LC 8-K 10/14/2016

Section 1: 8-K (8-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 2016

LendingClub Corporation
(Exact name of registrant as specified in its charter)

Commission File Number: 001-36771

Delaware

51-0605731

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

71 Stevenson St., Suite 300, San Francisco, CA 94105

(Address of principal executive offices and zip code)
(415) 632-5600
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01

Regulation FD Disclosure

Today, LendingClub Corporation (Lending Club or the Company) released a letter from its Chief Investment Officer providing:

a recap of 2016 credit and pricing changes implemented on the platform to date;
an update regarding recent credit performance and recent macroeconomic trends;
a description of pricing changes (as disclosed further below), credit enhancements and supplementing collections efforts; and
updated loss forecasts.

A copy of the letter is furnished as Exhibit 99.1 to this Form 8-K and incorporated by reference into this Item 7.01.

The information set forth in this Item 7.01, including Exhibit 99.1, shall not be deemed filed for purposes of Section 18 of the Securities and
Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended,
or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01

Other Events.

Effective October 14, 2016, interest rates on the Lending Club platform are increasing by a weighted average of 26 bps, predominantly in loan
grades F and G with marginal changes in other grades. Set forth below is a chart showing the interest rates assigned to standard program loans for
each of the Lending Club loan grades.

Loan Grade
A1
A2
A3
A4
A5
B1
B2
B3
B4
B5
C1
C2
C3
C4
C5
D1
D2
D3
D4
D5
E1
E2
E3
E4
E5
F1
F2
F3
F4
F5
G1
G2
G3
G4
G5

Interest Rate
5.32%
6.99%
7.24%
7.49%
7.99%
8.24%
10.49%
11.39%
11.44%
11.49%
12.74%
13.49%
13.99%
14.99%
15.99%
16.99%
17.99%
18.99%
19.99%
21.49%
22.74%
23.99%
24.74%
25.49%
26.24%
28.69%
29.49%
29.99%
30.49%
30.74%
30.79%
30.84%
30.89%
30.94%
30.99%

Illustration of Servicing Fee and Annual Returns for Fully Performing Loans of Each Loan Grade
The following tables illustrate hypothetical annual return information with respect to our Member Payment Dependent Notes, grouped by Lending
Club grade and term. The information in these tables is not based on actual results for investors and is presented only to illustrate the effects of
Lending Clubs 1.00% servicing fee by grade on hypothetical annual Member Payment Dependent Note returns. By column, each table presents:

loan grades;

the annual stated interest rate;

the reduction in the annual return due to Lending Club's 1.00% servicing fee on both interest and principal payments; and
the hypothetical annual returns on Notes, net of Lending Club's servicing fee.

Three Year Term

Loan
Grade

Interest
Rate

Reduction in
Note Return
due to 1.00%
Servicing Fee*

A1
A2
A3
A4
A5
B1
B2
B3
B4
B5
C1
C2
C3
C4
C5
D1
D2
D3
D4
D5
E1
E2
E3
E4
E5
F1
F2
F3
F4
F5
G1
G2
G3
G4
G5

5.32%
6.99%
7.24%
7.49%
7.99%
8.24%
10.49%
11.39%
11.44%
11.49%
12.74%
13.49%
13.99%
14.99%
15.99%
16.99%
17.99%
18.99%
19.99%
21.49%
22.74%
23.99%
24.74%
25.49%
26.24%
28.69%
29.49%
29.99%
30.49%
30.74%
30.79%
30.84%
30.89%
30.94%
30.99%

0.67%
0.68%
0.68%
0.68%
0.68%
0.68%
0.69%
0.69%
0.70%
0.70%
0.70%
0.70%
0.71%
0.71%
0.71%
0.72%
0.72%
0.73%
0.73%
0.74%
0.74%
0.75%
0.75%
0.76%
0.76%
0.77%
0.77%
0.78%
0.78%
0.78%
0.78%
0.78%
0.78%
0.78%
0.78%

