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What changed in LendingClub Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LendingClub Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+343 added−339 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-09)

Top changes in LendingClub Corp's 2023 10-K

343 paragraphs added · 339 removed · 266 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

130 edited+40 added−25 removed225 unchanged
Biggest changeIn addition to the discussion in this section, see the risk factor “ The current economic environment, including a potential recession, could negatively affect our business and operating results. ” If investors on our marketplace bank platform pause or cease their participation or exert influence over us, our business, financial condition and results of operations may be harmed.
Biggest changeFurther, increases in delinquency rates may require that we take additional allowances for losses, which may adversely affect our financial performance and our ability to allocate sufficient financial resources for other purposes, such as advancing our products and services, which could impact our results of operations. 22 LENDINGCLUB CORPORATION In addition to the discussion in this section, see the risk factor “ The current economic environment, including a potential recession and the resumption of Federal student loan payments, could negatively affect our business and operating results. ” If investors on our marketplace bank platform pause or cease their participation or exert influence over us, our business, financial condition and results of operations may be harmed.
We believe the technology platform that powers our marketplace bank enables us to deliver solutions to customers and platform investors, and provides a significant time and cost advantage over traditional banks. The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations, customer service and reputation.
We believe the technology platform that powers our marketplace bank enables us to deliver solutions to customers and marketplace investors, and provides a significant time and cost advantage over traditional banks. The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations, customer service and reputation.
Any such guarantee would require approval of the banking regulators and there can be no assurance that we would be able to obtain such a guarantee. To extent that we are not able to obtain a guarantee from LC Bank, it may be more difficult or expensive for us to borrow money.
Any such guarantee may require approval of the banking regulators and there can be no assurance that we would be able to obtain such a guarantee. To the extent that we are not able to obtain a guarantee from LC Bank, it may be more difficult or expensive for us to borrow money.
We strive to maintain a marketplace bank platform in which annual percentage rates are attractive to borrowers and returns, including the impact of credit losses and prepayments, are attractive to platform investors and the Company.
We strive to maintain a marketplace bank platform in which annual percentage rates are attractive to borrowers and returns, including the impact of credit losses and prepayments, are attractive to marketplace investors and the Company.
Negative publicity about our industry or our company, including with respect to the quality and reliability of our marketplace bank, effectiveness of the credit decisioning or scoring models used in our marketplace bank platform, the effectiveness of our collection efforts, statements regarding investment returns, changes to our marketplace 34 LENDINGCLUB CORPORATION bank, our ability to grow our borrower and investor base at a rate expected by the market, our ability to effectively manage and resolve borrower and investor complaints, our ability to manage borrower and investor accounts in compliance with regulatory requirements which may not be clear, privacy and security practices, use of loan proceeds by certain borrowers of ours or other companies in our industry for illegal purposes, litigation, regulatory activity, and the experience of borrowers and investors with our marketplace bank, products or services, even if inaccurate, could adversely affect our reputation and the confidence in, and the use of, our bank, products and services, which could harm our business and operating results.
Negative publicity about our industry or our company, including with respect to the quality and reliability of our marketplace bank, effectiveness of the credit decisioning or scoring models used in our marketplace bank platform, the effectiveness of our collection efforts, statements regarding investment returns, changes to our marketplace bank, our ability to grow our borrower and investor base at a rate expected by the market, our ability to effectively manage and resolve borrower and investor complaints, our ability to manage borrower and investor accounts in compliance with regulatory requirements which may not be clear, privacy and security practices, use of loan proceeds by certain borrowers of ours or other companies in our industry for illegal purposes, litigation, regulatory activity, and the experience of borrowers and investors with our marketplace bank, products or services, even if 34 LENDINGCLUB CORPORATION inaccurate, could adversely affect our reputation and the confidence in, and the use of, our bank, products and services, which could harm our business and operating results.
If these errors were to occur, we may be obligated to repurchase the affected loans, platform investors may try to rescind their affected purchases or investments or decide not to purchase or invest in loans in the future or borrowers may seek to revise the terms of their loans or reduce the use of our marketplace bank platform for loans.
If these errors were to occur, we may be obligated to repurchase the affected loans, marketplace investors may try to rescind their affected purchases or investments or decide not to purchase or invest in loans in the future or borrowers may seek to revise the terms of their loans or reduce the use of our marketplace bank platform for loans.
These factors could prevent us from processing or posting payments on loans, impact our marketplace bank operations, damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to abandon our marketplace bank platform, any of which could adversely affect our business, financial condition and results of operations.
These factors could prevent us from processing or posting payments on loans, impact our bank operations, damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to abandon our marketplace bank platform, any of which could adversely affect our business, financial condition and results of operations.
However, any acquisition (including our Acquisition), disposition or other strategic transactions involves risks, including: • difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business, which may require ongoing investment in development and enhancement of additional operational and reporting processes and controls; • inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; • difficulties in retaining, training, motivating and integrating key personnel; • diversion of management’s time and resources from our normal daily operations; • difficulties in successfully incorporating licensed or acquired technology and rights into our platform; • difficulties in maintaining uniform standards, controls, procedures and policies within the combined organization; • difficulties in retaining relationships with customers, employees and suppliers of the acquired business; • risks of entering markets in which we have no or limited direct prior experience; • regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; • failure to successfully further develop any acquired technology; • liability for activities of the acquired or disposed of business before the acquisition or disposition, including patent and trademark infringement claims, violations of laws, regulatory actions, commercial disputes, tax liabilities and other known and unknown liabilities; • difficulty in separating assets and replacing shared services; • assumption of exposure to performance of any acquired loan portfolios; • potential disruptions to our ongoing businesses; and • unexpected costs and unknown risks and liabilities associated with the acquisition.
However, any acquisition, disposition or other strategic transactions involves risks, including: • difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business, which may require ongoing investment in development and enhancement of additional operational and reporting processes and controls; 28 LENDINGCLUB CORPORATION • inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; • difficulties in retaining, training, motivating and integrating key personnel; • diversion of management’s time and resources from our normal daily operations; • difficulties in successfully incorporating licensed or acquired technology and rights into our platform; • difficulties in maintaining uniform standards, controls, procedures and policies within the combined organization; • difficulties in retaining relationships with customers, employees and suppliers of the acquired business; • risks of entering markets in which we have no or limited direct prior experience; • regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; • failure to successfully further develop any acquired technology; • liability for activities of the acquired or disposed of business before the acquisition or disposition, including patent and trademark infringement claims, violations of laws, regulatory actions, commercial disputes, tax liabilities and other known and unknown liabilities; • difficulty in separating assets and replacing shared services; • assumption of exposure to performance of any acquired loan portfolios; • potential disruptions to our ongoing businesses; and • unexpected costs and unknown risks and liabilities associated with the acquisition.
Further, a significant portion of our core deposits is sourced from depositors referred to the Company through third party platforms, and any change in the way such third-party platforms operate, including our participation or the placement of our products on such third-party platforms, may have a materially adverse impact on our ability to maintain and/or grow our deposit base.
Further, a significant portion of our deposits is sourced from depositors referred to the Company through third party platforms, and any change in the way such third-party platforms operate, including our participation or the placement of our products on such third-party platforms, may have a materially adverse impact on our ability to maintain and/or grow our deposit base.
Among other things, as inflation and interest rates are elevated: (i) existing borrowers may allocate more of their income to necessities such as housing and food, thereby potentially increasing their risk of default by reducing their ability to make loan payments, (ii) the rate we offer on our deposit products will increase to remain competitive, thereby increasing our cost of funding and reducing our net interest margin, (iii) the return our loan products generate may be less attractive relative to other investment options, thereby reducing platform investor demand in our loan products, and (iv) we may need to increase interest rates and/or tighten credit standards for new originations, thereby potentially making it more challenging to source enough interested and qualified borrowers to enable sufficient origination volume.
Among other things, as inflation and interest rates are elevated: (i) existing borrowers may allocate more of their income to necessities such as housing and food, thereby potentially increasing their risk of default by reducing their ability to make loan payments, (ii) the rate we offer on our deposit products will increase to remain competitive, thereby increasing our cost of funding and reducing our net interest margin, (iii) the return our loan products generate may be less attractive relative to other investment options, thereby reducing marketplace investor demand in our loan products, and (iv) we may need to increase interest rates and/or tighten credit standards for new originations, thereby potentially making it more challenging to source enough interested and qualified borrowers to enable sufficient origination volume.
These external economic and social conditions and resulting trends or uncertainties could adversely impact the ability or desire of our borrowers or platform investors to participate on our platform, which could negatively affect our business and results of operations. In addition to the discussion in this section, see “ Part II – Item 7.
These external economic and social conditions and resulting trends or uncertainties could adversely impact the ability or desire of our borrowers or marketplace investors to participate on our platform, which could negatively affect our business and results of operations. In addition to the discussion in this section, see “ Part II – Item 7.
Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, which could result in adverse liquidity events at either LendingClub Corporation and/or LC Bank.
Legal entity liquidity is an important consideration as there are legal, regulatory and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, which could result in adverse liquidity events at either LendingClub Corporation and/or LC Bank.
The financial services and banking industry is evolving rapidly and changing with disruptive technologies and the introduction of new products and services. We derive a significant portion of our revenue from transaction-based fees we collect in connection with the origination of unsecured personal loans.
The financial services and banking industry is evolving and changing with disruptive technologies and the introduction of new products and services. We derive a significant portion of our revenue from transaction-based fees we collect in connection with the origination of unsecured personal loans.
The provisions, among other things: • establish a classified board of directors so that not all members of our board of directors are elected at one time; • permit only our board of directors to establish the number of directors and fill vacancies on the board; • provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; • require two-thirds of all outstanding shares of our capital stock vote to amend some provisions in our Certificate of Incorporation and Bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan (also known as a “poison pill”); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires that all stockholder actions must be taken at a stockholder meeting; • do not provide for cumulative voting; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
The provisions, among other things: • establish a classified board of directors so that not all members of our board of directors are elected at one time; • permit only our board of directors to establish the number of directors and fill vacancies on the board; 46 LENDINGCLUB CORPORATION • provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; • require two-thirds of all outstanding shares of our capital stock vote to amend some provisions in our Certificate of Incorporation and Bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan (also known as a “poison pill”); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires that all stockholder actions must be taken at a stockholder meeting; • do not provide for cumulative voting; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
In particular, LC Bank is subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the parent company or other subsidiaries.
In particular, LC Bank is subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the parent company or other affiliates.
Under this model, the allowance is established to reserve for management’s best estimate of expected lifetime losses inherent in our finance receivables and loan portfolio. 21 LENDINGCLUB CORPORATION The process for determining the amount of the allowance requires subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of borrowers to repay their loans.
Under this model, the allowance is established to reserve for management’s best estimate of expected lifetime losses inherent in our finance receivables and loan portfolio. 20 LENDINGCLUB CORPORATION The process for determining the amount of the allowance requires subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of borrowers to repay their loans.
Further, our ability to hold or sell loans is dependent on a number of factors, including the economic and interest rate environment, the performance of our loans and the conditions of capital markets.
Our ability to hold or sell loans is dependent on a number of factors, including the economic and interest rate environment, the performance of our loans and the conditions of capital markets.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 19. Commitments and Contingencies, ” below. The scope, timing, outcome, consequences and impact of claims, lawsuits, proceedings, investigations, inquiries and requests that we are subject to cannot be predicted with certainty. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 20. Commitments and Contingencies, ” below. The scope, timing, outcome, consequences and impact of claims, lawsuits, proceedings, investigations, inquiries and requests that we are subject to cannot be predicted with certainty. Determining reserves for our pending litigation is a complex, fact-intensive process that requires significant judgment.
The deposit markets are competitive, and therefore it may prove difficult and/or costly to grow our core deposit base. For example, as the FRB has increased interest rates, we have made corresponding increases to the rate we offer depositors, which increases our cost of capital and may reduce the net interest margin on loans held for investment.
The deposit markets are competitive, and therefore it may prove difficult and/or costly to grow our deposit base. For example, as the FRB has increased interest rates, we have made corresponding increases to the rates we offer depositors, which increases our cost of capital and may reduce the net interest margin on loans held for investment.
While we take steps to mitigate the risks and uncertainties associated with these initiatives, these initiatives may not be implemented on time (or at all), within budget or without negative financial, operational or customer impact. Further if and when implemented, these initiatives may not perform as we or our customers, platform investors and other stakeholders expect.
While we take steps to mitigate the risks and uncertainties associated with these initiatives, these initiatives may not be implemented on time (or at all), within budget or without negative financial, operational or customer impact. Further if and when implemented, these initiatives may not perform as we or our customers, marketplace investors and other stakeholders expect.
The factors above may result in loans being issued to otherwise non-qualified borrowers and/or impact our ability to effectively segment borrowers into relative risk profiles, each of which may impair our ability to offer attractive risk-adjusted returns for investors, which may cause investors to seek alternative investments from ours and our business may suffer.
The factors above may result in loans being issued to otherwise non-qualified borrowers and/or impact our ability to effectively segment borrowers into relative risk profiles, each of which may impair our ability to offer competitive risk-adjusted returns for investors, which may cause investors to seek alternative investments from ours and our business may suffer.
Our stock price may continue to fluctuate in response to a number of events and factors, such as quarterly operating results; changes in our financial projections provided to the public or our failure to meet those projections; changes in the credit performance on our platform; the public’s reaction to our press releases, other public announcements and filings with the SEC; progress and resolution with respect to existing litigation and regulatory inquiries; our operation of LC Bank; significant transactions or acquisitions; new features, products or services offered by us or our competitors; changes in financial estimates and recommendations by securities analysts; media coverage of our business and financial performance; the operating and stock price performance of, or other developments involving, other companies that stockholders may deem comparable to us; trends in our industry; any significant change in our management; and general economic conditions.
Our stock price may continue to fluctuate in response to a number of events and factors, such as quarterly operating results; changes in our financial projections provided to the public or our failure to meet those projections; changes in the credit performance of our loans; the public’s reaction to our press releases, other public announcements and filings with the SEC; progress and resolution with respect to litigation and regulatory inquiries; our operation of LC Bank; significant transactions or acquisitions; new features, products or services offered by us or our competitors; changes in financial estimates and recommendations by securities analysts; media coverage of our business and financial performance; the operating and stock price performance of, or other developments involving, other companies that stockholders may deem comparable to us; trends in our industry; any significant change in our management; and general economic conditions.
Our tax attributes as of December 31, 2022 may expire unutilized or underutilized, which could prevent us from offsetting future taxable income. We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize certain deferred tax assets.
Our tax attributes as of December 31, 2023 may expire unutilized or underutilized, which could prevent us from offsetting future taxable income. We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize certain deferred tax assets.
In addition, our ability to maintain existing or obtain additional deposits may be impacted by factors, including factors beyond our control, including perceptions about our reputation, financial strength or branchless banking generally, which could reduce the number of consumers choosing to place deposits with us.
In addition, our ability to maintain existing or obtain additional deposits may be impacted by factors, including factors beyond our control, including perceptions about the stability of the banking industry, our reputation or financial strength, or branchless banking generally, which could reduce the number of consumers choosing to place deposits with us.
If any of our marketing channels become less effective, or the cost of these channels were to significantly increase, we may not be able to attract new and retain existing customers in a cost-effective manner or convert potential customers into active customers in our marketplace bank.
For example, if any of our marketing channels become less effective, or the cost of these channels were to significantly increase, we may not be able to attract new and retain existing customers in a cost-effective manner or convert potential customers into active customers in our marketplace bank.
Further, an economic downturn or recession could increase the risk of borrower default, reduce investor participation on our marketplace bank platform, cause us to change, postpone or cancel our strategic initiatives, or otherwise negatively affect our business, financial condition and results of operations.
Finally, an economic downturn or recession could increase the risk of borrower default, reduce investor participation on our marketplace bank platform, cause us to change, postpone or cancel our strategic initiatives, or otherwise negatively affect our business, financial condition and results of operations.
Any interruptions or delays in our technology systems or service, whether as a result of third-party error, our error, natural disasters, terrorism, other man-made problems, or security breaches, whether accidental or willful, could harm our reputation and relationships with our customers and platform investors.
Any interruptions or delays in our technology systems or service, whether as a result of third-party error, our error, natural disasters, terrorism, other man-made problems, or security breaches, whether accidental or willful, could harm our reputation and relationships with our customers and marketplace investors.
Accordingly, we and our designated third-party servicers and collection agencies are limited in our ability to collect loans. In addition, most platform investors depend on us or our third-party servicers and collection agents to pursue collection on delinquent borrower loans. Collections are remitted to platform investors only to the extent we receive borrower payments on the corresponding loans.
Accordingly, we and our designated third-party servicers and collection agencies are limited in our ability to collect loans. In addition, most marketplace investors depend on us or our third-party servicers and collection agents to pursue collection on delinquent borrower loans. Collections are remitted to marketplace investors only to the extent we receive borrower payments on the corresponding loans.
For example, following the historic increases in interest rates by the FRB in 2022, a number of our largest platform investors ceased or significantly reduced their purchases of our products, which resulted in a material reduction in our marketplace origination volume and revenue.
For example, following the historic increases in interest rates by the FRB in 2022 and 2023, a number of our largest marketplace investors ceased or significantly reduced their purchases of our products, which resulted in a material reduction in our marketplace origination volume and revenue.
Our failure to maintain satisfactory performance, reliability and availability of our technology and underlying network infrastructure may impair our ability to attract new and retain existing customers or platform investors, which could have a material adverse effect on our operations.
Our failure to maintain satisfactory performance, reliability and availability of our technology and underlying network infrastructure may impair our ability to attract new and retain existing customers or marketplace investors, which could have a material adverse effect on our operations.
If we breach representations or warranties in connection with our platform investor transactions, including whole loan sales, structured products or securitization transactions, or if we suffer a direct or indirect loss in our retained interests in these transactions, our financial condition could be harmed.
If we breach representations or warranties in connection with our marketplace investor transactions, including whole loan sales, structured products or securitization transactions, or if we suffer a direct or indirect loss in our retained interests in these transactions, our financial condition could be harmed.
For example, the Tax Cuts and Jobs Act (the Tax Act) enacted on December 22, 2017, made broad and complex changes to the U.S. tax code and the Tax Act’s reduction of the federal corporate 44 LENDINGCLUB CORPORATION income tax rate from 35% to 21%, effective January 1, 2018, has reduced our deferred tax asset associated with net operating loss carryforwards (NOLs).
