LendingClub Stock

LendingClub Corporation (LendingClub) operates as the bank holding company for LendingClub Bank, National Association (LC Bank) that provides various financial products and solutions.

LendingClub operates a leading digital marketplace bank and is one of a small number of fintech companies with a national bank charter.

Loan Origination and Deposit Gathering Model

The company’s sales and marketing efforts are designed to efficiently attract and retain members and build brand awareness. The company uses an array of marketing channels and constantly seeks to improve and optimize the member experience, both online and offline, to achieve efficiency and high levels of member satisfaction.

The company attracts and retains members directly through its website and through targeted online advertising, online aggregation partners, direct mail, and other channels, including search engines, online display advertising, email, social media and strategic relationship referrals.

The company’s primary loan products include unsecured personal loans, secured auto refinance loans, and patient and education finance loans (Consumer Loans).

The company offers borrowers multiple features to lower their cost of debt and enhance their financial position, including balance transfers (where a borrower’s existing credit card debt is directly paid down and the loan is consolidated into a fixed-rate term loan) and joint applications (where borrowers may receive a better rate when they jointly apply for a personal loan). These loan products are underpinned by a scalable technology platform and capabilities targeted directly at the company’s members’ core needs to either lower the cost of their debt and/or improve the returns on their savings.

The company’s commercial lending business is primarily focused on small businesses, and the company participates in the U.S. Small Business Administration (SBA) lending programs. Commercial loans are sourced through relationship managers who maintain and build relationships with businesses across the country. The company underwrites loans based on the creditworthiness of businesses, including an assessment of cash flows, and on the underlying value of any collateral. In the first quarter of 2023, the company ceased originating commercial real estate loans and equipment leases and intends to retain the existing loan portfolios to maturity.

The company’s deposit business includes sourcing deposits directly from consumer and commercial customers and from third-party marketing channels and deposit brokers. For consumer depositors, the company offers high-yield savings accounts, checking accounts and certificates of deposit (CDs). With the company’s FDIC-insured high-yield savings account, members can enhance their savings by earning competitive interest on their entire balance. The company’s checking accounts deliver an award-winning digital experience and member-friendly features, such as ATM fee rebates, no overdraft fees and early direct deposits.

Marketplace

The company’s Consumer Loans are either: sold to marketplace investors or retained by LC Bank. The company’s commercial loans are generally retained by LC Bank.

Loan Sales (Marketplace Activity): The company sells whole loans to institutional investors, such as banks, asset managers, insurance companies, investment funds, credit unions and other large non-bank investors, through the company’s innovative and proprietary marketplace. The company’s marketplace loan sales are executed as either: (i) whole loan sales to investors or (ii) Structured Program transactions.

In the second quarter of 2023, the company launched Structured Certificates – a new type of Structured Program transaction where the company retains the senior security and sell the residual certificate on a pool of loans to a marketplace investor at a predetermined price. This structure, developed by LendingClub and enabled by the company’s marketplace bank model, delivers a transaction that benefits both marketplace investors and LendingClub. Marketplace investors earn compelling levered returns on the residual certificate without the need for the financing typically required for a whole loan purchase and LendingClub earns an attractive yield with remote credit risk.

The company also facilitates loans through LCX, the company’s real-time electronic platform and settlement technology. This proprietary investor platform can easily be customized to meet the needs of individual investors, making transactions on the company’s marketplace fast, easy, and repeatable.

LendingClub Bank: LC Bank holds high-quality prime loans and funds those loans directly with its own capital and deposits, which are typically stable and low cost.

Loan Purchases: From time to time, the company may opportunistically purchase loans.

Retail Notes. Investors had historically been able to purchase LendingClub Member Payment Dependent Notes (Retail Notes), which are securities for which cash flows to investors were dependent upon principal and interest payments made by borrowers of certain unsecured personal loans. As of December 31, 2020, and in anticipation of the closing of the Acquisition, LendingClub ceased offering and selling Retail Notes.

Securities

As of December 31, 2023, the company’s securities were senior asset-backed securities related to Structured Program transactions; U.S. agency residential mortgage-backed securities; U.S. agency securities; other asset-backed securities related to structured program transactions; mortgage-backed securities; other asset-backed securities; and municipal securities.

Seasonality

Historically, personal loan volume on the company’s marketplace is generally lower in the first and fourth quarters of the year (year ended December 2023), primarily due to seasonality of borrower behavior. These seasonal trends contribute to fluctuations in the company’s operating results.

Revenue

The company originates Consumer Loans through its marketplace by selling them directly to investors, which generates a majority of related revenue immediately, or by using the company’s own capital to hold the loans for investment, which generates revenue over the life of the loan.

Regulation and Supervision

As a bank holding company, the company is subject to the Bank Holding Company Act of 1956 (BHCA) and is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Board of Governors of the Federal Reserve System (FRB).

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).

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 company is subject to the disclosure and regulatory requirements of the Securities Act and the Exchange Act, both as administered by the SEC. LC Bank is subject to periodic examination under the CRA by the OCC.

The company is subject to a wide range of laws related to anti-money laundering (AML), anti-corruption, anti-bribery, economic sanctions and prevention of financial crime, including the Bank Secrecy Act, the USA PATRIOT Act and economic sanctions programs. The company is 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. 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.

The company’s partner banks for education and patient finance loans were NBT Bank and Comenity Capital Bank, which originate and service such loans. NBT Bank is subject to oversight by the OCC and was phased out as a partner in 2021. Comenity Capital Bank is subject to oversight by the FDIC and the Utah Department of Financial Institutions, and continues to be a partner. These authorities impose obligations and restrictions on the company’s activities and the loans facilitated through its lending marketplace through issuing and partner banks.

History

The company was founded in 2006. It was incorporated in Delaware in 2006. The company was formerly known as SocBank Corporation and changed its name to LendingClub Corporation in 2006.