UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20212022
Commission File Number: 001-36771
| | |
| LendingClub Corporation |
| (Exact name of registrant as specified in its charter) |
| | | | | |
| Delaware | 51-0605731 |
(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer
Identification No.) |
| |
| | | | | | | | | | | | | | |
| 595 Market Street, Suite 200, | |
| San Francisco, | CA | 94105 | |
| (Address of principal executive offices and zip code) |
Registrant’s telephone number, including area code: (415) 632-5600
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common stock, par value $0.01 per share | LC | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| | | | | | | | | | | | | | |
| Large accelerated filer | | ☐☒ | Accelerated filer | ☒☐ |
| Non-accelerated filer | | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | | ☐ | | |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2021,29, 2022, there were 97,228,126102,194,037 shares of the registrant’s common stock outstanding.
LENDINGCLUB CORPORATION
TABLE OF CONTENTS
Glossary
The following is a list of common acronyms and terms LendingClub Corporation regularly uses in its financial reporting:
| | | | | |
| |
| Acquisition | Acquisition of Radius Bancorp, Inc. |
| AFS | Available for Sale |
| ACL | Allowance for Credit Losses (includes both the allowance for loan and lease losses and the reserve for unfunded lending commitments) |
| ALLL | Allowance for Loan and Lease Losses |
| Annual Report | Annual Report on Form 10-K for the year ended December 31, 2021 |
| ASU | Accounting Standards Update |
| AUM | Assets Under Management (outstanding balances of Loan Originations serviced by the Company including loans sold to investors as well as loans held for investment and held for sale by the Company) |
| Balance Sheet | Condensed Consolidated Balance Sheets |
| LC Bank or LendingClub Bank | LendingClub Bank, National Association |
| CECL | Current Expected Credit Losses (Accounting Standards Update 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) |
| CET1 | Common Equity Tier 1 |
| CET1 Capital Ratio | Common Equity Tier 1 capital divided by total risk-weighted assets as defined under the U.S. Basel III capital framework |
| DCF | Discounted Cash Flow |
| |
| EPS | Net Income (Loss) Per Share |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| FRB or Federal Reserve | Board of Governors of the Federal Reserve System and, as applicable, Federal Reserve Bank(s) |
| GAAP | Accounting Principles Generally Accepted in the United States of America |
| HFI | Loans which are retained by the Company and held for investment |
| HFS | Held for sale loans expected to be sold to investors, including Marketplace Loans |
| Income Statement | Condensed Consolidated Statements of Operations |
| LendingClub, LC, the Company, we, us, or our | LendingClub Corporation and its subsidiaries |
| Loan Originations | Unsecured personal loans and auto refinance loans originated by the Company or facilitated by third-party issuing banks |
| Marketplace Loans | Loan Originations designated as HFS and subsequently sold to investors |
| |
| N/M | Not meaningful |
| Parent | LendingClub Corporation (the parent company of LendingClub Bank, National Association and other subsidiaries) |
| |
| PPP Loans | Loans originated pursuant to the U.S. Small Business Administration’s Paycheck Protection Program |
| |
| Radius | Radius Bancorp, Inc. |
| |
| |
| ROA | Return on Average Total Assets |
| ROE | Return on Average Equity |
| |
| SEC | United States Securities and Exchange Commission |
| Securities Act | Securities Act of 1933, as amended |
| |
| Structured Program transactions | Asset-backed securitization transactions and Certificate Program transactions (CLUB and Levered certificates), where certain accredited investors and qualified institutional buyers have the opportunity to invest in securities backed by a pool of unsecured personal whole loans. |
| |
| | | | | |
| Tier 1 Capital Ratio | Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by total risk-weighted assets as defined under the U.S. Basel III capital framework. |
| Tier 1 Leverage Ratio | Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by quarterly adjusted average assets as defined under the U.S. Basel III capital framework. |
| Total Capital Ratio | Total capital, which includes Common Equity Tier 1 capital, Tier 1 capital and allowance for credit losses and qualifying subordinated debt that qualifies as Tier 2 capital, divided by total risk-weighted assets as defined under the U.S. Basel III capital framework. |
| Unsecured personal loans | Unsecured personal loans originated on the Company’s platforms, including an online direct to consumer platform and a platform connected with a network of education and patient finance providers. |
| VIE | Variable Interest Entity |
Except as the context requires otherwise, as used herein, “LendingClub,” “Company,” “we,” “us,” and “our,” refer to LendingClub Corporation, a Delaware corporation, and, where appropriate, its consolidated subsidiaries and consolidated variable interest entities (VIEs), including:
•including LendingClub Bank, National Association (the(LC Bank)
•Various, and various entities established to facilitate loan sale transactions under LendingClub’s Structured Program, including sponsoring asset-backed securities transactions and Certificate Program transactions, where certain accredited investors and qualified institutional buyers have the opportunity to invest in senior and subordinated securities backed by a pool of unsecured personal whole loans.
•LC Trust I (the LC Trust), an independent Delaware business trust that acquires loans from LendingClub and holds them for the sole benefit of certain investors that have purchased trust certificates issued by the LC Trust and that are related to specific underlying loans for the benefit of the investor.Program.
Forward-LookingForward-looking Statements
This Quarterly Report on Form 10-Q (Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934.1934, as amended (Exchange Act). Forward-looking statements in this Report include, without limitation, statements regarding borrowers, credit scoring, our strategy, future operations, expected losses, future financial position, future revenue, projected costs, prospects, plans, objectives of management, expected market growth and the impact on our business. You can identify these forward-looking statements by words such as “anticipate,” “appear,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “opportunity,” “plan,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or similar expressions.
These forward-looking statements include, among other things, statements about:
•our ability to integrate theLC Bank and the timing and ability to realize the expected financial and strategic benefits of the acquisition;acquisition of Radius Bancorp, Inc.;
•our ability following our acquisition of the Bank, to attract new members, to expand our product offerings and services, to improve revenue and generate recurring earnings, to capture expense benefits, to increase resiliency, and to enhance regulatory clarity;
•our ability, and that of third-party partners or providers, to address stricter or heightened regulatory or supervisory requirements and expectations;
•our compliance, and that of third-party partners or providers, with applicable local, state and Federalfederal laws, regulations and regulatory developments or court decisions affecting our business;
•the impact of COVID-19 and our ability to effectuate, and the effectiveness of, certain operational and strategystrategic initiatives in light of COVID-19;
•our ability to successfully navigate the current economic climate;
•our ability to sustain the business under adverse circumstances;
•the effects of natural disasters, public health crises, acts of war or terrorism and other external events on our customers and business;business, including the Ukrainian-Russian conflict;
•the impact of changes in laws or the regulatory or supervisory environment, including as a result of legislation, regulation, policies or changes in government officials or other personnel;
•the impact of changes in monetary, fiscal, or trade laws or policies, including as a result of actions by governmental agencies, central banks, or supranational authorities;
•the impact of new accounting standards or policies, including the Current Expected Credit LossLosses (CECL) standard;
•the results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, increase our allowance for loan losses, increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits;
•our ability, and that of third-party partners or providers, to maintain an enterprise risk management framework that is effective in mitigating risk;
•our ability to effectively manage capital or liquidity to support our evolving business or operational needs, while remaining compliant with regulatory or supervisory requirements and appropriate risk-management standards;
•our ability to attract and retain loan borrowers;
•our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;
•the impact of changes in consumer spending, borrowing and saving habits;
•the impact of the continuation of or changes in the short-term and long-term interest rate environment;
•the ability of borrowers to repay loans and the plans of borrowers;
•our ability to maintain investor confidence in the operation of our platform;
•our ability to retain existing sources and secure new or additional sources of investor commitments for our platform;
•the performance of our loan products and expected rates of return for investors;
•platform volume, pricing and balance;
•the effectiveness of our platform’s credit scoring models;
•our ability to innovate and the adoption and success of new products and services;
•the adequacy of our corporate governance, risk-management framework and compliance programs;
•the impact of, and our ability to resolve, pending litigation and governmental inquiries and investigations;
•the use of our own capital to purchase loans and the impact of holding loans on and our ability to sell loans off our balance sheet;
•our financial condition and performance, including the impact that management’s estimates have on our financial performance and the relationship between the interim period and full year results;
•our ability, and that of third-party vendors,partners and providers, to maintain service and quality expectations;
•capital expenditures;
•our compliance with contractual obligations or restrictions;
•the potential impact of macro-economic developments, including recessions, inflation or other adverse circumstances;
•our ability to develop and maintain effective internal controls;
•our ability to recruit and retain quality employees to support current operations and future growth;
•changes in the effectiveness and reliability of our information technology and computer systems, including the impact of any security or privacy breach; the impact of expense initiatives and our ability to control our cost structure;
•our ability to manage and repay our indebtedness; and
•other risk factors listed from time to time in reports we file with the SEC.United States Securities and Exchange Commission (SEC).
We caution you that the foregoing list may not contain all of the forward-looking statements in this Report. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. We have included important factors in the “Risk Factors” section of this Report and our Annual Report on Form 10-K for the year ended December 31, 2020,2021, as well as in our condensed consolidated financial statements, related notes, and other information appearing elsewhere in this Report and our other filings with the Securities and Exchange Commission,SEC that could, among other things, cause actual results or events to differ materially from forward-looking statements contained in this Report. Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Report carefully and completely and with the understanding that actual future results may be materially different from what we expect. We do not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, actual results, future events or otherwise, other than as required by law.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LENDINGCLUB CORPORATION
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Assets (1) | Assets (1) | | Assets (1) | |
| Cash and due from banks | Cash and due from banks | $ | 34,261 | | | $ | 5,197 | | Cash and due from banks | $ | 30,986 | | | $ | 35,670 | |
| Interest-bearing deposits in banks | Interest-bearing deposits in banks | 797,539 | | | 519,766 | | Interest-bearing deposits in banks | 1,022,239 | | | 651,456 | |
| Total cash and cash equivalents | Total cash and cash equivalents | 831,800 | | | 524,963 | | Total cash and cash equivalents | 1,053,225 | | | 687,126 | |
Restricted cash (2)(1) | Restricted cash (2)(1) | 139,080 | | | 103,522 | | Restricted cash (2)(1) | 60,507 | | | 76,460 | |
| Securities available for sale at fair value (includes $273,331 and $159,164 at amortized cost, respectively) | 274,419 | | | 142,226 | | |
Loans held for sale at fair value (2) | 166,623 | | | 121,902 | | |
| Securities available for sale at fair value ($402,944 and $256,170 at amortized cost, respectively) | | Securities available for sale at fair value ($402,944 and $256,170 at amortized cost, respectively) | 390,317 | | | 263,530 | |
Loans held for sale (includes $156,730 and $142,370 at fair value, respectively) (1) | | Loans held for sale (includes $156,730 and $142,370 at fair value, respectively) (1) | 156,730 | | | 391,248 | |
| Loans and leases held for investment | Loans and leases held for investment | 2,115,432 | | | 0 | | Loans and leases held for investment | 3,422,296 | | | 2,899,126 | |
| Allowance for loan and lease losses | Allowance for loan and lease losses | (36,132) | | | 0 | | Allowance for loan and lease losses | (187,985) | | | (144,389) | |
| Loans and leases held for investment, net | Loans and leases held for investment, net | 2,079,300 | | | 0 | | Loans and leases held for investment, net | 3,234,311 | | | 2,754,737 | |
Retail and certificate loans held for investment at fair value (2)(1) | Retail and certificate loans held for investment at fair value (2)(1) | 507,157 | | | 636,686 | | Retail and certificate loans held for investment at fair value (2)(1) | 168,906 | | | 229,719 | |
Other loans held for investment at fair value (2)(1) | Other loans held for investment at fair value (2)(1) | 42,485 | | | 49,954 | | Other loans held for investment at fair value (2)(1) | 15,384 | | | 21,240 | |
| Property, equipment and software, net | Property, equipment and software, net | 95,313 | | | 96,641 | | Property, equipment and software, net | 111,503 | | | 97,996 | |
| Goodwill | Goodwill | 75,717 | | | 0 | | Goodwill | 75,717 | | | 75,717 | |
Other assets (2)(1) | Other assets (2)(1) | 279,195 | | | 187,399 | | Other assets (2)(1) | 307,825 | | | 302,546 | |
| Total assets | Total assets | $ | 4,491,089 | | | $ | 1,863,293 | | Total assets | $ | 5,574,425 | | | $ | 4,900,319 | |
Liabilities and Equity (1) | Liabilities and Equity (1) | | Liabilities and Equity (1) | |
| Deposits: | Deposits: | | Deposits: | |
| Interest-bearing | Interest-bearing | 2,229,827 | | | 0 | | Interest-bearing | $ | 3,715,847 | | | $ | 2,919,203 | |
| Noninterest-bearing | Noninterest-bearing | 143,610 | | | 0 | | Noninterest-bearing | 261,630 | | | 216,585 | |
| Total deposits | Total deposits | 2,373,437 | | | 0 | | Total deposits | 3,977,477 | | | 3,135,788 | |
| Short-term borrowings | Short-term borrowings | 90,091 | | | 104,989 | | Short-term borrowings | 13,188 | | | 27,780 | |
| Advances from Paycheck Protection Program Liquidity Facility (PPPLF) | Advances from Paycheck Protection Program Liquidity Facility (PPPLF) | 370,086 | | | 0 | | Advances from Paycheck Protection Program Liquidity Facility (PPPLF) | 193,371 | | | 271,933 | |
Retail notes, certificates and secured borrowings at fair value (2)(1) | Retail notes, certificates and secured borrowings at fair value (2)(1) | 507,203 | | | 636,774 | | Retail notes, certificates and secured borrowings at fair value (2)(1) | 168,906 | | | 229,719 | |
Payable on Structured Program borrowings (2)(1) | Payable on Structured Program borrowings (2)(1) | 133,499 | | | 152,808 | | Payable on Structured Program borrowings (2)(1) | 20,347 | | | 65,451 | |
| Other long-term debt | Other long-term debt | 18,572 | | | 0 | | Other long-term debt | 15,388 | | | 15,455 | |
Other liabilities (2)(1) | Other liabilities (2)(1) | 265,066 | | | 244,551 | | Other liabilities (2)(1) | 298,314 | | | 303,951 | |
| Total liabilities | Total liabilities | 3,757,954 | | | 1,139,122 | | Total liabilities | 4,686,991 | | | 4,050,077 | |
| Equity | Equity | | Equity | |
| Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 0 and 43,000 shares issued and outstanding, respectively | 0 | | | 0 | | |
| Common stock, $0.01 par value; 180,000,000 shares authorized; 97,228,126 and 88,149,510 shares issued and outstanding, respectively | 972 | | | 881 | | |
| Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 0 shares issued and outstanding | | Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 0 shares issued and outstanding | — | | | — | |
| Common stock, $0.01 par value; 180,000,000 shares authorized; 102,194,037 and 101,043,924 shares issued and outstanding, respectively | | Common stock, $0.01 par value; 180,000,000 shares authorized; 102,194,037 and 101,043,924 shares issued and outstanding, respectively | 1,022 | | | 1,010 | |
Additional paid-in capital | Additional paid-in capital | 1,563,865 | | | 1,508,020 | | Additional paid-in capital | 1,576,147 | | | 1,559,616 | |
| Accumulated deficit | Accumulated deficit | (833,298) | | | (786,214) | | Accumulated deficit | (676,594) | | | (717,430) | |
| Treasury stock, at cost; 4,251 and 0 shares, respectively | (92) | | | 0 | | |
| Accumulated other comprehensive income | 1,688 | | | 1,484 | | |
| | Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | (13,141) | | | 7,046 | |
| | Total equity | Total equity | 733,135 | | | 724,171 | | Total equity | 887,434 | | | 850,242 | |
| Total liabilities and equity | Total liabilities and equity | $ | 4,491,089 | | | $ | 1,863,293 | | Total liabilities and equity | $ | 5,574,425 | | | $ | 4,900,319 | |
(1)Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
(2) Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below.
The following table presents the assets and liabilities of consolidated VIEs, which are included in the Condensed Consolidated Balance Sheets (Balance Sheet) above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Assets of consolidated VIEs, included in total assets above | Assets of consolidated VIEs, included in total assets above | | Assets of consolidated VIEs, included in total assets above | |
| Restricted cash | Restricted cash | $ | 17,536 | | | $ | 15,983 | | Restricted cash | $ | 9,602 | | | $ | 13,462 | |
| Loans held for sale at fair value | Loans held for sale at fair value | 83,926 | | | 98,190 | | Loans held for sale at fair value | — | | | 41,734 | |
| Retail and certificate loans held for investment at fair value | Retail and certificate loans held for investment at fair value | 36,277 | | | 52,620 | | Retail and certificate loans held for investment at fair value | 6,733 | | | 10,281 | |
| Other loans held for investment at fair value | Other loans held for investment at fair value | 42,261 | | | 50,102 | | Other loans held for investment at fair value | 15,014 | | | 20,929 | |
| Other assets | Other assets | 936 | | | 1,270 | | Other assets | 322 | | | 584 | |
| Total assets of consolidated variable interest entities | $ | 180,936 | | | $ | 218,165 | | |
| Total assets of consolidated VIEs | | Total assets of consolidated VIEs | $ | 31,671 | | | $ | 86,990 | |
| Liabilities of consolidated VIEs, included in total liabilities above | Liabilities of consolidated VIEs, included in total liabilities above | | Liabilities of consolidated VIEs, included in total liabilities above | |
| Retail notes, certificates and secured borrowings at fair value | Retail notes, certificates and secured borrowings at fair value | $ | 36,277 | | | $ | 52,620 | | Retail notes, certificates and secured borrowings at fair value | $ | 6,733 | | | $ | 10,281 | |
| Payable on Structured Program borrowings | Payable on Structured Program borrowings | 133,499 | | | 152,808 | | Payable on Structured Program borrowings | 20,347 | | | 65,451 | |
| Other liabilities | Other liabilities | 522 | | | 729 | | Other liabilities | 83 | | | 467 | |
| Total liabilities of consolidated variable interest entities | $ | 170,298 | | | $ | 206,157 | | |
| Total liabilities of consolidated VIEs | | Total liabilities of consolidated VIEs | $ | 27,163 | | | $ | 76,199 | |
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
March 31, | | | Three Months Ended
March 31, | |
| | | 2021 | | 2020 | | | 2022 | | 2021 | |
Non-interest income (1): | | | |
| Non-interest income: | | Non-interest income: | | |
| Marketplace revenue | Marketplace revenue | $ | 81,727 | | | $ | 102,477 | | | Marketplace revenue | $ | 179,966 | | | $ | 81,727 | | |
| Other non-interest income | Other non-interest income | 5,607 | | | 4,511 | | | Other non-interest income | 9,891 | | | 5,607 | | |
| Total non-interest income | Total non-interest income | 87,334 | | | 106,988 | | | Total non-interest income | 189,857 | | | 87,334 | | |
| Interest income (1): | | | |
| Interest income: | | Interest income: | | |
| Interest on loans held for sale | Interest on loans held for sale | 5,157 | | | 27,376 | | | Interest on loans held for sale | 7,450 | | | 5,157 | | |
| Interest and fees on loans and leases held for investment | Interest and fees on loans and leases held for investment | 15,301 | | | 0 | | | Interest and fees on loans and leases held for investment | 91,442 | | | 15,301 | | |
| Interest on retail and certificate loans held for investment at fair value | Interest on retail and certificate loans held for investment at fair value | 20,262 | | | 35,376 | | | Interest on retail and certificate loans held for investment at fair value | 6,969 | | | 20,262 | | |
| Interest on other loans held for investment at fair value | Interest on other loans held for investment at fair value | 1,479 | | | 1,999 | | | Interest on other loans held for investment at fair value | 593 | | | 1,479 | | |
| Interest on securities available for sale | Interest on securities available for sale | 2,235 | | | 3,779 | | | Interest on securities available for sale | 4,511 | | | 2,235 | | |
| Other interest income | Other interest income | 156 | | | 881 | | | Other interest income | 688 | | | 156 | | |
| Total interest income | Total interest income | 44,590 | | | 69,411 | | | Total interest income | 111,653 | | | 44,590 | | |
| Interest expense (1): | | | |
| Interest expense: | | Interest expense: | | |
| Interest on deposits | Interest on deposits | 1,014 | | | 0 | | | Interest on deposits | 3,438 | | | 1,014 | | |
| Interest on short-term borrowings | Interest on short-term borrowings | 1,264 | | | 7,398 | | | Interest on short-term borrowings | 435 | | | 1,264 | | |
| Interest on retail notes, certificates and secured borrowings | Interest on retail notes, certificates and secured borrowings | 20,262 | | | 35,376 | | | Interest on retail notes, certificates and secured borrowings | 6,969 | | | 20,262 | | |
| Interest on Structured Program borrowings | Interest on Structured Program borrowings | 3,208 | | | 2,299 | | | Interest on Structured Program borrowings | 764 | | | 3,208 | | |
| Interest on other long-term debt | Interest on other long-term debt | 336 | | | 140 | | | Interest on other long-term debt | 367 | | | 336 | | |
| Total interest expense | Total interest expense | 26,084 | | | 45,213 | | | Total interest expense | 11,973 | | | 26,084 | | |
| Net interest income (1) | Net interest income (1) | 18,506 | | | 24,198 | | | Net interest income (1) | 99,680 | | | 18,506 | | |
| Total net revenue (1) | Total net revenue (1) | 105,840 | | | 131,186 | | | Total net revenue (1) | 289,537 | | | 105,840 | | |
| Provision for credit losses (1) | Provision for credit losses (1) | 21,493 | | | 10,980 | | | Provision for credit losses (1) | 52,509 | | | 21,493 | | |
| Non-interest expense (1): | | | |
| Non-interest expense: | | Non-interest expense: | | |
| Compensation and benefits | Compensation and benefits | 64,420 | | | 75,545 | | | Compensation and benefits | 81,610 | | | 64,420 | | |
| Marketing | Marketing | 19,545 | | | 39,081 | | | Marketing | 55,080 | | | 19,545 | | |
| Equipment and software | Equipment and software | 7,893 | | | 6,490 | | | Equipment and software | 11,046 | | | 7,893 | | |
| Occupancy | Occupancy | 6,900 | | | 6,813 | | | Occupancy | 6,019 | | | 6,900 | | |
| Depreciation and amortization | Depreciation and amortization | 11,766 | | | 12,873 | | | Depreciation and amortization | 11,039 | | | 11,766 | | |
| Professional services | Professional services | 11,603 | | | 14,141 | | | Professional services | 12,406 | | | 11,603 | | |
| Other non-interest expense | Other non-interest expense | 12,125 | | | 13,031 | | | Other non-interest expense | 14,004 | | | 12,125 | | |
| Total non-interest expense | Total non-interest expense | 134,252 | | | 167,974 | | | Total non-interest expense | 191,204 | | | 134,252 | | |
| | Loss before income tax expense | (49,905) | | | (47,768) | | | |
| Income tax expense (benefit) | (2,821) | | | 319 | | | |
| Consolidated net loss | $ | (47,084) | | | $ | (48,087) | | | |
| Net loss per share attributable to common stockholders – Basic and Diluted (2) | $ | (0.49) | | | $ | (1.10) | | | |
Weighted-average common shares – Basic and Diluted (2) | 92,666,169 | | | 86,505,560 | | | |
Net income (loss) per share attributable to preferred stockholders – Basic and Diluted (2) | $ | (0.49) | | | $ | 18.36 | | | |
Weighted-average common shares, as converted – Basic and Diluted (2) | 2,648,758 | | | 2,579,710 | | | |
| Income (Loss) before income tax benefit (expense) | | Income (Loss) before income tax benefit (expense) | 45,824 | | | (49,905) | | |
| Income tax benefit (expense) | | Income tax benefit (expense) | (4,988) | | | 2,821 | | |
| Consolidated net income (loss) | | Consolidated net income (loss) | $ | 40,836 | | | $ | (47,084) | | |
LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Operations (Continued)
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| | 2022 | | 2021 | | | | |
| Consolidated net income (loss) | $ | 40,836 | | | $ | (47,084) | | | | | |
Net income (loss) per share: (1) | | | | | | | |
| Basic EPS – common stockholders | $ | 0.40 | | | $ | (0.49) | | | | | |
| Diluted EPS – common stockholders | $ | 0.39 | | | $ | (0.49) | | | | | |
| Weighted-average common shares – Basic | 101,493,561 | | | 92,666,169 | | | | | |
| Weighted-average common shares – Diluted | 105,052,904 | | | 92,666,169 | | | | | |
| | | | | | | |
| Basic EPS – preferred stockholders | $ | 0.00 | | | $ | (0.49) | | | | | |
| Diluted EPS – preferred stockholders | $ | 0.00 | | | $ | (0.49) | | | | | |
| Weighted-average common shares, as converted – Basic | — | | | 2,648,758 | | | | | |
| Weighted-average common shares, as converted – Diluted | — | | | 2,648,758 | | | | | |
(1)Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
(2) See “Notes to Condensed Consolidated Financial Statements – Note 4.3. Net Income (Loss) Per Share” for additional information.
See Notes to Condensed Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| Consolidated net loss | $ | (47,084) | | | $ | (48,087) | | | | | |
| Other comprehensive income (loss), before tax: | | | | | | | |
| Net unrealized gain (loss) on securities available for sale | 204 | | | (20,681) | | | | | |
| Other comprehensive income (loss), before tax | 204 | | | (20,681) | | | | | |
| Income tax effect | 0 | | | (319) | | | | | |
| Other comprehensive income (loss), net of tax | 204 | | | (20,362) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total comprehensive loss | $ | (46,880) | | | $ | (68,449) | | | | | |
See Notes to Condensed Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2022 | | 2021 | | | | |
| Consolidated net income (loss) | $ | 40,836 | | | $ | (47,084) | | | | | |
| Other comprehensive income (loss): | | | | | | | |
| Net unrealized gain (loss) on securities available for sale | (19,987) | | | 204 | | | | | |
| Other comprehensive income (loss), before tax | (19,987) | | | 204 | | | | | |
| Income tax effect | 200 | | | — | | | | | |
| Other comprehensive income (loss), net of tax | (20,187) | | | 204 | | | | | |
| Total comprehensive income (loss) | $ | 20,649 | | | $ | (46,880) | | | | | |
See Notes to Condensed Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Changes in Equity
(In Thousands, Except Share Data)
(Unaudited)
| | | | | | Preferred Stock | | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Accumulated
Deficit | | Total
Equity |
| | | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | |
Balance at
December 31, 2021 | | Balance at
December 31, 2021 | — | | | $ | — | | | 101,043,924 | | | $ | 1,010 | | | $ | 1,559,616 | | | — | | | $ | — | | | $ | 7,046 | | | $ | (717,430) | | | $ | 850,242 | |
| Stock-based compensation | | Stock-based compensation | — | | | — | | | — | | | — | | | 17,187 | | | — | | | — | | | — | | | — | | | 17,187 | |
Net issuances under equity incentive plans, net of tax (1) | | Net issuances under equity incentive plans, net of tax (1) | — | | | — | | | 1,150,113 | | | 12 | | | (656) | | | — | | | — | | | — | | | — | | | (644) | |
| | Net unrealized loss on securities available for sale, net of tax | | Net unrealized loss on securities available for sale, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (20,187) | | | — | | | (20,187) | |
| Net income | | Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 40,836 | | | 40,836 | |
Balance at
March 31, 2022 | | Balance at
March 31, 2022 | — | | | $ | — | | | 102,194,037 | | | $ | 1,022 | | | $ | 1,576,147 | | | — | | | $ | — | | | $ | (13,141) | | | $ | (676,594) | | | $ | 887,434 | |
| | | | | Preferred Stock | | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Accumulated
Deficit | | | Total
Equity | | Preferred Stock | | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Accumulated Other Comprehensive Income | | Accumulated
Deficit | | Total
Equity |
| | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Total
Equity | | Shares | | Amount | | Shares | | Amount | | Additional
Paid-in
Capital | | Shares | | Accumulated Other Comprehensive Income | | Accumulated
Deficit | |
Balance at
December 31, 2020 | Balance at
December 31, 2020 | 43,000 | | | $ | 0 | | | 88,149,510 | | | $ | 881 | | | $ | 1,508,020 | | | 0 | | | $ | 0 | | | $ | 1,484 | | | $ | (786,214) | | | | $ | 724,171 | | Balance at
December 31, 2020 | 43,000 | | | $ | — | | | $ | 881 | | | $ | 1,457,816 | | | $ | 1,484 | | | $ | (736,010) | | | $ | 724,171 | |
| Stock-based compensation | Stock-based compensation | — | | | — | | | — | | | — | | | 15,765 | | | — | | | — | | | — | | | — | | | | 15,765 | | Stock-based compensation | — | | | — | | | — | | | — | | | 15,765 | | | — | | | — | | | — | | | — | | | 15,765 | |
Net issuances under equity incentive plans, net of tax (1) | Net issuances under equity incentive plans, net of tax (1) | — | | | — | | | 1,017,502 | | | 10 | | | (1,301) | | | 4,251 | | | (92) | | | — | | | — | | | | (1,383) | | Net issuances under equity incentive plans, net of tax (1) | — | | | — | | | 1,017,502 | | | 10 | | | (1,301) | | | 4,251 | | | (92) | | | — | | | — | | | (1,383) | |
Net issuances of stock related to acquisition (2) | Net issuances of stock related to acquisition (2) | 0 | | | 0 | | | 3,761,114 | | | 38 | | | 41,424 | | | — | | | — | | | — | | | — | | | | 41,462 | | Net issuances of stock related to acquisition (2) | — | | | — | | | 3,761,114 | | | 38 | | | 41,424 | | | — | | | — | | | — | | | — | | | 41,462 | |
Exchange of preferred stock for common stock (3) | (43,000) | | | — | | | 4,300,000 | | | 43 | | | (43) | | | 0 | | | 0 | | | — | | | — | | | | — | | |
| Exchange of preferred stock for common stock | | Exchange of preferred stock for common stock | (43,000) | | | — | | | 4,300,000 | | | 43 | | | (43) | | | — | | | — | | | — | | | — | | | — | |
| | Net unrealized gain on securities available for sale, net of tax | Net unrealized gain on securities available for sale, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 204 | | | — | | | | 204 | | Net unrealized gain on securities available for sale, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 204 | | | — | | | 204 | |
| Net loss | Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (47,084) | | | | (47,084) | | Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (47,084) | | | (47,084) | |
Balance at
March 31, 2021 | Balance at
March 31, 2021 | 0 | | | $ | 0 | | | 97,228,126 | | | $ | 972 | | | $ | 1,563,865 | | | 4,251 | | | $ | (92) | | | $ | 1,688 | | | $ | (833,298) | | | | $ | 733,135 | | Balance at
March 31, 2021 | — | | | $ | — | | | 97,228,126 | | | $ | 972 | | | $ | 1,513,661 | | | 4,251 | | | $ | (92) | | | $ | 1,688 | | | $ | (783,094) | | | $ | 733,135 | |
| | | | Preferred Stock | | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Accumulated
Deficit | | Total
Equity |
| | | Preferred Stock | | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Accumulated
Deficit | | | Total
Equity | | | Amount | | Additional
Paid-in
Capital | | Shares | | Amount | | Accumulated Other Comprehensive Loss | | Accumulated
Deficit | | Total
Equity |
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | | Total
Equity | |
Balance at
December 31, 2019 | Balance at
December 31, 2019 | 0 | | | $ | 0 | | | 88,757,406 | | | $ | 892 | | | $ | 1,467,882 | | | 461,391 | | | $ | (19,550) | | | $ | (565) | | | $ | (548,472) | | | | $ | 900,187 | | Balance at
December 31, 2019 | — | | | $ | — | | | 88,757,406 | | | $ | 892 | | | $ | 1,467,882 | | | 461,391 | | | $ | (19,550) | | | $ | (565) | | | $ | (548,472) | | | $ | 900,187 | |
| Stock-based compensation | Stock-based compensation | — | | | — | | | — | | | — | | | 19,699 | | | — | | | — | | | — | | | — | | | | 19,699 | | Stock-based compensation | — | | | — | | | — | | | — | | | 19,699 | | | — | | | — | | | — | | | — | | | 19,699 | |
Net issuances under equity incentive plans, net of tax (1) | Net issuances under equity incentive plans, net of tax (1) | — | | | — | | | 674,689 | | | 7 | | | (4,623) | | | 5,658 | | | (71) | | | — | | | — | | | | (4,687) | | Net issuances under equity incentive plans, net of tax (1) | — | | | — | | | 674,689 | | | 7 | | | (4,623) | | | 5,658 | | | (71) | | | — | | | — | | | (4,687) | |
Net issuances of preferred stock in exchange for common stock (3) | 195,628 | | | 2 | | | (19,562,881) | | | (196) | | | 194 | | | — | | | — | | | — | | | (50,204) | | | | (50,204) | | |
| Issuance of preferred stock in exchange for common stock | | Issuance of preferred stock in exchange for common stock | 195,628 | | | 2 | | | (19,562,881) | | | (196) | | | (50,010) | | | — | | | — | | | — | | | — | | | (50,204) | |
| Retirement of treasury stock | Retirement of treasury stock | — | | | — | | | — | | | (4) | | | (19,617) | | | (467,049) | | | 19,621 | | | — | | | — | | | | — | | Retirement of treasury stock | — | | | — | | | — | | | (4) | | | (19,617) | | | (467,049) | | | 19,621 | | | — | | | — | | | — | |
| Net unrealized loss on securities available for sale, net of tax | Net unrealized loss on securities available for sale, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (20,362) | | | — | | | | (20,362) | | Net unrealized loss on securities available for sale, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (20,362) | | | — | | | (20,362) | |
| Net loss | Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (48,087) | | | | (48,087) | | Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (48,087) | | | (48,087) | |
Balance at
March 31, 2020 | 195,628 | | | $ | 2 | | | 69,869,214 | | | $ | 699 | | | $ | 1,463,535 | | | 0 | | | $ | 0 | | | $ | (20,927) | | | $ | (646,763) | | | | $ | 796,546 | | |
Balance at March 31, 2020 (3) | | Balance at March 31, 2020 (3) | 195,628 | | | $ | 2 | | | 69,869,214 | | | $ | 699 | | | $ | 1,413,331 | | | — | | | $ | — | | | $ | (20,927) | | | $ | (596,559) | | | $ | 796,546 | |
(1) Includes shares that were transferred to the Company to satisfy payment of all or a portion of the exercise price in connection with the exercise of stock options.
(2) Stock issued as part of the consideration paid related to the acquisitionAcquisition.
(3) The first quarter of Radius.2020 is presented to reflect the full retrospective adoption of Accounting Standards Update (ASU) 2020-06. See “Note 2. Business Acquisition.1. Summary of Significant Accounting Policies”
(3) Includes a payment of $50.2 million that was recorded as a deemed dividend within accumulated deficit related to the beneficial conversion feature of the Series A Preferred Stock issued on March 20, 2020, which would convert into common stock upon a sale by the preferred stockholder to a third party.
See Notes to Condensed Consolidated Financial Statements.
LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
| | | Three Months Ended
March 31, | | Three Months Ended
March 31, |
| | | 2021 | | 2020 | | 2022 | | 2021 |
Cash Flows from Operating Activities: (1) | Cash Flows from Operating Activities: (1) | | Cash Flows from Operating Activities: (1) | |
| Consolidated net loss | $ | (47,084) | | | $ | (48,087) | | |
| Adjustments to reconcile consolidated net loss to net cash used for operating activities: | | |
| Consolidated net income (loss) | | Consolidated net income (loss) | $ | 40,836 | | | $ | (47,084) | |
| Adjustments to reconcile consolidated net income (loss) to net cash provided by (used for) operating activities: | | Adjustments to reconcile consolidated net income (loss) to net cash provided by (used for) operating activities: | |
| Net fair value adjustments | Net fair value adjustments | 5,321 | | | 89,786 | | Net fair value adjustments | (15,249) | | | 5,321 | |
| Provision for credit losses | Provision for credit losses | 21,493 | | | 10,980 | | Provision for credit losses | 52,509 | | | 21,493 | |
| Change in fair value of loan servicing assets | Change in fair value of loan servicing assets | 11,837 | | | 9,608 | | Change in fair value of loan servicing assets | 16,979 | | | 11,837 | |
| Accretion of loan deferred fees and costs(1) | | Accretion of loan deferred fees and costs(1) | (19,252) | | | (3,273) | |
| Stock-based compensation, net | Stock-based compensation, net | 14,801 | | | 18,129 | | Stock-based compensation, net | 15,694 | | | 14,801 | |
| | Depreciation, amortization, and accretion | 11,450 | | | 13,730 | | |
Depreciation and amortization(1) | | Depreciation and amortization(1) | 11,039 | | | 11,766 | |
| Gain on sales of loans | Gain on sales of loans | (8,323) | | | (14,261) | | Gain on sales of loans | (24,110) | | | (8,323) | |
Other, net | Other, net | 2,548 | | | 1,455 | | Other, net | 1,559 | | | 5,505 | |
| | Net change to loans held for sale | Net change to loans held for sale | (42,786) | | | (191,496) | | Net change to loans held for sale | (29,601) | | | (42,786) | |
| | Net change in operating assets and liabilities: | Net change in operating assets and liabilities: | | Net change in operating assets and liabilities: | |
| | Other assets | Other assets | (10,290) | | | (4,918) | | Other assets | 443 | | | (10,290) | |
| | Other liabilities | Other liabilities | (10,333) | | | (101,373) | | Other liabilities | (10,174) | | | (10,333) | |
| | Net cash used for operating activities | (51,366) | | | (216,447) | | |
| Net cash provided by (used for) operating activities | | Net cash provided by (used for) operating activities | 40,673 | | | (51,366) | |
Cash Flows from Investing Activities: (1) | Cash Flows from Investing Activities: (1) | | Cash Flows from Investing Activities: (1) | |
| Acquisition of company | Acquisition of company | (145,344) | | | 0 | | Acquisition of company | — | | | (145,344) | |
| Cash received from acquisition | Cash received from acquisition | 668,236 | | | 0 | | Cash received from acquisition | — | | | 668,236 | |
| Net increase in loans and leases | (502,387) | | | (101,852) | | |
| Net change in loans and leases | | Net change in loans and leases | (258,829) | | | (502,387) | |
| Net decrease in retail and certificate loans | Net decrease in retail and certificate loans | 138,288 | | | 228,057 | | Net decrease in retail and certificate loans | 64,280 | | | 138,288 | |
| | Purchases of securities available for sale | Purchases of securities available for sale | (9,911) | | | (34,909) | | Purchases of securities available for sale | (166,123) | | | (9,911) | |
| Proceeds from sales of securities available for sale | Proceeds from sales of securities available for sale | 106,192 | | | 2,396 | | Proceeds from sales of securities available for sale | — | | | 106,192 | |
| Proceeds from maturities and paydowns of securities available for sale | Proceeds from maturities and paydowns of securities available for sale | 34,239 | | | 61,038 | | Proceeds from maturities and paydowns of securities available for sale | 24,990 | | | 34,239 | |
| Purchases of property, equipment and software, net | Purchases of property, equipment and software, net | (6,365) | | | (11,435) | | Purchases of property, equipment and software, net | (21,575) | | | (6,365) | |
| | Other investing activities | Other investing activities | 4,960 | | | 100 | | Other investing activities | (2,967) | | | 4,960 | |
| | Net cash provided by investing activities | 287,908 | | | 143,395 | | |
| Net cash (used for) provided by investing activities | | Net cash (used for) provided by investing activities | (360,224) | | | 287,908 | |
Cash Flows from Financing Activities: (1) | Cash Flows from Financing Activities: (1) | | Cash Flows from Financing Activities: (1) | |
| Net change in demand deposits and savings accounts | Net change in demand deposits and savings accounts | 343,787 | | | 0 | | Net change in demand deposits and savings accounts | 841,689 | | | 343,787 | |
| Principal payments on advances from PPPLF | (50,876) | | | 0 | | |
| Proceeds from issuance of retail notes and certificates | 0 | | | 104,620 | | |
| | Repayment on PPPLF | | Repayment on PPPLF | (78,562) | | | (50,876) | |
| | Net decrease in retail notes and certificates | (138,376) | | | (229,002) | | |
| | Principal payments on retail notes and certificates | | Principal payments on retail notes and certificates | (64,358) | | | (138,376) | |
| | | Principal payments on Structured Program borrowings | Principal payments on Structured Program borrowings | (22,391) | | | (6,911) | | Principal payments on Structured Program borrowings | (9,356) | | | (22,391) | |
| Proceeds from issuance of notes and certificates from Structured Program transactions | 0 | | | 186,190 | | |
| Proceeds from short-term borrowings | 0 | | | 979,539 | | |
| | Principal payments on short-term borrowings | Principal payments on short-term borrowings | (24,908) | | | (946,038) | | Principal payments on short-term borrowings | (14,732) | | | (24,908) | |
| | Deemed dividend paid to preferred stockholder | 0 | | | (50,204) | | |
| | Other financing activities | Other financing activities | (1,383) | | | (18,672) | | Other financing activities | (4,984) | | | (1,383) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 105,853 | | | 19,522 | | Net cash provided by financing activities | 669,697 | | | 105,853 | |
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $ | 342,395 | | | $ | (53,530) | | |
| Net Increase in Cash, Cash Equivalents and Restricted Cash | | Net Increase in Cash, Cash Equivalents and Restricted Cash | 350,146 | | | 342,395 | |
| Cash, Cash Equivalents and Restricted Cash, Beginning of Period | | Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 763,586 | | | 628,485 | |
| Cash, Cash Equivalents and Restricted Cash, End of Period | | Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 1,113,732 | | | $ | 970,880 | |
|
LENDINGCLUB CORPORATION
Condensed Consolidated Statements of Cash Flows (Continued)
(In Thousands)
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| | 2021 | | 2020 |
| Cash, Cash Equivalents and Restricted Cash, Beginning of Period | $ | 628,485 | | | $ | 487,122 | |
| Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 970,880 | | | $ | 433,592 | |
| Supplemental Cash Flow Information: | | | |
| Cash paid for interest | $ | 22,645 | | | $ | 43,559 | |
| Cash paid for operating leases included in the measurement of lease liabilities | $ | 4,291 | | | $ | 4,383 | |
| Non-cash investing activity: | | | |
| Net securities retained from Structured Program transactions | $ | 0 | | | $ | 44,260 | |
| Accruals for property, equipment and software | $ | 0 | | | $ | 2,439 | |
| | | |
| Non-cash investing and financing activity: | | | |
| Transfer of whole loans to redeem certificates | $ | 0 | | | $ | 17,414 | |
| Net issuances of stock related to acquisition | $ | 41,462 | | | $ | 0 | |
| Non-cash financing activity: | | | |
| Exchange of common stock for preferred stock | $ | 0 | | | $ | 207,244 | |
| | | |
| | | |
| | | |
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| | 2022 | | 2021 |
| Supplemental Cash Flow Information: | | | |
| Cash paid for interest | $ | 10,223 | | | $ | 22,645 | |
| Cash paid for operating leases included in the measurement of lease liabilities | $ | 4,895 | | | $ | 4,291 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Non-cash investing and financing activity: | | | |
| | | |
| Net issuances of stock related to acquisition | $ | — | | | $ | 41,462 | |
| Non-cash financing activity: | | | |
| Derecognition of payable to securitization note and residual certificate holders held in consolidated VIE | $ | 36,072 | | | $ | — | |
| | | |
| | | |
| | | |
(1)Prior period amounts have been reclassified to conform to the current period presentation.See “Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
The following presents cash, cash equivalents and restricted cash by category within the Condensed Consolidated Balance Sheets:Sheet:
| | | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 831,800 | | | $ | 524,963 | | Cash and cash equivalents | $ | 1,053,225 | | | $ | 687,126 | |
| Restricted cash | Restricted cash | 139,080 | | | 103,522 | | Restricted cash | 60,507 | | | 76,460 | |
| Total cash, cash equivalents and restricted cash | Total cash, cash equivalents and restricted cash | $ | 970,880 | | | $ | 628,485 | | Total cash, cash equivalents and restricted cash | $ | 1,113,732 | | | $ | 763,586 | |
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. Summary of Significant Accounting Policies
Basis of Presentation
LendingClub Corporation (LendingClub) was founded in 2006 to transform the banking industry by leveraging technology, data science and a marketplace model. LendingClub started by bringing a traditional credit product, the installment loan, into the digital age and became the largest provider of unsecured personal loans in the United States. On February 1, 2021, LendingClub Corporation (LendingClub) completed the acquisition (the Acquisition) of Radius Bancorp, Inc. (Radius), whereby LendingClub became a bank holding company and formed LendingClub Bank, National Association (the(LC Bank) as its wholly-owned subsidiary, through which it nowsubsidiary. The Company operates the vast majority of its business. Withbusiness through LC Bank, as a lender and originator of loans and as a regulated bank in the acquisition, LendingClub combined the complementary strengths of its digital lending capabilities with an award-winning digital bank.United States.
The accompanying unaudited condensed consolidated financial statements include LendingClub, its subsidiaries (collectively referred to as the Company, we, or us) and consolidated variable interest entities (VIEs). All intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and, in the opinion of management, contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the results and financial position for the periods presented. These accounting principles require management to make certain estimates and assumptions that affect the amounts in the accompanying financial statements. These estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. Results reported in interim periods are not necessarily indicative of results for the full year or any other interim period.
The acquisition significantly changed the presentation of the Company’s financial statements, which are now structured according to the presentation requirements for bank holding companies under Article 9 of the SEC’s Regulation S-X. Prior period amounts in the financial statements and related footnotes have been reclassified to conform to the current period presentation. See “Note 2. Business Acquisition” for detail illustrating the reclassification adjustments made to align with the current presentation.
The accompanying interim condensed consolidated financial statements and these related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 (Annual Report) filed on MarchFebruary 11, 2021.2022.
Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Part II – Item 8 –8. Financial Statements and Supplementary Data – Note 2.1. Summary of Significant Accounting Policies” in the Annual Report. There have been no changes to these significant accounting policies for the three month period ended March 31, 2021, except as noted below.2022.
Loans and Leases
The Company initially classifies loans and leases as either loans held for sale or loans held for investment based on management’s assessment of the Company’s intent and ability to hold the loans for the foreseeable future or until maturity. Management’s intent and ability with respect to certain loans may change from time to time depending on a number of factors, for example economic, liquidity, and capital conditions. In order to reclassify loans to held for sale, management must have the intent to sell the loans and reasonably identify the specific loans to be sold.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Loans classified as held for investment are reported at their amortized cost basis, which includes the principal amount outstanding, net of unamortized deferred fees and costs on originated loans, unamortized premiums and discounts on purchased loans, unless the fair value option was elected, in which case those loans are carried at fair value. Leases are reported at their net investment in the lease which includes the gross lease receivable and residual value, net of unearned income, unamortized deferred fees and costs on originated leases, and unamortized premiums and discounts on purchased leases. Deferred origination fees and costs, and premiums and discounts on purchased loans, are amortized over the contractual life of the related loan and leases as interest income using the effective interest method. Accrued interest receivable on loans and leases is included in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.