For example, the Tax Cuts and Jobs Act (the Tax Act) enacted on December 22, 2017, made broad and complex changes to the U.S. tax code and the Tax Act’s reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, has reduced our deferred tax asset associated with net operating loss carryforwards (NOLs).
Item 1. Business – Regulation and Supervision ” for information on the regulation and supervision framework which governs our Company and its activities. 20 LENDINGCLUB CORPORATION We are regularly examined and inspected by our regulators, including the FRB and OCC.
Item 1. Business – Regulation and Supervision ” for information on the regulation and supervision framework which governs our Company and its activities. 19 LENDINGCLUB CORPORATION We are regularly examined and inspected by our regulators, including the FRB and OCC.
For example, increasing inflation and interest rates may cause borrowers to allocate more of their income to necessities, such as housing and food, thereby potentially increasing their risk of default by reducing their ability to make loan payments. In some circumstances, economic and/or social factors could lead a borrower to pre-pay their loan obligations.
For example, increasing inflation and interest rates may 33 LENDINGCLUB CORPORATION cause borrowers to allocate more of their income to necessities, such as housing and food, thereby potentially increasing their risk of default by reducing their ability to make loan payments. In some circumstances, economic and/or social factors could lead a borrower to pre-pay their loan obligations.
Our regulators have extensive authority and discretion in their interpretation, implementation, supervision and enforcement of the regulatory regime, including on matters related to: • dividends or capital distributions by LC Bank or the Company; • capital and liquidity requirements applicable to us, including the imposition of requirements more stringent than those required under generally applicable laws; • the types and terms of products we offer, activities we may conduct or investments we may make; • the composition, risk characteristics, potential adverse classification, allowance and risk reserves in connection with our loans or other assets; • our deposit-gathering and other funding sources; • the quality of our board and management oversight; • the effectiveness of our risk management and compliance programs, including with respect to consumer protection, information technology, cybersecurity, third-party risk management, anti-money laundering and sanctions; • LC Bank’s commitment to helping meet the credit needs of low- and moderate-income neighborhoods under the Community Reinvestment Act of 1967; • their willingness to approve applications, such as for changes in our business plan, the establishment of new branches, the commencement of new activities, or the conduct of mergers and acquisitions; and • our rate of growth and other expansionary or strategic initiatives.
Our regulators have extensive authority and discretion in their interpretation, implementation, supervision and enforcement of the regulatory regime, including on matters related to: • dividends or capital distributions by LC Bank or the Company; • capital and liquidity requirements applicable to us, including the imposition of requirements more stringent than those required under generally applicable laws; • the types and terms of products we offer, activities we may conduct or investments we may make; • the composition, risk characteristics, potential adverse classification, allowance and risk reserves in connection with our loans or other assets; • our deposit-gathering and other funding sources; • the quality of our board and management oversight; • the effectiveness of our risk management and compliance programs, including with respect to consumer protection, information technology, cybersecurity, third-party risk management, anti-money laundering and sanctions; • LC Bank’s commitment to helping meet the credit needs of low- and moderate-income neighborhoods under the Community Reinvestment Act of 1977; • their willingness to approve applications, such as the establishment, relocation or closure of new branches, the commencement of new activities, or the conduct of mergers and acquisitions; and • our rate of growth and other expansionary or strategic initiatives.
Any material reduction in loan purchases or investments by platform investors, or the economics of those purchases or investments for the Company, may have a material adverse impact on our business, financial condition and results of operations.
Any material reduction in loan purchases or investments by marketplace investors, or the economics of those purchases or investments for the Company, may have a material adverse impact on our business, financial condition and results of operations.
These repurchase or reimbursement obligations could be material and have an adverse effect on our financial condition. 31 LENDINGCLUB CORPORATION In the event that we suffer losses on all or a portion of the interests in any securitization transaction that we have retained (whether to comply with applicable risk retention rules or otherwise), our financial condition could be harmed.
These repurchase or reimbursement obligations could be material and have an adverse effect on our financial condition. In the event that we suffer losses on all or a portion of the interests in any securitization transaction that we have retained (whether to comply with applicable risk retention rules or otherwise), our financial condition could be harmed.
Our failure to maintain satisfactory performance, reliability and availability of our technology and underlying network infrastructure may impair our ability to attract new customers and retain existing customers, which could have a material adverse effect on our business. Our business involves the collection, storage, processing and transmission of customers’ personal information, including their financial information.
Our failure to maintain satisfactory performance, reliability and availability of our technology and underlying network infrastructure may impair our ability to attract new customers and retain existing customers, which could have a material adverse effect on our business. 40 LENDINGCLUB CORPORATION Our business involves the collection, storage, processing and transmission of customers’ personal information, including their financial information.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. In addition to these provisions, banking laws impose notice, approval, and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. In addition to these provisions, banking laws impose notice, approval, and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution and bank holding company.
Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage.
Additionally, in the event of 26 LENDINGCLUB CORPORATION damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage.
On the basis of this evaluation, a valuation allowance has been recorded to recognize only deferred tax assets that are more likely than not to be realized. Our ability to accurately forecast net income (loss) is in part a function of our ability to use our NOLs and, more generally, forecast our tax liability.
On the basis of this evaluation, a valuation allowance has been recorded to recognize only deferred tax assets that are more likely than not to be realized. 44 LENDINGCLUB CORPORATION Our ability to accurately forecast net income (loss) is in part a function of our ability to use our NOLs and, more generally, forecast our tax liability.
Doing so requires that we attract a large number of new borrowers who meet our platform’s lending standards and those of new and existing platform investors, including investors in any securitizations of our loans.
Doing so requires that we attract a large number of new borrowers who meet our platform’s lending standards and those of new and existing marketplace investors, including investors in any securitizations of our loans.
If we, or third parties on our behalf, cannot adequately perform collection services on the loans, the platform investor will not be entitled to any remittances under the terms of the investment.
If we, or third parties on our behalf, cannot adequately perform collection services on the loans, the marketplace investor will not be entitled to any remittances under the terms of the investment.
In order to grow our business and effectuate our business strategy, we anticipate that we will depend in part on our ability to develop and expand our strategic relationship with third parties to offer additional products and services on our platform. Identifying suitable partners, and negotiating and documenting relationships with them, requires significant time and resources.
In order to grow our business and effectuate our business strategy, we anticipate that we will depend in part on our ability to develop and expand our strategic relationship with third parties to offer additional products and services on our platform. 39 LENDINGCLUB CORPORATION Identifying suitable partners, and negotiating and documenting relationships with them, requires significant time and resources.
We rely on a combination of copyright, trade secret, trademark, patent and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, underwriting and credit decisioning 43 LENDINGCLUB CORPORATION data, processes and other intellectual property. However, the steps we take to protect our intellectual property rights may be inadequate.
We rely on a combination of copyright, trade secret, trademark, patent and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, underwriting and credit decisioning data, processes and other intellectual property. However, the steps we take to protect our intellectual property rights may be inadequate.
In addition, any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or operating our platform or require that we comply with other unfavorable terms.
In addition, any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or operating our platform 43 LENDINGCLUB CORPORATION or require that we comply with other unfavorable terms.
For example, increasing inflation and interest rates may cause borrowers to allocate their income to necessities, such as housing and food, thereby potentially increasing their risk of default by reducing their ability to make loan payments. This may increase default rates, which could adversely affect platform investor returns.
For example, elevated inflation and interest rates may cause borrowers to allocate their income to necessities, such as housing and food, thereby potentially increasing their risk of default by reducing their ability to make loan payments. This may increase default rates, which could adversely affect marketplace investor returns.
LC Bank is subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company. 26 LENDINGCLUB CORPORATION Any inability to maintain an adequate liquidity position could adversely affect our operations, our compliance with applicable regulations and the performance of our business.
LC Bank is subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company. Any inability to maintain an adequate liquidity position could adversely affect our operations, our compliance with applicable regulations and the performance of our business.
Volatility or a decline in the value of the loans held on our balance sheet may adversely impact the liquidity of these loans, which could produce losses if we are unable to realize their fair value or manage declines in their value, each of which may adversely affect our financial performance.
Volatility or a decline in the value of the loans and/or Securitization Interests held on our balance sheet may adversely impact the liquidity of these loans/interests, which could produce losses if we are unable to realize their fair value or manage declines in their value, each of which may adversely affect our financial performance.
Accordingly, we may be unable to raise additional capital if needed or on acceptable terms, which may adversely affect our liquidity, business, financial condition and results of operations. We are regularly subject to litigation, and government and regulatory investigations, inquiries and requests.
Accordingly, we may be unable to raise additional capital if needed or on acceptable terms, which may adversely affect our liquidity, business, financial condition and results of operations. 25 LENDINGCLUB CORPORATION We are regularly subject to litigation, and government and regulatory investigations, inquiries and requests.
Although we were profitable for the years ended December 31, 2022 and December 31, 2021, and expect to remain profitable for the year ending December 31, 2023, we have incurred net losses in the past.
Although we were profitable for the years ended December 31, 2023 and 2022, and expect to remain profitable for the year ending December 31, 2024, we have incurred net losses in the past.
LC Bank is also subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company. In addition, in 47 LENDINGCLUB CORPORATION the future, we may enter into borrowing or other contractual arrangements that restrict our ability to pay dividends.
LC Bank is also subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company. In addition, in the future, we may enter into borrowing or other contractual arrangements that restrict our ability to pay dividends.
If we are able to identify an appropriate business opportunity, we may not be successful in 27 LENDINGCLUB CORPORATION negotiating favorable terms and/or consummating the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
If we are able to identify an appropriate business opportunity, we may not be successful in negotiating favorable terms and/or consummating the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
If these models are ineffective at predicting future losses or are otherwise inadequate, we may incur unexpected losses or otherwise be adversely affected. In addition, the information we use may be inaccurate or incomplete, both of which may be 22 LENDINGCLUB CORPORATION difficult to detect and avoid.
If these models are ineffective at predicting future losses or are otherwise inadequate, we may incur unexpected losses or otherwise be adversely affected. In addition, the information we use may be inaccurate or incomplete, both of which may be difficult to detect and avoid.
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 (including longer-term shifts in climate patterns, such as extreme heat, sea level rise and more frequent and prolonged drought), 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.
Our business operations are subject to interruption by, among other things, political events, terrorism, military conflict or acts of war (including the conflicts in Ukraine and the Gaza Strip), cyber-attacks, public health issues (such as the COVID-19 pandemic), natural disasters, severe weather, climate change (including longer-term shifts in climate patterns, such as extreme heat, sea level rise and more frequent and prolonged drought), infrastructure failure or outages (including power 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.
Social factors include changes in consumer confidence levels and changes in attitudes with respect to incurring debt and the stigma of personal bankruptcy. 33 LENDINGCLUB CORPORATION These social and economic factors may affect the ability or willingness of borrowers to make payments on their loans.
Social factors include changes in consumer confidence levels and changes in attitudes with respect to incurring debt and the stigma of personal bankruptcy. These social and economic factors may affect the ability or willingness of borrowers to make payments on their loans.
Additionally, our use of third-party vendors is subject to increasingly demanding regulatory requirements and attention by our regulators. Regulations require us to perform due diligence of, perform ongoing monitoring of and 39 LENDINGCLUB CORPORATION exercise certain controls over our third-party vendors and other ongoing third-party business relationships.
Additionally, our use of third-party vendors is subject to increasingly demanding regulatory requirements and attention by our regulators. Regulations require us to perform due diligence of, perform ongoing monitoring of and exercise certain controls over our third-party vendors and other ongoing third-party business relationships.
Specifically, personal information is increasingly subject to 42 LENDINGCLUB CORPORATION legislation and regulations in numerous U.S. and international jurisdictions, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction.
Specifically, personal information is increasingly subject to legislation and regulations in numerous U.S. and international jurisdictions, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction.
In addition, any such fines and 23 LENDINGCLUB CORPORATION penalties could create negative publicity, result in additional regulatory oversight that could limit our operations and ability to succeed, or otherwise hinder our plans to expand our business internationally.
In addition, any such fines and penalties could create negative publicity, result in additional regulatory oversight that could limit our operations and ability to succeed, or otherwise hinder our plans to expand our business internationally.
The U.S. economy is undergoing a period of rapid change and significant uncertainty. A number of factors are causing this change and uncertainty, including elevated inflation, increasing interest rates and changing U.S. consumer spending patterns.
The U.S. economy is undergoing a period of rapid change and significant uncertainty. A number of factors are causing this change and uncertainty, including elevated inflation, increasing interest rates, evolving government policies and changing U.S. consumer spending patterns.
In order to sell such loans, we may need to reduce the sale price in order to satisfy the yield expectations of our platform investors.
In order to sell such loans, we may need to reduce the sale price in order to satisfy the yield expectations of our marketplace investors.
Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage.
Our disaster recovery plan has not been tested under 41 LENDINGCLUB CORPORATION actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage.
In addition to the discussion in this section, see the risk factor “ Holding loans on our balance sheet exposes us to credit, default and liquidity risk, which may adversely affect our financial performance. ” Alternatively, in the event that investor demand at a given return exceeds borrower demand for that product for a given period, there may be insufficient inventory to satisfy investor demand.
See the risk factor “ Holding loans on our balance sheet exposes us to credit, default and liquidity risks, which may adversely affect our financial performance. ” Alternatively, in the event that investor demand at a given return exceeds borrower demand for that product for a given period, there may be insufficient inventory to satisfy investor demand.
Further, many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
Further, many of the companies with 38 LENDINGCLUB CORPORATION which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
In addition to the discussion in this section, see the risk factor “ The current economic environment, including a potential recession, could negatively affect our business and operating results. ” If we do not maintain or continue to increase loan originations, or expand our marketplace bank to new markets, we may not succeed in maintaining and/or growing our business, and as a result our business and results of operations could be adversely affected.
In addition to the discussion in this section, see the risk factor “ The current economic environment, including a potential recession and the resumption of Federal student loan payments, could negatively affect our business and operating results . ” 23 LENDINGCLUB CORPORATION If we do not maintain or continue to increase loan originations, or expand our marketplace bank to new markets, we may not succeed in maintaining and/or growing our business, and as a result our business and results of operations could be adversely affected.
We also may not be able to refinance our indebtedness or take such other actions, if necessary, on commercially reasonable terms, or at all. RISKS RELATED TO MACROECONOMIC CONDITIONS OR OTHER EXTERNAL FACTORS The current economic environment, including a potential recession, could negatively affect our business and operating results.
We also may not be able to refinance our indebtedness or take such other actions, if necessary, on commercially reasonable terms, or at all. RISKS RELATED TO MACROECONOMIC CONDITIONS OR OTHER EXTERNAL FACTORS The current economic environment, including a potential recession and the resumption of Federal student loan payments, could negatively affect our business and operating results.
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.
For example, the Ukrainian-Russian conflict, the responses thereto (such as sanctions imposed by the United States and other countries) and any expansion thereof have had, and may continue to have, unpredictable and/or adverse effects on the domestic and global economy and financial markets.
In addition to the discussion in this section, see the risk factor “ The current economic environment, including a potential recession, could negatively affect our business and operating results. ” If we are unable to develop and commercialize new products and services and enhancements to existing products and services, our business may suffer.
In addition to the discussion in this section, see the risk factor “ The current economic environment, including a potential recession and the resumption of Federal student loan payments, could negatively affect our business and operating results. ” If we are unable to develop and commercialize new products and services and enhancements to existing products and services, our business may suffer.
Although to date we have not suffered material costs or disruption to our business from any such incident, unauthorized access to our marketplace bank and servicing systems can result in confidential borrower and investor information being stolen and potentially used for criminal purposes.
Although in 2023, we did not suffer material costs or disruption to our business from any such incident, unauthorized access to our marketplace bank and servicing systems can result in confidential borrower and investor information being stolen and potentially used for criminal purposes.
Further, the pace of increases in inflation and interest rates creates unique challenges in our ability to operate our business. For example, the rapid increase in interest rates has quickly 32 LENDINGCLUB CORPORATION increased the cost of capital for our non-bank platform investors and thereby increased their return expectations.
Further, the pace of recent increases in inflation and interest rates creates unique challenges in our ability to operate our business. For example, the rapid increase in interest rates has quickly increased the cost of capital for our non-bank marketplace investors and thereby increased their return expectations.
Similarly, the returns to investors may be impacted by declines in market rates for sales of charged-off loans to third-party purchasers. Ultimately, if delinquencies impair our ability to offer attractive risk-adjusted returns for platform investors, they may seek alternative investments and our business may suffer.
Similarly, the returns to investors may be impacted by declines in market rates for sales of charged-off loans to third-party purchasers. Ultimately, if delinquencies impair 36 LENDINGCLUB CORPORATION our ability to offer competitive risk-adjusted returns for marketplace investors, they may seek alternative investments and our business may suffer.
There is also no assurance that we will be able to enter into any of these transactions if necessary, or if we do, what the final terms will be. Failure to attract investor capital on reasonable terms may result in a reduction in origination volume.
There is also no assurance that we will be able to enter into any of these arrangements or programs with interest parties, or if we do, what the final terms will be. Failure to attract investor capital on reasonable terms may result in a reduction in origination volume.
Additionally, applicable laws and regulations may restrict what LendingClub Corporation is able to do with the liquidity it does possess, which may adversely affect our business and results of operations. Bank holding companies, including the Company, are subject to capital and liquidity standards.
Additionally, applicable laws and regulations may restrict what LendingClub Corporation is able to do with the liquidity it does possess, which may adversely affect our business and results of operations. Bank holding companies, including the Company, are subject to capital and liquidity standards. From time to time, regulators may implement changes to these capital adequacy and liquidity requirements.
For example, certain of our platform investors and equity investors have recently inquired about our progress and disclosures on this topic. Further, this area of disclosure is subject to proposed rules from the SEC, which the Company continues to monitor and will comply 29 LENDINGCLUB CORPORATION with as applicable.
For example, certain of our marketplace investors and equity investors have inquired about our progress and disclosures on this topic. Further, this area of disclosure is subject to state legislation and proposed rules from the SEC, which the Company continues to monitor and will comply with as applicable.
Furthermore, in the event of any disruption to our operations or those of the companies with whom we do business 35 LENDINGCLUB CORPORATION 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.
Furthermore, in the event of any disruption to our operations or those of the companies with whom we do business with, we could experience delays in product development, marketing, operations and customer service efforts, 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.
