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Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses
 6 Months Ended
Jun. 30, 2021
Loans and Leases Receivable Disclosure [Abstract]  
Loans and Leases Held for Investment, Net of Allowance For Loan and Lease Losses Loans and Leases Held for Investment, Net of Allowance For Loan and Lease LossesAs a result of the acquisition of Radius and becoming a bank holding company, LendingClub now records loans and leases held for investment at amortized cost, and, loans initially classified as held for sale at fair value. Prior to the
acquisition, all loans were recorded at fair value. Therefore, the following disclosures apply to loans and leases held for investment at amortized cost.

Accrued interest receivable is excluded from the amortized cost basis of loans and leases held for investment and is reported within “Other assets” on the Company’s Condensed Consolidated Balance Sheets. Accrued interest within that caption related to loans and leases held for investment was $10.2 million as of June 30, 2021.

Loans and Leases Held for Investment

The Company defines its loans and leases held for investment portfolio segments as (i) consumer and (ii) commercial. The following table presents the components of each portfolio segment by class of financing receivable:
June 30, 2021
Unsecured personal$776,338 
Residential mortgages152,528 
Secured consumer326,318 
Other consumer157 
Total consumer loans held for investment1,255,341 
Equipment finance (1)
161,465 
Commercial real estate294,954 
Commercial and industrial (2)
658,366 
Total commercial loans and leases held for investment1,114,785 
Total loans and leases held for investment2,370,126 
Allowance for loan and lease losses(71,081)
Loans and leases held for investment, net$2,299,045 
(1)    Comprised of sales-type leases for equipment. See “Note 17. Leases” for additional information.
(2)    Includes $507.6 million of Paycheck Protection Program (PPP) loans. The Company determined no allowance for expected credit losses is needed on these loans.
The activity in the allowance for expected credit losses by portfolio segment for the second quarter and first half of 2021 was as follows:
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
ConsumerCommercialTotalConsumerCommercialTotal
Allowance for loan and lease losses, beginning of period$19,785 $16,347 $36,132 $— $— $— 
Credit loss expense for loans and leases held for investment34,317 659 34,976 53,499 5,030 58,529 
Initial allowance for PCD loans acquired during the period (1)
— — — 603 11,837 12,440 
Charge-offs(90)(156)(246)(90)(156)(246)
Recoveries46 173 219 46 312 358 
Allowance for loan and lease losses, end of period$54,058 $17,023 $71,081 $54,058 $17,023 $71,081 
Reserve for unfunded lending commitments, beginning of period$6 $404 $410 $— $— $— 
Credit loss expense for unfunded lending commitments (6)(14)(20)— 390 390 
Reserve for unfunded lending commitments, end of period$— $390 $390 $— $390 $390 
(1)    For acquired PCD loans, an allowance of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, a CECL allowance of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.

The Company did not recognize an allowance for loan and lease losses as of December 31, 2020 because it did not carry loans held for investment at amortized cost as of that date. During the first quarter of 2021, as a result of the Radius acquisition, the Company acquired and began originating loans held for investment at amortized cost. The allowance for loan and lease losses balance as of June 30, 2021 relates to the recognition of expected credit losses on these purchased and originated loans.
Consumer Lending Credit Quality Indicators

The Company evaluates the credit quality of its consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is based upon borrower payment activity relative to the contractual terms of the loan. The following table presents the classes of financing receivables within the consumer portfolio segment by credit quality indicator based on delinquency status as of June 30, 2021 and origination year:
June 30, 2021 Term Loans and Leases by Origination Year
20212020201920182017PriorWithin Revolving PeriodTotal
Unsecured personal
Current $775,813 $— $— $— $— $— $— $775,813 
30-59 days past due 239 — — — — — — 239 
60-89 days past due 206 — — — — — — 206 
90 or more days past due 80 — — — — — — 80 
Total unsecured personal776,338 — — — — — — 776,338 
Residential mortgages
Current 12,863 42,144 31,584 10,469 2,837 48,548 1,266 149,711 
30-59 days past due — — — — — — — — 
60-89 days past due — — — — — 90 — 90 
90 or more days past due — — 965 677 254 831 — 2,727 
Total residential mortgages 12,863 42,144 32,549 11,146 3,091 49,469 1,266 152,528 
Secured consumer
Current113,198 93,884 43,860 44,517 9,459 15,307 — 320,225 
30-59 days past due17 — — — — — — 17 
60-89 days past due— — — 1,302 — — — 1,302 
90 or more days past due— — 1,203 2,655 916 — — 4,774 
Total secured consumer113,215 93,884 45,063 48,474 10,375 15,307 — 326,318 
Other consumer
Current 145 — — — — — 11 156 
30-59 days past due — — — — — — 1 1 
60-89 days past due — — — — — — — — 
90 or more days past due — — — — — — — — 
Total other consumer145 — — — — — 12 157 
Total consumer loans held for investment$902,561 $136,028 $77,612 $59,620 $13,466 $64,776 $1,278 $1,255,341 

Commercial Lending Credit Quality Indicators

The Company evaluates the credit quality of its commercial loan portfolio based on regulatory risk ratings. The Company categorizes loans and leases into risk ratings based on relevant information about the quality and realizable value of collateral, if any, and the ability of borrowers to service their debts, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans and leases based on their associated credit risk and performs this analysis whenever credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans. Risk rating classifications consist of the following:

Special Mention – Loans and leases with a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date.
Substandard – Loans and leases that are inadequately protected by the current sound worth and paying capacity of the obligator or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Normal payment from the borrower is in jeopardy, although loss of principal, while still possible, is not imminent.

Doubtful – Loans and leases that have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

The following table presents the classes of financing receivables within the commercial portfolio segment by risk rating as of June 30, 2021 and origination year:
June 30, 2021 Term Loans and Leases by Origination Year
20212020201920182017PriorWithin Revolving PeriodTotal
Equipment finance
Pass $38,699 $41,282 $33,861 $22,080 $7,745 $13,154 $— $156,821 
Special mention1,634 222 1,942 — — — — 3,798 
Substandard — — — 846 — — — 846 
Doubtful — — — — — — — — 
Loss— — — — — — — — 
Total equipment finance40,333 41,504 35,803 22,926 7,745 13,154 — 161,465 
Commercial real estate
Pass 16,273 56,511 67,318 43,652 23,212 53,583 3,681 264,230 
Special mention— 8,347 277 1,367 1,047 10,914 — 21,952 
Substandard — — — 2,746 662 5,158 — 8,566 
Doubtful — — — — — — — — 
Loss— — — — — 206 — 206 
Total commercial real estate16,273 64,858 67,595 47,765 24,921 69,861 3,681 294,954 
Commercial and industrial
Pass 316,309 261,066 29,056 9,648 15,281 9,047 3,285 643,692 
Special mention— — 3,173 664 1,364 106 — 5,307 
Substandard — 1,120 130 2,935 2,277 1,742 100 8,304 
Doubtful — — — — — — — — 
Loss— — — — — 1,063 — 1,063 
Total commercial and industrial (1)
316,309 262,186 32,359 13,247 18,922 11,958 3,385 658,366 
Total commercial loans and leases held for investment372,915 368,548 135,757 83,938 51,588 94,973 7,066 1,114,785 
(1)    Includes $507.6 million of PPP loans. The Company determined no allowance for expected credit losses is needed on these loans.
The following table presents an analysis of the past-due loans and leases held for investment within the commercial portfolio segment at June 30, 2021:
June 30, 2021Days Past Due
Current-2930-5960-8990 or moreTotal
Equipment finance$161,465 $— $— $— $161,465 
Commercial real estate294,090 — — 864 294,954 
Commercial and industrial (1)
656,735 261 8 1,362 658,366 
Total commercial loans and leases held for investment$1,112,290 $261 $8 $2,226 $1,114,785 
(1)    Includes $507.6 million of PPP loans. The Company determined no allowance for expected credit losses is needed on these loans.

Nonaccrual Assets

Nonaccrual loans and leases are those for which accrual of interest has been suspended. Loans and leases are generally placed on nonaccrual status when contractually past due 90 days or more, or earlier if management believes that the probability of collection does not warrant further accrual.

The following table presents nonaccrual loans and leases as of June 30, 2021:
June 30, 2021
Nonaccrual(1)
Nonaccrual with no related ACL(2)
Unsecured personal$80 $— 
Residential mortgages2,973 2,719 
Secured consumer9,503 1,203 
Other consumer— — 
Total nonaccrual consumer loans held for investment12,556 3,922 
Equipment finance846 — 
Commercial real estate1,624 317 
Commercial and industrial1,988 1,063 
Total nonaccrual commercial loans and leases held for investment4,458 1,380 
Total nonaccrual loans and leases held for investment$17,014 $5,302 
(1)     There were no loans and leases that were 90 days or more past due and accruing as of June 30, 2021.
(2)     Subset of total nonaccrual loans and leases.

Troubled Debt Restructurings

TDRs are loan modifications where concessions were granted to borrowers experiencing financial difficulties. The Company may offer several types of assistance to aid customers, including payment extensions and reduction or forgiveness in amounts of principal and interest due.

TDRs identified by Radius prior to the acquisition are not disclosed because all such loans were recorded at fair value and a new accounting basis was established as of the acquisition date. Subsequent modifications, if any, are evaluated and recorded as TDRs in accordance with LendingClub’s accounting policies. See “Note 1. Summary of Significant Accounting Policies” for additional information.
Collateral-Dependent Assets

Certain loans on non-accrual status and certain TDR loans may be considered collateral-dependent loans if the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially through sale or operation of the collateral. Expected credit losses for the Company’s collateral-dependent loans are calculated as the difference between the amortized cost basis and the fair value of the underlying collateral less costs to sell, if applicable. See “Note 1. Summary of Significant Accounting Policies” for further detail.

Purchased Financial Assets with Credit Deterioration

Acquired loans are recorded at their fair value, which may result in the recognition of a discount or premium. In addition, the purchase price of PCD loans is grossed-up upon acquisition for the initial estimate of expected credit losses. For acquired PCD loans for which all or a portion of the balance was previously written off, or was required to be written off under LendingClub’s charge-off policy upon acquisition, the expected credit loss included in the grossed-up loan balance was immediately charged off. Subsequent changes to the allowance for expected credit losses are recorded as additions to or reversals of credit losses on the Company’s Condensed Consolidated Statements of Operations.

Acquired PCD loans during the first half of 2021 were as follows:
Six Months Ended June 30, 2021
Purchase price$337,118 
Allowance for expected credit losses (1)
30,378 
Discount attributable to other factors12,204 
Par value$379,700 
(1)    For acquired PCD loans, an allowance of $30.4 million was required with a corresponding increase to the amortized cost basis as of the acquisition date. For PCD loans where all or a portion of the loan balance had been previously written-off, or would be subject to write-off under the Company’s charge-off policy, a CECL allowance of $18.0 million included as part of the grossed-up loan balance at acquisition was immediately written-off. The net impact to the allowance for PCD assets on the acquisition date was $12.4 million.