For loans and leases held for investment at amortized cost, accrued interest income is calculated based on the contractual interest rate of the loan and recorded as interest income as earned. The accrual of interest and amortization of net deferred origination costs and fees is discontinued and the loan or lease is placed on nonaccrual status when the collectability of principal, interest or lease receivable is uncertain or payments of principal, interest or lease receivables have become past due 90 days or more. Past due status is based on the contractual terms. When a loan or lease held for investment is placed on nonaccrual status, all income previously accrued but not collected is reversed against the current period’s income. Because the Company has a nonaccrual policy which results in the timely reversal of past-due accrued interest, it does not record an allowance for expected credit losses on accrued interest receivable. Interest received on nonaccrual loans and leases is either applied against the principal balance or reported as income depending on management’s judgment as to the collectability of principal. Nonaccrual loans and leases are returned to accrual status when there no longer exists concern over collectability, the borrower has demonstrated, over time, both the intent and ability to repay and the loan or lease has been brought current and future payments are reasonably assured.
The Company has elected the fair value option for loans originated and held for sale. Changes in the fair value of loans held for sale are recorded in “Marketplace revenue” in the Condensed Consolidated Statements of Operations in the period of the fair value changes. Origination fees are recognized in earnings within “Marketplace revenue” in the Condensed Consolidated Statements of Operations when received from the borrower at the time of origination. Accrued interest income on loans held for sale is calculated based on the contractual interest rate of the loan and recorded as interest income as earned. The Company places loans held for sale on nonaccrual status at 90 days past due. When a loan held for sale is placed on nonaccrual status, the Company stops accruing interest and reverses all accrued but unpaid interest as of such date. The Company charges off loans held for sale no later than 120 days past due.
Allowance for Expected Credit Losses
The allowance for expected credit losses for loans and leases, and reserve for unfunded lending commitments (collectively the allowance for expected credit losses (ACL)), are valuation reserves that represent the Company’s best estimate of expected credit losses (ECL) on the Company’s assets measured at amortized cost and unfunded lending commitments. The allowance for expected credit losses is measured based on a lifetime expected loss model, which does not require a loss event to occur before a credit loss is recognized. Under the lifetime expected credit loss model, the Company estimates the allowance based on relevant available information related to past events, current conditions, and reasonable and supportable forecasts of future economic conditions.
The Company evaluates its estimate of expected credit losses each reporting period and records any additions to the allowance on the Condensed Consolidated Statements of Operations as a provision for credit losses. Any write-offs of amounts determined to be uncollectible are charged to the allowance. Estimates of expected credit losses include expected recoveries of amounts previously written-off and expected to be written-off. There could be instances where including expected recoveries of previously written-off loans in the estimate of expected credit losses may result in a negative allowance.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The allowance for expected credit losses is measured on a collective basis when loans share similar risk characteristics. Relevant risk characteristics for the consumer portfolio include product type, loan term, and monthly vintage. Relevant risk characteristics for the commercial portfolio include product type and purchased credit deteriorated (PCD) status. Loans measured on a collective basis generally have an allowance for expected credit losses which are made up of a quantitative, or modeled, component, and a qualitative component.
The Company will continue to monitor its loan pools on an ongoing basis and adjust accordingly as the risk characteristics of the financial assets may change over time. If a given financial asset does not share similar risk characteristics with other financial assets, the Company shall measure ECL on an individual, rather than on a collective basis. Loans measured on an individual basis generally have an allowance for expected credit losses which is measured in reference to any collateral securing the loan and/or expected cash flows which are specific to the borrower.
Allowance Calculation Methodology
The Company generally estimates ECL over the contractual term of its loans. The contractual term is adjusted for expected prepayments when appropriate. Expected renewals and extensions do not adjust the contractual term unless the extension or renewal option is through a troubled debt restructuring (TDR) that is reasonably expected to occur or represents an unconditionally cancellable option held by the borrower.
The quantitative, or modeled, component of the ACL is primarily based on statistical models that use known or estimated data as of the balance sheet date and forecasted data over the reasonable and supportable period. Known and estimated data include current probability of default, loss given default and exposure at default, timing and amount of expected prepayments, timing and amount of expected draws (for unfunded lending commitments), and relevant risk characteristics. Certain of the Company’s portfolios have limited historical loss data available internally. For these portfolios, the Company uses external credit loss information from the FDIC Call Report and Small Business Administration (SBA) data, which includes historical charge-off and balance data for peer banking institutions.
The Company obtains historical macroeconomic data dating back to 2004 from the St. Louis Federal Reserve Economic Database (FRED) and Moody’s Analytics to inform its view of the long-term condition of the economy. Forward-looking macroeconomic factors considered in the Company’s statistical models include Gross Domestic Product (GDP), unemployment rate, housing prices, and retail sales. Forward-looking macroeconomic factors are incorporated into the Company’s models for a two-year reasonable and supportable economic forecast period followed by a one-year reversion period during which expected credit losses are expected to revert back on a straight-line basis to historical losses unadjusted for economic conditions. The reasonable and supportable economic forecast period and reversion methodology are accounting estimates which may change in future periods as a result of changes to the current macroeconomic environment.
The Company’s statistical models produce expected cash flows, which are then discounted at the effective interest rate to derive net present value. This net present value is then compared to the amortized cost basis to derive the expected credit losses. As a result, the quantitative, or modeled, portion of ACL is estimated using a discounted cash flow (DCF) approach.
The Company also considers the need for qualitative adjustments to the modeled estimate of expected credit losses. For this purpose, the Company established a qualitative factor framework to periodically assess qualitative adjustments to address certain identified elements that are not directly captured by the expected credit loss models. These factors may include the impact of risk rating downgrades, changes in credit policies, problem loan trends,
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
identification of new risks not incorporated into the modeling framework, credit concentrations, changes in lending management and other external factors.
Zero Credit Loss Expectation Exception
The Company has a zero loss expectation when the loans, or portions thereof, are issued or guaranteed by certain U.S. government entities or agencies, and those entities or agencies have a long history of no defaults and the highest credit ratings issued by rating agencies. Loans held for investment which meet this criterion do not have an allowance for expected credit losses.
Reserve for Unfunded Lending Commitments
The Company also estimates expected credit losses associated with off-balance sheet commitments such as commitments to extend credit and unused lines of credit. The Company estimates these expected credit losses for the unfunded portion of the commitments that are not unconditionally cancellable depending on the likelihood that funding will occur. The reserve for unfunded lending commitments is reported as a liability within “Other liabilities” on the Company’s Condensed Consolidated Balance Sheets.
Individually Assessed Loans
Loans whose terms have been modified in a troubled debt restructuring (TDR) and collateral-dependent financial assets are individually assessed for purposes of measuring expected credit losses. The allowance for expected credit losses on loans modified in a TDR is calculated using the discounted cash flow approach and is recorded as the difference between the amortized cost basis and the expected future cash flows. For purposes of discounting, the Company uses the original effective interest rate of the TDR loan.
For loans that are determined to be collateral dependent, the allowance for expected credit losses is determined using the fair value of the collateral method. Loans are considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially through sale or operation of the collateral. For such loans, the allowance is calculated as the difference between the amortized cost basis and the fair value of the underlying collateral less costs to sell, if applicable.
Purchased Credit Deteriorated Assets
PCD assets are acquired financial assets (or groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer’s assessment. The Company considers indicators such as loan rating, FICO score, days past due status, nonaccrual status, TDR status, charge-off status, bankruptcy, purchased credit impaired (PCI) status from prior acquisition, COVID-19 modification or industry risk rating to determine whether an acquired asset meets the definition of PCD.
PCD assets are recorded on the acquisition date at their purchase price plus any related initial ACL, which results in a “gross-up” of the asset’s initial amortized cost basis. Recognition of the initial ACL upon acquisition for PCD assets does not impact net income. Subsequent to the acquisition date, any changes in the ACL are recorded through the provision for credit losses on the income statement. Acquired non-PCD assets are accounted for in a manner similar to originated financial assets, whereby any initial ACL is recorded through the provision for credit losses in the income statement.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Radius Acquisition
In connection with the Radius acquisition, the Company was required to record an allowance for non-PCD assets with a corresponding increase to the provision for credit losses. For acquired PCD loans, an allowance was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, the CECL allowance included as part of the grossed-up loan balance at acquisition was immediately written-off, resulting in a zero period-end allowance balance and no impact on the ACL rollforward. See “Note 2. Business Acquisition” for additional detail.
Charge-Offs
Charge-offs are recorded when the Company determines that a loan balance is uncollectible or a loss-confirming event has occurred. Loss confirming events usually involve the receipt of specific adverse information about the borrower and may include borrower delinquency status, bankruptcy, foreclosure, or receipt of an asset valuation indicating a shortfall between the value of the collateral and the book value of the loan when that collateral asset is the sole source of repayment. A full or partial charge-off reduces the amortized cost basis of the loan and the related ACL.
For acquired PCD loans where all or a portion of the loan balance had been charged off prior to acquisition, and for which active collection efforts are still underway, the CECL allowance included as part of the grossed-up loan balance at acquisition is immediately charged off if required by the Company’s existing charge off policy. Additionally, the Company is required to consider its existing policies in determining whether to charge off any financial assets, regardless of whether a charge-off was recorded by the predecessor company. The initial ACL recognized on PCD assets includes the gross-up of the loan balance reduced by immediate charge-offs for loans previously charged off by the predecessor company or which meet the Company’s charge-off policy on the date of acquisition. Charge-offs against the allowance related to such acquired PCD loans do not result in an income statement impact. See “Note 6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses” for additional detail.
Business Combinations
The Company accounts for business combinations using the acquisition method. The accounts of an acquired entity are included as of the date of acquisition, and any excess of purchase price over the fair value of the net assets acquired is capitalized as goodwill. See“Note 2. Business Acquisition” for further discussion of the acquisition of Radius and its impact on the Company’s consolidated financial statements.
Goodwill and Other Intangible Assets
Goodwill is the purchase consideration of an acquired business in excess of the aggregate fair value of the identified net assets acquired. The Company allocates goodwill to the reporting unit(s) (generally defined as an operating segment or one level below an operating segment for which financial information is available and reviewed regularly by management) that are expected to benefit from the synergies of the business combination.
The goodwill of each reporting unit is reviewed for impairment annually or whenever events or circumstances indicate that it is more likely than not that the estimated fair value of a reporting unit is below its carrying value. Our annual impairment testing is completed in the fourth quarter. Impairment exists whenever the carrying value of goodwill exceeds its estimated fair value. Adverse changes in impairment indicators such as lower than forecast financial performance, increased competition, increased regulatory oversight, or unplanned changes in operations could result in impairment.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Intangible assets with a defined life are amortized over their useful lives in a manner that best reflects their economic benefit, which may include straight-line or accelerated methods of amortization. Intangible assets are reviewed for impairment quarterly and whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable and its carrying amount exceeds its fair value. The Company does not have indefinite-lived intangible assets other than goodwill.
Adoption of New Accounting Standards
The Company did not adopt any new accounting standards during the three month period ended March 31, 2022, except as noted below.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity including convertible instruments and contracts on an entity’s own equity. The guidance allows for either full or modified retrospective adoption for fiscal periods beginning after December 15, 2021. The Company adopted this ASU on January 1, 2022 under the full retrospective approach. As a result of the adoption, the deemed dividend recorded in the first quarter of 2020 related to the beneficial conversion feature of the convertible Series A Preferred Stock, was reclassified from Accumulated Deficit to Additional Paid-in Capital within Equity, as shown in the following table:
| | | | | | | | | | | |
| Three Months Ended March 31, 2020 | Additional Paid-in Capital | | Accumulated Deficit |
| Issuance of preferred stock in exchange for common stock, as originally reported | $ | 194 | | | $ | (50,204) | |
| Adoption of ASU 2020-06 | (50,204) | | | 50,204 | |
| Issuance of preferred stock in exchange for common stock, as adjusted | $ | (50,010) | | | $ | — | |
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, since the beneficial conversion feature is no longer recorded as a deemed dividend the allocation of net income (loss) attributable to stockholders and the related Basic and Diluted net income (loss) per share (EPS) has been adjusted, as shown in the following table:
| | | | | | | | | | | |
| Three Months Ended March 31, 2020 | Common Stock | | Preferred Stock |
| Net income (loss) attributable to stockholders, as originally reported | $ | (95,444) | | | $ | 47,357 | |
| Adoption of ASU 2020-06 | 48,750 | | | (48,750) | |
| Net loss attributable to stockholders, as adjusted | $ | (46,694) | | | $ | (1,393) | |
| | | |
| Basic and Diluted EPS, as originally reported | $ | (1.10) | | | $ | 18.36 | |
| Adoption of ASU 2020-06 | 0.56 | | | (18.90) | |
| Basic and Diluted EPS, as adjusted | $ | (0.54) | | | $ | (0.54) | |
The adoption of this ASU did not impact the Company’s financial position and cash flows in the first quarter of 2020, nor did it change net loss reported in the period.
New Accounting Standards Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which, if certain criteria are met, provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. The provisions of the new standard may be adopted as of the beginning of the reporting period when the election is made until December 31, 2022. The Company is evaluating the impact of this ASU willand does not expect it to have a material impact on itsthe Company’s financial position, results of operations, cash flows and disclosures. The Company has not elected an adoption date.
In August 2020,March 2022, the FASB issued ASU 2020-06,2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt with ConversionRestructurings and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, Vintage Disclosures,which simplifieseliminates the accounting guidance on troubled debt restructurings (TDRs) for certaincreditors that have adopted the CECL model and amends the guidance on “vintage disclosures” to require disclosure of current period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under Accounting Standards Codification 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial instruments with characteristicsdifficulty. The provisions of liabilities and equity including convertible instruments and contracts in an entity’s own equity. The guidance allows for either full or modified retrospective adoptionthis standard are effective for fiscal periodsyears beginning after December 15, 20212022, including interim periods within those fiscal years, with early adoption permitted for fiscal periods beginning after December 15, 2020.permitted. The Company is evaluating the impact of this ASU will have on its financial position, results of operations, cash flows, and disclosures.ASU.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
2. Business Acquisition
On February 1, 2021, the Company completed the acquisition of Radius Bancorp, Inc. (Radius) in accordance with the Plan of Merger previously disclosed. The acquisition combined the Company’s complementary digital lending capabilities with those of a digital bank. Upon closing, LendingClub acquired all outstanding voting equity interests of Radius in exchange for total consideration as follows:
| | | | | |
Cash paid | $ | 140,256 | |
Fair value of common stock issued (1)
| 40,808 | |
Consideration related to share-based payments (2)
| 5,742 | |
Total consideration paid | $ | 186,806 | |
(1) Calculated using the closing stock price of $10.85 on January 29, 2021, the most recent trading day preceding the acquisition, multiplied by 3,761,114 shares issued pursuant to the Plan of Merger.
(2) In connection with the acquisition, LendingClub agreed to convert equity awards held by Radius employees into cash and LendingClub awards pursuant to the Plan of Merger.
The acquisition was accounted for as a purchase business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values determined as of the acquisition date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Fair value estimates related to the acquired assets and liabilities are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available.
The following table presents an allocation of the total consideration paid to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed:
| | | | | |
Assets acquired: | |
Cash and due from banks | $ | 18,184 | |
Interest-bearing deposits in banks | 650,052 | |
Total cash and cash equivalents | 668,236 | |
Securities available for sale at fair value | 259,037 | |
Loans and leases held for investment | 1,610,054 | |
Allowance for loan and lease losses | (12,440) | |
Loans and leases held for investment, net | 1,597,614 | |
Property, equipment and software, net | 1,926 | |
Goodwill | 75,717 | |
Other assets | 86,482 | |
Total assets | 2,689,012 | |
| |
Liabilities assumed: | |
Non-interest bearing deposits | 167,187 | |
Interest-bearing deposits | 1,862,272 | |
Total deposits | 2,029,459 | |
Short-term borrowings | 9,870 | |
Advances from PPPLF | 420,962 | |
Other long-term debt | 18,630 | |
Other liabilities | 23,285 | |
Total liabilities | 2,502,206 | |
| |
Total consideration paid | $ | 186,806 | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The purchase price exceeded the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed and, as a result of the purchase allocation, the Company recorded goodwill of $75.7 million, which is not deductible for tax purposes. The goodwill recognized is attributable primarily to strategic and financial benefits of the acquisition, including increased resiliency with access to stable, low-cost deposit funding replacing higher-cost and more volatile third-party warehouse funding; increased and more stable revenue driven by increased net interest income from loans held for investment; expense benefits by capturing the fees that were historically paid to our third-party issuing banks; and the ability to attract new members and deepen relationships with existing members through the addition of banking services.
The carrying amounts of cash, securities available for sale, short-term borrowings, advances from PPPLF, and certain other assets and liabilities were determined to be a reasonable estimate of the fair value of such items. The following is a description of the methods used to determine the fair values of significant assets and liabilities.
Securities available for sale: The Company acquired a debt securities portfolio containing U.S. agency residential mortgage-backed securities, municipal securities, U.S. agency securities, commercial mortgage-backed securities and other asset-backed securities. The acquisition date fair value of the securities was based on third-party dealer quotes which reflect exit prices pursuant to the guidance on fair value measurement.
Loans and leases held for investment: Fair values for loans and leases were primarily based on a discounted cash flow methodology that considered contractual terms, credit loss expectations, market interest rates, and other market factors such as liquidity from the perspective of a market participant. Loan portfolios were pooled together according to similar characteristics such as product type, lien position, risk grade, credit deterioration status, FICO score, and collateral type. Loan pools were treated in the aggregate when applying various valuation techniques. The contractual terms, default rates, loss given default rates, loss severity and recovery lag, and prepayment rates were the key assumptions embedded into the estimated cash flow valuation. These assumptions were informed by internal data on loan characteristics, historical loss experience, and current and forecasted economic conditions. The discount rates used are based on current market rates for new originations of comparable loans and include adjustments for liquidity. All of the merged loans were marked to fair value as of the acquisition date and, therefore, there was no carryover of the allowance for expected credit losses that had previously been recorded by Radius. Immediately following the acquisition, the Company recorded an ACL on non-PCD loans of $6.9 million through an increase to the provision for credit losses. The initial ACL for PCD loans of $12.4 million was recorded through an adjustment to the amortized cost basis of the loans.
Core deposit intangible (CDI): This intangible asset represents the value of the relationships with certain deposit clients and is included in “Other assets” in the Company’s Condensed Consolidated Balance Sheets. The fair value was estimated based on an after-tax cost savings method of the income approach. Under this method, fair value is equal to the present value of the after-tax cost savings or differential cash flows generated by the acquired deposit base. Cost savings is defined as the difference between the effective cost of funds on deposits and the cost of an equal amount of funds from an alternative source. Deposits were pooled by product type and channel. The discount rates used for CDI assets are based on current market participant rates. The CDI is being amortized over 10 years based upon the estimated economic benefits received.
Other Investments: The fair value of an investment in a private entity that was sold after the acquisition was determined based upon the price expected to be received in the subsequent sale. This investment was included in “Other assets” in the Company’s Condensed Consolidated Balance Sheets.
Interest-bearing deposits: In determining the fair value of certificates of deposit, the cash flows of the contractual interest payments during the specific period of the certificates of deposit and scheduled principal payout were discounted to present value at market-based interest rates.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Subordinated debt: The fair value of subordinated debt was determined by using a discounted cash flow method using a market participant discount rate for similar instruments. Subordinated debt is included in “Other long-term debt” in the Company’s Condensed Consolidated Balance Sheets.
The Company incurred approximately $16 million of expenses in connection with the acquisition.
The table below presents certain unaudited pro forma financial information for illustrative purposes only, for the first quarters of 2021 and 2020, as if the acquisition took place on January 1, 2020. The pro forma information combines the historical results of Radius with the Company’s, adjusting for the estimated impact of certain fair value adjustments for the respective periods. The pro forma information does not reflect changes to the provision for credit losses resulting from recording loan assets as fair value, cost savings, or business synergies. As a result, actual amounts would have differed from the unaudited pro forma information presented and the differences could be significant.
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2021 | | 2020 |
| Total net revenue | $ | 112,911 | | | $ | 144,593 | |
| Consolidated net loss | $ | (54,020) | | | $ | (54,611) | |
For the first quarter of 2021, actual total net revenue of approximately $15 million and net loss of approximately $3 million from the Radius acquisition are included in the Company’s Condensed Consolidated Statements of Operations. The net loss included an ACL on non-PCD loans of $6.9 million, as described above.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Summary of Reclassification Adjustments
The classification of the items presented by the Company in its consolidated financial statements under GAAP has been adjusted to align with the presentation requirements under Article 9 of the SEC’s Regulation S-X for bank holding companies. The presentation shown below is reflective of what is generally expected to be used by the combined company under GAAP.
| | | | | | | | | | | | | | | | | |
| As of December 31, 2020 |
| LendingClub Historical Presentation | | Reclassification Adjustments | | LendingClub Reclassified Amounts |
| Assets | | | | | |
| Cash and cash equivalents | $ | 524,963 | | | $ | (524,963) | | | $ | 0 | |
| Cash and due from banks | 0 | | | 5,197 | | | 5,197 | |
| Interest bearing deposits in banks | 0 | | | 519,766 | | | 519,766 | |
| Total cash and cash equivalents | 0 | | | 524,963 | | | 524,963 | |
| Restricted cash | 103,522 | | | 0 | | | 103,522 | |
| Securities available for sale at fair value | 142,226 | | | 0 | | | 142,226 | |
| Loans held for investment at fair value | 636,686 | | | (636,686) | | | 0 | |
| Loans held for investment by the Company at fair value | 49,954 | | | (49,954) | | | 0 | |
| Loans held for sale by the Company at fair value | 121,902 | | | (121,902) | | | 0 | |
| Loans held for sale at fair value | 0 | | | 121,902 | | | 121,902 | |
| Retail and certificate loans held for investment at fair value | 0 | | | 636,686 | | | 636,686 | |
| Other loans held for investment at fair value | 0 | | | 49,954 | | | 49,954 | |
| Accrued interest receivable | 5,205 | | | (5,205) | | | 0 | |
| Property, equipment and software, net | 96,641 | | | 0 | | | 96,641 | |
| Operating lease assets | 74,037 | | | (74,037) | | | 0 | |
| Intangible assets, net | 11,427 | | | (11,427) | | | 0 | |
| Other assets | 96,730 | | | 90,669 | | | 187,399 | |
| Total assets | $ | 1,863,293 | | | $ | 0 | | | $ | 1,863,293 | |
| Liabilities and Equity | | | | | |
| Accounts payable | $ | 3,698 | | | $ | (3,698) | | | $ | 0 | |
| Accrued interest payable | 4,572 | | | (4,572) | | | 0 | |
| Operating lease liabilities | 94,538 | | | (94,538) | | | 0 | |
| Accrued expenses and other liabilities | 101,457 | | | (101,457) | | | 0 | |
| Payable to investors | 40,286 | | | (40,286) | | | 0 | |
| Credit facilities and securities sold under repurchase agreements | 104,989 | | | (104,989) | | | 0 | |
| Short-term borrowings | 0 | | | 104,989 | | | 104,989 | |
| Retail notes, certificates and secured borrowings at fair value | 636,774 | | | 0 | | | 636,774 | |
| Payable on Structured Program borrowings | 152,808 | | | 0 | | | 152,808 | |
| Other liabilities | 0 | | | 244,551 | | | 244,551 | |
| Total liabilities | 1,139,122 | | | 0 | | | 1,139,122 | |
| Equity | | | | | |
| Common stock | 881 | | | 0 | | | 881 | |
| Additional paid-in capital | 1,508,020 | | | 0 | | | 1,508,020 | |
| Accumulated deficit | (786,214) | | | 0 | | | (786,214) | |
| Accumulated other comprehensive income | 1,484 | | | 0 | | | 1,484 | |
| Total equity | 724,171 | | | 0 | | | 724,171 | |
| Total liabilities and equity | $ | 1,863,293 | | | $ | 0 | | | $ | 1,863,293 | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2020 |
| LendingClub Historical Presentation | | Reclassification Adjustments | | LendingClub Reclassified Amounts |
| Net Revenue | | | | | |
| Transaction fees | $ | 136,243 | | | $ | (136,243) | | | $ | 0 | |
| Interest income | 69,411 | | | (69,411) | | | 0 | |
| Interest expense | (44,241) | | | 44,241 | | | — | |
| Net fair value adjustments | (101,738) | | | 101,738 | | | 0 | |
| Net interest income and fair value adjustments | (76,568) | | | 76,568 | | | — | |
| Investor fees | 41,759 | | | (41,759) | | | 0 | |
| Gain on sales of loans | 14,261 | | | (14,261) | | | 0 | |
| Net investor revenue | (20,548) | | | 20,548 | | | 0 | |
| Other revenue | 4,511 | | | (4,511) | | | 0 | |
| Total net revenue | 120,206 | | | (120,206) | | | 0 | |
| Non-interest income | | | | | |
Marketplace revenue (1) | 0 | | | 102,477 | | | 102,477 | |
| Other non-interest income | 0 | | | 4,511 | | | 4,511 | |
| Total non-interest income | 0 | | | 106,988 | | | 106,988 | |
| Interest income | | | | | |
| Interest on loans held for sale | 0 | | | 27,376 | | | 27,376 | |
| | | | | |
| Interest on retail and certificate loans held for investment at fair value | 0 | | | 35,376 | | | 35,376 | |
| Interest on other loans held for investment at fair value | 0 | | | 1,999 | | | 1,999 | |
| Interest on securities available for sale | 0 | | | 3,779 | | | 3,779 | |
| Other interest income | 0 | | | 881 | | | 881 | |
| Total interest income | 0 | | | 69,411 | | | 69,411 | |
| Interest expense | | | | | |
| | | | | |
| Interest on short-term borrowings | 0 | | | 7,398 | | | 7,398 | |
| Interest on retail notes, certificates and secured borrowings | 0 | | | 35,376 | | | 35,376 | |
| Interest on Structured Program borrowings | 0 | | | 2,299 | | | 2,299 | |
| Interest on other long-term debt | 0 | | | 140 | | | 140 | |
Total interest expense(2) | — | | | 45,213 | | | 45,213 | |
| Net interest income | — | | | 24,198 | | | 24,198 | |
Total net revenue (3) | 0 | | | 131,186 | | | 131,186 | |
Provision for credit losses (3) | 0 | | | 10,980 | | | 10,980 | |
| Operating expenses | | | | | |
| Sales and marketing | 49,784 | | | (49,784) | | | 0 | |
| Origination and servicing | 20,994 | | | (20,994) | | | 0 | |
| Engineering and product development | 38,710 | | | (38,710) | | | 0 | |
| Other general and administrative | 58,486 | | | (58,486) | | | 0 | |
| Total operating expenses | 167,974 | | | (167,974) | | | 0 | |
| Non-interest expense | | | | | |
| Compensation and benefits | 0 | | | 75,545 | | | 75,545 | |
| Marketing | 0 | | | 39,081 | | | 39,081 | |
| Equipment and software | 0 | | | 6,490 | | | 6,490 | |
| Occupancy | 0 | | | 6,813 | | | 6,813 | |
| Depreciation and amortization | 0 | | | 12,873 | | | 12,873 | |
| Professional services | 0 | | | 14,141 | | | 14,141 | |
| Other non-interest expense | 0 | | | 13,031 | | | 13,031 | |
| Total non-interest expense | 0 | | | 167,974 | | | 167,974 | |
| Loss before income tax expense | (47,768) | | | 0 | | | (47,768) | |
| Income tax expense | 319 | | | 0 | | | 319 | |
| Consolidated net loss | $ | (48,087) | | | $ | 0 | | | $ | (48,087) | |
(1) See “Note 3. Marketplace Revenue” for additional detail.
(2) The increase in total interest expense relates to valuation adjustments on Structured Program borrowings reclassified from net fair value adjustments to interest expense.
(3) The increase in total net revenue relates to credit valuation adjustments on securities available for sale reclassified from net fair value adjustments to provision for credit losses.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
3. Marketplace Revenue
Marketplace revenue consists of (i) origination fees, (ii) servicing fees, (iii) gain (loss) on sales of loans and (iv) net fair value adjustments, as described below.
Origination Fees: Origination fees are primarily fees earned related to originating and issuing unsecured personal loans that are held for sale. Origination fees are paid directly to the Company by borrowers upon the origination of the loan.
In addition, origination fees include transaction fees that are paid to the Company by issuing bank partners or education and patient service providers for the work performed in facilitating the origination of loans by the issuing banks. Prior to the acquisition of Radius, the Company relied on third-party issuing banks to originate and fund loans initiated by borrowers. Following the acquisition, the Company became the originator and lender for all unsecured personal and auto loans. However, the Company continues to utilize issuing bank partners to fund education and patient finance loans, which originate and service such loans and from whom the Company receives transaction fees.
Servicing Fees: The Company receives servicing fees to compensate it for the costs incurred in servicing a loan,loans on behalf of investors, including managing payments and collections from borrowers collections and payments to those investors. The amount of servicing fee revenue earned is predominantly affected by the servicing rates paid by investors and the outstanding principal balance of loans.loans serviced for investors. Servicing fee revenue related to whole loans sold also includes the associated change in fair value of servicing assets and liabilities associated with the loans. Servicing rights are recorded as either an asset or liability depending on the degree to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee.assets.
Gain (Loss) on Sales of Loans: In connection with loan sales and in addition to servicing fees earned with respect to the corresponding loan, the Company recognizes a gain or loss on the sale of that loan based on the level to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee. Additionally, the Company recognizes transaction costs as a loss on sale of loans.
Net Fair Value Adjustments: The Company records fair value adjustments on loans that are recorded at fair value.
The following table presents components of marketplace revenue for the periods presented:
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2021 | | 2020 |
| Origination fees | $ | 55,559 | | | $ | 136,243 | |
| Servicing fees | 23,166 | | | 41,759 | |
| Gain on sales of loans | 8,323 | | | 14,261 | |
Net fair value adjustments (1) | (5,321) | | | (89,786) | |
| Total marketplace revenue | $ | 81,727 | | | $ | 102,477 | |
(1) Certain prior period valuation adjustments on securities available for sale and Structured Program borrowings were reclassified from net fair value adjustments to provision for credit losses and interest expense, respectively, to conform to the current period presentation.
Revenue from Contracts with Customers
The Company’s revenue from contracts with customers includes i) transaction fees received from issuing bank partners and ii) referral fees from third-party companies. Transaction fees are presented as a component of
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
origination fees in “Marketplace revenue” and referral fees are presentedGain (Loss) on Sales of Loans: In connection with loan sales, the Company recognizes a gain or loss on the sale of loans based on the level to which the contractual servicing fee is above or below an estimated market rate of servicing. Additionally, the Company recognizes transaction costs, if any, as a componentloss on sale of “Other non-interest income” in the Condensed Consolidated Statements of Operations.loans.
Upon the acquisition of Radius, the Company’s principal sources of revenue are marketplace revenue and interest incomeNet Fair Value Adjustments: The Company records fair value adjustments on loans whichthat are outsiderecorded at fair value, including gains or losses from sale prices in excess of or less than the scope of ASC 606, Revenue from Contracts with Customers. The remainder of the Company’s revenue is classified as non-interest income and is earned from a variety of sources, such as custodial and other fees, service charges, gains and losses and other non-interest income.loan principal amount sold.
The following table presents the Company’scomponents of marketplace revenue from contracts with customers, disaggregated by revenue source for services transferred over time, for the first quarters of 2021 and 2020:periods presented:
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2021 | | 2020 |
| Transaction fees | $ | 22,402 | | | $ | 136,243 | |
| Referral fees | 2,594 | | | 1,614 | |
| Total revenue from contracts with customers | $ | 24,996 | | | $ | 137,857 | |
The Company recognizes transaction and referral fees at each distinct instance after the Company satisfies its performance obligations. The Company had 0 bad debt expense for the first quarters of 2021 and 2020. Because revenue is recognized at the same time that payments are received, the Company had no contract assets, contract liabilities, or deferred contract costs recorded as of both March 31, 2021 and December 31, 2020. Additionally, the Company did not recognize any revenue from performance obligations related to prior periods (for example, due to changes in transaction price) for the first quarters of 2021 and 2020. For additional detail on the Company’s accounting policy regarding revenue recognition, see “Note 1. Summary of Significant Accounting Policies.” | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2022 | | 2021 | | | | |
| Origination fees | $ | 122,093 | | | $ | 55,559 | | | | | |
| Servicing fees | 18,514 | | | 23,166 | | | | | |
| Gain on sales of loans | 24,110 | | | 8,323 | | | | | |
| Net fair value adjustments | 15,249 | | | (5,321) | | | | | |
| Total marketplace revenue | $ | 179,966 | | | $ | 81,727 | | | | | |
4.3. Net Income (Loss) Per Share
The following table details the computation of the Company’s basicBasic and diluted net income (loss) per shareDiluted EPS of common stock and Series A preferred stock:Preferred Stock:
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | 2021 | | 2020 |
| | | | | Common Stock | Preferred Stock (1)(2) | | Common Stock | Preferred Stock (1)(2) |
| | | | | | | | | |
| | | | | | | | | |
| Allocation of undistributed consolidated net loss | | | | | $ | (45,776) | | $ | (1,308) | | | $ | (45,240) | | $ | (2,847) | |
| Deemed dividend | | | | | 0 | | 0 | | | (50,204) | | 50,204 | |
| Net income (loss) attributable to stockholders | | | | | $ | (45,776) | | $ | (1,308) | | | $ | (95,444) | | $ | 47,357 | |
| Weighted-average common shares – Basic and Diluted | | | | | 92,666,169 | | 2,648,758 | | | 86,505,560 | | 2,579,710 | |
| Net income (loss) per share attributable to stockholders – Basic and Diluted | | | | | $ | (0.49) | | $ | (0.49) | | | $ | (1.10) | | $ | 18.36 | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | 2022 | | | 2021 |
| Common Stock | | | | Common Stock | | Preferred Stock (1) |
| Basic EPS: | | | | | | | |
| Net income (loss) attributable to stockholders | $ | 40,836 | | | | | $ | (45,776) | | | $ | (1,308) | |
| Weighted-average common shares – Basic | 101,493,561 | | | | | 92,666,169 | | | 2,648,758 | |
| Basic EPS | $ | 0.40 | | | | | $ | (0.49) | | | $ | (0.49) | |
| | | | | | | |
| Diluted EPS: | | | | | | | |
| Net income (loss) attributable to stockholders | $ | 40,836 | | | | | $ | (45,776) | | | $ | (1,308) | |
| Weighted-average common shares – Diluted | 105,052,904 | | | | | 92,666,169 | | | 2,648,758 | |
| Diluted EPS | $ | 0.39 | | | | | $ | (0.49) | | | $ | (0.49) | |
| | | | | | | |
| | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(1) Presented on an as-converted basis.
In February 2020,The following table summarizes the Company entered into an exchange agreement with its largest stockholder, Shanda Asset Management Holdings Limited and its affiliates (Shanda), pursuant to which, on March 20, 2020, Shanda exchanged all of 19,562,881 shares of LendingClub common stock, par value of $0.01 per share, held by it for (i) 195,628 newly issued shares of mandatorily convertible, non-voting, LendingClub preferred stock, series A (Series A Preferred Stock), par value of $0.01 per share, and (ii) a one-time cash payment of $50.2 million. The Series A Preferred Stock is considered a separate class ofweighted-average common shares that were excluded from the Company’s Diluted EPS computation because their effect would have been anti-dilutive for purposesthe first quarter of calculating net income (loss) per share because it participates in earnings similar to2021:
| | | | | | | | | | | |
| | | | | |
| | | | | | | |
| Preferred stock | | | 2,648,758 | | | | | |
| RSUs and PBRSUs | | | 1,468,191 | | | | | |
| Stock options | | | 371,367 | | | | | |
| Total | | | 4,488,316 | | | | | |
There were no weighted-average common stock and does not receive any significantshares that were excluded from the Company’s Diluted EPS computation for the first quarter of 2022.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
preferences over the common stock. During the period that included the Company’s preferred stock, Basic and Diluted EPS were computed using the two-class method, which is a net income (loss) allocation that determines EPS for each class of common stock according to dividends declared and participation rights in undistributed income (loss).
The following table summarizes the weighted-average common stock that were excluded from the Company’s diluted net income (loss) per share computation because their effect would have been anti-dilutive for the periods presented:
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| Preferred stock | 2,648,758 | | | 2,579,710 | | | | | |
| | | | | | | |
| RSUs and PBRSUs | 1,468,191 | | | 30,852 | | | | | |
| Stock options | 371,367 | | | 283,201 | | | | | |
| Total | 4,488,316 | | | 2,893,763 | | | | | |
5.4. Securities Available for Sale
The Company’s securities available for sale portfolio includes debt securities obtained in the first quarter of 2021 upon its acquisition of Radius and asset-backed securities related to the Company’s Structured Program transactions. The Company’s Structured Program transactions included (i) asset-backed securitization transactions and (ii) Certificate Program transactions. Certificate Program transactions included CLUB Certificate and Levered Certificate transactions.
The Company sponsored the sale of unsecured personal loans through the issuance of certificate securities under our Certificate Program. The CLUB Certificate issued securities retained by the Company are presented as “CLUB Certificate asset-backed securities” in the securities available for sale tables below. The Levered Certificate issued senior and subordinated securities retained by the Company are presented in aggregate with securities from asset-backed securitizations as “Asset-backed senior securities” and “Asset-backed subordinated securities,” respectively, in the tables below. The “Other asset-backed securities” caption in the tables below primarily includes investment-grade rated bonds that are collateralized by student loan receivables and small business association loans.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The amortized cost, gross unrealized gains and losses, allowance for credit losses,valuation allowance, and fair value of securities available for sale as of March 31, 2021 and December 31, 2020,(AFS) securities were as follows:
| | March 31, 2021 | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Allowance for Credit Losses | | Fair
Value | |
| March 31, 2022 | | March 31, 2022 | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | | Fair
Value |
| U.S. agency residential mortgage-backed securities | U.S. agency residential mortgage-backed securities | $ | 72,348 | | | $ | 19 | | | $ | (1,637) | | | $ | 0 | | | $ | 70,730 | | U.S. agency residential mortgage-backed securities | $ | 242,359 | | | $ | — | | | $ | (15,224) | | | | $ | 227,135 | |
Asset-backed senior securities(1) | 62,894 | | | 59 | | | 0 | | | 0 | | | 62,953 | | |
CLUB Certificate asset-backed securities (1) | 40,741 | | | 1,515 | | | (241) | | | (48) | | | 41,967 | | |
| U.S. agency securities | | U.S. agency securities | 66,455 | | | — | | | (4,530) | | | | 61,925 | |
| Commercial mortgage-backed securities | | Commercial mortgage-backed securities | 30,360 | | | — | | | (1,942) | | | | 28,418 | |
| Other asset-backed securities | Other asset-backed securities | 29,858 | | | 79 | | | (137) | | | 0 | | | 29,800 | | Other asset-backed securities | 25,008 | | | 78 | | | (489) | | | | 24,597 | |
| Commercial mortgage-backed securities | 28,856 | | | 12 | | | (428) | | | 0 | | | 28,440 | | |
| U.S. agency securities | 20,078 | | | 5 | | | (799) | | | 0 | | | 19,284 | | |
| Asset-backed senior securities | | Asset-backed senior securities | 21,868 | | | 36 | | | — | | | | 21,904 | |
| CLUB Certificate asset-backed securities | | CLUB Certificate asset-backed securities | 10,016 | | | 3,418 | | | — | | | | 13,434 | |
Asset-backed subordinated securities(1) | Asset-backed subordinated securities(1) | 15,044 | | | 3,688 | | | (79) | | | (866) | | | 17,787 | | Asset-backed subordinated securities(1) | 3,586 | | | 6,446 | | | — | | | | 10,032 | |
| Municipal securities | Municipal securities | 3,312 | | | 0 | | | (54) | | | 0 | | | 3,258 | | Municipal securities | 3,292 | | | — | | | (420) | | | | 2,872 | |
| Other securities | 200 | | | 0 | | | 0 | | | 0 | | | 200 | | |
Total securities available for sale(2) | $ | 273,331 | | | $ | 5,377 | | | $ | (3,375) | | | $ | (914) | | | $ | 274,419 | | |
| Total securities available for sale (1)(2) | | Total securities available for sale (1)(2) | $ | 402,944 | | | $ | 9,978 | | | $ | (22,605) | | | | $ | 390,317 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Allowance for Credit Losses | | Fair
Value |
Asset-backed senior securities(1) | $ | 75,332 | | | $ | 67 | | | $ | (27) | | | $ | 0 | | | $ | 75,372 | |
CLUB Certificate asset-backed securities(1) | 54,525 | | | 576 | | | (772) | | | (4,190) | | | 50,139 | |
Asset-backed subordinated securities(1) | 29,107 | | | 2,128 | | | (174) | | | (14,546) | | | 16,515 | |
| Other securities | 200 | | | 0 | | | 0 | | | 0 | | | 200 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Total securities available for sale(2) | $ | 159,164 | | | $ | 2,771 | | | $ | (973) | | | $ | (18,736) | | | $ | 142,226 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | | | Fair
Value |
| U.S. agency residential mortgage-backed securities | $ | 125,985 | | | $ | — | | | $ | (2,286) | | | | | $ | 123,699 | |
| Asset-backed senior securities | 28,057 | | | 72 | | | — | | | | | 28,129 | |
| U.S. agency securities | 26,902 | | | 1 | | | (731) | | | | | 26,172 | |
| Other asset-backed securities | 26,112 | | | 151 | | | (130) | | | | | 26,133 | |
| Commercial mortgage-backed securities | 26,649 | | | 1 | | | (552) | | | | | 26,098 | |
| CLUB Certificate asset-backed securities | 15,049 | | | 3,236 | | | — | | | | | 18,285 | |
| Asset-backed subordinated securities | 4,119 | | | 7,643 | | | — | | | | | 11,762 | |
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| | | | | | | | | |
| Municipal securities | 3,297 | | | — | | | (45) | | | | | 3,252 | |
Total securities available for sale (1)(2) | $ | 256,170 | | | $ | 11,104 | | | $ | (3,744) | | | | | $ | 263,530 | |
(1) As of March 31, 20212022 and December 31, 2020, $91.92021, $0.7 million and $119.3$13.3 million, respectively, of the asset-backed securities related to Structured Program transactions at fair value are subject to restrictions on transfer pursuant to the Company's obligations as a “sponsor” under the U.S. Risk Retention Rules.
(2) As of March 31, 2021,2022 and December 31, 2020,2021, includes $238.3$361.7 million and $133.5$236.8 million, respectively, of securities pledged as collateral at fair value.
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 AFS securities available for sale with unrealized losses for which ana credit valuation allowance for credit losses has not been recorded, as of March 31, 2021 and December 31, 2020, aggregated by period of continuous unrealized loss, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less than
12 months | | 12 months
or longer | | Total |
| March 31, 2021 | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses |
| U.S. agency residential mortgage-backed securities | $ | 63,011 | | | $ | (1,637) | | | $ | 0 | | | $ | 0 | | | $ | 63,011 | | | $ | (1,637) | |
| Asset-backed securities related to Structured Program transactions | 722 | | | (79) | | | 12,345 | | | (241) | | | 13,067 | | | (320) | |
| Other asset-backed securities | 17,534 | | | (137) | | | 0 | | | 0 | | | 17,534 | | | (137) | |
| Commercial mortgage-backed securities | 24,862 | | | (428) | | | 0 | | | 0 | | | 24,862 | | | (428) | |
| U.S. agency securities | 10,098 | | | (799) | | | 0 | | | 0 | | | 10,098 | | | (799) | |
| Municipal securities | 3,258 | | | (54) | | | 0 | | | 0 | | | 3,258 | | | (54) | |
Total securities with unrealized losses (1) | $ | 119,485 | | | $ | (3,134) | | | $ | 12,345 | | | $ | (241) | | | $ | 131,830 | | | $ | (3,375) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Less than
12 months | | 12 months
or longer | | Total |
| December 31, 2020 | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses |
| Asset-backed securities related to Structured Program transactions | $ | 26,678 | | | $ | (855) | | | $ | 6,052 | | | $ | (118) | | | $ | 32,730 | | | $ | (973) | |
Total securities with unrealized losses (1) | $ | 26,678 | | | $ | (855) | | | $ | 6,052 | | | $ | (118) | | | $ | 32,730 | | | $ | (973) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less than
12 months | | 12 months
or longer | | Total |
| March 31, 2022 | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses |
| U.S. agency residential mortgage-backed securities | $ | 190,822 | | | $ | (11,168) | | | $ | 36,313 | | | $ | (4,056) | | | $ | 227,135 | | | $ | (15,224) | |
| U.S. agency securities | 49,880 | | | (2,674) | | | 9,045 | | | (1,856) | | | 58,925 | | | (4,530) | |
| | | | | | | | | | | |
| Commercial mortgage-backed securities | 12,823 | | | (928) | | | 12,609 | | | (1,014) | | | 25,432 | | | (1,942) | |
| Other asset-backed securities | 16,552 | | | (382) | | | 2,743 | | | (107) | | | 19,295 | | | (489) | |
| Municipal securities | 2,730 | | | (404) | | | 142 | | | (16) | | | 2,872 | | | (420) | |
Total securities with unrealized losses(1) | $ | 272,807 | | | $ | (15,556) | | | $ | 60,852 | | | $ | (7,049) | | | $ | 333,659 | | | $ | (22,605) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Less than
12 months | | 12 months
or longer | | Total |
| December 31, 2021 | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses | | Fair
Value | | Unrealized
Losses |
| U.S. agency residential mortgage-backed securities | $ | 123,668 | | | $ | (2,286) | | | $ | — | | | $ | — | | | $ | 123,668 | | | $ | (2,286) | |
| U.S. agency securities | 24,175 | | | (731) | | | — | | | — | | | 24,175 | | | (731) | |
| Other asset-backed securities | 13,224 | | | (130) | | | — | | | — | | | 13,224 | | | (130) | |
| Commercial mortgage-backed securities | 25,927 | | | (552) | | | — | | | — | | | 25,927 | | | (552) | |
| Municipal securities | 3,252 | | | (45) | | | — | | | — | | | 3,252 | | | (45) | |
Total securities with unrealized losses(1) | $ | 190,246 | | | $ | (3,744) | | | $ | — | | | $ | — | | | $ | 190,246 | | | $ | (3,744) | |
(1) The number of investment positions with unrealized losses at March 31, 20212022 and December 31, 20202021 totaled 124206 and 55,145, respectively.
In the first quarter of 2020, the Company recorded an allowance for credit loss on those securities where there was a deterioration in future estimated cash flows. The Company also recorded unrealized losses on securities with fair value price reductions due to higher liquidity premiums observed due to the market dislocation related to COVID-19. In the first quarter of 2021, the Company deemed it not necessary to record unrealized losses as an allowance for credit loss for certain securities due to the nature of those securities and their investment grade quality.
