Lending Club Presentation1

LENDING CLUB

NYSE: LCMonday, 02 February 2015

INTR

OD

UCT

ION

Lending Club Presentation2

� Average U.S. total household debt is $107,7001

� Median U.S. household income of $51,939� Avg Debt 207% of income

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1. WSJ

Overview

Household Debt

� Average US household credit card debt is 15,950$� Or 14.8% of total debt� Average interest rate on CC debt is 17%

Credit Card Debt

Lending Club Presentation3

� Average U.S. total household debt is $107,7001

� Median U.S. household income of $51,939� Avg Debt 207% of income

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1. WSJ

Overview

Household Debt

� Average US household credit card debt is 15,950$� Or 14.8% of total debt� Average interest rate on CC debt is 17%

Credit Card Debt

0% 50% 100% 150% 200% 250%

U.S. Household

Greece

Italy

Spain

Debt/GDP

Lending Club Presentation4

� Average U.S. total household debt is $107,7001

� Median U.S. household income of $51,939� Avg Debt 207% of income

LEN

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1. WSJ

Overview

Household Debt

� Average US household credit card debt is 15,950$� Or 14.8% of total debt� Average interest rate on CC debt is 17%

Credit Card Debt

0% 50% 100% 150% 200% 250%

U.S. Household

Greece

Italy

Spain

Debt/GDP

0.00% 10.00% 20.00%

Greek 3yr Bond Yield pre-Syriza

U.S. Credit Card Debt

Greek 3yr Bond Yield post-Syriza

Interest on Debt

Lending Club Presentation5

233 Months

156 Months

119 Months97 Months

£10,000.00

£11,000.00

£12,000.00

£13,000.00

£14,000.00

£15,000.00

£16,000.00

£17,000.00

£18,000.00

£19,000.00

£20,000.00

1% 2% 3% 4% 5% 6%

Tota

l am

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pai

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Percent paid each month

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1. Navy Federal Credit Union

Credit Card Debt

Paying off £10,000 in credit card debt at 17% APR

Lending Club Presentation6

� 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

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Competing with big lenders

Competition to lenders

Lending Club Presentation7

� 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

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Competing with big lenders

Competition to lenders

� 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

FICO&

Credit Reports

Lending Club Presentation8

� 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

LEN

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Competing with big lenders

Competition to lenders

� 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

FICO&

Credit Reports

Packaged Debt

� 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

Lending Club Presentation9

Lend

ing

Club

Lending Club

1. Lending Club

� Peer to peer lending company

� 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

Purpose

Lending Club Presentation10

� Has access to the same information as credit card companies

� 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

Lend

ing

Club

Lending Club

Method

1. Lending Club

� Peer to peer lending company

� 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

Purpose

Lending Club Presentation11

� Has access to the same information as credit card companies

� 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

Lend

ing

Club

Lending Club

Method

1. Lending Club

� Peer to peer lending company

� 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

Purpose

� 699 FICO score

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

� 15.8 years of credit history

� $73,157 personal income (top 10% of US population)

� Average Loan Size: $14,182

AverageBorrowers1

Lending Club Presentation12

Lend

ing

Club

Notes & Grades

1. Lending Club

Effectively subprimeLikely between 650-700Likely 700+

Lending Club Presentation13

Lend

ing

Club

Example Portfolio

1. Lending Club

A7.62%

B11.85%

C15%

D17.67%

A7.62%

A7.62%

A7.62%

D17.67%

D17.67%

D17.67%

D17.67%

D17.67%

D17.67%

D17.67%

C15%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

B11.85%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

C15%

Portfolio

4.68% 6.82% 7.86% 7.89%

C15%

NR

Lending Club Presentation14

Lend

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Club

Lending

1. Lending Club

Activity1 Last Quarter Average Interest Rate1

� 36-month: 12.07%

� 60-month: 16.92%

� All Loan Terms: 14.09%

Investor Performance1