Document
false0001409970 0001409970 2020-05-05 2020-05-05


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2020
LendingClub Corporation
(Exact name of registrant as specified in its charter)
 
Commission File Number: 001-36771
 
 
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
Former name or former address, if changed since last report: N/A
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.
☐
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





Item 2.02
 
Results of Operations and Financial Condition

On May 5, 2020, LendingClub Corporation (“LendingClub”) issued a press release (the “Earnings Press Release”) regarding its financial results for the quarter ended March 31, 2020. A copy of the Earnings Press Release is attached as Exhibit 99.1 to this Form 8-K and is incorporated by reference herein.

The information set forth in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.

LendingClub includes non-GAAP financial measures in the Earnings Press Release. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the Earnings Press Release.

Item 8.01
 
Other Events

LendingClub expects to publish a blog post on May 5, 2020, entitled “Q1 2020 Quarterly Platform Update” (the “Blog Post”). A copy of the Blog Post is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 9.01
 
Financial Statements and Exhibits
(d)
 
Exhibits

Exhibit
Number
 
Exhibit Title or Description
 
 
104
 
Cover Page Interactive Data File (Cover page XBRL tags are embedded within the Inline XBRL document)





SIGNATURE(S)

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 hereunto duly authorized.

 
 
LendingClub Corporation
Date:
May 5, 2020
By:
/s/ Thomas W. Casey
 
 
 
Thomas W. Casey
 
 
 
Chief Financial Officer
 
 
 
(duly authorized officer)



lendingclublogonew.jpgEXHIBIT 99.1    


LendingClub Reports First Quarter 2020 Results
Company takes decisive action in response to business impacts of COVID-19, positioning itself to support borrowers, protect investor returns and navigate a range of economic scenarios

SAN FRANCISCO – May 5, 2020 – LendingClub Corporation (NYSE: LC), America’s largest online lending marketplace connecting borrowers and investors, today announced financial results for the first quarter ended March 31, 2020.
“The unprecedented scale and speed at which the COVID-19 lockdown has impacted the economy has created an enormous amount of suffering for millions of Americans, disrupted business activity, and resulted in a severe contraction in market liquidity. The deteriorating environment clearly has an impact on our outlook as we significantly reduce originations to allow platform investors time to assess and address issues pertaining to their capital, their liquidity and the expected performance across their portfolios.” said Scott Sanborn, CEO of LendingClub. “We have moved quickly and taken deliberate actions to keep our employees safe, protect investor returns, support our members, and preserve our liquidity. We believe that our actions, together with the steps we took to improve efficiency ahead of the downturn, have positioned LendingClub to successfully navigate the current challenges and to recover quickly when the economy stabilizes.”

We are navigating the business through this challenging environment by following five key guiding principles.
•
Keep our employees safe – LendingClub rapidly and proactively implemented a work from home program, including crisis pay so that employees in need were able to take paid time off to care for themselves and/or their families.

•
Protect investor returns – Until unemployment stabilizes and liquidity returns, the company significantly tightened credit and underwriting standards and raised rates. The company also successfully executed its contingency plan and significantly increased its collections and servicing capacity and maintained service levels.

•
Support our members – New originations are weighted towards existing members with positive payment histories. For borrowers experiencing hardship, LendingClub launched a two-month payment deferral plan (Skip-a-Pay). As of April 30, 2020, approximately 11% of LendingClub’s outstanding personal loans have been enrolled in Skip-a-Pay and the company is rolling out additional graduation and hardship programs for customers.

•
Preserve liquidity – At the end of the first quarter, the company had strong liquidity, including $602 million in Net Cash and Other Financial Assets. As a result of recent actions to reduce costs, the company lowered its quarterly expense run rate by approximately $70 million compared to the fourth quarter of 2019. LendingClub also performed stress testing of its cash flows in a variety of scenarios and believes that it has sufficient liquidity through the end of 2021.

•
Stay on track for the acquisition of Radius – Completing the acquisition remains an important strategic priority and the company remains in close contact with regulators to accomplish this objective.

Q1 results reflected a significant fair value adjustment driven by COVID-19.
GAAP Consolidated Net Loss for the quarter of $(48.1) million primarily reflected a fair value mark of $(101.7) million, of which approximately $(64) million was attributable to a COVID-19 related revaluation of loans held for sale by the company at fair value and securities available for sale. In addition to the impact of the fair value mark, the net loss per share on a GAAP basis also reflected a previously announced, non-recurring $50.2 million deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of convertible, non-voting, LendingClub Series A preferred stock.
•
Loan originations of $2.5 billion, down 8% year-over-year.
•
Net Revenue of $120.2 million, down 31% year-over-year.
•
GAAP Consolidated Net Loss of $(48.1) million ($(1.10) per share attributable to common stockholders), compared to a loss of $(19.9) million ($(0.23) per share attributable to common stockholders) in the first quarter of 2019.
•
Adjusted EBITDA of $(7.8) million, down 135% year-over-year.
•
Adjusted EBITDA Margin of (6.5)%, down 19.5 percentage points year-over-year.
•
Adjusted Net Loss of $(39.2) million ($(0.44) adjusted net loss per share), compared to an Adjusted Net Loss of $(11.5) million ($(0.13) adjusted net loss per share) in the first quarter of 2019.

1

First Quarter 2020 Financial Highlights
Commenting on financial results, Tom Casey, CFO of LendingClub, said “The operating environment was challenging in the first quarter. COVID-19’s effect on the economy resulted in a decline in origination volumes in March and a significant fair value mark, both of which impacted our earnings materially. We have taken decisive action to significantly reduce our exposure to loans held for sale, reduced our expenses by a quarterly run rate of approximately $70 million, and have sufficient liquidity to manage through a variety of stress scenarios.”
 