During the first quarters of 2021 and 2020, the Company recognized $(2.5) million and $11.0 million in credit recovery and loss expense, respectively.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the activity in the allowance for credit losses forAFS securities, available for sale, by major security type, for the first quarters of 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses | CLUB Certificate asset-backed securities | | Asset-backed subordinated securities | | Total | | | | |
| Beginning balance as of January 1, 2021 | $ | (4,190) | | | $ | (14,546) | | | $ | (18,736) | | | | | |
| Reversal of securities available for sale | 188 | | | 2,282 | | | 2,470 | | | | | |
| | | | | | | | | |
| Charge-offs | 3,954 | | | 11,398 | | | 15,352 | | | | | |
| Ending balance as of March 31, 2021 | $ | (48) | | | $ | (866) | | | $ | (914) | | | | | |
| | | | | | | | | |
| Allowance for Credit Losses | CLUB Certificate asset-backed securities | | Asset-backed subordinated securities | | Total | | | | |
| Beginning balance as of January 1, 2020 | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | |
| Impairment on securities available for sale | (4,684) | | | (6,296) | | | (10,980) | | | | | |
| Allowance arising from PCD financial assets | (3,954) | | | (3,901) | | | (7,855) | | | | | |
| Ending balance as of March 31, 2020 | $ | (8,638) | | | $ | (10,197) | | | $ | (18,835) | | | | | |
Securities available for sale purchased with credit deterioration during the first quarter of 2020 were as follows:2021:
| | | | | |
| Three Months Ended March 31, 2020 |
Purchase price of PCD securities at acquisition | $ | 23,043 | |
Allowance for credit losses on PCD securities at acquisition | 7,885 | |
Par value of acquired PCD securities at acquisition | $ | 30,928 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Credit Valuation Allowance | CLUB Certificate asset-backed securities | | Asset-backed subordinated securities | | Total | | | | |
| Balance at December 31, 2020 | $ | (4,190) | | | $ | (14,546) | | | $ | (18,736) | | | | | |
| Reversal of credit loss expense | 188 | | | 2,282 | | | 2,470 | | | | | |
| Reversal of allowance arising from PCD financial assets | 3,954 | | | 11,398 | | | 15,352 | | | | | |
| Balance at March 31, 2021 | $ | (48) | | | $ | (866) | | | $ | (914) | | | | | |
There were 0was no activity in the allowance for AFS securities available for sale purchased with credit deterioration during the first quarter of 2021.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The contractual maturities of AFS securities available for sale at March 31, 2021, were as follows:
| | March 31, 2022 | | March 31, 2022 | Amortized Cost | | Fair Value | | Weighted- average Yield(1) |
| | | Amortized Cost | | Fair Value | | Weighted- average Yield(1) | |
| | Due within 1 year: | | |
| Other securities | 200 | | 200 | | |
| Total due within 1 year | 200 | | 200 | | 0.02 | % | |
| | Due after 5 years through 10 years: | Due after 5 years through 10 years: | | Due after 5 years through 10 years: | |
| U.S. agency residential mortgage-backed securities | U.S. agency residential mortgage-backed securities | 449 | | | 446 | | | U.S. agency residential mortgage-backed securities | $ | 682 | | | $ | 643 | | |
| Other asset-backed securities | Other asset-backed securities | 1,084 | | | 1,084 | | | Other asset-backed securities | 923 | | | 936 | | |
| Commercial mortgage-backed securities | Commercial mortgage-backed securities | 3,503 | | | 3,403 | | | Commercial mortgage-backed securities | 4,136 | | | 3,778 | | |
| U.S. agency securities | U.S. agency securities | 4,092 | | | 4,094 | | | U.S. agency securities | 6,848 | | | 6,527 | | |
| Municipal securities | Municipal securities | 471 | | | 463 | | | Municipal securities | 627 | | | 562 | | |
| Total due after 5 years through 10 years | Total due after 5 years through 10 years | 9,599 | | | 9,490 | | | 0.97 | % | Total due after 5 years through 10 years | 13,216 | | | 12,446 | | | 2.00 | % |
| Due after 10 years: | Due after 10 years: | | Due after 10 years: | |
| U.S. agency residential mortgage-backed securities | U.S. agency residential mortgage-backed securities | 71,899 | | | 70,284 | | | U.S. agency residential mortgage-backed securities | 241,677 | | | 226,492 | | |
| Other asset-backed securities | Other asset-backed securities | 28,774 | | | 28,716 | | | Other asset-backed securities | 24,085 | | | 23,661 | | |
| Commercial mortgage-backed securities | Commercial mortgage-backed securities | 25,353 | | | 25,037 | | | Commercial mortgage-backed securities | 26,224 | | | 24,640 | | |
| U.S. agency securities | U.S. agency securities | 15,986 | | | 15,190 | | | U.S. agency securities | 59,607 | | | 55,398 | | |
| Municipal securities | Municipal securities | 2,841 | | | 2,795 | | | Municipal securities | 2,665 | | | 2,310 | | |
| Total due after 10 years | Total due after 10 years | 144,853 | | | 142,022 | | | 1.06 | % | Total due after 10 years | 354,258 | | | 332,501 | | | 2.11 | % |
| Asset-backed securities related to Structured Program transactions | Asset-backed securities related to Structured Program transactions | 118,679 | | | 122,707 | | | 6.04 | % | Asset-backed securities related to Structured Program transactions | 35,470 | | | 45,370 | | | 29.34 | % |
| | Total securities available for sale | Total securities available for sale | $ | 273,331 | | | $ | 274,419 | | | 3.22 | % | Total securities available for sale | $ | 402,944 | | | $ | 390,317 | | | 4.50 | % |
(1) The weighted-average yield is computed using the amortized cost at March 31, 2021.2022.
There were no Structured program transactions in the first quarter of 2021. During the first quarter of 2020, the Company and Consumer Loan Underlying Bond Depositor LLC (Depositor), a subsidiary of the Company, sold a combined $1.0 billion in asset-backed securities related to Structured Program transactions. There were 0 realized gains or losses related to such sales. For further information, see “Note 8. Fair Value of Assets and Liabilities.” Proceeds and gross realized gains and losses from other salesAFS securities during the first quarter of securities available for sale2021 were as follows:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
| Proceeds | $ | 106,192 | | | $ | 2,396 | | | | | |
| Gross realized gains | $ | 708 | | | $ | 3 | | | | | |
| Gross realized losses | $ | (952) | | | $ | (2) | | | | | |
| | | | | | | | | | | | | | | |
| Proceeds | | | | | | | $ | 106,192 | | | | | |
| Gross realized gains | | | | | | | $ | 708 | | | | | |
| Gross realized losses | | | | | | | $ | (952) | | | | | |
6. Loans and Leases Held for Investment, NetThere were no sales of Allowance For Loan and Lease Losses
As a resultAFS securities during the first quarter of the acquisition of Radius and becoming a bank holding company, LendingClub now records loans and leases held for investment at amortized cost, and, loans held for sale at fair value. Prior to the acquisition, all loans were recorded at fair value. Therefore, the following disclosures apply to loans and leases held for investment at amortized cost.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
5. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses
LendingClub records certain loans and leases held for investment (HFI) at amortized cost, whereas loans initially classified as held for sale (HFS) are recorded at fair value. Accrued interest receivable is excluded from the amortized cost basis of loans and leases held for investmentHFI and is reported within “Other assets” on the Company’s Condensed Consolidated Balance Sheets.Sheet. Accrued interest within that caption related to loans and leases held for investmentHFI was $9.0$17.0 million and $15.6 million as of March 31, 2021.2022 and December 31, 2021, respectively.
Loans and Leases Held for Investment
The Company defines its loans and leases held for investmentHFI portfolio segments as (i) consumer and (ii) commercial. The following table presentstables present the components of each portfolio segment by class of financing receivable:
| | | | | | | |
| March 31, 2021 | | |
Unsecured personal | $ | 321,104 | | | |
Residential mortgages | 164,002 | | | |
Secured consumer | 387,244 | | | |
Other consumer | 34 | | | |
Total consumer loans held for investment | 872,384 | | | |
Equipment finance (1)
| 145,885 | | | |
Commercial real estate | 302,445 | | | |
Commercial and industrial (2)
| 794,718 | | | |
Total commercial loans and leases held for investment | 1,243,048 | | | |
Total loans and leases held for investment | 2,115,432 | | | |
Allowance for loan and lease losses | (36,132) | | | |
Loans and leases held for investment, net | $ | 2,079,300 | | | |
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Unsecured personal | $ | 2,358,792 | | | $ | 1,804,578 | |
| Residential mortgages | 169,117 | | | 151,362 | |
| Secured consumer | 93,600 | | | 65,976 | |
| | | |
| Total consumer loans held for investment | 2,621,509 | | | 2,021,916 | |
Equipment finance (1) | 143,780 | | | 149,155 | |
| Commercial real estate | 313,710 | | | 310,399 | |
Commercial and industrial (2) | 343,297 | | | 417,656 | |
| Total commercial loans and leases held for investment | 800,787 | | | 877,210 | |
| Total loans and leases held for investment | 3,422,296 | | | 2,899,126 | |
| Allowance for loan and lease losses | (187,985) | | | (144,389) | |
Loans and leases held for investment, net (3) | $ | 3,234,311 | | | $ | 2,754,737 | |
(1) Comprised of sales-type leases for equipment. See “Note 17.16. Leases” for additional information.
(2) Includes $664.4$185.0 million and $268.3 million of pledged loans under the Paycheck Protection Program (PPP) loans. Theas of March 31, 2022 and December 31, 2021, respectively.
(3) As of March 31, 2022 and December 31, 2021, the Company does not measure anhad $164.1 million and $149.2 million in loans pledged as collateral under the Federal Reserve Bank (FRB) Discount Window, respectively.
| | | | | | | | | | | | | | |
| March 31, 2022 | Gross | ALLL | Net | Allowance Ratios (1) |
| Total consumer loans held for investment | $ | 2,621,509 | | $ | 173,857 | | $ | 2,447,652 | | 6.6 | % |
Total commercial loans and leases held for investment (2) | 800,787 | | 14,128 | | 786,659 | | 1.8 | % |
Total loans and leases held for investment (2) | $ | 3,422,296 | | $ | 187,985 | | $ | 3,234,311 | | 5.5 | % |
| | | | | | | | | | | | | | |
| December 31, 2021 | Gross | ALLL | Net | Allowance Ratios (1) |
| Total consumer loans held for investment | $ | 2,021,916 | | $ | 128,812 | | $ | 1,893,104 | | 6.4 | % |
Total commercial loans and leases held for investment (2) | 877,210 | | 15,577 | | 861,633 | | 1.8 | % |
Total loans and leases held for investment (2) | $ | 2,899,126 | | $ | 144,389 | | $ | 2,754,737 | | 5.0 | % |
(1) Calculated as the ratio of allowance for expected creditloan and lease losses (ALLL) to loans and leases HFI.
(2) As of March 31, 2022, excluding the $185.0 million of PPP loans, the ALLL represented 2.3% of commercial loans and leases HFI and 5.8% of total loans and leases HFI. As of December 31, 2021, excluding $268.3 million of PPP loans, the ALLL represented 2.6% of commercial loans and leases HFI and 5.5% of total loans and leases HFI. PPP loans are guaranteed by the Small Business Administration (SBA) and, therefore, the Company determined no ACL is required on these loans.
The activity in the allowance for expected credit losses by portfolio segment for the quarter ended March 31, 2021 was as follows:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 |
| Consumer | | Commercial | | Total |
| Allowance for loan and lease losses, beginning of period | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Credit loss expense for loans and leases held for investment | 19,182 | | | 4,371 | | | 23,553 | |
Initial allowance for PCD loans acquired during the period (1) | 603 | | | 11,837 | | | 12,440 | |
| Charge-offs | 0 | | | 0 | | | 0 | |
| Recoveries | 0 | | | 139 | | | 139 | |
| Allowance for loan and lease losses, end of period | $ | 19,785 | | | $ | 16,347 | | | $ | 36,132 | |
| | | | | |
| Reserve for unfunded lending commitments, beginning of period | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Credit loss expense for unfunded lending commitments | 6 | | | 404 | | | 410 | |
| Reserve for unfunded lending commitments, end of period | $ | 6 | | | $ | 404 | | | $ | 410 | |
(1) For acquired PCD loans, an allowance of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, a CECL allowance of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The Company did not recognize an allowanceactivity in the ACL by portfolio segment was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | |
| 2022 | | 2021 | | |
| Consumer | | Commercial | | Total | | Consumer | | Commercial | | Total | | | | | | |
| Allowance for loan and lease losses, beginning of period | $ | 128,812 | | | $ | 15,577 | | | $ | 144,389 | | | $ | — | | | $ | — | | | $ | — | | | | | | | |
Credit loss expense for loans and leases held for investment (1) | 53,718 | | | (1,490) | | | 52,228 | | | 19,182 | | | 4,371 | | | 23,553 | | | | | | | |
Initial allowance for PCD loans acquired during the period (2) | — | | | — | | | — | | | 603 | | | 11,837 | | | 12,440 | | | | | | | |
Charge-offs (3) | (9,017) | | | (72) | | | (9,089) | | | — | | | — | | | — | | | | | | | |
| Recoveries | 344 | | | 113 | | | 457 | | | — | | | 139 | | | 139 | | | | | | | |
| Allowance for loan and lease losses, end of period | $ | 173,857 | | | $ | 14,128 | | | $ | 187,985 | | | $ | 19,785 | | | $ | 16,347 | | | $ | 36,132 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, beginning of period | $ | — | | | $ | 1,231 | | | $ | 1,231 | | | $ | — | | | $ | — | | | $ | — | | | | | | | |
| Credit loss expense for unfunded lending commitments | — | | | 281 | | | 281 | | | 6 | | | 404 | | | 410 | | | | | | | |
Reserve for unfunded lending commitments, end of period (4) | $ | — | | | $ | 1,512 | | | $ | 1,512 | | | $ | 6 | | | $ | 404 | | | $ | 410 | | | | | | | |
(1) Includes $6.9 million of credit loss expense for loan and lease losses as of December 31, 2020 because it did not carryRadius loans heldat Acquisition for investment at amortized cost as of that date. During the first quarter of 2021,2021.
(2) For acquired PCD loans, an ACL of $30.4 million was required with a corresponding increase to the amortized cost basis as a result of the Radius acquisition date for the Company acquired and began originatingfirst quarter of 2021. For PCD loans held for investmentwhere all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, an ACL of $18.0 million included as part of the grossed-up loan balance at amortized cost.Acquisition was immediately written-off during the first quarter of 2021. The net impact to the allowance for loanPCD assets on the acquisition date was $12.4 million for the first quarter of 2021.
(3) Unsecured personal loans are charged-off when a borrower is (i) contractually 120 days past due or (ii) two payments past due and lease losses balancehas filed for bankruptcy or is deceased.
(4) Relates to $109.5 million and $98.3 million of unfunded commitments as of March 31, 2022 and 2021, relates to the recognition of expected credit losses on these purchased and originated loans.respectively.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Consumer Lending Credit Quality Indicators
The Company evaluates the credit quality of its consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is based upon borrower payment activity relative to the contractual terms of the loan. The following table presentstables present the classes of financing receivables within the consumer portfolio segment by credit quality indicator based on delinquency status as of March 31, 2021 and origination year:
| | March 31, 2021 | | Term Loans and Leases by Origination Year | | |
| March 31, 2022 | | March 31, 2022 | | Term Loans and Leases by Origination Year | |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Within Revolving Period | | Total | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Within Revolving Period | | Total |
| Unsecured personal | Unsecured personal | | | | | | | | | | | | | | | | | Unsecured personal | | | | | | | | | | | | | | | | |
| Current | Current | | $ | 321,104 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 321,104 | | Current | | $ | 777,710 | | | $ | 1,566,687 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,344,397 | |
| 30-59 days past due | 30-59 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 30-59 days past due | | 617 | | | 5,902 | | | — | | | — | | | — | | | — | | | — | | | 6,519 | |
| 60-89 days past due | 60-89 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 60-89 days past due | | — | | | 4,783 | | | — | | | — | | | — | | | — | | | — | | | 4,783 | |
| 90 or more days past due | 90 or more days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 90 or more days past due | | — | | | 3,093 | | | — | | | — | | | — | | | — | | | — | | | 3,093 | |
| Total unsecured personal | Total unsecured personal | | 321,104 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 321,104 | | Total unsecured personal | | 778,327 | | | 1,580,465 | | | — | | | — | | | — | | | — | | | — | | | 2,358,792 | |
| Residential mortgages | Residential mortgages | | Residential mortgages | |
| Current | Current | | 5,484 | | | 41,480 | | | 34,515 | | | 13,319 | | | 5,109 | | | 59,215 | | | 1,295 | | | 160,417 | | Current | | 4,730 | | | 60,715 | | | 34,104 | | | 24,031 | | | 5,024 | | | 38,573 | | | 1,264 | | | 168,441 | |
| 30-59 days past due | 30-59 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 94 | | | 358 | | | 0 | | | 452 | | 30-59 days past due | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| 60-89 days past due | 60-89 days past due | | 0 | | | 0 | | | 393 | | | 0 | | | 0 | | | 0 | | | 0 | | | 393 | | 60-89 days past due | | — | | | — | | | — | | | — | | | — | | | 92 | | | — | | | 92 | |
| 90 or more days past due | 90 or more days past due | | 0 | | | 0 | | | 970 | | | 678 | | | 255 | | | 837 | | | 0 | | | 2,740 | | 90 or more days past due | | — | | | — | | | — | | | — | | | — | | | 584 | | | — | | | 584 | |
| Total residential mortgages | Total residential mortgages | | 5,484 | | | 41,480 | | | 35,878 | | | 13,997 | | | 5,458 | | | 60,410 | | | 1,295 | | | 164,002 | | Total residential mortgages | | 4,730 | | | 60,715 | | | 34,104 | | | 24,031 | | | 5,024 | | | 39,249 | | | 1,264 | | | 169,117 | |
| Secured consumer | Secured consumer | | Secured consumer | |
| Current | Current | | 55,457 | | | 139,010 | | | 77,488 | | | 62,528 | | | 22,299 | | | 25,688 | | | 0 | | | 382,470 | | Current | | 27,301 | | | 56,289 | | | — | | | 2,602 | | | — | | | 4,005 | | | 11 | | | 90,208 | |
| 30-59 days past due | 30-59 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 30-59 days past due | | — | | | 293 | | | — | | | — | | | — | | | — | | | — | | | 293 | |
| 60-89 days past due | 60-89 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | 60-89 days past due | | — | | | 74 | | | — | | | — | | | — | | | — | | | — | | | 74 | |
| 90 or more days past due | 90 or more days past due | | 0 | | | 0 | | | 1,203 | | | 2,655 | | | 916 | | | 0 | | | 0 | | | 4,774 | | 90 or more days past due | | — | | | 17 | | | — | | | — | | | 2,627 | | | 381 | | | — | | | 3,025 | |
| Total secured consumer | Total secured consumer | | 55,457 | | | 139,010 | | | 78,691 | | | 65,183 | | | 23,215 | | | 25,688 | | | 0 | | | 387,244 | | Total secured consumer | | 27,301 | | | 56,673 | | | — | | | 2,602 | | | 2,627 | | | 4,386 | | | 11 | | | 93,600 | |
| Other consumer | | |
| Current | | 25 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 9 | | | 34 | | |
| 30-59 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | |
| 60-89 days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | |
| 90 or more days past due | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | |
| Total other consumer | | 25 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 9 | | | 34 | | |
| | Total consumer loans held for investment | Total consumer loans held for investment | | $ | 382,070 | | | $ | 180,490 | | | $ | 114,569 | | | $ | 79,180 | | | $ | 28,673 | | | $ | 86,098 | | | $ | 1,304 | | | $ | 872,384 | | Total consumer loans held for investment | | $ | 810,358 | | | $ | 1,697,853 | | | $ | 34,104 | | | $ | 26,633 | | | $ | 7,651 | | | $ | 43,635 | | | $ | 1,275 | | | $ | 2,621,509 | |
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, 2021 | | Term Loans and Leases by Origination Year | | | | |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Within Revolving Period | | Total |
| Unsecured personal | | | | | | | | | | | | | | | | |
| Current | | $ | 1,796,678 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,796,678 | |
| 30-59 days past due | | 3,624 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,624 | |
| 60-89 days past due | | 2,600 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,600 | |
| 90 or more days past due | | 1,676 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,676 | |
| Total unsecured personal | | 1,804,578 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,804,578 | |
| Residential mortgages | | | | | | | | | | | | | | | | |
| Current | | 36,732 | | | 37,620 | | | 26,798 | | | 7,277 | | | 2,682 | | | 37,685 | | | 1,265 | | | 150,059 | |
| 30-59 days past due | | — | | | — | | | — | | | — | | | — | | | 142 | | | — | | | 142 | |
| 60-89 days past due | | — | | | — | | | — | | | — | | | 92 | | | — | | | — | | | 92 | |
| 90 or more days past due | | — | | | — | | | — | | | — | | | 251 | | | 818 | | | — | | | 1,069 | |
| Total residential mortgages | | 36,732 | | | 37,620 | | | 26,798 | | | 7,277 | | | 3,025 | | | 38,645 | | | 1,265 | | | 151,362 | |
| Secured consumer | | | | | | | | | | | | | | | | |
| Current | | 62,731 | | | — | | | — | | | — | | | — | | | — | | | 10 | | | 62,741 | |
| 30-59 days past due | | 171 | | | — | | | — | | | — | | | — | | | — | | | — | | | 171 | |
| 60-89 days past due | | 53 | | | — | | | — | | | — | | | — | | | — | | | — | | | 53 | |
| 90 or more days past due | | — | | | — | | | — | | | 2,629 | | | 382 | | | — | | | — | | | 3,011 | |
| Total secured consumer | | 62,955 | | | — | | | — | | | 2,629 | | | 382 | | | — | | | 10 | | | 65,976 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total consumer loans held for investment | | $ | 1,904,265 | | | $ | 37,620 | | | $ | 26,798 | | | $ | 9,906 | | | $ | 3,407 | | | $ | 38,645 | | | $ | 1,275 | | | $ | 2,021,916 | |
Commercial Lending Credit Quality Indicators
The Company evaluates the credit quality of its commercial loan portfolio based on regulatory risk ratings. The Company categorizes loans and leases into risk ratings based on relevant information about the quality and realizable value of collateral, if any, and the ability of borrowers to service their debts, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans and leases based on their associated credit risk and performs this analysis whenever credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans. Risk rating classifications consist of the following:
Pass – Loans and leases that the Company believes will fully repay in accordance with the contractual loan terms.
Special Mention – Loans and leases with a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date.
Substandard – Loans and leases that are inadequately protected by the current sound worth and paying capacity of the obligator or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Normal payment from the borrower is in jeopardy, although loss of principal, while still possible, is not imminent.
Doubtful – Loans and leases that have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
Loss – Loans and leases that are considered uncollectible and of little value.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presentstables present the classes of financing receivables within the commercial portfolio segment by risk rating as of March 31, 2021 and origination year:
| | March 31, 2021 | | Term Loans and Leases by Origination Year | | |
| March 31, 2022 | | March 31, 2022 | | Term Loans and Leases by Origination Year | |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Within Revolving Period | | Total | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Within Revolving Period | | Total |
| Equipment finance | Equipment finance | | | | | | | | | | | | | | | | | Equipment finance | | | | | | | | | | | | | | | | |
| Pass | Pass | | $ | 14,126 | | | $ | 44,674 | | | $ | 38,224 | | | $ | 25,329 | | | $ | 8,434 | | | $ | 13,980 | | | $ | 0 | | | $ | 144,767 | | Pass | | $ | 6,913 | | | $ | 51,075 | | | $ | 33,129 | | | $ | 26,302 | | | $ | 14,550 | | | $ | 11,349 | | | $ | — | | | $ | 143,318 | |
| Special mention | Special mention | | 0 | | | 257 | | | 0 | | | 861 | | | 0 | | | 0 | | | 0 | | | 1,118 | | Special mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Substandard | Substandard | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Substandard | | — | | | — | | | — | | | — | | | 462 | | | — | | | — | | | 462 | |
| Doubtful | Doubtful | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | Loss | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total equipment finance | Total equipment finance | | 14,126 | | | 44,931 | | | 38,224 | | | 26,190 | | | 8,434 | | | 13,980 | | | 0 | | | 145,885 | | Total equipment finance | | 6,913 | | | 51,075 | | | 33,129 | | | 26,302 | | | 15,012 | | | 11,349 | | | — | | | 143,780 | |
| Commercial real estate | Commercial real estate | | Commercial real estate | |
| Pass | Pass | | 10,601 | | | 56,178 | | | 67,315 | | | 44,612 | | | 25,050 | | | 69,509 | | | 3,783 | | | 277,048 | | Pass | | 14,191 | | | 51,307 | | | 55,126 | | | 53,599 | | | 39,446 | | | 74,275 | | | — | | | 287,944 | |
| Special mention | Special mention | | 0 | | | 8,325 | | | 276 | | | 0 | | | 0 | | | 822 | | | 0 | | | 9,423 | | Special mention | | — | | | — | | | 8,458 | | | — | | | 1,362 | | | 2,265 | | | — | | | 12,085 | |
| Substandard | Substandard | | 0 | | | 0 | | | 0 | | | 2,959 | | | 445 | | | 12,363 | | | 0 | | | 15,767 | | Substandard | | — | | | — | | | — | | | 271 | | | 2,503 | | | 10,350 | | | — | | | 13,124 | |
| Doubtful | Doubtful | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | Loss | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 207 | | | 0 | | | 207 | | Loss | | — | | | — | | | — | | | — | | | — | | | 557 | | | — | | | 557 | |
| Total commercial real estate | Total commercial real estate | | 10,601 | | | 64,503 | | | 67,591 | | | 47,571 | | | 25,495 | | | 82,901 | | | 3,783 | | | 302,445 | | Total commercial real estate | | 14,191 | | | 51,307 | | | 63,584 | | | 53,870 | | | 43,311 | | | 87,447 | | | — | | | 313,710 | |
| Commercial and industrial | Commercial and industrial | | Commercial and industrial | |
| Pass | Pass | | 249,629 | | | 459,662 | | | 31,010 | | | 11,571 | | | 16,743 | | | 11,107 | | | 2,436 | | | 782,158 | | Pass | | 12,402 | | | 199,717 | | | 67,396 | | | 19,613 | | | 6,568 | | | 20,262 | | | 641 | | | 326,599 | |
| Special mention | Special mention | | 0 | | | 0 | | | 2,352 | | | 704 | | | 1,064 | | | 110 | | | 0 | | | 4,230 | | Special mention | | — | | | 200 | | | 2,257 | | | 2,287 | | | 171 | | | 1,243 | | | — | | | 6,158 | |
| Substandard | Substandard | | 0 | | | 1,118 | | | 133 | | | 2,340 | | | 1,885 | | | 1,791 | | | 0 | | | 7,267 | | Substandard | | — | | | — | | | 1,123 | | | 3,796 | | | 2,052 | | | 2,121 | | | 80 | | | 9,172 | |
| Doubtful | Doubtful | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Doubtful | | — | | | — | | | — | | | — | | | — | | | 293 | | | — | | | 293 | |
| Loss | Loss | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,063 | | | 0 | | | 1,063 | | Loss | | — | | | — | | | — | | | — | | | 7 | | | 1,068 | | | — | | | 1,075 | |
Total commercial and industrial (1) | Total commercial and industrial (1) | | 249,629 | | | 460,780 | | | 33,495 | | | 14,615 | | | 19,692 | | | 14,071 | | | 2,436 | | | 794,718 | | Total commercial and industrial (1) | | 12,402 | | | 199,917 | | | 70,776 | | | 25,696 | | | 8,798 | | | 24,987 | | | 721 | | | 343,297 | |
| Total commercial loans and leases held for investment | Total commercial loans and leases held for investment | | 274,356 | | | 570,214 | | | 139,310 | | | 88,376 | | | 53,621 | | | 110,952 | | | 6,219 | | | 1,243,048 | | Total commercial loans and leases held for investment | | $ | 33,506 | | | $ | 302,299 | | | $ | 167,489 | | | $ | 105,868 | | | $ | 67,121 | | | $ | 123,783 | | | $ | 721 | | | $ | 800,787 | |
(1) Includes $664.4$185.0 million of PPP loans. The Company does not measure an allowance for expected credit losses on these
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, 2021 | | Term Loans and Leases by Origination Year | | | | |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Within Revolving Period | | Total |
| Equipment finance | | | | | | | | | | | | | | | | |
| Pass | | $ | 52,440 | | | $ | 35,398 | | | $ | 26,918 | | | $ | 15,457 | | | $ | 6,184 | | | $ | 8,814 | | | $ | — | | | $ | 145,211 | |
| Special mention | | 1,531 | | | — | | | 1,810 | | | — | | | — | | | — | | | — | | | 3,341 | |
| Substandard | | — | | | — | | | — | | | 603 | | | — | | | — | | | — | | | 603 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total equipment finance | | 53,971 | | | 35,398 | | | 28,728 | | | 16,060 | | | 6,184 | | | 8,814 | | | — | | | 149,155 | |
| Commercial real estate | | | | | | | | | | | | | | | | |
| Pass | | 55,613 | | | 55,202 | | | 54,460 | | | 39,981 | | | 22,366 | | | 57,235 | | | — | | | 284,857 | |
| Special mention | | — | | | 8,397 | | | — | | | 1,366 | | | 1,018 | | | 7,242 | | | — | | | 18,023 | |
| Substandard | | — | | | — | | | 277 | | | 2,496 | | | — | | | 4,179 | | | — | | | 6,952 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | | — | | | — | | | �� | | | — | | | — | | | 567 | | | — | | | 567 | |
| Total commercial real estate | | 55,613 | | | 63,599 | | | 54,737 | | | 43,843 | | | 23,384 | | | 69,223 | | | — | | | 310,399 | |
| Commercial and industrial |
| Pass | | 241,368 | | | 108,574 | | | 24,106 | | | 7,874 | | | 14,756 | | | 8,058 | | | 599 | | | 405,335 | |
| Special mention | | — | | | — | | | 2,207 | | | 463 | | | 1,467 | | | 40 | | | — | | | 4,177 | |
| Substandard | | — | | | 1,122 | | | 862 | | | 1,858 | | | 1,525 | | | 1,571 | | | 87 | | | 7,025 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | | — | | | — | | | — | | | 52 | | | 4 | | | 1,063 | | | — | | | 1,119 | |
Total commercial and industrial (1) | | 241,368 | | | 109,696 | | | 27,175 | | | 10,247 | | | 17,752 | | | 10,732 | | | 686 | | | 417,656 | |
| Total commercial loans and leases held for investment | | $ | 350,952 | | | $ | 208,693 | | | $ | 110,640 | | | $ | 70,150 | | | $ | 47,320 | | | $ | 88,769 | | | $ | 686 | | | $ | 877,210 | |
(1) Includes $268.3 million of PPP loans.
The following table presentstables present an analysis of the past-duepast due loans and leases held for investmentHFI within the commercial portfolio segment at March 31, 2021:segment:
| | March 31, 2021 | Days Past Due | |
| Current-29 | | 30-59 | | 60-89 | | 90 or more | | Total | |
| March 31, 2022 | | March 31, 2022 | 30-59
Days | | 60-89
Days | | 90 or More Days | | Total Days Past Due |
| Equipment finance | Equipment finance | $ | 145,885 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 145,885 | | Equipment finance | $ | 3,223 | | | $ | — | | | $ | — | | | $ | 3,223 | |
| Commercial real estate | Commercial real estate | 300,350 | | | 1,226 | | | 0 | | | 869 | | | 302,445 | | Commercial real estate | — | | | 104 | | | 600 | | | 704 | |
Commercial and industrial (1) | Commercial and industrial (1) | 792,647 | | | 1,008 | | | 0 | | | 1,063 | | | 794,718 | | Commercial and industrial (1) | — | | | 3 | | | 1,361 | | | 1,364 | |
| Total commercial loans and leases held for investment | Total commercial loans and leases held for investment | $ | 1,238,882 | | | $ | 2,234 | | | $ | 0 | | | $ | 1,932 | | | $ | 1,243,048 | | Total commercial loans and leases held for investment | $ | 3,223 | | | $ | 107 | | | $ | 1,961 | | | $ | 5,291 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | 30-59
Days | | 60-89
Days | | 90 or More
Days | | Total Days Past Due | | | | |
| Equipment finance | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | |
| Commercial real estate | 104 | | | — | | | 609 | | | 713 | | | | | |
Commercial and industrial (1) | — | | | — | | | 1,410 | | | 1,410 | | | | | |
| Total commercial loans and leases held for investment | $ | 104 | | | $ | — | | | $ | 2,019 | | | $ | 2,123 | | | | | |
(1) Includes $664.4 million ofPast due PPP loans. The Company does not measure an allowance for expected credit losses on these loans.loans are excluded from the tables.
Nonaccrual Assets
Nonaccrual loans and leases are those for which accrual of interest has been suspended. Loans and leases are generally placed on nonaccrual status when contractually past due 90 days or more, or earlier if management believes that the probability of collection does not warrant further accrual.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
believes that the probability of collection does not warrant further accrual, and are charged-off no later than 120 days past due.
The following table presents nonaccrual loans and leases as of March 31, 2021:leases:
| | | March 31, 2021 | | | March 31, 2022 | | December 31, 2021 | |
| | Nonaccrual(1) | | Nonaccrual with no related ACL | | | Nonaccrual(1) | Nonaccrual with no related ACL(2) | | Nonaccrual(1) | Nonaccrual with no related ACL(2) | |
| Unsecured personal | Unsecured personal | $ | 0 | | | $ | 0 | | | Unsecured personal | $ | 3,093 | | $ | — | | | $ | 1,676 | | $ | — | | |
| Residential mortgages | Residential mortgages | 3,383 | | | 2,735 | | | Residential mortgages | 875 | | 875 | | | 1,373 | | 1,373 | | |
| Secured consumer | Secured consumer | 4,774 | | | 3,858 | | | Secured consumer | 3,025 | | 3,008 | | | 3,011 | | 3,011 | | |
| Other consumer | 0 | | | 0 | | | |
| | Total nonaccrual consumer loans held for investment | Total nonaccrual consumer loans held for investment | 8,157 | | | 6,593 | | | Total nonaccrual consumer loans held for investment | 6,993 | | 3,883 | | | 6,060 | | 4,384 | | |
| | Equipment finance | Equipment finance | 0 | | | 0 | | | Equipment finance | 462 | | — | | | 603 | | — | | |
| Commercial real estate | Commercial real estate | 2,420 | | | 1,653 | | | Commercial real estate | 1,079 | | 975 | | | 989 | | 989 | | |
| Commercial and industrial | Commercial and industrial | 1,360 | | | 1,063 | | | Commercial and industrial | 2,726 | | 1,062 | | | 2,333 | | 1,061 | | |
| Total nonaccrual commercial loans and leases held for investment | Total nonaccrual commercial loans and leases held for investment | 3,780 | | | 2,716 | | | Total nonaccrual commercial loans and leases held for investment | 4,267 | | 2,037 | | | 3,925 | | 2,050 | | |
| | Total nonaccrual loans and leases held for investment | Total nonaccrual loans and leases held for investment | $ | 11,937 | | | $ | 9,309 | | | Total nonaccrual loans and leases held for investment | $ | 11,260 | | $ | 5,920 | | | $ | 9,985 | | $ | 6,434 | | |
(1) ThereExcluding PPP loans, there were no loans and leases that were 90 days or more past due and accruing as of both March 31, 2022 and December 31, 2021.
Troubled Debt RestructuringsSubset of total nonaccrual loans and leases.
TDRs are loan modifications where concessions were granted | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | | |
| Nonaccrual | | Nonaccrual Ratios (1) | | Nonaccrual | | Nonaccrual Ratios (1) | | | | | | |
| Total nonaccrual consumer loans held for investment | $ | 6,993 | | | 0.27 | % | | $ | 6,060 | | | 0.30 | % | | | | | | |
| Total nonaccrual commercial loans and leases held for investment | 4,267 | | | 0.53 | % | | 3,925 | | | 0.45 | % | | | | | | |
Total nonaccrual loans and leases held for investment (2) | $ | 11,260 | | | 0.33 | % | | $ | 9,985 | | | 0.34 | % | | | | | | |
(1) Calculated as the ratio of nonaccruing loans and leases to borrowers experiencing financial difficulties. The Company may offer several types of assistance to aid customers, including payment extensionsloans and reduction or forgiveness in amounts of principal and interest due.
TDRs identified by Radius prior to the acquisition are not disclosed because all such(2) Nonaccruing loans were recorded at fair value and a new accounting basis was establishedleases represented 0.35% and 0.38% of total loans and leases HFI, excluding PPP loans, as of the acquisition date. Subsequent modifications, if any, are evaluatedMarch 31, 2022 and recorded as TDRs in accordance with LendingClub’s accounting policies. See “Note 1. Summary of Significant Accounting Policies” for additional information.December 31, 2021, respectively.
Collateral-Dependent Assets
Certain loans on non-accrual status and certain TDR loans may be considered collateral-dependent loans if the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially through sale or operation of the collateral. Expected credit losses for the Company’s collateral-dependent loans are calculated as the difference between the amortized cost basis and the fair value of the underlying collateral less costs to sell, if applicable. See “Note 1. Summary of Significant Accounting Policies” for further detail.
Purchased Financial Assets with Credit Deterioration
Acquired loans are recorded at their fair value, which may result in the recognition of a discount or premium. In addition, the purchase price of PCD loans is grossed-up upon acquisition for the initial estimate of expected credit losses. For acquired PCD loans for which all or a portion of the balance was previously written off, or was required to be written off under LendingClub’s charge-off policy upon acquisition, the expected credit loss included in the grossed-up loan balance was immediately charged off.ACL. Subsequent changes to the allowance for expected credit lossesACLs are recorded as additions to or reversals of credit losses on the Company’s Condensed Consolidated Statements of Operations.Operations (Income Statement).
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
There were no acquired PCD loans during the first quarter of 2022. Acquired PCD loans during the first quarter of 2021 were as follows:
| | | | | | |
| Three Months Ended March 31, 2021 | |
| Purchase price | | $ | 337,118 | |
Allowance for expected credit losses (1) | | 30,378 | |
| Discount attributable to other factors | | 12,204 | |
| Par value | | $ | 379,700 | |
(1) For acquired PCD loans, an allowanceACL of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date.date for the first quarter of 2021. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, a CECL allowancean ACL of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off.written-off during the first quarter of 2021. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.million for the first quarter of 2021.
7.6. Securitizations and Variable Interest Entities
VIE Assets and Liabilities
The following tables provide the classifications of assets and liabilities on the Company’s Condensed Consolidated Balance SheetsSheet for its transactions with consolidated and unconsolidated VIEs at March 31, 2021 and December 31, 2020.VIEs. Additionally, the assets and liabilities in the tabletables below exclude intercompany balances that eliminate in consolidation:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 | Consolidated VIEs | | Unconsolidated VIEs | | Total |
| Assets | | | | | |
| | | | | |
| Restricted cash | $ | 17,536 | | | $ | 0 | | | $ | 17,536 | |
| Securities available for sale at fair value | 0 | | | 122,707 | | | 122,707 | |
| Loans held for sale at fair value | 83,926 | | | 0 | | | 83,926 | |
| Retail and certificate loans held for investment at fair value | 36,277 | | | 0 | | | 36,277 | |
| Other loans held for investment at fair value | 42,261 | | | 0 | | | 42,261 | |
| Other assets | 936 | | | 27,701 | | | 28,637 | |
| Total assets | $ | 180,936 | | | $ | 150,408 | | | $ | 331,344 | |
| Liabilities | | | | | |
| Retail notes, certificates and secured borrowings at fair value | $ | 36,277 | | | $ | 0 | | | $ | 36,277 | |
| Payable on Structured Program borrowings | 133,499 | | | 0 | | | 133,499 | |
| Other liabilities | 522 | | | 0 | | | 522 | |
| Total liabilities | 170,298 | | | 0 | | | 170,298 | |
| Total net assets | $ | 10,638 | | | $ | 150,408 | | | $ | 161,046 | |
| | | | | | | | | | | | | | | | | |
| March 31, 2022 | Consolidated VIEs | | Unconsolidated VIEs | | Total |
| Assets | | | | | |
| | | | | |
| Restricted cash | $ | 9,602 | | | $ | — | | | $ | 9,602 | |
| Securities available for sale at fair value | — | | | 45,371 | | | 45,371 | |
| | | | | |
| Retail and certificate loans held for investment at fair value | 6,733 | | | — | | | 6,733 | |
| Other loans held for investment at fair value | 15,014 | | | — | | | 15,014 | |
| Other assets | 322 | | | 14,989 | | | 15,311 | |
| Total assets | $ | 31,671 | | | $ | 60,360 | | | $ | 92,031 | |
| Liabilities | | | | | |
| Retail notes, certificates and secured borrowings at fair value | $ | 6,733 | | | $ | — | | | $ | 6,733 | |
| Payable on Structured Program borrowings | 20,347 | | | — | | | 20,347 | |
| Other liabilities | 83 | | | — | | | 83 | |
| Total liabilities | 27,163 | | | — | | | 27,163 | |
| Total net assets | $ | 4,508 | | | $ | 60,360 | | | $ | 64,868 | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| December 31, 2020 | Consolidated VIEs | | Unconsolidated VIEs | | Total |
| Assets | | | | | |
| Restricted cash | $ | 15,983 | | | $ | 0 | | | $ | 15,983 | |
| Securities available for sale at fair value | 0 | | | 142,026 | | | 142,026 | |
| Loans held for sale at fair value | 98,190 | | | 0 | | | 98,190 | |
| Retail and certificate loans held for investment at fair value | 52,620 | | | 0 | | | 52,620 | |
| Other loans held for investment at fair value | 50,102 | | | 0 | | | 50,102 | |
| Other assets | 1,270 | | | 32,865 | | | 34,135 | |
| Total assets | $ | 218,165 | | | $ | 174,891 | | | $ | 393,056 | |
| Liabilities | | | | | |
| | | | | |
| Retail notes, certificates and secured borrowings at fair value | $ | 52,620 | | | $ | 0 | | | $ | 52,620 | |
| Payable on Structured Program borrowings | 152,808 | | | 0 | | | 152,808 | |
| Other liabilities | 729 | | | 0 | | | 729 | |
| Total liabilities | 206,157 | | | 0 | | | 206,157 | |
| Total net assets | $ | 12,008 | | | $ | 174,891 | | | $ | 186,899 | |
Consolidated VIEs
The Company consolidates VIEs when it is deemed to be the primary beneficiary. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies”in theAnnual Report for additional information.
LC Trust
The Company established the LC Trust for the purpose of acquiring and holding loans for the sole benefit of certain investors that have purchased trust certificates issued by the LC Trust. The Company is obligated to ensure that the LC Trust meets minimum capital requirements with respect to funding the administrative activities and maintaining the operations of the LC Trust.
Consolidated Trusts
The Company established trusts to facilitate the sale of loans and issuance of senior and subordinated securities. If the Company is the primary beneficiary of the trust, it is a consolidated VIE and will reflect senior and subordinated securities held by third parties within “Payable on Structured Program borrowings” in the Company’s Condensed Consolidated Balance Sheets. If subsequently the Company is not the primary beneficiary of the trust, the Company will deconsolidate the VIE. See “Note 13. Short-term Borrowings and Long-term Debt” for additional information.
Warehouse Credit Facilities
Prior to the acquisition of Radius, the Company established certain entities (deemed to be VIEs) to enter into warehouse credit facilities for the purpose of purchasing loans from LendingClub. In the fourth quarter of 2020, the Company fully repaid and terminated its credit facilities.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following tables present a summary of financial assets and liabilities from the Company’s involvement with consolidated VIEs at March 31, 2021 and December 31, 2020:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 | Assets | | Liabilities | | Net Assets |
| LC Trust | $ | 38,965 | | | $ | (36,554) | | | $ | 2,411 | |
| Consolidated trusts | 141,971 | | | (133,744) | | | 8,227 | |
| | | | | |
| Total consolidated VIEs | $ | 180,936 | | | $ | (170,298) | | | $ | 10,638 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2020 | Assets | | Liabilities | | Net Assets |
| LC Trust | $ | 55,447 | | | $ | (53,068) | | | $ | 2,379 | |
| Consolidated trusts | 162,460 | | | (153,089) | | | 9,371 | |
| Warehouse credit facility | 258 | | | 0 | | | 258 | |
| Total consolidated VIEs | $ | 218,165 | | | $ | (206,157) | | | $ | 12,008 | |
The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets. | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Consolidated VIEs | | Unconsolidated VIEs | | Total |
| Assets | | | | | |
| Restricted cash | $ | 13,462 | | | $ | — | | | $ | 13,462 | |
| Securities available for sale at fair value | — | | | 58,177 | | | 58,177 | |
| Loans held for sale at fair value | 41,734 | | | — | | | 41,734 | |
| Retail and certificate loans held for investment at fair value | 10,281 | | | — | | | 10,281 | |
| Other loans held for investment at fair value | 20,929 | | | — | | | 20,929 | |
| Other assets | 584 | | | 17,156 | | | 17,740 | |
| Total assets | $ | 86,990 | | | $ | 75,333 | | | $ | 162,323 | |
| Liabilities | | | | | |
| | | | | |
| Retail notes, certificates and secured borrowings at fair value | $ | 10,281 | | | $ | — | | | $ | 10,281 | |
| Payable on Structured Program borrowings | 65,451 | | | — | | | 65,451 | |
| Other liabilities | 467 | | | — | | | 467 | |
| Total liabilities | 76,199 | | | — | | | 76,199 | |
| Total net assets | $ | 10,791 | | | $ | 75,333�� | | | $ | 86,124 | |
Unconsolidated VIEs
The Company’s transactions with unconsolidated VIEs include asset-backed securitizations, CertificateStructured Program transactions and loan sale transactions of unsecured personal loans.transactions. The Company has various forms of involvement with VIEs, including servicing of loans and holding senior or subordinated residual interests in the VIEs. The accounting for these transactions is based on a primary beneficiary analysis to determine whether the underlying VIEs should be consolidated. If the VIEs are not consolidated and the transfer of the loans from the Company to the VIE meets sale accounting criteria, then the Company will recognize a gain or loss on sales of loans. The Company considers continued involvement in an unconsolidated VIE insignificant if it is the sponsor and servicer and does not hold other significant variable interests. In these instances, the Company’s involvement with the VIE is in the role as an agent and without significant participation in the economics of the VIE. The Company enters into separate servicing agreements with the VIEs and holds at least 5% of the beneficial interests issued by the VIEs to comply with regulatory risk retention rules. The beneficial interests retained by the Company consist of senior securities and subordinated securities and are accounted for as securities available for sale. In connection with these transactions, we make certain customary representations, warranties and covenants. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies”in theAnnual Report for additional information.
Investment Fund
The Company has an equity investment in a private fund (Investment Fund) that participates in a family of funds with other unrelated third parties. This family of funds purchases assets from third parties unrelated to the Company and historically purchased whole loans and interests in loans from the Company. As of March 31, 2021, the Company had an ownership interest of approximately 22% in the Investment Fund. The Company’s investment is deemed to be a variable interest in the Investment Fund because the Company shares in the expected returns and losses of the Investment Fund. The Company has requested a full redemption of our investment in the Investment Fund. At March 31, 2021, the Company’s investment was $7.8 million, which is recognized in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.
