Employee Incentive and Retirement Plans

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

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



	Three Months Ended March 31,
	2016		2015
Stock options	$	7,657	$	7,086
RSUs	5,126		481
ESPP	388		479
Stock issued related to acquisition	1,850		3,547
Total stock-based compensation expense	$	15,021	$	11,593

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



	Three Months Ended March 31,
	2016		2015 ⁽¹⁾
Sales and marketing	$	1,904	$	1,508
Origination and servicing	746		606
Engineering and product development	3,723		1,798
Other general and administrative	8,648		7,681
Total stock-based compensation expense	$	15,021	$	11,593


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

The Company capitalized $1.9 million and $0.8 million of stock-based compensation expense associated with developing software for internal use during the first quarters of 2016 and 2015, respectively. In addition, the Company recognized $39 thousand in tax benefits from exercised stock options and RSUs during the first quarter of 2016. There was no net income tax benefit recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options and RSUs due to the full valuation allowance during the first quarter of 2015.

Equity Incentive Plans

The Company has two equity incentive plans: the 2007 Stock Incentive Plan (2007 Plan) and the 2014 Equity Incentive Plan (2014 Plan). Upon the Company’s IPO in 2014, the 2007 Plan was terminated and all shares that remained available for future issuance under the 2007 Plan at that time were transferred to the 2014 Plan. As of March 31, 2016, 42,810,226 options to purchase common stock granted under the 2007 Plan remain outstanding. As of March 31, 2016, the total number of shares available for future grants under the 2014 Plan was 44,040,590 shares, including shares transferred from the 2007 Plan.

Stock Options

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



	Number of Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2015	48,208,911		$	3.60
Granted	4,547,230		$	8.48
Exercised	(3,822,799	)	$	1.26
Forfeited/Expired	(478,682	)	$	6.97
Outstanding at March 31, 2016	48,454,660		$	4.21	7.1	$	221,874
Vested and expected to vest at March 31, 2016	48,091,745		$	4.20	7.1	$	220,963
Exercisable at March 31, 2016	26,444,648		$	2.36	6.2	$	163,676


⁽¹⁾	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $8.30 as reported on the New York Stock Exchange on March 31, 2016.

For the first quarter of 2016, the Company granted service-based stock options to purchase 4,547,230 shares of common stock with a weighted average exercise price of $8.48 per option share, a weighted average grant date fair value of $4.26 per option share and an aggregate estimated fair value of $19.4 million. Stock options granted during the first quarter of 2016 included 265,987 shares of fully vested stock options granted in lieu of cash bonuses to be paid to certain employees for the 2015 performance period.

For the first quarter of 2015, the Company granted service-based stock options to purchase 768,500 shares of common stock with a weighted average exercise price of $20.81 per option share, a weighted average grant date fair value of $10.27 per option share and an aggregate estimated fair value of $7.9 million.

The aggregate intrinsic value of options exercised was $27.9 million and $10.8 million for the first quarters of 2016 and 2015, respectively. The total fair value of stock options vested for the first quarters of 2016 and 2015 was $10.3 million and $6.1 million, respectively.

As of March 31, 2016, the total unrecognized compensation cost, net of forfeitures, related to outstanding stock options was $85.9 million, which is expected to be recognized over the next 1.3 years.

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



	Three Months Ended March 31,
	2016		2015
Expected dividend yield	—		—
Weighted-average assumed stock price volatility	51.9	%	49.9	%
Weighted-average risk-free interest rate	1.39	%	1.56	%
Weighted-average expected life (in years)	6.18		6.25

Restricted Stock Units

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



	Number of RSUs		Weighted- Average Grant Date Fair Value
Unvested at December 31, 2015	4,443,399		$	15.23
RSUs granted	9,168,791		$	8.41
RSUs vested	(106,836	)	$	18.61
RSUs forfeited/expired	(404,127	)	$	10.83
Unvested at March 31, 2016	13,101,227		$	10.56
Expected to vest after March 31, 2016	12,751,261		$	10.53

For the first quarter of 2016, the Company granted 9,168,791 RSUs with an aggregate fair value of $77.1 million.

As of March 31, 2016, there was $126.9 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 3.7 years.

Employee Stock Purchase Plan

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

As of March 31, 2016, a total of 6,916,954 shares of common stock were reserved for issuance under the ESPP. The Company's employees did not purchase any shares of common stock under the ESPP during the first quarter of 2016, and all 6,916,954 shares remain available for future issuance as of March 31, 2016.

Share Repurchases

On February 9, 2016, the board of directors approved a share repurchase program under which Lending Club may repurchase up to $150.0 million of the Company’s common shares in open market or privately negotiated transactions in compliance with Securities and Exchange Act Rule 10b-18. This repurchase plan is valid for one year and does not obligate the Company to acquire any particular amount of common stock, and may be suspended at any time at Lending Club’s discretion. During the first quarter of 2016, the Company repurchased 2,282,700 shares of its common stock at a weighted average purchase price of $8.52 per share for an aggregate purchase price of $19.5 million. As of April 30, 2016, the Company has not purchased any additional shares under the share repurchase program.

Retirement Plan

Upon completing 90 days of service, employees may participate in the Company’s qualified retirement plan that is governed by section 401(k) of the IRS Code. Participants may elect to contribute a portion of their annual compensation up to the maximum limit allowed by federal tax law. In the first quarter of 2016, the Company approved an employer match of up to 4% of an employee’s eligible compensation with a maximum annual match of $5,000 per employee. The total expense for the employer match for the first quarters of 2016 and 2015 was $1.5 million and $0.6 million, respectively.