The vast majority of our revenue currently comes from origination fees, servicing fees on loans sold to platform investors and net interest income earned from retaining loans on our balance sheet for investment. To grow these revenue streams, we must continue to increase loan originations over time.
The vast majority of our revenue currently comes from origination fees, servicing fees on loans sold to marketplace investors and net interest income earned from retaining loans on our balance sheet for investment. Growing these revenue streams may require that we increase loan originations over time.
These increases in inflation and interest rates are changing lending and spending patterns, and thereby prompting fears that the U.S. is currently experiencing or will soon experience an economic downturn or prolonged period of slow economic growth. Our business is sensitive to and may be adversely impacted by the current inflation and interest rate environment.
The elevated inflation and interest rates, and uncertainty with respect to when the rates will decrease, are changing lending and spending patterns, and thereby prompting fears that the U.S. is currently experiencing or will soon experience an economic downturn or prolonged period of slow economic growth. 31 LENDINGCLUB CORPORATION Our business is sensitive to, and may be adversely impacted by, the current inflation and interest rate environment.
Additionally, if borrowers default on loans that are not priced correctly because the information provided by the borrowers or third parties is inaccurate, investors may try to rescind their affected investments in these loans or the loans may not perform as expected and our reputation may be harmed.
Additionally, if borrowers default on loans that are not priced correctly because the information provided by the borrowers or third parties is inaccurate, investors may try to rescind their affected investments in these loans or the loans may not perform as expected and our reputation may be harmed. 37 LENDINGCLUB CORPORATION RISKS RELATED TO OUR INDUSTRY Substantial and increasing competition in our industry may harm our business.
For example, in response to elevated inflation, the FRB increased interest rates eight times since early 2022, from a federal funds rate range of 0.00% to 0.25% in early 2022 to 4.50% to 4.75% as of February 2023, and has indicated that it may conduct additional rate increases to combat inflation.
For example, in response to elevated inflation, the FRB increased interest rates eight times since early 2022, from a federal funds rate range of 0.00% to 0.25% in early 2022 to 5.25% to 5.50% as of December 2023, and has indicated a willingness to conduct rate increases as it deems necessary to combat inflation.
Additionally, in a rising rate environment the return expectations of our platform investors will increase, and we may be unable to meet those expectations, which could prompt certain platform investors to reduce or cease their loan purchases or investments.
Additionally, in an elevated interest rate environment the return expectations of our marketplace investors will likely be elevated, and we may be unable to meet those expectations, which could prompt certain marketplace investors to reduce or cease their loan purchases or investments.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAt our investor relations website, ir.lendingclub.com , we make available free of charge the following information and capabilities: • Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC; • Press releases, including with respect to our quarterly earnings; • Announcements of public conference calls and webcasts; • Corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, committee charters, business conduct and ethics policy, and other governance-related policies; • Other news and market data that we may post from time to time that investors might find useful or interesting; and • Opportunity to sign up for email notifications.
Biggest changeAt our investor relations website, ir.lendingclub.com , we make available free of charge the following information and capabilities: • Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC; • Press releases, including with respect to our quarterly earnings; • Announcements of public conference calls and webcasts; • Corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, committee charters, business conduct and ethics policy, and other governance-related policies; • Other news and market data that we may post from time to time that investors might find useful or interesting; and • Opportunity to sign up for email notifications. 16 LENDINGCLUB CORPORATION In addition to announcing material financial information through our investor relations website, press releases, SEC filings, and public conference calls and webcasts, we also intend to use other online and social media channels, including our Blog ( http://blog.lendingclub.com ) and X (formerly Twitter) handles (@LendingClub and @LendingClubIR) to disclose material non-public information and to comply with our disclosure obligations under Regulation FD.
The regulators have the power to, among other things: 10 LENDINGCLUB CORPORATION • require affirmative actions to correct any violation or practice; • issue administrative orders that can be judicially enforced; • direct increases in capital; • direct the sale of subsidiaries or other assets; • limit dividends and distributions; • restrict growth and activities; • set forth parameters, obligations and/or limitations with respect to the operation of our business; • assess civil monetary penalties; • remove officers and directors; and • terminate deposit insurance.
The regulators have the power to, among other things: • require affirmative actions to correct any violation or practice; • issue administrative orders that can be judicially enforced; • direct increases in capital; • direct the sale of subsidiaries or other assets; • limit dividends and distributions; • restrict growth and activities; • set forth parameters, obligations and/or limitations with respect to the operation of our business; • assess civil monetary penalties; • remove officers and directors; and 10 LENDINGCLUB CORPORATION • terminate deposit insurance.
We are required to, among other things, maintain an effective anti-money laundering and counter-terrorist compliance program, identify and file suspicious activity and currency transaction reports, and block transactions with sanctioned persons or jurisdictions. Compliance with these laws requires significant investment of management attention and resources.
We are required to, among other things, maintain an effective anti-money laundering and counter-terrorist compliance program, identify and file suspicious activity and currency transaction reports, and block or reject transactions with sanctioned persons or jurisdictions. Compliance with these laws requires significant investment of management attention and resources.
Risks Related to Macroeconomic Conditions or Other External Factors • the impact of the current economic environment, including a potential recession; • fluctuations in interest rates; • a decline in overall social and economic conditions; • the political environment and governmental fiscal/monetary policies; • negative publicity and media coverage; • the impact of COVID-19; and • the impact of geopolitical events, natural disasters, infrastructure failures and other business interruptions. 19 LENDINGCLUB CORPORATION Risks Related to Credit and Collections • the accuracy and effectiveness of our credit decisioning models; • the effectiveness of our collection efforts; and • the accuracy of credit and other information received from borrowers or third parties.
Risks Related to Macroeconomic Conditions or Other External Factors • the impact of the current economic environment, including a potential recession; • fluctuations in interest rates; • a decline in overall social and economic conditions; • the political environment and governmental fiscal/monetary policies; • negative publicity and media coverage; and • the impact of geopolitical events, natural disasters, infrastructure failures and other business interruptions. 18 LENDINGCLUB CORPORATION Risks Related to Credit and Collections • the accuracy and effectiveness of our credit decisioning models; • the effectiveness of our collection efforts; and • the accuracy of credit and other information received from borrowers or third parties.
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; require an additional capital conservation buffer over the minimum required capital ratios in order to avoid certain limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses; and define what qualifies as capital for purposes of meeting the capital requirements.
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 11 LENDINGCLUB CORPORATION assets and certain other items for purposes of the risk-based capital ratios; require an additional capital conservation buffer over the minimum required capital ratios in order to avoid certain limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses; and define what qualifies as capital for purposes of meeting the capital requirements.
These laws are enforced by a number of regulatory authorities, including the FRB, OCC, Office of Foreign Assets Control, the Financial Crimes Enforcement Network, the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.
These laws are enforced by a number of federal and state regulatory and enforcement authorities, including the FRB, OCC, Office of Foreign Assets Control, the Financial Crimes Enforcement Network, the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.
Midland Funding, LLC led to an increase in inquiries, regulatory proceedings and litigation relating to the application of state usury restrictions and limitations and lending arrangements where a bank or other third party has made a loan and then sells and assigns it.
Midland Funding, LLC led to an 14 LENDINGCLUB CORPORATION increase in inquiries, regulatory proceedings and litigation relating to the application of state usury restrictions and limitations and lending arrangements where a bank or other third party has made a loan and then sells and assigns it.
Risks Related to Operating Our Business • holding loans on our balance sheet and associated credit, default and liquidity risks; • maintaining and increasing loan originations; • maintaining our deposit base; • the ability of platform investors to exert influence over us; • our ability to develop and commercialize products and services; • maintaining adequate liquidity; • the impact of litigation and government and regulatory investigations, inquiries and requests; • M&A and related integration activity; • disruptions in our technology systems or failures in our technology initiatives; • maintaining, protecting and promoting our brand; • managing, and the impact of, fraudulent activity; • forecasting demand for loans; • offering a breadth and volume of loan purchase and investment opportunities for platform investors; • our use of the issuing bank partnership model (where it is still used in our business); • breaches of certain representations and warranties made to others; and • our ability to manage indebtedness.
Risks Related to Operating Our Business • holding loans on our balance sheet and associated credit, default and liquidity risks; • selling loans through our marketplace bank platform; • maintaining and increasing loan originations; • maintaining our deposit base; • our ability to develop and commercialize products and services; • maintaining adequate liquidity; • the impact of litigation and government and regulatory investigations, inquiries and requests; • disruptions in our technology systems or failures in our technology initiatives; • maintaining, protecting and promoting our brand; • managing, and the impact of, fraudulent activity; • forecasting demand for loans; • M&A and related integration activity; • offering a breadth and volume of loan purchase and investment opportunities for marketplace investors; • our use of the issuing bank partnership model (where it is still used in our business); • breaches of certain representations and warranties made to others; and • our ability to manage indebtedness.
We are subject to extensive regulation, supervision and legal requirements that affect virtually all aspects of our operations. The regulatory regime governing banking organizations is generally intended to protect customers, depositors, the DIF and the overall financial stability of the United States, not our stockholders or creditors. See “
We are subject to extensive regulation, supervision and legal requirements that affect virtually all aspects of our operations. The regulatory regime governing banking organizations is generally intended to protect customers, depositors, the Deposit Insurance Fund and the overall financial stability of the United States, not our stockholders or creditors. See “
These risks are discussed more fully below and include, but are not limited to: Risks Related to Regulation, Supervision and Compliance • operating within the bank regulatory regime and to the satisfaction of the banking regulators; • our compliance with applicable laws and regulations (including foreign laws); • the adequacy of our allowance for loan losses; • operating within capital and liquidity regulations and requirements; • the adequacy and effectiveness of our risk management framework; • the impact of any changes to the legal and regulatory regime; and • our participation in the Federal Paycheck Protection Program.
These risks are discussed more fully below and include, but are not limited to: Risks Related to Regulation, Supervision and Compliance • operating within the bank regulatory regime and to the satisfaction of the banking regulators; • our compliance with applicable laws and regulations (including foreign laws); • the adequacy of our allowance for loan losses; • operating within capital and liquidity regulations and requirements; • the adequacy and effectiveness of our risk management framework; and • the impact of any changes to the legal and regulatory regime.
Specifically, the capital thresholds in order to be regarded as a well-capitalized institution under the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations are as follows: a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a Tier 1 leverage ratio of 5.0%.
Specifically, the capital thresholds in order to be regarded as a well-capitalized institution under the BCBS standardized approach for U.S. banking organizations are as follows: a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a Tier 1 leverage ratio of 5.0%.
Further, we have employee resource groups and allyship programs designed to empower our employees to advocate for the growth of minorities and build a more diverse and inclusive workplace. As of December 31, 2022, our full-time workforce was 46% female and 49% non-white. Available Information Our website address is www.lendingclub.com.
Further, we have employee resource groups and allyship programs designed to empower our employees to advocate for the growth of minorities and build a more diverse and inclusive workplace. As of December 31, 2023, our full-time workforce was 44% female and 50% non-white. Available Information Our website address is www.lendingclub.com.
Statutes, regulations and policies govern, among other things, the scope of activities that we may conduct and the manner in which we may conduct them; our business plan and growth; our board, management, and risk management infrastructure; the type, terms, and pricing of our products and services; our loan and investment portfolio; our capital and liquidity levels; our reserves against deposits; our ability to pay dividends, buy-back stock or distribute capital; and our ability to engage in mergers, acquisitions and other strategic initiatives.
Statutes, regulations and regulatory and supervisory policies govern, among other things, the scope of activities that we may conduct and the manner in which we may conduct them; our business plan and growth; our board, management, and risk management infrastructure; the type, terms, and pricing of our products and services; our loan and investment portfolio; our capital and liquidity levels; our reserves against deposits; our ability to pay dividends, buy-back stock or distribute capital; and our ability to engage in mergers, acquisitions, strategic initiatives and transactions between LC Bank and its affiliates.
Because substantially all of our business activities, income and cash flow are expected to be generated by LC Bank, an inability of LC Bank to pay dividends or distribute capital to the Company would adversely affect the Company’s liquidity. 12 LENDINGCLUB CORPORATION See “ Part II – Item 8.
Dividends and capital distributions by LC Bank are also limited by the regulatory regimes. Because substantially all of our business activities, income and cash flow are expected to be generated by LC Bank, an inability of LC Bank to pay dividends or distribute capital to the Company would adversely affect the Company’s liquidity. See “ Part II – Item 8.
The FDIC charges deposit insurance assessments to FDIC-insured institutions, including LC Bank, to fund and support the DIF. The rate of these deposit insurance assessments is based on, among other things, the risk characteristics of LC Bank. The FDIC has the power to terminate LC Bank’s deposit insurance if it determines LC Bank is engaging in unsafe or unsound practices.
The rate of these deposit insurance assessments is based on, among other things, the risk characteristics of LC Bank. The FDIC has the power to terminate LC Bank’s deposit insurance if it determines LC Bank is engaging in unsafe or unsound practices.
In some cases, LC Bank must obtain a consumer’s consent before sharing information with an unaffiliated third party, and LC Bank must allow a consumer to opt out of LC Bank’s sharing of information with its affiliates for marketing and certain other purposes.
In some cases, LC Bank must obtain a consumer’s consent before sharing information with an unaffiliated third party, and LC Bank must allow a consumer to opt out of LC Bank’s sharing of information with its affiliates for marketing and certain other purposes. We are also subject to laws and regulatory requirements related to information technology and cybersecurity.
We expect this trend of state-level activity in those areas to continue, and are continually monitoring developments in the states in which our clients are located. Limitations on Transactions with Affiliates and Loans to Insiders Banks are subject to restrictions on their ability to conduct transactions with affiliates and other related parties under federal banking laws.
We expect this trend of state-level activity in those areas to continue, and are continually monitoring developments in the states in which our clients are located. 13 LENDINGCLUB CORPORATION Limitations on Transactions with Affiliates and Loans to Insiders LC Bank is subject to restrictions on its ability to conduct transactions with affiliates and other related parties.
The federal banking regulators have proposed reforms to the regulations implementing the CRA that may impact how certain activities may be considered, and how regulators may assess performance, under the CRA.
The federal banking regulators have recently finalized reforms to the regulations implementing the CRA that, subject to the outcome of related litigation, may impact how certain activities may be considered, and how regulators may assess performance, under the CRA.
The legal and regulatory regime is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement.
The legal and regulatory regime is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement. Changes are difficult to predict and could have significant effects on our business.
The Operating Agreement sets forth key parameters within which LC Bank must operate, such as with respect to its business plan, minimum capital, directors and senior executive officers, risk management and compliance. The banking and financial regulators have broad examination and enforcement authority.
The Operating Agreement set forth key parameters which LC Bank was required to operate within, such as with respect to its business plan, minimum capital, directors and senior executive officers, risk management and compliance. Per its original terms, the Operating Agreement expired on February 2, 2024. The banking regulators have broad examination and enforcement authority.
LC Bank is subject to periodic examination under the CRA by the OCC, which will assign ratings based on the methodologies set forth in its regulations and guidance. Less favorable CRA ratings, or concerns raised under the CRA, may adversely affect LC Bank’s ability to obtain approval for certain types of applications.
LC Bank is subject to periodic examination under the CRA by the OCC, which will assign ratings based on the methodologies set forth in its regulations and guidance. Less favorable CRA ratings, or concerns raised under the CRA, may result in negative regulatory consequences for LC Bank.
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.
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. The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (PCA).
We support our employees professionally through onboarding programs, on-the-job training, career development sessions and performance check-ins. We monitor employee satisfaction and engagement through semi-annual engagement surveys. Our employee experience has earned a number of external recognitions, including being named to Newsweek’s list of the top 100 most loved workplaces.
We monitor employee satisfaction and engagement through semi-annual engagement surveys. Our employee experience has earned a number of external recognitions, including being named to Newsweek’s list of the top 100 most loved workplaces.
The contents of the websites referred to above are not incorporated into this filing or in any other report or document on file with the SEC.
The contents of the websites referred to above are not incorporated into this filing or in any other report or document on file with the SEC. Further, our references to the URLs for these websites are intended to be inactive textual references only.
If we fail to comply with these laws and regulations, we may be subject to significant penalties, judgments, other monetary or injunctive remedies, lawsuits (including putative class action lawsuits and actions by state and local attorneys general or other officials), customer rescission rights, supervisory or enforcement actions, and civil or criminal liability.
However, many consumer protection rules adopted or amended by the CFPB do apply to us and are the subject of examination and enforcement with respect to us by the OCC. 12 LENDINGCLUB CORPORATION If we fail to comply with these laws and regulations, we may be subject to significant penalties, judgments, other monetary or injunctive remedies, lawsuits (including putative class action lawsuits and actions by state and local attorneys general or other officials), customer rescission rights, supervisory or enforcement actions, and civil or criminal liability.
The OCC charges fees to national banks, including LC Bank, in connection with its supervisory activities. LC Bank’s deposits are insured by the DIF of the FDIC up to applicable legal limits. As an FDIC-insured depository institution, LC Bank is subject under certain circumstances to supervision, regulation and examination by the FDIC.
LC Bank’s deposits are insured by the DIF of the FDIC up to applicable legal limits. As an FDIC-insured depository institution, LC Bank is subject under certain circumstances to supervision, regulation and examination by the FDIC. The FDIC charges deposit insurance assessments to FDIC-insured institutions, including LC Bank, to fund and support the DIF.
In addition, purchases and sales of assets between an insured depository institution and its executive officers, directors, and principal stockholders may also be limited under such laws. The Sarbanes-Oxley Act generally prohibits loans by public companies to their executive officers and directors.
In addition, extensions of credit between an insured depository institution and its executive officers, directors, principal stockholders, and their related interests are also limited by federal law. The Sarbanes-Oxley Act generally prohibits loans by public companies to their executive officers and directors.
In addition to anti-racism, inclusive hiring, and breaking bias trainings for all of our employees, we have executive-sponsored programs designed to provide women and under-represented individuals with leadership training and growth opportunities.
Diversity and inclusion is an important consideration in hiring decisions and we strive for a 50% diverse candidate slate and interview panel for open roles. In addition to anti-racism, inclusive hiring, and breaking bias trainings for all of our employees, we have executive-sponsored programs designed to provide women and under-represented individuals with leadership training and growth opportunities.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 20. Regulatory Requirements ” for additional information. Consumer Protection We are subject to a broad array of federal, state and local laws and regulations that govern almost every aspect of our business relationships with consumers.