Three Months Ended  
 March 31,
($ in millions)
2020
 
2019
Loan Originations
$
2,521.5

 
$
2,727.8

Net Revenue
$
120.2

 
$
174.4

GAAP Consolidated Net Loss
$
(48.1
)
 
$
(19.9
)
Adjusted EBITDA
$
(7.8
)
 
$
22.6

Adjusted Net Loss
$
(39.2
)
 
$
(11.5
)
Loan Originations – Loan originations in the first quarter of 2020 were $2.5 billion, down 8% compared to the same quarter last year.
Net Revenue – Net Revenue in the first quarter of 2020 was $120.2 million, down 31% compared to the same quarter last year.
GAAP Consolidated Net Loss – GAAP Consolidated Net Loss was $(48.1) million for the first quarter of 2020, compared to $(19.9) million in the same quarter last year.
Adjusted EBITDA – Adjusted EBITDA was $(7.8) million in the first quarter of 2020, compared to $22.6 million in the same quarter last year.
Adjusted Net Loss – Adjusted Net Loss was $(39.2) million in the first quarter of 2020, compared to $(11.5) million in the same quarter last year.
Contribution – Contribution was $51.9 million in the first quarter of 2020, compared to $85.7 million in the same quarter last year, with Contribution Margin of 43.2% compared to 49.1% in same quarter last year.
Earnings Per Share (EPS) – Basic and diluted EPS attributable to common stockholders was $(1.10) in the first quarter of 2020, compared to basic and diluted EPS attributable to common stockholders of $(0.23) in the same quarter last year. In the first quarter of 2020, basic and diluted EPS reflected a $50.2 million deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of mandatorily convertible, non-voting, LendingClub Series A preferred stock.
Adjusted EPS – Adjusted EPS was $(0.44) in the first quarter of 2020, compared to an Adjusted EPS of $(0.13) in the same quarter last year.
Net Cash and Other Financial Assets – As of March 31, 2020, Net Cash and Other Financial Assets totaled $602.2 million compared to $679.7 million as of March 31, 2019.

For a calculation of Adjusted EBITDA, Adjusted Net Income (Loss), Contribution, Adjusted EPS and Net Cash and Other Financial Assets, refer to the “Reconciliation of GAAP to Non-GAAP Measures” tables at the end of this release.

2

About LendingClub

LendingClub was founded to transform the banking system to make credit more affordable and investing more rewarding. Today, LendingClub’s online credit marketplace connects borrowers and investors to deliver more efficient and affordable access to credit. Through its technology platform, LendingClub is able to create cost efficiencies and passes those savings onto borrowers in the form of lower rates and to investors in the form of risk-adjusted returns. LendingClub is based in San Francisco, California. All loans are made by federally regulated issuing bank partners. More information is available at https://www.lendingclub.com.

Conference Call and Webcast Information

The LendingClub first quarter 2020 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, May 5, 2020. A live webcast of the call will be available at http://ir.lendingclub.com under the Filings & Financials menu in Quarterly Results. To access the call, please dial +1 (888) 317-6003, or outside the U.S. +1 (412) 317-6061, with conference ID 2753920, ten minutes prior to 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time). An audio archive of the call will be available at http://ir.lendingclub.com. An audio replay will also be available 1 hour after the end of the call until May 12, 2020, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 1014914. LendingClub has used, and intends to use, its investor relations website, blog (http://blog.lendingclub.com), Twitter handle (@LendingClub) and Facebook page (https://www.facebook.com/LendingClubTeam) as a means of disclosing material non-public information and to comply with its disclosure obligations under Regulation FD.

Contacts

For Investors:
[email protected]

Media Contact:
[email protected]

3

Non-GAAP Financial Measures and Supplemental Financial Statement Information

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Contribution, Contribution Margin, Adjusted Net Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Earnings (Loss) Per Share (Adjusted EPS) and Net Cash and Other Financial Assets. Our non-GAAP measures do have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP.

We believe these non-GAAP measures provide management and investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures.

In particular, we believe Contribution and Contribution Margin are useful measures of overall direct product profitability because the measures illustrate the relationship between costs most directly associated with revenue generating activities and the related revenue, and the effectiveness of the direct costs in obtaining revenue. Contribution is calculated as net revenue less “Sales and marketing” and “Origination and servicing” expenses on the Company’s Statements of Operations, adjusted to exclude cost structure simplification and non-cash stock-based compensation expenses within these captions and income or loss attributable to noncontrolling interests. The adjustment for cost structure simplification expense relates to a review of our cost structure and a number of expense initiatives underway, including the establishment of a site in the Salt Lake City area. The expense includes incremental and excess personnel-related expenses associated with establishing our Salt Lake City area site and external advisory fees. Contribution Margin is a non-GAAP financial measure calculated by dividing Contribution by total net revenue.

We believe Adjusted Net Income (Loss) is an important measure because it directly reflects the financial performance of our business. Adjusted Net Income (Loss) adjusts for certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) expenses related to our cost structure simplification, as discussed above, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) acquisition and related expenses and (5) other items (including certain non-legacy litigation and/or regulatory settlement expenses, gains on disposal of certain assets and expenses resulting from the COVID-19 pandemic), net of tax. Legacy items are generally those expenses that arose from the decisions of legacy management prior to the board review initiated in 2016 and resulted in the resignation of our former CEO, including legal and other costs associated with ongoing regulatory and government investigations, indemnification obligations, litigation, and termination of certain legacy contracts. In the fourth quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) for “Acquisition and related expenses” to adjust for costs related to the acquisition of Radius. In the second quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) and Adjusted EBITDA for Other items to adjust for expenses or gains that are not part of our core operating results.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin are important measures of operating performance because they allow for the comparison of our core operating results, including our return on capital and operating efficiencies, from period to period. Adjusted EBITDA adjusts for certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) cost structure simplification expense, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) acquisition and related expenses, (5) other items, as discussed above, (6) depreciation, impairment and amortization expense, (7) stock-based compensation expense and (8) income tax expense (benefit). Additionally, we utilize Adjusted EBITDA as an input into the Company’s calculation of the annual bonus plan. Adjusted EBITDA Margin is a non-GAAP financial measure calculated by dividing Adjusted EBITDA by total net revenue.