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 summarizepresent total unconsolidated VIEs with which the Company has significant continuing involvement, but is not the primary beneficiary at March 31, 2021 and December 31, 2020:beneficiary:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | Carrying Value |
| Total VIE Assets | | Securities Available for Sale | | Other Assets | | | | | | Net Assets |
| Unconsolidated Trusts | $ | 1,077,309 | | | $ | 51,273 | | | $ | 7,911 | | | | | | | $ | 59,184 | |
| Certificate Program | 1,555,920 | | | 71,434 | | | 12,015 | | | | | | | 83,449 | |
| Investment Fund | 35,369 | | | 0 | | | 7,775 | | | | | | | 7,775 | |
| Total unconsolidated VIEs | $ | 2,668,598 | | | $ | 122,707 | | | $ | 27,701 | | | | | | | $ | 150,408 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | Total VIE Assets | | Securities Available for Sale | | Other Assets | | | | | | Net Assets |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Carrying value | $ | 1,094,857 | | | $ | 45,371 | | | $ | 14,989 | | | | | | | $ | 60,360 | |
| Total exposure | N/A | | $ | 45,371 | | | $ | 14,989 | | | | | | | $ | 60,360 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Total VIE Assets | | Securities Available for Sale | | Other Assets | | | | | | Net Assets |
| Carrying value | $ | 1,386,279 | | | $ | 58,177 | | | $ | 17,156 | | | | | | | $ | 75,333 | |
| Total exposure | N/A | | $ | 58,177 | | | $ | 17,156 | | | | | | | $ | 75,333 | |
N/A – Not applicable
| | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | Maximum Exposure to Loss |
| Securities Available for Sale | | Other Assets | | | | | | Net Assets |
| Unconsolidated Trusts | $ | 51,273 | | | $ | 7,911 | | | | | | | $ | 59,184 | |
| Certificate Program | 71,434 | | | 12,015 | | | | | | | 83,449 | |
| Investment Fund | 0 | | | 7,775 | | | | | | | 7,775 | |
| Total unconsolidated VIEs | $ | 122,707 | | | $ | 27,701 | | | | | | | $ | 150,408 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | Carrying Value |
| Total VIE Assets | | Securities Available for Sale | | Other Assets | | | | | | Net Assets |
| Unconsolidated Trusts | $ | 1,267,611 | | | $ | 57,511 | | | $ | 9,654 | | | | | | | $ | 67,165 | |
| Certificate Program | 1,931,429 | | | 84,515 | | | 15,436 | | | | | | | 99,951 | |
| Investment Fund | 34,376 | | | 0 | | | 7,775 | | | | | | | 7,775 | |
| Total unconsolidated VIEs | $ | 3,233,416 | | | $ | 142,026 | | | $ | 32,865 | | | | | | | $ | 174,891 | |
| | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | Maximum Exposure to Loss |
| Securities Available for Sale | | Other Assets | | | | | | Total Exposure |
| Unconsolidated Trusts | $ | 57,511 | | | $ | 9,654 | | | | | | | $ | 67,165 | |
| Certificate Program | 84,515 | | | 15,436 | | | | | | | 99,951 | |
| Investment Fund | 0 | | | 7,775 | | | | | | | 7,775 | |
| Total unconsolidated VIEs | $ | 142,026 | | | $ | 32,865 | | | | | | | $ | 174,891 | |
“Total VIE Assets” represents the remaining principal balance of loans held by unconsolidated VIEs with respectVIEs. “Net Assets” continue to Unconsolidated Trusts, Certificatedecline due to the ongoing paydown of loan balances from prior Structured Program transactions, and the net assets held by the Investment Fund using the most current information available. “Securitiestransactions.“Securities Available for Sale” and “Other Assets” are the balances inon the Company’s Condensed Consolidated Balance SheetsSheet related to its involvement with the unconsolidated VIEs. “Other Assets” primarily includes the Company’s servicing assets and servicing receivables and the Company’s equity investment with respect to the Investment Fund.receivables. “Total Exposure” refers to the Company’s maximum exposure to loss from its involvement with unconsolidated VIEs. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is extremely remote, such as where the value of interests and any associated collateral declines to zero. Accordingly, this required disclosure is not an indication of expected losses.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table summarizes activity related to the Unconsolidated Trusts and Certificate Program trusts, with the transfers accounted for as a sale on the Company’s financial statements for the first quarters of 2021 and 2020:statements:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | 2021 | | 2020 |
| Unconsolidated Trusts | | Unconsolidated Certificate Program
Trusts | | | | Unconsolidated Trusts | | Unconsolidated Certificate Program
Trusts |
| Principal derecognized from loans securitized or sold | $ | 0 | | | $ | 0 | | | | | $ | 255,203 | | | $ | 637,637 | |
| Net gains (losses) recognized from loans securitized or sold | $ | 0 | | | $ | 0 | | | | | $ | (20) | | | $ | 5,596 | |
Fair value of asset-backed senior and subordinated securities, and CLUB Certificate asset-backed securities retained upon settlement (1) | $ | 0 | | | $ | 0 | | | | | $ | 12,707 | | | $ | 31,423 | |
| Cash proceeds from loans securitized or sold | $ | 0 | | | $ | 0 | | | | | $ | 237,764 | | | $ | 598,515 | |
| Cash proceeds from servicing and other administrative fees on loans securitized or sold | $ | 3,017 | | | $ | 4,918 | | | | | $ | 5,121 | | | $ | 6,992 | |
| Cash proceeds for interest received on senior securities and subordinated securities | $ | 608 | | $ | 1,258 | | | | $ | 1,040 | | $ | 2,273 |
(1) For Structured Program transactions, the Company retained asset-backed senior securities of $23.0 million, CLUB Certificate asset-backed securities of $18.3 million, and asset-backed subordinated securities of $2.9 million for the first quarter of 2020. The Company did not retain asset-backed securities related to Structured Program transactions during the first quarter of 2021. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | 2022 | | 2021 |
| Unconsolidated Trusts | | Unconsolidated Certificate Program
Trusts | | | | Unconsolidated Trusts | | Unconsolidated Certificate Program
Trusts |
Principal derecognized from loans securitized or sold | $ | — | | | $ | 41,023 | | | | | $ | — | | | $ | — | |
| Net gains recognized from loans securitized or sold | $ | — | | | $ | 259 | | | | | $ | — | | | $ | — | |
| Fair value of asset-backed senior and subordinated securities, and CLUB Certificate asset-backed securities retained upon settlement | $ | — | | | $ | 2,180 | | | | | $ | — | | | $ | — | |
| | | | | | | | | |
| Cash proceeds from servicing and other administrative fees on loans securitized or sold | $ | 1,259 | | | $ | 1,846 | | | | | $ | 3,017 | | | $ | 4,918 | |
| Proceeds from sale of securities by consolidated VIE | $ | — | | | $ | 5,320 | | | | | $ | — | | | $ | — | |
| Cash proceeds for interest received on senior securities and subordinated securities | $ | 828 | | | $ | 1,867 | | | | | $ | 608 | | | $ | 1,258 | |
The Company and other investors in the subordinated interests issued by trusts and Certificate Program trusts have rights to cash flows only after the investors holding the senior securities issued by the trusts have first received their contractual cash flows. The investors and the trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the trusts can look only to the assets of the securitization trusts that issued their securities for payment. The beneficial interests held by the Company are subject principally to the credit and prepayment risk stemming from the underlying unsecured personal loans.
Off-Balance Sheet Loans
Off-balance sheet loans pursuant to unconsolidated VIE’s primarily relate to Structured Program transactions for which the Company has some form of continuing involvement, including as servicer. For
As of March 31, 2022, the aggregate unpaid principal balance of the off-balance sheet loans related to Structured Program transactions where servicing iswas $1.0 billion, of which $25.5 million was attributable to off-balance sheet loans that were 31 days or more past due. As of December 31, 2021, the only formaggregate unpaid principal balance of continuing involvement,the off-balance sheet loans related to Structured Program transactions was $1.3 billion, of which $35.0 million was attributable to off-balance sheet loans that were 31 days or more past due. For such loans, the Company would only experience a loss if it was required to repurchase a loan due to a breach in representations and warranties associated with its loan sale or servicing contracts.
As of March 31, 2021, the aggregate unpaid principal balance of the off-balance sheet loans related to Structured Program transactions was $2.6 billion, of which $66.0 million was attributable to off-balance sheet loans that were 31 days or more past due. As of December 31, 2020, the aggregate unpaid principal balance of the off-balance sheet loans related to Structured Program transactions was $3.2 billion, of which $94.8 million was attributable to off-balance sheet loans that were 31 days or more past due.
Retained Interests from Unconsolidated VIEs
The Company and other investors in the subordinated interests issued by trusts and Certificate Program trusts have rights to cash flows only after the investors holding the senior securities issued by the trusts have first received their contractual cash flows. The investors and the trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the trusts can look only to the assets of the securitization trusts that issued their securities for payment. The beneficial interests held by the Company are subject principally to the credit and prepayment risk stemming from the underlying unsecured personal whole loans.
See “Note 8. Fair Value of Assets and Liabilities” for additional information on the fair value sensitivity of asset-backed securities related to Structured Program transactions.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
8.7. Fair Value of Assets and Liabilities
For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Part II – Item 8. Financial Statements and Supplementary Data – Note 1. Summary of Significant Accounting Policies” in the Annual Report. The Company records certain assets and liabilities at fair value as listed in the following tables.
Financial Instruments, Assets and Liabilities Recorded at Fair Value
The following tables present the fair value hierarchy for assets and liabilities measured at fair value at March 31, 2021 and December 31, 2020:value:
| | March 31, 2021 | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value | |
| March 31, 2022 | | March 31, 2022 | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | Assets: | | Assets: | |
| Loans held for sale at fair value | Loans held for sale at fair value | $ | 0 | | | $ | 0 | | | $ | 166,623 | | | 166,623 | | Loans held for sale at fair value | $ | — | | | $ | — | | | $ | 156,730 | | | $ | 156,730 | |
| Retail and certificate loans held for investment at fair value | Retail and certificate loans held for investment at fair value | 0 | | | 0 | | | 507,157 | | | 507,157 | | Retail and certificate loans held for investment at fair value | — | | | — | | | 168,906 | | | 168,906 | |
| Other loans held for investment at fair value | Other loans held for investment at fair value | 0 | | | 0 | | | 42,485 | | | 42,485 | | Other loans held for investment at fair value | — | | | — | | | 15,384 | | | 15,384 | |
| Securities available for sale: | Securities available for sale: | | Securities available for sale: | |
| U.S. agency residential mortgage-backed securities | | U.S. agency residential mortgage-backed securities | — | | | 227,135 | | | — | | | 227,135 | |
| U.S. agency securities | | U.S. agency securities | — | | | 61,925 | | | — | | | 61,925 | |
| Asset-backed senior securities and subordinated securities | Asset-backed senior securities and subordinated securities | 0 | | | 62,953 | | | 17,787 | | | 80,740 | | Asset-backed senior securities and subordinated securities | — | | | 21,904 | | | 10,032 | | | 31,936 | |
| U.S. agency residential mortgage-backed securities | 0 | | | 70,730 | | | 0 | | | 70,730 | | |
| Commercial mortgage-backed securities | | Commercial mortgage-backed securities | — | | | 28,418 | | | — | | | 28,418 | |
| Other asset-backed securities | | Other asset-backed securities | — | | | 24,597 | | | — | | | 24,597 | |
| CLUB Certificate asset-backed securities | CLUB Certificate asset-backed securities | 0 | | | 0 | | | 41,967 | | | 41,967 | | CLUB Certificate asset-backed securities | — | | | — | | | 13,434 | | | 13,434 | |
| Other asset-backed securities | 0 | | | 29,800 | | | 0 | | | 29,800 | | |
| Commercial mortgage-backed securities | 0 | | | 28,440 | | | 0 | | | 28,440 | | |
| U.S. agency securities | 0 | | | 19,284 | | | 0 | | | 19,284 | | |
| Municipal securities | Municipal securities | 0 | | | 3,258 | | | 0 | | | 3,258 | | Municipal securities | — | | | 2,872 | | | — | | | 2,872 | |
| Other securities | 0 | | | 200 | | | 0 | | | 200 | | |
| | Total securities available for sale | Total securities available for sale | 0 | | | 214,665 | | | 59,754 | | | 274,419 | | Total securities available for sale | — | | | 366,851 | | | 23,466 | | | 390,317 | |
| Servicing assets | Servicing assets | 0 | | | 0 | | | 54,113 | | | 54,113 | | Servicing assets | — | | | — | | | 72,112 | | | 72,112 | |
| Other assets | Other assets | 0 | | | 4,235 | | | 5,202 | | | 9,437 | | Other assets | — | | | 2,550 | | | 2,408 | | | 4,958 | |
| Total assets | Total assets | $ | 0 | | | $ | 218,900 | | | $ | 835,334 | | | $ | 1,054,234 | | Total assets | $ | — | | | $ | 369,401 | | | $ | 439,006 | | | $ | 808,407 | |
| | Liabilities: | Liabilities: | | Liabilities: | |
| Retail notes, certificates and secured borrowings | Retail notes, certificates and secured borrowings | $ | 0 | | | $ | 0 | | | $ | 507,203 | | | $ | 507,203 | | Retail notes, certificates and secured borrowings | $ | — | | | $ | — | | | $ | 168,906 | | | $ | 168,906 | |
| Payable on Structured Program borrowings | Payable on Structured Program borrowings | 0 | | | 0 | | | 133,499 | | | 133,499 | | Payable on Structured Program borrowings | — | | | — | | | 20,347 | | | 20,347 | |
| Other liabilities | Other liabilities | 0 | | | 0 | | | 22,276 | | | 22,276 | | Other liabilities | — | | | — | | | 10,024 | | | 10,024 | |
| Total liabilities | Total liabilities | $ | 0 | | | $ | 0 | | | $ | 662,978 | | | $ | 662,978 | | Total liabilities | $ | — | | | $ | — | | | $ | 199,277 | | | $ | 199,277 | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | | | | | | | |
| Loans held for sale at fair value | $ | 0 | | | $ | 0 | | | $ | 121,902 | | | $ | 121,902 | |
| Retail and certificate loans held for investment at fair value | 0 | | | 0 | | | 636,686 | | | 636,686 | |
| Other loans held for investment at fair value | 0 | | | 0 | | | 49,954 | | | 49,954 | |
| Securities available for sale: | | | | | | | |
| Asset-backed senior securities and subordinated securities | 0 | | | 75,372 | | | 16,515 | | | 91,887 | |
| CLUB Certificate asset-backed securities | 0 | | | 0 | | | 50,139 | | | 50,139 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other securities | 0 | | | 200 | | | 0 | | | 200 | |
| Total securities available for sale | 0 | | | 75,572 | | | 66,654 | | | 142,226 | |
| Servicing assets | 0 | | | 0 | | | 56,347 | | | 56,347 | |
| Total assets | $ | 0 | | | $ | 75,572 | | | $ | 931,543 | | | $ | 1,007,115 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Retail notes, certificates and secured borrowings | $ | 0 | | | $ | 0 | | | $ | 636,774 | | | $ | 636,774 | |
| Payable on Structured Program borrowings | 0 | | | 0 | | | 152,808 | | | 152,808 | |
| Other liabilities | 0 | | | 0 | | | 12,270 | | | 12,270 | |
| Total liabilities | $ | 0 | | | $ | 0 | | | $ | 801,852 | | | $ | 801,852 | |
Changes in the fair value of financial liabilities presented in the tables above, caused by a change in the Company’s risk are reported in other comprehensive income (OCI). For the first quarters of 2021 and 2020, the amount reported in OCI is zero because these financial liabilities are either payable only upon receipt of cash flows from underlying loans or secured by cash collateral. | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | | | | | | | |
| Loans held for sale at fair value | $ | — | | | $ | — | | | $ | 142,370 | | | $ | 142,370 | |
| Retail and certificate loans held for investment at fair value | — | | | — | | | 229,719 | | | 229,719 | |
| Other loans held for investment at fair value | — | | | — | | | 21,240 | | | 21,240 | |
| Securities available for sale: | | | | | | | |
| U.S. agency residential mortgage-backed securities | — | | | 123,699 | | — | | | 123,699 |
| Asset-backed senior securities and subordinated securities | — | | | 28,129 | | 11,762 | | | 39,891 |
| U.S. agency securities | — | | | 26,172 | | — | | | 26,172 |
| Other asset-backed securities | — | | | 26,133 | | | — | | | 26,133 | |
| Commercial mortgaged-backed securities | — | | | 26,098 | | | — | | | 26,098 | |
| CLUB Certificate asset-backed securities | — | | | — | | | 18,285 | | | 18,285 | |
| Municipal securities | — | | | 3,252 | | | — | | | 3,252 | |
| | | | | | | |
| Total securities available for sale | — | | | 233,483 | | 30,047 | | | 263,530 |
| Servicing assets | — | | | — | | | 67,726 | | | 67,726 |
| Other assets | — | | | 2,812 | | | 3,312 | | | 6,124 | |
| Total assets | $ | — | | | $ | 236,295 | | | $ | 494,414 | | | $ | 730,709 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Retail notes, certificates and secured borrowings | $ | — | | | $ | — | | | $ | 229,719 | | | $ | 229,719 | |
| Payable on Structured Program borrowings | — | | | — | | | 65,451 | | | 65,451 |
| Other liabilities | — | | | — | | | 12,911 | | | 12,911 |
| Total liabilities | $ | — | | | $ | — | | | $ | 308,081 | | | $ | 308,081 | |
Financial instruments are categorized in the valuation hierarchy based on the significance of observable or unobservable factors in the overall fair value measurement. SinceFor the financial instruments listed in the tables above that do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, changes in fair value for assets and liabilities within the Level 2 or Level 3 categories may include changes in fair value that were attributable to observable and unobservable inputs, respectively. The Company primarily uses a discounted cash flow (DCF) model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect ourthe Company’s best estimates of the assumptions a market participant would use to calculate fair value. The Company did 0tnot transfer any assets or liabilities in or out of Level 3 during the first quarters of 20212022 or 2020.
Fair valuation adjustments are recorded through earnings related to Level 3 instruments for the first quarters of 2021 and 2020. Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input.2021.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Loans Held for Sale at Fair Value
Significant Unobservable InputsAs of both March 31, 2022 and December 31, 2021, the majority of loans HFS were sold shortly after origination and at committed prices. Therefore, the Company is generally not exposed to fair value fluctuations as a result of adverse changes in key assumptions.
Fair Value Reconciliation
The following table presents quantitativetables present additional information about the significant unobservable inputs used for the Company’s Level 3 loans held for sale at fair value at March 31, 2021 and December 31, 2020:HFS on a recurring basis:
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| | | | Loans Held for Sale at Fair Value |
| | | | | | | March 31, 2021 | | December 31, 2020 |
| | | | | | | Minimum | | Maximum | | Weighted-
Average | | Minimum | | Maximum | | Weighted-
Average |
| Discount rates | | 5.2 | % | | 15.5 | % | | 8.3 | % | | 7.6 | % | | 16.0 | % | | 8.5 | % |
Net cumulative expected loss rates (1) | | 2.5 | % | | 22.8 | % | | 6.6 | % | | 5.0 | % | | 28.0 | % | | 8.2 | % |
Cumulative expected prepayment rates (1) | | 28.2 | % | | 46.2 | % | | 31.9 | % | | 27.2 | % | | 41.2 | % | | 30.4 | % |
(1) Expressed as a percentage of the original principal balance of the loan. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | |
| Balance at December 31, 2021 | | | | | | | $ | 147,193 | | | $ | (4,823) | | | $ | 142,370 | | | | | | | |
| Originations and purchases | | | | | | | 2,270,925 | | | — | | | 2,270,925 | | | | | | | |
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| Sales | | | | | | | (2,247,648) | | | (10,053) | | | (2,257,701) | | | | | | | |
| Principal payments and retirements | | | | | | | (12,286) | | | — | | | (12,286) | | | | | | | |
| Charge-offs, net of recoveries | | | | | | | (532) | | | (518) | | | (1,050) | | | | | | | |
| Change in fair value recorded in earnings | | | | | | | — | | | 14,472 | | | 14,472 | | | | | | | |
| Balance at March 31, 2022 | | | | | | | $ | 157,652 | | | $ | (922) | | | $ | 156,730 | | | | | | | |
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| | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | |
| Balance at December 31, 2020 | | | | | | | $ | 132,600 | | | $ | (10,698) | | | $ | 121,902 | | | | | | | |
| Originations and purchases | | | | | | | 941,945 | | | (1,629) | | | 940,316 | | | | | | | |
| Transfers to loans held for investment | | | | | | | (63) | | | — | | | (63) | | | | | | | |
| Sales | | | | | | | (873,672) | | | 7,037 | | | (866,635) | | | | | | | |
| Principal payments and retirements | | | | | | | (22,821) | | | — | | | (22,821) | | | | | | | |
| Charge-offs, net of recoveries | | | | | | | (3,859) | | | 3,186 | | | (673) | | | | | | | |
| Change in fair value recorded in earnings | | | | | | | — | | | (5,403) | | | (5,403) | | | | | | | |
| Balance at March 31, 2021 | | | | | | | $ | 174,130 | | | $ | (7,507) | | | $ | 166,623 | | | | | | | |
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Significant Recurring Level 3 Fair Value Input SensitivityRetail and Certificate Loans and Related Notes, Certificates and Secured Borrowings
The sensitivityCompany does not assume principal or interest rate risk on loans that were funded by its member payment- dependent self-directed retail program (Retail Program) because loan balances, interest rates and maturities are matched and offset by an equal balance of notes with the exact same interest rates and maturities. At March 31, 2022 and December 31, 2021, the DCF methodology used to estimate the retail note, certificate and secured borrowings’ fair values used the same projected net cash flows as their related loans. Therefore, the fair value adjustments for retail loans held for sale atinvestment were largely offset by the corresponding fair value adjustments due to adverse changes in key assumptions asthe payment dependent design of March 31, 2021the retail notes, certificates and December 31, 2020, are as follows:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Loans held for sale at fair value | $ | 166,623 | | | $ | 121,902 | |
| Expected weighted-average life (in years) | 1.2 | | 1.1 |
| Discount rates | | | |
| 100 basis point increase | $ | (1,706) | | | $ | (1,151) | |
| 200 basis point increase | $ | (3,382) | | | $ | (2,282) | |
| Expected credit loss rates on underlying loans | | | |
| 10% adverse change | $ | (1,486) | | | $ | (1,099) | |
| 20% adverse change | $ | (3,003) | | | $ | (2,220) | |
| Expected prepayment rates | | | |
| 10% adverse change | $ | (514) | | | $ | (273) | |
| 20% adverse change | $ | (1,027) | | | $ | (556) | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Reconciliation
The following tables present additional information about Level 3 loans held for sale at fair value on a recurring basis for the first quarters of 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Loans Held for Sale at Fair Value | | |
| | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | |
| Balance at December 31, 2020 | | | | | | | $ | 132,600 | | | $ | (10,698) | | | $ | 121,902 | | | | | | | |
| Originations and purchases | | | | | | | 941,945 | | | (1,629) | | | 940,316 | | | | | | | |
| Transfers (to) from loans held for investment and/or loans held for sale | | | | | | | (63) | | | 0 | | | (63) | | | | | | | |
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| Sales | | | | | | | (873,672) | | | 7,037 | | | (866,635) | | | | | | | |
| Principal payments and retirements | | | | | | | (22,821) | | | 0 | | | (22,821) | | | | | | | |
| Charge-offs, net of recoveries | | | | | | | (3,859) | | | 3,186 | | | (673) | | | | | | | |
| Change in fair value recorded in earnings | | | | | | | 0 | | | (5,403) | | | (5,403) | | | | | | | |
| Balance at March 31, 2021 | | | | | | | $ | 174,130 | | | $ | (7,507) | | | $ | 166,623 | | | | | | | |
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|
| | | Loans Held for Sale at Fair Value | | |
| | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | |
| Balance at December 31, 2019 | | | | | | | $ | 747,394 | | | $ | (25,039) | | | $ | 722,355 | | | | | | | |
| Purchases | | | | | | | 1,379,094 | | | 0 | | | 1,379,094 | | | | | | | |
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| Transfers (to) from loans held for investment and/or loans held for sale | | | | | | | (43,123) | | | 0 | | | (43,123) | | | | | | | |
| Sales | | | | | | | (1,171,407) | | | 19,909 | | | (1,151,498) | | | | | | | |
| Principal payments and retirements | | | | | | | (70,103) | | | 0 | | | (70,103) | | | | | | | |
| Charge-offs, net of recoveries | | | | | | | (6,298) | | | 5,779 | | | (519) | | | | | | | |
| Change in fair value recorded in earnings | | | | | | | 0 | | | (94,502) | | | (94,502) | | | | | | | |
| Balance at March 31, 2020 | | | | | | | $ | 835,557 | | | $ | (93,853) | | | $ | 741,704 | | | | | | | |
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Retail and Certificate Loans Held for Investment at Fair Value and Retail Notes, Certificates and Secured Borrowings
Significant Unobservable Inputs
The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for retail and certificate loans held for investment at fair value and the related retail notes, certificates and secured borrowings at March 31, 2021 and December 31, 2020:
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| | | | Retail and Certificate Loans Held for Investment at Fair Value,
and Retail Notes, Certificates and Secured Borrowings |
| | | | | | | March 31, 2021 | | December 31, 2020 |
| | | | | | | Minimum | | Maximum | | Weighted-
Average | | Minimum | | Maximum | | Weighted-
Average |
| Discount rates | | 7.6 | % | | 15.2 | % | | 9.4 | % | | 7.6 | % | | 15.0 | % | | 9.4 | % |
Net cumulative expected loss rates (1) | | 3.7 | % | | 20.6 | % | | 9.7 | % | | 4.3 | % | | 28.1 | % | | 11.2 | % |
Cumulative expected prepayment rates (1) | | 28.3 | % | | 36.3 | % | | 31.5 | % | | 27.3 | % | | 35.7 | % | | 30.4 | % |
(1) Expressed as a percentage of the original principal balance of the loan, note, certificate or secured borrowing.
Significant Recurring Level 3 Fair Value Input Sensitivity
At March 31, 2021 and December 31, 2020, the discounted cash flow methodology used to estimate the retail note, certificate and secured borrowings’ fair values used the same projected net cash flows as their related retail loans. As demonstrated by the following tables, the fair value adjustments for retail and certificate loans held for
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
investment were largely offset by the corresponding fair value adjustments due to the payment dependent design of the retail notes, certificates and secured borrowings.
Fair Value Reconciliation
The following tables present additional information about Level 3 retail and certificate loans held for investment at fair value and retail notes, certificates and secured borrowings measured at fair value on a recurring basis for the first quarters of 2021 and 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Retail and Certificate Loans Held for
Investment at Fair Value | | | | Retail Notes, Certificates and Secured Borrowings |
| Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value |
| Balance at December 31, 2020 | $ | 679,903 | | | $ | (43,217) | | | $ | 636,686 | | | | | | | | | $ | 679,903 | | | $ | (43,129) | | | $ | 636,774 | |
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| Principal payments and retirements | (131,020) | | | 0 | | | (131,020) | | | | | | | | | (131,020) | | | 0 | | | (131,020) | |
| Charge-offs, net of recoveries | (12,008) | | | 4,740 | | | (7,268) | | | | | | | | | (12,008) | | | 4,652 | | | (7,356) | |
| Change in fair value recorded in earnings | 0 | | | 8,759 | | | 8,759 | | | | | | | | | 0 | | | 8,805 | | | 8,805 | |
| Balance at March 31, 2021 | $ | 536,875 | | | $ | (29,718) | | | $ | 507,157 | | | | | | | | | $ | 536,875 | | | $ | (29,672) | | | $ | 507,203 | |
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| Retail and Certificate Loans Held for
Investment at Fair Value | | Retail Notes, Certificates and Secured Borrowings |
| Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value |
| Balance at December 31, 2019 | $ | 1,148,888 | | | $ | (69,573) | | | $ | 1,079,315 | | | $ | 1,148,888 | | | $ | (67,422) | | | $ | 1,081,466 | |
| Purchases | 104,620 | | | 0 | | | 104,620 | | | 0 | | | 0 | | | 0 | |
| Transfers (to) from retail and certificate loans held for investment and/or loans held for sale | (17,478) | | | 0 | | | (17,478) | | | 0 | | | 0 | | | 0 | |
| Issuances | 0 | | | 0 | | | 0 | | | 104,620 | | | 0 | | | 104,620 | |
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| Principal payments and retirements | (215,748) | | | 0 | | | (215,748) | | | (233,226) | | | 0 | | | (233,226) | |
| Charge-offs, net of recoveries | (29,620) | | | 17,311 | | | (12,309) | | | (29,620) | | | 16,431 | | | (13,189) | |
| Change in fair value recorded in earnings | 0 | | | (52,987) | | | (52,987) | | | 0 | | | (52,831) | | | (52,831) | |
| Balance at March 31, 2020 | $ | 990,662 | | | $ | (105,249) | | | $ | 885,413 | | | $ | 990,662 | | | $ | (103,822) | | | $ | 886,840 | |
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Other Loans Held for Investment at Fair Value
Significant Unobservable Inputs
The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 other loans held for investment at fair value at March 31, 2021 and December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Other Loans Held for Investment at Fair Value |
| | | | | | | March 31, 2021 | | December 31, 2020 |
| | | | | | | Minimum | | Maximum | | Weighted-
Average | | Minimum | | Maximum | | Weighted-
Average |
| Discount rates | | 5.2 | % | | 15.4 | % | | 8.8 | % | | 7.5 | % | | 16.1 | % | | 8.8 | % |
Net cumulative expected loss rates (1) | | 2.5 | % | | 20.2 | % | | 8.3 | % | | 5.0 | % | | 26.3 | % | | 10.3 | % |
Cumulative expected prepayment rates (1) | | 27.7 | % | | 42.6 | % | | 31.8 | % | | 26.8 | % | | 39.7 | % | | 30.7 | % |
(1) Expressed as a percentage of the original principal balance of the loan.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Significant Recurring Level 3 Fair Value Input Sensitivity
The sensitivity of other loans held for investment at fair value to adverse changes in key assumptions as of March 31, 2021 and December 31, 2020, are as follows:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Other loans held for investment at fair value | $ | 42,485 | | | $ | 49,954 | |
| Expected weighted-average life (in years) | 1.0 | | 1.1 |
| Discount rates | | | |
| 100 basis point increase | $ | (428) | | | $ | (541) | |
| 200 basis point increase | $ | (849) | | | $ | (1,073) | |
| Expected credit loss rates on underlying loans | | | |
| 10% adverse change | $ | (447) | | | $ | (640) | |
| 20% adverse change | $ | (906) | | | $ | (1,295) | |
| Expected prepayment rates | | | |
| 10% adverse change | $ | (164) | | | $ | (181) | |
| 20% adverse change | $ | (342) | | | $ | (368) | |
Fair Value Reconciliation
The following tables present additional information about Level 3 other loans held for investment at fair value on a recurring basis for the first quarters of 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Other Loans Held for Investment at Fair Value | | |
| | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | |
| Balance at December 31, 2020 | | | | | | | $ | 56,388 | | | $ | (6,434) | | | $ | 49,954 | | | | | | | |
| Purchases | | | | | | | 116 | | | (98) | | | 18 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Principal payments and retirements | | | | | | | (8,324) | | | 0 | | | (8,324) | | | | | | | |
| Charge-offs, net of recoveries | | | | | | | (1,025) | | | 574 | | | (451) | | | | | | | |
| Change in fair value recorded in earnings | | | | | | | 0 | | | 1,288 | | | 1,288 | | | | | | | |
| Balance at March 31, 2021 | | | | | | | $ | 47,155 | | | $ | (4,670) | | | $ | 42,485 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
|
| | | Other Loans Held for Investment at Fair Value | | |
| | | | | | | Outstanding Principal Balance | | Valuation Adjustment | | Fair Value | | | | | | |
| Balance at December 31, 2019 | | | | | | | $ | 47,042 | | | $ | (3,349) | | | $ | 43,693 | | | | | | | |
| Purchases | | | | | | | 727 | | | (693) | | | 34 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Transfers (to) from other loans held for investment and/or loans held for sale | | | | | | | 43,188 | | | 0 | | | 43,188 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Principal payments and retirements | | | | | | | (5,684) | | | 0 | | | (5,684) | | | | | | | |
| Charge-offs, net of recoveries | | | | | | | (1,623) | | | 134 | | | (1,489) | | | | | | | |
| Change in fair value recorded in earnings | | | | | | | 0 | | | (8,739) | | | (8,739) | | | | | | | |
| Balance at March 31, 2020 | | | | | | | $ | 83,650 | | | $ | (12,647) | | | $ | 71,003 | | | | | | | |
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LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Asset-Backed Securities Related to Structured Program Transactions
Significant Unobservable Inputs
The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for asset-backed securities related to Structured Program transactions at March 31, 2021 and December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Asset-Backed Securities Related to Structured Program Transactions |
| | | | | | | March 31, 2021 | | December 31, 2020 |
| | | | | | | Minimum | | Maximum | | Weighted-
Average | | Minimum | | Maximum | | Weighted-
Average |
| Discount rates | | 2.2 | % | | 25.1 | % | | 8.7 | % | | 2.2 | % | | 25.1 | % | | 8.4 | % |
Net cumulative expected loss rates (1) | | 5.1 | % | | 23.8 | % | | 14.9 | % | | 5.4 | % | | 28.9 | % | | 18.8 | % |
Cumulative expected prepayment rates (1) | | 10.1 | % | | 31.8 | % | | 26.9 | % | | 6.3 | % | | 30.5 | % | | 24.8 | % |
(1) Expressed as a percentage of the outstanding collateral balance.
Significant Recurring Fair Value Input Sensitivity
The following tables present adverse changes to the fair value sensitivity of Level 2 and Level 3 asset-backed securities related to Structured Program transactions to changes in key assumptions at March 31, 2021 and December 31, 2020:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 |
| Asset-Backed Securities Related to
Structured Program Transactions |
| Senior Securities | | Subordinated Securities | | CLUB Certificates |
| Fair value of interests held | $ | 62,953 | | | $ | 17,787 | | | $ | 41,967 | |
| Expected weighted-average life (in years) | 0.8 | | 1.3 | | 0.9 |
| Discount rates | | | | | |
| 100 basis point increase | $ | (434) | | | $ | (164) | | | $ | (324) | |
| 200 basis point increase | $ | (859) | | | $ | (350) | | | $ | (642) | |
| Expected credit loss rates on underlying loans | | | | | |
| 10% adverse change | $ | 0 | | | $ | (1,286) | | | $ | (1,019) | |
| 20% adverse change | $ | 0 | | | $ | (2,630) | | | $ | (2,089) | |
| Expected prepayment rates | | | | | |
| 10% adverse change | $ | 0 | | | $ | (712) | | | $ | (561) | |
| 20% adverse change | $ | 0 | | | $ | (1,666) | | | $ | (1,168) | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Asset-Backed Securities Related to
Structured Program Transactions |
| Senior Securities | | Subordinated Securities | | CLUB Certificates |
| Fair value of interests held | $ | 75,372 | | | $ | 16,515 | | | $ | 50,139 | |
| Expected weighted-average life (in years) | 0.9 | | 1.4 | | 0.9 |
| Discount rates | | | | | |
| 100 basis point increase | $ | (579) | | | $ | (161) | | | $ | (405) | |
| 200 basis point increase | $ | (1,145) | | | $ | (343) | | | $ | (800) | |
| Expected credit loss rates on underlying loans | | | | | |
| 10% adverse change | $ | 0 | | | $ | (1,831) | | | $ | (1,528) | |
| 20% adverse change | $ | 0 | | | $ | (3,718) | | | $ | (3,095) | |
| Expected prepayment rates | | | | | |
| 10% adverse change | $ | 0 | | | $ | (791) | | | $ | (659) | |
| 20% adverse change | $ | 0 | | | $ | (1,736) | | | $ | (1,343) | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Reconciliation
The following table presents additional information about Level 3 asset-backed securities related to Structured Program transactions measured at fair value on a recurring basis for the first quarters of 2021 and 2020:
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | | | |
| 2021 | | 2020 | | | | | | | | |
| Fair value at beginning of period | $ | 66,654 | | | $ | 110,796 | | | | | | | | | |
| Additions | 578 | | | 23,585 | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Cash received | (14,194) | | | (16,266) | | | | | | | | | |
| Change in unrealized gain (loss) | 3,125 | | | (5,256) | | | | | | | | | |
| Accrued interest | 1,121 | | | 1,632 | | | | | | | | | |
| Reversal of (impairment on) securities available for sale | 2,470 | | | (10,980) | | | | | | | | | |
| | | | | | | | | | | |
| Fair value at end of period | $ | 59,754 | | | $ | 103,511 | | | | | | | | | |
Servicing Assets
Significant Unobservable Inputs
The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for servicing assets at March 31, 2021 and December 31, 2020:relating to loans sold to investors:
| | | | | Servicing Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | | | Minimum | | Maximum | | Weighted-
Average | | Minimum | | Maximum | | Weighted-
Average | | | | Minimum | | Maximum | | Weighted-
Average | | Minimum | | Maximum | | Weighted-
Average |
| Discount rates | Discount rates | | 4.8 | % | | 16.4 | % | | 9.9 | % | | 4.8 | % | | 16.4 | % | | 9.9 | % | Discount rates | | 7.5 | % | | 16.4 | % | | 10.0 | % | | 7.5 | % | | 16.4 | % | | 10.0 | % |
Net cumulative expected loss rates (1) | Net cumulative expected loss rates (1) | | 2.6 | % | | 26.9 | % | | 10.7 | % | | 4.5 | % | | 26.3 | % | | 12.5 | % | Net cumulative expected loss rates (1) | | 2.3 | % | | 26.8 | % | | 10.9 | % | | 2.4 | % | | 26.4 | % | | 10.2 | % |
Cumulative expected prepayment rates (1) | Cumulative expected prepayment rates (1) | | 28.1 | % | | 46.2 | % | | 32.7 | % | | 27.0 | % | | 38.9 | % | | 31.2 | % | Cumulative expected prepayment rates (1) | | 32.1 | % | | 46.2 | % | | 39.8 | % | | 32.1 | % | | 45.9 | % | | 38.4 | % |
Total market servicing rates (% per annum on outstanding principal balance) (2) | Total market servicing rates (% per annum on outstanding principal balance) (2) | | 0.62 | % | | 0.62 | % | | 0.62 | % | | 0.62 | % | | 0.62 | % | | 0.62 | % | Total market servicing rates (% per annum on outstanding principal balance) (2) | | 0.62 | % | | 0.62 | % | | 0.62 | % | | 0.62 | % | | 0.62 | % | | 0.62 | % |
(1) Expressed as a percentage of the original principal balance of the loan.
(2) Includes collection fees estimated to be paid to a hypothetical third-party servicer.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Significant Recurring Level 3 Fair Value Input Sensitivity
The Company’s selection of the most representative market servicing rates for servicing assets is inherently judgmental. The Company reviews third-party servicing rates for its loans, loans in similar credit sectors, and market servicing benchmarking analyses provided by third-party valuation firms, when available. The table below shows the impact on the estimated fair value of servicing assets, calculated using different market servicing rate assumptions as of March 31, 2021 and December 31, 2020:assumptions:
| | | Servicing Assets | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Weighted-average market servicing rate assumptions | Weighted-average market servicing rate assumptions | 0.62 | % | | 0.62 | % | Weighted-average market servicing rate assumptions | 0.62 | % | | 0.62 | % |
| Change in fair value from: | Change in fair value from: | | Change in fair value from: | |
| Servicing rate increase by 0.10% | Servicing rate increase by 0.10% | $ | (7,757) | | | $ | (7,379) | | Servicing rate increase by 0.10% | $ | (9,852) | | | $ | (9,495) | |
| Servicing rate decrease by 0.10% | Servicing rate decrease by 0.10% | $ | 7,757 | | | $ | 7,379 | | Servicing rate decrease by 0.10% | $ | 9,852 | | | $ | 9,495 | |
The following table presents the fair value sensitivity of servicing assets to adverse changes in key assumptions as of March 31, 2021 and December 31, 2020:assumptions:
| | | Servicing Assets | | March 31, 2022 | | December 31, 2021 |
| March 31, 2021 | | December 31, 2020 | |
| Fair value of servicing assets | $ | 54,113 | | | $ | 56,347 | | |
| Fair value of Servicing Assets | | Fair value of Servicing Assets | $ | 72,112 | | | $ | 67,726 | |
| Discount rates | Discount rates | | Discount rates | |
| 100 basis point increase | 100 basis point increase | $ | (437) | | | $ | (455) | | 100 basis point increase | $ | (594) | | | $ | (558) | |
| 200 basis point increase | 200 basis point increase | $ | (875) | | | $ | (911) | | 200 basis point increase | $ | (1,187) | | | $ | (1,115) | |
| Expected loss rates | Expected loss rates | | Expected loss rates | |
| 10% adverse change | 10% adverse change | $ | (598) | | | $ | (346) | | 10% adverse change | $ | (560) | | | $ | (693) | |
| 20% adverse change | 20% adverse change | $ | (1,196) | | | $ | (691) | | 20% adverse change | $ | (1,121) | | | $ | (1,386) | |
| Expected prepayment rates | Expected prepayment rates | | Expected prepayment rates | |
| 10% adverse change | 10% adverse change | $ | (2,277) | | | $ | (1,596) | | 10% adverse change | $ | (1,935) | | | $ | (2,401) | |
| 20% adverse change | 20% adverse change | $ | (4,554) | | | $ | (3,192) | | 20% adverse change | $ | (3,870) | | | $ | (4,802) | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Reconciliation
The following table presents additional information about Level 3 servicing assets measured at fair value on a recurring basis for the first quarters of 2021 and 2020:basis:
| | | Three Months Ended
March 31, | | | Three Months Ended
March 31, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| Fair value at beginning of period | Fair value at beginning of period | $ | 56,347 | | | $ | 89,680 | | | Fair value at beginning of period | $ | 67,726 | | | $ | 56,347 | | |
Issuances (1) | Issuances (1) | 7,235 | | | 17,581 | | | Issuances (1) | 22,365 | | | 7,235 | | |
| Change in fair value, included in Marketplace revenue | Change in fair value, included in Marketplace revenue | (11,837) | | | (9,608) | | | Change in fair value, included in Marketplace revenue | (16,979) | | | (11,837) | | |
| Other net changes included in Deferred revenue | Other net changes included in Deferred revenue | 2,368 | | | (4,828) | | | Other net changes included in Deferred revenue | (1,000) | | | 2,368 | | |
| Fair value at end of period | Fair value at end of period | $ | 54,113 | | | $ | 92,825 | | | Fair value at end of period | $ | 72,112 | | | $ | 54,113 | | |
|
(1) Represents the gains or losses on sales of the related loans.
Financial Instruments, Assets and Liabilities Not Recorded at Fair Value
The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | Carrying Amount | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | | | | | | | | | |
| Loans and leases held for investment, net | $ | 3,234,311 | | | $ | — | | | $ | — | | | $ | 3,469,527 | | | $ | 3,469,527 | |
| | | | | | | | | |
| | | | | | | | | |
| Other assets | 19,118 | | | — | | | 17,036 | | | 2,082 | | | 19,118 | |
| Total assets | $ | 3,253,429 | | | $ | — | | | $ | 17,036 | | | $ | 3,471,609 | | | $ | 3,488,645 | |
| Liabilities: | | | | | | | | | |
Deposits (1) | $ | 218,801 | | | $ | — | | | $ | — | | | $ | 218,801 | | | $ | 218,801 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Short-term borrowings | 13,188 | | | — | | | 12,417 | | | 771 | | | 13,188 | |
| Advances from PPPLF | 193,371 | | | — | | | — | | | 193,371 | | | 193,371 | |
| Other long-term debt | 15,388 | | | — | | | — | | | 15,388 | | | 15,388 | |
| | | | | | | | | |
| | | | | | | | | |
| Other liabilities | 51,297 | | | — | | | 20,146 | | | 31,151 | | | 51,297 | |
| Total liabilities | $ | 492,045 | | | $ | — | | | $ | 32,563 | | | $ | 459,482 | | | $ | 492,045 | |
(1) Excludes deposit liabilities with no defined or contractual maturities.
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, 2021 | Carrying Amount | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | | | | | | | | | |
| Loans held for sale | $ | 248,878 | | | $ | — | | | $ | — | | | $ | 251,101 | | | $ | 251,101 | |
| Loans and leases held for investment, net | 2,754,737 | | | — | | | — | | | 2,964,691 | | | 2,964,691 | |
| Other assets | 18,274 | | | — | | | 15,630 | | | 2,644 | | | 18,274 | |
| | | | | | | | | |
| Total assets | $ | 3,021,889 | | | $ | — | | | $ | 15,630 | | | $ | 3,218,436 | | | $ | 3,234,066 | |
| Liabilities: | | | | | | | | | |
Deposits (1) | $ | 68,405 | | | $ | — | | | $ | — | | | $ | 68,405 | | | $ | 68,405 | |
| Short-term borrowings | 27,780 | | | — | | | 17,595 | | | 10,185 | | | 27,780 | |
| Advances from PPPLF | 271,933 | | | — | | | — | | | 271,933 | | | 271,933 | |
| Other long-term debt | 15,455 | | | — | | | — | | | 15,455 | | | 15,455 | |
| Other liabilities | 51,655 | | | — | | | 22,187 | | | 29,468 | | | 51,655 | |
| Total liabilities | $ | 435,228 | | | $ | — | | | $ | 39,782 | | | $ | 395,446 | | | $ | 435,228 | |
(1) Excludes deposit liabilities with no defined or contractual maturities.
8. Property, Equipment and Software, Net
Property, equipment and software, net, consist of the following:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Software (1) | $ | 143,174 | | | $ | 121,102 | |
| Leasehold improvements | 37,284 | | | 37,347 | |
| Computer equipment | 29,614 | | | 29,598 | |
| Furniture and fixtures | 7,342 | | | 8,346 | |
| Total property, equipment and software | 217,414 | | | 196,393 | |
| Accumulated depreciation and amortization | (105,911) | | | (98,397) | |
| Total property, equipment and software, net | $ | 111,503 | | | $ | 97,996 | |
(1) Includes $25.5 million and $14.7 million of development in progress for internally-developed software and $10.9 million and $2.5 million of development in progress to customize purchased software as of March 31, 2022 and December 31, 2021, respectively.
Depreciation and amortization expense on property, equipment and software was $9.5 million and $10.2 million for the first quarters of 2022 and 2021, respectively.
The Company recorded impairment expense on its internal-use software of $0.3 million for both of the first quarters of 2022 and 2021.
The Company records the above expenses in “Depreciation and amortization” expense on the Income Statement.