Note Returns After

Lending Club's
Servicing Fee
4.65%
6.31%
6.56%
6.81%
7.31%
7.56%
9.80%
10.70%
10.74%
10.79%
12.04%
12.79%
13.28%
14.28%
15.28%
16.27%
17.27%
18.26%
19.26%
20.75%
22.00%
23.24%
23.99%
24.73%
25.48%
27.92%
28.72%
29.21%
29.71%
29.96%
30.01%
30.06%
30.11%
30.16%
30.21%

* Impact of Note servicing fees is computed using the loans contractual cashflows; no charge-off losses or prepayments are projected over the
loans life that would otherwise affect the loans projected cashflows.

Five Year Term

Loan
Grade

Interest
Rate

Reduction in
Note Return
due to 1.00%
Servicing Fee*

A1
A2
A3
A4
A5
B1
B2
B3
B4
B5
C1
C2
C3
C4
C5
D1
D2
D3
D4
D5
E1
E2
E3
E4
E5
F1
F2
F3
F4
F5
G1
G2
G3
G4
G5

5.32%
6.99%
7.24%
7.49%
7.99%
8.24%
10.49%
11.39%
11.44%
11.49%
12.74%
13.49%
13.99%
14.99%
15.99%
16.99%
17.99%
18.99%
19.99%
21.49%
22.74%
23.99%
24.74%
25.49%
26.24%
28.69%
29.49%
29.99%
30.49%
30.74%
30.79%
30.84%
30.89%
30.94%
30.99%

0.41%
0.42%
0.42%
0.42%
0.42%
0.43%
0.44%
0.44%
0.44%
0.44%
0.44%
0.45%
0.45%
0.45%
0.46%
0.46%
0.47%
0.47%
0.48%
0.48%
0.49%
0.50%
0.50%
0.50%
0.51%
0.52%
0.53%
0.53%
0.53%
0.53%
0.53%
0.53%
0.53%
0.53%
0.53%

Note Returns After

Lending Club's
Servicing Fee
4.91%
6.57%
6.82%
7.07%
7.57%
7.81%
10.05%
10.95%
11.00%
11.05%
12.30%
13.04%
13.54%
14.54%
15.53%
16.53%
17.52%
18.52%
19.51%
21.01%
22.25%
23.49%
24.24%
24.99%
25.73%
28.17%
28.96%
29.46%
29.96%
30.21%
30.26%
30.31%
30.36%
30.41%
30.46%

* Impact of Note servicing fees is computed using the loans contractual cashflows; no charge-off losses or prepayments are projected over the
loans life that would otherwise affect the loans projected cashflows.

Item 9.01
(d)
Exhibit
Number
99.1

Financial Statements and Exhibits

Exhibits
Exhibit Title or Description
Investor Letter dated October 14, 2016

SIGNATURE(S)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.

LendingClub Corporation
Date: October 14, 2016

By:

/s/ Scott Sanborn

Scott Sanborn
President and Chief Executive Officer
(duly authorized officer)

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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

October 14, 2016

Dear Investor:
A key aspect of Lending Clubs mission is delivering solid, risk-adjusted returns to investors. Today we are announcing updated loss
forecasts and changes to credit and interest rates as part of our regular and continuous adjustment process. Below we have provided:
1) a recap of 2016 credit and interest rate changes to date; 2) information on recent credit performance; 3) a description of additional
enhancements and interest rate changes; and 4) updated forecasts.
2016 Changes to Date
Lending Club has a deliberate, prudent approach to risk management. We monitor a variety of economic, credit and competitive
indicators so that borrowers can benefit from meaningful savings compared to alternatives, and investors can continue to find solid
risk-adjusted returns compared to other fixed income investments or investment alternatives. We regularly adjust to changing market
conditions, and have the ability to quickly adapt underwriting models and dynamically increase or decrease interest rates to provide an
appropriate level of loss coverage to investors.
In the first and second quarters of 2016, we previously commented on mixed economic data and pockets of underperformance on the
platform, which caused us to be cautious in our overall credit performance outlook and prompted changes to credit and interest rates.
Changes included:

Interest Rates. Interest rates on the Lending Club platform increased by a weighted average of approximately 135 basis
points from November 2015 to June 2016. Rate increases were concentrated in grades D through G in order to improve riskadjusted returns in pockets experiencing higher losses.
Credit Policy Tightening. The credit policy was tightened in April 2016 to remove populations primarily characterized by
borrowers with high indebtedness, an increased propensity to accumulate debt, and lower credit scores. In June, the
maximum debt-to-income (DTI) threshold (excluding mortgage and the requested program loan amount) across the prime
loan program was further reduced to 35% (from 40%). As a result of these changes, the platform no longer approves loans
for approximately 9% of borrowers who previously would have been able to obtain a loan under prior underwriting criteria.

We anticipate loans originated in the second half of 2016 and going forward to benefit from these combined changes.
Recent Credit Performance and Recent Macroeconomic Trends

Lending Club understands the importance of credit performance to platform investors, and continuously monitors delinquency trends
and recommends adjustments to the credit model as needed.
Consistent with observations earlier this year, we have continued to observe higher delinquencies in populations characterized by high
indebtedness, an increased propensity to accumulate debt, and lower credit scores. Although the trend can now be observed across
grades, it is less notable in lower risk grades and more notable in higher risk grades, particularly grades E, F and G, which account for
approximately 12% of platform volume. Higher delinquencies are more evident in 2015 and early 2016 vintages, which coincides with
an uptick in consumer indebtedness in the U.S.
While signs indicate the American consumer remains strong (the unemployment rate is low at 5.0%, the economy is adding
approximately 178,000 jobs per month, and housing prices are strong)1, consumers appear to be taking on more debt overall due to
low prevailing interest rates. The Federal Reserves most recent estimates show consumer

credit increased at a seasonally adjusted annual rate of 8.5% in August 2016.2 Similarly, the Federal Reserve Bank of New York
observed an increasing amount of indebtedness across student loans, mortgages, credit cards, auto loans, and other forms of credit as
of the second quarter 2016.3 It also reported that the median respondent to its monthly survey reported an increase in the probability
of missing a minimum debt payment over the next three months to the highest level since February 2014.4 We carefully watch these
trends because general availability of credit can have an impact on overall borrower indebtedness and credit performance. We
discuss these risks and others in our Prospectus, and most recently filed Form 10-K and Form 10-Q.
(1)

(2)
(3)
(4)

Source: U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, October 2016; U.S. Bureau of Labor Statistics, Current
Employment Statistics Highlights, September 2016; FreddieMac, House Price Index, June 2016.
Source: Federal Reserve, Consumer Credit (G19) Release, October 2016.
Source: Federal Reserve Bank of New York, Q2 2016.
Source: Federal Reserve Bank of New York, October 2016.

Additional Enhancements & Interest Rate Changes

As outlined above, Lending Club has implemented changes several times in 2016 to reduce credit risk on the platform and address the
higher risk populations identified above. We seek to continuously adapt to competitive, macroeconomic and credit trends. As a result
of recent observations, Lending Club is making the following proactive changes that reflect our overall prudent approach to risk
management and goal of providing solid risk adjusted returns to investors:
1.

2.

3.