Consumer Protection We are subject to a broad array of federal, state and local laws and regulations that govern almost every aspect of our business relationships with consumers.
Our success depends, in large part, on our ability to recruit, develop, motivate, and retain employees with the skills to execute our long-term strategy. We participate in a competitive market for talent and aim to distinguish ourselves by offering our employees the opportunity to make a meaningful positive impact on the financial health of Americans in an innovative technology-oriented environment.
We participate in a competitive market for talent and aim to distinguish ourselves by offering our employees the opportunity to make a meaningful positive impact on the financial health of Americans in an innovative technology-oriented environment. We also offer competitive compensation and benefits.
Further, our references to the URLs for these websites are intended to be inactive textual references only. 17 LENDINGCLUB CORPORATION The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . 18 LENDINGCLUB CORPORATION Item 1A.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . 17 LENDINGCLUB CORPORATION Item 1A.
LC Bank has assets less than $10 billion; therefore, we are not currently subject to the examination and enforcement jurisdiction of the CFPB. However, many consumer protection rules adopted or amended by the CFPB do apply to us and are the subject of examination and enforcement with respect to us by the OCC.
LC Bank has assets less than $10 billion; therefore, we are not currently subject to the examination and enforcement jurisdiction of the CFPB.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. For example, the California Privacy Rights Act of 2020 became fully operative on January 1, 2023.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
The bank regulatory regime, including through the Operating Agreement, requires that we obtain prior approval of one or more regulators for various initiatives or corporate actions, including acquisitions or minority investments, the establishment of branches, certain changes to our board or senior management, certain dividends or capital distributions, and significant deviations from LC Bank’s previously approved business plan.
The bank regulatory regime requires that we obtain prior approval of one or more regulators for various initiatives or corporate actions, including acquisitions or minority investments, the establishment, relocation or closure of branches, certain dividends or capital distributions.
We are also subject to laws and 13 LENDINGCLUB CORPORATION regulatory requirements related to information technology and cybersecurity. For example, the Federal Financial Institutions Examination Council (FFIEC), which is a council comprised of the primary federal banking regulators, has issued guidance and supervisory expectations for banking organizations with respect to information technology and cybersecurity.
For example, the Federal Financial Institutions Examination Council (FFIEC), which is a council comprised of the primary federal banking regulators, has issued guidance and supervisory expectations for banking organizations with respect to information technology and cybersecurity. Our regulators regularly examine us for compliance with applicable laws and adherence to industry best practices with respect to these topics.
Thus, if LC Bank were to be in financial distress or to otherwise be viewed by the regulators as in an unsatisfactory condition, then the regulators could require the Company to provide additional capital or liquidity support, or take other action, in support of LC Bank, even if doing so is not otherwise in the best interest of the Company. 11 LENDINGCLUB CORPORATION Regulatory Capital Requirements and Prompt Corrective Action The banking regulators view capital levels as important indicators of an institution’s financial soundness.
Thus, if LC Bank were to be in financial distress or to otherwise be viewed by the regulators as in an unsatisfactory condition, then the Federal Reserve has the authority to require the Company to act as a source of strength for LC Bank, which could include providing additional capital or liquidity support, or take other action, in support of LC Bank, even if doing so is not otherwise in the best interest of the Company.
In addition to capital requirements, depository institutions are required to maintain non-interest bearing reserves at specified levels against their transaction accounts and certain non-personal time deposits.
Among other things, institutions that are less than well-capitalized become subject to increasingly stringent restrictions on their ability to accept and/or rollover brokered deposits. In addition to capital requirements, depository institutions are required to maintain non-interest bearing reserves at specified levels against their transaction accounts and certain non-personal time deposits.
Cal.)). 15 LENDINGCLUB CORPORATION Regulatory Examinations and Actions Relating to the Company’s Pre-Acquisition Business The Company is routinely subject to examination for compliance with applicable laws and regulations in the states in which it is licensed.
The Office of the Comptroller of the Currency, et al. , No. 4:20-cv-05200-JSW (N.D. Cal.); California, et al. v. Federal Deposit Insurance Corporation , No. 4:20-cv-05860-JSW (N.D. Cal.)). Regulatory Examinations and Actions Relating to the Company’s Pre-Acquisition Business The Company is routinely subject to examination for compliance with applicable laws and regulations in the states in which it is licensed.
In a receivership, the claims of LC Bank’s depositors (and those of the FDIC as subrogee of LC Bank) would have priority over other general unsecured claims against LC Bank. We are subject to the disclosure and regulatory requirements of the Securities Act and the Exchange Act, both as administered by the SEC.
In a receivership, the claims of the receiver for administrative expenses and the claims of LC Bank’s depositors (and those of the FDIC as subrogee of LC Bank) would have priority over other general unsecured claims against LC Bank.
Human Capital The Company and its consolidated subsidiaries had 1,585 employees as of December 31, 2022, all of whom were located in the United States. On January 12, 2023, we announced a plan to streamline our operations and more closely align our expense structure to loan volume and revenue.
Human Capital The Company and its consolidated subsidiaries had 1,025 employees as of December 31, 2023, all of whom were located in the United States. On October 12, 2023, we announced a cost reduction plan to align our cost structure to our financial profile given the continued adverse impact of the evolving macroeconomic environment on our 15 LENDINGCLUB CORPORATION business.
Our common stock is listed on the New York Stock Exchange (NYSE) under the trading symbol “LC” and therefore we are also subject to the rules of the NYSE for listed companies. Broad Powers to Ensure Safety and Soundness A principal objective of the U.S. bank regulatory system is to ensure the safety and soundness of banking organizations.
We are subject to the disclosure and regulatory requirements of the Securities Act and the Exchange Act, both as administered by the SEC. Our common stock is listed on the New York Stock Exchange (NYSE) under the trading symbol “LC” and therefore we are also subject to the rules of the NYSE for listed companies.
Changes are difficult to predict and could have significant effects on our business. 9 LENDINGCLUB CORPORATION The material regulatory requirements that are applicable to us and our subsidiaries are summarized below.
The material regulatory requirements that are applicable to us and our subsidiaries are summarized below.
Our benefits programs consist of comprehensive health, dental, and welfare benefits, including a 401(k) matching program and standalone mental health coverage. We strive to create a welcoming and empowering environment where our employees feel that they are reaching their full potential, are highly engaged and are doing what they do best every day to accomplish our mission and vision.
We strive to create a welcoming and empowering environment where our employees feel that they are reaching their full potential, are highly engaged and are doing what they do best every day to accomplish our mission and vision. We support our employees professionally through onboarding programs, on-the-job training, career development sessions and performance check-ins.
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 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.
We also offer competitive compensation and benefits. Our compensation programs consist primarily of base salary, corporate bonus, and equity awards. We periodically conduct pay equity surveys to ensure our compensation programs are applied equitably across our 16 LENDINGCLUB CORPORATION workforce.
Our compensation programs consist primarily of base salary, annual corporate bonus opportunity, and long-term equity and cash awards. We periodically conduct pay equity surveys to ensure our compensation programs are applied equitably across our workforce. Our benefits programs consist of comprehensive health, dental, and welfare benefits, including a 401(k) matching program and standalone mental health coverage.
With that principle in mind, in 2020, we rapidly and effectively implemented a work from home program. In 2022, we reopened our physical offices and we grounded our return to office strategy in legal requirements and public health guidance, in combination with the needs of our employees.
With that principle in mind, in 2020, we rapidly and effectively implemented a work from home program. In 2022, we reopened our physical offices and have since adopted a hybrid work model for our employees. Diversity and inclusion are core to our corporate culture and we continue to strive to improve the diversity of talent within the financial services industry.
The federal banking regulators have also implemented rules to require banks and their service providers to provide certain notification when certain cybersecurity incidents occur. State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
For example, they will evaluate our security of user and customer credentials, business continuity planning, and the ability to identify and thwart cyber-attacks. The federal banking regulators have also implemented rules to require banks and their service providers to provide certain notification when certain cybersecurity incidents occur.
The FRB’s jurisdiction also extends to any company that is directly or indirectly controlled by a bank holding company. As a national bank, LC Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Office of the Comptroller of the Currency (OCC).
The FRB acts as the supervisor of the consolidated operations of bank holding companies. 9 LENDINGCLUB CORPORATION As a national bank, LC Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Office of the Comptroller of the Currency (OCC). The OCC charges fees to national banks, including LC Bank, in connection with its supervisory activities.
The plan included a reduction of our workforce by 225 employees and a reorganization to align responsibilities for the operation and utilization of our investor marketplace and bank balance sheet (the Workforce Reduction). For employees impacted by the Workforce Reduction, we offered severance, extended benefits coverage and outplacement assistance.
The plan reduced our workforce by 172 employees (the Workforce Reduction). For employees impacted by the Workforce Reduction, we offered severance, extended benefits coverage and outplacement assistance. Our success depends, in large part, on our ability to recruit, develop, motivate, and retain employees with the skills to execute our long-term strategy.
Removed
In this regard, and unless otherwise directed by the OCC, we have made commitments for LC Bank to maintain a CET1 risk-based capital ratio of 11%, a Tier 1 risk-based capital ratio above 11%, a total risk-based capital ratio above 13% and a Tier 1 leverage ratio of 11% for a minimum of three years following its formation.
Added
Broad Powers to Ensure Safety and Soundness A principal objective of the U.S. bank regulatory system is to ensure the safety and soundness of banking organizations.
Removed
The PCA requires remedial actions and imposes limitations that become increasingly stringent as an institution’s condition deteriorates and its PCA capitalization category declines. Among other things, institutions that are less than well-capitalized become subject to increasingly stringent restrictions on their ability to accept and/or rollover brokered deposits.
Added
Capital and Liquidity Requirements and Prompt Corrective Action The Company and LC Bank are expected to have established policies and practices for identifying, measuring, monitoring and controlling their funding and liquidity risks. The banking regulators view capital levels as important indicators of an institution’s financial soundness.
Removed
Dividends and capital distributions by LC Bank are also limited by the regulatory regimes. For example, the Operating Agreement requires LC Bank to obtain a prior written determination of non-objection from the OCC before declaring any dividend. Taking into account a wide range of factors, the OCC may object and therefore prevent LC Bank from paying dividends to the Company.
Added
The U.S. capital requirements generally are modeled off the Capital Accords of the Basel Committee on Banking Supervision (BCBS).
Removed
Other laws and regulations generally applicable to national banks also limit the amount of dividends and capital distributions that may be made by a national bank and/or require prior approval of the OCC.
Added
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 21. Regulatory Requirements ” and “ Item 1A. Risk Factors – Risks Related to Regulation, Supervision and Compliance ” for additional information.
Removed
Our regulators regularly examine us for compliance with applicable laws, and adherence to industry best practices, with respect to these topics. For example, they will evaluate our security of user and customer credentials, business continuity planning, and the ability to identify and thwart cyber-attacks.
Added
For example, the California Privacy Rights Act of 2020 became fully operative on January 1, 2023.
Removed
Certain Regulatory Developments Relating to the COVID-19 Pandemic CARES Act On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was passed by Congress and signed into law by the President.
Removed
Below is a brief overview of some of the provisions of the CARES Act and other regulations and supervisory guidance related to the COVID-19 pandemic that are applicable to the operations and activities of the Company and LC Bank. 14 LENDINGCLUB CORPORATION Paycheck Protection Program (PPP).
Removed
A principal provision of the CARES Act amended the Small Business Administration’s (SBA) loan program to create a guaranteed, unsecured loan program, the PPP, to fund operational costs of eligible businesses, organizations, and self-employed persons during the COVID-19 pandemic.
Removed
On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds.
Removed
Shortly thereafter, and due to the evolving impact of the COVID-19 pandemic, additional legislation authorizing the SBA to resume accepting PPP applications on July 6, 2020 and extending the PPP application deadline to August 8, 2020 was signed. Subsequently, the SBA was authorized to resume accepting PPP applications through May 31, 2021.
Removed
As a participating lender in the PPP, LC Bank continues to monitor legislative, regulatory, and supervisory developments related thereto. Temporary Regulatory Capital Relief Related to Impact of CECL. Concurrent with enactment of the CARES Act, federal bank regulatory authorities issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL.
Removed
The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.
Removed
The Office of the Comptroller of the Currency, et al. , No. 4:20-cv-05200-JSW (N.D. Cal.); California, et al. v. Federal Deposit Insurance Corporation , No. 4:20-cv-05860-JSW (N.D.
Removed
Diversity and inclusion are core to our corporate culture and we continue to strive to improve the diversity of talent within the financial services industry. Diversity and inclusion is an important consideration in hiring decisions and we strive for a 50% diverse candidate slate and interview panel for open roles.
Removed
In addition to announcing material financial information through our investor relations website, press releases, SEC filings, and public conference calls and webcasts, we also intend to use other online and social media channels, including our Blog ( http://blog.lendingclub.com ) and Twitter handles (@LendingClub and @LendingClubIR) to disclose material non-public information and to comply with our disclosure obligations under Regulation FD.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor more information regarding our leases, see “ Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 18. Leases ” of this Annual Report.
Biggest changeFor more information regarding our leases, see “ Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 19. Leases ” of this Annual Report.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings The information set forth under “ Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 19. Commitments and Contingencies ” of this Annual Report is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 48 LENDINGCLUB CORPORATION PART II
Biggest changeItem 3. Legal Proceedings The information set forth under “ Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 20. Commitments and Contingencies ” of this Annual Report is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 49 LENDINGCLUB CORPORATION PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 48 PART II 49 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 Item 6. [Reserved] 50 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 51
Biggest changeItem 4. Mine Safety Disclosures 49 PART II 50 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 50 Item 6. [Reserved] 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−1 removed2 unchanged
Biggest changeRegulatory Requirements ” for a summary of certain rules and regulations that limit the ability of the Company or LC Bank to pay dividends. Sales of Unregistered Securities None.
Biggest changeFinancial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 21. Regulatory Requirements ” for a summary of certain rules and regulations that limit the ability of the Company or LC Bank to pay dividends. Sales of Unregistered Securities None.
Issuer Purchases of Equity Securities None. 49 LENDINGCLUB CORPORATION Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of LendingClub under the Securities Act, or the Exchange Act.
Issuer Purchases of Equity Securities None. 50 LENDINGCLUB CORPORATION Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of LendingClub under the Securities Act, or the Exchange Act.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock LendingClub’s common stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol “LC.” Holders of Record As of January 31, 2023, there were 34 holders of record of LendingClub’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock LendingClub’s common stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol “LC.” Holders of Record As of January 31, 2024, there were 34 holders of record of LendingClub’s common stock.
An investment of $100 (with reinvestment of all dividends, when applicable) is assumed to have been made in LendingClub’s common stock and in each index at market close on December 29, 2017 and its relative performance is tracked through December 30, 2022. The returns shown are based on historical results and are not intended to suggest future performance.
An investment of $100 (with reinvestment of all dividends, when applicable) is assumed to have been made in LendingClub’s common stock and in each index at market close on December 31, 2018 and its relative performance is tracked through December 29, 2023. The returns shown are based on historical results and are not intended to suggest future performance.
Dividend Policy LendingClub has not paid cash or other dividends since its inception, and does not anticipate paying cash or other dividends in the foreseeable future. Further, see “ Part I – Item 1. Business – Regulation and Supervision – Regulatory Limits on Dividends and Distributions ” and “Notes to Consolidated Financial Statements – Note 20.
Dividend Policy LendingClub has not paid cash or other dividends since its inception, and does not anticipate paying cash or other dividends in the foreseeable future. Further, see “ Part I – Item 1. Business – Regulation and Supervision – Regulatory Limits on Dividends and Distributions ” and “Item 8.
Removed
December 29, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 30, 2022 LendingClub Corporation $ 100 $ 63.68 $ 61.11 $ 51.14 $ 117.09 $ 42.62 KBW Nasdaq Bank Index $ 100 $ 80.40 $ 106.23 $ 91.75 $ 123.91 $ 94.51 Standard & Poor’s 500 Index $ 100 $ 93.76 $ 120.84 $ 140.49 $ 178.27 $ 143.61
Added
December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 30, 2022 December 29, 2023 LendingClub Corporation $ 100 $ 95.97 $ 80.30 $ 183.88 $ 66.92 $ 66.46 KBW Nasdaq Bank Index $ 100 $ 132.14 $ 114.13 $ 154.12 $ 117.55 $ 111.92 Standard & Poor’s 500 Index $ 100 $ 128.88 $ 149.83 $ 190.13 $ 153.16 $ 190.27

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 2021 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, restricted cash and other $ 987,833 $ 18,579 1.88 % $ 754,920 $ 1,170 0.16 % $ 395,734 $ 1,053 0.27 % Securities available for sale at fair value 370,277 16,116 4.35 % 288,545 11,025 3.82 % 217,189 12,125 5.58 % Loans held for sale 162,760 26,183 16.09 % 218,349 29,540 13.53 % 489,750 72,876 14.88 % Loans and leases held for investment at amortized cost: Unsecured personal loans (2) 2,967,410 410,222 13.82 % 863,266 122,807 15.52 % — — — % Secured consumer loans 301,023 11,093 3.69 % 485,195 17,105 3.85 % — — — % Commercial loans and leases 669,907 36,167 5.40 % 617,483 30,731 5.43 % — — — % PPP loans 138,575 7,968 5.75 % 487,435 18,334 4.10 % — — — % Loans and leases held for investment at amortized cost 4,076,915 465,450 11.42 % 2,453,379 188,977 8.40 % — — — % Loans held for investment at fair value 91,057 12,877 14.14 % 34,938 4,436 12.70 % 60,093 7,688 12.79 % Total loans and leases held for investment 4,167,972 478,327 11.48 % 2,488,317 193,413 7.77 % 60,093 7,688 12.79 % Retail and certificate loans held for investment at fair value 128,047 18,135 14.16 % 406,406 57,684 14.19 % 815,255 115,952 14.20 % Total interest-earning assets 5,816,889 557,340 9.58 % 4,156,537 292,832 7.46 % 1,978,021 209,694 10.59 % Cash and due from banks and restricted cash 72,764 112,012 114,105 Allowance for loan and lease losses (234,532) (77,223) — Other non-interest earning assets 547,388 426,323 339,746 Total assets $ 6,202,509 $ 4,617,649 $ 2,431,872 Interest-bearing liabilities Interest-bearing deposits: Checking and money market accounts 2,205,691 16,464 0.75 % $ 2,071,640 $ 5,954 0.31 % $ — $ — — % Savings accounts and certificates of deposit 2,123,037 43,987 2.07 % 383,447 1,274 0.36 % — — — % Interest-bearing deposits (2) 4,328,728 60,451 1.40 % 2,455,087 7,228 0.32 % — — — % Short-term borrowings 10,437 1,002 9.60 % 68,032 3,677 5.40 % 387,958 17,837 4.60 % Advances from PPPLF 141,528 503 0.36 % 365,976 1,183 0.35 % — — — % Retail notes, certificates and secured borrowings 128,047 18,135 14.16 % 407,471 57,684 14.16 % 816,010 115,952 14.21 % Structured Program borrowings 20,962 1,508 7.19 % 110,579 9,638 8.72 % 162,688 16,204 9.96 % 59 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Year Ended December 31, 2022 2021 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 Other long-term debt 15,219 916 6.02 % 16,355 591 3.61 % 6,824 373 5.47 % Total interest-bearing liabilities 4,644,921 82,515 1.78 % 3,423,500 80,001 2.36 % 1,373,480 150,366 10.95 % Non-interest bearing deposits 264,099 126,982 — Other liabilities 274,209 289,163 272,164 Total liabilities $ 5,183,229 $ 3,839,645 $ 1,645,644 Total equity $ 1,019,280 $ 778,004 $ 786,228 Total liabilities and equity $ 6,202,509 $ 4,617,649 $ 2,431,872 Interest rate spread 7.80 % 5.10 % (0.36) % Net interest income and net interest margin $ 474,825 8.16 % $ 212,831 5.56 % $ 59,328 3.00 % (1) Nonaccrual loans and any related income are included in their respective loan categories.