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

We believe Net Cash and Other Financial Assets is a useful measure because it illustrates the overall financial stability and operating leverage of the Company. This measure is calculated as cash and certain other assets and liabilities,

4

including loans and securities available for sale, which are partially secured and offset by related credit facilities, and working capital.

There are a number of limitations related to the use of these non-GAAP financial measures versus their most comparable GAAP measure. In particular, many of the adjustments to derive the non-GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future. Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.

For more information on our non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measure, please see the “Reconciliation of GAAP to Non-GAAP Measures” tables at the end of this release.

Safe Harbor Statement

Some of the statements above, including statements regarding cost savings and other financial or other benefits of the acquisition of Radius, the ability and timing to satisfy the closing conditions for the Radius acquisition (including obtaining regulatory approval), our ability to effectuate and the effectiveness of certain strategy initiatives, borrower and investor demand, anticipated future financial results, the impact of the coronavirus, our ability to navigate the current economic environment, and the impact of a bank charter on our business are “forward-looking statements.” The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “predict,” “project,” “will,” “would” and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include: the outcomes of pending governmental investigations and pending or threatened litigation, which are inherently uncertain; the impact of management changes and the ability to continue to retain key personnel; our ability to achieve cost savings from restructurings; our ability to continue to attract and retain new and existing borrowers and investors; our ability to obtain or add bank functionality and a bank charter; competition; overall economic conditions; demand for the types of loans facilitated by us; default rates and those factors set forth in the section titled “Risk Factors” in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K, each as filed with the Securities and Exchange Commission, as well as our subsequent reports on Form 10-Q and 10-K each as filed with the Securities and Exchange Commission. 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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Information in this press release is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

*****


5




LENDINGCLUB CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
 
Three Months Ended  
 March 31,
 
2020
 
2019
Net revenue:
 
 
 
 
 
 
 
Transaction fees
$
136,243

 
$
135,397

 
 
 
 
Interest income
69,411

 
100,172

Interest expense
(44,241
)
 
(75,360
)
Net fair value adjustments
(101,738
)
 
(34,729
)
Net interest income and fair value adjustments
(76,568
)
 
(9,917
)
Investor fees
41,759

 
31,731

Gain on sales of loans
14,261

 
15,152

Net investor revenue
(20,548
)
 
36,966

 
 
 
 
Other revenue
4,511

 
2,055

 
 
 
 
Total net revenue
120,206

 
174,418

Operating expenses: (1)
 
 
 
Sales and marketing
49,784

 
66,623

Origination and servicing
20,994

 
28,273

Engineering and product development
38,710

 
42,546

Other general and administrative
58,486

 
56,876

Total operating expenses
167,974

 
194,318

Loss before income tax expense
(47,768
)
 
(19,900
)
Income tax expense
319

 
—

Consolidated net loss
(48,087
)
 
(19,900
)
Less: Income attributable to noncontrolling interests
—

 
35

LendingClub net loss
$
(48,087
)
 
$
(19,935
)
Net loss per share attributable to common stockholders:(2)(3)
 
 
 
Basic
$
(1.10
)
 
$
(0.23
)
Diluted
$
(1.10
)
 
$
(0.23
)
Weighted-average common shares – Basic
86,505,560

 
86,108,871

Weighted-average common shares – Diluted
86,505,560

 
86,108,871

 
 
 
 
Net income (loss) per share attributable to preferred stockholders:(2)(3)
 
 
 
Basic
$
18.36

 
$
0.00

Diluted
$
18.36

 
$
0.00

Weighted-average common shares, as converted – Basic
2,579,710

 
—

Weighted-average common shares, as converted – Diluted
2,579,710

 
—


6




(1) 
Includes stock-based compensation expense as follows:
 
Three Months Ended  
 March 31,
 
2020
 
2019
Sales and marketing
$
1,663

 
$
1,571

Origination and servicing
636

 
924

Engineering and product development
4,615

 
5,231

Other general and administrative
11,215

 
10,526

Total stock-based compensation expense
$
18,129

 
$
18,252

(2) 
The following table details the computation of the Company’s basic and diluted net income (loss) per share of common stock and preferred stock (presented on an as-converted basis):
Three Months Ended March 31,
2020
 
2019
 
Common Stock
 
Preferred Stock
 
Common
Stock
Allocation of undistributed LendingClub net loss
$
(45,240
)
 
$
(2,847
)
 
$
(19,935
)
Deemed dividend
(50,204
)
 
50,204

 
—

Net income (loss) attributable to stockholders (4)
$
(95,444
)
 
$
47,357

 
$
(19,935
)
 
 
 
 
 
 
Weighted-average common shares – Basic (3)
86,505,560

 
2,579,710

 
86,108,871

Weighted-average common shares – Diluted (3)
86,505,560

 
2,579,710

 
86,108,871

 
 
 
 
 
 
Net income (loss) per share attributable to stockholders: (3)
 
 
 
 
 
Basic
$
(1.10
)
 
$
18.36

 
$
(0.23
)
Diluted
$
(1.10
)
 
$
18.36

 
$
(0.23
)
(3) 
Share information and balances have been retroactively adjusted, as applicable, to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.
(4) 
Reflects a deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of mandatorily convertible, non-voting, LendingClub Series A preferred stock.