9. Goodwill and Intangible Assets
Goodwill
The Company’s goodwill balance was $75.7 million as of both March 31, 2022 and December 31, 2021. The Company did not record any goodwill impairment expense for the first quarters of 2022 and 2021. Goodwill is not
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Financial Instruments, Assets, and Liabilities Not Recorded at Fair Value
The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value at March 31, 2021 and December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | Carrying Amount | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | | | | | | | | | |
| Loans and leases held for investment, net | $ | 2,079,300 | | | $ | 0 | | | $ | 0 | | | $ | 2,126,840 | | | $ | 2,126,840 | |
| | | | | | | | | |
| | | | | | | | | |
| Servicing assets | 2,859 | | | 0 | | | 0 | | | 2,921 | | | 2,921 | |
| | | | | | | | | |
| Other assets | 0 | | | 0 | | | 9,023 | | | 0 | | | 9,023 | |
| Total assets | $ | 2,082,159 | | | $ | 0 | | | $ | 9,023 | | | $ | 2,129,761 | | | $ | 2,138,784 | |
| Liabilities: | | | | | | | | | |
| Deposits | $ | 98,547 | | | $ | 0 | | | $ | 0 | | | $ | 98,547 | | | $ | 98,547 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Short-term borrowings | 90,091 | | | 0 | | | 54,088 | | | 36,003 | | | 90,091 | |
| Advances from PPPLF | 370,086 | | | 0 | | | 0 | | | 370,086 | | | 370,086 | |
| Other long-term debt | 18,572 | | | 0 | | | 0 | | | 18,572 | | | 18,572 | |
| | | | | | | | | |
| | | | | | | | | |
| Other liabilities | 50,755 | | | 0 | | | 35,063 | | | 15,692 | | | 50,755 | |
| Total liabilities | $ | 628,051 | | | $ | 0 | | | $ | 89,151 | | | $ | 538,900 | | | $ | 628,051 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | Carrying Amount | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Balance at
Fair Value |
| Assets: | | | | | | | | | |
Total cash and cash equivalents (1) | $ | 524,963 | | | $ | 0 | | | $ | 524,963 | | | $ | 0 | | | $ | 524,963 | |
Restricted cash (1) | 103,522 | | | 0 | | | 103,522 | | | 0 | | | 103,522 | |
| Other assets | 914 | | | 0 | | | 914 | | | 0 | | | 914 | |
| | | | | | | | | |
| Total assets | $ | 629,399 | | | $ | 0 | | | $ | 629,399 | | | $ | 0 | | | $ | 629,399 | |
| Liabilities: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Short-term borrowings | $ | 104,989 | | | $ | 0 | | | $ | 65,121 | | | $ | 39,868 | | | $ | 104,989 | |
| Other liabilities | 57,536 | | | 0 | | | 43,984 | | | 13,552 | | | 57,536 | |
| Total liabilities | $ | 162,525 | | | $ | 0 | | | $ | 109,105 | | | $ | 53,420 | | | $ | 162,525 | |
(1) Carrying amount approximates fair value due to the short maturity of these financial instruments.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
9. Property, Equipment and Software, Net
Property, equipment and software, net, consist of the following:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Internally developed software (1) | $ | 108,414 | | | $ | 101,953 | |
| Leasehold improvements | 36,387 | | | 35,140 | |
| Computer equipment | 27,896 | | | 27,030 | |
| Purchased software | 19,327 | | | 19,004 | |
| Furniture and fixtures | 8,252 | | | 8,203 | |
| Construction in progress | 3,046 | | | 2,761 | |
| Total property, equipment and software | 203,322 | | | 194,091 | |
| Accumulated depreciation and amortization | (108,009) | | | (97,450) | |
| Total property, equipment and software, net | $ | 95,313 | | | $ | 96,641 | |
(1) Includes $14.7 million and $13.9 million of development in progress as of March 31, 2021 and December 31, 2020, respectively.
Depreciation and amortization expense on property, equipment and software was $10.2 million and $11.8 million for the first quarters of 2021 and 2020, respectively. The Company recorded impairment expense on its internally developed software of $0.3 million and $0.2 million for the first quarters of 2021 and 2020, respectively. The Company records impairment expense on its internally developed software in “Depreciation and amortization” expense in the Condensed Consolidated Statements of Operations.
10. Goodwill and Intangible Assets
Goodwill
In connection with its acquisition of Radius in the first quarter of 2021, the Company recognized Goodwill of $75.7 million, which is fully allocated to the LendingClub Bank operating segment. Goodwill is not amortized, but will beis subject to annual impairment tests. Seetests that are performed in the fourth quarter of each calendar year. For additional detail, see “Part II – Item 8. Financial Statements and Supplementary Data – Note 2. Business Acquisition.1. Summary of Significant Accounting Policies” in the Annual Report.
Intangible Assets
Intangible assets consist of customer relationships, which include the core deposit intangible acquired during the first quarter of 2021 as part of the acquisition of Radius.relationships. Intangible assets, net of accumulated amortization, are included in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.Sheet. The gross and net carrying values and accumulated amortization arewere as follows for the periods presented:follows:
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| Gross carrying value | Gross carrying value | $ | 54,500 | | | $ | 39,500 | | Gross carrying value | $ | 54,500 | | | $ | 54,500 | |
| Accumulated amortization | Accumulated amortization | (29,280) | | | (28,073) | | Accumulated amortization | (34,614) | | | (33,319) | |
| Net carrying value | Net carrying value | $ | 25,220 | | | $ | 11,427 | | Net carrying value | $ | 19,886 | | | $ | 21,181 | |
The customer relationship intangible assets are amortized on an accelerated basis from ten to fourteen years. Amortization expense associated with intangible assets for the first quarters of 2022 and 2021 and 2020 was $1.2$1.3 million and $0.8$1.2 million, respectively. There was 0no impairment loss for the first quarters of 2022 and 2021.
The expected future amortization expense for intangible assets as of March 31, 2022, is as follows:
| | | | | |
| 2022 | $ | 3,553 | |
| 2023 | 4,198 | |
| 2024 | 3,549 | |
| 2025 | 2,901 | |
| 2026 | 2,252 | |
| Thereafter | 3,433 | |
| Total | $ | 19,886 | |
10. Other Assets
Other assets consist of the following:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Operating lease assets | $ | 74,882 | | | $ | 77,316 | |
Servicing assets (1) | 74,195 | | | 70,370 | |
| Nonmarketable equity investments | 34,694 | | | 31,726 | |
Intangible assets, net (2) | 19,886 | | | 21,181 | |
| Other | 104,168 | | | 101,953 | |
| Total other assets | $ | 307,825 | | | $ | 302,546 | |
(1) Loans underlying servicing assets had a total outstanding principal balance of $10.7 billion and $10.3 billion as of March 31, 2022 and December 31, 2021, respectively.
(2) See “Note 9. Goodwill and 2020.Intangible Assets” for additional detail.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The expected future amortization expense for intangible assets as of March 31, 2021, is as follows:
| | | | | |
| 2021 | $ | 4,039 | |
| 2022 | 4,847 | |
| 2023 | 4,198 | |
| 2024 | 3,549 | |
| 2025 | 2,901 | |
| Thereafter | 5,686 | |
| Total | $ | 25,220 | |
11. Other Assets
Other assets consist of the following:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Operating lease assets | $ | 84,931 | | | $ | 74,037 | |
Servicing assets (1) | 56,972 | | | 56,347 | |
| Bank-owned life insurance | 31,623 | | | 0 | |
Intangible assets, net (2) | 25,220 | | | 11,427 | |
| Prepaid expenses | 17,163 | | | 16,455 | |
| Accounts receivable | 14,194 | | | 10,243 | |
| | | |
| Other investments | 13,871 | | | 8,275 | |
| Accrued interest receivable | 13,792 | | | 5,205 | |
| | | |
| | | |
| | | |
| Other | 21,429 | | | 5,410 | |
| Total other assets | $ | 279,195 | | | $ | 187,399 | |
(1) As of March 31, 2021 and December 31, 2020, loans underlying loan servicing rights had a total outstanding principal balance of $9.4 billion and $10.1 billion, respectively.
(2) See “Note 10. Goodwill and Intangible Assets” for additional detail.
12. Deposits
Deposits consist of the following:
| | | | | | | |
| March 31, 2021 | | |
Interest-bearing deposits: | | | |
Checking accounts | $ | 1,653,254 | | | |
Savings and money market accounts | 478,026 | | | |
Certificates of deposit (1)
| 98,547 | | | |
Total | $ | 2,229,827 | | | |
Noninterest-bearing deposits | 143,610 | | | |
Total deposits | $ | 2,373,437 | | | |
| | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | | |
| Interest-bearing deposits: | | | | | |
| Checking accounts | $ | 2,108,231 | | | $ | 1,993,809 | | | |
| Savings and money market accounts | 1,388,815 | | | 856,989 | | | |
Certificates of deposit (1) | 218,801 | | | 68,405 | | | |
| Total | $ | 3,715,847 | | | $ | 2,919,203 | | | |
| Noninterest-bearing deposits | 261,630 | | | 216,585 | | | |
| Total deposits | $ | 3,977,477 | | | $ | 3,135,788 | | | |
(1)Includes $93.4$16.9 million and $14.0 million in denominations of $100 thousand or more and $33.8 million in denominations in excessexceeding the Federal Deposit Insurance Corporation (FDIC) limit of $250 thousand federal insurance limits.as of March 31, 2022 and December 31, 2021, respectively.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Total certificates of deposit at March 31, 20212022 are scheduled to mature as follows:
| | 2021 | $ | 69,001 | | |
| 2022 | 2022 | 25,062 | | 2022 | $ | 46,338 | |
| 2023 | 2023 | 3,861 | | 2023 | 109,851 | |
| 2024 | 2024 | 57 | | 2024 | 61,050 | |
| 2025 | 2025 | 231 | | 2025 | 618 | |
| Thereafter | 335 | | |
| 2026 | | 2026 | 944 | |
| | Total certificates of deposit | Total certificates of deposit | $ | 98,547 | | Total certificates of deposit | $ | 218,801 | |
13.12. Short-term Borrowings and Long-term Debt
Short-term Borrowings:
Repurchase Agreements
The Company entered into repurchase agreements pursuant to which the Company sold securities (subject to an obligation to repurchase such securities at a specified future date and price) in exchange for cash. As of March 31, 20212022 and December 31, 2020,2021, the Company had $90.1$13.2 million and $105.0$27.8 million in aggregate debt outstanding under its repurchase agreements, respectively, which is primarily amortized over time through regular principal and interest payments collected from the pledged securities. At March 31, 2021,2022, a majority of the Company’s repurchase agreements have contractual repurchase dates ranging from September 2022 to March 2028. These contractual repurchase dates correspond to either a set repurchase schedule or to the maturity dates of the underlying securities, which have a remaining weighted-average estimated life from 0.8 to 1.3 years.of less than one year. At March 31, 20212022 and December 31, 2020, these2021, the repurchase agreements bore interest rates ranging from 3.08%3.2% to 6.91% and 6.33% and 3.05%3.12% to 4.00%6.72%, respectively, which are either fixed or based on a benchmark of the three-month LIBOR rate or the weighted-average interest rate of the securities sold plus a spread. Underlying securities retained and pledged as collateral under repurchase agreements were $114.9$39.3 million and $133.5 million, respectively, at March 31, 2021 and December 31, 2020.
Other Short-term Borrowings
The Company had a Federal Funds unsecured borrowing facility of $7.5$50.5 million at March 31, 2021. As of March2022 and December 31, 2021, there were no borrowings outstanding under this line. The interest rate for the Federal Funds is determined by the lender based on market conditions per transaction.respectively.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Long-term Debt:
Advances from PPPLF
As of March 31, 2022 and December 31, 2021, outstanding PPPLF borrowings were $370.1 million. The borrowings$193.4 million and $271.9 million, respectively, and are collateralized by the SBA PPP loans originated by the Company. The maturity date of the PPPLF borrowings matches the maturity date of the SBA PPP loans. When loans are forgiven by the SBA, the corresponding PPPLF advance is paid by the Company. The interest rate on the PPPLF borrowings is fixed at 0.35%. No further advances may be made without authorization from the Board of Governs of the Federal Reserve System (FRB).
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Retail Notes, Certificates, and Secured Borrowings
The Company issued member payment dependentpayment-dependent notes, (Retail Notes)or retail notes, and the LC Trust issued certificates as a means to allow investors to invest in the corresponding loans. Prior to the acquisition of Radius, investorsInvestors were able to purchase Retail Notes, which were securities for whichthese retail notes and certificates, where the cash flows to investors were dependent upon principal and interest payments made by borrowers of certainthe underlying unsecured personal loans. As of December 31, 2020, LendingClub ceased offering and selling Retail Notes.retail notes and certificates. The total balance of outstanding Retail Notesretail notes and certificates will continue to decline as underlying borrower payments are made. The Company does not assume principal or interest rate risk on loans that were funded by Retail Notesretail notes and certificates because loan balances, interest rates and maturities were matched and offset by an equal balance of notes and certificates with the exact same interest rates and maturities.See “Note 8. Fair Value of Assets and Liabilities” for information about the outstanding principal balance and net fair value adjustments for retail notes, certificates, and secured borrowings.
The following table provides the balances of retail notes, certificates and secured borrowings at fair value at the endas of the periods indicated:presented:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Retail notes | $ | 470,720 | | | $ | 583,219 | |
| Certificates | 36,277 | | | 52,620 | |
Secured borrowings (1) | 206 | | | 935 | |
| Total retail notes, certificates and secured borrowings | $ | 507,203 | | | $ | 636,774 | |
(1) At March 31, 2021 and December 31, 2020, a fair value of $0.2 million and $0.8 million included in “Retail and certificate loans held for investment at fair value” was pledged as collateral for secured borrowings, respectively. | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Retail notes | $ | 162,171 | | | $ | 219,435 | |
| Certificates and secured borrowings | 6,735 | | | 10,284 | |
| | | |
| Total retail notes, certificates and secured borrowings | $ | 168,906 | | | $ | 229,719 | |
Payable on Structured Program Borrowings
The Company consolidated certain sponsored Structured Program transactions through master trusts comprised of unsecured personal whole loans. The Company is the primary beneficiary of the trusts, which are consolidated. As of March 31, 20212022 and December 31, 2020,2021, the certificate participations and securities of certain consolidated VIEs held by third-party investors of $133.5$20.3 million and $152.8$65.5 million, respectively, are included in “Payable on Structured Program borrowings” inon the Condensed Consolidated Balance SheetsSheet and were secured by “Other loans held for investment at fair value” and “Loans held for sale at fair value”sale” of $126.2$15.0 million and $148.3$62.7 million and restricted cash of $15.2$7.3 million and $13.5$11.2 million, included in the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.
Other Long-term Debt
With the acquisition of Radius, theThe Company assumedhas subordinated notes with an outstanding amount of $15.8$15.3 million as of both March 31, 2022 and December 31, 2021. The subordinated notes are at a 6.5% fixed to floating rate and are due June 30, 2027. Fixed interest payments are due semiannually in arrears on June 30 and December 30 through June 30, 2022.30. Subsequent to June 30, 2022, the rate resets quarterly at a rate equal to 3-month LIBORLondon Interbank Offered Rate (LIBOR) plus 4.64%. The subordinated notes are junior in right to the repayment in full of all existing claims of creditors and depositors of the Company. The subordinated notes may be redeemed, in whole or in part, at par plus accrued unpaid interest after June 27, 2022 at the option of the Company. The carrying amount of the subordinated notes was $15.3 million, including a purchase premium of $0.4 million as of March 31, 2021.
In addition, the Company assumed advances from the Federal Home Loan Bank of Boston (FHLBB) of $2.8 million as of March 31, 2021, which were subsequently fully paid.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
14.13. Other Liabilities
Other liabilities consist of the following:
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Operating lease liabilities | $ | 104,220 | | | $ | 94,538 | |
| Payable to investors | 35,063 | | | 40,286 | |
| Accrued expenses | 26,176 | | | 14,382 | |
Contingent liabilities (1) | 21,988 | | | 21,592 | |
| Accrued compensation | 16,319 | | | 28,805 | |
| Transaction fee refund reserve | 15,692 | | | 14,119 | |
| Accounts payable | 10,742 | | | 3,698 | |
| Deferred revenue | 7,615 | | | 4,923 | |
| Loan trailing fee liability, at fair value | 6,499 | | | 7,494 | |
| Other | 20,752 | | | 14,714 | |
| Total other liabilities | $ | 265,066 | | | $ | 244,551 | |
(1) See “Note 18. Commitments and Contingencies” for further information. | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Accounts payable and accrued expenses | $ | 92,737 | | | $ | 100,972 | |
| | | |
| Operating lease liabilities | 88,180 | | | 91,588 | |
| Payable to investors | 20,146 | | | 22,187 | |
| | | |
| | | |
| Other | 97,251 | | | 89,204 | |
| Total other liabilities | $ | 298,314 | | | $ | 303,951 | |
15.14. Employee Incentive Plans
The Company’s 2014 Equity Incentive Plan (EIP) providesequity incentive plans provide for granting awards, including restricted stock units (RSUs), performance-based restricted stock units (PBRSUs)RSUs, PBRSUs, cash awards and stock options to employees, officers and directors.
Stock-based Compensation
Stock-based compensation expense, included in “Compensation and benefits” expense on the Company’s Condensed Consolidated Statements of Operations,Income Statement, was as follows for the periods presented:
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2021 | | 2020 | | | | |
| RSUs and PBRSUs | $ | 14,743 | | | $ | 17,706 | | | | | |
Stock options (1) | 450 | | | 423 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total stock-based compensation expense | $ | 15,193 | | | $ | 18,129 | | | | | |
(1) In the first quarter of 2021, includes common stock issued and consideration related to share-based payments in connection with the acquisition of Radius. See “Note 2. Business Acquisition” for additional information. | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | | | |
| 2022 | | 2021 | | | | | | | | |
| RSUs and PBRSUs | $ | 15,674 | | | $ | 14,743 | | | | | | | | | |
| Stock options | 20 | | | 450 | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total stock-based compensation expense | $ | 15,694 | | | $ | 15,193 | | | | | | | | | |
The Company capitalized $1.0$1.7 million and $1.6$1.0 million of stock-based compensation expense associated with developing software for internal use during the first quarters of 20212022 and 2020,2021, respectively.
Restricted Stock Units
The following table summarizes the activities for the Company’s RSUs:
| | | | | | | | | | | |
| Number
of Units | | Weighted-
Average
Grant Date
Fair Value |
| Unvested at December 31, 2021 | 9,703,751 | | | $ | 12.44 | |
| Granted | 3,784,854 | | | $ | 14.24 | |
| Vested | (1,199,296) | | | $ | 11.88 | |
| Forfeited/expired | (540,695) | | | $ | 14.42 | |
| Unvested at March 31, 2022 | 11,748,614 | | | $ | 12.98 | |
| | | |
During the first quarter of 2022, the Company granted 3,784,854 RSUs with an aggregate fair value of $53.9 million.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Restricted Stock Units
The following table summarizes the activities for the Company’s RSUs during the first quarter of 2021:
| | | | | | | | | | | |
| Number
of Units | | Weighted-
Average
Grant Date
Fair Value |
| Unvested at December 31, 2020 | 11,395,112 | | | $ | 11.26 | |
| Granted | 4,415,391 | | | $ | 11.15 | |
| Vested | (1,011,815) | | | $ | 13.57 | |
| Forfeited/expired | (496,946) | | | $ | 12.21 | |
| Unvested at March 31, 2021 | 14,301,742 | | | $ | 11.03 | |
| | | |
During the first quarterquarters of 2022 and 2021, the Company granted 4,415,391recognized $13.8 million and $13.5 million in stock-based compensation expense related to RSUs, with an aggregate fair value of $49.2 million.respectively.
As of March 31, 2021,2022, there was $148.7$140.4 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 2.72.2 years.
Performance-based Restricted Stock Units
PBRSUs are restricted stock unit awards that are earned and eligible for vesting (if applicable) based upon the achievement of certain pre-established performance metrics over a specific performance period. OurThe Company’s PBRSU awards have a separate market-based component and/or a performance-based component. Certain of ourthe Company’s PBRSU awards have additional time-based vesting for any earned shares. With respect to PBRSU awards with market-based metrics, the compensation expense of the award is fixed at the time of grant (incorporating the probability of achieving the market-based metrics), not adjusted for actual performance and expensed over the performance and vesting period. With respect to PBRSU awards with performance-based metrics, the compensation expense of the award is set at the time of grant (assuming a target level of achievement), adjusted for actual performance during the performance period and expensed over the performance and vesting period.
The following table summarizes the activities for the Company’s PBRSUs duringPBRSUs:
| | | | | | | | | | | |
| Number
of Units | | Weighted-
Average
Grant Date
Fair Value |
| Unvested at December 31, 2021 | 1,771,869 | | | $ | 9.72 | |
| Granted | 510,911 | | | $ | 8.26 | |
| | | |
| | | |
| Unvested at March 31, 2022 | 2,282,780 | | | $ | 9.40 | |
| | | |
During the first quarter of 2021:
| | | | | | | | | | | |
| Number
of Units | | Weighted-
Average
Grant Date
Fair Value |
| Unvested at December 31, 2020 | 1,441,311 | | | $ | 5.31 | |
| Granted | 568,285 | | | $ | 22.54 | |
| Vested | (20,285) | | | $ | 22.59 | |
| | | |
| Unvested at March 31, 2021 | 1,989,311 | | | $ | 10.12 | |
| | | |
During the first quarters of 20212022 and 2020,2021, the Company recognized $1.2$1.9 million and $0.8$1.2 million in stock-based compensation expense related to PBRSUs, respectively.
As of March 31, 2021,2022, there was $17.2$11.7 million of unrecognized compensation cost related to unvested PBRSUs, which is expected to be recognized over the next 2.11.6 years.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
16.15. Income Taxes
For the first quarter of 2022, the Company recorded an income tax expense of $5.0 million primarily related to income tax expense for state jurisdictions that limit net operating loss utilization. For the first quarter 2021, the Company recorded an income tax benefit of $2.8 million primarily related to changes in the deferred tax asset valuation allowance resulting from a deferred tax liability assumed with the acquisition of Radius. For the first quarter of 2020, the Company recorded an income tax expense of $319 thousand primarily attributable to the tax effects of other comprehensive income associated with the Company’s available for sale portfolio.Acquisition.
The Company continues to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.
17.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
16. Leases
Lessor Arrangements
Upon the acquisition of Radius, theThe Company assumedhas lessor arrangements which consist of sales-type leases for equipment (Equipment Finance). Such arrangements may include options to renew or to purchase the leased equipment at the end of the lease term. For the first quarterquarters of 2022 and 2021, interest earned on Equipment Finance was $2.6 million and $1.9 million, respectively, and is included in “Interest and fees on loans and leases held for investment” inon the Company’s Condensed Consolidated Statements of Operations.Income Statement.
The components of Equipment Finance assets are as follows:
| | | | | | | |
| March 31, 2021 | | |
Lease receivables | $ | 111,571 | | | |
Unguaranteed residual asset values | 36,646 | | | |
Unearned income | (2,455) | | | |
Deferred fees | 123 | | | |
Total (1)
| $ | 145,885 | | | |
(1) See “Note 6. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses” for additional information. | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | | |
| Lease receivables | $ | 118,512 | | | $ | 122,927 | | | |
| Unguaranteed residual asset values | 35,916 | | | 36,837 | | | |
| Unearned income | (11,206) | | | (10,989) | | | |
| Deferred fees | 558 | | | 380 | | | |
| Total | $ | 143,780 | | | $ | 149,155 | | | |
Future minimum lease payments based on maturity of the Company’s lessor arrangements atas of March 31, 20212022 were as follows:
| | | | | |
| 2021 | $ | 32,252 | |
| 2022 | 37,073 | |
| 2023 | 27,303 | |
| 2024 | 17,568 | |
| 2025 | 9,393 | |
| Thereafter | 8,772 | |
| Total lease payments | $ | 132,361 | |
| Discount effect | (20,790) | |
| Present value of future minimum lease payments | $ | 111,571 | |
The Company did not have any lessor arrangements with related parties or any deferred selling profits as of March 31, 2021.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| | | | | |
| 2022 | $ | 32,709 | |
| 2023 | 36,881 | |
| 2024 | 28,710 | |
| 2025 | 17,570 | |
| 2026 | 10,100 | |
| Thereafter | 4,541 | |
| Total lease payments | $ | 130,511 | |
| Discount effect | (11,999) | |
| Present value of future minimum lease payments | $ | 118,512 | |
Lessee Arrangements
The Company has operating leases for its headquarters in San Francisco, California, as well as additional office space for its origination and servicing operations in the Salt Lake City, area, Utah, and Westborough, Massachusetts. In addition, the Company assumed operating leases in Boston, Massachusetts upon the acquisition of Radius.areas. As of March 31, 2021,2022, the lease agreements have remaining lease terms ranging from approximately one yeartwo years to tennine years. Some of the lease agreements include options to extend the lease term for up to an additional fifteen years. In addition, the Company is the sublessor of a portion of its office space in San Francisco, with remaining lease terms of approximatelyless than one year. As of March 31, 2021,2022, the Company pledged $0.8$0.9 million of cash and $5.5 million in letters of credit as security deposits in connection with its lease agreements.
The right-of-use (ROU) assets and related liabilities recorded for the leases assumed upon acquisition were both approximately $5.0 million. The ROU assets were adjusted to reflect favorable terms of the lease, when compared to market terms, which resulted in an increase to the acquired ROU of approximately $1.7 million. Lease liabilities assumed were measured based on the net present value of remaining future lease payments on the date of acquisition, with consideration given for options to extend or renew each lease. Remaining future lease payments were discounted at the Company’s estimated incremental borrowing rate on the date of acquisition.
The Company reviewed operating lease ROUright-of-use (ROU) assets for impairment. For the first quarter of 2021, the Company recognized an impairment expense of $1.0 million net, on operating lease assets, included in “Occupancy expense”Occupancy expense on the Company’s Condensed Consolidated Statement of Operations. NaNIncome Statement. The Company did not recognize an impairment expense was recorded during the first quarter of 2020.
Balance sheet information as of March 31, 2021 and December 31, 2020 related to leases was as follows:
| | | | | | | | | | |
| ROU Assets and Lease Liabilities | March 31, 2021 | December 31, 2020 | | |
| Operating lease assets | $ | 84,931 | | $ | 74,037 | | | |
Operating lease liabilities (1) | $ | 104,220 | | $ | 94,538 | | | |
(1) The difference between operating lease assets and operating lease liabilities is the unamortized balance of deferred rent.
Components of net lease costs for the first quarters of 2021 and 2020 were as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| Net Lease Costs | Income Statement Classification | 2021 | | 2020 | | | | |
Operating lease costs (1) | Occupancy | $ | (4,977) | | | $ | (4,620) | | | | | |
| Sublease revenue | Other non-interest income | 1,537 | | | 1,534 | | | | | |
| Net lease costs | | $ | (3,440) | | | $ | (3,086) | | | | | |
(1) Includes variable lease costs of $0.1 million and $0.4 million for the first quarters of 2021 and 2020, respectively.2022.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Balance sheet information related to leases was as follows:
| | | | | | | | | | | | | |
| ROU Assets and Lease Liabilities | Balance Sheet Classification | March 31, 2022 | December 31, 2021 | | |
| Operating lease assets | Other assets | $ | 74,882 | | $ | 77,316 | | | |
Operating lease liabilities (1) | Other liabilities | $ | 88,180 | | $ | 91,588 | | | |
(1) The difference between operating lease assets and operating lease liabilities is the unamortized balance of deferred rent.
Components of net lease costs were as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| Net Lease Costs | Income Statement Classification | 2022 | | 2021 | | | | |
Operating lease costs (1) | Occupancy | $ | (4,480) | | | $ | (4,977) | | | | | |
| Sublease revenue | Other non-interest income | 1,537 | | | 1,537 | | | | | |
| Net lease costs | | $ | (2,943) | | | $ | (3,440) | | | | | |
(1) Includes variable lease costs of $0.4 million and $0.1 million for the first quarters of 2022 and 2021, respectively.
Supplemental cash flow information related to the Company’s operating leases for the first quarters of 2021 and 2020 was as follows:
| | | Three Months Ended
March 31, | | | Three Months Ended
March 31, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| Non-cash operating activity: | Non-cash operating activity: | | | Non-cash operating activity: | | |
Leased assets obtained in exchange for new and amended operating lease liabilities (1) | Leased assets obtained in exchange for new and amended operating lease liabilities (1) | $ | 12,914 | | | $ | 0 | | | Leased assets obtained in exchange for new and amended operating lease liabilities (1) | $ | — | | | $ | 12,914 | | |
(1) Represents non-cash activity and, accordingly, is not reflected in the Condensed Consolidated Statements of Cash Flows. Amount includes noncash remeasurements of the operating lease ROU asset.
The Company’s future minimum undiscounted lease payments under operating leases and anticipated sublease revenue as of March 31, 20212022 were as follows:
| | | Operating Lease
Payments | | Sublease
Revenue | | Net | | Operating Lease
Payments | | Sublease
Revenue | | Net |
| 2021 | $ | 16,148 | | | $ | (5,079) | | | $ | 11,069 | | |
| 2022 | 2022 | 15,947 | | | (2,918) | | | 13,029 | | 2022 | $ | 11,135 | | | $ | (1,229) | | | $ | 9,906 | |
| 2023 | 2023 | 12,465 | | | 0 | | | 12,465 | | 2023 | 12,554 | | | — | | | 12,554 | |
| 2024 | 2024 | 12,810 | | | 0 | | | 12,810 | | 2024 | 12,810 | | | — | | | 12,810 | |
| 2025 | 2025 | 13,163 | | | 0 | | | 13,163 | | 2025 | 13,163 | | | — | | | 13,163 | |
| 2026 | | 2026 | 13,375 | | | — | | | 13,375 | |
| Thereafter | Thereafter | 62,350 | | | 0 | | | 62,350 | | Thereafter | 48,975 | | | — | | | 48,975 | |
| Total lease payments | Total lease payments | $ | 132,883 | | | $ | (7,997) | | | $ | 124,886 | | Total lease payments | $ | 112,012 | | | $ | (1,229) | | | $ | 110,783 | |
| Discount effect | Discount effect | 28,663 | | | Discount effect | (23,832) | | |
| Present value of future minimum lease payments | Present value of future minimum lease payments | $ | 104,220 | | | Present value of future minimum lease payments | $ | 88,180 | | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The weighted-average remaining lease term and discount rate used in the calculation of the Company’s operating lease assets and liabilities were as follows:
| | | | | | | | | |
| Lease Term and Discount Rate | March 31, 20212022 | | | | |
| Weighted-average remaining lease term (in years) | 8.698.33 | | | | |
| Weighted-average discount rate | 5.405.43 | % | | | | |
18.17. Commitments and Contingencies
Operating Lease Commitments
For discussion regarding the Company’s operating lease commitments, see “Note 17.16. Leases.”
Loan Purchase Obligation
Prior to the acquisition of Radius, under the Company’s loan account program with WebBank, which served as the Company’s primary issuing bank for loans facilitated through the Company’s platform, WebBank retained ownership of the loans it originated for two business days after origination. As part of this arrangement, the Company was committed to purchase any loans that have been fully approved at par plus accrued interest, at the conclusion of the two business days. As of December 31, 2020, the Company was committed to purchase loans with
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
an outstanding principal balance of $13.8 million at par. The Company was not committed to purchase any such loans as of March 31, 2021 as it now originates loans and no longer has a loan account program with WebBank.
Loan Repurchase Obligations
The Company is generally required to repurchase loans or interests therein in the event of identity theft or certain other types of fraud on the part of the borrower or education and patient service providers. The Company may also repurchase loans or interests therein in connection with certain customer accommodations. In connection with certain whole loan and Certificate Program sales, as well as to facilitate access to securitization markets, the Company agreed to repurchase loans if representations and warranties made with respect to such loans were breached under certain circumstances. In the case of certain securitization transactions, the Company also agreed to repurchase or substitute loans for which a borrower failed to make the first payment due under a loan. The Company believes such provisions are customary and consistent with institutional loan and securitization market standards.
In addition to and distinct from the repurchase obligations described in the preceding paragraph, the Company performed certain administrative functions for a variety of retail and institutional investors, including executing, without discretion, loan investments as directed by the investor. To the extent loans did not meet the investor’s investment criteria at the time of issuance, or were transferred to the investor as a result of a system error by the Company, the Company repurchased such loans or interests therein at par.
As a result of the loan repurchase obligations described above, the Company repurchased $0.2 million and $1.1 million in loans or interests therein during the first quarters of 2021 and 2020, respectively.
Purchase Commitments
If the Company could not arrange for other investors to invest in or purchase loans that the Company facilitated and that were originated by an issuing bank partner but did not meet the credit criteria for purchase by the issuing bank partner, the Company was contractually committed to purchase those loans. As of both March 31, 2021 and December 31, 2020, the Company had a $9.0 million deposit in a bank account to secure potential future purchases of these loans, if necessary. The funds are recorded as restricted cash on the Company’s Condensed Consolidated Balance Sheets. During the first quarters of 2021 and 2020, the Company was required to purchase $7.1 million and $13.2 million of loans facilitated by the Company or Springstone Financial LLC (a previously held wholly-owned subsidiary of LendingClub), respectively. These purchased loans are held on the Company’s Condensed Consolidated Balance Sheets and have a fair value of $9.2 million and $4.5 million as of March 31, 2021 and December 31, 2020, respectively.
Unfunded Loan Commitments
UnfundedAs of March 31, 2022 and December 31, 2021, the contractual amount of unfunded loan commitments was $109.5 million and unused lines$110.8 million, respectively. See “Note 5. Loans and Leases Held for Investment, Net of credit at their contractual amounts were as follows:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 |
| Fixed | | Variable | | Total |
| Commitments to extend credit | $ | 0 | | | $ | 57,853 | | | $ | 57,853 | |
| Lines of credit | $ | 3,338 | | | $ | 37,129 | | | $ | 40,467 | |
Legal
The Company is subject to various claims brought in a litigation or regulatory context. These matters include lawsuits, and federal regulatory litigation, including but not limited to, putative class action lawsuits derivative lawsuits, and litigation with the FTC. In addition, the Company is subject to federal or state regulatory
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
examinations, investigations, or actions relating to the Company’s business practices or licensing. It is also party to a number of routine litigation matters arising in the ordinary course of business. In addition, the Company, and its business practices and compliance with licensing and other regulatory requirements, is subject to periodic exams, investigations, inquiries or requests, enforcement actions and other proceedings from federal and state regulatory agencies, including from the federal banking regulators that directly regulate the Company and/or LC Bank. The majority of these claims and proceedings relate to or arise from alleged state or federal law and regulatory violations, or are alleged commercial disputes or consumer complaints. The Company accrues for costs related to contingencies when a loss from such claims is probable and the amount of loss can be reasonably estimated. In determining whether a loss from a claim is probable and the loss can be reasonably estimated, the Company reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If the Company determines an unfavorable outcome is not probable or the amount of loss cannot be reasonably estimated, the Company does not accrue for a potential litigation loss. In those situations, the Company discloses an estimate or range of the reasonably possible losses, if such estimates can be made. Except as otherwise specifically noted below, at this time, the Company does not believe that it is possible to estimate the reasonably possible losses or a range of reasonably possible losses related to the matters described below.
FTC Lawsuit
In 2016, the Company received a formal request for information from the Federal Trade Commission (FTC). The FTC commenced an investigation concerning certain of the Company’s policies and practices and related legal compliance.
On April 25, 2018, the FTC filed a complaint in the Northern District of California (FTC v. LendingClub Corporation, No. 3:18-cv-02454) alleging causes of action for violations of the FTC Act, including claims of deception in connection with disclosures related to the origination fee associated with loans available through the Company’s platform, and in connection with communications relating to the likelihood of loan approval during the application process, and a claim of unfairness relating to certain unauthorized charges to borrowers’ bank accounts. The FTC’s complaint also alleged a violation of the Gramm-Leach-Bliley Act regarding the Company’s practices in delivering its privacy notice. Following the Court’s ruling on a motion to dismiss filed by the Company, the FTC filed an amended complaint on October 22, 2018, which reasserted the same causes of action from the original complaint. On November 13, 2018, the Company filed an answer to the amended complaint. Following a motion by the FTC to strike certain affirmative defenses in the answer, the Company filed an amended answer in the case on May 29, 2019. The discovery period in the case is closed.
On February 27, 2020, both the Company and the FTC filed various motions with the Court, including motions to exclude expert testimony and motions for summary judgment as to some or all of the claims in the case. The FTC also filed a motion for partial judgment on the pleadings in the case. These motions were heard by the Court on April 27, 2020. On June 1, 2020, the Court issued an order granting in part and denying in part both the Company’s and the FTC’s motions for summary judgment. The Court also denied the motions to exclude expert testimony and granted in part and denied in part the FTC’s motion for partial judgment on the pleadings. The FTC’s Gramm-Leach-Bliley Act claim has been dismissed from the case, but issues relating to the FTC’s three other claims will need to be tried. On July 30, 2020, the Company filed a motion to stay the litigation pending the U.S. Supreme Court’s decisions in two cases (F.T.C. v. Credit Bureau Center and AMG Capital Management, LLC v. F.T.C.) that raise the issue whether the FTC is entitled to seek monetary relief under Section 13(b) of the FTC Act. On August 20, 2020, the Court issued an order granting the Company’s motion to stay proceedings in the case until the U.S. Supreme Court issues its decision in the Credit Bureau Center and AMG Capital Management cases. As a result of this order, the trial that was scheduled for October 19, 2020 will need to be rescheduled at a later date following the Supreme Court’s ruling. The Supreme Court has vacated its prior grant of review in the Credit Bureau Center case but heard oral argument in the AMG Capital Management case on January 13, 2021. The impact of the Supreme Court decision could impact our case which is why the trial was stayed pending the Supreme Court decision. On April 22, 2021, the Supreme Court ruled in favor of AMG Capital Management ordering that the FTC does not currently have the authority to obtain equitable monetary relief under the statute that is also applicable in our matter with the FTC . The Court in our case will need to apply the Supreme Court’s order. The Company
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
denies, and will continue to vigorously defend against, the claims remaining in this case. Notwithstanding the Company’s vigorous defense, the Company and the FTC have participated in voluntary settlement conferences and may engage in additional settlement discussions. No assurances can be given as to the timing, outcome or consequences of this matter.
Class Action Lawsuit Following Announcement of FTC Litigation
In May 2018, following the announcement of the FTC’s litigation against the Company, putative shareholder class action litigation was filed in the U.S. District Court of the Northern District of California (Veal v. LendingClub Corporation et.al., No. 5:18-cv-02599) against the Company and certain of its current and former officers and directors alleging violations of federal securities laws in connection with the Company’s description of fees and compliance with federal privacy law in securities filings. On January 7, 2019, the lead plaintiffs filed a consolidated amended class action complaint which asserts the same causes of action as the original complaint and adds additional allegations. That complaint was subsequently dismissed by the Court with leave to amend. Plaintiff filed a Second Amended Complaint on December 19, 2019, which modified and added certain allegations and dropped one of the former officer defendants as a defendant in the case, but otherwise advanced the same causes of action. On June 12, 2020, the Court issued an order granting a motion to dismiss by defendants without leave to amend, in part, and with leave to amend, in part. On July 27, 2020, the lead plaintiffs filed a notice with the Court indicating their intention not to file a Third Amended Complaint in this case and requesting that the Court enter judgment. The Court entered judgment and dismissed all claims in the case the same day. The lead plaintiffs have appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. The timing of a ruling in the appeal is uncertain. The Company denies and will vigorously defend against the allegations in the case. No assurances can be given as to the timing, outcome or consequences of this matter.
Derivative Litigation Following FTC Lawsuit
In August 2019, a putative shareholder derivative action was filed in the Court of Chancery for the State of Delaware (Fisher v. Sanborn, et al., Case No. 2019-0631) against certain of the Company’s current and former officers and directors and naming the Company as a nominal defendant. This lawsuit accuses the individual defendants of breaching their fiduciary duties by failing to adequately monitor the Company and prevent it from engaging in the purported regulatory violations alleged by the FTC and by causing the Company to make allegedly false and misleading public statements (as alleged in the Veal action). The lawsuit also alleges that certain of the individual defendants breached their fiduciary duties by selling Company shares while in possession of material, non-public information. The defendants filed a motion to dismiss the operative complaint in the case, which was granted by the Court. The plaintiff has now appealed this ruling. The timing of a ruling in this appeal is uncertain. No assurances can be given as to the timing, outcome or consequences of this matter.
Regulatory Examinations and Actions Relating to the Company’s Business Practices and Licensing
The Company is and has been subject to periodic inquiries and enforcement actions brought by federal and state regulatory agencies relating to the Company’s business practices, the required licenses to operate its business, and its manner of operating in accordance with the requirements of its licenses. Inlicenses and the past, the Company has successfully resolved inquiries in a manner that was not materialregulatory framework applicable to its results of financial operations in any period and that did not materially limit the Company’s ability to conduct its business.
The Company is routinely subject to examination for compliance with applicable laws and regulations in the states in which it is licensed. As of the date of this Report, theThe Company is subject to examination by the New York Department of Financial Services (NYDFS) and other regulators. The Company periodically has discussions with various regulatory agencies regarding its business model and has engaged in similar discussions with the NYDFS. During the course of such discussions with the NYDFS, which remain ongoing, the Company decided to voluntarily
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
comply with certain rules and regulations of the NYDFS. NoNYDFS while it was not a bank holding company operating a national bank.
In the past, the Company has successfully resolved such matters in a manner that was not material to its results of financial operations in any period and that did not materially limit the Company’s ability to conduct its business. However, no assurances can be given as to the timing, outcome or consequences of this matterthese matters or othersother similar matters if or as they arise.
Putative Class Actions
In February 2020, a putative class action lawsuit was filed against the Company in the U.S. District Court for the Northern District of California (Erceg v. LendingClub Corporation, No. 3:4:20-cv-01153). The lawsuit allegesalleged violations of California and Massachusetts law based on allegations that LendingClubthe Company recorded a call with plaintiff without notifying him that it would be recorded. Plaintiff seekssought to represent a purported class of similarly situated individuals who had phone calls recorded by LendingClubthe Company without their knowledge and consent. LendingClubThe Company filed a motion to dismiss certain of plaintiff’s claims, strike nationwide class allegations, and, alternatively, to stay the litigation. Rather than oppose that motion, plaintiff filed an amended complaint. The Company again filed a motion to stay, or alternatively to dismiss certain of the claims in the amended complaint and to strike nationwide class allegations. That motion was heard by the Court on July 9, 2020. On July 28, 2020, the Court entered an order granting the Company’s motion to stay plaintiff’s California claims pending a decision by the California Supreme Court in a case involving the California Invasion of Privacy Act (Smith v. LoanMe, Inc.), dismissing with prejudice plaintiff’s claim under Massachusetts law, and denying the Company’s motion to strike plaintiff’s nationwide class allegations. TheIn April 2021, the California Supreme Court has issued a decision in the LoanMe case in a manner that permitted plaintiff’s claims in the Company’s case involvingto continue. The Company then filed its answer to plaintiff’s complaint and discovery began. The parties have since reached a settlement, the California Invasionterms of Privacy Act which the Court in our matter will need to apply. No assurances can be given asare not material to the timing, outcome or consequences of this matter.Company. This matter is now concluded.
In February 2021, a putative class action lawsuit was filed against the Company in the U.S. District Court for the Southern District of Texas (Bradford v. Lending Club Corporation, No. 4:21-cv-00588). The lawsuit assertsasserted a cause of action under the Fair Credit Reporting Act (FCRA) based on allegations that the Company obtained plaintiff’s credit report without his consent or authorization and without a permissible purpose under the FCRA. Plaintiff seekssought to represent a class of allegedly similarly situated persons in the case and seekssought monetary, injunctive, and declaratory relief, among other relief. No assurances can be given asPlaintiff amended the complaint to assert additional allegations regarding the timing, outcome or consequences ofCompany’s purported requests for plaintiff’s credit report from another credit reporting agency. The Company has since filed its answer to plaintiff’s complaint and discovery began. The Court scheduled this matter.
California Private Attorneys General Lawsuit
Inmatter for trial in September 2018, a putative action under the California Private Attorney General Act was brought against the Company in the California Superior Court (Brott v. LendingClub Corporation, et al., CGC-18-570047) alleging violations of the California Labor Code. The complaint by a former employee alleges that the Company improperly failed to pay certain hourly employees for all wages owed, pay the correct rate of pay including overtime, and provide accurate wage statements. The lawsuit alleges that the plaintiff and aggrieved employees are entitled to recover civil penalties under the California Labor Code.2022. The parties have since reached a resolution of this matter,settlement, the terms of which are not material to the Company’s financial position or results of operations. The resolution will require court approval. The parties have finalized a written settlement agreement and have a hearing with the Court in May 2021 to seek the Court’s approval of the negotiated resolution. It remains unclear when the Court will consider approving the settlement or issuing a ruling in connection with the same.Company. This matter is now concluded.
Certain Financial Considerations Relating to Litigation and Investigations
With respect to the matters discussed above, the Company had $22.0 million and $21.6 million in accrued contingent liabilities at March 31, 2021 and December 31, 2020, respectively.
In addition to the foregoing, the Company is subject to, and may continue to be subject to, legal proceedings and regulatory actions in the ordinary course of business. No assurance can be given as to the timing, outcome or consequences of any of these matters.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Certain Financial Considerations Relating to Litigation and Investigations
The Company had $2.5 million in accrued contingent liabilities at both March 31, 2022 and December 31, 2021.
In addition to the foregoing, the Company is subject to, and may continue to be subject to, legal proceedings and regulatory actions in the ordinary course of business. No assurances can be given as to the timing, outcome or consequences of any of these matters.
19.18. Regulatory Requirements
LendingClub a bank holding company, and LendingClubLC Bank a nationally chartered association, are subject to comprehensive supervision, examination and enforcement, and regulation by the FRB and the Office of the Comptroller of the Currency (OCC). The Company and the Bank are each subject to, including generally similar capital adequacy requirements adopted by the FRB and the OCC, respectively. These requirements establish required minimum ratios for Common Equity Tier 1 (CET1) risk-based capital, Tier 1 risk-based capital, total risk-based capital and a Tier 1 leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; and define what qualifies as capital for purposes of meeting the capital requirements. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.Company.
The minimum capital requirements under the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel IIIIII) capital framework are: a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. Additionally, a capital conservation bufferCapital Conservation Buffer (CCB) of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases, and certain discretionary bonus payments. In addition to these guidelines, the regulators assess any particular institution’s capital adequacy based on numerous factors and may require a particular banking organization to maintain capital at levels higher than the generally applicable minimums prescribed under the U.S. Basel III capital framework. In this regard, and unless otherwise directed by the FRB and the OCC, we have made commitments for the Company and theLC Bank (for a minimum of three years following its formation)(until February 2024) to maintain a CET1 risk-based capital ratio of 11%11.0%, a Tier 1 risk-based capital ratio above 11%11.0%, a total risk-based capital ratio above 13%13.0%, and a Tier 1 leverage ratio of 11%11.0%.
The following table summarizes LC Bank’s regulatory capital amounts and ratios (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LendingClub Bank | March 31, 2022 | | December 31, 2021 | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| Amount | | Ratio | | Amount | | Ratio | |
CET1 capital (1) | $ | 577.6 | | | 16.0 | % | | $ | 523.7 | | | 16.7 | % | | 7.0 | % |
| Tier 1 capital | $ | 577.6 | | | 16.0 | % | | $ | 523.7 | | | 16.7 | % | | 8.5 | % |
| Total capital | $ | 623.8 | | | 17.3 | % | | $ | 563.7 | | | 18.0 | % | | 10.5 | % |
| Tier 1 leverage | $ | 577.6 | | | 13.2 | % | | $ | 523.7 | | | 14.3 | % | | 4.0 | % |
| Risk-weighted assets | $ | 3,606.6 | | | N/A | | $ | 3,130.4 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 4,379.8 | | | N/A | | $ | 3,667.7 | | | N/A | | N/A |
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the regulatory capital and ratios of the Company (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LendingClub | March 31, 2022 | | December 31, 2021 | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| Amount | | Ratio | | Amount | | Ratio | |
CET1 capital (1) | $ | 756.0 | | | 20.6 | % | | $ | 710.0 | | | 21.3 | % | | 7.0 | % |
| Tier 1 capital | $ | 756.0 | | | 20.6 | % | | $ | 710.0 | | | 21.3 | % | | 8.5 | % |
| Total capital | $ | 818.7 | | | 22.3 | % | | $ | 767.9 | | | 23.0 | % | | 10.5 | % |
| Tier 1 leverage | $ | 756.0 | | | 15.6 | % | | $ | 710.0 | | | 16.5 | % | | 4.0 | % |
| Risk-weighted assets | $ | 3,668.1 | | | N/A | | $ | 3,333.2 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 4,859.8 | | | N/A | | $ | 4,301.7 | | | N/A | | N/A |
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
In response to the COVID-19 pandemic, the FRB, OCC, and FDIC adopted a final rule related to the regulatory capital treatment of the allowance for credit losses under CECL. As permitted by the rule, the Company elected to delay the estimated impact of CECL on regulatory capital, resulting in a CET1 capital benefit of $35.5 million at December 31, 2021. This benefit is phased out over a three-year transition period that commenced on January 1, 2022 at a rate of 25% each year through January 1, 2025. Accordingly, the capital benefit included in CET1 capital was reduced to $26.7 million at March 31, 2022.