Biggest changeYear Ended December 31, 2023 2022 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 (1) Cash, cash equivalents, restricted cash and other $ 1,293,047 $ 65,917 5.10 % $ 987,833 $ 18,579 1.88 % $ 754,920 $ 1,170 0.16 % Securities available for sale at fair value 652,047 40,235 6.17 % 370,277 16,116 4.35 % 288,545 11,025 3.82 % Loans held for sale at fair value 252,519 35,655 14.12 % 162,760 26,183 16.09 % 218,349 29,540 13.53 % Loans and leases held for investment at amortized cost: Unsecured personal loans (2) 4,143,482 549,256 13.26 % 2,967,410 410,222 13.82 % 863,266 122,807 15.52 % Secured consumer loans 402,668 16,963 4.21 % 301,023 11,093 3.69 % 485,195 17,105 3.85 % Commercial loans and leases 722,419 48,307 6.69 % 669,907 36,167 5.40 % 617,483 30,731 5.43 % PPP loans 26,114 2,209 8.46 % 138,575 7,968 5.75 % 487,435 18,334 4.10 % Loans and leases held for investment at amortized cost 5,294,683 616,735 11.65 % 4,076,915 465,450 11.42 % 2,453,379 188,977 8.40 % Loans held for investment at fair value 538,577 69,866 12.97 % 91,057 12,877 14.14 % 34,938 4,436 12.70 % Total loans and leases held for investment 5,833,260 686,601 11.77 % 4,167,972 478,327 11.48 % 2,488,317 193,413 7.77 % Retail and certificate loans held for investment at fair value 28,927 4,222 14.60 % 128,047 18,135 14.16 % 406,406 57,684 14.19 % Total interest-earning assets 8,059,800 832,630 10.33 % 5,816,889 557,340 9.58 % 4,156,537 292,832 7.46 % Cash and due from banks and restricted cash 70,653 72,764 112,012 Allowance for loan and lease losses (345,434) (234,532) (77,223) Other non-interest earning assets 676,335 547,388 426,323 Total assets $ 8,461,354 $ 6,202,509 $ 4,617,649 Interest-bearing liabilities Interest-bearing deposits: Checking and money market accounts 1,344,431 34,462 2.56 % $ 2,205,691 $ 16,464 0.75 % $ 2,071,640 $ 5,954 0.31 % Savings accounts and certificates of deposit 5,345,734 231,094 4.32 % 2,123,037 43,987 2.07 % 383,447 1,274 0.36 % Interest-bearing deposits (2) 6,690,165 265,556 3.97 % 4,328,728 60,451 1.40 % 2,455,087 7,228 0.32 % Retail notes and certificates 28,927 4,222 14.60 % 128,047 18,135 14.16 % 407,471 57,684 14.16 % Other interest-bearing liabilities 40,193 1,014 2.52 % 188,146 3,929 2.09 % 560,942 15,089 2.69 % Total interest-bearing liabilities 6,759,285 270,792 4.01 % 4,644,921 82,515 1.78 % 3,423,500 80,001 2.36 % 61 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Year Ended December 31, 2023 2022 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 236,618 264,099 126,982 Other liabilities 261,401 274,209 289,163 Total liabilities $ 7,257,304 $ 5,183,229 $ 3,839,645 Total equity $ 1,204,050 $ 1,019,280 $ 778,004 Total liabilities and equity $ 8,461,354 $ 6,202,509 $ 4,617,649 Interest rate spread 6.32 % 7.80 % 5.10 % Net interest income and net interest margin $ 561,838 6.97 % $ 474,825 8.16 % $ 212,831 5.56 % (1) Nonaccrual loans and any related income are included in their respective loan categories.
Loans and Leases Held for Investment at Amortized Cost, Net of Allowance For Loan and Lease Losses .” 63 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 and deposit customer 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 consulting fees.
Loans and Leases Held for Investment at Amortized Cost, Net of Allowance For Loan and Lease Losses .” 64 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 and deposit customer acquisition efforts and building general brand awareness, (iii) equipment and software, (iv) depreciation and amortization, (v) professional services, which primarily consist of consulting fees and (vi) occupancy, which includes rent expense and all other costs related to occupying our office spaces.
The formation of LC Bank as a nationally chartered association and the organization of the Company as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and the FRB, including the requirement to maintain regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S.
The formation of LC Bank as a nationally chartered association and the organization of the Company as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and the FRB, including the requirement to maintain regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (Basel III).
Net Income (Loss) Excluding Income Tax Benefit adjusts for the release of a deferred tax asset valuation allowance in 2022. Diluted EPS Excluding Income Tax Benefit is a non-GAAP financial measure calculated by dividing Net Income (Loss) Excluding Income Tax Benefit by the weighted-average diluted common shares outstanding.
Net Income Excluding Income Tax Benefit adjusts for the release of a deferred tax asset valuation allowance in 2022. Diluted EPS Excluding Income Tax Benefit is a non-GAAP financial measure calculated by dividing Net Income Excluding Income Tax Benefit by the weighted-average diluted common shares outstanding.
Principal payments on our loans HFI continue to reduce the outstanding balance of this portfolio, and, as a result, the fair value impact from changes in interest rates continues to diminish. Contingencies For a comprehensive discussion of contingencies as of December 31, 2022, see “ Item 8.
Principal payments on our loans HFI continue to reduce the outstanding balance of this portfolio, and, as a result, the fair value impact from changes in interest rates continues to diminish. Contingencies For a comprehensive discussion of contingencies as of December 31, 2023, see “ Item 8.
Management may make adjustments as the assumptions in the underlying analyses change to reflect an estimate of expected lifetime loan losses and prepayments at the reporting date, based on the best information available at that time. 74 LENDINGCLUB CORPORATION Item 7A.
Management may make adjustments as the assumptions in the underlying analyses change to reflect an estimate of expected lifetime loan losses and prepayments at the reporting date, based on the best information available at that time. 75 LENDINGCLUB CORPORATION Item 7A.
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.
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, or be required to obtain a new license or authorization, (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 and/or (vi) be unable to execute on certain Company initiatives, 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.
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.
As a 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.
In this regard, and unless otherwise directed by the FRB and the OCC, we have made commitments for the Company and LC Bank (until February 2024) to maintain a CET1 risk-based capital ratio of 11.0%, a Tier 1 risk-based capital ratio above 11.0%, a total risk-based capital ratio above 13.0%, and a Tier 1 leverage ratio of 11.0%.
In this regard, and unless otherwise directed by the FRB and the OCC, the Company and LC Bank made commitments (until February 2024) to maintain a CET1 risk-based capital ratio of 11.0%, a Tier 1 risk-based capital ratio above 11.0%, a total risk-based capital ratio above 13.0%, and a Tier 1 leverage ratio of 11.0%.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 19. Commitments and Contingencies. ” Critical Accounting Estimates Our significant accounting policies are described in “ Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 20. Commitments and Contingencies. ” Critical Accounting Estimates Our significant accounting policies are described in “ Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1.
Financial Statements and Supplementary Data – Consolidated Statements of Cash Flows ” for additional detail regarding our cash flows. Market Risk Market risk represents the risk of potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices.
See “ Item 8. Financial Statements and Supplementary Data – Consolidated Statements of Cash Flows ” for additional detail regarding our cash flows. Market Risk Market risk represents the risk of potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices.
We believe Pre-Provision Net Revenue, Net Income (Loss) Excluding Income Tax Benefit and Diluted EPS Excluding Income Tax Benefit are important measures because they reflect the underlying financial performance of our business operations. Pre-Provision Net Revenue is a non-GAAP financial measure calculated by subtracting the provision for credit losses and income tax benefit/expense from net income.
We believe PPNR, Net Income Excluding Income Tax Benefit and Diluted EPS Excluding Income Tax Benefit are important measures because they reflect the underlying financial performance of our business operations. PPNR is a non-GAAP financial measure calculated by subtracting the provision for credit losses and income tax benefit/expense from net income.
Income Taxes For the year ended December 31, 2022, we recorded an income tax benefit of $136.6 million primarily due to the release of a $175.6 million valuation allowance against our deferred tax assets, of which $143.5 million is primarily based on our reassessment of the realizability of our deferred tax assets.
For the year ended December 31, 2022, we recorded an income tax benefit of $136.6 million primarily due to the release of a $175.6 million valuation allowance against our deferred tax assets, of which $143.5 million was primarily based on our reassessment of the future realizability of our deferred tax assets.
LendingClub Holding Company Liquidity The primary source of liquidity at the holding company is $56.5 million and $88.3 million in cash and cash equivalents as of December 31, 2022 and 2021, respectively. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
LendingClub Holding Company Liquidity The primary source of liquidity at the holding company is $110.3 million and $56.5 million in cash and cash equivalents as of December 31, 2023 and 2022, respectively. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
Capital expenditures in 2023 are expected to be approximately $60 million, primarily related to costs associated with the continued development and support of our online lending marketplace platform, including regulatory compliance costs.
Capital expenditures in 2024 are expected to be approximately $50 million, primarily related to costs associated with the continued development and support of our online lending marketplace platform, including regulatory compliance costs.
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: December 31, 2022 December 31, 2021 Instantaneous Change in Interest Rates: + 200 basis points (6.9) % (0.8) % + 100 basis points (3.3) % (0.2) % - 100 basis points 1.9 % (0.2) % - 200 basis points 3.5 % N/M As illustrated in the table above, net interest income is projected to decrease over the next twelve months during rising interest rate environments primarily as a result of higher rates paid on interest-bearing deposits, partially offset by higher rates earned on new loans, investment purchases, and cash and cash equivalents.
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: December 31, 2023 December 31, 2022 Instantaneous Change in Interest Rates: + 200 basis points (4.8) % (6.9) % + 100 basis points (2.2) % (3.3) % - 100 basis points 0.0 % 1.9 % - 200 basis points (0.4) % 3.5 % As illustrated in the table above, net interest income is projected to decrease over the next twelve months during hypothetical rising interest rate environments primarily as a result of higher rates paid on interest-bearing deposits, partially offset by higher rates earned on new loans, investment purchases, and cash and cash equivalents as well as by the impact of our hedging activity.
For additional information on the ACL and nonaccrual loans and leases, see “ Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies ” and “ Note 6.
For additional information on the ACL and nonaccrual loans and leases, see “ Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies ” and “ Note 6.
(2) The average yield/rate for unsecured consumer loans decreased in 2022 compared to 2021 due to a shift in the mix toward higher credit quality loans. The average yield/rate for interest-bearing deposits increased due to a higher federal funds rate and an increasing concentration of online deposits.
(2) The average yield/rate for unsecured consumer loans decreased in 2023 compared to 2022 due to a shift in the mix toward higher credit quality loans, which generally have lower interest rates. The average yield/rate for interest-bearing deposits increased due to a higher federal funds rate and an increasing concentration of online deposits.
Specifically, as a bank holding company, the Company is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the FRB. Further, as a national bank, LC Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the OCC.
Further, as a national bank, LC Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the OCC.
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.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 5. Securities Available for Sale. ” LendingClub Holding Company At the holding company level, we continue to measure interest rate sensitivity by evaluating the change in fair value of certain assets and liabilities due to a hypothetical change in interest rates.
See “ Non-GAAP Financial Measures ” for additional information. (2) Excludes an income tax benefit of $143.5 million for the year ended December 31, 2022 due to the release of a deferred tax asset valuation allowance. (3) Calculated as the ratio of non-interest expense to total net revenue.
See “ Non-GAAP Financial Measures ” for additional information. (2) The year ended December 31, 2022 excludes an income tax benefit of $143.5 million due to the release of our deferred tax asset valuation allowance. (3) Calculated as the ratio of non-interest expense to total net revenue. (4) Includes unsecured personal loans and auto loans only.
The following table presents nonaccrual loans and leases (1) : December 31, 2022 December 31, 2021 Total nonaccrual loans and leases held for investment $ 34,827 $ 9,985 Ratio of total nonaccrual loans and leases held for investment to total loans and leases held for investment 0.7 % 0.3 % Ratio of total nonaccrual loans and leases held for investment to total loans and leases held for investment, excluding PPP loans 0.7 % 0.4 % (1) Excluding PPP loans, there were no loans that were 90 days or more past due and accruing as of both December 31, 2022 and 2021 .
The following table presents nonaccrual loans and leases (1) : December 31, 2023 December 31, 2022 Total nonaccrual loans and leases held for investment at amortized cost $ 44,382 $ 34,827 Ratio of total nonaccrual loans and leases held for investment to total loans and leases held for investment 0.9 % 0.7 % (1) Excluding PPP loans, there were no loans that were 90 days or more past due and accruing as of both December 31, 2023 and 2022 .
Basel III capital framework are: a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%.
The minimum capital requirements under the 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%.
Net capital expenditures were $69.5 million, or 6% of total net revenue and $32.6 million, or 4% of total net revenue, for the years ended December 31, 2022 and 2021, respectively.
Net capital expenditures were $59.5 million, or 7% of total net revenue and $69.5 million, or 6% of total net revenue, for the years ended December 31, 2023 and 2022, respectively.
The following tables provide a reconciliation of Pre-Provision Net Revenue (PPNR) to the nearest GAAP measure: For the year ended December 31, 2022 2021 2020 GAAP Net income (loss) $ 289,685 $ 18,580 $ (187,538) Less: Provision for credit losses (267,326) (138,800) (3,382) Less: Income tax benefit 136,648 136 79 Pre-provision net revenue $ 420,363 $ 157,244 $ (184,235) For the year ended December 31, 2022 2021 2020 Non-interest income $ 712,391 $ 605,799 $ 258,756 Net interest income 474,825 212,831 59,328 Total net revenue 1,187,216 818,630 318,084 Non-interest expense (766,853) (661,386) (502,319) Pre-provision net revenue 420,363 157,244 (184,235) Provision for credit losses (267,326) (138,800) (3,382) Income (Loss) before income tax benefit 153,037 18,444 (187,617) Income tax benefit 136,648 136 79 GAAP Net income (loss) $ 289,685 $ 18,580 $ (187,538) 67 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) The following table provides a reconciliation of Net Income (Loss) Excluding Income Tax Benefit and Diluted EPS Excluding Income Tax Benefit to the nearest GAAP measures: As of and For The Year Ended December 31, 2022 2021 2020 GAAP Net income (loss) $ 289,685 $ 18,580 $ (187,538) Income tax benefit from release of tax valuation allowance 143,495 — — Net income (loss) excluding income tax benefit $ 146,190 $ 18,580 $ (187,538) GAAP Diluted EPS – common stockholders $ 2.79 $ 0.18 $ (2.07) (A) Income tax benefit from release of tax valuation allowance $ 143,495 N/A N/A (B) Weighted-average common shares – Diluted 104,001,288 N/A N/A (A/B) Diluted EPS impact of income tax benefit $ 1.38 N/A N/A Diluted EPS excluding income tax benefit $ 1.41 $ 0.18 $ (2.07) N/A – Not applicable The following table provides a reconciliation of TBV Per Common Share to the nearest GAAP measure: As of December 31, 2022 2021 2020 GAAP common equity $ 1,164,294 $ 850,242 $ 724,171 Less: Goodwill (75,717) (75,717) — Less: Intangible assets (16,334) (21,181) (11,427) Tangible common equity $ 1,072,243 $ 753,344 $ 712,744 Book value per common share GAAP common equity $ 1,164,294 $ 850,242 $ 724,171 Common shares issued and outstanding 106,546,995 101,043,924 88,149,510 Book value per common share $ 10.93 $ 8.41 $ 8.22 Tangible book value per common share Tangible common equity $ 1,072,243 $ 753,344 $ 712,744 Common shares issued and outstanding 106,546,995 101,043,924 88,149,510 Tangible book value per common share $ 10.06 $ 7.46 $ 8.09 Supervision and Regulatory Environment We are subject to periodic exams, investigations, inquiries or requests, enforcement actions and other proceedings from federal and state regulatory agencies, including the federal banking regulators that directly regulate the Company and/or LC Bank.