7




LENDINGCLUB CORPORATION
OPERATING HIGHLIGHTS
(In thousands, except percentages and number of employees, or as noted)
(Unaudited)
 
Three Months Ended
 
% Change
 
March 31, 
 2020
 
December 31, 
 2019
 
September 30, 
 2019
 
June 30, 
 2019
 
March 31, 
 2019
 
Y/Y
Operating Highlights:
Loan originations (in millions)
$
2,521

 
$
3,083

 
$
3,350

 
$
3,130

 
$
2,728

 
(8
)%
Net revenue
$
120,206

 
$
188,486

 
$
204,896

 
$
190,807

 
$
174,418

 
(31
)%
Consolidated net income (loss)
$
(48,087
)
 
$
234

 
$
(392
)
 
$
(10,632
)
 
$
(19,900
)
 
(142
)%
Contribution (1)
$
51,902

 
$
101,261

 
$
105,789

 
$
99,556

 
$
85,688

 
(39
)%
Contribution margin (1)
43.2
 %
 
53.7
%
 
51.6
%
 
52.2
%
 
49.1
%
 
(12
)%
Adjusted EBITDA (1)
$
(7,831
)
 
$
38,981

 
$
40,021

 
$
33,181

 
$
22,589

 
(135
)%
Adjusted EBITDA margin (1)
(6.5
)%
 
20.7
%
 
19.5
%
 
17.4
%
 
13.0
%
 
(150
)%
Adjusted net income (loss) (1)
$
(39,151
)
 
$
6,981

 
$
7,951

 
$
(1,232
)
 
$
(11,518
)
 
N/M

EPS (common stockholders) – diluted (2)(3)
$
(1.10
)
 
$
0.00

 
$
0.00

 
$
(0.12
)
 
$
(0.23
)
 
N/M

Adjusted EPS – diluted (1)(3)
$
(0.44
)
 
$
0.08

 
$
0.09

 
$
(0.01
)
 
$
(0.13
)
 
N/M

Loan Originations by Investor Type:
Banks
43
 %
 
32
%
 
38
%
 
45
%
 
49
%
 
 
LendingClub inventory
20
 %
 
23
%
 
23
%
 
13
%
 
10
%
 
 
Other institutional investors
17
 %
 
25
%
 
20
%
 
21
%
 
18
%
 
 
Managed accounts
16
 %
 
17
%
 
15
%
 
16
%
 
17
%
 
 
Self-directed retail investors
4
 %
 
3
%
 
4
%
 
5
%
 
6
%
 


Total
100
 %
 
100
%
 
100
%
 
100
%
 
100
%
 
 
Loan Originations by Program:
Personal loans – standard program
70
 %
 
68
%
 
70
%
 
69
%
 
71
%
 
 
Personal loans – custom program
23
 %
 
26
%
 
24
%
 
24
%
 
21
%
 
 
Other – custom program (4)
7
 %
 
6
%
 
6
%
 
7
%
 
8
%
 
 
Total
100
 %
 
100
%
 
100
%
 
100
%
 
100
%
 
 
Personal Loan Originations by Loan Grade – Standard Loan Program (in millions):
A
$
620.0

 
$
654.1

 
$
757.4

 
$
705.6

 
$
608.3

 
2
 %
B
544.6

 
644.7

 
738.3

 
650.8

 
574.5

 
(5
)%
C
357.3

 
479.6

 
523.3

 
509.2

 
452.5

 
(21
)%
D
249.1

 
309.1

 
324.2

 
308.1

 
243.5

 
2
 %
E
—

 
—

 
—

 
0.6

 
49.4

 
(100
)%
F
—

 
—

 
—

 
—

 
0.2

 
(100
)%
Total
$
1,771.0

 
$
2,087.5

 
$
2,343.2

 
$
2,174.3

 
$
1,928.4

 
(8
)%
N/M – Not meaningful
(1)
Represents a non-GAAP measure. See “Reconciliation of GAAP to Non-GAAP Measures.”
(2)
Reflects a $50.2 million deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of mandatorily convertible, non-voting, LendingClub Series A preferred stock.
(3)
Share information and balances have been retroactively adjusted, as applicable, to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.
(4) 
Comprised of education and patient finance loans, auto refinance loans, and small business loans. Beginning in the third quarter of 2019, this category no longer includes small business loans.


8




LENDINGCLUB CORPORATION
OPERATING HIGHLIGHTS (Continued)
(In thousands, except percentages and number of employees, or as noted)
(Unaudited)
 
Three Months Ended
 
% Change
 
March 31, 
 2020
 
December 31, 
 2019
 
September 30, 
 2019
 
June 30, 
 2019
 
March 31, 
 2019
 
Y/Y
Servicing Portfolio by Method Financed (in millions, at end of period):
Whole loans sold
$
14,118

 
$
14,118

 
$
13,509

 
$
12,777

 
$
11,761

 
20
 %
Notes
833

 
919

 
1,016

 
1,092

 
1,169

 
(29
)%
Certificates
147

 
211

 
272

 
471

 
577

 
(75
)%
Secured borrowings
11

 
19

 
29

 
42

 
59

 
(81
)%
Loans invested in by the Company
866

 
744

 
696

 
426

 
565

 
53
 %
Total
$
15,975

 
$
16,011

 
$
15,522

 
$
14,808

 
$
14,131

 
13
 %
Employees and contractors (4)
1,542

 
1,538

 
1,726

 
1,715

 
1,621

 
(5
)%
(4)
As of the end of each respective period.



