LENDING CLUB

NYSE: LC

INTRODUCTION

Sunday,8 February 15

Lending Club Presentation

Overview
! Average U.S. total household debt is $107,7001
Household Debt

Credit Card Debt

! Median U.S. household income of $51,939

! Avg Debt 207% of income
! Average US household credit card debt is 15,950$
! Or 14.8% of total debt
! Average interest rate on CC debt is 17%

Debt/GDP

Interest on Debt
0%

50%

100%

150%

200%

250%

0.00%

U.S. Household

10.00%

20.00%

Greek 3yr Bond Yield pre-Syriza

Greece
LENDING IN AMERICA

U.S. Credit Card Debt

Italy
Greek 3yr Bond Yield post-Syriza

Spain
1. WSJ

Lending Club Presentation

Credit Card Debt

Paying off 10,000 in credit card debt at 17% APR
20,000.00
19,000.00

Total amount paid

18,000.00
17,000.00
16,000.00

15,000.00
233 Months

14,000.00
13,000.00

156 Months

12,000.00

119 Months

11,000.00

97 Months

LENDING IN AMERICA

10,000.00
1%

2%

3%

4%

5%

6%

Percent paid each month

1. Navy Federal Credit Union

Lending Club Presentation

Competing with big lenders

Competition to
lenders

! 17% return on investment is ridiculous

! More than compensates for defaults.
! Many people would loan money for much less than 17%, but:
! Adverse selection and high individual risks for smaller lenders make this difficult

LENDING IN AMERICA

FICO
&
Credit Reports

Packaged Debt

! In the U.S., your FICO score and credit report can be accessed by anyone lending to you
! FICO is an algorithm that measures credit worthiness
! Takes into account total debt, payment history, type of credit, income/debt ratio
! Gives a score between 300 and 850
! <650 is subprime (now nonprime)
! 650 is acceptable
! 720 is good
! >780 is excellent
! Mortgage backed securities were created to reduce
individual risk by pooling large numbers of mortgages
together
! Not to be confused with Collateralized Debt
Obligations, which were used to alchemize junk-grade
subprime mortgages into investment-grades by
creating a tower with varying payment priorities.
! By buying $10,000 of an MBS, you own a tiny piece of every loan contained within the MBS
! One individual defaulting will have a minimal impact on the value of an MBS
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Lending Club Presentation

Lending Club
! Peer to peer lending company

Purpose

! Seeks to lure borrowers away from larger lenders by providing loans with lower interest rates
! Does not loan money itself, instead takes 1% a cut on interest paid by borrowers to lenders
! Has access to the same information as credit card companies

Method

! Takes FICO score (>650 only), credit report (income, existing debt, payment history), the purpose of the loan
and other information into account and assigns a loan grade. Accepts about 10% of applicants.
!

Slices each loan into smaller pieces that are sold individually.
! Lenders can select each pieces individually or automatically based on assigned criteria

! 699 FICO score

Average
Borrowers1

! 16.9% debt-to-income ratio (excluding mortgage)

! 15.8 years of credit history
! $73,157 personal income (top 10% of US population)

Lending Club

! Average Loan Size: $14,182

1. Lending Club

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Lending Club Presentation

Notes & Grades

Lending Club

Likely 700+

Likely between 650-700

Effectively subprime

1. Lending Club

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Lending Club Presentation

Example Portfolio

Portfolio
NR

4.68%

7.86%

7.89%

7.62%

11.85%

11.85%

11.85%

15%

15%

15%

15%

17.67%

17.67%

7.62%

11.85%

11.85%

11.85%

15%

15%

15%

15%

17.67%

17.67%

7.62%

11.85%

11.85%

11.85%

11.85%

11.85%

11.85%

7.62%

Lending Club

6.82%

15%

15%

15%

15%

17.67%

17.67%

15%

15%

15%

17.67%

17.67%

15%

1. Lending Club

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Lending Club Presentation

Lending
Activity1

Last Quarter Average Interest Rate1

! 36-month: 12.07%
! 60-month: 16.92%
! All Loan Terms: 14.09%

Lending Club

Investor Performance1

1. Lending Club

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Lending Club Presentation