The following tables provide a reconciliation of Pre-Provision Net Revenue to the nearest GAAP measure: For the year ended December 31, 2023 2022 2021 GAAP Net income $ 38,939 $ 289,685 $ 18,580 Less: Provision for credit losses (243,565) (267,326) (138,800) Less: Income tax benefit (expense) (15,678) 136,648 136 Pre-provision net revenue $ 298,182 $ 420,363 $ 157,244 For the year ended December 31, 2023 2022 2021 Non-interest income $ 302,781 $ 712,391 $ 605,799 Net interest income 561,838 474,825 212,831 Total net revenue 864,619 1,187,216 818,630 Non-interest expense (566,437) (766,853) (661,386) Pre-provision net revenue 298,182 420,363 157,244 Provision for credit losses (243,565) (267,326) (138,800) Income before income tax benefit (expense) 54,617 153,037 18,444 Income tax benefit (expense) (15,678) 136,648 136 GAAP Net income $ 38,939 $ 289,685 $ 18,580 68 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) The following table provides a reconciliation of Net Income Excluding Income Tax Benefit and Diluted EPS Excluding Income Tax Benefit to the nearest GAAP measures: As of and For The Year Ended December 31, 2023 2022 2021 GAAP Net income $ 38,939 $ 289,685 $ 18,580 Income tax benefit from release of tax valuation allowance — 143,495 — Net income excluding income tax benefit $ 38,939 $ 146,190 $ 18,580 GAAP Diluted EPS – common stockholders $ 0.36 $ 2.79 $ 0.18 (A) Income tax benefit from release of tax valuation allowance N/A $ 143,495 N/A (B) Weighted-average common shares – Diluted N/A 104,001,288 N/A (A/B) Diluted EPS impact of income tax benefit N/A $ 1.38 N/A Diluted EPS excluding income tax benefit $ 0.36 $ 1.41 $ 0.18 N/A – Not applicable The following table provides a reconciliation of TBV Per Common Share to the nearest GAAP measure: As of December 31, 2023 2022 2021 GAAP common equity $ 1,251,822 $ 1,164,294 $ 850,242 Less: Goodwill (75,717) (75,717) (75,717) Less: Intangible assets (12,135) (16,334) (21,181) Tangible common equity $ 1,163,970 $ 1,072,243 $ 753,344 Book value per common share GAAP common equity $ 1,251,822 $ 1,164,294 $ 850,242 Common shares issued and outstanding 110,410,602 106,546,995 101,043,924 Book value per common share $ 11.34 $ 10.93 $ 8.41 Tangible book value per common share Tangible common equity $ 1,163,970 $ 1,072,243 $ 753,344 Common shares issued and outstanding 110,410,602 106,546,995 101,043,924 Tangible book value per common share $ 10.54 $ 10.06 $ 7.46 Supervision and Regulatory Environment We are subject to periodic exams, investigations, inquiries or requests, enforcement actions and other proceedings from federal and state regulatory and/or law enforcement agencies, including the federal banking regulators that directly regulate the Company and/or LC Bank.
The tables below illustrate the composition of other non-interest income for each period presented: Year Ended December 31, 2022 2021 Change ($) Change (%) Referral revenue $ 12,942 $ 14,234 $ (1,292) (9) % Realized losses on sales of securities available for sale and other investments — (93) 93 N/M Other 15,823 13,078 2,745 21 % Other non-interest income $ 28,765 $ 27,219 $ 1,546 6 % Year Ended December 31, 2021 2020 Change ($) Change (%) Referral revenue $ 14,234 $ 5,011 $ 9,223 184 % Realized gains (losses) on sales of securities available for sale and other investments (93) 11 (104) N/M Other 13,078 8,420 4,658 55 % Other non-interest income $ 27,219 $ 13,442 $ 13,777 102 % 58 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 table below presents net interest income information corresponding to interest-earning assets and interest-bearing funding sources on a consolidated basis for the Company.
The tables below illustrate the composition of other non-interest income for each period presented: Year Ended December 31, 2023 2022 Change ($) Change (%) Referral revenue $ 4,574 $ 12,942 $ (8,368) (65) % Other 6,723 15,823 (9,100) (58) % Other non-interest income $ 11,297 $ 28,765 $ (17,468) (61) % Year Ended December 31, 2022 2021 Change ($) Change (%) Referral revenue $ 12,942 $ 14,234 $ (1,292) (9) % Realized losses on sales of securities available for sale and other investments — (93) 93 N/M Other 15,823 13,078 2,745 21 % Other non-interest income $ 28,765 $ 27,219 $ 1,546 6 % 60 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 table below presents net interest income information corresponding to interest-earning assets and interest-bearing funding sources.
Additionally, an analysis of the Company’s results of operations and material trends for the year ended December 31, 2022 compared to the year ended December 31, 2021 is provided on a consolidated basis in “ Results of Operations .” Non-GAAP Financial Measures To supplement our financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Pre-Provision Net Revenue, Net Income (Loss) Excluding Income Tax Benefit, Diluted EPS Excluding Income Tax Benefit, and Tangible Book Value (TBV) Per Common Share.
An analysis of the Company’s results of operations and material trends for the year ended December 31, 2023 compared to the year ended December 31, 2022 is provided on a consolidated basis in “ Results of Operations .” 67 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Non-GAAP Financial Measures To supplement our financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Pre-Provision Net Revenue (PPNR), Net Income Excluding Income Tax Benefit, Diluted EPS Excluding Income Tax Benefit, and Tangible Book Value (TBV) Per Common Share.
The following presents our select financial metrics for the periods presented: As Of and For The Year Ended December 31, 2022 2021 2020 Non-interest income $ 712,391 $ 605,799 $ 258,756 Net interest income 474,825 212,831 59,328 Total net revenue 1,187,216 818,630 318,084 Non-interest expense 766,853 661,386 502,319 Pre-provision net revenue (1) 420,363 157,244 (184,235) Provision for credit losses 267,326 138,800 3,382 Income (Loss) before income tax benefit 153,037 18,444 (187,617) Income tax benefit 136,648 136 79 Net income (loss) $ 289,685 $ 18,580 $ (187,538) Income tax benefit from release of tax valuation allowance 143,495 — — Net income (loss) excluding income tax benefit (1)(2) $ 146,190 $ 18,580 $ (187,538) Basic EPS – common stockholders $ 2.80 $ 0.19 $ (2.07) Diluted EPS – common stockholders $ 2.79 $ 0.18 $ (2.07) Diluted EPS excluding income tax benefit (1)(2) $ 1.41 $ 0.18 $ (2.07) LendingClub Corporation Performance Metrics: Net interest margin 8.2 % 5.6 % 3.0 % Efficiency ratio (3) 64.6 % 80.8 % N/A Return on average equity (ROE) 28.4 % 2.4 % N/A Return on average total assets (ROA) 4.7 % 0.4 % N/A Marketing as a % of loan originations 1.5 % 1.5 % 1.2 % LendingClub Corporation Capital Metrics: Common equity tier 1 capital ratio 15.8 % 21.3 % N/A Tier 1 leverage ratio 14.1 % 16.5 % N/A Book value per common share $ 10.93 $ 8.41 $ 8.22 Tangible book value per common share (1) $ 10.06 $ 7.46 $ 8.09 Loan Originations (in millions) (4) : Marketplace loans $ 9,389 $ 8,099 $ 4,343 Loan originations held for investment 3,731 2,282 — Total loan originations $ 13,121 $ 10,381 $ 4,343 Loan originations held for investment as a % of total loan originations 28 % 22 % — % Servicing Portfolio AUM (in millions) (5) : Total servicing portfolio $ 16,157 $ 12,463 $ 11,002 Loans serviced for others $ 10,819 $ 10,124 $ 10,139 N/A – Not applicable (1) Represents a non-GAAP financial measure.
The following presents our select financial metrics for the periods presented: 54 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 and For The Year Ended December 31, 2023 2022 2021 Non-interest income $ 302,781 $ 712,391 $ 605,799 Net interest income 561,838 474,825 212,831 Total net revenue 864,619 1,187,216 818,630 Non-interest expense 566,437 766,853 661,386 Pre-provision net revenue (1) 298,182 420,363 157,244 Provision for credit losses 243,565 267,326 138,800 Income before income tax benefit (expense) 54,617 153,037 18,444 Income tax benefit (expense) (15,678) 136,648 136 Net income $ 38,939 $ 289,685 $ 18,580 Income tax benefit from release of tax valuation allowance — 143,495 — Net income excluding income tax benefit (1)(2) $ 38,939 $ 146,190 $ 18,580 Basic EPS – common stockholders $ 0.36 $ 2.80 $ 0.19 Diluted EPS – common stockholders $ 0.36 $ 2.79 $ 0.18 Diluted EPS excluding income tax benefit (1)(2) $ 0.36 $ 1.41 $ 0.18 LendingClub Corporation Performance Metrics: Net interest margin 7.0 % 8.2 % 5.6 % Efficiency ratio (3) 65.5 % 64.6 % 80.8 % Return on average equity (ROE) 3.2 % 28.4 % 2.4 % Return on average total assets (ROA) 0.5 % 4.7 % 0.4 % Marketing as a % of loan originations 1.3 % 1.5 % 1.5 % LendingClub Corporation Capital Metrics: Common equity tier 1 capital ratio 17.9 % 15.8 % 21.3 % Tier 1 leverage ratio 12.9 % 14.1 % 16.5 % Book value per common share $ 11.34 $ 10.93 $ 8.41 Tangible book value per common share (1) $ 10.54 $ 10.06 $ 7.46 Loan Originations (in millions) (4) : Marketplace loans $ 5,253 $ 9,389 $ 8,099 Loan originations held for investment 2,184 3,731 2,282 Total loan originations $ 7,437 $ 13,121 $ 10,381 Loan originations held for investment as a % of total loan originations 29 % 28 % 22 % Servicing Portfolio AUM (in millions) (5) : Total servicing portfolio $ 14,122 $ 16,157 $ 12,463 Loans serviced for others $ 9,336 $ 10,819 $ 10,124 (1) Represents a non-GAAP financial measure.
The following table presents loan origination volume during each of the periods set forth below: Year Ended December 31, 2022 2021 2020 2022 vs. 2021 Change (%) 2021 vs. 2020 Change (%) Marketplace loans $ 9,389,445 $ 8,099,109 $ 4,343,411 16 % 86 % Loan originations held for investment 3,731,057 2,282,206 — 63 % N/A Total loan originations (1) $ 13,120,502 $ 10,381,315 $ 4,343,411 26 % 139 % N/A – Not applicable (1) Includes unsecured personal loans and auto loans only.
The following table presents loan origination volume during each of the periods set forth below: Year Ended December 31, 2023 2022 2021 2023 vs. 2022 Change (%) 2022 vs. 2021 Change (%) Marketplace loans $ 5,252,668 $ 9,389,445 $ 8,099,109 (44) % 16 % Loan originations held for investment 2,184,095 3,731,057 2,282,206 (41) % 63 % Total loan originations (1) $ 7,436,763 $ 13,120,502 $ 10,381,315 (43) % 26 % (1) Includes unsecured personal loans and auto loans only.
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.
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.
Net income for the year ended December 31, 2022 included a $143.5 million income tax benefit related to the reversal of our valuation allowance against our deferred tax assets. • Net income excluding income tax benefit: Net income excluding income tax benefit (related to the reversal of our valuation allowance against our deferred tax assets) increased $127.6 million for the year ended December 31, 2022 compared to the same period in 2021. • Diluted EPS: Diluted EPS was $2.79 for the year ended December 31, 2022, increasing from $0.18 in the prior year.
Net income for the year ended December 31, 2022 included a $143.5 million income tax benefit related to the reversal of our valuation allowance against our deferred tax assets. • Diluted Earnings Per Share (EPS): Diluted EPS was $0.36 for the year ended December 31, 2023, compared to $2.79 in the prior year.
The increase was primarily due to an increase in consulting fees. 64 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Other non-interest expense increased $2.9 million, or 5%, for the year ended December 31, 2022 compared to the same period in 2021.
The decrease was primarily due to a decrease in consulting fees. 65 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 expense decreased $4.4 million, or 20%, for the year ended December 31, 2023 compared to the same period in 2022.
As of December 31, 2022 2021 Change ($) Change (%) AUM (in millions): Loans sold $ 10,819 $ 10,124 $ 695 7 % Loans held by LendingClub Bank 5,263 2,026 3,237 160 % Retail notes, certificates and secured borrowings 59 238 (179) (75) % Other loans invested in by the Company 16 75 (59) (79) % Total $ 16,157 $ 12,463 $ 3,694 30 % As of December 31, 2021 2020 Change ($) Change (%) AUM (in millions): Loans sold $ 10,124 $ 10,139 $ (15) — % Loans held by LendingClub Bank 2,026 — $ 2,026 N/M Retail notes, certificates and secured borrowings 238 680 $ (442) (65) % Other loans invested in by the Company 75 183 (108) (59) % Total $ 12,463 $ 11,002 $ 1,461 13 % In addition to the loans serviced on our marketplace platform, we earned servicing fee revenue on $167.0 million and $214.0 million in outstanding principal balance of commercial loans sold as of December 31, 2022 and 2021, respectively.
As of December 31, 2023 2022 Change ($) Change (%) AUM (in millions): Loans sold $ 9,336 $ 10,819 $ (1,483) (14) % Loans held by LendingClub Bank 4,767 5,263 (496) (9) % Retail notes and certificates 11 59 (48) (81) % Other loans invested in by the Company 8 16 (8) (50) % Total $ 14,122 $ 16,157 $ (2,035) (13) % As of December 31, 2022 2021 Change ($) Change (%) AUM (in millions): Loans sold $ 10,819 $ 10,124 $ 695 7 % Loans held by LendingClub Bank 5,263 2,026 3,237 160 % Retail notes and certificates 59 238 (179) (75) % Other loans invested in by the Company 16 75 (59) (79) % Total $ 16,157 $ 12,463 $ 3,694 30 % In addition to the loans serviced on our marketplace platform, we serviced $133.2 million, $167.0 million and $214.0 million in outstanding principal balance of commercial loans sold as of December 31, 2023, 2022 and 2021, respectively.
The table below illustrates the composition of the provision for credit losses for each period presented: Year Ended December 31, 2022 2021 2020 Credit loss expense for Radius loans at acquisition $ — $ 6,929 $ — Credit loss expense for loans and leases held for investment 266,679 134,022 — Credit loss expense for unfunded lending commitments 647 1,231 — Total credit loss expense 267,326 142,182 — (Reversal of) Impairment on securities available for sale — (3,382) 3,382 Total provision for credit losses $ 267,326 $ 138,800 $ 3,382 The provision for credit losses increased $128.5 million, or 93%, for the year ended December 31, 2022 compared to the same period in 2021.
The table below illustrates the composition of the provision for credit losses for each period presented, as well as the loan originations held for investment in each period, which is a key driver for credit loss expense: Year Ended December 31, 2023 2022 2021 Credit loss expense for Radius loans at acquisition $ — $ — $ 6,929 Credit loss expense for loans and leases held for investment 243,570 266,679 134,022 Credit loss expense for unfunded lending commitments (5) 647 1,231 Total credit loss expense 243,565 267,326 142,182 Reversal of impairment on securities available for sale — — (3,382) Total provision for credit losses $ 243,565 $ 267,326 $ 138,800 Loan originations held for investment $ 2,184,095 $ 3,731,057 $ 2,282,206 The provision for credit losses was $243.6 million and $267.3 million for the year ended December 31, 2023 and 2022, respectively, a decrease of 9%.
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. 65 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Financial information for the segments is presented in the following table: LendingClub Bank LendingClub Corporation (Parent only) Intercompany Eliminations Consolidated Total Year Ended December 31, Eleven Months Ended December 31, Year Ended December 31, Year Ended December 31, Eleven Months Ended December 31, Year Ended December 31, 2022 2021 2022 2021 2022 2021 2022 2021 Non-interest income: Marketplace revenue $ 610,536 $ 462,821 $ 48,231 $ 115,759 $ 24,859 $ — $ 683,626 $ 578,580 Other non-interest income 85,208 94,953 15,628 16,718 (72,071) (84,452) 28,765 27,219 Total non-interest income 695,744 557,774 63,859 132,477 (47,212) (84,452) 712,391 605,799 Interest income: Interest income 526,471 210,739 30,869 82,093 — — 557,340 292,832 Interest expense (60,954) (8,412) (21,561) (71,589) — — (82,515) (80,001) Net interest income 465,517 202,327 9,308 10,504 — — 474,825 212,831 Total net revenue 1,161,261 760,101 73,167 142,981 (47,212) (84,452) 1,187,216 818,630 (Provision for) reversal of credit losses (267,326) (142,182) — 3,382 — — (267,326) (138,800) Non-interest expense (724,304) (547,799) (89,761) (198,039) 47,212 84,452 (766,853) (661,386) Income (Loss) before income tax benefit (expense) 169,631 70,120 (16,594) (51,676) — — 153,037 18,444 Income tax benefit (expense) (42,354) 9,171 125,954 44,013 53,048 (53,048) 136,648 136 Net income (loss) $ 127,277 $ 79,291 $ 109,360 $ (7,663) $ 53,048 $ (53,048) $ 289,685 $ 18,580 Capital expenditures $ 69,481 $ 32,602 $ — $ 1,811 $ — $ — $ 69,481 $ 34,413 Depreciation and amortization $ 16,489 $ 4,569 $ 27,342 $ 39,716 $ — $ — $ 43,831 $ 44,285 The Company integrated the Acquisition into its reportable segments in the first quarter of 2021.
Financial information for the segments is presented in the following table: LendingClub Bank LendingClub Corporation (Parent only) Intercompany Eliminations Consolidated Total Year Ended December 31, Eleven Months Ended December 31, Year Ended December 31, Year Ended December 31, Eleven Months Ended December 31, Year Ended December 31, 2023 2022 2021 (1) 2023 2022 2021 2023 2022 2021 (1) 2023 2022 2021 Non-interest income: Marketplace revenue $ 206,381 $ 610,536 $ 462,821 $ 41,817 $ 48,231 $ 115,759 $ 43,286 $ 24,859 $ — $ 291,484 $ 683,626 $ 578,580 Other non-interest income 74,684 85,208 94,953 9,503 15,628 16,718 (72,890) (72,071) (84,452) 11,297 28,765 27,219 Total non-interest income 281,065 695,744 557,774 51,320 63,859 132,477 (29,604) (47,212) (84,452) 302,781 712,391 605,799 Interest income: Interest income 818,206 526,471 210,739 14,424 30,869 82,093 — — — 832,630 557,340 292,832 Interest expense (266,218) (60,954) (8,412) (4,574) (21,561) (71,589) — — — (270,792) (82,515) (80,001) Net interest income 551,988 465,517 202,327 9,850 9,308 10,504 — — — 561,838 474,825 212,831 Total net revenue 833,053 1,161,261 760,101 61,170 73,167 142,981 (29,604) (47,212) (84,452) 864,619 1,187,216 818,630 (Provision for) reversal of credit losses (243,565) (267,326) (142,182) — — 3,382 — — — (243,565) (267,326) (138,800) Non-interest expense (537,026) (724,304) (547,799) (59,015) (89,761) (198,039) 29,604 47,212 84,452 (566,437) (766,853) (661,386) Income (Loss) before income tax benefit (expense) 52,462 169,631 70,120 2,155 (16,594) (51,676) — — — 54,617 153,037 18,444 Income tax benefit (expense) (17,881) (42,354) 9,171 2,203 125,954 44,013 — 53,048 (53,048) (15,678) 136,648 136 Net income (loss) $ 34,581 $ 127,277 $ 79,291 $ 4,358 $ 109,360 $ (7,663) $ — $ 53,048 $ (53,048) $ 38,939 $ 289,685 $ 18,580 Capital expenditures $ 59,509 $ 69,481 $ 32,602 $ — $ — $ 1,811 $ — $ — $ — $ 59,509 $ 69,481 $ 34,413 Depreciation and amortization $ 30,216 $ 16,489 $ 4,569 $ 16,979 $ 27,342 $ 39,716 $ — $ — $ — $ 47,195 $ 43,831 $ 44,285 (1) Because the LendingClub Bank reportable segment was formed upon the Acquisition on February 1, 2021, the associated results are presented for the eleven month period ended December 31, 2021.