The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (PCA). The PCA regime provides for capitalization categories ranging from “well-capitalized” to “critically undercapitalized.” An institution’s PCA category is determined primarily by its regulatory capital ratios. The PCA requires remedial actions and imposes limitations that become increasingly stringent as an institution’s condition deteriorates and its PCA capitalization category declines. Among other things, institutions that are less than well-capitalized become
subject to increasingly stringent restrictions on theirdeclines, including the ability to accept and/or rollover brokered deposits. At March 31, 2022 and December 31, 2021, the Company’s and theLC Bank’s regulatory capital ratios exceeded the thresholds required to be regarded as well-capitalized institutions and met all capital adequacy requirements to which they are subject. There have been no events or conditions since March 31, 20212022 that management believes would change the Company’s categorization.
Federal laws and regulations limit the dividends that a national bank may pay. Dividends that may be paid by a national bank without the express approval of the OCC are limited to that bank’s retained net profits for the preceding two calendar years plus retained net profits up to the date of any dividend declaration in the current calendar year. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. Additionally, under the OCC Operating Agreement, LC Bank is required to obtain a written determination of non-objection from the OCC before declaring any dividend. No dividends were declared by LC Bank during the first quarters of 2022 and 2021.
Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. These covered transactions may not exceed 10% of the bank’s capital and surplus (which for this purpose represents tier 1 and tier 2 capital, as calculated under the risk-based capital rules, plus the balance of the ACL excluded from tier 2 capital) with any single nonbank affiliate and 20% of the bank’s capital and surplus with all its nonbank affiliates. Covered transactions that are extensions of credit may require collateral to be pledged to provide added security to the bank.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the regulatory capital and ratios of the Company as of March 31, 2021 (in millions):
| | | | | | | | | | | | | | | | | |
| LendingClub | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| March 31, 2021 | Amount | | Ratio | |
| CET1 capital | $ | 578.1 | | | 26.0 | % | | 7.0 | % |
| Tier 1 capital | $ | 578.1 | | | 26.0 | % | | 8.5 | % |
| Total capital | $ | 611.8 | | | 27.5 | % | | 10.5 | % |
| Tier 1 leverage | $ | 578.1 | | | 14.5 | % | | 4.0 | % |
| Risk-weighted assets | $ | 2,224.0 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 3,974.3 | | | N/A | | N/A |
N/A – Not applicable
The following table summarizes the Bank’s regulatory capital amounts and ratios at March 31, 2021 (in millions):
| | | | | | | | | | | | | | | | | |
| LendingClub Bank | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| March 31, 2021 | Amount | | Ratio | |
| CET1 capital | $ | 338.9 | | | 20.9 | % | | 7.0 | % |
| Tier 1 capital | $ | 338.9 | | | 20.9 | % | | 8.5 | % |
| Total capital | $ | 356.9 | | | 22.1 | % | | 10.5 | % |
| Tier 1 leverage | $ | 338.9 | | | 12.9 | % | | 4.0 | % |
| Risk-weighted assets | $ | 1,617.9 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 2,626.3 | | | N/A | | N/A |
N/A – Not applicable
At March 31, 2021, $6.1 million of this capital benefit was applied to the computation of common equity Tier 1 capital.
20.19. Other Non-interest Income and Non-interest Expense
Other non-interest income consists of the following:
| | | Three Months Ended
March 31, | | | Three Months Ended
March 31, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| Referral revenue | Referral revenue | $ | 2,594 | | | $ | 1,614 | | | Referral revenue | $ | 3,691 | | | $ | 2,594 | | |
| Sublease revenue | 1,537 | | | 1,534 | | | |
| Realized gains (losses) on sales of securities available for sale | (244) | | | 1 | | | |
| Realized gains (losses) on sales of securities available for sale and other investments | | Realized gains (losses) on sales of securities available for sale and other investments | 36 | | | (244) | | |
| Other | Other | 1,720 | | | 1,362 | | | Other | 6,164 | | | 3,257 | | |
| Total other non-interest income | Total other non-interest income | $ | 5,607 | | | $ | 4,511 | | | Total other non-interest income | $ | 9,891 | | | $ | 5,607 | | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Other non-interest expense consists of the following:
| | | Three Months Ended
March 31, | | | Three Months Ended
March 31, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| Consumer credit services | Consumer credit services | $ | 3,292 | | | $ | 5,507 | | | Consumer credit services | $ | 5,524 | | | $ | 3,292 | | |
| Third-party collection fees | 1,749 | | | 2,609 | | | |
| Insurance expense | 1,347 | | | 1,164 | | | |
| Other | Other | 5,737 | | | 3,751 | | | Other | 8,480 | | | 8,833 | | |
| Total other non-interest expense | Total other non-interest expense | $ | 12,125 | | | $ | 13,031 | | | Total other non-interest expense | $ | 14,004 | | | $ | 12,125 | | |
21.20. Segment Reporting
The Company defines operating segments to be components of the Company for which discrete financial information is evaluated regularly by the Company’s chief executive officer and chief financial officer to allocate resources and evaluate financial performance. This information is reviewed according to the legal organizational structure of the Company’s operations with products and services presented separately for the parent bank holding company and its wholly-owned subsidiary, LendingClubLC Bank.
LendingClub Corporation (Parent Only)
The LendingClub Corporation (parent only) Taxes are recorded on a separate entity basis whereby each operating segment represents the holding company legaldetermines income tax expense or benefit as if it filed a separate tax return. Differences between separate entity and predominately reflects the historical operations of the Company. This activity includes, but is not limited to, the purchase and sale of loans prior to February 1, 2021 and ongoing issuances of education and patient finance loans thatconsolidated tax returns are originated by banking partners.eliminated upon consolidation.
LendingClub Bank
The LendingClubLC Bank operating segment represents the national bank legal entity and reflects post-acquisitionpost-Acquisition operating activities. This segment provides a full complement of financial products and solutions, including loans, leases and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to investors and manages the acquired business relationships with deposit holders.
All of the Company’s revenue is generated in the United States. No individual borrower or investor accounted for 10% or more of consolidated net revenue for any of the periods presented.
LendingClub Corporation (Parent Only)
The LendingClub Corporation (Parent only) operating segment represents the holding company legal entity and predominately reflects the operations of the Company prior to the Acquisition. This activity includes, but is not limited to, servicing fee revenue for loans serviced prior to the Acquisition, and interest income and interest expense related to the Retail Program and Structured Program transactions.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Financial information for the segments is presented in the following tables:
| | | LendingClub
Corporation
(Parent only) | | LendingClub
Bank | | Intercompany
Eliminations | | Total | | | LendingClub
Bank | | LendingClub
Corporation
(Parent only) | | Intercompany
Eliminations | | Consolidated Total |
| | Three Months Ended
March 31, | | Three Months Ended
March 31, | | Three Months Ended
March 31, | | Three Months Ended
March 31, | | | Three Months Ended March 31, | | Two Months Ended March 31, | | Three Months Ended March 31, | | Three Months Ended March 31, | | Two Months Ended March 31, | | Three Months Ended March 31, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Non-interest income: | Non-interest income: | | | Non-interest income: | |
| Marketplace revenue | Marketplace revenue | $ | 45,665 | | | $ | 102,477 | | | $ | 36,062 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 81,727 | | | $ | 102,477 | | | Marketplace revenue | $ | 164,835 | | | $ | 36,062 | | | $ | 15,131 | | | $ | 45,665 | | | $ | — | | | $ | — | | | $ | 179,966 | | | $ | 81,727 | |
| Other non-interest income | Other non-interest income | 4,098 | | | 4,511 | | | 19,700 | | | 0 | | | (18,191) | | | 0 | | | 5,607 | | | 4,511 | | | Other non-interest income | 19,498 | | | 19,700 | | | 4,223 | | | 4,098 | | | (13,830) | | | (18,191) | | | 9,891 | | | 5,607 | |
| Total non-interest income | Total non-interest income | 49,763 | | | 106,988 | | | 55,762 | | | 0 | | | (18,191) | | | 0 | | | 87,334 | | | 106,988 | | | Total non-interest income | 184,333 | | | 55,762 | | | 19,354 | | | 49,763 | | | (13,830) | | | (18,191) | | | 189,857 | | | 87,334 | |
| | Interest income: | Interest income: | | | Interest income: | |
| Interest income | Interest income | 27,092 | | | 69,411 | | | 17,498 | | | 0 | | | 0 | | | 0 | | | 44,590 | | | 69,411 | | | Interest income | 99,823 | | | 17,498 | | | 11,830 | | | 27,092 | | | — | | | — | | | 111,653 | | | 44,590 | |
| Interest expense | Interest expense | (24,837) | | | (45,213) | | | (1,247) | | | 0 | | | 0 | | | 0 | | | (26,084) | | | (45,213) | | | Interest expense | (3,644) | | | (1,247) | | | (8,329) | | | (24,837) | | | — | | | — | | | (11,973) | | | (26,084) | |
| Net interest income | Net interest income | 2,255 | | | 24,198 | | | 16,251 | | | 0 | | | 0 | | | 0 | | | 18,506 | | | 24,198 | | | Net interest income | 96,179 | | | 16,251 | | | 3,501 | | | 2,255 | | | — | | | — | | | 99,680 | | | 18,506 | |
| | Total net revenue | Total net revenue | 52,018 | | | 131,186 | | | 72,013 | | | 0 | | | (18,191) | | | 0 | | | 105,840 | | | 131,186 | | | Total net revenue | 280,512 | | | 72,013 | | | 22,855 | | | 52,018 | | | (13,830) | | | (18,191) | | | 289,537 | | | 105,840 | |
| | Provision for credit losses | 2,470 | | | (10,980) | | | (23,963) | | | 0 | | | 0 | | | 0 | | | (21,493) | | | (10,980) | | | |
| (Provision for) reversal of credit losses | | (Provision for) reversal of credit losses | (52,509) | | | (23,963) | | | — | | | 2,470 | | | — | | | — | | | (52,509) | | | (21,493) | |
| Non-interest expense | Non-interest expense | (76,944) | | | (167,974) | | | (75,499) | | | 0 | | | 18,191 | | | 0 | | | (134,252) | | | (167,974) | | | Non-interest expense | (178,459) | | | (75,499) | | | (26,575) | | | (76,944) | | | 13,830 | | | 18,191 | | | (191,204) | | | (134,252) | |
| Loss before income tax expense | $ | (22,456) | | | $ | (47,768) | | | $ | (27,449) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | (49,905) | | | $ | (47,768) | | | |
| Income (Loss) before income tax benefit (expense) | | Income (Loss) before income tax benefit (expense) | 49,544 | | | (27,449) | | | (3,720) | | | (22,456) | | | — | | | — | | | 45,824 | | | (49,905) | |
| Income tax benefit (expense) | | Income tax benefit (expense) | (12,355) | | | 23 | | | 17,727 | | | 2,292 | | | (10,360) | | | 506 | | | (4,988) | | | 2,821 | |
| Consolidated net income (loss) | | Consolidated net income (loss) | $ | 37,189 | | | $ | (27,426) | | | $ | 14,007 | | | $ | (20,164) | | | $ | (10,360) | | | $ | 506 | | | $ | 40,836 | | | $ | (47,084) | |
| Capital expenditures | Capital expenditures | $ | 1,811 | | | $ | 11,435 | | | $ | 4,554 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 6,365 | | | $ | 11,435 | | | Capital expenditures | $ | 21,575 | | | $ | 4,554 | | | $ | — | | | $ | 1,811 | | | $ | — | | | $ | — | | | $ | 21,575 | | | $ | 6,365 | |
| Depreciation and amortization | Depreciation and amortization | $ | 11,150 | | | $ | 12,873 | | | $ | 616 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 11,766 | | | $ | 12,873 | | | Depreciation and amortization | $ | 3,500 | | | $ | 616 | | | $ | 7,539 | | | $ | 11,150 | | | $ | — | | | $ | — | | | $ | 11,039 | | | $ | 11,766 | |
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LendingClub
Corporation
(Parent only) | | LendingClub
Bank | | Intercompany
Eliminations | | Total | | | | |
| | March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 | | | | |
| Assets | | | | | | | | | | | | | | | | | | | |
| Total cash and cash equivalents | $ | 75,950 | | | $ | 524,963 | | | $ | 792,701 | | | $ | 0 | | | $ | (36,851) | | | $ | 0 | | | $ | 831,800 | | | $ | 524,963 | | | | | |
| Restricted cash | 139,080 | | | 103,522 | | | 0 | | | 0 | | | 0 | | | 0 | | | 139,080 | | | 103,522 | | | | | |
| Securities available for sale at fair value | 122,766 | | | 142,226 | | | 151,653 | | | 0 | | | 0 | | | 0 | | | 274,419 | | | 142,226 | | | | | |
| Loans held for sale at fair value | 105,792 | | | 121,902 | | | 60,831 | | | 0 | | | 0 | | | 0 | | | 166,623 | | | 121,902 | | | | | |
| Loans and leases held for investment, net | 0 | | | 0 | | | 2,079,300 | | | 0 | | | 0 | | | 0 | | | 2,079,300 | | | 0 | | | | | |
| Retail and certificate loans held for investment at fair value | 507,157 | | | 636,686 | | | 0 | | | 0 | | | 0 | | | 0 | | | 507,157 | | | 636,686 | | | | | |
| Other loans held for investment at fair value | 42,485 | | | 49,954 | | | 0 | | | 0 | | | 0 | | | 0 | | | 42,485 | | | 49,954 | | | | | |
| Property, equipment and software, net | 88,364 | | | 96,641 | | | 6,949 | | | 0 | | | 0 | | | 0 | | | 95,313 | | | 96,641 | | | | | |
| Investment in subsidiary | 458,917 | | | 0 | | | 0 | | | 0 | | | (458,917) | | | 0 | | | 0 | | | 0 | | | | | |
| Goodwill | 0 | | | 0 | | | 75,717 | | | 0 | | | 0 | | | 0 | | | 75,717 | | | 0 | | | | | |
| Other assets | 206,756 | | | 187,399 | | | 123,227 | | | 0 | | | (50,788) | | | 0 | | | 279,195 | | | 187,399 | | | | | |
| Total assets | 1,747,267 | | | 1,863,293 | | | 3,290,378 | | | 0 | | | (546,556) | | | 0 | | | 4,491,089 | | | 1,863,293 | | | | | |
| Liabilities and Equity | | | | | | | | | | | | | | | | | | | |
| Total deposits | 0 | | | 0 | | | 2,410,288 | | | 0 | | | (36,851) | | | 0 | | | 2,373,437 | | | 0 | | | | | |
| Short-term borrowings | 87,347 | | | 104,989 | | | 2,744 | | | 0 | | | 0 | | | 0 | | | 90,091 | | | 104,989 | | | | | |
| Advances from PPPLF | 0 | | | 0 | | | 370,086 | | | 0 | | | 0 | | | 0 | | | 370,086 | | | 0 | | | | | |
| Retail notes, certificates and secured borrowings at fair value | 507,203 | | | 636,774 | | | 0 | | | 0 | | | 0 | | | 0 | | | 507,203 | | | 636,774 | | | | | |
| Payable on Structured Program borrowings | 133,499 | | | 152,808 | | | 0 | | | 0 | | | 0 | | | 0 | | | 133,499 | | | 152,808 | | | | | |
| Other long-term debt | 15,738 | | | 0 | | | 2,834 | | | 0 | | | 0 | | | 0 | | | 18,572 | | | 0 | | | | | |
| Other liabilities | 240,486 | | | 244,551 | | | 75,875 | | | 0 | | | (51,295) | | | 0 | | | 265,066 | | | 244,551 | | | | | |
| Total liabilities | 984,273 | | | 1,139,122 | | | 2,861,827 | | | 0 | | | (88,146) | | | 0 | | | 3,757,954 | | | 1,139,122 | | | | | |
| Total equity | 762,994 | | | 724,171 | | | 428,551 | | | 0 | | | (458,410) | | | 0 | | | 733,135 | | | 724,171 | | | | | |
| Total liabilities and equity | $ | 1,747,267 | | | $ | 1,863,293 | | | $ | 3,290,378 | | | $ | 0 | | | $ | (546,556) | | | $ | 0 | | | $ | 4,491,089 | | | $ | 1,863,293 | | | | | |
22. Related Party Transactions
Related party transactions must be reviewed and approved by the Audit Committee of the Company’s board of directors when not conducted in the ordinary course of business subject to the standard terms of the Company’s lending marketplace or certificate investment program. Any material amendment or modification to an existing related party transaction is also subject to the review and approval of the Audit Committee. Related party transactions may include any transaction between entities under common control or with a related person that has occurred since the beginning of the Company’s latest fiscal year or is currently proposed. The Company has defined related persons as members of the board of directors, executive officers, principal owners of the Company’s outstanding stock and any immediate family members of each such related person, as well as any other person or entity with significant influence over the Company’s management or operations.
Several of the Company’s executive officers and directors (including immediate family members) have made deposits and withdrawals to their investor accounts and purchased loans or interests therein. The Company believes all such transactions by related persons were made in the ordinary course of business and were transacted on terms and conditions that were not more favorable than those obtained by similarly situated third-party investors.
LENDINGCLUB CORPORATION
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
In February 2020, the Company entered into an exchange agreement with its largest stockholder, Shanda, pursuant to which, in March 2020, Shanda exchanged all of 19,562,881 shares of LendingClub common stock held by it for (i) 195,628 newly issued shares of mandatorily convertible, non-voting, LendingClub preferred stock, series A, both with a par value of $0.01 per share, and (ii) a one-time cash payment of $50.2 million.
As of March 31, 2021, the Company had a $7.8 million investment and an approximate 22% ownership interest in an Investment Fund, a private fund that participates in a family of funds with other unrelated third parties. This family of funds purchases assets from third parties unrelated to the Company and, prior to 2020, purchased whole loans and interests in loans from the Company. The Company has requested a full redemption of its investment in the Investment Fund. The Company’s investment in the Investment Fund is recorded in “Other assets” on the Company’s Condensed Consolidated Balance Sheets. The Company believes all arrangements were on terms and conditions that were not more favorable than those obtained by other third-party investors. The Investment Fund provides audited financial statements annually and periodic investment statements throughout each calendar year on a delayed basis, which are used by the Company to evaluate performance and recoverability of its investment.
23. Subsequent Events
The Company has evaluated the impact of events that have occurred subsequent to March 31, 2021, through the date the condensed consolidated financial statements were filed with the SEC. Based on this evaluation, other than as recorded or disclosed within these condensed consolidated financial statements and related notes, the Company has determined no additional subsequent events were required to be recognized or disclosed. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LendingClub Bank | | LendingClub Corporation
(Parent only) | | Intercompany
Eliminations | | Consolidated Total |
| | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 |
| Assets | | | | | | | | | | | | | | | |
| Total cash and cash equivalents | $ | 1,014,464 | | | $ | 659,919 | | | $ | 119,711 | | | $ | 88,268 | | | $ | (80,950) | | | $ | (61,061) | | | $ | 1,053,225 | | | $ | 687,126 | |
| Restricted cash | — | | | — | | | 64,165 | | | 76,540 | | | (3,658) | | | (80) | | | 60,507 | | | 76,460 | |
| Securities available for sale at fair value | 345,964 | | | 205,730 | | | 44,353 | | | 57,800 | | | — | | | — | | | 390,317 | | | 263,530 | |
| Loans held for sale | 145,117 | | | 335,449 | | | 11,613 | | | 55,799 | | | — | | | — | | | 156,730 | | | 391,248 | |
| Loans and leases held for investment, net | 3,234,311 | | | 2,754,737 | | | — | | | — | | | — | | | — | | | 3,234,311 | | | 2,754,737 | |
| Retail and certificate loans held for investment at fair value | — | | | — | | | 168,906 | | | 229,719 | | | — | | | — | | | 168,906 | | | 229,719 | |
| Other loans held for investment at fair value | — | | | — | | | 15,384 | | | 21,240 | | | — | | | — | | | 15,384 | | | 21,240 | |
| Property, equipment and software, net | 57,482 | | | 36,424 | | | 54,021 | | | 61,572 | | | — | | | — | | | 111,503 | | | 97,996 | |
| Investment in subsidiary | — | | | — | | | 591,051 | | | 557,577 | | | (591,051) | | | (557,577) | | | — | | | — | |
| Goodwill | 75,717 | | | 75,717 | | | — | | | — | | | — | | | — | | | 75,717 | | | 75,717 | |
| Other assets | 292,043 | | | 254,075 | | | 149,099 | | | 168,042 | | | (133,317) | | | (119,571) | | | 307,825 | | | 302,546 | |
| Total assets | 5,165,098 | | | 4,322,051 | | | 1,218,303 | | | 1,316,557 | | | (808,976) | | | (738,289) | | | 5,574,425 | | | 4,900,319 | |
| Liabilities and Equity | | | | | | | | | | | | | | | |
| Total deposits | 4,062,084 | | | 3,196,929 | | | — | | | — | | | (84,607) | | | (61,141) | | | 3,977,477 | | | 3,135,788 | |
| Short-term borrowings | 164 | | | 165 | | | 13,024 | | | 27,615 | | | — | | | — | | | 13,188 | | | 27,780 | |
| Advances from PPPLF | 193,371 | | | 271,933 | | | — | | | — | | | — | | | — | | | 193,371 | | | 271,933 | |
| Retail notes, certificates and secured borrowings at fair value | — | | | — | | | 168,906 | | | 229,719 | | | — | | | — | | | 168,906 | | | 229,719 | |
| Payable on Structured Program borrowings | — | | | — | | | 20,347 | | | 65,451 | | | — | | | — | | | 20,347 | | | 65,451 | |
| Other long-term debt | — | | | — | | | 15,388 | | | 15,455 | | | — | | | — | | | 15,388 | | | 15,455 | |
| Other liabilities | 218,365 | | | 218,775 | | | 143,701 | | | 150,727 | | | (63,752) | | | (65,551) | | | 298,314 | | | 303,951 | |
| Total liabilities | 4,473,984 | | | 3,687,802 | | | 361,366 | | | 488,967 | | | (148,359) | | | (126,692) | | | 4,686,991 | | | 4,050,077 | |
| Total equity | 691,114 | | | 634,249 | | | 856,937 | | | 827,590 | | | (660,617) | | | (611,597) | | | 887,434 | | | 850,242 | |
| Total liabilities and equity | $ | 5,165,098 | | | $ | 4,322,051 | | | $ | 1,218,303 | | | $ | 1,316,557 | | | $ | (808,976) | | | $ | (738,289) | | | $ | 5,574,425 | | | $ | 4,900,319 | |
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (Report). In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in “Part I – Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 (Annual Report) as modified by “Part II – Item 1A. Risk Factors” in this Report. The forward-looking statements included in this Report are made only as of the date hereof.
Overview
LendingClub was founded in 2006 to transform the banking industry by leveraging technology, data science and a marketplace model. We started by bringing a traditional credit product, the installment loan, into the digital age and became the largest provider of unsecured personal loans in the United States. On February 1, 2021, LendingClub completed the acquisition of Radius Bancorp, Inc. (Radius), whereby LendingClub became a bank holding company and formed LendingClub Bank, National Association (the Bank) as its wholly-owned subsidiary, through which we now operate the vast majority of our business. With the acquisition, we combined the complementary strengths of the Company’s digital lending capabilities with an award-winning digital bank.
We anticipate that additional strategic and financial benefits of the Radius acquisition will include:
•Increased resiliency with access to stable, low-cost deposit funding replacing higher-cost and more volatile third-party warehouse funding;
•Increased and more stable revenue driven by increased net interest income from consumer loans held for investment;
•Expense benefits by capturing the fees that were historically paid to our third-party issuing banks; and
•Ability to attract new members and deepen relationships with existing members through the addition of banking services that leverage LendingClub’s marketing and brand strengths.
We fund our consumer loan originations through the Company’s marketplace by either selling loans directly to third-party purchasers or investing our own capital in originated loans and holding those loans for investment. The mix of loans held for investment and originated for sale depend on a number of factors, including origination volumes, bank capital availability and demand from third-party loan investors.
As the originator of consumer loans, origination fees from loans held for sale (HFS) are recorded as a component of marketplace revenue. Marketplace revenue also includes servicing revenue associated with loan sales. Origination fees and costs from loans held for investment (HFI) are amortized through interest income over the life of the loans, and the expected credit losses reflected as a charge through earnings. The lifetime estimated credit losses on HFI loans are initially recognized through earnings when such loans are originated or otherwise acquired, while the interest received is recognized according to the loan’s contractual payment terms. Due to this timing difference between credit losses taken through earnings and actual charge-offs, we expect earnings to be disproportionately impacted in the near term from the expected organic growth in our HFI loan portfolio before benefiting from higher levels of interest income in later periods.
The change in our business model to being an originating lender with a stable deposit base also diversifies our funding strategy. As we expand our product offerings and grow our loan originations and HFI loan portfolio, we will increasingly rely on funding from customer deposits to prudently manage reliance on wholesale funding
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
sources that tend to be more susceptible to market dislocations during periods of economic stress. We did not share in any interest rate or credit risk on the loans facilitated through our lending marketplace that were funded by Member Payment Dependent Notes (Retail Notes), certificates and certain secured borrowings because loan balances, interest rates and maturities were matched and offset by an equal balance of notes, certificates or secured borrowings with the exact same interest rates and maturities. As of December 31, 2020, LendingClub ceased offering and selling Retail Notes. The total balance of outstanding Retail Notes will continue to decline as underlying borrower payments are made.
The formation of the Bank as a nationally chartered association and the organization of our Parent as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and FRB, including the requirement to maintain minimum regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel III). In addition to these guidelines and as part of our regulatory approvals, we have made various commitments to the regulators in order to demonstrate that we will operate the bank in a safe and sound manner. See “Capital Management” for additional information.
The acquisition significantly changed the presentation of our financial statements, which are now structured according to the presentation requirements for bank holding companies under Article 9 of the SEC’s Regulation S-X. Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 2. Business Acquisition” for detail illustrating the reclassification adjustments made to align with the current presentation.
Key Operating and Financial Metrics
We regularly review several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The following presents our key operating and financial metrics:
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | | |
Loan originations (1) | $ | 1,483,150 | | | $ | 912,022 | | | $ | 2,521,497 | | | | | |
| Total net revenue | $ | 105,840 | | | $ | 75,914 | | | $ | 120,206 | | | | | |
| Consolidated net loss | $ | (47,084) | | | $ | (26,655) | | | $ | (48,087) | | | | | |
Diluted EPS attributable to common stockholders (2) | $ | (0.49) | | | $ | (0.29) | | | $ | (1.10) | | | | | |
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(1) Includes unsecured personal loans, auto loans, and education and patient finance loans.
(2) See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 4. Net Income (Loss) Per Share” for additional information.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Loan Originations by Investor Type
Our investment channels consist of (1) managed accounts and other institutional investors, which primarily include other non-bank investors, dedicated third-party funds, and public and private funds managed by third-party asset managers, (2) banks (excluding LendingClub Bank) which are deposit taking institutions or their affiliates, (3) LendingClub Bank, which includes loan originations held for investment by the Company, (4) LendingClub inventory, which includes loan originations remaining as held for sale and not yet sold by the Company, and (5) self-directed retail investors.
The following table shows the percentage of loan origination volume originated in the period by investor type as of the end of each period presented:
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| March 31, 2021 | | December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Managed accounts and other institutional investors | 43 | % | | 58 | % | | 44 | % | | 10 | % | | 33 | % |
| Banks | 29 | % | | 33 | % | | 41 | % | | 68 | % | | 43 | % |
| LendingClub Bank | 23 | % | | — | % | | — | % | | — | % | | — | % |
| LendingClub inventory | 5 | % | | 1 | % | | 2 | % | | 5 | % | | 20 | % |
Self-directed retail investors (1) | — | % | | 8 | % | | 13 | % | | 17 | % | | 4 | % |
| Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
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(1) As of December 31, 2020, LendingClub ceased offering and selling Retail Notes.
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)
Overview
LendingClub is America’s leading digital marketplace bank. The Company was founded in 2006 and brought a traditional credit product – the installment loan – into the digital age by leveraging technology, data science, and a unique marketplace model. In doing so, we became one of the largest providers of unsecured personal loans in the United States. In February 2021, LendingClub completed the acquisition (the Acquisition) of an award-winning digital bank, Radius, becoming a bank holding company and forming LC Bank as its wholly-owned subsidiary. We operate the vast majority of our business through LC Bank, as a lender and originator of loans and as a regulated bank in the United States.
Executive Summary
•Loan originations:Total loan originations for the first quarter of 2022 were $3.2 billion, improving 117% year-over-year and 5% sequentially. The increase was primarily driven by the growth in unsecured personal loan origination volume.
•Total net revenue: Total net revenue for the first quarter of 2022 was $289.5 million, improving 174% year-over-year and 10% sequentially, outpacing origination growth of 117% and 5%, respectively. The increase was primarily due to the growth in marketplace revenue and increased net interest income.
◦Marketplace revenue: Marketplace revenue for the first quarter of 2022 was $180.0 million, improving 120% year-over-year and 6% sequentially. The increase was primarily driven by a higher volume of marketplace loans sold.
◦Net interest income: Net interest income for the first quarter of 2022 was $99.7 million, improving 439% year-over-year and 20% sequentially. The increase was primarily due to an increase in unsecured personal loans retained in current and prior periods as held for investment (HFI).
•Provision for credit losses: Provision for credit losses for the first quarter of 2022 was $52.5 million, increasing 144% year-over-year and 16% sequentially. The increase was primarily due to an increase in unsecured personal loans retained as HFI.
•Total non-interest expense: Total non-interest expense for the first quarter of 2022 was $191.2 million, increasing 42% year-over-year and 2% sequentially. The increase was primarily driven by an increase in variable marketing expenses based on higher origination volume.
•Consolidated net income: Consolidated net income for the first quarter of 2022 was $40.8 million, improving by $87.9 million year-over-year and 40% sequentially.
•Loans and leases held for investment:Loans and leases held for investment, net of allowance for loan and lease losses, were $3.2 billion at March 31, 2022, growing 56% year-over-year and 17% sequentially.
•Deposits: Total depositsat March 31, 2022 were $4.0 billion, growing 68% year-over-year and 27% sequentially, supporting growth in loans HFI.
The above summary should be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety. For additional discussion related to our operating segments, see “Segment Information.”
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Financial Highlights
We regularly review several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The following presents our select financial metrics for the periods presented:
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| Three Months Ended | | |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | | | |
| Non-interest income | $ | 189,857 | | | $ | 179,111 | | | $ | 87,334 | | | | | |
| Net interest income | $ | 99,680 | | | $ | 83,132 | | | $ | 18,506 | | | | | |
| Total net revenue | $ | 289,537 | | | $ | 262,243 | | | $ | 105,840 | | | | | |
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| Consolidated net income (loss) | $ | 40,836 | | | $ | 29,108 | | | $ | (47,084) | | | | | |
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| Basic EPS | $ | 0.40 | | | $ | 0.29 | | | $ | (0.49) | | | | | |
| Diluted EPS | $ | 0.39 | | | $ | 0.27 | | | $ | (0.49) | | | | | |
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| LendingClub Bank Performance Metrics: |
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Efficiency ratio (1) | 63.6 | % | | 69.5 | % | | 104.8 | % | | | | |
| Return on average equity (ROE) | 22.5 | % | | 21.7 | % | | N/A | | | | |
| Return on average total assets (ROA) | 3.1 | % | | 3.1 | % | | N/A | | | | |
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| LendingClub Bank Capital Ratios: | | | | | | | | | |
| CET1 1 Capital Ratio | 16.0 | % | | 16.7 | % | | 20.9 | % | | | | |
| Tier 1 Leverage Ratio | 13.2 | % | | 14.3 | % | | 12.9 | % | | | | |
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| Consolidated LendingClub Corporation Performance Metrics: |
| Net interest margin | 8.3 | % | | 7.6 | % | | 1.8 | % | | | | |
Efficiency ratio (1) | 66.0 | % | | 71.8 | % | | 126.8 | % | | | | |
| Return on average equity (ROE) | 18.7 | % | | 14.1 | % | | N/A | | | | |
| Return on average total assets (ROA) | 3.1 | % | | 2.4 | % | | N/A | | | | |
| Marketing as a % of loan originations | 1.7 | % | | 1.7 | % | | 1.3 | % | | | | |
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| Loan Originations (in millions): | | | | | | | | | |
| Marketplace loans | $ | 2,360 | | | $ | 2,308 | | | $ | 1,139 | | | | | |
| Loan originations held for investment | 856 | | | 761 | | | 344 | | | | | |
| Total loan originations | $ | 3,217 | | | $ | 3,069 | | | $ | 1,483 | | | | | |
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AUM (in millions) (2) | $ | 13,341 | | | $ | 12,463 | | | $ | 10,271 | | | | | |
N/A – Not applicable
(1) Calculated as the ratio of non-interest expense to total net revenue.
(2) Assets under management (AUM) reflects loans serviced on our platform, which includes outstanding balances of unsecured personal loans, auto refinance loans and education and patient finance loans serviced for others and retained for investment by the Company.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
| | | | | | | | | | | | | | | | | | | | | |
| As of the Three Months Ended | | |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | | | |
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| Balance Sheet Data: | | | | | | | | | |
| Loans and leases held for investment, net, excluding PPP loans | $ | 3,049,325 | | | $ | 2,486,440 | | | $ | 1,414,900 | | | | | |
| PPP loans | $ | 184,986 | | | $ | 268,297 | | | $ | 664,400 | | | | | |
| Total loans and leases held for investment, net | $ | 3,234,311 | | | $ | 2,754,737 | | | $ | 2,079,300 | | | | | |
| Total assets | $ | 5,574,425 | | | $ | 4,900,319 | | | $ | 4,491,089 | | | | | |
| Total deposits | $ | 3,977,477 | | | $ | 3,135,788 | | | $ | 2,373,437 | | | | | |
| Total liabilities | $ | 4,686,991 | | | $ | 4,050,077 | | | $ | 3,757,954 | | | | | |
| Total equity | $ | 887,434 | | | $ | 850,242 | | | $ | 733,135 | | | | | |
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| Allowance Ratios: | | | | | | | | | |
| ALLL to total loans and leases held for investment | 5.5 | % | | 5.0 | % | | 1.7 | % | | | | |
| ALLL to total loans and leases held for investment, excluding PPP loans | 5.8 | % | | 5.5 | % | | 2.5 | % | | | | |
| ALLL to consumer loans and leases held for investment | 6.6 | % | | 6.4 | % | | 2.3 | % | | | | |
| ALLL to commercial loans and leases held for investment | 1.8 | % | | 1.8 | % | | 1.3 | % | | | | |
| ALLL to commercial loans and leases held for investment, excluding PPP loans | 2.3 | % | | 2.6 | % | | 1.7 | % | | | | |
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LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Results of Operations
The following tables settable sets forth the Condensed Consolidated Statements of Operations (Income Statement) data for each of the periods presented: | | | Three Months Ended | | | Change (%) | | Three Months Ended | | | Change (%) |
| | March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | Q1 2021
vs
Q1 2020 | | Q1 2021
vs
Q4 2020 | | March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | | Q1 2022
vs
Q1 2021 | | Q1 2022
vs
Q4 2021 |
| Non-interest income: | Non-interest income: | | | | Non-interest income: | | | |
| Marketplace revenue | Marketplace revenue | $ | 81,727 | | | $ | 69,322 | | | $ | 102,477 | | | | (20) | % | | 18 | % | Marketplace revenue | $ | 179,966 | | | $ | 170,562 | | | $ | 81,727 | | | | 120 | % | | 6 | % |
| Other non-interest income | Other non-interest income | 5,607 | | | 3,276 | | | 4,511 | | | | 24 | % | | 71 | % | Other non-interest income | 9,891 | | | 8,549 | | | 5,607 | | | | 76 | % | | 16 | % |
| Total non-interest income | Total non-interest income | 87,334 | | | 72,598 | | | 106,988 | | | | (18) | % | | 20 | % | Total non-interest income | 189,857 | | | 179,111 | | | 87,334 | | | | 117 | % | | 6 | % |
| | Interest income: | Interest income: | | | | Interest income: | | | |
| Interest on loans held for sale | Interest on loans held for sale | 5,157 | | | 5,297 | | | 27,376 | | | | (81) | % | | (3) | % | Interest on loans held for sale | 7,450 | | | 7,153 | | | 5,157 | | | | 44 | % | | 4 | % |
| Interest and fees on loans and leases held for investment | Interest and fees on loans and leases held for investment | 15,301 | | | — | | | — | | | | N/M | | N/M | Interest and fees on loans and leases held for investment | 91,442 | | | 76,964 | | | 15,301 | | | | 498 | % | | 19 | % |
| Interest on retail and certificate loans held for investment at fair value | Interest on retail and certificate loans held for investment at fair value | 20,262 | | | 23,759 | | | 35,376 | | | | (43) | % | | (15) | % | Interest on retail and certificate loans held for investment at fair value | 6,969 | | | 9,236 | | | 20,262 | | | | (66) | % | | (25) | % |
| Interest on other loans held for investment at fair value | Interest on other loans held for investment at fair value | 1,479 | | | 1,666 | | | 1,999 | | | | (26) | % | | (11) | % | Interest on other loans held for investment at fair value | 593 | | | 762 | | | 1,479 | | | | (60) | % | | (22) | % |
| Interest on securities available for sale | Interest on securities available for sale | 2,235 | | | 2,194 | | | 3,779 | | | | (41) | % | | 2 | % | Interest on securities available for sale | 4,511 | | | 3,071 | | | 2,235 | | | | 102 | % | | 47 | % |
| Other | Other | 156 | | | 34 | | | 881 | | | | (82) | % | | N/M | Other | 688 | | | 469 | | | 156 | | | | N/M | | 47 | % |
| Total interest income | Total interest income | 44,590 | | | 32,950 | | | 69,411 | | | | (36) | % | | 35 | % | Total interest income | 111,653 | | | 97,655 | | | 44,590 | | | | 150 | % | | 14 | % |
| | Interest expense: | Interest expense: | | | | Interest expense: | | | |
| Interest on deposits | Interest on deposits | 1,014 | | | — | | | — | | | | N/M | | N/M | Interest on deposits | 3,438 | | | 2,616 | | | 1,014 | | | | 239 | % | | 31 | % |
| Interest on short-term borrowings | Interest on short-term borrowings | 1,264 | | | 1,506 | | | 7,398 | | | | (83) | % | | (16) | % | Interest on short-term borrowings | 435 | | | 561 | | | 1,264 | | | | (66) | % | | (22) | % |
| Interest on retail notes, certificates and secured borrowings | Interest on retail notes, certificates and secured borrowings | 20,262 | | | 23,759 | | | 35,376 | | | | (43) | % | | (15) | % | Interest on retail notes, certificates and secured borrowings | 6,969 | | | 9,236 | | | 20,262 | | | | (66) | % | | (25) | % |
| Interest on Structured Program borrowings | Interest on Structured Program borrowings | 3,208 | | | 4,786 | | | 2,299 | | | | 40 | % | | (33) | % | Interest on Structured Program borrowings | 764 | | | 1,642 | | | 3,208 | | | | (76) | % | | (53) | % |
| Interest on other long-term debt | Interest on other long-term debt | 336 | | | — | | | 140 | | | | N/M | | N/M | Interest on other long-term debt | 367 | | | 468 | | | 336 | | | | 9 | % | | (22) | % |
| Total interest expense | Total interest expense | 26,084 | | | 30,051 | | | 45,213 | | | | (42) | % | | (13) | % | Total interest expense | 11,973 | | | 14,523 | | | 26,084 | | | | (54) | % | | (18) | % |
| | Net interest income | Net interest income | 18,506 | | | 2,899 | | | 24,198 | | | | (24) | % | | N/M | Net interest income | 99,680 | | | 83,132 | | | 18,506 | | | | 439 | % | | 20 | % |
| | Total net revenue | Total net revenue | 105,840 | | | 75,497 | | | 131,186 | | | | (19) | % | | 40 | % | Total net revenue | 289,537 | | | 262,243 | | | 105,840 | | | | 174 | % | | 10 | % |
| | Provision for credit losses | Provision for credit losses | 21,493 | | | (417) | | | 10,980 | | | | 96 | % | | N/M | Provision for credit losses | 52,509 | | | 45,149 | | | 21,493 | | | | 144 | % | | 16 | % |
| | Non-interest expense: | Non-interest expense: | | | | Non-interest expense: | | | |
| Compensation and benefits | Compensation and benefits | 64,420 | | | 52,527 | | | 75,545 | | | | (15) | % | | 23 | % | Compensation and benefits | 81,610 | | | 78,741 | | | 64,420 | | | | 27 | % | | 4 | % |
| Marketing | Marketing | 19,545 | | | 8,488 | | | 39,081 | | | | (50) | % | | 130 | % | Marketing | 55,080 | | | 50,708 | | | 19,545 | | | | 182 | % | | 9 | % |
| Equipment and software | Equipment and software | 7,893 | | | 5,911 | | | 6,490 | | | | 22 | % | | 34 | % | Equipment and software | 11,046 | | | 12,019 | | | 7,893 | | | | 40 | % | | (8) | % |
| Occupancy | Occupancy | 6,900 | | | 5,629 | | | 6,813 | | | | 1 | % | | 23 | % | Occupancy | 6,019 | | | 4,706 | | | 6,900 | | | | (13) | % | | 28 | % |
| Depreciation and amortization | Depreciation and amortization | 11,766 | | | 12,198 | | | 12,873 | | | | (9) | % | | (4) | % | Depreciation and amortization | 11,039 | | | 10,462 | | | 11,766 | | | | (6) | % | | 6 | % |
| Professional services | Professional services | 11,603 | | | 9,057 | | | 14,141 | | | | (18) | % | | 28 | % | Professional services | 12,406 | | | 12,699 | | | 11,603 | | | | 7 | % | | (2) | % |
| Other non-interest expense | Other non-interest expense | 12,125 | | | 9,083 | | | 13,031 | | | | (7) | % | | 33 | % | Other non-interest expense | 14,004 | | | 18,885 | | | 12,125 | | | | 15 | % | | (26) | % |
| Total non-interest expense | Total non-interest expense | 134,252 | | | 102,893 | | | 167,974 | | | | (20) | % | | 30 | % | Total non-interest expense | 191,204 | | | 188,220 | | | 134,252 | | | | 42 | % | | 2 | % |
| | Loss before income tax expense | (49,905) | | | (26,979) | | | (47,768) | | | | 4 | % | | 85 | % | |
| Income tax expense (benefit) | (2,821) | | | (324) | | | 319 | | | | N/M | | N/M | |
| Consolidated net loss | $ | (47,084) | | | $ | (26,655) | | | $ | (48,087) | | | | (2) | % | | 77 | % | |
| Income (Loss) before income tax benefit (expense) | | Income (Loss) before income tax benefit (expense) | 45,824 | | | 28,874 | | | (49,905) | | | | N/M | | 59 | % |
| Income tax benefit (expense) | | Income tax benefit (expense) | (4,988) | | | 234 | | | 2,821 | | | | N/M | | N/M |
| Consolidated net income (loss) | | Consolidated net income (loss) | $ | 40,836 | | | $ | 29,108 | | | $ | (47,084) | | | | N/M | | 40 | % |
N/M – Not meaningful
The analysis below is presented for the following periods: First quarter of 20212022 compared to the first quarter of 2020 (Quarter Over Quarter) and first quarter of 2021 compared to the fourth quarter of 2021 (Sequential).
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)
2021 (Quarter Over Quarter) and first quarter of 2022 compared to the fourth quarter of 2021 (Sequential). As a result of the timing of the Company’s acquisition of Radius on February 1, 2021, our results of operations discussed below for the three month period ended March 31, 2021 only reflect the revenue and expenses generated by LendingClub Bank for two months of such period.
Marketplace Revenue
Marketplace revenue consists of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Change (%) |
| March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | | Q1 2021
vs
Q1 2020 | | Q1 2021
vs
Q4 2020 |
Origination fees (1) | $ | 55,559 | | | $ | 43,151 | | | $ | 136,243 | | | | | (59) | % | | 29 | % |
| Servicing fees | 23,166 | | | 24,940 | | | 41,759 | | | | | (45) | % | | (7) | % |
| Gain on sales of loans | 8,323 | | | 7,088 | | | 14,261 | | | | | (42) | % | | 17 | % |
Net fair value adjustments (2) | (5,321) | | | (5,857) | | | (89,786) | | | | | (94) | % | | (9) | % |
| Total marketplace revenue | $ | 81,727 | | | $ | 69,322 | | | $ | 102,477 | | | | | (20) | % | | 18 | % |
(1) Include transaction fees from issuing bank partners in connection with the Company’s role in facilitating certain loan originations.
(2) Certain prior period valuation adjustments on securities available for sale and Structured Program borrowings were reclassified from net fair value adjustments to provision for credit losses and interest expense, respectively, to conform to the current period presentation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Change (%) |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | | | Q1 2022
vs
Q1 2021 | | Q1 2022
vs
Q4 2021 |
| Origination fees | $ | 122,093 | | | $ | 118,353 | | | $ | 55,559 | | | | | 120 | % | | 3 | % |
| Servicing fees | 18,514 | | | 20,940 | | | 23,166 | | | | | (20) | % | | (12) | % |
| Gain on sales of loans | 24,110 | | | 20,569 | | | 8,323 | | | | | 190 | % | | 17 | % |
| Net fair value adjustments | 15,249 | | | 10,700 | | | (5,321) | | | | | N/M | | 43 | % |
| Total marketplace revenue | $ | 179,966 | | | $ | 170,562 | | | $ | 81,727 | | | | | 120 | % | | 6 | % |
Origination Fees
Origination fees recorded as a component of marketplace revenue are primarily fees earned related to originating and issuing unsecured personal loans that are held for sale. In addition, origination fees include transaction fees that arewere paid to the Companyus by issuing bank partners or education and patient service providers for the work performed in facilitating the origination of loans by the issuing banks. DuringFollowing the first quarter of 2021,Acquisition, LC Bank became the Company ceased using issuing bank partners to originateoriginator and lender for all unsecured personal and auto refinance loans and autothe majority of education and patient finance loans.