9




LENDINGCLUB CORPORATION
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
 
March 31, 
 2020
 
December 31, 
 2019
Assets
 
 
 
Cash and cash equivalents
$
294,345

 
$
243,779

Restricted cash
139,247

 
243,343

Securities available for sale (includes $296,316 and $271,173 at amortized cost, $18,835 and $0 in allowance for credit losses, and $130,230 and $174,849 pledged as collateral at fair value, respectively)
256,554

 
270,927

Loans held for investment at fair value
885,413

 
1,079,315

Loans held for investment by the Company at fair value
71,003

 
43,693

Loans held for sale by the Company at fair value
741,704

 
722,355

Accrued interest receivable
11,574

 
12,857

Property, equipment and software, net
116,043

 
114,370

Operating lease assets
90,863

 
93,485

Intangible assets, net
13,703

 
14,549

Other assets
164,104

 
143,668

Total assets
$
2,784,553

 
$
2,982,341

Liabilities and Equity
 
 
 
Accounts payable
$
5,301

 
$
10,855

Accrued interest payable
9,029

 
9,260

Operating lease liabilities
109,481

 
112,344

Accrued expenses and other liabilities
100,241

 
142,636

Payable to investors
50,003

 
97,530

Notes, certificates and secured borrowings at fair value
886,840

 
1,081,466

Payable to Structured Program note and certificate holders at fair value
206,092

 
40,610

Credit facilities and securities sold under repurchase agreements
621,020

 
587,453

Total liabilities
1,988,007

 
2,082,154

Equity
 
 
 
Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 195,628 and 0 shares issued, respectively; 195,628 and 0 shares outstanding, respectively
2

 
—

Common stock, $0.01 par value; 180,000,000 shares authorized; 69,869,214 and 89,218,797 shares issued, respectively; 69,869,214 and 88,757,406 shares outstanding, respectively
699

 
892

Additional paid-in capital
1,463,535

 
1,467,882

Accumulated deficit
(646,763
)
 
(548,472
)
Treasury stock, at cost; 0 and 461,391 shares, respectively
—

 
(19,550
)
Accumulated other comprehensive income (loss)
(20,927
)
 
(565
)
Total equity
796,546

 
900,187

Total liabilities and equity
$
2,784,553

 
$
2,982,341




10


LENDINGCLUB CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands, except percentages and per share data)
(Unaudited)
 
Three Months Ended
 
March 31, 
 2020
 
December 31, 
 2019
 
September 30, 
 2019
 
June 30, 
 2019
 
March 31, 
 2019
GAAP LendingClub net income (loss)
$
(48,087
)
 
$
234

 
$
(383
)
 
$
(10,661
)
 
$
(19,935
)
Engineering and product development expense
38,710

 
41,080

 
41,455

 
43,299

 
42,546

Other general and administrative expense
58,486

 
57,607

 
59,485

 
64,324

 
56,876

Cost structure simplification expense (1)
175

 
188

 
2,778

 
646

 
3,706

Stock-based compensation expense (2)
2,299

 
2,012

 
2,357

 
2,386

 
2,495

Income tax expense (benefit)
319

 
140

 
97

 
(438
)
 
—

Contribution
$
51,902

 
$
101,261

 
$
105,789

 
$
99,556

 
$
85,688

Total net revenue
$
120,206

 
$
188,486

 
$
204,896

 
$
190,807

 
$
174,418

Contribution margin
43.2
%
 
53.7
%
 
51.6
%
 
52.2
%
 
49.1
%
(1)  
Contribution excludes the portion of personnel-related expenses associated with establishing a site in the Salt Lake City area that are included in the “Sales and marketing” and “Origination and servicing” expense categories.
(2) 
Contribution excludes stock-based compensation expense included in the “Sales and marketing” and “Origination and servicing” expense categories.


11


LENDINGCLUB CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)
(In thousands, except percentages and per share data)
(Unaudited)
 
Three Months Ended
 
March 31, 
 2020
 
December 31, 
 2019
 
September 30, 
 2019
 
June 30, 
 2019
 
March 31, 
 2019
GAAP LendingClub net income (loss)
$
(48,087
)
 
$
234

 
$
(383
)
 
$
(10,661
)
 
$
(19,935
)
Cost structure simplification expense (1)
228

 
284

 
3,443

 
1,934

 
4,272

Legal, regulatory and other expense related to legacy issues (2)
4,476

 
4,531

 
4,142

 
6,791

 
4,145

Acquisition and related expenses (3)
3,611

 
932

 
—

 
—

 
—

Other items (4)
621

 
1,000

 
749

 
704

 
—

Adjusted net income (loss)
$
(39,151
)
 
$
6,981

 
$
7,951

 
$
(1,232
)
 
$
(11,518
)
Depreciation and impairment expense:
 
 
 
 
 
 
 
 
 
Engineering and product development
10,423

 
12,532

 
11,464

 
11,838

 
13,373

Other general and administrative
1,603

 
1,739

 
1,569

 
1,596

 
1,542

Amortization of intangible assets
846

 
848

 
845

 
866

 
940

Stock-based compensation expense
18,129

 
16,741

 
18,095

 
20,551

 
18,252

Income tax expense (benefit)
319

 
140

 
97

 
(438
)
 
—

Adjusted EBITDA
$
(7,831
)
 
$
38,981


$
40,021


$
33,181


$
22,589

Total net revenue
$
120,206

 
$
188,486

 
$
204,896

 
$
190,807

 
$
174,418

Adjusted EBITDA margin
(6.5
)%
 
20.7
%
 
19.5
%
 
17.4
%
 
13.0
%
(1) 
Includes personnel-related expenses associated with establishing a site in the Salt Lake City area and external advisory fees. These expenses are included in “Sales and marketing,” “Origination and servicing,” “Engineering and product development” and “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. In the first quarter of 2019, also includes external advisory fees which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations.
(2) 
Consists of legal legacy expenses which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations and expense related to the dissolution of certain private funds managed by LCAM, which is included in “Net fair value adjustments” on the Company’s Condensed Consolidated Statements of Operations. For the second quarter of 2019, also includes expense related to the termination of a legacy contract, which is included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations.
(3) 
Represents costs related to the acquisition of Radius.
(4) 
In the first quarter of 2020, includes one-time expenses resulting from the COVID-19 pandemic which are included in “Engineering and product development” and “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. In 2019, includes expenses related to certain non-legacy litigation and regulatory matters. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment. Both of these are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations.