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.
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 sets forth the Income Statement data for each of the periods presented: Year Ended December 31, 2022 2021 2020 Non-interest income: Marketplace revenue $ 683,626 $ 578,580 $ 245,314 Other non-interest income 28,765 27,219 13,442 Total non-interest income 712,391 605,799 258,756 Interest income: Interest on loans held for sale 26,183 29,540 72,876 Interest and fees on loans and leases held for investment 465,450 188,977 — Interest on loans held for investment at fair value 12,877 4,436 7,688 Interest on retail and certificate loans held for investment at fair value 18,135 57,684 115,952 Interest on securities available for sale 16,116 11,025 12,125 Other interest income 18,579 1,170 1,053 Total interest income 557,340 292,832 209,694 Interest expense: Interest on deposits 60,451 7,228 — Interest on short-term borrowings 1,002 3,677 17,837 Interest on retail notes, certificates and secured borrowings 18,135 57,684 115,952 Interest on Structured Program borrowings 1,508 9,638 16,204 Interest on other long-term debt 1,419 1,774 373 Total interest expense 82,515 80,001 150,366 Net interest income 474,825 212,831 59,328 Total net revenue 1,187,216 818,630 318,084 Provision for credit losses 267,326 138,800 3,382 Non-interest expense: Compensation and benefits 339,397 288,390 252,517 Marketing 197,747 156,142 51,518 Equipment and software 49,198 39,490 26,842 Occupancy 21,977 24,249 27,870 Depreciation and amortization 43,831 44,285 54,030 Professional services 50,516 47,572 41,780 Other non-interest expense 64,187 61,258 47,762 Total non-interest expense 766,853 661,386 502,319 Income (Loss) before income tax benefit 153,037 18,444 (187,617) Income tax benefit 136,648 136 79 Net income (loss) $ 289,685 $ 18,580 $ (187,538) 55 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Marketplace Revenue Marketplace revenue consists of the following: Year Ended December 31, 2022 2021 Change ($) Change (%) Origination fees $ 499,179 $ 416,839 $ 82,340 20 % Servicing fees 80,609 87,639 (7,030) (8) % Gain on sales of loans 95,335 70,116 25,219 36 % Net fair value adjustments 8,503 3,986 4,517 113 % Total marketplace revenue $ 683,626 $ 578,580 $ 105,046 18 % Year Ended December 31, 2021 2020 Change ($) Change (%) Origination fees $ 416,839 $ 207,640 $ 209,199 101 % Servicing fees 87,639 111,864 (24,225) (22) % Gain on sales of loans 70,116 30,812 39,304 128 % Net fair value adjustments 3,986 (105,002) 108,988 N/M Total marketplace revenue $ 578,580 $ 245,314 $ 333,266 136 % We elected to account for HFS loans under the fair value option.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in the Annual Report on Form 10-K for the year ended December 31, 2022. 56 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 sets forth the Income Statement data for each of the periods presented: Year Ended December 31, 2023 2022 2021 Non-interest income: Marketplace revenue $ 291,484 $ 683,626 $ 578,580 Other non-interest income 11,297 28,765 27,219 Total non-interest income 302,781 712,391 605,799 Interest income: Interest on loans held for sale 35,655 26,183 29,540 Interest and fees on loans and leases held for investment 616,735 465,450 188,977 Interest on loans held for investment at fair value 69,866 12,877 4,436 Interest on retail and certificate loans held for investment at fair value 4,222 18,135 57,684 Interest on securities available for sale 40,235 16,116 11,025 Other interest income 65,917 18,579 1,170 Total interest income 832,630 557,340 292,832 Interest expense: Interest on deposits 265,556 60,451 7,228 Interest on retail notes and certificates 4,222 18,135 57,684 Other interest expense 1,014 3,929 15,089 Total interest expense 270,792 82,515 80,001 Net interest income 561,838 474,825 212,831 Total net revenue 864,619 1,187,216 818,630 Provision for credit losses 243,565 267,326 138,800 Non-interest expense: Compensation and benefits 261,948 339,397 288,390 Marketing 93,840 197,747 156,142 Equipment and software 53,485 49,198 39,490 Depreciation and amortization 47,195 43,831 44,285 Professional services 35,173 50,516 47,572 Occupancy 17,532 21,977 24,249 Other non-interest expense 57,264 64,187 61,258 Total non-interest expense 566,437 766,853 661,386 Income before income tax benefit (expense) 54,617 153,037 18,444 Income tax benefit (expense) (15,678) 136,648 136 Net income $ 38,939 $ 289,685 $ 18,580 57 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Marketplace Revenue Marketplace revenue consists of the following: Year Ended December 31, 2023 2022 Change ($) Change (%) Origination fees $ 279,146 $ 499,179 $ (220,033) (44) % Servicing fees 98,613 80,609 18,004 22 % Gain on sales of loans 47,839 95,335 (47,496) (50) % Net fair value adjustments (134,114) 8,503 (142,617) N/M Total marketplace revenue $ 291,484 $ 683,626 $ (392,142) (57) % Year Ended December 31, 2022 2021 Change ($) Change (%) Origination fees $ 499,179 $ 416,839 $ 82,340 20 % Servicing fees 80,609 87,639 (7,030) (8) % Gain on sales of loans 95,335 70,116 25,219 36 % Net fair value adjustments 8,503 3,986 4,517 113 % Total marketplace revenue $ 683,626 $ 578,580 $ 105,046 18 % We elected to account for HFS loans under the fair value option.
Servicing fees were $80.6 million and $87.6 million for the years ended December 31, 2022 and 2021, respectively, a decrease of 8%.
Servicing fees were $98.6 million and $80.6 million for the years ended December 31, 2023 and 2022, respectively, an increase of 22%.
For additional discussion related to our operating segments, see “ Segment Information .” 52 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 above summary should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety. For additional discussion related to our operating segments, see “ Segment Information .” Financial Highlights We regularly review several metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions.
Gain on sales of loans was $95.3 million and $70.1 million for the years ended December 31, 2022 and 2021, respectively, an increase of 36%. The increase was primarily due to an increase in the volume of marketplace loans sold and an increase in expected servicing fee revenue.
Gain on sales of loans was $47.8 million and $95.3 million for the years ended December 31, 2023 and 2022, respectively, a decrease of 50%. The decrease was primarily due to a decrease in the volume of marketplace loans sold.
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.
Accordingly, we have been and continue to invest in 69 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) 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.
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.
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 capital benefit of $35 million at December 31, 2021.
(2) Relates to $138.0 million and $110.8 million of unfunded commitments as of December 31, 2022 and 2021, respectively . 62 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Year Ended December 31, 2022 2021 Ratio of allowance for loan and lease losses to total loans and leases held for investment at amortized cost 6.5 % 5.0 % Ratio of allowance for loan and lease losses to total loans and leases held for investment at amortized cost, excluding PPP loans 6.6 % 5.5 % Average loans and leases held for investment at amortized cost, excluding PPP loans $ 3,938,340 $ 1,965,944 Net charge-off ratio (1) 2.1 % 0.5 % (1) Calculated as annualized net charge-offs divided by average outstanding loans and leases held for investment during the period, excluding PPP loans.
Year Ended December 31, 2023 2022 2021 Ratio of allowance for loan and lease losses to total loans and leases held for investment at amortized cost 6.4 % 6.5 % 5.0 % Average loans and leases held for investment at amortized cost, excluding PPP loans $ 5,268,569 $ 3,938,340 $ 1,965,944 Net charge-off ratio (1) 5.0 % 2.1 % 0.5 % (1) Calculated as net charge-offs divided by average outstanding loans and leases held for investment during the period, excluding PPP loans.
We expect continued pressure on net interest margin to continue during 2023. 60 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) An analysis of the year-to-year changes in the categories of interest income and interest expense resulting from changes in volume and rate is as follows: 2022 Compared to 2021 2021 Compared to 2020 Increase (Decrease) Due to Change in: Increase (Decrease) Due to Change in: Average Volume (1) Average Rate (1) Total Average Volume (1) Average Rate (1) Total Interest-earning assets Cash, cash equivalents, restricted cash and other $ 470 $ 16,939 $ 17,409 $ 682 $ (565) $ 117 Securities available for sale at fair value 3,414 1,677 5,091 3,342 (4,442) (1,100) Loans held for sale (8,336) 4,979 (3,357) (37,233) (6,103) (43,336) Loans and leases held for investment at amortized cost 286,205 (9,732) 276,473 188,977 — 188,977 Loans held for investment at fair value 7,883 558 8,441 (3,195) (57) (3,252) Retail and certificate loans held for investment at fair value (39,422) (127) (39,549) (58,194) (74) (58,268) Total increase (decrease) in interest income on interest-earning assets $ 250,214 $ 14,294 $ 264,508 $ 94,379 $ (11,241) $ 83,138 Interest-bearing liabilities Checking and money market accounts $ 472 $ 10,038 $ 10,510 $ 5,954 $ — $ 5,954 Savings accounts and certificates of deposit 20,965 21,748 42,713 1,274 — 1,274 Interest-bearing deposits 21,437 31,786 53,223 7,228 — 7,228 Short-term borrowings (4,374) 1,699 (2,675) (16,837) 2,677 (14,160) Advances from PPPLF (691) 11 (680) 1,183 — 1,183 Retail notes, certificates and secured borrowings (39,573) 24 (39,549) (57,838) (430) (58,268) Structured Program borrowings (6,689) (1,441) (8,130) (4,723) (1,843) (6,566) Other long-term debt (44) 369 325 379 (161) 218 Total increase (decrease) in interest expense on interest-bearing liabilities $ (29,934) $ 32,448 $ 2,514 $ (70,608) $ 243 $ (70,365) Increase (decrease) in net interest income $ 280,148 $ (18,154) $ 261,994 $ 164,987 $ (11,484) $ 153,503 (1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates. 61 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 at amortized cost is initially recognized as “Provision for credit losses” at the time of origination.
An analysis of the year-over-year changes in the categories of interest income and interest expense resulting from changes in volume and rate is as follows: 2023 Compared to 2022 2022 Compared to 2021 Increase (Decrease) Due to Change in: Increase (Decrease) Due to Change in: Average Volume (1) Average Rate (1) Total Average Volume (1) Average Rate (1) Total Interest-earning assets Cash, cash equivalents, restricted cash and other $ 7,243 $ 40,095 $ 47,338 $ 470 $ 16,939 $ 17,409 Securities available for sale at fair value 15,571 8,548 24,119 3,414 1,677 5,091 Loans held for sale at fair value 12,994 (3,522) 9,472 (8,336) 4,979 (3,357) Loans and leases held for investment at amortized cost 155,258 (3,973) 151,285 286,205 (9,732) 276,473 Loans held for investment at fair value 58,140 (1,151) 56,989 7,883 558 8,441 Retail and certificate loans held for investment at fair value (14,452) 539 (13,913) (39,422) (127) (39,549) Total increase in interest income on interest-earning assets $ 234,754 $ 40,536 $ 275,290 $ 250,214 $ 14,294 $ 264,508 Interest-bearing liabilities Checking and money market accounts $ (8,592) $ 26,590 $ 17,998 $ 472 $ 10,038 $ 10,510 Savings accounts and certificates of deposit 109,053 78,054 187,107 20,965 21,748 42,713 Interest-bearing deposits 100,461 104,644 205,105 21,437 31,786 53,223 Retail notes and certificates (14,452) 539 (13,913) (39,573) 24 (39,549) Other interest-bearing liabilities (3,598) 683 (2,915) (11,798) 638 (11,160) Total increase (decrease) in interest expense on interest-bearing liabilities $ 82,411 $ 105,866 $ 188,277 $ (29,934) $ 32,448 $ 2,514 Increase (decrease) in net interest income $ 152,343 $ (65,330) $ 87,013 $ 280,148 $ (18,154) $ 261,994 (1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates. 62 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 at amortized cost is initially recognized as “Provision for credit losses” at the time of origination.
Year Ended December 31, 2022 2021 Change ($) Change (%) Non-interest expense: Compensation and benefits $ 339,397 $ 288,390 $ 51,007 18 % Marketing 197,747 156,142 41,605 27 % Equipment and software 49,198 39,490 9,708 25 % Occupancy 21,977 24,249 (2,272) (9) % Depreciation and amortization 43,831 44,285 (454) (1) % Professional services 50,516 47,572 2,944 6 % Other non-interest expense 64,187 61,258 2,929 5 % Total non-interest expense $ 766,853 $ 661,386 $ 105,467 16 % Year Ended December 31, 2021 2020 Change ($) Change (%) Non-interest expense: Compensation and benefits $ 288,390 $ 252,517 $ 35,873 14 % Marketing 156,142 51,518 104,624 203 % Equipment and software 39,490 26,842 12,648 47 % Occupancy 24,249 27,870 (3,621) (13) % Depreciation and amortization 44,285 54,030 (9,745) (18) % Professional services 47,572 41,780 5,792 14 % Other non-interest expense 61,258 47,762 13,496 28 % Total non-interest expense $ 661,386 $ 502,319 $ 159,067 32 % Compensation and benefits expense increased $51.0 million, or 18%, for the year ended December 31, 2022 compared to the same period in 2021.
Year Ended December 31, 2023 2022 Change ($) Change (%) Non-interest expense: Compensation and benefits $ 261,948 $ 339,397 $ (77,449) (23) % Marketing 93,840 197,747 (103,907) (53) % Equipment and software 53,485 49,198 4,287 9 % Depreciation and amortization 47,195 43,831 3,364 8 % Professional services 35,173 50,516 (15,343) (30) % Occupancy 17,532 21,977 (4,445) (20) % Other non-interest expense 57,264 64,187 (6,923) (11) % Total non-interest expense $ 566,437 $ 766,853 $ (200,416) (26) % Year Ended December 31, 2022 2021 Change ($) Change (%) Non-interest expense: Compensation and benefits $ 339,397 $ 288,390 $ 51,007 18 % Marketing 197,747 156,142 41,605 27 % Equipment and software 49,198 39,490 9,708 25 % Depreciation and amortization 43,831 44,285 (454) (1) % Professional services 50,516 47,572 2,944 6 % Occupancy 21,977 24,249 (2,272) (9) % Other non-interest expense 64,187 61,258 2,929 5 % Total non-interest expense $ 766,853 $ 661,386 $ 105,467 16 % Compensation and benefits expense decreased $77.4 million, or 23%, for the year ended December 31, 2023 compared to the same period in 2022.
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix, size of our balance sheet, or other business developments that could affect net income. Actual results could differ materially from the estimated outcomes of our simulations.
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix, size of our balance sheet, or other business 73 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) developments that could affect net income.
Servicing fee revenue related to loans sold also includes the change in fair value of servicing assets associated with the loans. The table below illustrates AUM serviced on our platform by the method in which the loans were financed as of the end of each period presented.
Servicing fee revenue related to loans sold also includes the change in fair value of servicing assets associated with the loans. 58 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) The table below illustrates AUM serviced on our platform by the method in which the loans were financed as of the periods presented.
Several factors were considered, which primarily included our business model transition and resulting increase in profitability and the expectation of continued profitability. These factors resulted in the release of the majority of our valuation allowance against our deferred tax assets.
In 2022, we evaluated both positive and negative evidence when assessing the recoverability of our net deferred tax assets. Several factors were considered, which primarily included our business model transition and the resulting increase in profitability and the expectation of continued profitability.
Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return. Differences between separate entity and consolidated tax returns are eliminated upon consolidation.
Changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions are recorded as current period income tax expense or benefit. Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return.
Allowance for Loan and Lease Losses Under the CECL model, we reserve for expected credit losses on our loan and lease portfolio when loans are initially recorded as HFI at amortized cost through the ALLL by using a DCF approach to calculate the NPV of expected cash flows.
These judgments, estimates and assumptions are inherently subjective and actual results may materially differ from these estimates and assumptions. 74 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 Loan and Lease Losses Under the CECL model, we reserve for expected credit losses on our loan and lease portfolio when loans are initially recorded as HFI at amortized cost through the ALLL by using a DCF approach to calculate the NPV of expected cash flows.
The realization and timing of these state NOLs and tax credit carryforwards, based on the allocation of taxable income to the Parent, is uncertain and may expire before being utilized. We expect that our statutory tax rate in 2023 will approximate 27%.
The realization and timing of any remaining state NOLs and state tax credit carryforwards is uncertain and may expire before being utilized, based primarily on the allocation of taxable income constraints to the Parent and not related to the earnings of the Company.
The percentage of loan originations HFI in any period is dependent on many factors, including quarterly loan origination volume, risk-adjusted returns, liquidity and general regulatory capital considerations. • Total net revenue: Total net revenue increased $368.6 million, or 45%, for the year ended December 31, 2022 compared to the same period in 2021. ◦ Marketplace revenue: Marketplace revenue increased $105.0 million, or 18%, for the year ended December 31, 2022 compared to the same period in 2021.
The percentage of loan originations HFI in any period is dependent on many factors, including quarterly loan origination volume, risk-adjusted returns, liquidity and general regulatory capital considerations.
The increase was primarily due to higher loan sale 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.
The change to a loss from a gain was primarily due to lower loan sale prices. 59 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Other Non-interest Income Other non-interest income primarily consists of referral revenue that relates to fees earned from third-party companies when customers referred by us consider or purchase products or services from such third-party companies.