The following table presents loan origination volume during each of the periods set forth below:
| | | Three Months Ended | | | Three Months Ended | |
| | March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | March 31,
2022 | | December 31,
2021 | | March 31,
2021 | |
| Loan originations held for sale or originated by issuing bank partners | $ | 1,138,736 | | | $ | 912,022 | | | $ | 2,521,497 | | | |
| Marketplace loans | | Marketplace loans | $ | 2,360,238 | | | $ | 2,307,601 | | | $ | 1,138,736 | | |
| Loan originations held for investment | Loan originations held for investment | 344,414 | | | — | | | — | | | Loan originations held for investment | 856,312 | | | 761,455 | | 344,414 | | |
Total loan originations (1) | Total loan originations (1) | $ | 1,483,150 | | | $ | 912,022 | | | $ | 2,521,497 | | | Total loan originations (1) | $ | 3,216,550 | | | $ | 3,069,056 | | | $ | 1,483,150 | | |
|
(1) Includes unsecured personal loans, auto loans, and education and patient finance loans.
Origination fees recorded as a component of marketplace revenue were $55.6$122.1 million and $136.2$55.6 million for the first quarters of 20212022 and 2020, respectively, a decrease of 59%. The decrease was due to lower origination volume of loans held for sale, primarily due to the impact of COVID-19, and the deferral of origination fees and costs on loans held for investment. Loan origination volume of loans held for sale or originated by issuing bank partners decreased to $1.14 billion for the first quarter of 2021, compared to $2.52 billion for the first quarter of 2020, a decrease of 55%.
Origination fees were $55.6 million and $43.2 million for the first quarter of 2021 and fourth quarter of 2020, respectively, an increase of 29%120%. The increase was due to higher origination volume of loans held for sale, partially offset by the deferral of origination fees and costs on loans held for investment.marketplace loans. Loan origination volume of marketplace loans held for sale or originated by issuing bank partners increased to $1.14$2.4 billion for the first quarter of 2022 compared to $1.1 billion for the first quarter of 2021, an increase of 107%.
Origination fees were $122.1 million and $118.4 million for the first quarter of 2022 and fourth quarter of 2021, respectively, an increase of 3%. The increase was due to higher origination volume of marketplace loans. Loan origination volume of marketplace loans increased to $2.4 billion for the first quarter of 2022 compared to $912.0 million$2.3 billion for the fourth quarter of 2020,2021, an increase of 25%2%.
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)
Servicing Fees
The Company receivesWe receive servicing fees to compensate itus for the costs incurred in servicing a loan,loans on behalf of investors, including managing payments from borrowers, collections and payments to those investors. Servicing fee revenue related to whole loans sold also includes the change in fair value of servicing assets and liabilities associated with the loans.
The table below illustrates the outstanding principal balance of loansAUM serviced which is a key driver of servicing fees,on our platform by the method in which the loans were financed for each period presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Change (%) |
| March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | | Q1 2021
vs
Q1 2020 | | Q1 2021
vs
Q4 2020 |
|
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Outstanding Principal Balance of Loans Serviced On Our Platform (in millions)(1): |
| Whole loans sold | $ | 9,185 | | | $ | 10,139 | | | $ | 14,118 | | | | | (35) | % | | (9) | % |
| Retail notes, certificates and secured borrowings | 537 | | | 680 | | | 991 | | | | | (46) | % | | (21) | % |
| LendingClub Bank | 399 | | | — | | | — | | | | | N/M | | N/M |
| Other loans invested in by the Company | 150 | | | 183 | | | 866 | | | | | (83) | % | | (18) | % |
| Total | $ | 10,271 | | | $ | 11,002 | | | $ | 15,975 | | | | | (36) | % | | (7) | % |
N/M – Not meaningful
(1) Asfinanced. Loans sold and subsequently serviced on behalf of the endinvestor represent a key driver of each respective period.our servicing fee revenue.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Change (%) |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | | | Q1 2022
vs
Q1 2021 | | Q1 2022
vs
Q4 2021 |
AUM (in millions): |
| Loans sold | $ | 10,475 | | | $ | 10,124 | | | $ | 9,185 | | | | | 14 | % | | 3 | % |
| Loans held by LendingClub Bank | 2,669 | | | 2,026 | | | 399 | | | | | N/M | | 32 | % |
| Retail notes, certificates and secured borrowings | 175 | | | 238 | | | 537 | | | | | (67) | % | | (26) | % |
| Other loans invested in by the Company | 22 | | | 75 | | | 150 | | | | | (85) | % | | (71) | % |
| Total | $ | 13,341 | | | $ | 12,463 | | | $ | 10,271 | | | | | 30 | % | | 7 | % |
In addition to the loans serviced on our marketplace platform, the Company earnswe earned servicing fee revenue on $197.4 million, $214.0 million and $259.6 million in outstanding principal balance of commercial loans sold as of March 31, 2022, December 31, 2021 that are serviced outside of our platform in connection with our acquisition of Radius.and March 31, 2021, respectively.
Servicing fees were $23.2$18.5 million and $41.8$23.2 million for the first quarters of 20212022 and 2020,2021, respectively, a decrease of 45%20%. The decrease in revenue was primarily due to changes in the fair value of our servicing asset and higher expected prepayment rates, partially offset by a lowerhigher principal balance of loans serviced and positive fair value adjustments recorded in the first quarter of 2020.serviced.
Servicing fees were $23.2$18.5 million and $24.9$20.9 million for the first quarter of 20212022 and fourth quarter of 2020,2021, respectively, a decrease of 7%12%. The decrease in revenue was primarily due to changes in the fair value of our servicing asset and higher expected prepayment rates, partially offset by a lowerhigher principal balance of loans serviced, partially offset by an increase in collection and recovery fees.serviced.
Gain on Sales of Loans
In connection with loan sales, and in addition to servicing fees earned with respect to the corresponding loan, the Company recognizeswe recognize a gain or loss on the sale of that loanloans based on the level to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee.of servicing. Additionally, the Company recognizeswe recognize transaction costs, if any, as a loss on sale of loans.
Gain on sales of loans was $8.3$24.1 million and $14.3$8.3 million for the first quarters of 2022 and 2021, and 2020, respectively, a decreasean increase of 42%190%. The decreaseincrease was primarily due to a decreasean increase in the volume of marketplace loans sold.
Gain on sales of loans was $8.3$24.1 million and $7.1$20.6 million for the first quarter of 20212022 and fourth quarter of 2020,2021, respectively, an increase of 17%. The increase was primarily due to an increase in the volume of marketplace loans sold.
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)
Net Fair Value Adjustments
The Company recordsWe record fair value adjustments on loans that are recorded at fair value.value, including gains or losses from sale prices in excess of or less than the loan principal amount sold.
Net fair value adjustments were $(5.3)$15.2 million and $(89.8)$(5.3) million for the first quarters of 2022 and 2021, and 2020, respectively, a decreasean increase of 94%.$20.5 million. The decreaseincrease was primarily associated with fair value adjustments recorded in the first quarter of 2020 due to COVID-19, which included an increase in estimated expected credit losseshigher loan sale prices and an increase in liquidity premiums.the volume of marketplace loans sold.
Net fair value adjustments were $(5.3)$15.2 million and $(5.9)$10.7 million for the first quarter of 20212022 and fourth quarter of 2020,2021, respectively, a decreasean increase of 9%.$4.5 million. The decreaseincrease was primarily due to higher loan sale prices.prices and an increase in the volume of marketplace loans sold.
Other Non-Interest Income
Other non-interest income primarily consists of referral revenue that relates to fees earned from third-party companies when customers referred by us consider or purchase products or services from such third-party companies and sublease revenue from our sublet office space in San Francisco, California.companies. The table below illustrates the composition of other non-interest income for each period presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Change (%) |
| March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | | Q1 2021
vs
Q1 2020 | | Q1 2021
vs
Q4 2020 |
| Referral revenue | $ | 2,594 | | | $ | 1,508 | | | $ | 1,614 | | | | | 61 | % | | 72 | % |
| Sublease revenue | 1,537 | | | 1,537 | | | 1,534 | | | | | — | % | | — | % |
| Realized gains (losses) on sales of securities available for sale | (244) | | | 13 | | | 1 | | | | | N/M | | N/M |
| Other | 1,720 | | | 218 | | | 1,362 | | | | | 26 | % | | 689 | % |
| Other non-interest income | $ | 5,607 | | | $ | 3,276 | | | $ | 4,511 | | | | | 24 | % | | 71 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
N/M – Not meaningful | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Change (%) |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | | | Q1 2022
vs
Q1 2021 | | Q1 2022
vs
Q4 2021 |
| Referral revenue | $ | 3,691 | | | $ | 4,585 | | | $ | 2,594 | | | | | 42 | % | | (19) | % |
| Realized gains (losses) on sales of securities available for sale and other investments | 36 | | | 3 | | | (244) | | | | | (115) | % | | N/M |
| Other | 6,164 | | | 3,961 | | | 3,257 | | | | | 89 | % | | 56 | % |
| Other non-interest income | $ | 9,891 | | | $ | 8,549 | | | $ | 5,607 | | | | | 76 | % | | 16 | % |
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)
Net Interest Income
The tables below present net interest income information on a standalone basis for LendingClub Bank and LendingClub Corporation (Parent only), and on a consolidated basis for the Company.
LendingClub Bank
The following table presents net interest income information corresponding to interest-earning assets and interest-bearing funding sources on a consolidated basis for the Condensed Balance Sheets of LendingClub Bank:Company.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | December 31, 2020 | | March 31, 2020 |
| Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate |
Interest-earning assets (1) | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents and restricted cash | $ | 780,238 | | | $ | 138 | | | 0.11 | % | | $ | — | | | $ | — | | | N/A | | $ | — | | | $ | — | | | N/A |
| Securities available for sale at fair value | 232,001 | | | 444 | | | 1.15 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Loans held for sale at fair value | 64,720 | | | 1,615 | | | 14.97 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Unsecured personal loans | 146,925 | | | 3,392 | | | 13.85 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Secured consumer loans | 521,399 | | | 3,215 | | | 3.70 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Commercial loans and leases | 605,495 | | | 5,119 | | | 5.07 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| PPP loans | 621,292 | | | 3,575 | | | 3.45 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Loans and leases held for investment | 1,895,111 | | | 15,301 | | | 4.84 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Total interest-earning assets | $ | 2,972,070 | | | $ | 17,498 | | | 3.53 | % | | $ | — | | | $ | — | | | N/A | | $ | — | | | $ | — | | | N/A |
| Interest-bearing funding sources | | | | | | | | | | | | | | | | | |
| Deposits | $ | 2,059,074 | | | $ | 1,014 | | | 0.30 | % | | $ | — | | | $ | — | | | N/A | | $ | — | | | $ | — | | | N/A |
| Short-term borrowings | 1,829 | | | 0.3 | | | 0.09 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Advances from PPPLF | 405,989 | | | 233 | | | 0.35 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Other long-term debt | 2,834 | | | — | | | — | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Total interest-bearing funding sources | $ | 2,469,726 | | | $ | 1,247 | | | 0.31 | % | | $ | — | | | $ | — | | | N/A | | $ | — | | | $ | — | | | N/A |
| Net interest income and net interest margin | | | $ | 16,251 | | | 3.28 | % | | | | $ | — | | | N/A | | | | $ | — | | | N/A |
N/A – Not applicable
(1) Nonaccrual loans and any related income are included in their respective loan categories.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated LendingClub Corporation (1) |
| Three Months Ended
March 31, 2022 | | Three Months Ended
December 31, 2021 | | Three Months Ended
March 31, 2021 |
| Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate |
Interest-earning assets (2) | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents, restricted cash and other | $ | 892,921 | | | $ | 688 | | | 0.31 | % | | $ | 710,472 | | | $ | 469 | | | 0.26 | % | | $ | 918,148 | | | $ | 156 | | | 0.10 | % |
| Securities available for sale at fair value | 325,155 | | | 4,511 | | | 5.55 | % | | 265,140 | | | 3,071 | | | 4.63 | % | | 362,621 | | | 2,235 | | | 2.71 | % |
| Loans held for sale | 255,139 | | | 7,450 | | | 11.68 | % | | 184,708 | | | 7,153 | | | 15.49 | % | | 198,592 | | | 5,157 | | | 12.01 | % |
| Loans and leases held for investment: | | | | | | | | | | | | | | | | | |
| Unsecured personal loans | 2,060,323 | | | 78,376 | | | 15.22 | % | | 1,542,285 | | | 60,384 | | | 15.66 | % | | 146,925 | | | 3,392 | | | 13.85 | % |
| Secured consumer loans | 232,235 | | | 2,275 | | | 3.92 | % | | 436,260 | | | 4,029 | | | 3.69 | % | | 521,399 | | | 3,215 | | | 3.70 | % |
| Commercial loans and leases | 620,660 | | | 7,588 | | | 4.89 | % | | 619,648 | | | 8,663 | | | 5.59 | % | | 605,495 | | | 5,119 | | | 5.07 | % |
| PPP loans | 222,517 | | | 3,203 | | | 5.76 | % | | 325,133 | | | 3,888 | | | 4.78 | % | | 621,292 | | | 3,575 | | | 3.45 | % |
| Loans and leases held for investment | 3,135,735 | | | 91,442 | | | 11.66 | % | | 2,923,326 | | | 76,964 | | | 10.53 | % | | 1,895,111 | | | 15,301 | | | 4.84 | % |
| Retail and certificate loans held for investment at fair value | 198,813 | | | 6,969 | | | 14.02 | % | | 262,548 | | | 9,236 | | | 14.07 | % | | 574,158 | | | 20,262 | | | 14.12 | % |
| Other loans held for investment at fair value | 18,523 | | | 593 | | | 12.80 | % | | 24,184 | | | 762 | | | 12.60 | % | | 46,212 | | | 1,479 | | | 12.80 | % |
| Total interest-earning assets | 4,826,286 | | | 111,653 | | | 9.25 | % | | 4,370,378 | | | 97,655 | | | 8.94 | % | | 3,994,842 | | | 44,590 | | | 5.34 | % |
| | | | | | | | | | | | | | | | | |
| Cash and due from banks and restricted cash | 92,683 | | | | | | | 73,258 | | | | | | | 137,216 | | | | | |
| Allowance for loan and lease losses | (163,631) | | | | | | | (125,120) | | | | | | | (30,357) | | | | | |
| Other non-interest earning assets | 486,363 | | | | | | | 465,010 | | | | | | | 326,040 | | | | | |
| Total assets | $ | 5,241,701 | | | | | | | $ | 4,783,526 | | | | | | | $ | 4,427,741 | | | | | |
| | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | | | | | | | | | |
| Checking and money market accounts | $ | 2,240,450 | | | $ | 1,724 | | | 0.31 | % | | $ | 2,146,687 | | | $ | 1,716 | | | 0.32 | % | | $ | 1,735,274 | | | $ | 913 | | | 0.33 | % |
| Savings accounts and certificates of deposit | 1,071,133 | | | 1,714 | | | 0.64 | % | | 580,361 | | | 900 | | | 0.62 | % | | 323,800 | | | 101 | | | 0.19 | % |
| Interest-bearing deposits | 3,311,583 | | | 3,438 | | | 0.42 | % | | 2,727,048 | | | 2,616 | | | 0.38 | % | | 2,059,074 | | | 1,014 | | | 0.30 | % |
| Short-term borrowings | 20,371 | | | 435 | | | 8.56 | % | | 36,823 | | | 561 | | | 6.08 | % | | 98,818 | | | 1,264 | | | 5.12 | % |
| Advances from PPPLF | 234,872 | | | 206 | | | 0.35 | % | | 342,335 | | | 307 | | | 0.36 | % | | 405,989 | | | 233 | | | 0.35 | % |
| Retail notes, certificates and secured borrowings | 198,813 | | | 6,969 | | | 14.02 | % | | 262,548 | | | 9,236 | | | 14.07 | % | | 574,192 | | | 20,262 | | | 14.12 | % |
| Structured Program borrowings | 42,026 | | | 764 | | | 7.29 | % | | 77,354 | | | 1,642 | | | 8.49 | % | | 143,045 | | | 3,208 | | | 8.97 | % |
| Other long-term debt | 15,421 | | | 161 | | | 4.19 | % | | 15,514 | | | 161 | | | 4.15 | % | | 18,605 | | | 103 | | | 2.21 | % |
| Total interest-bearing liabilities | 3,823,086 | | | 11,973 | | | 1.25 | % | | 3,461,622 | | | 14,523 | | | 1.68 | % | | 3,299,723 | | | 26,084 | | | 3.24 | % |
| | | | | | | | | | | | | | | | | |
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 (Parent only)
The following table presents net interest income information corresponding to interest-earning assets and interest-bearing funding sources on the Condensed Balance Sheets of LendingClub Corporation (Parent only):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | December 31, 2020 | | March 31, 2020 |
| Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate |
Interest-earning assets (1) | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents and restricted cash | $ | 311,888 | | | $ | 18 | | | 0.02 | % | | $ | 572,387 | | | $ | 34 | | | 0.04 | % | | $ | 465,395 | | | $ | 881 | | | 1.14 | % |
| Securities available for sale at fair value | 130,620 | | | 1,791 | | | 5.48 | % | | 160,868 | | | 2,194 | | | 5.46 | % | | 257,812 | | | 3,779 | | | 5.86 | % |
| Loans held for sale at fair value | 133,872 | | | 3,542 | | | 10.58 | % | | 159,270 | | | 5,297 | | | 13.30 | % | | 796,567 | | | 27,376 | | | 13.75 | % |
| Retail and certificate loans held for investment at fair value | 574,158 | | | 20,262 | | | 14.12 | % | | 674,223 | | | 23,759 | | | 14.10 | % | | 1,066,854 | | | 35,376 | | | 13.26 | % |
| Other loans held for investment at fair value | 46,212 | | | 1,479 | | | 12.80 | % | | 54,920 | | | 1,666 | | | 12.13 | % | | 65,759 | | | 1,999 | | | 12.16 | % |
| Total interest-earning assets | $ | 1,196,750 | | | $ | 27,092 | | | 9.06 | % | | $ | 1,621,668 | | | $ | 32,950 | | | 8.13 | % | | $ | 2,652,387 | | | $ | 69,411 | | | 10.53 | % |
| Interest-bearing funding sources | | | | | | | | | | | | | | | | | |
| Short-term borrowings | 96,989 | | | 1,264 | | | 5.21 | % | | 103,968 | | | 1,506 | | | 5.79 | % | | 584,711 | | | 7,398 | | | 5.06 | % |
| Retail notes, certificates and secured borrowings | 574,192 | | | 20,262 | | | 14.12 | % | | 674,356 | | | 23,759 | | | 14.10 | % | | 1,066,865 | | | 35,376 | | | 13.26 | % |
| Structured Program borrowings | 143,045 | | | 3,208 | | | 8.97 | % | | 163,409 | | | 4,786 | | | 11.72 | % | | 127,488 | | | 2,299 | | | 7.21 | % |
| Other long-term debt | 15,771 | | | 103 | | | 2.61 | % | | — | | | — | | | N/A | | 12,821 | | | 140 | | | 6.55 | % |
| Total interest-bearing funding sources | $ | 829,997 | | | $ | 24,837 | | | 11.97 | % | | $ | 941,733 | | | $ | 30,051 | | | 12.76 | % | | $ | 1,791,885 | | | $ | 45,213 | | | 10.11 | % |
| Net interest income and net interest margin | | | $ | 2,255 | | | 0.75 | % | | | | $ | 2,899 | | | 0.72 | % | | | | $ | 24,198 | | | 3.65 | % |
N/A – Not applicable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated LendingClub Corporation (1) |
| Three Months Ended
March 31, 2022 | | Three Months Ended
December 31, 2021 | | Three Months Ended
March 31, 2021 |
| Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate |
| Non-interest bearing deposits | 227,337 | | | | | | | 211,692 | | | | | | | 119,272 | | | | | |
| Other liabilities | 319,241 | | | | | | | 282,339 | | | | | | | 286,907 | | | | | |
| Total liabilities | $ | 4,369,664 | | | | | | | $ | 3,955,653 | | | | | | | $ | 3,705,902 | | | | | |
| | | | | | | | | | | | | | | | | |
| Total equity | $ | 872,037 | | | | | | | $ | 827,873 | | | | | | | $ | 721,839 | | | | | |
| Total liabilities and equity | $ | 5,241,701 | | | | | | | $ | 4,783,526 | | | | | | | $ | 4,427,741 | | | | | |
| | | | | | | | | | | | | | | | | |
| Interest rate spread | | | | | 8.00 | % | | | | | | 7.26 | % | | | | | | 2.11 | % |
| | | | | | | | | | | | | | | | | |
| Net interest income and net interest margin | | | $ | 99,680 | | | 8.26 | % | | | | $ | 83,132 | | | 7.61 | % | | | | $ | 18,506 | | | 2.67 | % |
(1) Consolidated presentation reflects intercompany eliminations.
(2) Nonaccrual loans and any related income are included in their respective loan categories.
An analysis of the year-to-year changes in the categories of interest revenue and interest expense resulting from changes in volume and rate is as follows:
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022
Compared to
Three Months Ended March 31, 2021 |
| Increase (Decrease) Due to Change in: |
| Average Volume(1) | | Average Rate(1) | | Total |
| Interest-earning assets | | | | | |
| Cash, cash equivalents, restricted cash and other | $ | (5) | | | $ | 537 | | | $ | 532 | |
| Securities available for sale at fair value | (258) | | | 2,534 | | | 2,276 | |
| Loans held for sale | 2,391 | | | (98) | | | 2,293 | |
| Loans and leases held for investment | 24,167 | | | 51,974 | | | 76,141 | |
| Retail and certificate loans held for investment at fair value | (13,157) | | | (136) | | | (13,293) | |
| Other loans held for investment at fair value | (886) | | | — | | | (886) | |
| Total increase in interest income on interest-earning assets | $ | 12,252 | | | $ | 54,811 | | | $ | 67,063 | |
| Interest-bearing liabilities | | | | | |
| Checking and money market accounts | $ | 813 | | | $ | (2) | | | $ | 811 | |
| Savings accounts and certificates of deposit | 803 | | | 810 | | | 1,613 | |
| Interest-bearing deposits | 1,616 | | | 808 | | | 2,424 | |
| Short-term borrowings | (1,369) | | | 540 | | | (829) | |
| Advances from PPPLF | (28) | | | 1 | | | (27) | |
| Retail notes, certificates and secured borrowings | (13,158) | | | (135) | | | (13,293) | |
| Structured Program borrowings | (1,931) | | | (513) | | | (2,444) | |
| Other long-term debt | (20) | | | 78 | | | 58 | |
| Total increase (decrease) in interest expense on interest-bearing liabilities | $ | (14,890) | | | $ | 779 | | | $ | (14,111) | |
| | | | | |
| Increase in net interest income | $ | 27,142 | | | $ | 54,032 | | | $ | 81,174 | |
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Consolidated LendingClub Corporation
The following table presents net interest income information corresponding to interest-earning assets and interest-bearing funding sources on the Company’s Condensed Consolidated Balance Sheets(1):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | December 31, 2020 | | March 31, 2020 |
| Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate | | Average
Balance | | Interest Income/
Expense | | Average Yield/
Rate |
Interest-earning assets (2) | | | | | | | | | | | | | | | | | |
| Cash, cash equivalents and restricted cash | $ | 1,055,364 | | | $ | 156 | | | 0.08 | % | | $ | 572,387 | | | $ | 34 | | | 0.04 | % | | $ | 465,395 | | | $ | 881 | | | 1.14 | % |
| Securities available for sale at fair value | 362,621 | | | 2,235 | | | 2.71 | % | | 160,868 | | | 2,194 | | | 5.46 | % | | 257,812 | | | 3,779 | | | 5.86 | % |
| Loans held for sale at fair value | 198,592 | | | 5,157 | | | 12.01 | % | | 159,270 | | | 5,297 | | | 13.30 | % | | 796,567 | | | 27,376 | | | 13.75 | % |
| Loans and leases held for investment | 1,895,111 | | | 15,301 | | | 4.84 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Retail and certificate loans held for investment at fair value | 574,158 | | | 20,262 | | | 14.12 | % | | 674,223 | | | 23,759 | | | 14.10 | % | | 1,066,854 | | | 35,376 | | | 13.26 | % |
| Other loans held for investment at fair value | 46,212 | | | 1,479 | | | 12.80 | % | | 54,920 | | | 1,666 | | | 12.13 | % | | 65,759 | | | 1,999 | | | 12.16 | % |
| Total interest-earning assets | $ | 4,132,058 | | | $ | 44,590 | | | 5.16 | % | | $ | 1,621,668 | | | $ | 32,950 | | | 8.13 | % | | $ | 2,652,387 | | | $ | 69,411 | | | 10.53 | % |
| Interest-bearing funding sources | | | | | | | | | | | | | | | | | |
| Deposits | $ | 2,022,312 | | | $ | 1,014 | | | 0.30 | % | | $ | — | | | $ | — | | | N/A | | $ | — | | | $ | — | | | N/A |
| Short-term borrowings | 98,818 | | | 1,264 | | | 5.12 | % | | 103,968 | | | 1,506 | | | 5.79 | % | | 584,711 | | | 7,398 | | | 5.06 | % |
| Advances from PPPLF | 405,989 | | | 233 | | | 0.35 | % | | — | | | — | | | N/A | | — | | | — | | | N/A |
| Retail notes, certificates and secured borrowings | 574,192 | | | 20,262 | | | 14.12 | % | | 674,356 | | | 23,759 | | | 14.10 | % | | 1,066,865 | | | 35,376 | | | 13.26 | % |
| Structured Program borrowings | 143,045 | | | 3,208 | | | 8.97 | % | | 163,409 | | | 4,786 | | | 11.72 | % | | 127,488 | | | 2,299 | | | 7.21 | % |
| Other long-term debt | 18,605 | | | 103 | | | 2.21 | % | | — | | | — | | | N/A | | 12,821 | | | 140 | | | 6.55 | % |
| Total interest-bearing funding sources | $ | 3,262,961 | | | $ | 26,084 | | | 3.28 | % | | $ | 941,733 | | | $ | 30,051 | | | 12.76 | % | | $ | 1,791,885 | | | $ | 45,213 | | | 10.11 | % |
| Net interest income and net interest margin | | | $ | 18,506 | | | 1.79 | % | | | | $ | 2,899 | | | 0.72 | % | | | | $ | 24,198 | | | 3.65 | % |
N/A – Not applicable | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022
Compared to
Three Months Ended December 31, 2021 |
| Increase (Decrease) Due to Change in: |
| Average Volume(1) | | Average Rate(1) | | Total |
| Interest-earning assets | | | | | |
| Cash, cash equivalents, restricted cash and other | $ | 127 | | | $ | 92 | | | $ | 219 | |
| Securities available for sale at fair value | 767 | | | 673 | | | 1,440 | |
| Loans held for sale | 2,320 | | | (2,023) | | | 297 | |
| Loans and leases held for investment | 5,831 | | | 8,647 | | | 14,478 | |
| Retail and certificate loans held for investment at fair value | (2,235) | | | (32) | | | (2,267) | |
| Other loans held for investment at fair value | (181) | | | 12 | | | (169) | |
| Total increase in interest income on interest-earning assets | $ | 6,629 | | | $ | 7,369 | | | $ | 13,998 | |
| Interest-bearing liabilities | | | | | |
| Checking and money market accounts | $ | 72 | | | $ | (64) | | | $ | 8 | |
| Savings accounts and certificates of deposit | 781 | | | 33 | | | 814 | |
| Interest-bearing deposits | 853 | | | (31) | | | 822 | |
| Short-term borrowings | (304) | | | 178 | | | (126) | |
| Advances from PPPLF | (94) | | | (7) | | | (101) | |
| Retail notes, certificates and secured borrowings | (2,235) | | | (32) | | | (2,267) | |
| Structured Program borrowings | (670) | | | (208) | | | (878) | |
| Other long-term debt | (1) | | | 1 | | | — | |
| Total decrease in interest expense on interest-bearing liabilities | $ | (2,451) | | | $ | (99) | | | $ | (2,550) | |
| | | | | |
| Increase in net interest income | $ | 9,080 | | | $ | 7,468 | | | $ | 16,548 | |
(1) Consolidated presentation reflects intercompany eliminations.
(2) Nonaccrual loansVolume and any related income are includedrate changes have been allocated on a consistent basis using the respective percentage changes in their respective loan categories.
LENDINGCLUB CORPORATION
Management’s Discussionaverage balances 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 on Securities Available for Sale at Fair Value
Interest on securities available for sale was $2.2 million and $3.8 million for the first quarters of 2021 and 2020, respectively, a decrease of 41%. The decrease was primarily due to a decrease in the average outstanding balance of securities available for sale.
Interest on securities available for sale remained flat at $2.2 million for both the first quarter of 2021 and fourth quarter of 2020.
Interest on Loans Held for Sale at Fair Value
Interest on loans held for sale was $5.2 million and $27.4 million for the first quarters of 2021 and 2020, respectively, a decrease of 81%. The decrease was primarily due to a decrease in the average outstanding balances of loans held for sale.
Interest on loans held for sale remained relatively flat at $5.2 million and $5.3 million for the first quarter of 2021 and fourth quarter of 2020, respectively, a decrease of 3%.
Interest on Loans and Leases Held for Investment
Interest and fees on loans and leases held for investment of $15.3 million for the first quarter of 2021 were primarily related to the loans and leases acquired from Radius and $344.4 million of originated personal and auto loans retained for investment. There were no loans and leases held for investment at amortized cost for the first and fourth quarters of 2020.
Interest on Retail and Certificate Loans Held for Investment at Fair Value
We do not assume principal or interest rate risk on loans facilitated through our lending marketplace that were funded by notes, certificates and certain secured borrowings because loan balances, interest rates and maturities are matched and offset by an equal balance of notes, certificates or secured borrowings with the exact same interest rates and maturities.
Interest income on retail and certificate loans held for investment at fair value was $20.3 million and $35.4 million for the first quarters of 2021 and 2020, respectively, a decrease of 43%. The decrease was primarily due to a decrease in the average outstanding balances of retail and certificate loans held for investment. Interest expense on retail notes, certificates and secured borrowings was $20.3 million and $35.4 million for the first quarters of 2021 and 2020, respectively, a decrease of 43%. The decrease was primarily due to a decrease in the average outstanding balance of retail notes, certificates and secured borrowings. We ceased offering and selling Retail Notes at December 31, 2020, therefore, this balance will continue to decline as underlying borrower payments are made.
Interest income on retail and certificate loans held for investment at fair value was $20.3 million and $23.8 million for the first quarter of 2021 and fourth quarter of 2020, respectively, a decrease of 15%. The decrease was primarily due to a decrease in the average outstanding balances of retail and certificate loans held for investment. Interest expense on retail notes, certificates and secured borrowings was $20.3 million and $23.8 million for the first quarter of 2021 and fourth quarter of 2020, respectively, a decrease of 15%. The decrease was primarily due to a decrease in the average outstanding balance of retail notes, certificates and secured borrowings.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Interest on Other Loans Held for Investment at Fair Value
Interest on other loans held for investment at fair value was $1.5 million and $2.0 million for the first quarters of 2021 and 2020, respectively, a decrease of 26%. The decrease was primarily due to a decrease in the average outstanding balance of other loans held for investment at fair value.
Interest on other loans held for investment at fair value was $1.5 million and $1.7 million for the first quarter of 2021 and fourth quarter of 2020, respectively, a decrease of 11%. The decrease was primarily due to a decrease in the average outstanding balance of other loans held for investment at fair value.
Interest on Deposits
Interest on deposits of $1.0 million for the first quarter of 2021 was primarily related to the deposits assumed from Radius. There were no deposits held by the Company for the first and fourth quarters of 2020.
Interest on Short-term Borrowings
Interest on short-term borrowings was $1.3 million and $7.4 million for the first quarters of 2021 and 2020, respectively, a decrease of 83%. The decrease was primarily due to a decrease in the average outstanding balance of short-term borrowings.
Interest on short-term borrowings was $1.3 million and $1.5 million for the first quarter of 2021 and fourth quarter of 2020, respectively, a decrease of 16%. The decrease was primarily due to a decrease in the average outstanding balance of short-term borrowings.
Interest on Structured Program Borrowings
Interest on Structured Program borrowings was $3.2 million and $2.3 million for the first quarters of 2021 and 2020, respectively, an increase of 40%. The increase was primarily due to an increase in the average outstanding balance of Structured Program borrowings.
Interest on Structured Program borrowings was $3.2 million and $4.8 million for the first quarter of 2021 and fourth quarter of 2020, respectively, a decrease of 33%. The decrease was primarily due to a decrease in the average outstanding balance of Structured Program borrowings.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Provision for Credit Losses
The allowance for loan and lease losses (ALLL) for lifetime expected losses under CECL on HFI loans and leases is initially recognized as “Provision for credit losses” at the time of origination. The ALLL is estimated using a discounted cash flow (DCF) approach, where effective interest rates are used to calculate the net present value of expected cash flows. The net present value from the DCF approach is then compared to the amortized cost basis of the loans and leases to derive expected credit losses. The provision for credit losses includes the credit loss expense for HFI loans and leases, held for investment, credit impairments recorded on securities available for sale (AFS) securities and the credit loss expense for unfunded lending commitments. The table below illustrates the composition of the provision for credit losses for each period presented:
| | | Three Months Ended | | | Three Months Ended | |
| | March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | March 31,
2022 | | December 31,
2021 | | March 31,
2021 | |
| Credit loss expense for Radius loans at acquisition | Credit loss expense for Radius loans at acquisition | $ | 6,929 | | | $ | — | | | $ | — | | | Credit loss expense for Radius loans at acquisition | $ | — | | | $ | — | | | $ | 6,929 | | |
| Credit loss expense for loans and leases held for investment | Credit loss expense for loans and leases held for investment | 16,624 | | | — | | | — | | | Credit loss expense for loans and leases held for investment | 52,228 | | | 45,289 | | | 16,624 | | |
| Credit loss expense for unfunded lending commitments | 410 | | | — | | | — | | | |
| Credit loss (reversal of) expense for unfunded lending commitments | | Credit loss (reversal of) expense for unfunded lending commitments | 281 | | | (46) | | | 410 | | |
| Total credit loss expense | Total credit loss expense | 23,963 | | | — | | | — | | | Total credit loss expense | 52,509 | | | 45,243 | | | 23,963 | | |
| (Reversal of) impairment on securities available for sale | (2,470) | | | (417) | | | 10,980 | | | |
| Reversal of credit loss expense on securities available for sale | | Reversal of credit loss expense on securities available for sale | — | | | (94) | | | (2,470) | | |
| Total provision for credit losses | Total provision for credit losses | $ | 21,493 | | | $ | (417) | | | $ | 10,980 | | | Total provision for credit losses | $ | 52,509 | | | $ | 45,149 | | | $ | 21,493 | | |
|
The provision for credit losses was $52.5 million and $21.5 million infor the first quarters of 2022 and 2021, respectively. The increase was primarily due to higher balances of unsecured personal loans retained as HFI. Total volume of loans retained as HFI was $856.3 million and $344.4 million for the first quarters of 2022 and 2021, respectively.
The provision for credit losses was $52.5 million and $45.1 million for the first quarter of 2022 and fourth quarter of 2021, respectively. The increase was primarily due to the originationhigher balances of unsecured personal loans retained as heldHFI. Total volume of loans retained as HFI was $856.3 million and $761.5 million for investment and the impact from applying CECL to the Radius loans upon their acquisition, partially offset by a $2.5 million reversal of impairment originally recorded in the securities available for sale portfolio in the first quarter of 2020.
The allowance for expected credit losses totaled $36.5 million at March 31,2022 and fourth quarter of 2021, comprised of an allowance for loan and lease losses of $36.1 million and a reserve for unfunded lending commitments of $0.4 million. The allowance for loan and lease losses of $36.1 million includes $12.4 million related to the initial allowance measured on acquired Radius loans that were determined to have experienced a more-than-insignificant deterioration in credit quality since their origination date, and were therefore recorded as Purchased Credit Deteriorated (PCD) loans. Upon acquisition, the amortized cost of PCD loans was increased by the amount of the allowance, resulting in no impact to the provision for credit losses for the initial allowance.respectively.
The activity in the allowance for expected credit losses for the quarter ended March 31, 2021ACL was as follows:
| | | | | |
| March 31, 2021 |
Allowance for loan and lease losses, beginning of period | $ | — | |
Credit loss expense for loans and leases held for investment (1)
| 23,553 | |
Initial allowance for PCD loans acquired during the period (2)
| 12,440 | |
Charge-offs | — | |
Recoveries | 139 | |
Allowance for loan and lease losses, end of period | $ | 36,132 | |
| |
Reserve for unfunded lending commitments, beginning of period | $ | — | |
Credit loss expense for unfunded lending commitments | 410 | |
Reserve for unfunded lending commitments, end of period | $ | 410 | |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | |
| Allowance for loan and lease losses, beginning of period | $ | 144,389 | | | $ | 104,736 | | | $ | — | | | |
Credit loss expense for loans and leases held for investment | 52,228 | | | 45,289 | | | 23,553 | | | |
Initial allowance for purchased credit deteriorated (PCD) loans acquired during the period (1) | — | | | — | | | 12,440 | | | |
| Charge-offs | (9,089) | | | (5,870) | | | — | | | |
| Recoveries | 457 | | | 234 | | | 139 | | | |
| Allowance for loan and lease losses, end of period | $ | 187,985 | | | $ | 144,389 | | | $ | 36,132 | | | |
| | | | | | | |
| Reserve for unfunded lending commitments, beginning of period | $ | 1,231 | | | $ | 1,277 | | | $ | — | | | |
| Credit loss expense for unfunded lending commitments | 281 | | | (46) | | | 410 | | | |
Reserve for unfunded lending commitments, end of period (2) | $ | 1,512 | | | $ | 1,231 | | | $ | 410 | | | |
(1)Includes credit loss expense for Radius loans at acquisition.
(2) For acquired PCD loans, an allowanceACL of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, a CECL allowancean ACL of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The allowance for loan and lease losses represented 1.71% of total loans | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | |
| Ratio of allowance for loan and lease losses to total loans and leases held for investment | 5.49 | % | | 4.98 | % | | 1.71 | % | | |
| Ratio of allowance for loan and lease losses to total loans and leases held for investment, excluding PPP loans | 5.81 | % | | 5.49 | % | | 2.49 | % | | |
| | | | | | | |
| Average loans and leases held for investment | $ | 3,135,735 | | | $ | 2,923,326 | | | $ | 1,895,111 | | | |
| Ratio of net charge-offs to average loans and leases held for investment | 0.28 | % | | 0.19 | % | | — | % | | |
Loans and leases held for investment,are generally placed on nonaccrual status when contractually past due 90 days or 2.49%more, or earlier if management believes that the probability of total loanscollection does not warrant further accrual, and leases held for investment excluding Paycheck Protection Program (PPP) loans.are charged-off no later than 120 days past due. The allowance for loan and lease losses represented 303% offollowing table presents nonaccrual loans and leases as of the periods presented (1):
| | | | | | | | |
| March 31, 2022 | December 31, 2021 |
| Unsecured personal | $ | 3,093 | | $ | 1,676 | |
| Residential mortgages | 875 | | 1,373 | |
| Secured consumer | 3,025 | | 3,011 | |
| | |
| Total nonaccrual consumer loans held for investment | 6,993 | | 6,060 | |
| | |
| Equipment finance | 462 | | 603 | |
| Commercial real estate | 1,079 | | 989 | |
| Commercial and industrial | 2,726 | | 2,333 | |
| Total nonaccrual commercial loans and leases held for investment | 4,267 | | 3,925 | |
| | |
| Total nonaccrual loans and leases held for investment | $ | 11,260 | | $ | 9,985 | |
(1) Excluding PPP loans, there were no loans that were 90 days or more past due and accruing as of both March 31, 2022 and December 31, 2021.
The allowance for expected credit losses for financing receivablesAs of March 31, 2022, nonaccrual loans and leases represented 0.33% of total loans and reserve for unfunded lending commitments (collectively the allowance for expected credit losses (ACL)), are valuation reserves that represent our best estimateleases HFI, or 0.35% of expected credit losses (ECL) on the assets measured at amortized costtotal loans and unfunded lending commitments. The allowance for expected credit losses is measured based on a lifetime expected loss model, which does not require a loss event to occur before a credit loss is recognized. Under the lifetime expected credit loss model, we estimate the allowance based on relevant available information related to past events, current conditions,leases HFI excluding PPP loans. As of December 31, 2021, nonaccrual loans and reasonableleases represented 0.34% of total loans and supportable forecastsleases HFI, or 0.38% of future economic conditions.
We generally estimate ECL over the contractual term of itstotal loans and leases HFI excluding PPP loans. The contractual term is adjusted for expected prepayments when appropriate. Expected renewals and extensions do not adjust the contractual term unless the extension or renewal option is through a troubled debt restructuring (TDR) that is reasonably expected to occur or represents an unconditionally cancellable option held by the borrower.
The quantitative, or modeled, component of the ACL is primarily based on statistical models that use known or estimated data as of the balance sheet date and forecasted data over the reasonable and supportable period. Known and estimated data include current probability of default, loss given default and exposure at default, timing and amount of expected prepayments, timing and amount of expected draws (for unfunded lending commitments), and relevant risk characteristics. Certain of our portfolios have limited historical loss data available internally. For these portfolios, we use external credit loss information from the FDIC Call Report and Small Business Administration (SBA) data, which includes historical charge-off and balance data for peer banking institutions.
We obtain historical macroeconomic data dating back to 2004 from the St. Louis Federal Reserve Economic Database (FRED) and Moody’s Analytics to inform our view of the long-term condition of the economy. Forward-looking macroeconomic factors considered in our statistical models include Gross Domestic Product (GDP), unemployment rate, housing prices, and retail sales. Forward-looking macroeconomic factors are incorporated into our models for a two-year reasonable and supportable economic forecast period followed by a one-year reversion period during which expected credit losses are expected to revert back on a straight-line basis to historical losses unadjusted for economic conditions. The reasonable and supportable economic forecast period and reversion methodology are accounting estimates which may change in future periods as a result of changes to the current macroeconomic environment.
Our statistical models produce expected cash flows, which are then discounted at the effective interest rate to derive net present value. This net present value is then compared to the amortized cost basis to derive the expected credit losses. As a result, the quantitative, or modeled, portion of ACL is estimated using a discounted cash flow (DCF) approach.
We also consider the need for qualitative adjustments to the modeled estimate of expected credit losses. For this purpose, we established a qualitative factor framework to periodically assess qualitative adjustments to address certain identified elements that are not directly captured by the expected credit loss models. These factors may include the impact of risk rating downgrades, changes in credit policies, problem loan trends, identification of new risks not incorporated into the modeling framework, credit concentrations, changes in lending management and other external factors.
Loans that do not share common risk characteristics are evaluated individually to determine the allowance balance. Loans assessed individually include TDRs, reasonably expected TDRs and collateral-dependent loans. 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)
allowance for individually assessed loans is generally determined using either DCF analyses or collateral valuations to determine if loan carrying values exceed what we expect to collect.
For additional information on the allowance for expected credit losses and nonaccrual loans and leases, see “Critical Accounting Estimates,” “ Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies,” of our Annual Report and “Notes to Condensed Consolidated Financial Statements – Note 6.5. Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses.” in this Report.
The following table presents nonaccrual loans and leases as of March 31, 2021:
| | | | | |
As of March 31, 2021 | Nonaccrual Loans and Leases (1)
|
Unsecured personal | $ | — | |
Residential mortgages | 3,383 | |
Secured consumer | 4,774 | |
Other consumer | — | |
Total nonaccrual consumer loans held for investment | 8,157 | |
| |
Equipment finance | — | |
Commercial real estate | 2,420 | |
Commercial and industrial | 1,360 | |
Total nonaccrual commercial loans and leases held for investment | 3,780 | |
| |
Total nonaccrual loans and leases held for investment | $ | 11,937 | |
(1) There were no loans or leases that were 90 days or more past due and accruing as of March 31, 2021.
Nonaccrual loans and leases represented 0.56% of total loans and leases held for investment, or 0.82% of total loans and leases held for investment excluding PPP loans, as of March 31, 2021.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Non-Interest Expense
Non-interest expense primarily consists of (i) compensation and benefits, which include salaries and wages, benefits and stock-based compensation expense, (ii) marketing, which includes costs attributable to borrower acquisition efforts and building general brand awareness, (iii) equipment and software, (iv) occupancy, which includes rent expense and all other costs related to occupying our office spaces, (v) depreciation and amortization and (vi) professional services, which primarily consist of legal and accounting fees.
| | | Three Months Ended | | | Change (%) | | Three Months Ended | | Change (%) |
| | March 31, 2021 | | December 31,
2020 | | March 31, 2020 | | | Q1 2021
vs
Q1 2020 | | Q1 2021
vs
Q4 2020 | | March 31,
2022 | | December 31,
2021 | | March 31,
2021 | | Q1 2022
vs
Q1 2021 | | Q1 2022
vs
Q4 2021 |
| Non-interest expense: | Non-interest expense: | | | | Non-interest expense: | |
| Compensation and benefits | Compensation and benefits | $ | 64,420 | | | $ | 52,527 | | | $ | 75,545 | | | | (15) | % | | 23 | % | Compensation and benefits | $ | 81,610 | | | $ | 78,741 | | | $ | 64,420 | | | 27 | % | | 4 | % |
| Marketing | Marketing | 19,545 | | | 8,488 | | | 39,081 | | | | (50) | % | | 130 | % | Marketing | 55,080 | | | 50,708 | | | 19,545 | | | 182 | % | | 9 | % |
| Equipment and software | Equipment and software | 7,893 | | | 5,911 | | | 6,490 | | | | 22 | % | | 34 | % | Equipment and software | 11,046 | | | 12,019 | | | 7,893 | | | 40 | % | | (8) | % |
| Occupancy | Occupancy | 6,900 | | | 5,629 | | | 6,813 | | | | 1 | % | | 23 | % | Occupancy | 6,019 | | | 4,706 | | | 6,900 | | | (13) | % | | 28 | % |
| Depreciation and amortization | Depreciation and amortization | 11,766 | | | 12,198 | | | 12,873 | | | | (9) | % | | (4) | % | Depreciation and amortization | 11,039 | | | 10,462 | | | 11,766 | | | (6) | % | | 6 | % |
| Professional services | Professional services | 11,603 | | | 9,057 | | | 14,141 | | | | (18) | % | | 28 | % | Professional services | 12,406 | | | 12,699 | | | 11,603 | | | 7 | % | | (2) | % |
| Other non-interest expense | Other non-interest expense | 12,125 | | | 9,083 | | | 13,031 | | | | (7) | % | | 33 | % | Other non-interest expense | 14,004 | | | 18,885 | | | 12,125 | | | 15 | % | | (26) | % |
| Total non-interest expense | Total non-interest expense | $ | 134,252 | | | $ | 102,893 | | | $ | 167,974 | | | | (20) | % | | 30 | % | Total non-interest expense | $ | 191,204 | | | $ | 188,220 | | | $ | 134,252 | | | 42 | % | | 2 | % |
Compensation and benefits wereexpense was $81.6 million and $64.4 million and $75.5 million for the first quarters of 20212022 and 2020, respectively, a decrease of 15%. The decrease was primarily due to lower headcount as a result of a workforce reduction in the second quarter of 2020 associated with the impact of COVID-19.
Compensation and benefits were $64.4 million and $52.5 million for the first quarter of 2021, and fourth quarter of 2020, respectively, an increase of 23%27%. The increase was primarily due to an increase in headcount relatedheadcount.
Compensation and benefits expense was $81.6 million and $78.7 million for the first quarter of 2022 and fourth quarter of 2021, respectively, an increase of 4%. The increase was primarily due to the acquisition of Radius.an increase in headcount.