12


LENDINGCLUB CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)
(In thousands, except percentages and per share data)
(Unaudited)
Three Months Ended
March 31, 
 2020
 
December 31, 
 2019
 
September 30, 
 2019
 
June 30, 
 2019
 
March 31, 
 2019
 
Common and Preferred Stock (1)
 
Common Stock
 
Common
Stock
 
Common Stock
 
Common Stock
Adjusted net income (loss) attributable to stockholders
$
(39,151
)
 
$
6,981

 
$
7,951

 
$
(1,232
)
 
$
(11,518
)
 
 
 
 
 
 
 
 
 
 
Weighted-average GAAP diluted shares (2)(3)
89,085,270

 
88,912,677

 
87,588,495

 
86,719,049

 
86,108,871

Non-GAAP diluted shares (2)(3)
89,085,270

 
88,912,677

 
87,588,495

 
86,719,049

 
86,108,871

 
 
 
 
 
 
 
 
 
 
Adjusted EPS - diluted (3)
$
(0.44
)
 
$
0.08

 
$
0.09

 
$
(0.01
)
 
$
(0.13
)
(1)
Presented on an as-converted basis, as the preferred stock is considered common shares because it participates in earnings similar to common stock and does not receive any significant preferences over the common stock.
(2)
In the first quarter of 2020, includes the total weighted-average shares outstanding of both common and preferred stock on an as-converted basis.
(3)
Share information and balances have been retroactively adjusted, as applicable, to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.


13


LENDINGCLUB CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)
(Unaudited)

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, 2020
 
December 31, 2019
 
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
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

$
—

$
294,345

$
294,345

 
$
—

$
—

$
243,779

$
243,779

Restricted cash
—

12,625

126,622

139,247

 
—

2,894

240,449

243,343

Securities available for sale
—

—

256,554

256,554

 
—

—

270,927

270,927

Loans held for investment at fair value
751,712

133,701

—

885,413

 
881,473

197,842

—

1,079,315

Loans held for investment by the Company at fair value (4)
—

65,254

5,749

71,003

 
—

37,638

6,055

43,693

Loans held for sale by the Company at fair value
—

127,718

613,986

741,704

 
—

—

722,355

722,355

Accrued interest receivable
5,387

2,119

4,068

11,574

 
5,930

1,815

5,112

12,857

Property, equipment and software, net
—

—

116,043

116,043

 
—

—

114,370

114,370

Operating lease assets
—

—

90,863

90,863

 
—

—

93,485

93,485

Intangible assets, net
—

—

13,703

13,703

 
—

—

14,549

14,549

Other assets
—

—

164,104

164,104

 
—

—

143,668

143,668

Total assets
$
757,099

$
341,417

$
1,686,037

$
2,784,553

 
$
887,403

$
240,189

$
1,854,749

$
2,982,341

Liabilities and Equity
 
 
 
 
 
 
 
 
 
Accounts payable
$
—

$
—

$
5,301

$
5,301

 
$
—

$
—

$
10,855

$
10,855

Accrued interest payable
5,387

1,624

2,018

9,029

 
5,930

1,737

1,593

9,260

Operating lease liabilities
—

—

109,481

109,481

 
—

—

112,344

112,344

Accrued expenses and other liabilities
—

—

100,241

100,241

 
—

—

142,636

142,636

Payable to investors
—

—

50,003

50,003

 
—

—

97,530

97,530

Notes, certificates and secured borrowings at fair value
751,712

133,701

1,427

886,840

 
881,473

197,842

2,151

1,081,466

Payable to Structured Program note and certificate holders at fair value (4)
—

206,092

—

206,092

 
—

40,610

—

40,610

Credit facilities and securities sold under repurchase agreements
—

—

621,020

621,020

 
—

—

587,453

587,453

Total liabilities
757,099

341,417

889,491

1,988,007

 
887,403

240,189

954,562

2,082,154

Total equity
—

—

796,546

796,546

 
—

—

900,187

900,187

Total liabilities and equity
$
757,099

$
341,417

$
1,686,037

$
2,784,553

 
$
887,403

$
240,189

$
1,854,749

$
2,982,341

(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

14


notes of $28.9 million and $42.0 million was equally matched and offset by interest income from the related loans of $28.9 million and $42.0 million for the first quarters of 2020 and 2019, respectively, resulting in no net effect on our Net interest income and fair value adjustments.
(2) 
Represents assets and equal and offsetting liabilities of certain VIEs that we are required to consolidate in accordance with GAAP, but which are not legally ours. The liabilities are only payable from the cash flows generated by the associated assets. The creditors of the VIEs have no recourse to the general credit of the Company. Interest expense on these liabilities owned by third parties of $7.8 million and net fair value adjustments of $2.7 million for the first quarter of 2020 were equally matched and offset by interest income on the loans of $10.5 million, resulting in no net effect on our Net interest income and fair value adjustments. Interest expense on these liabilities owned by third parties of $27.1 million and net fair value adjustments of $7.7 million for the first quarter of 2019 were equally matched and offset by interest income on the loans of $34.8 million, resulting in no net effect on our Net interest income and fair value adjustments. Economic interests held by LendingClub, including retained interests, residuals and equity of the VIEs, are reflected in “Loans held for sale by the Company at fair value,” “Loans held for investment by the Company at fair value” and “Restricted cash,” respectively, within the “All Other LendingClub” column.
(3) 
Represents all other assets and liabilities of LendingClub, other than those related to our Retail Program and certain consolidated VIEs, but includes any economic interests held by LendingClub, including retained interests, residuals and equity of those consolidated VIEs.
(4) 
Beginning in the fourth quarter of 2019, the Company sponsored a new Structured Program transaction that was consolidated, resulting in an increase to “Loans held for investment by the Company at fair value” and the related “Payable to Structured Program note and certificate holders at fair value.”

