016, respectively, ~~a decrease~~an increase of ~~22%~~4%. The ~~decrease~~increase was primarily due to a ~~$2.3~~$2.7 million ~~decrease~~increase in personnel-related expenses associated with ~~lower~~higher headcount levels, ~~and severance~~partially offset by a $1.8 million decrease in loan processing costs.

Engineering and product development: Engineering and product development expense was ~~$29.4~~$35.7 million and ~~$21.1~~$29.2 million for the ~~third~~second quarters of ~~2016~~2017 and ~~2015,~~2016, respectively, an increase of ~~40%~~22%. The increase was primarily driven by continued investment in technology and platform improvements that are focused on enhancing our ~~platform~~credit decisioning capabilities, internal testing environment and ~~product development,~~cloud infrastructure, which included a ~~$5.3~~$1.8 million increase in personnel-related expenses resulting from increased headcount, ~~and increased~~ salaries and retention costs, and a ~~$2.4~~$4.3 million increase in equipment, software and depreciation expense.

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

On a sequential basis, engineering and product development expense ~~was $29.4~~remained relatively flat at $35.7 million and ~~$29.2~~$35.8 million for the ~~third quarter~~second and first quarters of ~~2016 compared to~~2017, respectively.

Engineering and product development expense was $71.5 million and $53.4 million for the ~~second quarter~~first halves of 2017 and 2016, respectively, an increase of 1%34%. The increase was primarily driven by ~~investment in our platform and product development, which included~~ a ~~$0.9~~$8.9 million increase in personnel-related expenses resulting from increased headcount, salaries and retention costs, ~~offset by a $0.7~~and an $8.6 million ~~decrease~~increase in equipment, software and depreciation expense.

We capitalized ~~$9.8~~$23.9 million and ~~$7.5~~$20.1 million in software development costs in the ~~third quarters~~first halves of ~~2016~~2017 and ~~2015,~~2016, respectively.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Other general and administrative expense: Other general and administrative expense was ~~$58.9~~$52.5 million and ~~$32.3~~$53.5 million for the ~~third~~second quarters of 2017 and 2016, ~~and 2015,~~ respectively, ~~an increase~~a decrease of ~~83%~~2%. The ~~increase~~decrease was primarily due to a ~~$13.8~~decrease of $5.2 million ~~increase~~ in professional services related to legal, audit, communications, and advisory fees ~~associated with~~and a $2.4 million insurance reimbursement for certain legal expenses incurred as a result of the Company’s board review and ~~government inquiries discussed above, including investigating the matters identified in the board review, supporting investor due diligence activities, remediation efforts~~related governmental and ~~pending and potential future litigation matters.~~regulatory inquiries. The decrease was partially offset by an increase ~~was also due to a $7.2~~of $5.6 million ~~increase~~ in salaries and stock-based compensation expense related to increased headcount, ~~and~~ salaries of newly hired executives as we invested in infrastructure and support teams, ~~a $2.8 million operational loss related to certain service providers of our patient~~ and ~~educational finance business,~~retention costs, and a ~~$2.1~~$1.0 million increase in facilities expense.

On a sequential basis, other general and administrative expense was $58.9 million and $53.5 million for the third quarter of 2016 compared to the second quarter of 2016, respectively, an increase of 10%. The increase was primarily due to a $2.9 million increase in stock-based compensation expense primarily driven by retention costs, and a $2.8 million operational loss related to certain service providers of our patient and educational finance business. The increase was also due to a $0.3 million increase in legal, audit, communications, and advisory fees associated with the board review discussed above, including investigating the matters identified in the board review, supporting investor due diligence activities, remediation efforts and litigation matters that have arisen, and may continue to arise.

Nine Months Ended September 30,
2016
2015⁽¹⁾
Change (%)
Sales and marketing $ 161,213
$ 117,989
37 %
Origination and servicing 56,464
43,639
29 %
Engineering and product development 82,835
53,175
56 %
Other general and administrative 150,432
86,937
73 %
Goodwill impairment 37,050
—
N/M
Total operating expenses $ 487,994
$ 301,740
62 %

~~N/M - Not meaningful.~~


⁽¹⁾	~~Prior period amounts have been reclassified to conform to the current period presentation.~~

Sales and marketing expense was $161.2 million and $118.0 million for the first nine months of 2016 and 2015, respectively, an increase of 37%. The increase was primarily due to $34.9 million increase in variable marketing that drove higher loan originations, a $4.3 million increase in personnel-related expense associated with higher headcount levels, retention costs, severance costs, and a $2.8 million increase in non-recurring advisory fees.

~~Origination and servicing expense was $56.5~~$52.5 million and $43.6 million for the second and first ~~nine months~~quarters of ~~2016 and 2015,~~2017, respectively, an increase of 29%. The increase was due to a $4.7 million increase in consumer reporting agency and loan processing costs, both driven by higher loan originations and a higher outstanding balance of loans serviced, and a $7.5 million increase in personnel-related expenses associated with higher headcount levels, retention costs, and severance costs.

~~Engineering and product development expense was $82.8 million and $53.2 million for the first nine months of 2016 and 2015, respectively, an increase of 56%~~20%. The increase was primarily driven by ~~investment in our platform and product development, which included~~ a ~~$18.2~~$6.9 million increase in ~~personnel-related expenses resulting from increased headcount, retention costs, and a $9.0 million increase in equipment, software and depreciation expense.~~

~~LENDINGCLUB CORPORATION~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

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

~~We capitalized $29.9 million and $18.1 million in software development costs in the first nine months of 2016 and 2015, respectively.~~

~~Other general and administrative expense was $150.4 million and $86.9 million for the first nine months of 2016 and 2015, respectively, an increase of 73%. The increase was primarily due~~professional services related to ~~a $29.1 million increase in~~ legal, audit, communications, and advisory fees, ~~associated with the board review discussed above, including investigating the matters identified in the board review, supporting investor due diligence activities, remediation efforts~~ and ~~litigation matters that have arisen, and may continue to arise. The increase is also due to~~ a ~~$21.4~~$2.9 million increase in salaries and stock-based compensation expense related to increased headcount, salaries of newly hired executives, and retention costs. Legal expense in the second and first quarters of 2017 were offset by $2.4 million and $9.6 million of insurance reimbursements for certain legal expenses, as ~~we invested~~discussed above.

Other general and administrative expense was $96.1 million and $91.5 million for the first halves of 2017 and 2016, respectively, an increase of 5%. The increase was primarily driven by increases of $10.0 million in ~~infrastructure~~salaries and ~~support teams, retention costs, severance costs, as well as a $6.8~~stock-based compensation expense, $2.4 million ~~increase~~ in facilities ~~expense.~~expense, and $2.4 million in professional services related to legal, audit, communications, and advisory fees. These increases were offset by $12.0 million of insurance reimbursements in the first half of 2017 for certain legal expenses, as discussed above.

Goodwill Impairment

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

In the second quarter of 2016, ~~and in the third quarter of 2016,~~ the Company recorded a goodwill impairment charge of $35.4 million ~~and $1.7 million, respectively,~~as related to the education and patient finance reporting ~~unit, for a total charge of $37.1 million for the first nine months of 2016.~~unit. There were no goodwill charges in the second quarter or first ~~quarter~~half of ~~2016 or the first nine months of 2015.~~2017. See “Part I – Financial Information – Item 1 – Financial Statements – Note 910. Intangible Assets and ~~Goodwill~~Goodwill” for a further description of this impairment. If the performance of the education and patient finance reporting unit fails to meet current expectations, it is possible that the carrying value of this reporting unit, even after the current impairment charge, will exceed its fair value, which could result in further recognition of a noncash impairment of goodwill that could be material.

Income Taxes

For the third quarter and first nine months of 2016 we recorded income tax benefit of $0.2 million and $4.0 million, respectively. For the third quarter and first nine months of 2015, we recorded income tax expense of $1.2 million and $2.2 million, respectively. The income tax benefit in the third quarter and first nine months of 2016 included the recognition ofWe continued to recognize a full valuation allowance against deferred tax assets and the tax effects of unrealized gains credited to other comprehensive income. In addition, the income tax benefit in the first nine months of 2016 included the tax effects of the impairment of tax deductible goodwill, which occurred during the second quarter of 2016.

~~We continued to record a valuation allowance against the~~ net deferred tax assets. AsThis determination was based on the assessment of ~~September 30, 2016,~~ the ~~valuation allowance was $35.4 million. We intend~~available positive and negative evidence to ~~continue maintaining a full valuation allowance on our~~estimate if sufficient future taxable income will be generated to utilize the existing deferred tax ~~assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.~~assets.

Non-GAAP Financial Measures

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

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

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.

These measures do not consider the potentially dilutive impact of stock-based compensation.

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA and adjusted EBITDA margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.

Adjusted EBITDA and adjusted EBITDA margin do not reflect tax payments that may represent a reduction in cash available to us.

Contribution and Contribution Margin

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

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

The following table shows the calculation of contribution and contribution ~~margin.~~margin:


	Three Months Ended									Nine Months Ended						Three Months Ended									Six Months Ended
	September 30, 2016			June 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			June 30, 2017			March 31, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Operating Revenue	$	112,609		$	102,391		$	115,062		$	366,265		$	292,226
Less: Sales and marketing ⁽¹⁾	44,901			49,737			44,018			161,213			117,989
Less: Origination and servicing⁽¹⁾	16,332			20,934			16,732			56,464			43,639
Total net revenue																$	139,573		$	124,482		$	103,440		$	264,055		$	255,734
Less: Sales and marketing expense																55,582			54,583			49,737			110,165			116,312
Less: Origination and servicing expense																21,274			20,449			20,934			41,723			40,132
Total direct expenses	$	61,233		$	70,671		$	60,750		$	217,677		$	161,628		$	76,856		$	75,032		$	70,671		$	151,888		$	156,444
Add: Stock-based compensation ⁽²⁾⁽¹⁾	$	2,712		$	2,376		$	2,945		$	7,738		$	7,491		$	3,321		$	3,715		$	2,376		$	7,036		$	5,026
Contribution⁽¹⁾⁽²⁾	$	54,088		$	34,096		$	57,257		$	156,326		$	138,089		$	66,038		$	53,165		$	35,145		$	119,203		$	104,316
Contribution margin⁽¹⁾⁽²⁾	48.0		%	33.3		%	49.8		%	42.7		%	47.3		%	47.3		%	42.7		%	34.0		%	45.1		%	40.8		%


⁽¹⁾	~~Prior period amounts have been reclassified to conform to the current period presentation. See “Results of Operations – Operating Expenses” for additional information.~~


⁽²⁾	Contribution ~~also~~ excludes stock-based compensation expense included in the sales and marketing and origination and servicing expense categories.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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


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

The following table presents a reconciliation of net income (loss) to contribution for each of the periods indicated:

Three Months Ended Nine Months Ended
September 30, 2016 June 30,
2016 September 30, 2015 September 30, 2016 September 30, 2015
Net income (loss) $ (36,486 ) $ (81,351 ) $ 950
$ (113,700 ) $ (9,564 )
Net interest income and fair value adjustments (1,947 ) (1,049 ) (1,214 ) (4,025 ) (2,199 )
Engineering and product development expense⁽¹⁾
29,428
29,209
21,063
82,835
53,175
Other general and administrative expense⁽¹⁾
58,940
53,457
32,280
150,432
86,937
Goodwill impairment 1,650
35,400
—
37,050
—
Stock-based compensation expense⁽¹⁾⁽²⁾
2,712
2,376
2,945
7,738
7,491
Income tax (benefit) expense (209 ) (3,946 ) 1,233
(4,004 ) 2,249
Contribution⁽¹⁾
$ 54,088
$ 34,096
$ 57,257
$ 156,326
$ 138,089
Total operating revenue $ 112,609
$ 102,391
$ 115,062
$ 366,265
$ 292,226
Contribution margin⁽¹⁾
48.0 % 33.3 % 49.8 % 42.7 % 47.3 %



	Three Months Ended									Six Months Ended
	June 30, 2017			March 31, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Consolidated net loss	$	(25,444	)	$	(29,844	)	$	(81,351	)	$	(55,288	)	$	(77,214	)
Engineering and product development expense	35,718			35,760			29,209			71,478			53,407
Other general and administrative expense	52,495			43,574			53,457			96,069			91,492
Goodwill impairment	—			—			35,400			—			35,400
Stock-based compensation expense⁽¹⁾	3,321			3,715			2,376			7,036			5,026
Income tax (benefit) expense	(52		)	(40		)	(3,946		)	(92		)	(3,795		)
Contribution⁽²⁾	$	66,038		$	53,165		$	35,145		$	119,203		$	104,316
Total net revenue	$	139,573		$	124,482		$	103,440		$	264,055		$	255,734
Contribution margin ⁽²⁾	47.3		%	42.7		%	34.0		%	45.1		%	40.8		%


⁽¹⁾	~~Prior period amounts have been reclassified to conform to the current period presentation. See “Results of Operations – Operating Expenses” for additional information.~~


⁽²⁾	Contribution ~~also~~ excludes stock-based compensation expense included in the sales and marketing and origination and servicing expense categories.


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

Adjusted EBITDA and Adjusted EBITDA Margin

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

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

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated:


	Three Months Ended									Nine Months Ended						Three Months Ended									Six Months Ended
	September 30, 2016			June 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			June 30, 2017			March 31, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Net income (loss)	$	(36,486	)	$	(81,351	)	$	950		$	(113,700	)	$	(9,564	)
Net interest income and fair value adjustments	(1,947		)	(1,049		)	(1,214		)	(4,025		)	(2,199		)
Consolidated net loss																$	(25,444	)	$	(29,844	)	$	(81,351	)	$	(55,288	)	$	(77,214	)
Acquisition and related expense	294			293			937			880			1,634			56			293			293			349			586
Depreciation expense:
Engineering and product development	5,362			4,917			3,808			14,772			9,813			8,483			7,794			4,917			16,277			9,410
Other general and administrative	1,104			993			708			3,003			1,636			1,305			1,298			993			2,603			1,899
Amortization of intangible assets	1,163			1,180			1,256			3,599			4,075			1,057			1,162			1,180			2,219			2,436
Goodwill impairment	1,650			35,400			—			37,050			—			—			—			35,400			—			35,400
Stock-based compensation expense	17,922			13,447			13,479			46,390			37,558			19,088			19,498			13,447			38,586			28,468
Income tax (benefit) expense	(209		)	(3,946		)	1,233			(4,004		)	2,249			(52		)	(40		)	(3,946		)	(92		)	(3,795		)
Adjusted EBITDA⁽¹⁾	$	(11,147	)	$	(30,116	)	$	21,157		$	(16,035	)	$	45,202		$	4,493		$	161		$	(29,067	)	$	4,654		$	(2,810	)
Total operating revenue	$	112,609		$	102,391		$	115,062		$	366,265		$	292,226
Adjusted EBITDA margin	(9.9		)%	(29.4		)%	18.4		%	(4.4		)%	15.5		%
Total net revenue																$	139,573		$	124,482		$	103,440		$	264,055		$	255,734
Adjusted EBITDA margin ⁽¹⁾																3.2		%	0.1		%	(28.1		)%	1.8		%	(1.1		)%


⁽¹⁾	Beginning in the first quarter of 2017, adjusted EBITDA includes net interest revenue to capture the full spectrum of revenue we expect to generate. Prior period amounts have been ~~reclassified~~adjusted to conform to the current period presentation. ~~See “Results of Operations – Operating Expenses” for additional information.~~

Operating expenses include the following amounts of ~~stock based~~stock-based compensation for the periods ~~presented.~~presented:


	Three Months Ended						Nine Months Ended				Three Months Ended						Six Months Ended
	September 30, 2016		June 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015		June 30, 2017		March 31, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Sales and marketing	$	1,699	$	1,413	$	2,283	$	5,016	$	5,504	$	1,967	$	2,299	$	1,413	$	4,266	$	3,317
Origination and servicing	1,013		963		662		2,722		1,987		1,354		1,416		963		2,770		1,709
Engineering and product development	4,931		4,480		3,145		13,134		7,886		5,773		6,588		4,480		12,361		8,203
Other general and administrative	10,279		6,591		7,389		25,518		22,181		9,994		9,195		6,591		19,189		15,239
Total stock-based compensation expense⁽¹⁾	$	17,922	$	13,447	$	13,479	$	46,390	$	37,558	$	19,088	$	19,498	$	13,447	$	38,586	$	28,468


⁽¹⁾	~~Prior period amounts have been reclassified to conform to the current period presentation. See “Results of Operations – Operating Expenses” for additional information.~~

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

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

LENDINGCLUB CORPORATION

~~Management's~~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)

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

Servicing and management fee revenue associated with the servicing portfolio, excluding fair market value accounting adjustments, is a non-GAAP financial measure that is calculated as servicing fees less the fair market value accounting adjustment. The Company has elected to account for servicing assets and liabilities at fair value with changes in fair value recorded through earnings in the period of change. The Company believes this is a useful non-GAAP financial measure because it reflects the amount of fees actually collected and represents the true economic benefit of our servicing arrangements. We believe that the fair value adjustments to the servicing assets and liabilities is less useful in particular because the Company does not trade or transfer such servicing assets or liabilities.

The following table presents a reconciliation of ~~servicing~~investor fees to ~~servicing~~investor fees before change in fair value of servicing assets and ~~liabilities.~~liabilities:

Three Months Ended Nine Months Ended
September 30, 2016
June 30,
2016
September 30, 2015 September 30, 2016 September 30, 2015
Servicing fees $ 16,513
$ 11,603
$ 8,999
$ 45,058
$ 20,870
Change in fair value of servicing assets and liabilities 1,703
4,672
(403 ) 4,065
(1,452 )
Servicing fees before change in fair value of servicing assets and liabilities $ 18,216
$ 16,275
$ 8,596
$ 49,123
$ 19,418



	Three Months Ended						Six Months Ended
	June 30, 2017		March 31, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Investor fees	$	21,116	$	21,180	$	14,656	$	42,296	$	35,143
Change in fair value of servicing assets and liabilities	4,436		3,238		4,672		7,674		2,362
Investor fees before change in fair value of servicing assets and liabilities	$	25,552	$	24,418	$	19,328	$	49,970	$	37,505

Investments by Investment Channel and Investor Concentration

The following table shows the percentage of loan originations funded by investment channel for the periods ~~presented.~~presented:


	September 30, 2015		December 31, 2015		March 31, 2016		June 30, 2016		September 30, 2016		June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016
Originations by Investor Type:
Managed accounts	36	%	38	%	30	%	35	%	55	%	31	%	33	%	43	%	55	%	35	%
Self-managed, individuals	15	%	13	%	15	%	17	%	14	%
Self-directed											13	%	15	%	13	%	14	%	17	%
Banks	26	%	23	%	34	%	28	%	13	%	44	%	40	%	31	%	13	%	28	%
Other institutional investors	23	%	26	%	21	%	20	%	18	%	12	%	12	%	13	%	18	%	20	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

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

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

September 30, 2015 December 31, 2015 March 31, 2016 June 30, 2016 September 30, 2016
Percentage of Loans Invested In by Ten Largest Investors (by $ invested) 58 % 58 % 51 % 62 % 72 %



	June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016
Percentage of loans invested in by ten largest investors (by $ invested)	59	%	61	%	68	%	72	%	62	%

For the quarter ended ~~September~~June 30, ~~2016,~~2017, no single investor accounted for more than ~~26%~~20% of the loans invested in through our marketplace. The composition of the top ten investors may vary from period to period. In addition to these investors, private funds associated with LCA and publicly issued member payment dependent notes accounted for approximately 1% and 14%, respectively, of investment capital provided through our marketplace during the period.

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Effectiveness of Scoring Models

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

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Loan Portfolio Information and Credit Metrics

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

Fair Value and Delinquencies

The outstanding principal balance, fair value and percentage of these loans that are delinquent, by loan product, are as follows:



	June 30, 2017						December 31, 2016
(in millions, except percentages)	Outstanding Principal Balance		Fair Value ⁽²⁾		Delinquent Loans ⁽²⁾		Outstanding Principal Balance		Fair Value ⁽²⁾		Delinquent Loans ⁽²⁾
Personal loans - standard program	$	3,859.5	94.1	%	3.0	%	$	4,290.4	94.6	%	3.2	%
Personal loans - custom program	196.3		91.7		6.0		267.4		91.4		5.6
Other loans ⁽¹⁾	23.0		97.4		2.8		17.2		96.8		2.8
Total	$	4,078.8	94.0	%	3.2	%	$	4,575.0	94.5	%	3.3	%

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

⁽²⁾Expressed as a percent of outstanding principal balance.

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Net Annualized Charge-Off Rates

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

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

The annualized net charge-off rates for personal loans for both standard and custom programs in total for the last five quarters are as follows:



Total Platform ⁽¹⁾	June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016
Personal Loans - Standard Program:
Annualized net charge-off rate	8.1	%	8.5	%	8.0	%	6.1	%	4.9	%
Weighted average age in months	12.9		12.5		12.0		11.3		10.3

Personal Loans - Custom Program:
Annualized net charge-off rate	14.1	%	15.7	%	14.6	%	11.0	%	8.6	%
Weighted average age in months	10.5		10.5		9.8		9.1		8.4



Loans retained on balance sheet	June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016
Personal Loans - Standard Program:
Annualized net charge-off rate	10.2	%	10.9	%	10.4	%	8.2	%	6.5	%
Weighted average age in months	14.9		14.2		13.5		12.9		12.1

Personal Loans - Custom Program:
Annualized net charge-off rate	15.5	%	19.6	%	19.1	%	14.0	%	8.2	%
Weighted average age in months	15.7		14.3		12.4		10.9		8.4


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

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

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

charge-off rate in the second quarter of 2017 compared to the first quarter of 2017, as well as an increase in recovery rates for charged-off loans in the second quarter of 2017. These changes were a result of a combination of factors:

The effect of credit tightening implemented in 2016 and early 2017. As the newer vintages are beginning to season we are seeing improved loss performance vintage-over-vintage as a result of the tighter credit criteria.

The benefits from investments made in servicing of delinquent loans, including increased staffing and improved technology infrastructure.