Increasing Interest Rates. As disclosed in the Form 8-K we filed today, effective October 14, 2016, interest rates on the
Lending Club platform will increase by a weighted average of 26 bps. Rate increases are concentrated in Grades F and G
with marginal changes in other grades. Increased interest rates enable Lending Club to continue to provide borrowers with
competitive interest rates and investors with solid risk-adjusted returns. (See further detail in the Form 8-K and below.)
Tightening Credit. In line with actions taken throughout 2016, the thresholds on borrower leverage were tightened on
October 12, 2016. The platform will no longer approve loans for certain sub-segments of borrowers who meet a combination
of several risk factors such as high revolving debt, multiple recently opened installment loans, and higher risk scores on our
proprietary scorecard. Accordingly, approximately 1% of borrowers who previously would have been able to obtain a loan
under prior underwriting criteria will no longer be approved.
Supplementing Collections Efforts. Lending Club utilizes a multifaceted servicing strategy and makes enhancements
regularly. Over the past several months, we have invested in additional tools to drive collections effectiveness, added new
recovery strategies, added a new agency partner and expanded our internal collections team capacity. The early signs of all
of these changes are positive and are allowing us to help our borrowers be more successful while driving better recovery
rates.

Updating Forecasts
Effective October 14, 2016, Lending Club is updating loss forecasts, as summarized in the tables below. The loss forecasts
incorporate the impact of delinquency observations noted above as well as historical data available from Lending Clubs nine year
track record. The forecasts also include the impact of the additional credit model tightening and interest rate adjustments described
above that are effective this month on loans issued going forward.
2

Platform Summary as of October 14, 2016

36-Month & 60-Month Prime Loans
Average Interest
Rate
A
B
C
D
E
F
G
(1)

(2)

(3)

Forecasted
Annualized Net
Credit Loss (1)

7.04%
10.70%
14.27%
18.84%
24.45%
29.63%
30.86%

1.83%
3.98%
6.49%
9.66%
13.35%
17.76%
18.22%

Projected
Investor
Returns (2), (3)
4.38%
5.72%
6.50%
7.32%
8.22%
8.56%
9.06%

Annualized Net Credit Loss is also known as projected charge-offs. Projected charge-offs vary by loan grade and are based on historical data, expected
performance, macroeconomic conditions and other factors. Projected charge-offs are provided as an informational tool, are not a promise of future expected
charge-offs and should not be relied upon.
Projected returns are provided as an informational tool, are not a promise of future expected returns and should not be relied upon. Projected returns have
been calculated by Lending Club as of October 2016, and are based on Lending Clubs assumptions regarding future interest rates, prepayment rates,
delinquency rates and charge-off rates, among other things. Actual returns may differ materially from projected returns if Lending Clubs assumptions
regarding such rates are different from actual future rates or if there are changes in other market conditions. Actual returns experienced by any individual
portfolio may be impacted by, among other things, the size and diversity of the portfolio, its exposure to particular loans, borrowers, or groups of loans or
borrowers, as well as macroeconomic conditions.
Projected returns calculated based on grade and maturity mix for the six weeks ending September 23, 2016.

***
Lending Clubs ability to adapt is key to our business and a core strength of the marketplace model. Our continuous enhancement
cycle helps us to anticipate and adapt to broader macroeconomic and competitive conditions, with the goal of providing borrowers
with competitive interest rates and investors with solid risk-adjusted returns. Inclusive of all of the changes noted above, we project
net investor returns across loan grades to range from approximately 4% to 8% going forward. Lending Club continues to offer a
unique asset that provides compelling monthly income and solid net returns, especially in todays low yield environment.
The forecasts and projections noted above reflect the latest information available to us and are not a guarantee of future
performance. We will continue to optimize our efforts and update you as we make additional enhancements.
As always, please feel free to reach out to our team with any questions. We look forward to having you as an investor for years to
come.
Sincerely,
Siddhartha Jajodia
Lending Club Chief Investment Officer

Safe Harbor Statement

Some of the statements above are forward-looking statements. The words anticipate, believe, estimate, expect,
intend, may, outlook, plan, predict, project, will, would and similar expressions may identify forwardlooking statements, although not all forward-looking statements contain these identifying words. Lending Club may not
actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place
undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and
expectations disclosed in forward-looking statements. Lending Club does not assume any obligation to update any forwardlooking statements, whether as a result of new information, future events or otherwise, except as required by law.

4
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