15


LENDINGCLUB CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)
NET CASH AND OTHER FINANCIAL ASSETS
(In thousands)
(Unaudited)
 
March 31, 
 2020
 
December 31, 
 2019
 
September 30, 
 2019
 
June 30, 
 2019
 
March 31, 
 2019
Cash and cash equivalents (1)
$
294,345

 
$
243,779

 
$
199,950

 
$
334,713

 
$
402,311

Restricted cash committed for loan purchases (2)
4,572

 
68,001

 
84,536

 
31,945

 
24,632

Securities available for sale
256,554

 
270,927

 
246,559

 
220,449

 
197,509

Loans held for investment by the Company at fair value (3)
71,003

 
43,693

 
4,211

 
5,027

 
8,757

Loans held for sale by the Company at fair value
741,704

 
722,355

 
710,170

 
435,083

 
552,166

Payable to Structured Program note and certificate holders (3)
(206,092
)
 
(40,610
)
 
—

 
—

 
(233,269
)
Credit facilities and securities sold under repurchase agreements
(621,020
)
 
(587,453
)
 
(509,107
)
 
(324,426
)
 
(263,863
)
Other assets and liabilities (2)
61,107

 
(6,226
)
 
(31,795
)
 
(12,089
)
 
(8,541
)
Net cash and other financial assets (4)
$
602,173

 
$
714,466

 
$
704,524

 
$
690,702

 
$
679,702

(1) 
Variations in cash and cash equivalents are primarily due to variations in the amount and timing of loan purchases invested in by the Company.
(2) 
In the fourth quarter of 2019, we added a new line item called “Other assets and liabilities” which is a total of “Accrued interest receivable,” “Other assets,” “Accounts payable,” “Accrued interest payable” and “Accrued expenses and other liabilities,” included on our Consolidated Balance Sheets. This line item represents certain assets and liabilities that impact working capital and are affected by timing differences between revenue and expense recognition and related cash activity. In the third quarter of 2019, we added a new line item called “Restricted cash committed for loan purchases,” which represents cash and cash equivalents that are transferred to restricted cash for loans that are pending purchase by the Company. We believe this is a more complete representation of the Company’s net cash and other financial assets position as of each period presented in the table above. Prior period amounts have been reclassified to conform to the current period presentation.
(3) 
Beginning in the fourth quarter of 2019, the Company sponsored a new Structured Program transaction that was consolidated, resulting in an increase to “Loans held for investment by the Company at fair value” and the related “Payable to Structured Program note and certificate holders at fair value.”
(4) 
Comparable GAAP measure cannot be provided as not practicable.


16
EXHIBIT 99.2

Q1 2020 Quarterly Platform Update

Over the past several weeks we’ve spoken with many investors about the effects of the coronavirus (COVID-19) pandemic - both on their daily lives and their investment portfolios. For our part, we have undertaken a number of measures and initiatives aimed at ensuring investors continue to have a positive experience with LendingClub, and that our members are getting the help they need in this challenging time. According to our usual practice we have provided a quarterly update on the platform below and encourage investors to reach out to us with any questions. We’re here to help.

Macroeconomic, Credit, and Interest Rate Observations

The scale and speed of the coronavirus’ impact on the US economy has no historical precedent. Industry forecasts vary widely on the long-term effect, but the real question is how quickly the US economy will recover and rebound. This will depend on the speed at which we can contain the virus, emerge from shelter-in-place and other similar measures, resume pre-pandemic spending behavior and how quickly unemployment stabilizes, among other things.

While there is little to like about the current macroeconomic picture, the government response has been large and timely, injecting liquidity into the financial markets and providing relief for consumers and small businesses. The Federal Reserve has taken dramatic action, and is indicating that it will continue with this approach: in a recent statement, the Federal Reserve committed to keeping its interest rate within a target range of 0-0.25% “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Platform Observations

As the coronavirus threat emerged, we took swift action across the platform. We tightened underwriting on new loans, successfully implemented a 2-month payment deferral hardship plan (Skip-a-Pay) with borrowers applying either online or via the phone and increased the number of LendingClub employees answering calls to maintain service levels, after an initial spike.

As of today, hardship enrollments are slowing down in line with our current expectations and broader industry trends​. Approximately 11% of borrowers (representing 13% of overall loan balances) are enrolled in a hardship plan as of the end of April. Although certain segments of borrowers are enrolling at a higher rate than others (for example, self-employed borrowers are enrolling at twice the overall rate and borrowers in higher risk loans grades are enrolling at higher rates versus lower risk loan grades), we are encouraged by signs that the overall enrollment rate is flattening. The standard portfolio (those not enrolled in hardship plans) is currently performing in line with expectations. Approximately 91%* of all borrowers continue to pay on time (which is down approximately 6-7 percentage points from March and February, respectively, but still notably strong given the current economic environment). Prepayments are also trending down, which should be accretive to investor returns. Other indicators we watch such as early delinquency and automatic cash withdrawal enrollment rates are also currently stable. Overall current roll rate performance (the percentage of borrowers who progress into later delinquency stages) for the non-hardship population is in line with or better than previously observed portfolio performance in February and March 2020​.

A Look Into the Next Few Months

Reflecting the volatility of the current environment, average daily volume of prime loans in April 2020 was 83% smaller as compared to January 2020, a trend we expect will result in an overall approximate 90% reduction in quarter-over-quarter overall platform volume in Q2 2020. In response, our efforts are squarely focused on protecting investor returns and actively managing the existing and new loan portfolios.


* When data for the full April payment cycle comes in, we expect the percentage of borrowers making on-time payments to more closely match the percentage of borrowers enrolled in hardship plans (approximately 89% as of 4/30).

