LendingClub Corp
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
HAPN$15.96-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0001409970-24-000024
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001409970-24-000039
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 169 previous paragraphs and 188 current paragraphs.
111 unchanged; 40 reworded; 35 added; 17 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 24 previous and 31 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Sequential: Origination fees were $77.1 million and $70.1 million for the second and first quarters of 2024, respectively, an increase of 10%.
Current report
Year Over Year: Origination fees were $77.1 million and $71.0 million for the second quarters of 2024 and 2023, respectively, an increase of 9%.
Current report
Six Months Over Six Months: Origination fees were $147.2 million and $141.5 million for the first halves of 2024 and 2023, respectively, an increase of 4%.
Current report
The increases in origination fees were primarily due to higher origination volumes of marketplace loans.
Current report
Sequential: Servicing fees were $19.9 million and $19.6 million for the second and first quarters of 2024, respectively, an increase of 1%.
Current report
Six Months Over Six Months: Servicing fees were $39.5 million and $48.4 million for the first halves of 2024 and 2023, respectively, a decrease of 18%.
Current report
The decreases in servicing fees year over year and six months over six months were primarily due to a decrease in loan balances serviced for others.
Current report
Sequential: Gain on sales of loans was $10.7 million and $10.9 million for the second and first quarters of 2024, respectively, a decrease of 1%.
Current report
Six Months Over Six Months: Gain on sales of loans was $21.7 million and $27.3 million for the first halves of 2024 and 2023, respectively, a decrease of 21%.
Current report
The decreases in the gain on sales of loans were primarily due to a decrease in the volume of marketplace loans sold.
Current report
Sequential: Net fair value adjustments were $(51.4) million and $(44.7) million for the second and first quarters of 2024, respectively, an increased loss of $6.7 million.
Current report
Six Months Over Six Months: Net fair value adjustments were $(96.1) million and $(38.9) million for the first halves of 2024 and 2023, respectively, an increased loss of $57.2 million.
Current report
The increased losses were primarily due to a higher origination volume of marketplace loans. Additionally, the increased losses year over year and six months over six months were also attributable to lower loan sales prices.
Current report
Net fair value adjustments primarily consist of fair value adjustments on our loans HFS portfolio. See “Notes to Condensed Consolidated Financial Statements – Note 7. Fair Value Measurements” for additional information related to the significant unobservable inputs used in the fair value measurement of loans HFS and activity within the loans HFS portfolio.
Current report
Sequential: The provision for credit losses was $35.6 million and $31.9 million for the second and first quarters of 2024, respectively, an increase of 11%.
Current report
Year Over Year: The provision for credit losses was $35.6 million and $66.6 million for the second quarters of 2024 and 2023, respectively, a decrease of 47%.
Current report
Six Months Over Six Months: The provision for credit losses was $67.5 million and $137.2 million for the first halves of 2024 and 2023, respectively, a decrease of 51%.
Current report
The changes in the provision for credit losses primarily reflect the change in the initial provision based on the volume of originated loans retained as HFI at amortized cost, offset by a lower discounting effect of the NPV on prior loan vintages. In addition, the sequential increase was due to the impact of a $5.3 million provision in our CRE portfolio due to one office loan. Excluding this one office loan, the CRE office loan portfolio balance was under $40 million as of June 30, 2024. The majority of office loans were originated prior to the Acquisition.
Current report
(1)Relates to $91.5 million, $72.1 million and $108.9 million of unfunded commitments as of June 30, 2024, March 31, 2024 and June 30, 2023, respectively. As of June 30, 2024, $8.3 million of the $91.5 million of unfunded commitments is unconditionally cancellable and therefore has no associated reserve.
Current report
Sequential: Compensation and benefits expense decreased $3.0 million, or 5%, for the second quarter of 2024 compared to the first quarter of 2024. The decrease was primarily due to a change in the composition of the executive team.
Current report
Six Months Over Six Months: Compensation and benefits expense decreased $28.8 million, or 20%, for the first half of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in headcount as a result of the workforce reduction plans we implemented in 2023.
Current report
Six Months Over Six Months: Marketing expense remained relatively flat for the first half of 2024 compared to the same period in 2023.
Current report
The increases in marketing expense were primarily due to an increase in variable marketing expenses based on higher origination volume of marketplace loans.