Marketing expense was $19.5$55.1 million and $39.1$19.5 million for the first quarters of 20212022 and 2020, respectively, a decrease of 50%. The decrease was primarily due to a decrease in variable marketing expenses based on lower origination volume.
Marketing was $19.5 million and $8.5 million for the first quarter of 2021, and fourth quarter of 2020, respectively, an increase of 130%182%. The increase was primarily due to an increase in variable marketing expenses based on higher origination volume.volume, partially offset by the deferral of applicable marketing expenses for HFI loans.
Equipment and softwareMarketing expense was $7.9$55.1 million and $6.5$50.7 million for the first quartersquarter of 20212022 and 2020,fourth quarter of 2021, respectively, an increase of 22%9%. The increase was primarily due to an increase in variable marketing expenses associated with the integration of Radius,based on higher origination volume and an increase in deposits, partially offset by one-timethe deferral of applicable marketing expenses in the first quarter of 2020 resulting from COVID-19.for HFI loans.
Equipment and software expense was $7.9$11.0 million and $5.9$7.9 million for the first quarterquarters of 20212022 and fourth quarter of 2020,2021, respectively, an increase of 34%40%. The increase was primarily due to an increase in expenses associated withhosting fees and subscription costs.
Equipment and software expense was $11.0 million and $12.0 million for the integrationfirst quarter of Radius.2022 and fourth quarter of 2021, respectively, a decrease of 8%. The decrease was primarily due to a decrease in equipment purchases and lower cloud hosting fees.
Occupancy remained relatively flat at $6.9expense was $6.0 million, $4.7 million, and $6.8$6.9 million for the first quartersquarter of 2022, fourth quarter of 2021, and 2020, respectively, an increasefirst quarter of 1%.2021, respectively.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Occupancy was $6.9 million and $5.6 million for the first quarter of 2021 and fourth quarter of 2020, respectively, an increase of 23%. The increase was primarily due to an impairment expense in the first quarter of 2021 related to our leasehold improvements.
Depreciation and amortization expense was $11.8$11.0 million and $12.9$11.8 million for the first quarters of 20212022 and 2020,2021, respectively, a decrease of 9%6%. The decrease was primarily due to an increase in fully depreciated assets, partially offset by an increase in the amortization of intangible assets resulting from the acquisition of Radius.Acquisition.
Depreciation and amortization was $11.8expense remained relatively flat at $11.0 million and $12.2$10.5 million for the first quarter of 20212022 and fourth quarter of 2020, respectively, a decrease of 4%. The decrease was primarily due to a decrease in asset impairments, partially offset by an increase in the amortization of intangible assets resulting from the acquisition of Radius.2021, respectively.
Professional services were $11.6$12.4 million and $14.1$11.6 million for the first quarters of 20212022 and 2020, respectively, a decrease of 18%. The decrease was primarily due to a decrease in legal fees related to legacy issues, partially offset by an increase in professional fees associated with the acquisition of Radius.
Professional services were $11.6 million and $9.1 million for the first quarter of 2021, and fourth quarter of 2020, respectively, an increase of 28%7%. The increase was primarily due to an increase in professional fees associated withconsulting fees.
Professional services remained relatively flat at $12.4 million and $12.7 million for the acquisitionfirst quarter of Radius.2022 and fourth quarter of 2021, respectively.
Income Taxes
For the first quarter of 2022, we recorded an income tax expense of $5.0 million primarily related to income tax expense for state jurisdictions that limit net operating loss utilization. For the first quarter 2021, we recorded an income tax benefit of $2.8 million primarily related to changes in the deferred tax asset valuation allowance resulting from a deferred tax liability assumed with the acquisition of Radius. For the first quarter of 2020, we recorded an income tax expense of $319 thousand primarily attributable to the tax effects of other comprehensive income associated with our available for sale portfolio.Acquisition.
We continue to recognize a full valuation allowance against net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence. Our improved and accelerated profitability are examples of positive evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. We intend to continue maintainingthat there is a fullreasonable possibility that a portion of our valuation allowance on our deferredis no longer needed in 2022. A release of the valuation allowance will result in a material tax assets until there is sufficient evidence to supportbenefit recognized in the reversalquarter of all or some portion of these allowances. Changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positionsrelease.
Income taxes are recorded as current periodon a separate entity basis whereby each operating segment determines income tax expense.expense or benefit as if it filed a separate tax return. Differences between separate entity and consolidated tax returns are eliminated upon consolidation.
Segment Information
The Company defines operating segments to be components of the Company for which discrete financial information is evaluated regularly by the Company’s chief executive officer and chief financial officer to allocate resources and evaluate financial performance. This information is reviewed according to the legal organizational structure of the Company’s operations with products and services presented separately for the parent bank holding company and its wholly-owned subsidiary, LC Bank.
LendingClub Bank.Bank
The LC Bank operating segment represents the national bank legal entity and reflects post-Acquisition operating activities. This segment provides a full complement of financial products and solutions, including loans, leases and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to investors and manages relationships with deposit holders.
LendingClub Corporation (Parent Only)
The LendingClub Corporation (parent(Parent only) operating segment represents the holding company legal entity and predominately reflects the historical operations of the Company.Company prior to the Acquisition. This activity includes, but is not limited to, the purchase and sale of loans prior to February 1, 2021 and ongoing issuances of education and patient finance loans that are originated by banking partners.
LENDINGCLUB 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 Bank
The LendingClub Bank operating segment representslimited to, servicing fee revenue for loans serviced prior to the National Bank legal entityAcquisition, and reflects post-acquisition operating activities. This segment provides a full complement of financial productsinterest income and solutions, including loans, leasesinterest expense related to the Retail Program and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to investors and manages the acquired business relationships with deposit holders.
Management evaluates the performance of the segments on a pre-tax basis.Structured Program transactions.
Financial information for the segments is presented in the following table:
| | | LendingClub
Corporation
(Parent only) | | LendingClub
Bank | | Intercompany
Eliminations | | Total | | | LendingClub
Bank | | LendingClub
Corporation
(Parent only) | | Intercompany
Eliminations | | Consolidated Total |
| | Three Months Ended
March 31, | | Three Months Ended
March 31, | | Three Months Ended
March 31, | | Three Months Ended
March 31, | | | Three Months Ended March 31, | | Two Months Ended March 31, | | Three Months Ended March 31, | | Three Months Ended March 31, | | Two Months Ended March 31, | | Three Months Ended March 31, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Non-interest income: | Non-interest income: | | | Non-interest income: | |
| Marketplace revenue | Marketplace revenue | $ | 45,665 | | | $ | 102,477 | | | $ | 36,062 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 81,727 | | | $ | 102,477 | | | Marketplace revenue | $ | 164,835 | | | $ | 36,062 | | | $ | 15,131 | | | $ | 45,665 | | | $ | — | | | $ | — | | | $ | 179,966 | | | $ | 81,727 | |
| Other non-interest income | Other non-interest income | 4,098 | | | 4,511 | | | 19,700 | | | 0 | | | (18,191) | | | 0 | | | 5,607 | | | 4,511 | | | Other non-interest income | 19,498 | | | 19,700 | | | 4,223 | | | 4,098 | | | (13,830) | | | (18,191) | | | 9,891 | | | 5,607 | |
| Total non-interest income | Total non-interest income | 49,763 | | | 106,988 | | | 55,762 | | | 0 | | | (18,191) | | | 0 | | | 87,334 | | | 106,988 | | | Total non-interest income | 184,333 | | | 55,762 | | | 19,354 | | | 49,763 | | | (13,830) | | | (18,191) | | | 189,857 | | | 87,334 | |
| | Interest income: | Interest income: | | | Interest income: | |
| Interest income | Interest income | 27,092 | | | 69,411 | | | 17,498 | | | 0 | | | 0 | | | 0 | | | 44,590 | | | 69,411 | | | Interest income | 99,823 | | | 17,498 | | | 11,830 | | | 27,092 | | | — | | | — | | | 111,653 | | | 44,590 | |
| Interest expense | Interest expense | (24,837) | | | (45,213) | | | (1,247) | | | 0 | | | 0 | | | 0 | | | (26,084) | | | (45,213) | | | Interest expense | (3,644) | | | (1,247) | | | (8,329) | | | (24,837) | | | — | | | — | | | (11,973) | | | (26,084) | |
| Net interest income | Net interest income | 2,255 | | | 24,198 | | | 16,251 | | | 0 | | | 0 | | | 0 | | | 18,506 | | | 24,198 | | | Net interest income | 96,179 | | | 16,251 | | | 3,501 | | | 2,255 | | | — | | | — | | | 99,680 | | | 18,506 | |
| | Total net revenue | Total net revenue | 52,018 | | | 131,186 | | | 72,013 | | | 0 | | | (18,191) | | | 0 | | | 105,840 | | | 131,186 | | | Total net revenue | 280,512 | | | 72,013 | | | 22,855 | | | 52,018 | | | (13,830) | | | (18,191) | | | 289,537 | | | 105,840 | |
| | Provision for credit losses | 2,470 | | | (10,980) | | | (23,963) | | | 0 | | | 0 | | | 0 | | | (21,493) | | | (10,980) | | | |
| (Provision for) reversal of credit losses | | (Provision for) reversal of credit losses | (52,509) | | | (23,963) | | | — | | | 2,470 | | | — | | | — | | | (52,509) | | | (21,493) | |
| Non-interest expense | Non-interest expense | (76,944) | | | (167,974) | | | (75,499) | | | 0 | | | 18,191 | | | 0 | | | (134,252) | | | (167,974) | | | Non-interest expense | (178,459) | | | (75,499) | | | (26,575) | | | (76,944) | | | 13,830 | | | 18,191 | | | (191,204) | | | (134,252) | |
| Loss before income tax expense | $ | (22,456) | | | $ | (47,768) | | | $ | (27,449) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | (49,905) | | | $ | (47,768) | | | |
| Income (Loss) before income tax benefit (expense) | | Income (Loss) before income tax benefit (expense) | 49,544 | | | (27,449) | | | (3,720) | | | (22,456) | | | — | | | — | | | 45,824 | | | (49,905) | |
| Income tax benefit (expense) | | Income tax benefit (expense) | (12,355) | | | 23 | | | 17,727 | | | 2,292 | | | (10,360) | | | 506 | | | (4,988) | | | 2,821 | |
| Consolidated net income (loss) | | Consolidated net income (loss) | $ | 37,189 | | | $ | (27,426) | | | $ | 14,007 | | | $ | (20,164) | | | $ | (10,360) | | | $ | 506 | | | $ | 40,836 | | | $ | (47,084) | |
|
The Company integrated its business acquisition of Radiusthe Acquisition into its reportable segments in the first quarter of 2021. As the Company’s reportable segments are based on legal organizational structure and LendingClubLC Bank was formed upon the acquisition,Acquisition, an analysis of the Company’s results of operations and material trends for the first quarter of 20212022 compared to the first quarter of 20202021 is provided on a consolidated basis in “Results of Operations.”
Supervision and Regulatory Environment
We are regularly subject to claims, individual and class action lawsuits, and lawsuits alleging regulatory violations, government (including state agencies) and regulatoryviolations. Further, we are subject to periodic exams, investigations, inquiries or requests, enforcement actions and other proceedings.proceedings from federal and state regulatory agencies, including the federal banking regulators that directly regulate the Company and/or LC Bank. The number and significance of these claims, lawsuits, exams, investigations, inquiries, requests and proceedings have been increasing in part because our business expandedproducts and services have been increasing in scope and geographic reach,complexity and our products and services increased in complexity. At this time, the Company is not able to project the impact of becomingpart because we have become a bank holding company operating a national bank onbank. Although historically the numberCompany has generally resolved these matters in a manner that was not materially adverse to its financial results or significancebusiness operations, no assurance can be given as to the timing, outcome or consequences of such matters.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
State Inquiries and Licensing
We have historically conducted business through nonbank entities, some of which maintain or maintained various financial services licenses in numerous jurisdictions. Much of our business activity is now conducted through the Bank pursuant to the laws applicable to national banks. Nevertheless, our nonbank entities continue to maintain certain state licenses and may continue to be subject to the regulation, supervision and enforcement of various state regulatory authorities with respect to the legacy or residual activities.
We are subject to examination by the New York Department of Financial Services (NYDFS) and regulators in other states with respect to the period prior to our acquisition of Radius and becoming a bank holding company operating a national bank. These exams have included the application of state usury rates and lending arrangements where a bank or other third party has made a loan and then sells and assigns it to an entity that is engaged in assisting with the origination or servicing of a loan. For example, in July 2018, the NYDFS issued an Online Lending Report (Lending Report). The Lending Report included, among other things, an analysis of the online lenders operating in New York including their methods of operations, lending practices, interest rates and costs, products offered and complaints and investigations relating to online lenders. The Lending Report also included information and recommendations regarding protecting New York’s markets and consumers. Although the Lending Report noted that the rapid growth of online lending demonstrates there is value to new technologies that allow financial institutions to connect with borrowers in new ways, it noted that in many cases an online lender is the “true lender” and that lending in New York, whether through banks, credit unions or online lenders, should be subject to applicable usury limits. We have periodically had discussions with various regulatory agencies regarding our historical business model and engaged in similar discussions with the NYDFS and other regulators. During the course of such discussions, we decided to voluntarily comply with certain rules and regulations.
Prior to discontinuing the offer and sale of Retail Notes in December 2020, the Company undertook a review of its portfolio of licenses and had discussions with regulators in Texas, Arizona, New York, Florida and North Dakota concerning the registrations required for the Company’s issuance of Retail Notes to investors in these states and applied for registrations in these states to facilitate these operations. The Company had discussions with certain of these regulators to resolve concerns regarding the Company’s historical licensing/registration status in connection with Retail Notes issued and reached resolutions with Texas, Arizona and North Dakota to resolve their concerns, the outcome of which is not material to the Company’s operations or financial position. The Company is not able to predict with certainty the timing, outcome, or consequence of discussions, with the remaining states, including in relation to whether and how any concerns those states have will be resolved. Discussions with these remaining states could result in fines or other penalties, which are not expected to have a material adverse impact on the Company’s operations or results of operations.
Regulatory Actions Taken in Relation to COVID-19
Regulators and government officials at the federal government level and in states across the country have issued orders, passed laws or otherwise issued guidance in connection with COVID-19. Some of these orders and laws have placed restrictions on debt collection activity, all or certain types of communications with delinquent borrowers or others, required that borrowers be allowed to defer payments on outstanding debt, governgoverned credit reporting and the use of credit reporting, and placed certain restrictions and requirements on operations in the workplace. We have taken steps to monitor regulatory developments relating to COVID-19 and to comply with orders and laws applicable to our business. Given the ongoing nature of the pandemic, it is possible that additional orders, laws, or regulatory guidance may still be issued. The Company isWe are not able to predict the extent of the impact on itsour business from any regulatory activity relating to or resulting from COVID-19.
86Federal Banking Regulator Supervision
LENDINGCLUB CORPORATIONSince the Acquisition, we are subject to supervision, regulation, examination and enforcement by multiple federal banking regulatory bodies. Specifically, as a bank holding company, the Company is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Board of Governors of the Federal Reserve System (FRB). Further, as a national bank, LC Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the OCC. Accordingly, we have been and continue to invest in regulatory compliance and be subject to certain parameters, obligations and/or limitations set forth by the banking regulations and regulators with respect to the operation of our business.
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)
Consequences
If we are found to not have complied with applicable laws, regulations or requirements, we could: (i) lose one or more of our licenses or authorizations, (ii) become subject to a consent order or administrative enforcement action, (iii) face lawsuits (including class action lawsuits), sanctions, penalties, or other monetary losses due to judgments, orders, or settlements, (iv) be in breach of certain contracts, which may void or cancel such contracts, (v) decide or be compelled to modify or suspend certain of our business practices, (vi) be unable to execute on certain Company initiatives, or (vii) be required to obtain a license in such jurisdiction, which may have an adverse effect on our ability to operate and/or evolve our lending marketplace and other products and/or services; any of which may harm our business or financial results.
See “Part I – Item 1. Business – Regulation and Supervision,” “Part I – Item 1A. Risk Factors – Risks Related to Regulation, Supervision and Compliance,” and “Part I – Item 1A. Risk Factors – Risks Related to Operating Our Business” in our Annual Report for further discussion regarding our supervision and regulatory environment.
Capital Management
The prudent management of capital is fundamental to the successful achievement of our business initiatives. We actively manage capital through a process that continuously assesses and monitors the Company’s overall capital adequacy. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations.
The formation of theLC Bank as a nationally chartered association and the organization of the Company as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and the FRB, including the requirement to maintain regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel III). As a U.S. Basel III standardized approach institution, we selected the one-time election to opt-out of the requirements to include all the components of accumulated other comprehensive income included in common stockholder’s equity. The minimum capital requirements under the U.S. Basel III capital framework are: a common equity Tier 1 (CET1) risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. Additionally, a capital conservation buffer (CCB) of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases, and certain discretionary bonus payments.
The following table presents the regulatory capital and ratios of the Company as of March 31, 2021 (in millions):
| | | | | | | | | | | | | | | | | |
| LendingClub | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| March 31, 2021 | Amount | | Ratio | |
| CET1 capital | $ | 578.1 | | | 26.0 | % | | 7.0 | % |
| Tier 1 capital | $ | 578.1 | | | 26.0 | % | | 8.5 | % |
| Total capital | $ | 611.8 | | | 27.5 | % | | 10.5 | % |
| Tier 1 leverage | $ | 578.1 | | | 14.5 | % | | 4.0 | % |
| Risk-weighted assets | $ | 2,224.0 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 3,974.3 | | | N/A | | N/A |
N/A – Not applicable
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following table summarizesrequirements under the Bank’s regulatoryU.S. Basel III capital amountsframework are: a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and ratios at March 31, 2021 (in millions):
| | | | | | | | | | | | | | | | | |
| LendingClub Bank | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| March 31, 2021 | Amount | | Ratio | |
| CET1 capital | $ | 338.9 | | | 20.9 | % | | 7.0 | % |
| Tier 1 capital | $ | 338.9 | | | 20.9 | % | | 8.5 | % |
| Total capital | $ | 356.9 | | | 22.1 | % | | 10.5 | % |
| Tier 1 leverage | $ | 338.9 | | | 12.9 | % | | 4.0 | % |
| Risk-weighted assets | $ | 1,617.9 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 2,626.3 | | | N/A | | N/A |
N/A – Not applicable
a Tier 1 leverage ratio of 4.0%. Additionally, a Capital Conservation Buffer (CCB) of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases, and certain discretionary bonus payments. In addition to these guidelines, the banking regulators may require a banking organization to maintain capital at levels higher than the minimum ratios prescribed under the U.S. Basel III capital framework. In this regard, and unless otherwise directed by the FRB and the OCC, we have made commitments for the Company and theLC Bank (for a minimum of three years following its formation)(until February 2024) to maintain a CET1 risk-based capital ratio of 11%11.0%, a Tier 1 risk-based capital ratio above 11%11.0%, a total risk-based capital ratio above 13%13.0%, and a Tier 1 leverage ratio of 11%11.0%. For further information on the U.S. Basel III framework, seeSee “Part I – Item 1. Business – Regulation and Supervision – Regulatory Capital Requirements and Prompt Corrective Action” in our Annual Report.Report and “Notes to Condensed Consolidated Financial Statements– Note 18. Regulatory Requirements” in this Reportfor additional information.
The following table summarizes LC Bank’s regulatory capital amounts and ratios (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LendingClub Bank | March 31, 2022 | | December 31, 2021 | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| Amount | | Ratio | | Amount | | Ratio | |
CET1 capital (1) | $ | 577.6 | | | 16.0 | % | | $ | 523.7 | | | 16.7 | % | | 7.0 | % |
| Tier 1 capital | $ | 577.6 | | | 16.0 | % | | $ | 523.7 | | | 16.7 | % | | 8.5 | % |
| Total capital | $ | 623.8 | | | 17.3 | % | | $ | 563.7 | | | 18.0 | % | | 10.5 | % |
| Tier 1 leverage | $ | 577.6 | | | 13.2 | % | | $ | 523.7 | | | 14.3 | % | | 4.0 | % |
| Risk-weighted assets | $ | 3,606.6 | | | N/A | | $ | 3,130.4 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 4,379.8 | | | N/A | | $ | 3,667.7 | | | N/A | | N/A |
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
The following table presents the regulatory capital and ratios of the Company (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | | Required Minimum plus Required CCB for Non-Leverage Ratios |
| LendingClub | Amount | | Ratio | | Amount | | Ratio | |
CET1 capital (1) | $ | 756.0 | | | 20.6 | % | | $ | 710.0 | | | 21.3 | % | | 7.0 | % |
| Tier 1 capital | $ | 756.0 | | | 20.6 | % | | $ | 710.0 | | | 21.3 | % | | 8.5 | % |
| Total capital | $ | 818.7 | | | 22.3 | % | | $ | 767.9 | | | 23.0 | % | | 10.5 | % |
| Tier 1 leverage | $ | 756.0 | | | 15.6 | % | | $ | 710.0 | | | 16.5 | % | | 4.0 | % |
| Risk-weighted assets | $ | 3,668.1 | | | N/A | | $ | 3,333.2 | | | N/A | | N/A |
| Quarterly adjusted average assets | $ | 4,859.8 | | | N/A | | $ | 4,301.7 | | | N/A | | N/A |
N/A – Not applicable
(1) Consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including the addition of the CECL transitional benefit and deductions for goodwill and other intangible assets.
The higher risk-based capital ratios for the Company reflect generally lower risk-weights for assets held by LendingClub Corporation as compared with LC Bank.
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)
In response to the COVID-19 pandemic, the FRB, OCC, and FDIC jointly issuedadopted a final rule related to the regulatory capital treatment of the allowance for credit losses under CECL. ThisAs permitted by the rule, allows banking organizations to electthe Company elected to delay the estimated impact of CECL on regulatory capital, through 2021, followed byresulting in a CET1 capital benefit of $35.5 million at December 31, 2021. This benefit is phased out over a three-year phase-intransition period that commenced on January 1, 2022 at a rate of 25% each year through January 1, 2025. Accordingly, the aggregate effect. The Company has elected this relief. Atcapital benefit included in CET1 capital was reduced to $26.7 million at March 31, 2021, $6.1 million of this capital benefit was applied to the computation of CET1 capital.2022.
Liquidity
Liquidity is defined as the Company’s abilityWe manage liquidity to meet its fundingour cash flow and collateral obligations in a timely manner at a reasonable cost. We must maintain operating liquidity to meet our expected daily and forecasted cash flow requirements, as well as contingent liquidity to meet unexpected funding requirements.
As our primary business at theLC Bank involves taking deposits and making loans, a key role of liquidity management is to ensure that customers have timely access to funds from deposits and for loans. Liquidity management also involves maintaining sufficient liquidity to repay wholesale borrowings, pay operating expenses and support extraordinary funding requirements when necessary.
LendingClub Bank Liquidity
In the ordinary course of business, the liquidity of the Bank is managed by matching sources and uses of cash. The primary sources of LC Bank short-term liquidity include cash;cash, unencumbered available-for-saleAFS debt securities;securities, and unused borrowing capacity with the Federal Home Loan Bank (FHLB). TheAdditionally, customer deposits provide LC Bank also relies on our stable andwith a significant source of relatively low-cost deposit base to generate liquidity over time.funds. The primary uses of LC Bank liquidity include the funding of loans and securities purchases; withdrawals, maturities and maturities of deposits;the payment of interest on deposits; fundingcompensation and benefits expense; taxes; capital expenditures, including internally developed software, leasehold improvements and computer equipment; and costs associated with the continued development and support of loansour online lending marketplace platform.
Net capital expenditures were $21.6 million, or 7.7% of total net revenue and $4.6 million or 6.3% of total net revenue, for the first quarters of 2022 and 2021, respectively. Capital expenditures in 2022 are expected to be approximately $65 million, primarily related commitments;to costs associated with the continued development and fundingsupport of securities purchases.our online lending marketplace platform, including regulatory compliance costs.
As of March 31, 2022 and December 31, 2021, cash and cash equivalents at theLC Bank were $792.7$1.0 billion and $659.9 million, respectively, reflecting the continued growth in LC Bank deposits during the first quarter of 2022. Outstanding PPPLF borrowings were $193.4 million and deposits were $2.4 billion. The$271.9 million at March 31, 2022 and December 31, 2021, respectively, and are collateralized by PPP loans originated by the Company. In addition, LC Bank hadhas available Federal Home Loan Bank of Des Moines secured borrowing capacity totaling $299.6 million and $173.4 million at March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, LC Bank also has secured borrowing capacity available under the FRB Discount Window totaling $340.3 million. The Bank
LENDINGCLUB CORPORATION
Management’s Discussion$105.0 million and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
also had $2.8$75.2 million, of outstanding advances with the Federal Home Loan Bank of Boston (FHLBB) and available FHLBB borrowing capacity totaling $115.5 million. As of March 31, 2021 the Bank had $19.4 million of available for sale debt securities that are not pledged as collateral for loans and, therefore, can be used as an additional source of liquidity.respectively.
LendingClub Holding Company Liquidity
The primary source of liquidity at the holding company is $76.0$119.7 million and $88.3 million in cash and cash equivalents as of March 31, 2021.2022 and December 31, 2021, respectively. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
Uses of cash at the holding company include the routine cash flow requirements as a bank holding company, such as interest and expenses;expenses (including those associated with our office leases), the needs of subsidiariesLC Bank for additional
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)
equity and, as required, its need for debt financing;financing and the support for extraordinary funding requirements when necessary.
Factors Impacting Liquidity
The Company’s liquidity could be adversely impacted by deteriorating financial and market conditions, the inability or unwillingness of a creditor to provide funding, an idiosyncratic event (e.g., a major loss, causing a perceived or actual deterioration in its financial condition), an adverse systemic event (e.g., default or bankruptcy of a significant capital markets participant), or others.
We believe, based on our projections, that our cash on hand, AFS securities, available for sale, available funds, and cash flow from operations is sufficient to meet our liquidity needs for the next twelve months, as well as beyond the next twelve months. See “Item 1. Financial Statements and Supplementary Data – Condensed Consolidated Statements of Cash Flows” for additional detail regarding our cash flows.
Market Risk
Market risk represents the risk of potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices. The primary market risk to which we are exposed is interest rate risk. Interest rate risk arises from financial instruments including loans, securities and borrowings, all entered into for purposes other than trading.
Our net interest income is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, and the level and composition of deposits and liabilities.
Interest Rate Sensitivity
LendingClub Bank
In prior periods, we measured interest rate sensitivity as the change in fair value of certain assets and liabilities due to a hypothetical change in interest rates. However, the acquisition of Radius and thereby becoming a bank holding company and operating as a bank has significantly changed our interest rate risk profile. Loans held for investmentHFI at LendingClubLC Bank are funded primarily through the Radiusour deposit base, and the majority of loans on theLC Bank’s balance sheet, at any point in time, are retained in the held-for-investmentHFI portfolio and accounted for at amortized cost. As a result, the primary component of interest rate risk on our financial instruments at theLC Bank level arises from the impact of fluctuations in loan and deposit rates on our net interest income. Therefore, we measure this sensitivity by assessing the impact of hypothetical changes in interest rates on our net interest income results.
The following table presents the change in projected net interest income for the next twelve months due to a hypothetical instantaneous parallel change in interest rates relative to current rates as of March 31, 2022:
| | | | | | | |
| |
| | | |
| 200 basis point increase | (0.4) | % | | |
| 100 basis point decrease | (0.3) | % | | |
The impact of these hypothetical interest rate changes are not significant to LC Bank’s net interest income. Non-maturity deposit rates at March 31, 2022 are below the 100 basis point hypothetical interest rate reduction which results in an insignificant negative impact to net interest income.
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following table presents the change in projected net interest income for the next twelve months due to a hypothetical instantaneous parallel change in interest rates relative to current rates as of March 31, 2021:
| | | | | | | |
| |
| March 31, 2021 | | |
200 basis point increase | 13.3 | % | | |
100 basis point decrease | (1.7) | % | | |
As the above table illustrates, our balance sheet is asset-sensitive; net interest income would benefit from an increase in interest rates, while a decline in interest rates would result in a decrease in net interest income.
The following table presents the maturities of loans and leases held for investmentHFI as of March 31, 2021:2022:
| | | Due in
1 Year or Less | | Due After
1 Year Through
5 Years | | Due After
5 Years
Through
15 Years | | March 31, 2021 | | | Due in
1 Year or Less | | Due After
1 Year Through
5 Years | | Due After
5 Years
Through
15 Years | | March 31, 2022 | |
| Unsecured personal | Unsecured personal | $ | — | | | $ | 321,104 | | | $ | — | | | $ | 321,104 | | | Unsecured personal | $ | — | | | $ | 2,335,146 | | | $ | 23,646 | | | $ | 2,358,792 | | |
| Residential mortgages | Residential mortgages | 1,277 | | | 2,443 | | | 160,282 | | | 164,002 | | | Residential mortgages | 1,574 | | | 743 | | | 166,800 | | | 169,117 | | |
| Secured consumer | Secured consumer | 2,585 | | | 1,142 | | | 383,517 | | | 387,244 | | | Secured consumer | 12 | | | 45,471 | | | 48,117 | | | 93,600 | | |
| Other consumer | 34 | | | — | | | — | | | 34 | | | |
| | Total consumer loans held for investment | Total consumer loans held for investment | 3,896 | | | 324,689 | | | 543,799 | | | 872,384 | | | Total consumer loans held for investment | 1,586 | | | 2,381,360 | | | 238,563 | | | 2,621,509 | | |
| Equipment finance | Equipment finance | 6,864 | | | 107,891 | | | 31,130 | | | 145,885 | | | Equipment finance | 11,355 | | | 105,983 | | | 26,442 | | | 143,780 | | |
| Commercial real estate | Commercial real estate | 21,755 | | | 77,092 | | | 203,598 | | | 302,445 | | | Commercial real estate | 18,812 | | | 70,844 | | | 224,054 | | | 313,710 | | |
| Commercial and industrial | Commercial and industrial | 3,754 | | | 708,371 | | | 82,593 | | | 794,718 | | | Commercial and industrial | 19,589 | | | 199,103 | | | 124,605 | | | 343,297 | | |
| Total commercial loans and leases held for investment | Total commercial loans and leases held for investment | 32,373 | | | 893,354 | | | 317,321 | | | 1,243,048 | | | Total commercial loans and leases held for investment | 49,756 | | | 375,930 | | | 375,101 | | | 800,787 | | |
| Total loans and leases held for investment | Total loans and leases held for investment | $ | 36,269 | | | $ | 1,218,043 | | | $ | 861,120 | | | $ | 2,115,432 | | | Total loans and leases held for investment | $ | 51,342 | | | $ | 2,757,290 | | | $ | 613,664 | | | $ | 3,422,296 | | |
| Loans and leases due after one year at fixed interest rates | Loans and leases due after one year at fixed interest rates | $ | — | | | $ | 1,161,516 | | | $ | 452,959 | | | $ | 1,614,475 | | | Loans and leases due after one year at fixed interest rates | | $ | 2,701,715 | | | $ | 256,786 | | | $ | 2,958,501 | | |
| Loans and leases due after one year at variable interest rates | Loans and leases due after one year at variable interest rates | $ | — | | | $ | 56,527 | | | $ | 408,161 | | | $ | 464,688 | | | Loans and leases due after one year at variable interest rates | | $ | 55,575 | | | $ | 356,878 | | | $ | 412,453 | | |
For the weighted-average yields on the Company’sour AFS securities available for sale portfolio, see “Notes to Condensed Consolidated Financial Statements – Note 5.4. Securities Available for Sale.”
LendingClub Holding Company
At the holding company level, we continue to measure interest rate sensitivity by evaluating the change in fair value of certain assets and liabilities due to a hypothetical change in interest rates. Our legacy loan portfolio heldPrincipal payments on our loans HFI at fair value will decline over time,continue to reduce the outstanding balance of this portfolio, and, as a result, the impact of interest rate changes on the fair value of the legacy portfolio will continueimpact from changes in interest rates continues to diminish as the portfolio runs off. For additional detail regarding interest rate sensitivity on our legacy loan portfolio as well as our securities available for sale, servicing asset, and credit facilities and securities sold under repurchase agreements, see “Part II –Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report.
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)
Off-Balance Sheet Arrangements
In the ordinary course of business, we engage in activities that are not reflected on our Condensed Consolidated Balance Sheets, generally referred to as off-balance sheet arrangements.
With the acquisition of Radius, the Company assumed off-balance sheet arrangements which include commitments to make loans and commercial letters of credit, and unused lines of credit. As of March 31, 2021, unfunded loan commitments at their contractual amounts were as follows:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 |
| Fixed | | Variable | | Total |
| Commitments to extend credit | $ | — | | | $ | 57,853 | | | $ | 57,853 | |
| Lines of credit | $ | 3,338 | | | $ | 37,129 | | | $ | 40,467 | |
In addition, at both March 31, 2021 and December 31, 2020, the Company had a total of $5.5 million in standby letters of credit 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.
Off-balance sheet arrangements also include the Company’s Structured Program transactions with unconsolidated variable interest entities including Company-sponsored securitizations and Certificate Program transactions. The Company retains at least 5% of securities and residual interests from these transactions and enters into a servicing arrangement with the unconsolidated variable interest entity. We are exposed to market risk in the securitization market. We provide additional information regarding transactions with unconsolidated variable interest entities in “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 7. Securitizations and Variable Interest Entities.”diminish.
Contingencies
For a comprehensive discussion of contingencies as of March 31, 2021,2022, see “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 18.17. Commitments and ContingenciesContingencies.”
LENDINGCLUB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Supplemental Financial Information
The following table is provided to delineate between the assets and liabilities belonging to our member payment dependent self-directed retail program (Retail Program) note holders and certain VIEs that we are required to consolidate in accordance with GAAP. Such assets are not legally ours and the associated liabilities are payable only from the cash flows generated by those assets (i.e. Pass-throughs). As such, these debt holders do not have a secured interest in any other assets of LendingClub. We believe this is a useful measure because it illustrates the overall financial stability and operating leverage of the Company. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Retail Program (1) | Consolidated VIEs (2)(4) | All Other LendingClub (3) | Condensed Consolidated Balance Sheet | | Retail Program (1) | Consolidated VIEs (2)(4) | All Other LendingClub (3) | Condensed Consolidated Balance Sheet |
| Assets | | | | | | | | | |
| Total cash and cash equivalents | $ | — | | $ | — | | $ | 831,800 | | $ | 831,800 | | | $ | — | | $ | — | | $ | 524,963 | | $ | 524,963 | |
| Restricted cash | — | | 15,229 | | 123,851 | | 139,080 | | | — | | 13,473 | | 90,049 | | 103,522 | |
| Securities available for sale at fair value | — | | — | | 274,419 | | 274,419 | | | — | | — | | 142,226 | | 142,226 | |
Loans held for sale at fair value (4) | — | | 79,281 | | 87,342 | | 166,623 | | | — | | 92,802 | | 29,100 | | 121,902 | |
| Loans and leases held for investment, net | — | | — | | 2,079,300 | | 2,079,300 | | | — | | — | | — | | — | |
| Retail and certificate loans held for investment at fair value | 470,880 | | 36,277 | | — | | 507,157 | | | 584,066 | | 52,620 | | — | | 636,686 | |
Other loans held for investment at fair value (4) | — | | 38,680 | | 3,805 | | 42,485 | | | — | | 46,120 | | 3,834 | | 49,954 | |
| Property, equipment and software, net | — | | — | | 95,313 | | 95,313 | | | — | | — | | 96,641 | | 96,641 | |
| Goodwill | — | | — | | 75,717 | | 75,717 | | | — | | — | | — | | — | |
Other assets | 2,879 | | 828 | | 275,488 | | 279,195 | | | 3,797 | | 1,134 | | 182,468 | | 187,399 | |
| Total assets | $ | 473,759 | | $ | 170,295 | | $ | 3,847,035 | | $ | 4,491,089 | | | $ | 587,863 | | $ | 206,149 | | $ | 1,069,281 | | $ | 1,863,293 | |
| Liabilities and Equity | | | | | | | | | |
| Total deposits | $ | — | | $ | — | | $ | 2,373,437 | | $ | 2,373,437 | | | $ | — | | $ | — | | $ | — | | $ | — | |
| Short-term borrowings | — | | — | | 90,091 | | 90,091 | | | — | | — | | 104,989 | | 104,989 | |
| Advances from PPPLF | — | | — | | 370,086 | | 370,086 | | | — | | — | | — | | — | |
| Retail notes, certificates and secured borrowings at fair value | 470,880 | | 36,277 | | 46 | | 507,203 | | | 584,066 | | 52,620 | | 88 | | 636,774 | |
Payable on Structured Program borrowings (4) | — | | 133,499 | | — | | 133,499 | | | — | | 152,808 | | — | | 152,808 | |
| Other long-term debt | — | | — | | 18,572 | | 18,572 | | | — | | — | | — | | — | |
| Other liabilities | 2,879 | | 519 | | 261,668 | | 265,066 | | | 3,797 | | 721 | | 240,033 | | 244,551 | |
| Total liabilities | 473,759 | | 170,295 | | 3,113,900 | | 3,757,954 | | | 587,863 | | 206,149 | | 345,110 | | 1,139,122 | |
| Total equity | — | | — | | 733,135 | | 733,135 | | | — | | — | | 724,171 | | 724,171 | |
| Total liabilities and equity | $ | 473,759 | | $ | 170,295 | | $ | 3,847,035 | | $ | 4,491,089 | | | $ | 587,863 | | $ | 206,149 | | $ | 1,069,281 | | $ | 1,863,293 | |
(1)Represents loans held for investment at fair value that are funded directly by our Retail Program notes. The liabilities are only payable from the cash flows generated by the associated assets. We do not assume principal or interest rate risk on loans facilitated through our lending marketplace that are funded by our Retail Program because loan balances, interest rates and maturities are matched and offset by an equal balance of notes with the exact same interest rates and maturities. We do not retain any economic interests from our Retail Program. Interest expense on Retail Program notes of $18.4 million and $28.9 million was equally matched and offset by interest income from the related loans of $18.4 million and $28.9 million for the first quarters of 2021 and 2020, respectively, resulting in no net effect on our net interest income.
(2) Represents assets and equal and offsetting liabilities of certain VIEs that we are required to consolidate 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)
accordance with GAAP, but which are not legally ours. The liabilities are only payable from the cash flows generated by the associated assets. The creditors of the VIEs have no recourse to the general credit of the Company. Interest expense on these liabilities owned by third parties of $5.1 million and $10.5 million was equally matched and offset by interest income on the loans of $5.1 million and $10.5 million for the first quarters of 2021 and 2020, respectively, resulting in no net effect on our net interest income. Economic interests held by LendingClub, including retained interests, residuals and equity of the VIEs, are reflected in “Loans held for sale at fair value,” “Other loans held for investment at fair value” and “Restricted cash,” respectively, within the “All Other LendingClub” column.
(3) Represents all other assets and liabilities of LendingClub, other than those related to our Retail Program and certain consolidated VIEs, but includes any economic interests held by LendingClub, including retained interests, residuals and equity of those consolidated VIEs.
(4) The Company has sponsored Structured Program transactions that have been consolidated, resulting in an increase to “Other loans held for investment at fair value,” “Loans held for sale at fair value” and the related “Payable on Structured Program borrowings.” See “Notes to Condensed Consolidated Financial Statements – Note 13. Short-term Borrowings and Long-term Debt” for additional information.
Critical Accounting Estimates
Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report. There have been no significant changes to these critical accounting estimates during the first quarter of 2021, except as noted below.
Allowance for Expected Credit Losses
We reserve for expected credit losses on our loan and lease portfolio through the allowance for loan and lease losses (ALLL) and for expected credit losses in our unfunded lending commitments through other liabilities. Collectively, the ALLL and reserves for expected credit losses in unfunded lending commitments are referred to as the allowance for credit losses (ACL). Changes in the ACL are reflected in net income through provision for credit losses. Changes in the credit risk profile of our loans and leases result in changes in provision expense with a resulting change, net of charge-offs and recoveries, in the ACL balance.
The ACL represents our best estimate of expected lifetime credit losses over the contractual life of the loan and lease portfolios and on the unfunded lending commitments. Our determination of the ACL is based on periodic evaluation of the loan and lease portfolios and unfunded lending commitments that are not unconditionally cancellable considering a number of relevant underlying factors, including key assumptions and evaluation of quantitative and qualitative information. Estimates of expected future loan and lease losses are determined by using statistical models and management’s judgement. The models are designed to forecast probability of default, exposure at default and loss given default by correlating certain macroeconomic forecast data to historical experience. The models are generally applied at the portfolio level to pools of loans with similar risk characteristics. The macroeconomic data used in the models is based on forecasted variables for the reasonable and supportable period of two years. Beyond this forecast period the models gradually revert to long-term historical loss conditions over a one year period. Expected losses are estimated through contractual maturity, giving appropriate consideration to expected prepayments unless the borrower has a right to renew that is not cancellable or it is reasonably expected that the loan will be modified as a TDR.
A qualitative allowance which incorporates management’s judgement is also included in the estimation of expected future loan and lease losses, including qualitative adjustments in circumstances where the model output is inconsistent with management’s expectations with respect to expected credit losses. This allowance is used to adjust for limitations in modeled results related to the current economic conditions and capture risks in the portfolio such
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)
as considerations with respect to the impact of current economic events, the outcomes of which are uncertain. These events may include, but are not limited to, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical areas and industries in which the Company conducts business.
Loans and leases that do not share common risk characteristics and significant loans that are considered collateral-dependent are individually evaluated. For these loans, the ALLL is determined through review of data specific to the borrower and related collateral, if any. For TDRs, default expectations and estimated prepayment speeds that are specific to each of the restructured loan populations are incorporated in the determination of the ALLL. The evaluation of quantitative and qualitative information is performed through assessments of groups of assets that share similar risk characteristics and certain individual loans and leases that do not share similar risk characteristics with the collective group. Loans are grouped generally by product type and significant loan portfolios are assessed for credit losses using statistical models. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to change, sometimes materially and rapidly.
The methodology used to determine an estimate for the reserve for unfunded commitments is similar to that used to determine the funded component of the ALLL and is measured over the period there is a contractual obligation to extend credit that is not unconditionally cancellable. The reserve for unfunded commitments is adjusted for factors specific to binding commitments, including the probability of funding and exposure at default. A detailed discussion of the methodology used in determining the ACL is included in “Note 1. Summary of Significant Accounting Policies.”2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a comprehensive discussion regarding quantitative and qualitative disclosures about market risk, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended)Act) as of March 31, 2021. As
permitted by SEC guidance for newly acquired businesses, this evaluation did not include an assessment of those
disclosure controls and procedures that are subsumed by, and did not include an assessment of internal control over
financial reporting as it relates to Radius which was acquired on February 1, 2021.2022. In designing and evaluating its disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, of achieving the desired control objectives, and is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures as of March 31, 2021,2022, were designed and functioned effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities and Exchange Act of 1934, as amended, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
Except as described below, noNo change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)Act) occurred during the first quarter of 2021,2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
As part of our ongoing integration of Radius, we are continuing to incorporate Radius into our enterprise controls and procedures and to augment our enterprise-wide controls to reflect the risks inherent in this acquisition. See “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 2. Business Acquisition” for detail regarding the significance of the acquisition of Radius to the Company’s Condensed Consolidated Financial Statements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a comprehensive discussion of legal proceedings, see “Part I. Financial Information – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 18.17. Commitments and Contingencies – Legal,” which is incorporated herein by reference.
Item 1A. Risk Factors
The risks described in “Part I – Item 1A. Risk Factors” in our Annual Report, could materially and adversely affect our business, financial condition, operating results and prospects, and the trading price of our common stock could 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 remains current in all material respects.respects, with the exception of the below.
Our business operations may be adversely impacted by political events, terrorism, military conflict or acts of war, cyber-attacks, public health issues, natural disasters, severe weather, climate change, infrastructure failure or outages, labor disputes and other business interruptions.
Our business operations are subject to interruption by, among other things, political events, terrorism, military conflict or acts of war (including the war in Ukraine), cyber-attacks, public health issues, natural disasters, severe weather, climate change, infrastructure failure or outages, labor disputes and other events which could: (i) decrease demand for our products and services, (ii) adversely affect the macroeconomy and/or our customers, or (iii) make it difficult or impossible for us to deliver a satisfactory experience to our customers. Any such events could also affect the Company by impacting the stability of our deposit base, impairing the ability of our borrowers to repay their outstanding loans, causing significant property damage or otherwise impair the value of collateral securing our loans, and/or resulting in loss of revenue and/or cause us to incur additional expenses. Furthermore, in the event of any disruption to our operations or those of the companies with whom we do business with, we could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume or maintain operations, any of which could have a material adverse impact on our business, financial condition and results of operations.
For example, the Ukrainian-Russian conflict, the responses thereto (such as sanctions imposed by the United States and other countries) and any expansion thereof is likely to have unpredictable and/or adverse effects on the domestic and global economy and financial markets. Although we have not yet experienced any material direct impact from the Ukrainian-Russian conflict, in part because our business is conducted exclusively in the United States, our business, financial condition or results of operations may be impacted if the conflict prolongs and/or its impact exacerbates. Further, the Ukrainian-Russian conflict and its impact may also have the effect of heightening many of the other risks described in “Item 1A. Risk Factors” and elsewhere in our Annual Report, such as escalating inflation, elevating the possibility of a decline in economic conditions and increasing cybersecurity risk.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The table below summarizes purchases made by or on behalf of LendingClub of its common stock for each calendar month in the first quarter of 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Month | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program |
| January 1 - January 31 | | — | | | $ | — | | | — | | | $ | — | |
| February 1 - February 28 | | — | | | $ | — | | | — | | | $ | — | |
March 1 - March 31 (1) | | 4,251 | | | $ | 21.72 | | | — | | | $ | — | |
| Total | | 4,251 | | | $ | 21.72 | | | — | | | $ | — | |
(1) Represents shares that were transferred to the Company to satisfy payment of all or a portion of the exercise price in connection with the exercise of stock options.None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.Not applicable.
Item 5. Other Information
None.
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 |
| | | | | | |
| | | | | | |
| | | | | | |
101.INS | XBRL Instance Document‡ | | | | | X |
101.SCH | XBRL Taxonomy Extension Schema Document | | | | | X |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | | | | | X |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | | | | | X |
101.LAB | XBRL Taxonomy Extension Label Linkbase | | | | | X |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | | | | | X |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Incorporated by Reference | |
Exhibit
Number | Exhibit Description | Form | File No. | Exhibit | Filing
Date | Filed Herewith |
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| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| 101.INS | XBRL Instance Document‡ | | | | | X |
| 101.SCH | XBRL Taxonomy Extension Schema Document | | | | | X |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | | | | | X |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | | | | | X |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | | | | | X |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | | | | | X |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | |
‡ The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | | | | | | | |
| | | | |
| | | LENDINGCLUB CORPORATION |
| | | (Registrant) | |
| | | | |
| Date: | May 7, 20214, 2022 | | /s/ SCOTT SANBORN | |
| | | Scott Sanborn |
| | | Chief Executive Officer |
| | | | |
| Date: | May 7, 20214, 2022 | | /s/ THOMAS W. CASEY | |
| | | Thomas W. Casey |
| | | Chief Financial Officer |