An increase in recovery rates as sales prices of charged-off debt have trended back up.

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

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

Regulatory Environment

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

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

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Liquidity and Capital Resources

Liquidity

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

Nine Months Ended September 30,
Condensed Cash Flow Information: 2016 2015
Net cash (used for) provided by operating activities $ (7,746 ) $ 53,350

Cash flow used for loan investing activities ⁽¹⁾
(252,740 ) (1,442,964 )
Cash flow used for all other investing activities (88,154 ) (477,954 )
Net cash used for investing activities (340,894 ) (1,920,918 )

Cash flow provided by note/certificate, and secured borrowings financing ⁽¹⁾
244,096
1,454,391
Cash flow provided by all other financing activities 1,780
122,603
Net cash provided by financing activities 245,876
1,576,994
Net decrease in cash and cash equivalents $ (102,764 ) $ (290,574 )



	Six Months Ended June 30,
Condensed Cash Flow Information:	2017			2016
Net cash used for operating activities	$	(30,652	)	$	(1,190	)

Cash flow related to loan investing activities ⁽¹⁾	288,043			(222,412		)
Cash flow related to all other investing activities	76,043			(44,516		)
Net cash provided by (used for) investing activities	364,086			(266,928		)

Cash flow related to note/certificate and secured borrowings financing ⁽¹⁾	(287,499		)	214,044
Cash flow used for all other financing activities	(23,093		)	3,469
Net cash (used for) provided by financing activities	(310,592		)	217,513
Net increase (decrease) in cash and cash equivalents	$	22,842		$	(50,605	)

⁽¹⁾

Cash flow ~~used for~~related to loan investing activities includes the purchase of loans and repayment of loans facilitated through our marketplace. Cash flow ~~provided by~~related to note/certificate and secured borrowings financing activities includes the issuance of notes and certificates to investors and the repayment of those notes and certificates. These amounts generally correspond and offset each other.

Our short-term liquidity needs generally relate to our working capital requirements. These liquidity needs are generally met through cash generated from the operations of facilitating loan originations. If ~~the recent~~we experience a pause in investor ~~funding~~capital on our platform, ~~as described above, continues,~~ cash generated from facilitating loan originations could decline, in which case we may need to use our cash and cash equivalents on hand, which was ~~$520.8~~$538.4 million at ~~September~~June 30, ~~2016,~~2017, to meet our working capital needs. ~~The Company additionally~~Additionally, we had ~~$278.9~~$225.3 million of available for sale securities at ~~September~~June 30, ~~2016. As shown in the table above, the Company had negative operating cash flow for the first nine months of 2016.~~2017. The consolidated net loss during the first ~~nine months~~half of 2016, including cash expenses for legal, audit, communications, and advisory fees associated with the board review and government inquiries discussed above, including investigating the matters identified in the board review, supporting investor due diligence activities, remediation efforts and pending and potential future litigation matters,of 2017, along with the ~~purchases~~purchase of loans the Company sold and intends to sell, ~~contributed to~~and the payment of the 2016 corporate cash bonus in February 2017, resulted in negative operating cash ~~flow~~flows for the ~~nine months~~first half of 2016. Generally, there has been no material impact on our liquidity position as of September 30, 2016, related to the purchase of loans in the first nine months of 2016; as such, loans generally were funded by proceeds from the issuance of corresponding notes and certificates, or such loans have been sold on the same day to whole loan investors.2017.

As a result of recent events arising out of our board review noted above, we are actively exploring ways to restore investor confidence in our platform and obtain investment capital for the platform. See “~~Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Current Economic and Business Environment.~~”

Additionally, given the payment dependent structure of the notes and certificates, principal and interest payments on notes and certificates are paid only when received from borrowers on the corresponding retained loans, resulting in no material impact to our liquidity. During the ~~second quarter~~first half of ~~2016, the Company~~2017, we purchased a total of ~~$134.9~~$189.4 million inof loans ~~to fulfill regulatory requirements and~~through the platform to support ~~short-term marketplace equilibrium. The Company was able to find additional investors in these loans, or previously funded loans,~~securitization initiatives and ~~resold $135.5 million~~

~~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)~~

~~of these loans before June 30, 2016. The Company purchased $0.4 million in loans in the third quarter of 2016 to~~ fulfill ~~regulatory requirements or to support short-term market place equilibrium.~~contractual purchase obligations. The outstanding principal balance of loans for which ~~the Company~~we remained invested in as of ~~September~~June 30, ~~2016~~2017 amounted to ~~$34.2~~$57.2 million. ~~See “Item 4 – Controls and Procedures.~~”

Cash and cash equivalents are primarily held in institutional money market funds, ~~and~~ interest-bearing deposit accounts at investment grade financial ~~institutions.~~institutions, certificates of deposit, and commercial paper. Cash and cash equivalents were $~~520.8~~538.4 million and $~~623.5~~515.6 million as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016, respectively. Changes in the balance of cash and cash equivalents ~~during the first nine months of 2016 were primarily~~are generally a result of timing related to working capital requirements or investments in or out of our securities available for sale portfolio and changes in restricted cash and other investments.

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

LENDINGCLUB CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Tabular Amounts in ~~a Rabbi Trust through a grantor trust agreement to satisfy obligations to partnerships under the Company's 2016 Cash Retention Bonus Plan,~~Thousands, Except Share and Per Share Data and Ratios, or ~~(iv) received from~~ as Noted)

investors but not yet been applied to their accounts on the platform and transferred to segregated bank accounts that hold investors’ ~~funds.~~funds; or (iv) as of December 31, 2016, held in a Rabbi Trust through a grantor trust agreement to satisfy obligations to partnerships under the 2016 Cash Retention Bonus Plan. Restricted cash was ~~$139.5~~$161.7 million and ~~$80.7~~$177.8 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~,2016, respectively. The ~~increase~~decrease in restricted cash is primarily attributable to ~~additional transactions related~~a decrease in cash received from investors that has not yet been applied to ~~our platform or with certain investors.~~their accounts.

~~In April 2015, we invested~~We invest in securities classified as available for sale. The fair value of securities available for sale as of ~~September~~June 30, 2017 and December 31, 2016 was ~~$278.9 million.~~$225.3 million and $287.1 million, respectively. At ~~September~~June 30, ~~2016~~,2017, these securities ~~include~~included corporate debt securities, certificates of deposit, asset-backed securities, commercial paper, U.S. agency securities, U.S. Treasury securities, asset-backed securities related to consolidated VIE and other securities. All securities, except for the subordinate residual certificates of the consolidated VIE related to a sponsored securitization transaction, were rated investment grade (defined as a rating equivalent to a Moody’s rating of “Baa3” or higher, or a Standard & Poor’s rating of “BBB-” or higher) and there were no significant unrealized losses. These securities provided ~~$2.7~~$1.9 million and $1.8 million of interest income for the first ~~nine months~~halves of ~~2016.~~2017 and 2016, respectively. These securities continue to be available to meet liquidity needs.

Our available liquidity resources may also be provided by external sources. On December 17, 2015, we entered into a credit and guaranty agreement with several lenders for an aggregate ~~$120~~$120.0 million secured revolving credit facility (Credit Facility). In connection with the credit agreement, we entered into a pledge and security agreement with Morgan Stanley Senior Funding, Inc., as collateral agent. Proceeds of loans made under the Credit Facility may be borrowed, repaid and reborrowed until December 17, 2020. Repayment of any outstanding proceeds are payable on December 17, 2020, but may be prepaid without penalty. We did not have any loans outstanding under the Credit Facility during the first ~~nine months~~half of ~~2016.~~2017.

On ~~February 9, 2016~~Borrowings under the Credit Facility bear interest, at our option, at an annual rate based on LIBOR rate plus a spread of 1.75% to 2.00%, ~~our board~~which is fixed for a Company-selected interest period of ~~directors approved a share repurchase program under which we may repurchase up~~one, two, three, six or 12 months, or at an alternative base rate (which is tied to ~~$150 million of our common shares~~ either the prime rate, federal funds effective rate, or the adjusted eurocurrency rate, as defined in ~~open market or privately negotiated transactions in compliance with Securities and Exchange Act Rule 10b-18~~the credit agreement). ~~This repurchase program is valid for one year and does not obligate the Company to acquire any particular amount of common stock, and~~Base rate borrowings may be ~~suspended~~prepaid at any time ~~at Lending Club’s discretion. During~~without penalty, however pre-payment of LIBOR-based borrowings before the ~~nine months ended September~~end of the selected interest period may result in us incurring expense to compensate the lenders for their funding costs through the end of the interest period. Interest is payable quarterly. Additionally, we are required to pay a quarterly commitment fee to the lenders of between 0.25% and 0.375% per annum, depending on our total net leverage ratio, on the average undrawn portion available under the revolving loan facility.

The Credit Facility and pledge and security agreement contain certain covenants applicable to us, including restrictions on the Company’s ability to pay dividends, incur indebtedness, pledge our assets, merge or consolidate, make investments, and enter into certain affiliate transactions. The Credit Facility required us to maintain a maximum total net leverage ratio (defined as the ratio of net debt to Adjusted EBITDA, on a consolidated basis for the four most recent Fiscal Quarter periods) of 4.00:1.00 initially, which decreases over the term of the Credit Facility to 3.00:1.00 on and after June 30, ~~2016, we repurchased 2,282,720 shares~~2018 (on a consolidated basis). As of June 30, 2017, the total net leverage ratio, calculated as defined in the Credit Facility, was 0%.

~~Historically, our overall business model has not been premised on using our balance sheet and assuming credit risk~~obligations for loans facilitated by our marketplace. In order to support contractual obligations (Pool B loans and repurchase obligations), regulatory commitments (direct mail), short-term marketplace equilibrium, customer accommodations or other needs, we may use our capital on the platformfunded without a matched third-party investor, from time to ~~time on terms that are substantially similar to other investors.~~time. Additionally, we may use our own capital to invest in loans ~~associated with the testing or initial launch of~~to fulfill regulatory obligations, support short-

LENDINGCLUB CORPORATION

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

term marketplace equilibrium, offer customer accommodations, or to test and establish a track record of performance for new or alternative loan terms, programs, or ~~channels to establish a track record of performance prior to facilitating third-party investments in these loans.~~

With the announcement of the initial results of the internal board review on May 9, 2016 and additional findings disclosed on June 28, 2016, many investors paused or reduced their investment activity. The Company has been focused on working with these investors to resume their investment activity and on bringing new investors to the platform. During the second quarter of 2016 and the third quarter of 2016 through August 31,2016 the Company offered incentives to investors in exchange for investment activity. The Company did not offer incentives to investors for investments in loans in the month of September 2016. Although the Company did not have to use a material amount of its own capital to purchase loans in the third quarter of 2016, the failure of the Company to attract investor capital may result in the Company using a greater amount of its own capital to purchase loans on the platform compared to prior periods, or reduce origination volume. These actions may have material adverse impacts on the Company's business, financial condition (including its liquidity), results of operations or ability to sustain and grow loan volume. For a description of recent developments and their potential impact to our liquidity and capital resources, see “~~Current Economic and Business Environment” above.~~channels.