Existing loan portfolio. We are focused on maintaining operational readiness and proactively engaging our members with flexible payment options.

1.
Operational readiness: We’ve dramatically increased our collections and servicing capabilities to keep service levels high. We have increased headcount by approximately 30% from the first quarter of 2020 and will adjust this capacity as needed based on call volume. 100% of servicing and collections employees are remote and service levels have stayed strong: in the month of April, 90%+ of payment solutions calls were answered in less than 20 seconds.
2.
Flexible options for borrowers who need them: To date, we have launched two short-term relief plans: a 3-month COVID interest only hardship plan and a 2-month Skip-a-Pay plan (with the ability to extend by several additional months if needed). We are currently developing long term restructuring plans and expect to have them available later this quarter. Our experience in past natural disasters suggests that offering borrowers flexibility during tough times enables a significantly higher percentage of affected borrowers to avoid default versus eligible borrowers who did not enroll in relief programs. Notable data points on Skip-a-Pay enrollees includes: 1) 90% were current when they enrolled​; 2) 78% of enrollees have never been delinquent with LendingClub; and 3) 76% of enrollees have not been delinquent on any debt obligations reported to the credit bureaus within the past 24 months​. We’ve asked these members what they think the future may hold for them (nearly 90% of 1,800 survey respondents indicated they think they will need 4 months or less in payment relief​) and so we are developing a graduation flow to additional payment plans to help them stay on track​. Given how unique the current environment is, we’ll be watching performance closely in the next several months.
3.
Proactive engagement: We have a proactive, high-touch strategy aimed at keeping members across the platform on track​. Our communications strategy is cross-channel (email, SMS, phone) so borrowers can interact with us in their preferred channels, and we are customizing resources by customer segment to meet members where they are in this moment. We’ve enrolled 200,000+ members in Credit Profile to date (a tool designed to give borrowers a view into their financial health) as well as added COVID-specific resources to our website. We are committed to adding more resources and being there for our members when they need it most.
​
New issuance. While unemployment rates remain volatile and until loan performance of recent vintages can be further observed, we are not focused on growing loan volume. We are focused on supporting our members and trying to protect investor returns. To that end, Q2 issuance to date is characterized by:

1.
A focus on existing members: We are focused on serving the needs of our large active member base as these members have historically exhibited significantly lower losses than loans from new borrowers. Approximately 85%+ of the loans issued during the second quarter to date are with existing members (versus borrowers new to the LendingClub platform). Here, we are leveraging two distinct advantages. First, our data advantage. We have more data from previous customers and we also know how a member’s first loan has performed; members only become eligible for an additional loan after performing well on their first loan. This enables more effective targeting and underwriting of historically high-performing borrowers. Second, we benefit from a relationship and loyalty advantage. Because we have a strong relationship with our customers, they come directly back to LendingClub using our proprietary marketing channels (email and website)​; 80% of surveyed members say they don’t apply to other companies when looking for an additional loan. Historically, these loyalty and data advantages have translated to lower delinquency rates on average for repeat customers.
2.
Significant tightening: We have made substantial credit cuts (about 30%+) over the past two months in order to focus on the most resilient borrowers and seek to protect investor returns. Key credit changes include: declining new borrower segments who list a loan purpose other than debt consolidation, as well as reducing exposure to a segment that appears two times more likely to enroll in Skip-a-Pay. The resulting portfolio is focused on higher FICO, lower-risk grades, lower payment-to-income, and shorter duration​. For example, April 2020 issuance to date shows an average FICO that’s 15 points higher and average income that’s 17.8% higher than 2019 vintages. In late March we also increased interest rates significantly.


3.
Enhanced underwriting: Finally, we have identified and segmented risk groups based on numerous variables, including credit performance and industry in order to refine our verification and underwriting policies, and paired that information with other relevant factors such as employment status and payment-to-income ratio as we strive to optimize loan facilitations in the current environment.

The actions above are intended to protect investor returns in the current environment and position investors for improved returns when the environment normalizes. Clearly, we are not in a normal environment and we are continuously tracking expansive data sets on a range of inputs, including unemployment forecasts, the impacts of our credit tightening, and the expected performance of our hardship plans, in order to make quick adjustments as the situation evolves. Once we have digested the data and its impact, we expect to make additional meaningful actions and then issue updated performance targets. Given the dynamic environment, we are also monitoring the performance of our member payment dependent notes program and will evaluate prudent adjustments to the program as necessary to further protect investor returns.

Conclusion

We have unique advantages to navigate this unprecedented environment, among them a digital, technology-first platform that enables us to rapidly deploy credit changes and borrower solutions as the situation evolves, a data advantage from a 13+ year track record, ​and the ability to underwrite a deep member base using proprietary data.
We’ve also been struck by the number of individual investors reaching out to see how they can help. We’re heartened by our community and the promise of a group of people helping people.

Much has changed since our last quarterly update. What hasn’t changed is our commitment to our borrowers and investors. We will continue to keep our investors posted and encourage them to reach out to us with any questions.

Safe Harbor Statement

Some of the statements above, including statements regarding our ability to effectuate and the effectiveness of changes in strategy, the impact of credit and underwriting initiatives, loan performance, platform volume and returns, borrower and investor demand, borrower attributes (including the number and behavior of those enrolled in hardship plans), our ability to add servicing and payment plan capabilities, our ability to successfully navigate the current economic climate, adjustments to the member payment dependent notes program, the performance of the company and the impact of the coronavirus are “forward-looking statements.” The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “predict,” “project,” “will,” “would” and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include the impact of global economic, political, market, health and social events or conditions, including the impact of the coronavirus, and those factors set forth in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, as well as our subsequent reports on Form 10-Q and 10-K each as filed with the Securities and Exchange Commission. 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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Information in this blog post is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction