Securitizations and Variable Interest Entities

VIE Assets and Liabilities

The Company has segregated its involvement with VIEs between consolidated VIEs and unconsolidated VIEs. The following tables provide the classifications of assets and liabilities on the Company’s Condensed Consolidated Balance Sheets for its transactions with VIEs at June 30, 2018 and December 31, 2017:



June 30, 2018	Consolidated VIEs		Unconsolidated VIEs		Total
Assets
Cash and cash equivalents	$	29,479	$	—	$	29,479
Restricted cash	37,311		—		37,311
Securities available for sale at fair value	—		93,714		93,714
Loans held for investment at fair value	893,282		—		893,282
Loans held for sale by Company at fair value	389,491		—		389,491
Accrued interest receivable	11,941		939		12,880
Other assets	2,936		22,773		25,709
Total assets	$	1,364,440	$	117,426	$	1,481,866
Liabilities
Accrued interest payable	$	9,806	$	—	$	9,806
Accrued expenses and other liabilities	1,227		—		1,227
Notes, certificates and secured borrowings at fair value	899,250		—		899,250
Payable to credit facilities	249,232		—		249,232
Total liabilities	1,159,515		—		1,159,515
Total net assets	$	204,925	$	117,426	$	322,351



December 31, 2017	Consolidated VIEs		Unconsolidated VIEs		Total
Assets
Restricted cash	$	34,370	$	—	$	34,370
Securities available for sale at fair value	—		47,049		47,049
Loans held for investment at fair value	1,202,260		—		1,202,260
Loans held for investment by the Company at fair value	350,699		—		350,699
Loans held for sale by Company at fair value	60,812		—		60,812
Accrued interest receivable	15,602		407		16,009
Other assets	6,324		15,779		22,103
Total assets	$	1,670,067	$	63,235	$	1,733,302
Liabilities
Accrued interest payable	$	14,789	$	—	$	14,789
Accrued expenses and other liabilities	52		300		352
Notes, certificates and secured borrowings at fair value	1,210,349		—		1,210,349
Payable to securitization note and residual certificate holders	312,123		—		312,123
Payable to revolving credit facilities	32,100		—		32,100
Total liabilities	1,569,413		300		1,569,713
Total net assets	$	100,654	$	62,935	$	163,589

Consolidated VIEs

The Company consolidates VIEs when it is deemed to be the primary beneficiary. The primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity. A consolidation analysis can generally be performed qualitatively, however if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. See “Part II – Item 8 – Financial Statements and Supplementary Data – Note 2. Summary of Significant Accounting Policies” in the Annual Report on Form 10-K for additional information.

LC Trust I Certificates

The Company established the Trust for the purpose of acquiring and holding loans for the sole benefit of certain investors that have purchased trust certificates issued by the Trust. The Company consolidates the Trust, including the certificates issued by the Trust, because the Company has determined that it is the primary beneficiary of the Trust based on (i) its power to direct the activities that most significantly impact the economic outcomes of the Trust through involvement in the design and ongoing activities and (ii) its significant variable interest held in the Trust. The Company is obligated to ensure that the Trust meets minimum capital requirements with respect to funding the administrative activities and maintaining the operations of the Trust.

Consolidated Securitizations

The Company previously consolidated a self-sponsored securitization trust because the Company was the primary beneficiary based on its power to direct the activities that most significantly impact the trust’s economic performance through its role as servicer and holding significant variable interests in the trust through retained residual certificates. Because the Company consolidated the securitization trust, no gain or loss on sale of loans was recognized from the securitization transaction. In May 2018, the Company sold a portion of the residual certificates and no longer holds a significant variable interest in the securitization trust. As the result, the Company deconsolidated the securitization trust and recognized a $1.8 million gain on deconsolidation, which was recorded in “Gain on sales of loans” in the Company’s Condensed Consolidated Statements of Operations during the second quarter of 2018. The Company retained 5% of the beneficial interests issued by the securitization trust, which are classified as available for sale securities. Additionally, the Company’s continued involvement includes loan servicing responsibilities for which it receives servicing fees over the life of the underlying loans.

CLUB Certificates

In May 2018, the Company acquired two previously sold CLUB Certificates, and as a result consolidated the two trusts because the Company became the primary beneficiary based on its power to direct the activities that most significantly impact the economic outcomes through its role as servicer and its significant variable interests through holding 100% of the issued CLUB Certificates. The Company recognized a $0.5 million loss on consolidation, primarily due to the derecognition of the related servicing asset. The loss on derecognition of the servicing asset was recorded in “Investor fees” in the Company’s Condensed Consolidated Statement of Operations during the second quarter of 2018. The Company redeemed the CLUB Certificates, received the underlying loans, and dissolved the two trusts prior to the end of the second quarter of 2018.

Warehouse Credit Facilities

The Company established warehouse credit facilities (deemed to be VIEs) for the purpose of purchasing loans from LendingClub. The Company consolidates the VIEs as it is the primary beneficiary based on its power to direct the activities that most significantly impact the economic outcomes of the VIEs through involvement in the design and ongoing activities and significant variable interests held in the VIEs.

The following table presents a summary of financial assets and liabilities from the Company’s involvement with consolidated VIEs at June 30, 2018 and December 31, 2017:



June 30, 2018	Assets		Liabilities			Net Assets
Trust Certificates	$	913,387	$	(909,215	)	$	4,172
Warehouse Credit Facilities	451,053		(250,300		)	200,753
Total consolidated VIEs	$	1,364,440	$	(1,159,515	)	$	204,925



December 31, 2017	Assets		Liabilities			Net Assets
Trust Certificates	$	1,226,957	$	(1,224,473	)	$	2,484
Securitizations	375,607		(312,832		)	62,775
Warehouse Credit Facility	67,503		(32,108		)	35,395
Total consolidated VIEs	$	1,670,067	$	(1,569,413	)	$	100,654

The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets.

Unconsolidated VIEs

The Company’s transactions with unconsolidated VIEs include securitizations of unsecured personal whole loans, CLUB Certificate transactions, and sales of whole loans to VIEs. The Company has various forms of involvement with VIEs, including servicing of loans and holding senior or subordinated interests. The Company considers continued involvement in an unconsolidated VIE insignificant if it is the sponsor and servicer but does not hold other significant variable interests. In these instances, the Company’s involvement with the VIE is in the role as an agent and without significant participation in the economics of the VIE. In connection with these securitizations, as well as our whole loan and CLUB Certificate transactions, we made certain customary representations, warranties and covenants. See “Part II - Item 8 -Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies” in the Annual Report on Form 10-K for additional information.

Unconsolidated Securitizations

The Company sponsors securitizations of unsecured personal whole loans through issuances of asset-backed securities, which are collateralized by loans that are contributed by the Company and third parties. In connection with these securitizations, the Company established VIEs to purchase the loans from the Company and third-party whole loan investors and simultaneously transferred the loans to a securitization trust with the transfer accounted for as a sale of financial assets. The assets are transferred into a trust such that the assets are legally isolated from the creditors of the Company and are not available to satisfy its obligations. These assets can only be used to settle obligations of the underlying securitization trusts.

The Company enters into separate servicing agreements with the VIEs and holds 5% of the beneficial interests issued by the VIEs to comply with regulatory risk retention rules. In the case of certain securitization transactions, the Company has also agreed to repurchase or substitute loans for which a borrower fails to make the first payment due under a loan. The Company has determined that the variable interests it holds with respect to the securitizations are not significant to the VIE, and as such, the Company is not the primary beneficiary. The senior securities and subordinated residual certificates retained by the company are accounted for as securities available for sale.

CLUB Certificates

The Company sponsors the sale of unsecured personal whole loans through issuance of pass-through securities called CLUB Certificates, which are collateralized by loans transferred to a VIE. In the fourth quarter of 2017, the Company introduced the CLUB Certificate, which is an instrument that trades in the over-the-counter market with a CUSIP. The CLUB Certificate transaction typically involves the transfer of unsecured personal whole loans to a trust with the transfer accounted for as a sale. In addition, the Company enters into a servicing agreement with each applicable trust and holds 5% of the beneficial interests issued by the trust to comply with regulatory risk retention rules. The Company has determined that the variable interests it holds with respect to CLUB Certificates are not significant to the VIE and as such, the Company is not the primary beneficiary. The CLUB Certificates retained by the Company are accounted for as securities available for sale. Additionally, the Company’s continued involvement includes loan servicing responsibilities for which it receives servicing fees over the life of the underlying loans.

Investment Fund

The Company has an equity investment in a holding company (Investment Fund) that participates in a family of funds with other unrelated third parties that purchases loans and interest in loans from the Company. As of June 30, 2018, the Company had an ownership interest of approximately 24% in the Investment Fund. The Company’s investment is deemed to be a variable interest in the Investment Fund because the Company shares in the expected returns and losses of the Investment Fund. However, the Company is not the primary beneficiary of the Investment Fund because the Company does not have the power to direct the activities that most significantly affect the Investment Fund’s economic performance. As a result, the Company does not consolidate the operations of the Investment Fund in its condensed consolidated financial statements. At June 30, 2018, the Company’s investment was $8.5 million, which is recognized in “Other assets” on the Company’s Condensed Consolidated Balance Sheets.

The following tables summarize unconsolidated VIEs with which the Company has significant continuing involvement, but is not the primary beneficiary at June 30, 2018 and December 31, 2017:



June 30, 2018			Carrying Value
	Total VIE Assets		Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Net Assets
Securitizations	$	1,538,229	$	77,751	$	828	$	11,500	$	—	$	90,079
CLUB Certificates	321,077		15,963		111		2,784		—		18,858
Investment Fund	35,901		—		—		8,489		—		8,489
Total unconsolidated VIEs	$	1,895,207	$	93,714	$	939	$	22,773	$	—	$	117,426



June 30, 2018	Maximum Exposure to Loss
	Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Total Exposure
Securitizations	$	77,751	$	828	$	11,500	$	—	$	90,079
CLUB Certificates	15,963		111		2,784		—		18,858
Investment Fund	—		—		8,489		—		8,489
Total unconsolidated VIEs	$	93,714	$	939	$	22,773	$	—	$	117,426



December 31, 2017			Carrying Value
	Total VIE Assets		Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities			Net Assets
Securitizations	$	863,589	$	45,256	$	391	$	5,446	$	(300	)	$	50,793
CLUB Certificates	36,833		1,793		16		315		—			2,124
Investment Fund	40,494		—		—		10,018		—			10,018
Total unconsolidated VIEs	$	940,916	$	47,049	$	407	$	15,779	$	(300	)	$	62,935



December 31, 2017	Maximum Exposure to Loss
	Securities Available for Sale		Accrued Interest Receivable		Other Assets		Accrued Expenses and Other Liabilities		Total Exposure
Securitizations	$	45,256	$	391	$	5,446	$	300	$	51,393
CLUB Certificates	1,793		16		315		—		2,124
Investment Fund	—		—		10,018		—		10,018
Total unconsolidated VIEs	$	47,049	$	407	$	15,779	$	300	$	63,535

“Total VIE Assets” represents the remaining principal balance of loans held by unconsolidated VIEs with respect to securitizations and CLUB Certificates, and the net assets held by the investment fund using the most current information available. “Securities Available for Sale,” “Accrued Interest Receivable,” “Other Assets” and “Accrued Expenses and Other Liabilities” are the balances in the Company’s Condensed Consolidated Balance Sheets related to its involvement with the unconsolidated VIEs. “Other Assets” includes the Company’s servicing assets associated with loans transferred as part of securitizations and CLUB Certificates and the Company’s equity investment with respect to the Investment Fund. “Total Exposure” refers to the Company’s maximum exposure to loss from its involvement with unconsolidated VIEs. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is extremely remote, such as where the value of interests and any associated collateral declines to zero. Accordingly, this required disclosure is not an indication of expected losses.

The following tables summarize activity related to the unconsolidated personal whole loan securitizations and personal whole loan CLUB Certificates with the transfers accounted for as a sale on the Company’s condensed consolidated financial statements for the second quarters and first halves of 2018 and 2017:



	Three Months Ended June 30, 2018				Three Months Ended June 30, 2017
	Personal Whole Loan Securitizations		Personal Whole Loan CLUB Certificates		Personal Whole Loan Securitizations
Principal derecognized from loans securitized or sold	$	646,242	$	196,670	$	336,658
Net gains (losses) recognized from loans securitized or sold	$	2,412	$	1,580	$	1,739
Fair value of senior securities and subordinated certificates retained upon settlement ⁽¹⁾	$	32,291	$	9,724	$	17,536
Cash proceeds from loans securitized or sold	$	307,094	$	185,966	$	260,829
Cash proceeds from servicing and other administrative fees on loans securitized or sold	$	3,143	$	572	$	70
Cash proceeds for interest received on senior securities and subordinated certificates	$	1,006	$	329	$	—


⁽¹⁾	For personal whole loan securitizations, the Company retained senior securities of $28.7 million and $14.0 million for the second quarters of 2018 and 2017, respectively, and subordinated certificates of $3.6 million for both the second quarters of 2018 and 2017.



	Six Months Ended June 30, 2018				Six Months Ended June 30, 2017
	Personal Whole Loan Securitizations		Personal Whole Loan CLUB Certificates		Personal Whole Loan Securitizations
Principal derecognized from loans securitized or sold	$	1,001,490	$	358,545	$	336,658
Net gains (losses) recognized from loans securitized or sold	$	5,509	$	3,037	$	1,739
Fair value of senior securities and subordinated certificates retained upon settlement ⁽¹⁾	$	50,784	$	17,826	$	17,536
Cash proceeds from loans securitized or sold	$	590,366	$	340,805	$	260,829
Cash proceeds from servicing and other administrative fees on loans securitized or sold	$	5,493	$	707	$	70
Cash proceeds for interest received on senior securities and subordinated certificates	$	1,302	$	411	$	—


⁽¹⁾	For personal whole loan securitizations, the Company retained senior securities of $43.8 million and $14.0 million and subordinated certificates of $7.0 million and $3.6 million, for the first halves of 2018 and 2017, respectively.

Off-Balance Sheet Loans

Off-balance sheet loans primarily relate to Company-sponsored securitization transactions and CLUB Certificate transactions for which the Company has some form of continuing involvement, including as servicer. Delinquent loans are comprised of loans 31 days or more past due, including non-accrual loans. For loans securitized or in a CLUB Certificate, where servicing is the only form of continuing involvement, the Company would only experience a loss if it was required to repurchase a delinquent loan due to a breach in representations and warranties associated with our loan sale or servicing contracts.

As of June 30, 2018, the aggregate unpaid principal balance of the off-balance sheet loans pursuant to Company-sponsored securitization transactions and CLUB Certificate transactions was $1.9 billion, of which $54.5 million was 31 days or more past due. As of December 31, 2017, the aggregate unpaid principal balance of the off-balance sheet loans pursuant to Company-sponsored securitization transactions and CLUB Certificate transactions was $900.4 million, of which $26.5 million was 31 days or more past due.

Retained Interests from Unconsolidated VIEs

The Company and other investors in the beneficial interests have rights to cash flows after the investors holding the senior securities issued by the securitization trusts have first received their contractual cash flows. The investors and the securitization trusts have no direct recourse to the Company’s assets, and holders of the securities issued by the securitization trusts can look only to the assets of the securitization trusts that issued their securities for payment. The beneficial interests held by the Company and the Company’s MOA are subject principally to the credit and prepayment risk stemming from the underlying unsecured personal whole loans. Additionally, the Company holds 5% of each issuance of CLUB Certificates to comply with regulatory risk retention rules. Accordingly, the Company has exposure to the loans underlying this pass-through security.

The following tables provide adverse changes to the fair value sensitivity of the senior securities, subordinated residual certificates and CLUB Certificates to changes in key assumptions at June 30, 2018 and December 31, 2017:



	June 30, 2018
	Asset-Backed Securities Related to Company-Sponsored Securitizations and CLUB Certificate Transactions
	Senior Securities			Subordinated Residual Certificates			CLUB Certificates
Fair value of interests held	$	64,987		$	12,764		$	15,963
Expected weighted-average life (in years)	0.9			1.6			1.2
Discount rates
100 basis point increase	$	(667	)	$	(172	)	$	(228	)
200 basis point increase	$	(1,318	)	$	(338	)	$	(449	)
Expected credit loss rates on underlying loans
10% adverse change	$	—		$	(1,741	)	$	(311	)
20% adverse change	$	—		$	(3,466	)	$	(615	)
Expected prepayment rates
10% adverse change	$	—		$	(629	)	$	(105	)
20% adverse change	$	—		$	(1,247	)	$	(205	)



	December 31, 2017
	Asset-Backed Securities Related to Company-Sponsored Securitizations and CLUB Certificate Transactions
	Senior Securities			Subordinated Residual Certificates			CLUB Certificates
Fair value of interests held	$	37,020		$	8,236		$	1,793
Expected weighted-average life (in years)	1.0			1.5			1.4
Discount rates
100 basis point increase	$	(326	)	$	(105	)	$	(41	)
200 basis point increase	$	(644	)	$	(208	)	$	(76	)
Expected credit loss rates on underlying loans
10% adverse change	$	(1	)	$	(1,060	)	$	(15	)
20% adverse change	$	(2	)	$	(2,118	)	$	(25	)
Expected prepayment rates
10% adverse change	$	(1	)	$	(265	)	$	(21	)
20% adverse change	$	(3	)	$	(513	)	$	(42	)