Current report
Sequential: Equipment and software expense decreased $0.3 million, or 3%, for the second quarter of 2024 compared to the first quarter of 2024.
Current report
Six Months Over Six Months: Equipment and software expense decreased $2.6 million, or 9%, for the first half of 2024 compared to the same period in 2023.
Current report
The decreases in equipment and software expense were primarily due to a decrease in subscription costs.
Current report
Sequential: Depreciation and amortization expense increased $0.4 million, or 3%, for the second quarter of 2024 compared to the first quarter of 2024.
Current report
Six Months Over Six Months: Depreciation and amortization expense increased $1.8 million, or 7%, for the first half of 2024 compared to the same period in 2023.
Current report
The increases in depreciation and amortization expense were primarily due to an increase in the amortization of internally-developed software.
Current report
Six Months Over Six Months: Professional services decreased $4.1 million, or 22%, for the first half of 2024 compared to the same period in 2023.
Current report
The changes in professional services expense were primarily due to an increase or decrease in consulting fees.
Current report
Six Months Over Six Months: Occupancy expense decreased $1.2 million, or 13%, for the first half of 2024 compared to the same period in 2023.
Current report
The decreases in occupancy expense were primarily due to a decrease in rent expense.
Current report
Six Months Over Six Months: Other non-interest expense decreased $8.9 million, or 27%, for the first half of 2024 compared to the same period in 2023.
Current report
The decreases in other non-interest expense were primarily due to decreases in miscellaneous operating expenses.
Removed paragraphs (17)
Previous report
•Cash and cash equivalents: Total cash and cash equivalents as of March 31, 2024 decreased $186.2 million, or 15%, sequentially and $570.7 million, or 35%, year over year.
Previous report
•Total equity: Total equity as of March 31, 2024 increased $14.5 million, or 1%, sequentially, and $75.5 million, or 6%, year over year, primarily reflecting an increase in additional paid-in capital resulting from stock-based compensation expense and net income generated over the period.
Previous report
Sequential: Origination fees were $70.1 million and $76.7 million for the first quarter of 2024 and fourth quarter of 2023, respectively, a decrease of 9%. The decrease was primarily due to lower origination volume of marketplace loans and a lower weighted average origination fee for marketplace loans in the first quarter of 2024 compared to the fourth quarter of 2023.
Previous report
Year Over Year: Origination fees were $70.1 million and $70.5 million for the first quarters of 2024 and 2023, respectively, a decrease of 1%. The decrease was due to a lower weighted average origination fee for marketplace loans in the first quarter of 2024 compared to the same period in 2023, partially offset by higher origination volume of marketplace loans.
Previous report
Sequential: Servicing fees were $19.6 million and $17.5 million for the first quarter of 2024 and fourth quarter of 2023, respectively, an increase of 12%. This was primarily due to an increase in collections revenue in the first quarter of 2024 compared to the fourth quarter of 2023.
Previous report
Sequential: Gain on sales of loans was $10.9 million and $11.9 million for the first quarter of 2024 and fourth quarter of 2023, respectively, a decrease of 8%. The decrease was primarily due to a decrease in the volume of marketplace loans sold.
Previous report
Sequential: Net fair value adjustments were $(44.7) million and $(53.9) million for the first quarter of 2024 and fourth quarter of 2023, respectively, a decreased loss of $9.2 million. The decrease in loss was primarily due to lower volume of loans sold, partially offset by an increase in loan sale prices.
Previous report
(3) The average rate for interest-bearing deposits increased both sequentially and year over year due to the continued elevated interest rate environment and an increasing concentration of online deposits. We expect pressure on net interest margin to continue during 2024, but decline at a slower pace compared to 2023.
Previous report
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
Previous report
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
Previous report
Sequential: The provision for credit losses was $31.9 million and $41.9 million for the first quarter of 2024 and fourth quarter of 2023, respectively, a decrease of 24%. The decrease was due to lower balances of HFI loans at amortized cost, partially offset by a higher volume of originated loans retained as HFI at amortized cost and the related initial provision for credit losses.
Previous report
Year Over Year: The provision for credit losses was $31.9 million and $70.6 million for the first quarters of 2024 and 2023, respectively, a decrease of 55%. 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.
Previous report
(1)Relates to $72.1 million, $78.1 million and $117.2 million of unfunded commitments as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
Previous report
Sequential: Compensation and benefits expense remained relatively flat for the first quarter of 2024 compared to the fourth quarter of 2023. The increase in the accrual of variable compensation expense was offset by a decrease in headcount as a result of the workforce reduction plan we implemented in October 2023.