The following table summarizes LC Bank’s regulatory capital amounts (in millions) and ratios: December 31, 2022 December 31, 2021 Required Minimum plus Required CCB for Non-Leverage Ratios LendingClub Bank Amount Ratio Amount Ratio CET1 capital (1) $ 852.2 13.8 % $ 523.7 16.7 % 7.0 % Tier 1 capital $ 852.2 13.8 % $ 523.7 16.7 % 8.5 % Total capital $ 932.4 15.1 % $ 563.7 18.0 % 10.5 % Tier 1 leverage $ 852.2 12.5 % $ 523.7 14.3 % 4.0 % Risk-weighted assets $ 6,194.0 N/A $ 3,130.4 N/A N/A Quarterly adjusted average assets $ 6,795.2 N/A $ 3,667.7 N/A N/A N/A – Not applicable (1) Consists of common stockholders’ equity as defined under U.S.
Business – Regulation and Supervision – Capital and Liquidity Requirements and Prompt Corrective Action ” of this Annual Report for additional information regarding regulatory capital requirements. 70 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 summarizes the Company’s and LC Bank’s regulatory capital amounts (in millions) and ratios: December 31, 2023 December 31, 2022 Required Minimum plus Required CCB for Non-Leverage Ratios Amount Ratio Amount Ratio LendingClub Corporation: CET1 capital (1) $ 1,090.2 17.9 % $ 1,005.8 15.8 % 7.0 % Tier 1 capital $ 1,090.2 17.9 % $ 1,005.8 15.8 % 8.5 % Total capital $ 1,169.2 19.2 % $ 1,088.1 17.1 % 10.5 % Tier 1 leverage $ 1,090.2 12.9 % $ 1,005.8 14.1 % 4.0 % Risk-weighted assets $ 6,104.5 N/A $ 6,360.7 N/A N/A Quarterly adjusted average assets $ 8,476.1 N/A $ 7,119.0 N/A N/A LendingClub Bank: CET1 capital (1) $ 949.4 15.8 % $ 852.2 13.8 % 7.0 % Tier 1 capital $ 949.4 15.8 % $ 852.2 13.8 % 8.5 % Total capital $ 1,027.4 17.1 % $ 932.4 15.1 % 10.5 % Tier 1 leverage $ 949.4 11.4 % $ 852.2 12.5 % 4.0 % Risk-weighted assets $ 6,022.2 N/A $ 6,194.0 N/A N/A Quarterly adjusted average assets $ 8,337.4 N/A $ 6,795.2 N/A N/A N/A – Not applicable (1) Consists of common stockholders’ equity as defined under U.S.
Risk Factors.” Overview LendingClub is America’s leading digital marketplace bank. The Company was founded in 2006 and brought a traditional credit product – the installment loan – into the digital age by leveraging technology, data science, and a unique marketplace model. In doing so, we became one of the largest providers of unsecured personal loans in the United States.
Risk Factors.” Overview LendingClub 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 February 2021, LendingClub completed the acquisition of Radius, becoming a bank holding company and forming LC Bank as its wholly-owned subsidiary.
The increase was primarily driven by an increase in compensation and benefits expenses primarily due to an increase in headcount as well as an increase in variable marketing expenses based on higher origination volume. • Net income: Net income increased $271.1 million for the year ended December 31, 2022 compared to the same period in 2021.
The decrease was primarily driven by a decrease in variable marketing expenses based on lower origination volume and prudent management of expenses and a decrease in compensation expense due to a decrease in headcount as a result of the workforce reduction plans we implemented in January and October 2023. • Net income: Net income decreased $250.7 million, or 87%, for the year ended December 31, 2023 compared to the same period in 2022.
The increase was primarily due to an increase in headcount. Marketing expense increased $41.6 million, or 27%, for the year ended December 31, 2022 compared to the same period in 2021. The increase was primarily due to an increase in variable marketing expenses based on higher origination volume, partially offset by the deferral of applicable marketing expenses for HFI loans.
The decrease was primarily due to a decrease in variable marketing expenses based on lower origination volume. Equipment and software expense increased $4.3 million, or 9%, for the year ended December 31, 2023 compared to the same period in 2022.
Equipment and software expense increased $9.7 million, or 25%, for the year ended December 31, 2022 compared to the same period in 2021. The increase was primarily due to an increase in hosting fees and subscription costs. Occupancy expense was $22.0 million and $24.2 million for the years ended December 31, 2022 and 2021, respectively.
The increase was primarily due to an increase in subscription costs and hosting fees, partially offset by a decrease in support and maintenance expense. Depreciation and amortization expense increased $3.4 million, or 8%, for the year ended December 31, 2023 compared to the same period in 2022.
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.
This segment provides a full complement of financial products and solutions, including loans, leases and deposits.
The increase was primarily due to growth in loans HFI at amortized cost, discounting effect of the NPV allowance on prior loan vintages and additional qualitative allowance reflecting a less favorable economic outlook. • Total non-interest expense: Total non-interest expense increased $105.5 million, or 16%, for the year ended December 31, 2022 compared to the same period in 2021.
The decrease was primarily due to lower volume of originated loans retained as HFI at amortized cost and the related initial provision for credit losses, partially offset by an increase in quantitative and qualitative allowance due to an increase in expected losses and a less favorable economic outlook. • Total non-interest expense: Total non-interest expense decreased $200.4 million, or 26%, for the year ended December 31, 2023 compared to the same period in 2022.
Our non-GAAP financial 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. 66 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) We believe these non-GAAP financial 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.
We believe these non-GAAP financial 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.
The activity in the allowance for credit losses (ACL) was as follows: Year Ended December 31, 2022 2021 Allowance for loan and lease losses, beginning of period $ 144,389 $ — Credit loss expense for loans and leases held for investment 266,679 140,951 Initial allowance for purchased credit deteriorated (PCD) loans acquired during the period (1) — 12,440 Charge-offs (87,473) (10,452) Recoveries 4,257 1,450 Allowance for loan and lease losses, end of period $ 327,852 $ 144,389 Reserve for unfunded lending commitments, beginning of period $ 1,231 $ — Credit loss expense for unfunded lending commitments 647 1,231 Reserve for unfunded lending commitments, end of period (2) $ 1,878 $ 1,231 (1) For acquired PCD loans, an ACL of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date during the year ended December 31, 2021.
The decrease was primarily due to the lower volume of originated loans retained as HFI at amortized cost and the related initial provision for credit losses, partially offset by an increase in quantitative and qualitative allowance due to an increase in expected losses and a less favorable economic outlook. 63 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 activity in the allowance for credit losses (ACL) was as follows: Year Ended December 31, 2023 2022 2021 Allowance for loan and lease losses, beginning of period $ 327,852 $ 144,389 $ — Credit loss expense for loans and leases held for investment 243,570 266,679 140,951 Initial allowance for purchased credit deteriorated (PCD) loans acquired during the period — — 12,440 Charge-offs (281,107) (87,473) (10,452) Recoveries 20,072 4,257 1,450 Allowance for loan and lease losses, end of period (1) $ 310,387 $ 327,852 $ 144,389 Reserve for unfunded lending commitments, beginning of period $ 1,878 $ 1,231 $ — Credit loss expense for unfunded lending commitments (5) 647 1,231 Reserve for unfunded lending commitments, end of period (2) $ 1,873 $ 1,878 $ 1,231 (1) Comprised of $355.8 million, $340.4 million and $145.2 million in allowance for future estimated net charge-offs on existing portfolio balances, net of a negative allowance of $45.4 million, $12.5 million and $0.8 million for expected recoveries of amounts previously charged-off as of December 31, 2023, 2022 and 2021, respectively .
Uses of cash at the holding company include the routine cash flow requirements as a bank holding company, such as interest and expenses (including those associated with our office leases), the needs of LC Bank for additional equity and, as required, its need for debt financing and support for extraordinary funding requirements when necessary. 71 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) 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.
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.
The increase was primarily driven by the growth in unsecured personal loan origination volume. ◦ Loan originations held for investment (HFI) at amortized cost increased $1.4 billion, or 63%, for the year ended December 31, 2022 compared to the prior year. ◦ Loan originations HFI at amortized cost as a percentage of total loan originations was 28%, increasing from 22% in the prior year.
We attribute the decrease in volume and investor demand to the rising interest rate environment. ◦ Loan originations held for investment (HFI) at amortized cost decreased $1.5 billion, or 41%, for the year ended December 31, 2023 compared to the prior year. ◦ Loan originations HFI at amortized cost as a percentage of loan originations was 29% and 28% for the years ended December 31, 2023 and 2022, respectively.
Although historically the Company has generally resolved these matters in a manner that was not materially adverse to its financial results or business operations, no assurance can be given as to the timing, outcome or consequences of any of these matters in the future. 68 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) 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.
Although historically the Company has generally resolved these matters in a manner that was not materially adverse to its financial results or business operations, no assurance can be given as to the timing, outcome or consequences of any of these matters in the future.
For discussion related to 2020 items and year-over-year comparisons between 2021 and 2020, see “ Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in the Annual Report on Form 10-K for the year ended December 31, 2021.
For discussion related to 2021 items and year-over-year comparisons between 2022 and 2021, see “ Part II – Item 7.
Origination fees were $499.2 million and $416.8 million for the years ended December 31, 2022 and 2021, respectively, an increase of 20%.
Origination fees were $279.1 million and $499.2 million for the years ended December 31, 2023 and 2022, respectively, a decrease of 44%. The decrease was due to lower origination volume of marketplace loans.
We believe, based on our projections, that our cash on hand, AFS securities, available funds, and cash flow from operations are sufficient to meet our liquidity needs for the next twelve months, as well as beyond the next twelve months. See “ Item 8.
We believe, based on our projections, that our cash on hand, liquid AFS securities, available borrowing capacity, and net cash flows from operating, investing and financing activities are sufficient to meet our liquidity needs for 72 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 next twelve months, as well as beyond the next twelve months.
Depreciation and amortization expense remained relatively flat for the year ended December 31, 2022 compared to the same period in 2021. Professional services expense increased $2.9 million, or 6%, for the year ended December 31, 2022 compared to the same period in 2021.
The increase was primarily due to an increase in the amortization of internally-developed software and purchased software. Professional services expense decreased $15.3 million, or 30%, for the year ended December 31, 2023 compared to the same period in 2022.
The decrease was primarily due to higher fair value amortization of our servicing asset resulting from a larger asset balance, as well as a servicing asset write-off related to the acquisition of a $1.05 billion outstanding principal loan portfolio in the fourth quarter of 2022, partially offset by an increase in the fair value of the servicing asset based on higher expected servicing fee revenue.
This was primarily due to a one-time benefit related to recouping volume-based purchase incentives and an increase in the fair value of the servicing asset based on higher expected servicing fee revenue, partially offset by a decrease in loan balances serviced for others.
Net Fair Value Adjustments We record fair value adjustments on loans that are recorded at fair value, including gains or losses from sale prices in excess of or less than the loan principal amount sold. 57 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 were $8.5 million and $4.0 million for the years ended December 31, 2022 and 2021, respectively, an increase of $4.5 million.
Net Fair Value Adjustments We record fair value adjustments on loans that are recorded at fair value, including gains or losses from sale prices in excess of or less than the loan principal amount sold.
Diluted EPS for the year ended December 31, 2022 included a $1.38 per share benefit from the deferred tax valuation allowance reversal, as well as revenue growth and improved operating efficiency. • Pre-provision net revenue: Pre-provision net revenue increased $263.2 million, or 167%, for the year ended December 31, 2022 compared to the same period in 2021, reflecting revenue growth combined with improved operating efficiency. • Total assets: Total assets as of December 31, 2022 increased $3.1 billion, or 63%, compared to the prior year, primarily reflecting growth in loans held for investment, including the acquisition of a $1.05 billion outstanding principal loan portfolio at the end of 2022. • Deposits: Total deposits as of December 31, 2022 increased $3.3 billion, or 104%, compared to the prior year, primarily reflecting growth in online savings deposits. • Total equity: Total equity as of December 31, 2022 increased $314.1 million, or 37%, compared to the prior year, primarily reflecting net income generated over the period and the deferred tax asset valuation allowance reversal.
Diluted EPS for the year ended December 31, 2022 included a $1.38 per share benefit from the deferred tax valuation allowance reversal. • Pre-provision net revenue (PPNR): PPNR for the year ended December 31, 2023 decreased $122.2 million, or 29%, compared to the same period in 2022. • Cash and cash equivalents: Total cash and cash equivalents as of December 31, 2023 increased $195.5 million, or 18%, compared to the same period in 2022.
The increase was primarily driven by an 51 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) increase in unsecured personal loans retained in current and prior periods as HFI, partially offset by an increase in interest expense on deposits due to higher interest rates. ◦ Net interest margin: Net interest margin was 8.2%, increasing from 5.6% in the prior year, primarily reflecting a greater mix of personal loans which generate a higher yield than the rest of the loans HFI, partially offset by higher interest rates on deposits. • Provision for credit losses: Provision for credit losses increased $128.5 million, or 93%, for the year ended December 31, 2022 compared to the same period in 2021.
The increase was primarily driven by higher interest income due to a higher average balance of loans retained as HFI in the current period, a higher average balance of securities retained associated with our Structured Certificates and higher interest rates earned on cash and cash equivalents, partially offset by higher interest rates paid on a higher average balance of deposits. ◦ Net interest margin: Net interest margin for the year ended December 31, 2023 was 7.0%, decreasing from 8.2% in the prior year. • Provision for credit losses: Provision for credit losses decreased $23.8 million, or 9%, for the year ended December 31, 2023 compared to the same period in 2022.
The increase in sensitivity as of December 31, 2022 relative to the prior year is primarily due to the 72 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) composition of our loans and deposits.
Federal Deposit Insurance Corporation (FDIC)-insured deposits represented approximately 87% of total deposits as of December 31, 2023. 53 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) • Total equity: Total equity as of December 31, 2023 increased $87.5 million, or 8%, compared to the same period in 2022, primarily reflecting an increase in Additional Paid-In Capital resulting from Stock-Based Compensation expense and net income generated over the period.
The asset quality metrics presented in the following table are for loans and leases held for investment at amortized cost and do not reflect loans held for investment at fair value: As of and for the year ended December 31, 2022 2021 ALLL to total loans and leases held for investment 6.5 % 5.0 % ALLL to total loans and leases held for investment, excluding PPP loans 6.6 % 5.5 % ALLL to consumer loans and leases held for investment 7.3 % 6.4 % ALLL to commercial loans and leases held for investment 2.0 % 1.8 % ALLL to commercial loans and leases held for investment, excluding PPP loans 2.2 % 2.6 % Net charge-offs $ 83,216 $ 9,002 Net charge-off ratio (1) 2.1 % 0.5 % (1) Calculated as net charge-offs divided by average outstanding loans and leases HFI at amortized cost during the period, excluding PPP loans. 54 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Results of Operations This section of this Form 10-K generally discusses 2022 and 2021 items and year-over-year comparisons between 2022 and 2021.
(2) Calculated as net charge-offs divided by average outstanding loans and leases HFI at amortized cost during the period, excluding PPP loans. Results of Operations This section of this Form 10-K generally discusses 2023 and 2022 items and year-over-year comparisons between 2023 and 2022.
As of December 31, 2022 2021 Balance Sheet Data: Loans and leases held for investment at amortized cost, net, excluding PPP loans $ 4,638,331 $ 2,486,440 PPP loans 66,971 268,297 Total loans and leases held for investment at amortized cost, net (1) $ 4,705,302 $ 2,754,737 Loans held for investment at fair value $ 925,938 $ 21,240 Total loans and leases held for investment $ 5,631,240 $ 2,775,977 Total assets $ 7,979,747 $ 4,900,319 Total deposits $ 6,392,553 $ 3,135,788 Total liabilities $ 6,815,453 $ 4,050,077 Total equity $ 1,164,294 $ 850,242 (1) Excludes loans held for investment at fair value, which primarily consists of a loan portfolio that was acquired at the end of 2022.
(5) 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. 55 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 December 31, 2023 2022 Balance Sheet Data: Securities available for sale $ 1,620,262 $ 345,702 Loans held for sale at fair value $ 407,773 $ 110,400 Loans and leases held for investment at amortized cost, net, excluding PPP loans $ 4,533,523 $ 4,638,331 PPP loans $ 6,392 $ 66,971 Total loans and leases held for investment at amortized cost, net (1) $ 4,539,915 $ 4,705,302 Loans held for investment at fair value $ 262,190 $ 925,938 Total loans and leases held for investment $ 4,802,105 $ 5,631,240 Total assets $ 8,827,463 $ 7,979,747 Total deposits $ 7,333,486 $ 6,392,553 Total liabilities $ 7,575,641 $ 6,815,453 Total equity $ 1,251,822 $ 1,164,294 Allowance Ratios (1) : ALLL to total loans and leases held for investment 6.4 % 6.5 % ALLL to consumer loans and leases held for investment 7.2 % 7.3 % ALLL to commercial loans and leases held for investment 1.8 % 2.0 % Net charge-offs $ 261,035 $ 83,216 Net charge-off ratio (2) 5.0 % 2.1 % (1) Excludes loans held for investment at fair value, which primarily consists of a loan portfolio that was acquired at the end of 2022.
The minimum capital 69 LENDINGCLUB CORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) requirements under the U.S.
It originates loans to individuals and businesses, retains loans for investment, sells loans to investors and manages relationships with deposit holders. 66 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 LendingClub Corporation (Parent only) operating segment represents the holding company legal entity and predominately reflects the operations of the Company prior to the Acquisition.
We are not able to predict the extent of the impact on our business from any regulatory activity relating to or resulting from COVID-19. Federal Banking Regulator Supervision Since the Acquisition, we are subject to supervision, regulation, examination and enforcement by multiple federal banking regulatory bodies.
Since 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).
Changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions are recorded as current period income tax expense or benefit. As of December 31, 2022, we maintained a valuation allowance of $47.7 million related to state NOLs and tax credit carryforwards.
These factors resulted in the release of the majority of our valuation allowance against our deferred tax assets in 2022. As of December 31, 2023, we maintained a valuation allowance of $46.1 million related to certain state net operating loss carryforwards (NOLs) and state tax credit carryforwards.
Removed
In February 2021, LendingClub completed the acquisition of an award-winning digital bank, Radius, becoming a bank holding company and forming LC Bank as its wholly-owned subsidiary. We operate the vast majority of our business through LC Bank, as a lender and originator of loans and as a regulated bank in the United States.

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Other LC 10-K year-over-year comparisons