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

Capital Resources

~~Capital~~Net capital expenditures were ~~$39.0~~$19.7 million, or 7.3% of total net revenue, and $26.9 million, or 10.5% of total net revenue, ~~and $25.9 million, or~~ ~~9.0%~~ ~~of total net revenue,~~ for the first ~~nine months~~halves of ~~2016~~2017 and ~~2015,~~2016, respectively. Capital expenditures generally consist of internally developed software, computer equipment, and construction in ~~2016~~progress. Capital expenditures in 2017 are expected to be approximately ~~$59.0~~$50.0 million,, primarily related to costs associated with the continued ~~investment~~development and support of our lending platform. In the future, we expect our capital expenditures to increase as we continue to enhance our platform to support the growth in ~~infrastructure and technology.~~our business.

Off-Balance Sheet Arrangements

As of both ~~September~~June 30, 2017 and December 31, 2016, a total of $4.7 million in standby letters of credit were outstanding related to certain financial covenants required for our leased facilities. To date, no amounts have been drawn against the letters of credit, which renew annually and expire at various dates through July 2026. ~~There were no off-balance sheet arrangements during the first nine months of 2015.~~

Contingencies

~~The Company's~~For a comprehensive discussion of contingencies as of ~~September~~June 30, ~~2016 are included in~~2017, see “Part I – Financial Information – Item 1 – Financial Statements – Note ~~15 –~~15. Commitments and Contingencies.”

Critical Accounting Policies and Estimates

Certain of the ~~Company's~~Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II – Item 7 – ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Estimates” in the Annual Report. There have been no significant changes to these critical accounting estimates during the first ~~nine months~~half of ~~of 2016,~~2017, except as ~~noted below.~~disclosed in

“Note 2. Summary of Significant Accounting Policies,” pertaining to “Goodwill and Intangible ~~Assets~~

~~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)~~

goodwill exceeds its implied fair value. Adverse changes in impairment indicators such as loss of key personnel, increase regulatory oversight, or unplanned changes in our operations could result in impairment. We recognized $1.7 million and 37.1 million of goodwill impairment expense during the third quarter and first nine months of 2016, respectively. We did not recognize any goodwill impairment during the third quarter and first nine months of 2015, respectively.

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

If we do not qualitatively assess goodwill we compare a reporting unit’s estimated fair value to its carrying value. We estimate the fair value of a reporting unit using both an income approach and a market approach. When applying the income approach, we use a discounted cash flow model, which requires the estimation of cash flows and an appropriate discount rate. We project cash flows expected to be generated by the reporting unit inclusive of an estimated terminal value. The discount rate assumption contemplates a weighted-average cost of capital based on both market observable and company-specific factors. The discount rate is risk-adjusted to include any premiums related to equity price volatility, size, and projected capital structure of publicly traded companies in similar lines of business. The market approach estimates the fair value of a reporting unit based on certain market value multiples of publicly traded companies in similar lines of business, such as total enterprise value to revenue, or to EBITDA. Under the market approach, we also consider fair value implied from any relevant and comparable market transactions. Both approaches include reliance on long-term growth rates, and revenue and earnings projections.

~~We recorded a goodwill impairment during the second and third quarter of 2016 after completing the annual impairment test. See “~~Assets.”~~Part I – Financial Information – Item 1 – Financial Statements – Note 9 –Intangible Assets and Goodwill” for additional information.~~

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

~~Consolidation of Variable Interest Entities~~

A variable interest entity (VIE) is a legal entity that does not have sufficient equity at risk to finance its own operations, whose equity holders do not have the power to direct the activities most significantly affecting the economic outcome of those activities, or whose equity holders do not share proportionately in the losses or receive the residual returns of the entity. The determination of whether an entity is a VIE requires a significant amount of judgment. When we have a controlling financial interest in a VIE, it must consolidate the results of the VIE’s operations into its condensed consolidated financial statements. A controlling financial interest exists if we have both the power to direct the VIE’s activities that most significantly affect the VIE’s economic performance (power) and the obligation to absorb losses or receive benefits that could be potentially significant to the VIE (economics).

~~LC Trust I~~

We have determined that LC Trust I (the Trust) is a VIE and that we have a controlling financial interest in the Trust and therefore we must consolidate the Trust in its condensed consolidated financial statements. We established the Trust in February 2011 and funded it with a nominal residual investment. We are the only residual investor in the

~~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)~~

Trust. The purpose of the Trust is to acquire and hold loans for the benefit of investors who have invested in certificates issued by the Trust. The Trust conducts no other business other than purchasing and retaining loans or portions thereof for the benefit of the investment funds and their underlying limited partners. The Trust holds loans, none of which are financed by us. The cash flows from the loans held by the Trust are used to repay obligations under the certificates. The Trust’s assets and liabilities were reflected in the condensed consolidated financial statements at September 30, 2016 and December 31, 2015.

In connection with the formation of the investment funds, it was determined that in order to achieve success in raising investment capital, the assets to be invested in by the investment funds must be held by an entity that was separate and distinct from us (i.e. bankruptcy remote) in order to reduce this risk and uncertainty. In the event of our insolvency, it is anticipated that the assets of the Trust would not become part of the bankruptcy estate, but that outcome is uncertain.

Our capital contributions, which are the only equity investments in the Trust, are insufficient to allow the Trust to finance the purchase of a significant amount of loans without the issuance of certificates to investors. Therefore, the Trust’s capitalization level qualifies the Trust as a VIE. We have a financial interest in the Trust because of our right to returns related to servicing fee revenue from the Trust, our right to reimbursement for expenses, and our obligation to repurchase loans from the Trust in certain instances. Additionally, we perform or direct activities that significantly affect the Trust’s economic performance through or by (i) operation of the platform that enables borrowers to apply for loans purchased by the Trust; (ii) credit underwriting and servicing of loans purchased by the Trust; (iii) LCA's selection of the loans that are purchased by the Trust on behalf of advised Certificate holders; and (iv) LCA’s role to source investors that ultimately purchase limited partnership interests in a fund or Certificates, both of which supply the funds for the Trust to purchase loans. Collectively, the activities described above allow us to fund more loans than would be the case without the existence of the Trust, to collect the related loan transaction fees and for LCA to collect the management fees on the investors’ capital used to purchase certificates. Accordingly, we are deemed to have power to direct activities most significant to the Trust and economic interest in the activities because of loan funding and transaction and management fees. Therefore, we concluded that we are the primary beneficiary of the Trust and consolidated the Trust’s operations in our condensed consolidated financial statements.

~~Investment In Cirrix Capital~~

On April 1, 2016, we closed our $10.0 million investment, for an approximate ownership interest of 15% in Cirrix Capital (Investment Fund), a holding company to a family of funds that purchases loans and interests in loans from us. Per the partnership agreement, the family of funds can invest up to 20% of their assets outside of whole loans and interests in whole loans facilitated by us. At September 30, 2016, 100% of the family of funds' assets were comprised of whole loans and interests in loans facilitated by Lending Club's platform. At the time we made our investment, our then Chief Executive Officer (former CEO) and a board member (together, the Related Party Investors) also had limited partnership interests in the Investment Fund that resulted in an aggregate ownership of approximately 29% in the Investment Fund by the Related Party Investors and us. As of September 30, 2016, we and a board member had an aggregate ownership interest of approximately 27% in the Investment Fund.

Our investment is deemed to be a variable interest in the Investment Fund because the limited partnership interest shares in the expected returns and losses of the Investment Fund. The expected returns and losses of the Investment Fund result from the net returns of the family of funds owned by the Investment Fund, which are derived from interest income earned from loans and interests in whole loans that are purchased by the Investment Fund. Such loans and interests in loans were facilitated by us. Additionally, the Investment Fund is considered a VIE. We are not the primary beneficiary of the Investment Fund because we do not have the power to direct the activities that most significantly affect the Investment Fund’s economic performance. As a result, we do not consolidate the operations of the Investment Fund in our financial statements. We account for this investment under the equity method of accounting, which approximates its maximum exposure to loss as a result of its involvement in the

~~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)~~

~~Investment Fund. At September 30, 2016, our investment was $10.1 million, which was recorded in other assets in the condensed consolidated balance sheet.~~

Separately, we are subject to a credit support agreement that requires us to pledge and restrict cash in support of our contingent obligation to reimburse the Investment Fund for net credit losses on loans underlying the interests in whole loans that are in excess of a specified, aggregate net loss threshold. The Related Party Investors and us are excluded from receiving any benefits, if provided, from this credit support agreement. As of September 30, 2016, we have not been required to nor do we anticipate recording losses under this agreement. In conjunction with our determination that we have a variable interest in a VIE, the Investment Fund, we are required to disclose our maximum exposure to loss under this credit support agreement, which was limited to $6.0 million and $34.4 million at September 30, 2016 and December 31, 2015, respectively.

The Investment Fund passes along credit risk to the limited partners. We did not design the Investment Fund’s investment strategy and cannot require the Investment Fund to purchase loans. Additionally, we reviewed whether we collectively, with the board member's investment, had power to control the Investment Fund and concluded that we did not based on the unilateral ability of the general partner to exercise power over the limited partnership and the inability of the limited partners to remove the general partner. See “~~Note 17 – Related Party Transactions” for additional information.~~

~~LCA Managed or Advised Private Funds~~

In conjunction with the adoption of a new accounting standard that amends accounting for consolidations effective January 1, 2016, we reviewed our relationship with the private funds managed or advised by LCA and concluded that we do not have a variable interest in the private funds. As of September 30, 2016, we do not hold any investments in the private funds. Certain of our related parties have investments in the private funds, as discussed in “~~Part I – Financial Information – Item 1 – Financial Statements – Note 17– Related Party Transactions.~~” We charge the limited partners in the private funds a management fee based on their account balance at month end for services performed as the general manager, including fund administration, and audit, accounting and tax preparation services. Accordingly, our fee arrangements contain only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length. These fees are solely compensation for services provided and are commensurate with the level of effort required to provide those services. We do not have any other interests in the private funds and therefore we do not have a variable interest in the private funds.

Management regularly reviews and reconsiders its previous conclusion regarding whether it holds variable interest in potential VIEs, the status of an entity as a VIE, and whether we are required to consolidate such VIEs in the condensed consolidated financial statements.

~~There have been no other significant changes to these critical accounting policies and estimates during the first nine months of 2016.~~

~~Loan Servicing Rights~~

As a result of the nature of servicing rights on the sale of loans, the we are a variable interest holder in certain entities that purchase these loans. For all of these entities we either do not have the power to direct the activities that most significantly affect the VIE's economic performance or we do not have a potentially significant economic interest in the VIE. In no case are we the primary beneficiary and as a result none of these entities are consolidated on our consolidated financial statements.

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 3. Quantitative and Qualitative Disclosures about Market Risk

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

~~Except for the loans invested in by the Company, we generally do not assume principal or interest rate~~Discount Rate Sensitivity

We are exposed to market risk on loans ~~funded~~facilitated through our marketplace ~~because loan balances, interest rates and maturities of loans~~that are ~~matched and offset by an equal balance of~~not sold or funded with offsetting notes and ~~certificates with the exact same interest rates and maturities. Accordingly, we believe that we do not have any material exposure to changes~~certificates. Changes in the ~~net~~ fair value of these ~~combined loan, note and certificate portfolios as a result of~~loans are primarily related to changes in ~~interest rates. For~~market discount rates and actual credit performance. The fair values of loans ~~that~~ are ~~invested~~estimated using a discounted cash flow methodology, where the discount rate represents an estimate of the required rate of return by market participants. The discount rates for our loans may change due to expected loan performance or changes in by the ~~Company,~~expected returns of similar financial instruments available in the ~~Company has exposure to interest rate risk.~~market.

During the second quarter of ~~2016, the Company~~2017, we purchased a total of ~~$134.9~~$183.2 million of loans ~~to fulfill regulatory requirements and~~through the platform, primarily to support ~~short-term marketplace equilibrium. The Company was able to find additional investors in these loans, or previously funded~~securitization partners and upcoming securitization initiatives, fund certain custom program loans, and ~~resold $135.5~~fulfill contractual purchase obligations. In the second quarter of 2017, we sold $142.4 million of ~~these~~ loans ~~before~~we previously purchased. We recorded a negative $2.2 million net fair value adjustment related to the loans we invested in as of June 30, ~~2016. The Company purchased $0.4 million in loans in the third quarter of 2016 to fulfill regulatory requirements or to support short-term market place equilibrium.~~2017. The outstanding principal balance of loans for which ~~the Company~~we remained invested in as of ~~September~~June 30, ~~2016~~2017 was ~~$34.2~~$57.2 million. ~~See “Part I – Financial Information – Item 1 – Financial Statements – Note 12 – Secured Borrowings” for additional information.~~ We do not believe the interest rate risk associated with ~~these~~the remaining loans we held as of ~~September~~June 30, ~~2016~~2017 is ~~material. We~~material, but we will experience increased exposure to ~~interest rate risk~~market risks if we increase the amount of our capital used to invest in ~~loans given the pausing of investment by platform investors based upon the outcome of the review described above.~~loans. See “~~Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations –~~ Current Economic and Business Environment” and “~~Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations –~~ Liquidity and Capital Resources – ~~Liquidity.~~Liquidity” for additional discussion. We do not hold or issue other financial instruments for trading purposes.

~~The fair values of loans and the related notes and certificates are determined using a discounted cash flow methodology.~~Interest Rate Sensitivity

We invest in securities classified as available for sale. The fair value ~~adjustments~~of securities available for ~~loans are largely offset by~~sale as of June 30, 2017 and December 31, 2016 was $225.3 million and $287.1 million, respectively, consisting of corporate debt securities, asset-backed securities, U.S. agency securities, certificates of deposit, commercial paper, U.S. Treasury securities, asset-backed securities related to a consolidated VIE and other securities. To mitigate the risk of loss, our investment policy and strategy is focused first on the preservation of capital and supporting our liquidity requirements, and then maximizing returns. To manage this risk, the Company limits and monitors maturities, credit ratings, and concentrations within the investment portfolio. Changes in U.S. interest rates affect the interest earned on our securities available for sale and the market value of those securities. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $0.8 million in the fair value ~~adjustments~~ of ~~the notes and certificates due to the borrower payment dependent design~~our securities available for sale as of ~~the notes and certificates and due to the total principal balances~~June 30, 2017. A hypothetical 100 basis point decrease in interest rates would result in an increase of approximately $0.8 million in the ~~loans being very close to the combined principal balances of the notes and certificates. The Company recorded a negative~~ fair value ~~adjustment related to the loans the Company invested in~~of our securities available for sale as of ~~September~~June 30, ~~2016 of approximately 1.0 million and $0.5 million during~~2017. Any unrealized gains or losses resulting from such interest rate changes would only be recorded if we sold the ~~second and third quarter of 2016, respectively.~~securities prior to maturity or if the securities were not considered other-than-temporarily impaired.

We had cash and cash equivalents of ~~$520.8~~$538.4 million as of ~~September~~June 30, ~~2016.~~2017. These amounts were held primarily in interest-bearing deposits at investment grade financial institutions, ~~and~~ institutional money market funds, certificates of deposit, and commercial paper, which are short-term. Cash and cash equivalents are held for working capital purposes. Due to their short-term nature, we ~~believe that we~~ do not believe we have ~~any~~ material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will not materially reduce interest income on these cash and cash equivalents because of the current low rate environment. Increases in short-term interest rates will modestly increase the interest income earned on these cash balances.

~~Interest Rate Sensitivity~~

The Company holds securities available for sale. At September 30, 2016, the fair value of our securities available for sale portfolio was $278.9 million, consisting of corporate debt securities, asset-backed securities, U.S. agency securities, certificates of deposit, commercial paper, U.S. Treasury securities and other securities. To mitigate the risk of loss, our investment policy and strategy is focused first on the preservation of capital and supporting our liquidity requirements, and then maximizing returns. To manage this risk, the Company limits and monitors

LENDINGCLUB CORPORATION

maturities, credit ratings, and concentrations within the investment portfolio. Changes in U.S. interest rates affect the interest earned on our securities available for sale and the market value of those securities. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $1.5 million in the fair value of our securities available for sale as of September 30, 2016. A hypothetical 100 basis point decrease in interest rates would result in an increase of approximately $1.5 million in the fair value of our securities available for sale as of September 30, 2016. Any realized gains or losses resulting from such interest rate changes would only be recorded if we sold the securities prior to maturity and the securities were not considered other-than-temporarily impaired.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management ~~of the Company,~~evaluated, with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), ~~has evaluated~~ the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of ~~September~~June 30, ~~2016. This evaluation is performed to determine if our~~2017. In designing and evaluating its disclosure controls and procedures, ~~are effective~~the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, of achieving the desired control objectives, and is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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

~~As previously disclosed, during~~forms, and (ii) accumulated and communicated to management, including the ~~second quarter of 2016, we identified a material weakness in our internal control over~~principal executive and principal financial ~~reporting,~~officers, as ~~described further in “Changes in Internal Control Over Financial Reporting” below. As a result of the circumstances giving rise~~appropriate, to the material weakness described below, the Company's CEO and CFO have concluded that the Company's disclosure controls and procedures were not effective at a level that provides reasonable assurance that the objectives of disclosure controls and procedures were met as of September 30, 2016.

The identified material weakness is the result of the aggregation of control deficiencies related to the Company’s “tone at the top,” which manifested in three primary areas described further below.allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the second quarter of 2016, and in connection with a board review, with the assistance of independent outside counsel and other advisors, regarding specific near-prime loan sales and other compliance matters described elsewhere herein, we identified a material weakness in our internal control over financial reporting. As a result, the Company has concluded that, as of September 30, 2016, the Company's internal control over financial reporting was ineffective. See “~~Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Board Review~~.” In addition, the Company concluded that the deficiencies aggregating to this material weakness existed at the end of 2015 and therefore that its internal control over financial reporting was ineffective as of December 31, 2015 and amended its Annual Report on Form 10-K for the year ended December 31, 2015 accordingly. The Company made a similar conclusion with respect to its internal control over financial reporting as of March 31, 2016 and June 30, 2016, as disclosed in our Form 10-Q for the quarter ended March 31, 2016 and June 30, 2016, respectively.

The material weakness relates to the aggregation of control deficiencies in the Company's "tone at the top" and manifested in three primary areas described further below. The control environment, which includes the Company’s Code of Conduct and Ethics Policy, is the responsibility of senior management, and sets the tone of our organization, influences the control consciousness of employees, and is the foundation for the other components of internal control over financial reporting. Although each area described below involved its own deficiencies, a

~~LENDINGCLUB CORPORATION~~

significant contributing factor to all of the deficiencies aggregating to a material weakness was the Company’s lack of an appropriate tone at the top set by certain former members of senior management. The Company took immediate and significant steps to address this material weakness through the resignation or termination of certain senior managers and the resignation of the Company’s former CEO. The Company initially appointed Scott Sanborn as acting CEO and Hans Morris as Executive Chairman. On June 28, 2016, the Company announced that the Board appointed Scott Sanborn as the Company's Chief Executive Officer and President, effective June 27, 2016, and that Hans Morris would step down from his temporary role as Executive Chairman. On that date the Company also announced that Mr. Morris had been appointed the independent Chairman of the Board. The Company believes that making these changes was a critical step toward addressing the tone at the top concerns that contributed to the material weakness it has identified. On August 2, 2016 the Company accepted the resignation of the CFO and appointed Bradley Coleman as principal accounting officer and interim CFO. On September 19, 2016, the Company hired Thomas W. Casey as CFO. Bradley Coleman will continue in his role as Principal Accounting Officer and Corporate Controller.

In particular, as previously disclosed in our Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016, the material weakness relates to a lack of sufficient controls that allowed the following:

~~Sales of near-prime loans~~: During March and April of 2016, the Company effected sales of $22.3 million of near-prime loans in private transactions with an institutional investor that certain senior managers of the Company apparently were aware were not compliant with a specific non-credit, non-pricing requirement of the investor. In one case, involving approximately $3.0 million in loans, an application date was changed in a live Company database in an attempt to appear to meet the investor's requirement, and the balance of the loans was sold in direct contravention of the investor's direction. Employees involved in the sales of the near-prime loans that did not meet the investor's non-credit, non-pricing requirement were terminated or have resigned their positions.

Management determined that the Company’s control deficiencies resulting from the Company’s “tone at the top” permitted the circumvention of controls designed to ensure that investor portfolios are reviewed for adherence, and do adhere, to the investor’s instructions. Additionally, management determined that incremental to existing change management processes, the Company had not designed and implemented an additional level of review and approval for live database changes that impact high risk fields to provide reasonable assurance that all loans allocated comply with investor instructions.

As previously reported in our Form 10-Q for the quarter ended March 31, 2016, certain senior managers involved in the sales of near-prime loans that did not meet the investor’s non-credit, non-pricing requirement were terminated or resigned in May of 2016. In addition, in the second quarter of 2016, to further improve our internal controls we updated our Code of Conduct and Ethics Policy. In the third quarter of 2016 we strengthened our data management controls by creating a data change classification matrix and plan to change approval process in the fourth quarter over live database changes of high risk fields prior to changes being made.

~~Review of related party transactions~~: The Board did not have the information required to review and approve or disapprove investments made by its former CEO in 2015 and 2016, and a member of its board of directors in 2015, in a holding company for a family of funds (Cirrix Capital, L.P.) that purchases loans and interests in loans from the Company in accordance with Company policies, including the Code of Conduct and Ethics. Although the Company was aware of these investments before they were made, the investments were not reported by the Company or by the respective investors to the board's Audit Committee or Risk Committee. In addition, the investments were not listed in questionnaires designed to identify such related party investments and provided to the Company by the former CEO and board member.

As a result, relevant information was not provided to the financial accounting and reporting function on a timely basis. This could have caused - but in this case did not cause - a failure to ensure that appropriate financial reporting of the transactions was made in all material respects in a timely manner. In addition, in

~~LENDINGCLUB CORPORATION~~

~~March 2016 the Risk Committee approved an investment by the Company in Cirrix Capital, L.P. without all committee members being aware of the prior investments by the former CEO and the board member.~~

As a result of control deficiencies in the Company's "tone at the top" management determined that the Company's controls were not effective to ensure that information about related party investments known by certain members of management was adequately conveyed to other members of management and, ultimately, to the relevant committees of the board, including the audit and risk committees, on a timely basis. In addition, management determined that the Company’s process to identify related party investments may not have been adequately designed to ensure that such investments were appropriately reported.

In the third quarter of 2016, we initiated a preliminary update to the Related Party Policy and communicated it to the directors. Additionally, we have trained all directors and officers on the revised Related Party Policy and new quarterly questionnaire that is used to report and communicate related transactions. We have also enhanced controls designed to ensure that a current list of related parties and other relevant information, if applicable, is communicated to appropriate functions.

~~Lack of transparent communication and appropriate oversight of investor contract amendments~~: In 2015 and more extensively during the first quarter of 2016, the Company entered into contract amendments with platform investors, related to existing business arrangements. The Company failed in a number of cases to appropriately document or obtain authorizations of these amendments, assess the impact such amendments could have on pre-existing agreements and to communicate these amendments to the appropriate departments. As a result, the Company’s accounting function was not always made aware of these amendments on a timely basis in order to enable it to assess the extent of any corresponding financial impacts or disclosure requirements in a timely manner.

Certain contract amendments were executed without transparent communication and appropriate oversight, reflecting the deficiencies in tone at the top. Specifically, management had not implemented existing controls over contract governance to include governance of investor contract amendments. Management determined that the Company had detective controls in place to identify amendments to contracts and to govern the documentation, authorization, communication and monitoring of investor agreements and contract amendments. However, management determined that, as a result of a design deficiency, the Company lacked key preventative controls designed to ensure that these processes and procedures were consistently followed for amendments to contracts.

In the fourth quarter of 2016 we expect to implement or enhance new processes and controls that are designed to ensure that our investor contracts, including contract amendments, adhere to enhanced requirements established by the Risk Committee of the Board. We also plan to enhance our third-party contract management system to strengthen our controls surrounding the governance, review and ongoing monitoring for contract provisions and amendments.

The control improvements noted above to remediate and close this material weakness are subject to the Company’s internal control testing and assessment process to ensure such controls are operating for a sufficient period of time and operating effectively.

While the material weakness described herein creates a reasonable possibility that an error in financial reporting may go undetected, after review and the performance of additional analysis and other procedures, no material adjustments, restatement or other revisions to our previously issued financial statements were required.

As part of the board review referenced above, the board retained an additional independent advisor who reviewed application data for all other whole loans applied for in the first quarter of 2016 and confirmed the accuracy of such data on the Company’s systems, for all data other than the non-credit, non-pricing element that was changed as to $3.0 million of near-prime loans to a single investor described above.

~~LENDINGCLUB CORPORATION~~

~~Subject to the foregoing, no other~~No change in the ~~Company's~~Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) was identified during the ~~third~~second quarter of ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

~~During the first nine months of 2016, there have been no material changes to the risk factors~~The risks described in ““Part I ~~Part I~~ – Item ~~1A –~~1A. Risk Factors,” in ~~the Company's Annual Report, except as noted below.~~

~~Our business could be materially and adversely harmed as a result of the announcement of the results of~~ our ~~internal review and the resignation of our Chief Executive Officer (CEO).~~

As a result of recent events, numerous law firms have filed or have announced that they are looking into potentially filing lawsuits. As a result, we will be subject to significant litigation in the near future. In addition, we have been contacted by regulatory authorities requesting information related to the events surrounding the resignation of our former CEO, and we are cooperating fully with those inquiries. Litigation and inquiries of this nature are costly and time consuming, can generate negative publicity and could have a material and adverse effect on our business.

There can be no assurances as to the final outcome of any of these matters. The cost of defending any investigation or lawsuit is costly and can impose a significant burden on management and employees. Any litigation to which we are a party may result in onerous or unfavorable judgments that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, which could adversely affect our business, financial conditions, or results of operations.

~~Unfavorable media coverage could negatively affect our business.~~

We have received a high degree of media coverage related to the results of our review and resignation of our former CEO. Unfavorable publicity regarding the events described herein has resulted in investors pausing their investments through the platform and may result in, a slowdown in investor demand on our platform. If this negatively publicity were to persist, it could further harm our reputation, and materially and adversely affect our business in the future.

~~A decline in social and economic conditions may adversely affect our customers, which may negatively impact our business and results of operations.~~

As a credit marketplace, we believe our customers are more highly susceptible to uncertainties and negative trends in the markets driven by, among other factors, general social and economic conditions in the United States and abroad. These social and economic factors may affect the ability or willingness of borrowers to make payments on their loans, and consequently, impact the credit performance of the loans, notes and certificates.

Lending Club monitors a variety of economic, credit and competitive indicators so that borrowers can benefit from meaningful savings compared to alternatives, and investors can continue to find attractive risk-adjusted returns compared to other fixed income investments or investment alternatives. Economic factors include interest rates, unemployment levels, gasoline prices, adjustments in monthly payments adjustable-rate mortgages and other debt

~~LENDINGCLUB CORPORATION~~

payments, the rate of inflation and consumer perceptions of economic conditions. Social factors include changes in consumer confidence levels and changes in attitudes with respect to incurring debt and the stigma of personal bankruptcy. In the third quarter of 2016, we continued to observe mixed economic data, including an increased propensity for consumers to accumulate debt due to low interest rates, which caused us to remain cautious in our overall credit performance outlook.

Our marketplace has a number of levers at its disposal to adjust to changing market conditions, including the ability to quickly adapt underwriting models and dynamically increase or decrease pricing to provide an appropriate level of loss coverage to investors. Although we have observed some higher delinquencies in populations of loans characterized by high indebtedness, an increased propensity to accumulate debt, and lower credit scores across credit loan grades, it is less notable in lower risk grades.

These external economic conditions and resulting trends or uncertainties could adversely impact our customer's ability or desire to participate on our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations. See “~~Part 1 – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Current Economic and Business Environment.~~”

Following the announcement of our board review and resignation of our former CEO, we experienced a slowdown in a significant amount of investment capital available on our platform. While some of these investors have returned, it is still possible that we may be unable to attract additional investors to invest in loans, or we may need to grant investors significant inducements in order to attract capital or use our own capital.

As a result of the circumstances relating to our board review into certain private loan sales to a single institutional investor in contravention of its requirements and other matters, and the resignation of our former CEO, a number of investors that account for, in the aggregate, a significant amount of investment capital on the platform, have paused their investments in loans through the platform. While many of these investors have returned, many have invested at reduced levels, and it is possible that some investors may not resume investing through our platform. As a result, we may use a greater amount of our own capital, compared to past experience, to invest in loans.

During the third quarter of 2016 the Company offered incentives to investors to obtain additional capital for the platform. The Company has been focused on working with investors to resume their investment activity and bringing new investors to the platform. If these investors pause their investment activity again, the Company may need to provide further incentives, and enter into different additional incentive structures or terms, including the use of the Company's equity, to attract investor capital to the platform. Failure to attract investor capital on reasonable terms may result in the Company having to use additional capital to invest in loans or reduce origination volume. In order to obtain additional investor capital to our platform, we may need to enter into various arrangements with new or existing investors. These arrangements may have a number of different structures and terms, including equity or debt transactions, alternative fee arrangements or other inducements including equity. These structures may enable us or third-parties to purchase loans through the platform. Such actions may have a material impact on our business and results of operations and may be costly or dilutive to existing stockholders. There is no assurance that we will be able to enter into any of these transactions, or if we do, what the final terms will be. These actions likely may have material adverse impacts on the Company's business, financial condition (including its liquidity), results of operations and ability to sustain and grow loan volume.

A relatively small number of investors account for a large dollar amount of investment in loans funded through our marketplace and we may be required to increase our repurchase obligations to attract additional investors. Historically, we have limited our loan or note repurchase obligations to events of verified identity theft or in connection with certain customer accommodations. To attract additional investors, some of which are beginning to purchase loans, and seek to subsequently securitize such loans, we have increased the circumstances and the required burden of proof of economic harm under which we are obligated to repurchase loans from these investors.

~~LENDINGCLUB CORPORATION~~

While these repurchase obligations are consistent with institutional loan market standards for loans that may be securitized, such repurchase obligations could negatively affect our business and results of operation.

In addition, if a large number of our existing investors ceased utilizing our marketplace over a short period of time, our business could be temporarily interrupted and we may decide to use our capital to fulfill regulatory or contractual purchase obligations or support short-term marketplace equilibrium as new investors complete the administrative and diligence updating processes necessary to enable their investments. We may use our capital to invest in loans associated with the testing or initial launch of alternative loan terms, programs or channels to establish a track record of performance prior to facilitating third-party investments in these loans.

~~Misconduct and errors by our employees and third-party service providers could harm our business and reputation.~~

We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees, such as the change to application dates for $3.0 million in loans as described below, and other third-party service providers. Our business depends on our employees and third-party service providers to process a large number of increasingly complex transactions, and if any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interacting with borrowers and investors, we could be liable for damages, be subject to repurchase obligations and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability. Because our subsidiary, LCA, is the general partner or investment manager for a series of private funds and we have a limited partnership interest in Cirrix Capital L.P. family of funds, we could be perceived as having a conflict of interest regarding access to loans versus other platform investors. We believe that we have controls and processes in place as to mitigate this issue.

Any of these occurrences could result in our diminished ability to operate our business, potential liability to borrowers and investors, inability to attract future borrowers and investors, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

After the end of the first quarter of 2016, the Company became aware that approximately $22.3 million in near-prime loans were sold to a single institutional investor in March and April 2016, in contravention of the investor’s express instructions as to a non-credit and non-pricing element. Certain personnel apparently were aware that the sales did not meet the investor’s criteria. In one case, involving $3.0 million in loans, a non-credit, non-pricing attribute was changed in a live Company database in an attempt to appear to meet the investor’s requirement, and the balance of the loans were sold in direct contravention of the investor’s director. As a result of the board’s review into these and other matters, certain senior managers and our then-CEO resigned or were terminated. In April 2016, we repurchased these loans from the investor. See “~~Part 1 – Item 4 – Controls and Procedures.~~”

~~If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.~~

In addition to attracting and retaining highly skilled employees in general, our future performance depends, in part, on our ability to attract and retain key personnel, including our executive officers, senior management team and other key personnel, all of whom would be difficult to replace. The loss of the services of our executive officers or members of our senior management team, and the process to replace any of them, would involve significant time and expense and distraction that may significantly delay or prevent the achievement of our business objectives or impair our operations or results.

Subsequent to March 31, 2016, following an internal board review of certain loan sales and other matters, our CEO resigned, and certain senior managers either resigned or were terminated. We also implemented a reduction in workforce in June 2016 and attrition has been higher than usual in the months since the reduction in force. With any

~~LENDINGCLUB CORPORATION~~

change in leadership and reduction in workforce, there is a risk to retention of employees, including other members of senior management, as well as the potential for disruption to business operations, initiatives, plans and strategies. In light of the circumstances surrounding these employee actions, we have offered significant additional compensation to retain certain employees, but we cannot predict whether we ultimately will be able to retain these or other employees in the future, or whether we will have to incur substantial additional cost to do so. In addition, in light of these recent events and their potential overall effect on our business and stock price, key executive officers or senior management may opt to depart the company to pursue other opportunities, which could significantly delay or prevent the achievement of our business objectives or impair our operations or results. See “~~Part 1 – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Board Review.~~”

~~Our stock price has been and will likely continue to be volatile.~~

As a result of recent events, our stock price has declined significantly since the end of the first quarter of 2016 and has exhibited substantial volatility. Recent developments notwithstanding, our stock price may fluctuate in response to a number of events and factors, such as quarterly operating results; changes in our financial projections provided to the public or our failure to meet those projections; changes in the credit performance on our platform; the public's reaction to our press releases, other public announcements and filings with the SEC; significant transactions, or new features, products or services by us or our competitors; changes in financial estimates and recommendations by securities analysts; media coverage of our business and financial performance; the operating and stock price performance of, or other developments involving, other companies that investors may deem comparable to us; trends in our industry; any significant change in our management; and general economic conditions.

In addition, the stock market in general, and the market prices for companies in our industry, have experienced volatility that often has been unrelated to operating performance. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Price volatility over a given period may cause the average price at which we repurchase our own stock to exceed the stock’s price at a given point in time. Volatility in our stock price also impacts the value of our equity compensation, which affects our ability to recruit and retain employees. In addition, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We have been the target of this type of litigation and may continue to be a target in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.

If we fail to meet expectations related to future growth, profitability, or other market expectations, our stock price may decline significantly, which could have a material adverse impact on investor confidence and employee retention. A sustained decline in our stock price and market capitalization could lead to impairment charges.

~~We have identified a material weakness in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements.~~

During the second quarter of 2016, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. As described in ~~"Item 4 - Controls and Procedures"~~, we have concluded that our internal control over financial reporting was not effective as of June 30, 2016 due to material weakness. Specifically, our identified material weakness related to (i) appropriate system controls, or review and oversight by other personnel, to detect and prevent sales of loans in direct contravention of the loan agreement, (ii) failure to identify related party transactions so as to ensure proper review and approval or disapproval by the Audit Committee or the board, and (iii) failure to appropriately document, authorize, communicate and monitor amendments to investor contracts. Based upon that discovery, and in connection with the board review of specific near-prime loan sales to an investor and other unrelated compliance matters described elsewhere herein, the Company's CEO and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective at a level that provides reasonable assurance that the objectives of disclosure controls and procedures were met as of September 30, 2016. As described in ~~“Item 4 –~~

~~LENDINGCLUB CORPORATION~~

~~Controls and Procedures,”~~ ~~the Company determined that the material weakness existed as of March 31, 2016 and December 31, 2015 and amended its~~ Annual Report on Form 10-K for the year ended December 31, ~~2015, solely~~2016, could materially and adversely affect our business, financial condition, operating results and prospects, and the trading price of our common stock could decline. While we believe the risks and uncertainties described therein include all material risks currently known by us, it is possible that these may not be the only ones we face. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2016, remains current in all material respects, with the exception of the below.

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

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

LENDINGCLUB CORPORATION

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

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

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

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

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

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

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

LENDINGCLUB CORPORATION

potentially vulnerable to cyber attacks, computer viruses, physical or electronic break-ins or similar disruptions. In addition, in certain circumstances we utilize third-party vendors to facilitate the servicing of borrower and investor accounts. Under these arrangements, these third-party vendors require access to certain customer data for the purpose of ~~amending management’s assessment of internal control over financial reporting. This amendment will have impact on~~servicing the ~~financial statements included therein.~~

Giving full consideration to this weakness, and the additional analyses and other procedures we performed to ensure that our consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles (GAAP), our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with GAAP.accounts. While the material weakness described above creates a reasonable possibility that an error in financial reporting may go undetected, after review and the performance of additional analysis and other procedures, no material adjustments, restatement or other revisions to our previously issued financial statements were required.

~~As further described in~~ ~~"Item 4 – Controls and Procedures,”~~ we are taking specific steps to remediate the material weakness that we identified; however, the material weakness will not be remediated until the necessary controls have been implemented and we have determined the controls to be operating effectively. Because the reliability of the internal control process requires repeatable execution, the successful remediation of this material weakness will require review and evidence of effectiveness prior to concluding that the controls are effective. In addition, we may need to take additional measures to address the material weakness or modify the remediation steps, and we cannot be certain that the measures we have taken ~~and expect~~steps to ~~take,~~protect confidential information that we have access to, ~~improve~~ our ~~internal controls will be sufficient to address the issues identified, to ensure that our internal controls are effective~~security measures or ~~to ensure that the identified material weakness will not result in a material misstatement~~those of our ~~annual~~third-party vendors could be breached. Any accidental or ~~interim consolidated financial statements. Implementing any appropriate changes~~willful security breaches or other unauthorized access to our ~~internal controls~~marketplace or servicing systems could cause confidential borrower and investor information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, third-party vendor error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, our relationships with borrowers and investors could be severely damaged, and we could incur significant liability.

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

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

If we are unable to ~~correct the material weakness or deficiencies in internal controls in a timely manner,~~maintain our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, lead to delisting, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impactrelationships with issuing banks, our business ~~and financial condition.~~will suffer.

~~There continues~~We rely on issuing banks to ~~be uncertainty as to how the Consumer Financial Protection Bureau's (CFPB) actions or the actions of any other federal or state regulator could impact our business or that of our issuing banks.~~

The CFPB, which commenced operations in July 2011, has broad authority over the businesses in which we engage. This includes authority to write regulations under federal consumer financial protection laws, such as the Truth in Lending Act and the Equal Credit Opportunity Act,originate all loans and to ~~enforce those laws against~~comply with various federal, state and ~~examine large financial institutions, such~~other laws. Our primary issuing bank is WebBank, a Utah-chartered industrial bank that handles a variety of consumer and commercial financing programs. Springstone Financial, LLC (Springstone), our wholly-owned subsidiary, relies on NBT Bank and Comenity Capital Bank as ~~our~~ issuing banks for ~~compliance. The CFPB~~its purchase finance loans such as education and patient finance loans. Our agreements with WebBank are non-exclusive and do not prohibit WebBank from working with our competitors or from offering competing services. Our current agreements with WebBank have initial terms ending in January 2020, with two automatic, one-year renewal terms, subject to certain early termination provisions as set forth in the agreements. These agreements provide WebBank with a right to originate a certain percentage of the loans facilitated through our platform. WebBank currently offers loan programs through other online marketplaces and other alternative lenders. WebBank could decide that working with us is ~~authorized to prevent “unfair, deceptive or abusive acts or practices” through its regulatory, supervisory and enforcement authority. To assist~~not in its ~~enforcement,~~interest, could make working with it cost prohibitive or could decide to enter into exclusive or more favorable relationships with our competitors. In addition, WebBank may not perform as expected under our agreements including potentially being unable to accommodate our projected growth in loan volume. We could in the ~~CFPB maintains an online complaint system that allows consumers~~future have disagreements or disputes with WebBank or other issuing banks, which could negatively impact or threaten our relationship.

WebBank is subject to ~~log complaints~~oversight by the FDIC and the State of Utah and must comply with ~~respect~~complex rules and regulations, licensing and examination requirements, including requirements to ~~various consumer finance products, including the loan products we facilitate. This system could inform future CFPB decisions with respect~~maintain a certain amount of regulatory capital relative to its ~~regulatory, enforcement or examination focus.~~

~~While~~outstanding loans. We are a service provider to WebBank, and as such, we are subject to audit by WebBank in accordance with FDIC guidance related to management of third-party vendors. We are also subject to the ~~regulatory~~examination and enforcement authority of the ~~CFPB,~~FDIC as a ~~facilitator, servicer~~bank service company covered by

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

We believe that our relationships with all of our issuing bank partners are critical to our business and that maintaining backup arrangements for origination of loans is vital to the health of our business. However, if we need to enter into alternative arrangements with a different issuing bank to replace our existing arrangements, we may not be able to negotiate a comparable alternative arrangement. Transitioning loan originations to a new issuing bank is untested and may result in delays in the issuance of loans or, if our platform becomes inoperable, may result in our inability to facilitate loans through ~~the use of “larger participant rules,”~~our platform. If we were unable to ~~cover the markets for consumer installment~~enter in an alternative arrangement with a different issuing bank, we would need to obtain a state license in each state in which we operate to enable us to originate loans, as well as comply with other state and ~~auto title loans. The CFPB is also considering whether rules to require registration of these~~federal laws, which would be costly and time-consuming. If we are unsuccessful in maintaining our relationships with WebBank or other ~~non-depository lenders~~issuing banks, our ability to provide loan products could be materially impaired and our operating results would ~~facilitate supervision. The CFPB~~suffer.

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

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

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

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

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

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

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

LENDINGCLUB CORPORATION

and will utilize a greater share of our balance sheet to support securitization initiatives. Historically our business has not ~~announced specifics regarding its proposed rulemaking~~been dependent on using our balance sheet and ~~consequently, there continues to be uncertainty as to how the CFPB’s strategies and priorities, including any final rules, will impact~~assuming credit risk for loans facilitated through our ~~businesses and~~platform. As we continue such activities (whether in connection with supporting securitization initiatives or otherwise), our financial condition, liquidity or results of operations ~~going forward.~~will become more dependent upon the performance of the retained loans and retained interests in securitizations.

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

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

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

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

LENDINGCLUB CORPORATION

~~Recognizing the growth in online marketplaces such as ours, in July 2015 the U.S. Treasury Department issued a request for information (RFI) to study the various business models~~Recent legislative and ~~products offered by online marketplace lenders, the potential for online marketplace lending to expand access to credit to historically underserved borrowers~~regulatory initiatives have imposed restrictions and ~~how the~~requirements on financial regulatory framework should evolve to support the safe growth of the industry. We, along with many other interested groups, submitted responses to the Treasury’s RFI by the September 30, 2015 deadline.

~~On May 10, 2016, the U.S. Treasury Department released a white paper~~institutions that could have an adverse effect on the online marketplace lending industry to continue the work initiated by the RFI. The white paper includes several recommendations to the federal government and private sector participants to encourage safe growth and access to credit. We cannot predict whether any legislation or proposed rulemaking will actually be introduced or how any legislation or rulemaking will impact our ~~business and results of operations going forward.~~

In December 2015, the California Department of Business Oversight sent an online survey to fourteen marketplace lenders, including us, requesting information about our business model, online platform, loan performance and investor funding process. In May 2016, the DBO requested additional information from us and other survey participants. We submitted our response to this additional information in June 2016.

~~If the loans originated through our marketplace were found to violate a state’s usury laws, we may have to alter our business model and our business could be harmed.~~business.

The ~~interest rates that are charged~~Dodd-Frank Act and other legislation and regulations relating to ~~borrowers~~financial institutions and ~~that form~~markets, including alternative asset management funds, has resulted in increased oversight and taxation. However, the basis of payments to investors through our marketplace are enabled by legal principles including (i) the application of federal law to enable an issuing bank that originates the loan to export the interest rates of the jurisdiction where it is located, or (ii) the application of common law “choice of law” principles based upon factors such as the loan document’s termsrecent presidential and ~~where the loan transaction is completed to provide uniform rates to borrowers, or (iii) the application of principles that allow the transferee of a loan to continue to collect interest as provided~~congressional elections in the ~~loan document. WebBank, the primary issuing bank of the loans originated through our marketplace, is chartered~~United States could result in significant changes in, and ~~operates out of, Utah, which allows parties~~uncertainty with respect to, generally agree by contract to any interest rate. Certain states, including Utah, have no statutory interest rate limitations on personal loans, while other jurisdictions have a maximum rate. In some jurisdictions, the maximum rate is less than the current maximum rate offered by WebBank through our platform. If the laws of such jurisdictions were found to apply to the loans originated through our marketplace, those loans could be in violation of such laws.

~~In May 2015, the U.S. Court of Appeals for the Second Circuit issued its decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the National Bank Act~~legislation, regulation and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. The Second Circuit denied the defendant’s motion to reconsider the decision and remanded the case to address choice of law matters. The Second Circuit’s decision is binding on federal courts located in Connecticut, New York, and Vermont, but the decision could also be adopted by other courts. The defendant petitioned the U.S. Supreme Court to review the decision and in March 2016, the Court invited the Solicitor General to file a brief expressing the views of the U.S. on the petition. The Solicitor General filed an amicus brief that stated the Second Circuit decision was incorrect, but that the case was not yet ready to be heard by the Supreme Court. In June 2016, the Supreme Court declined to hear the case. The Federal District Court is not hearing the case in regards to Midland’s alternative claim regarding choice of laws, which if successful, could create potential liability under state statutes such as usury and consumer protection statutes. The petition was denied in June 2016.

government policy. There has been, ~~(and~~and may continue to ~~be)~~be, a related increase in regulatory investigations of the trading and other ~~litigation~~investment activities of alternative investment funds. Such investigations may impose additional expenses on us, may require the attention of senior management and may result in fines if any of our funds are deemed to have violated any regulations.

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

The Consumer Financial Protection Bureau ~~v. CashCall, Inc., et al (C.D. Cal August 31, 2016) engaged~~(CFPB) published a final rule on July 19, 2017, applicable to certain providers of consumer financial products or services that prevent a provider from using a mandatory arbitration clause to bar a consumer from filing or participating in ~~unfair, deceptive,~~a class action and abusive acts and practices by servicing and collecting loans that state licensing and state usury laws had rendered partially or wholly uncollectible. The court in that case held that to identify the true lenderrequires providers who invoke use of a ~~loan~~pre-dispute arbitration clause to submit certain arbitration and court records to the ~~totality~~CFPB within a specified time frame. After the compliance date of ~~the circumstances~~

~~LENDINGCLUB CORPORATION~~

~~and a “predominant economic interest” test should be considered. If a similar test were applied~~this rule, we may see an industry-wide increase in ~~a case regarding our platform, there is no assurance the court would determine that our issuing bank partners have the predominant economic interest in loans facilitated through our platform.~~

~~In April 2016, a putative~~ class ~~action lawsuit was~~actions filed ~~in federal court in New York, alleging that persons received loans, through our platform, that exceeded states' usury limits in violation~~against providers of ~~state usury and consumer protection laws, and the federal RICO statute.~~

If a borrower were to successfully bring claims against us for state usury law violations, and the rate on that borrower’s personal loan was greater than that allowed under applicable state law, we could be subject to fines and penalties, including the voiding of loans and repayment of principal and interest to borrowers and investors. We might decide to limit the maximum interest rate on certain loans originated through our marketplace, and we might decide to originate loans under state-specific licenses, where this ruling is applicable. These actions could adversely impact our business. Further, if we were unable to partner with another issuing bank, we would have to substantially modify our business operations from the manner currently contemplated and would be required to maintain state-specific licenses and only provide a limited range of interest rates for personal loans, all of which would substantially reduce our operating efficiency and attractiveness to investors and possiblyfinancial products or services. This may result in a ~~decline~~corresponding increase in cost for our ~~operating results.~~business to defend against alleged class actions. In addition, we may incur an increased cost for compliance with the CFPB reporting requirements.

The announcement of our internal board review and resignation of our former CEO has resulted in government inquiries, books and records demands and private litigation and could result in government enforcement actions and private litigation that could have a material adverse impact on our results of operations, result in substantial costs and divert management’s attention.

We are regularly subject to claims, lawsuits (including class actions and individual lawsuits), government investigations, and other proceedings in the ordinary course of business. The number and significance of these disputes and inquiries have increased as a result of our internal board review and resignation of our former CEO.

We have received a grand jury subpoena from the U.S. Department of Justice (“DOJ”) and have been contacted by the SEC and other governmental entities. We continue to cooperate with the DOJ, SEC and any other governmental or regulatory authorities or agencies. In the first and second quarter of 2016, several putative class action lawsuits and shareholder derivative actions were filed. The Company believes the plaintiffs’ actions are without merit and intends to vigorously defend against the claims. No assurance can be given as to the timing or outcome of these, or other matters. Responding to inquiries and lawsuits of this nature is costly and time-consuming to management, can generate negative publicity, and could have a material adverse impact on our results of operation. See “~~Part 1 - Financial Information - Item 1 - Financial Statements - Note 15 - Commitments and Contingencies - Legal” for additional information regarding these matters.~~

~~Any delay in the implementation of our technology systems could disrupt our operations and cause unanticipated increases in our costs~~.

We believe the technology platform that powers our online marketplace enables us to deliver innovative solutions to borrowers and investors and provides a significant time and cost advantage over traditional banks that run on legacy systems. The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to attract new and retain existing borrowers and investors. In addition, our future growth prospects are highly dependent on our ability to implement changes to our technology platform to support the future demands of our customers and industry. Our failure to implement changes to our technology platform and adapt to our customers’ changing technological needs and requirements or to hire and retain a sufficient number of engineers and maintain our engineering, and technological expertise could have a material adverse effect on our operations.

~~LENDINGCLUB CORPORATION~~

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

LENDINGCLUB CORPORATION

Item 6. Exhibits

Exhibit Index

The exhibits noted in the accompanying Exhibit Index are filed or incorporated by reference as a part of this Report and such Exhibit Index is incorporated herein by reference.



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
10.1	~~Form of Master Loan Purchase~~Whole Loans Backup Servicing Agreement					X
10.2	~~Form of Master Loan~~Fractional Loans Backup Servicing ~~Agreement~~					X
~~10.3~~	~~Form of Borrower Loan~~ Agreement					X
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase					X
101.LAB	XBRL Taxonomy Extension Label Linkbase					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase					X

LENDINGCLUB CORPORATION

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




		LENDINGCLUB CORPORATION
		(Registrant)

Date:	~~November 9, 2016~~August 8, 2017	/s/ SCOTT SANBORN
		Scott Sanborn
		Chief Executive Officer and President

Date:	~~November 9, 2016~~August 8, 2017	/s/ THOMAS W. CASEY
		Thomas W. Casey
		Chief Financial Officer

8870



	Three Months Ended September 30, 2016						Three Months Ended September 30, 2015
	Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities
Fair value at beginning of period	$	16,126		$	3,412		$	5,225		$	4,831
Issuances ⁽¹⁾	3,009			712			3,092			1,402
Change in fair value, included in servicing fees	(2,429		)	(727		)	(1,436		)	(1,839		)
Other net changes included in deferred revenue	(451		)	—			368			—
Fair value at end of period	$	16,255		$	3,397		$	7,249		$	4,394

	Nine Months Ended September 30, 2016						Nine Months Ended September 30, 2015
	Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities
Fair value at beginning of period	$	10,250		$	3,973		$	2,181		$	3,973
Issuances ⁽¹⁾	12,984			2,452			6,476			4,340
Change in fair value, included in servicing fees	(7,092		)	(3,028		)	(2,467		)	(3,919		)
Other net changes included in deferred revenue	113			—			1,059			—
Fair value at end of period	$	16,255		$	3,397		$	7,249		$	4,394



Three Months Ended September 30,	2016						2015
	Before Tax		Tax Effect		Net of Tax		Before Tax			Tax Effect		Net of Tax
Change in net unrealized income (loss) on securities available for sale	$	111	$	46	$	65	$	(341	)	$	—	$	(341	)
Other comprehensive income (loss)	$	111	$	46	$	65	$	(341	)	$	—	$	(341	)

Nine Months Ended September 30,	2016						2015
	Before Tax		Tax Effect		Net of Tax		Before Tax			Tax Effect		Net of Tax
Change in net unrealized income (loss) on securities available for sale	$	1,710	$	696	$	1,014	$	(1,172	)	$	—	$	(1,172	)
Other comprehensive income (loss)	$	1,710	$	696	$	1,014	$	(1,172	)	$	—	$	(1,172	)



	Total Accumulated Other Comprehensive Loss
Balance at December 31, 2015	$	(1,671	)
Change in net unrealized loss on securities available for sale	1,014
Balance at September 30, 2016	$	(657	)



	Number of Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2015	48,208,911		$	3.60
Granted	7,482,011		$	7.22
Exercised	(14,041,282	)	$	0.78
Forfeited/Expired	(8,686,702	)	$	6.61
Outstanding at September 30, 2016	32,962,938		$	4.83	7.0	$	81,007
Vested and expected to vest at September 30, 2016	32,837,306		$	4.83	7.0	$	80,920
Exercisable at September 30, 2016	19,488,544		$	3.52	6.1	$	67,646



	Number of RSUs		Weighted- Average Grant Date Fair Value
Unvested at December 31, 2015	4,443,399		$	15.23
RSUs granted	35,556,344		$	6.12
RSUs vested	(1,917,809	)	$	11.44
RSUs forfeited/expired	(4,003,552	)	$	9.13
Unvested at September 30, 2016	34,078,382		$	6.66
Expected to vest after September 30, 2016	33,386,970		$	9.47



	Three Months Ended						Change %
	September 30, 2016		June 30, 2016		September 30, 2015⁽¹⁾		Q3 2016 vs Q3 2015		Q3 2016 vs Q2 2016
Sales and marketing	$	44,901	$	49,737	$	44,018	2	%	(10	)%
Origination and servicing	16,332		20,934		16,732		(2	)%	(22	)%
Engineering and product development	29,428		29,209		21,063		40	%	1	%
Other general and administrative	58,940		53,457		32,280		83	%	10	%
Goodwill impairment	1,650		35,400		—		N/M		N/M
Total operating expenses	$	151,251	$	188,737	$	114,093	33	%	(20	)%



	Nine Months Ended September 30,
	2016		2015⁽¹⁾		Change (%)
Sales and marketing	$	161,213	$	117,989	37	%
Origination and servicing	56,464		43,639		29	%
Engineering and product development	82,835		53,175		56	%
Other general and administrative	150,432		86,937		73	%
Goodwill impairment	37,050		—		N/M
Total operating expenses	$	487,994	$	301,740	62	%



	September 30, 2015		December 31, 2015		March 31, 2016		June 30, 2016		September 30, 2016
Percentage of Loans Invested In by Ten Largest Investors (by $ invested)	58	%	58	%	51	%	62	%	72	%