Previous report
Sequential: Equipment and software expense decreased $0.5 million, or 4%, for the first quarter of 2024 compared to the fourth quarter of 2023.
Previous report
Sequential: Professional services decreased $0.6 million, or 8%, for the first quarter of 2024 compared to the fourth quarter of 2023.
Previous report
Sequential: Other non-interest expense increased $1.1 million, or 10%, for the first quarter of 2024 compared to the fourth quarter of 2023.
Reworded paragraphs (40)
Previous wording
Despite the interest rate environment and broader economic volatility adversely impacting our business, predominantly through investor demand and pricing for marketplace loans, we have been able to sustain GAAP profitability as a result of our differentiated business model, strong execution, data advantage, and ongoing innovation. While we expect these headwinds to persist, we’re leveraging our Structured Certificates program to drive marketplace originations and managing the business prudently by aligning our expense base to current market and anticipated conditions. Furthermore, we maintained strong liquidity and capital levels and delivered the following results, despite a challenging economic environment.
Current wording
Despite the interest rate environment and broader economic volatility adversely impacting our business, predominantly through investor demand and pricing for marketplace loans, we have been able to sustain GAAP profitability as a result of our loan credit performance, expense discipline, strong execution and continued innovation. Furthermore, we maintained strong liquidity and capital levels and delivered the following results.
Previous wording
•Loan originations: Loan originations for the first quarter of 2024 increased $16.0 million, or 1%, sequentially and decreased $641.1 million, or 28%, year over year. The year over year decrease was primarily driven by a decrease in unsecured personal loan origination volume. We attribute the decrease in volume and investor demand to the elevated interest rate environment.
Current wording
•Loan originations: Loan originations for the second quarter of 2024 increased $166.3 million, or 10%, sequentially and decreased $197.8 million, or 10%, year over year. The sequential increase was driven by an increase in unsecured personal loan origination volume combined with investor demand for Structured Certificates. The year-over-year decrease was primarily driven by a decrease in unsecured personal loan origination volume. We attribute the decrease in volume and investor demand to the elevated interest rate environment.
Previous wording
◦Loan originations held for investment (HFI) at amortized cost for the first quarter of 2024 increased $86.9 million, or 44%, sequentially and decreased $716.7 million, or 72%, year over year.
Current wording
◦Loan originations held for investment (HFI) at amortized cost for the second quarter of 2024 increased $50.3 million, or 18%, sequentially and decreased $321.7 million, or 49%, year over year.
Previous wording
◦Loan originations HFI at amortized cost as a percentage of loan originations was 17% and 12% for the first quarter of 2024 and fourth quarter of 2023, respectively, and 44% for the first quarter of 2023. 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.
Current wording
◦Loan originations HFI at amortized cost as a percentage of loan originations was 19% and 17% for the second and first quarters of 2024, respectively, and 33% for the second quarter of 2023. 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.
Previous wording
•Total net revenue: Total net revenue for the first quarter of 2024 decreased $4.9 million, or 3%, sequentially and $65.0 million, or 26%, year over year.
Current wording
•Total net revenue: Total net revenue for the second quarter of 2024 increased $6.6 million, or 4%, sequentially and decreased $45.2 million, or 19%, year over year.
Previous wording
◦Marketplace revenue: Marketplace revenue for the first quarter of 2024 increased $3.7 million, or 7%, sequentially and decreased $39.7 million, or 42%, year over year. The sequential increase was primarily due to higher loan sale prices, partially offset by lower origination fees. The year over year decrease was primarily due to a decrease in loan origination volume and lower loan sale prices resulting from a shift in investor demand from banks to asset managers.
Current wording
◦Marketplace revenue: Marketplace revenue for the second quarter of 2024 increased $0.5 million, or 1%, sequentially and decreased $26.4 million, or 32%, year over year. The year-over-year decrease was primarily due to a decrease in marketplace loan origination volume and lower loan sale prices resulting from a shift in investor demand from banks to asset managers.
Previous wording
◦Net interest income: Net interest income for the first quarter of 2024 decreased $8.6 million, or 7%, sequentially and $23.8 million, or 16%, year over year. The decreases were primarily driven by a shift in asset mix from HFI loans to senior securities and an increase in interest expense associated with higher deposit funding costs.
Current wording
◦Net interest income: Net interest income for the second quarter of 2024 increased $5.6 million, or 5%, sequentially and decreased $18.1 million, or 12%, year over year. The sequential increase was primarily due to growth in total interest-earning assets, offset by an increase in interest expense associated with higher deposit funding costs. The year-over-year decrease was primarily driven by a shift in asset mix from loans to senior securities and an increase in interest expense associated with higher deposit funding costs.
Previous wording
◦Net interest margin: Net interest margin for the first quarter of 2024 was 5.8%, decreasing from 6.4% in the fourth quarter of 2024 and from 7.5% in the first quarter of 2023.
Current wording
◦Net interest margin: Net interest margin for the second quarter of 2024 was 5.75%, remaining flat compared to the first quarter of 2024 and decreasing from 7.09% in the second quarter of 2023.
Previous wording
•Provision for credit losses: Provision for credit losses for the first quarter of 2024 decreased $10.0 million, or 24%, sequentially and $38.7 million, or 55%, year over year. The sequential decrease was due to overall lower balances of HFI loans, partially offset by a higher volume of originated loans retained as HFI at amortized cost and the related initial provision for credit losses. The year over year decrease was due to the lower volume of originated loans retained as HFI at amortized cost and the related initial provision for credit losses.
Current wording
•Provision for credit losses: Provision for credit losses for the second quarter of 2024 increased $3.6 million, or 11%, sequentially and decreased $31.0 million, or 47%, year over year. The sequential increase was primarily driven by an increase in initial provision from a higher volume of originated loans retained as HFI at amortized cost, offset by a lower discounting effect of the net present value (NPV) on prior loan vintages, and the impact of a $5.3 million provision in our Commercial Real Estate (CRE) portfolio due to one office loan. Excluding this one office loan, the CRE office loan portfolio balance was under $40 million as of June 30, 2024. The majority of office loans were originated prior to the Acquisition. The year-over-year decrease reflects a decrease in the initial provision for credit losses from a lower volume of originated loans retained as HFI at amortized cost.
Previous wording
•Total non-interest expense: Total non-interest expense for the first quarter of 2024 increased $2.2 million, or 2%, sequentially and decreased $25.1 million, or 16%, year over year. The year over year decrease was primarily driven by a decrease in compensation and benefits expense due to a decrease in headcount as a result of the workforce reduction plans we implemented in 2023 and a decrease in variable marketing expenses based on lower origination volume and prudent management of expenses.
Current wording
•Total non-interest expense: Total non-interest expense for the second quarter of 2024 remained relatively flat sequentially and decreased $18.8 million, or 12%, year over year. The year-over-year decrease was primarily driven by a decrease in compensation and benefits expense due to a decrease in headcount as a result of the workforce reduction plans we implemented in 2023.
Previous wording
•Net income: Net income for the first quarter of 2024 increased $2.1 million, or 21%, sequentially and decreased $1.4 million, or 10%, year over year.
Current wording
•Net income: Net income for the second quarter of 2024 increased $2.7 million, or 22%, sequentially and $4.8 million, or 47%, year over year.
Previous wording
•Diluted earnings per share (EPS): Diluted EPS for the first quarter of 2024 was $0.11, compared to $0.09 for the fourth quarter of 2024 and $0.13 for the same quarter last year.
Current wording
•Diluted earnings per share (EPS): Diluted EPS for the second quarter of 2024 was $0.13, compared to $0.11 for the first quarter of 2024 and $0.09 for the same quarter last year.
Previous wording
•Pre-provision net revenue (PPNR): Pre-provision net revenue for the first quarter of 2024 decreased $7.1 million, or 13%, sequentially and $39.9 million, or 45%, year over year.
Current wording
•Pre-provision net revenue (PPNR): Pre-provision net revenue for the second quarter of 2024 increased $6.5 million, or 13%, sequentially and decreased $26.4 million, or 32%, year over year.
Previous wording
•Total assets: Total assets as of March 31, 2024 increased $417.4 million, or 5%, sequentially and $490.8 million, or 6%, year over year. The increases primarily reflect growth in securities related to our Structured Certificates and growth in loans held for sale (HFS) related to our extended seasoning program.
Current wording
•Total assets: Total assets as of June 30, 2024 increased $341.2 million, or 4%, sequentially and $1.2 billion, or 15%, year over year. The increases primarily reflect growth in securities related to our Structured Certificates program and growth in loans held for sale (HFS) related to our extended seasoning program, partially offset by decreases in loans HFI.
Previous wording
•Deposits: Total deposits as of March 31, 2024 increased $188.2 million, or 3%, sequentially, and $302.8 million, or 4%, year over year. The sequential increase primarily reflects growth in high yield savings and certificates of deposit, partially offset by a decrease in brokered deposits. The year over year increase was due to an increase in certificates of deposit. Federal Deposit Insurance Corporation (FDIC)-insured deposits represent approximately 87% of total deposits as of March 31, 2024.
Current wording
•Deposits: Total deposits as of June 30, 2024 increased $573.7 million, or 8%, sequentially, and $1.3 billion, or 18%, year over year. The increases primarily reflect growth in high-yield savings and certificates of deposit. Federal Deposit Insurance Corporation (FDIC)-insured deposits represent approximately 87% of total deposits as of June 30, 2024.
Previous wording
The analysis below is presented for the following periods: First quarter of 2024 compared to the fourth quarter of 2023 (sequential) and first quarter of 2024 compared to the first quarter of 2023 (year over year).
Current wording
The analysis below is presented for the following periods: Second quarter of 2024 compared to the first quarter of 2024 (sequential), second quarter of 2024 compared to the second quarter of 2023 (year over year) and first half of 2024 compared to the first half of 2023 (six months over six months).
Previous wording
We elected to account for held for sale (HFS) loans under the fair value option. With the election of the fair value option, origination fees, net fair value adjustments prior to the sales of the loans, and servicing asset gains on the sales of the loans, are reported as separate components within “Marketplace revenue.”
Current wording
We elected to account for HFS loans under the fair value option. With the election of the fair value option, origination fees, net fair value adjustments prior to the sales of the loans, and servicing asset gains on the sales of the loans, are reported as separate components within “Marketplace revenue.”
Previous wording
In addition to the loans serviced on our marketplace platform, we serviced $124.4 million, $133.2 million and $159.1 million in outstanding principal balance of commercial loans sold as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
Current wording
In addition to the loans serviced on our marketplace platform, we serviced $111.6 million, $124.4 million and $146.9 million in outstanding principal balance of commercial loans sold as of June 30, 2024, March 31, 2024 and June 30, 2023, respectively.
Previous wording
Year Over Year: Servicing fees were $19.6 million and $26.4 million for the first quarters of 2024 and 2023, respectively, a decrease of 26%. This was primarily due to a decrease in loan balances serviced for others.
Current wording
Year Over Year: Servicing fees were $19.9 million and $22.0 million for the second quarters of 2024 and 2023, respectively, a decrease of 10%.
Previous wording
Year Over Year: Gain on sales of loans was $10.9 million and $14.1 million for the first quarters of 2024 and 2023, respectively, a decrease of 23%. The decrease was primarily due to a decrease in the volume of marketplace loans sold.
Current wording
Year Over Year: Gain on sales of loans was $10.7 million and $13.2 million for the second quarters of 2024 and 2023, respectively, a decrease of 19%.
Previous wording
Year Over Year: Net fair value adjustments were $(44.7) million and $(15.4) million for the first quarters of 2024 and 2023, respectively, an increased loss of $29.3 million. The increase in loss was primarily due to lower loan sale prices.
Current wording
Year Over Year: Net fair value adjustments were $(51.4) million and $(23.4) million for the second quarters of 2024 and 2023, respectively, an increased loss of $28.0 million.
Previous wording
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. The ALLL is estimated using a discounted cash flow (DCF) approach, where effective interest rates are used to calculate the net present value (NPV) of expected cash flows. The effective interest rates are calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and costs, to provide a constant rate of return over the loan term. The NPV from the DCF approach is then compared to the amortized cost basis of the loans and leases to derive expected credit losses. Under the DCF approach, the provision for credit losses in subsequent periods includes a credit loss expense relating to the discounting effect due to the passage of time after the initial recognition of ALLL on originated HFI loans at amortized cost.
Current wording
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. The ALLL is estimated using a discounted cash flow (DCF) approach, where effective interest rates are used to calculate the NPV of expected cash flows. The effective interest rates are calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and costs, to provide a constant rate of return over the loan term. The NPV from the DCF approach is then compared to the amortized cost basis of the loans and leases to derive expected credit losses. Under the DCF approach, the provision for credit losses in subsequent periods includes a credit loss expense related to the discounting effect due to the passage of time after the initial recognition of ALLL on originated HFI loans at amortized cost.
Previous wording
Year Over Year: Compensation and benefits expense decreased $13.8 million, or 19%, for the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in headcount as a result of the workforce reduction plans we implemented in 2023.
Current wording
Year Over Year: Compensation and benefits expense decreased $15.0 million, or 21%, for the second quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in headcount as a result of the workforce reduction plans we implemented in 2023.
Previous wording
Sequential: Marketing expense increased $0.7 million, or 3%, for the first quarter of 2024 compared to the fourth quarter of 2023.
Current wording
Sequential: Marketing expense increased $2.5 million, or 10%, for the second quarter of 2024 compared to the first quarter of 2024.
Previous wording
Year Over Year: Marketing expense decreased $2.7 million, or 10%, for the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in variable marketing expenses based on lower origination volume.
Current wording
Year Over Year: Marketing expense increased $2.7 million, or 11%, for the second quarter of 2024 compared to the same period in 2023.
Previous wording
Year Over Year: Equipment and software expense decreased $1.0 million, or 7%, for the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in subscription costs.
Current wording
Year Over Year: Equipment and software expense decreased $1.6 million, or 12%, for the second quarter of 2024 compared to the same period in 2023.
Previous wording
Year Over Year: Depreciation and amortization expense increased $0.3 million, or 3%, for the first quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Depreciation and amortization expense increased $1.4 million, or 12%, for the second quarter of 2024 compared to the same period in 2023.
Previous wording
Sequential: Depreciation and amortization expense increased $0.7 million, or 6%, for the first quarter of 2024 compared to the fourth quarter of 2023.
Current wording
Sequential: Professional services increased $0.7 million, or 10%, for the second quarter of 2024 compared to the first quarter of 2024.
Previous wording
Year Over Year: Professional services decreased $2.0 million, or 22%, for the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in consulting fees.
Current wording
Year Over Year: Professional services decreased $2.2 million, or 22%, for the second quarter of 2024 compared to the same period in 2023.
Previous wording
Sequential: Occupancy expense remained relatively flat for the first quarter of 2024 compared to the fourth quarter of 2023.
Current wording
Sequential: Occupancy expense remained relatively flat for the second quarter of 2024 compared to the first quarter of 2024.
Previous wording
Year Over Year: Occupancy expense decreased $0.4 million, or 10%, for the first quarter of 2024 compared to the same period in 2023.
Current wording
Year Over Year: Occupancy expense decreased $0.7 million, or 16%, for the second quarter of 2024 compared to the same period in 2023.
Previous wording
Year Over Year: Other non-interest expense decreased $5.5 million, or 31%, for the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a decrease in consumer credit services.
Current wording
Year Over Year: Other non-interest expense decreased $3.4 million, or 22%, for the second quarter of 2024 compared to the same period in 2023.
Previous wording
For the first quarter of 2024, we recorded an income tax expense of $4.3 million, representing an effective tax rate of 25.9%. For the first quarter of 2023, we recorded an income tax expense of $4.1 million, representing an effective tax rate of 23.2%. The effective tax rate differs from the statutory rate due to the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the unfavorable impact of stock-based compensation.
Current wording
For the second quarter and first half of 2024, we recorded an income tax expense of $4.5 million and $8.8 million, respectively, representing an effective tax rate of 23.3% and 24.5%, respectively. For the second quarter and first half of 2023, we recorded an income tax expense of $4.7 million and $8.8 million, respectively, representing an effective tax rate of 31.7% and 27.1%, respectively. The effective tax rate differs from the statutory rate due to the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the unfavorable impact of stock-based compensation. The decrease in effective tax rates for 2024 compared to the same periods in 2023 is primarily due to a decrease in the unfavorable impact of stock-based compensation.
Previous wording
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. 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 entered into prior to the Acquisition.
Current wording
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. This activity includes, but is not limited to, servicing fee revenue for loan servicing retained prior to the Acquisition, and interest income and interest expense related to the Retail Program and Structured Program transactions entered into prior to the Acquisition.
Previous wording
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). 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. 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%. 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 Basel III capital framework. See “Part I – Item 1. Business – Regulation and Supervision – Capital and Liquidity Requirements and
Current wording
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). 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. 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%. 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 Basel III capital framework. See “Part I – Item 1. Business – Regulation and Supervision – Capital and Liquidity Requirements and Prompt Corrective Action” in our Annual Report and “Notes to Condensed Consolidated Financial Statements – Note 19. Regulatory Requirements”in this Report for additional information.
Previous wording
Net capital expenditures were $11.8 million, or 6.8% of total net revenue, and $16.4 million, or 6.9% of total net revenue, for the first quarters of 2024 and 2023, respectively. 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.
Current wording
Net capital expenditures were $24.6 million, or 7.0% of total net revenue, and $32.3 million, or 7.0% of total net revenue, for the first halves of 2024 and 2023, respectively. 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.
Previous wording
The primary source of liquidity at the holding company is $125.4 million and $110.3 million in cash and cash equivalents as of March 31, 2024 and December 31, 2023, respectively. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
Current wording
The primary source of liquidity at the holding company is $136.3 million and $110.3 million in cash and cash equivalents as of June 30, 2024 and December 31, 2023, respectively. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
Previous wording
Loans HFI at LC Bank are funded primarily through our deposit base. The majority of loans HFI are fixed-rate instruments over the term of the loans. As a result, the primary component of interest rate risk on our financial instruments at LC Bank arises from the impact of fluctuations in loan and deposit rates on our net interest income. Therefore, we use a sensitivity analysis to assess the impact of hypothetical changes in interest rates on our net interest income results. The outcome of the analysis is influenced by a variety of assumptions, including the maturity profile and prepayment level of our unsecured consumer loans and expected consumer responses to changes in rates paid on non-maturity deposit products. Our assumptions are periodically calibrated to observed data and/or expected outcomes. We actively monitor the level of exposure to movements in interest rates and have entered into interest rate swaps, which qualify for hedge accounting treatment, to manage such risk. See “Note 8. Derivative Instruments and Hedging Activities” for additional information.
Current wording
Loans HFI at LC Bank are funded primarily through our deposit base. The majority of loans HFI are fixed-rate instruments over the term of the loans. As a result, the primary component of interest rate risk on our financial instruments at LC Bank arises from the impact of fluctuations in loan and deposit rates on our net interest income. Therefore, we use a sensitivity analysis to assess the impact of hypothetical changes in interest rates on our net interest income results. The outcome of the analysis is influenced by a variety of assumptions, including the maturity profile and prepayment level of our unsecured consumer loans and expected consumer responses to changes in rates paid on non-maturity deposit products. Our assumptions are periodically calibrated to observed data and/or expected outcomes. We actively monitor the level of exposure to movements in interest rates and have entered into interest rate hedging instruments, some of which qualify for hedge accounting treatment, to manage such risk. See “Note 8. Derivative Instruments and Hedging Activities” for additional information.
Previous wording
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. Conversely, net interest income is projected to increase over the next twelve months during hypothetical declining interest rate environments. The increase in sensitivity as of March 31, 2024 relative to December 31, 2023 is primarily due to the composition of our loans and deposits and assumes no replacement of maturing interest rate hedges. Furthermore, during fluctuating interest rate environments, the increased sensitivity of repricing interest-bearing deposits is more impactful than that of repricing fixed-rate loans.
Current wording
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. Conversely, net interest income is projected to increase over the next twelve months during hypothetical declining interest rate environments. The increase in sensitivity as of June 30, 2024 relative to December 31, 2023 is primarily due to the composition of our loans, deposits and hedging instruments and assumes no replacement of maturing interest rate hedges. Furthermore, during fluctuating interest rate environments, the increased sensitivity of repricing interest-bearing deposits is more impactful than that of repricing fixed-rate loans.
Previous wording
Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report. There have been no significant changes to these critical accounting estimates during the first quarter of 2024.
Current wording
Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report. There have been no significant changes to these critical accounting estimates during the first half of 2024.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
(1) Nonaccrual loans and any related income are included in their respective loan categories.
Current report — wording carried from elsewhere
Sequential: Other non-interest expense decreased $0.4 million, or 3%, for the second quarter of 2024 compared to the first quarter of 2024.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Prompt Corrective Action” in our Annual Report and “Notes to Condensed Consolidated Financial Statements – Note 19. Regulatory Requirements”in this Report for additional information.