# How We Measure Net Annualized Return

Net Annualized Return (NAR) is based on funds actually received each month, net of our service charge of 1%. We make deductions for any charged off loans ("charge off amounts") and we add back any recoveries. As explained below, "charge off amounts" are equal to the outstanding principal amount of any Note for which the corresponding member loan is actually charged off.

### Why We Display Net Annualized Return

NAR reflects only actual funds received to date. Therefore, we believe it gives you a more accurate measure of the performance of your total investment versus considering only the stated interest rate on the Notes you have purchased. It is not a forward-looking projection of performance.

### How We Calculate Net Annualized Return

NAR is the output of a formula where the numerator is composed of interest received, plus late fees received, minus the 1% service charge paid. If a Note does not get paid, the interest received in that period will be zero. If a corresponding loan is in "charge off" status, we subtract the entire principal amount of the Note from the numerator. If a portion of the loan is recovered, we add that amount back to the numerator. Next, we divide this result by the outstanding principal amount of the Note for that period. This yields a fraction for the period.

This calculation is performed for each period, taking into account all interest received, late fees received, service charges paid, and all charge offs and recoveries relative to the principal outstanding in each period. Doing so means we account for performance on investments that begin in different periods, have different payment dates, and so forth. The final step in the calculation involves annualizing the result. We take the sum of (1 + the dollar-weighted average performance for all periods), raise it to the 12th power, and subtract 1. This result is NAR, which is expressed as a percentage.

### NAR formula

NAR can be expressed as this formula, for any period from month 1 to month N, where i is the recurring monthly period:

### What is Adjusted NAR?

We offer a tool that allows investors to model the impact of potential loan losses on their portfolio before a loan is actually charged off. This tool allows investors to create an Adjusted NAR. For Adjusted NAR, we make a deduction for estimated future losses on loans based on status ("Note status adjustment amount"). To calculate this deduction we apply an estimated loss rate to the outstanding principal of a Note for which the corresponding member loan is past due but not actually charged off. Lending Club provides an estimated loss rate based on historical data. Investors have the option to customize the estimated loss rate applied to their portfolio.

Adjusted NAR reflects the actual funds received to date and a risk-adjusted view of the outstanding principal based on loan status. Adjusted NAR may be attractive to investors who want to model possible future loan losses for each loan status. Whether an investor uses Lending Club's estimated loss rate or their own, it is not a guarantee of future performance.

### How We Calculate Adjusted Net Annualized Return

For Adjusted NAR, we perform the same calculation as we do for Unadjusted NAR but we make an additional adjustment for estimated future losses on past due loans. We apply an estimated loss rate to the outstanding principal of a Note and subtract that amount from the numerator ("Note status adjustment amount").

### Adjusted NAR Formula

Adjusted NAR can be expressed as this formula, for any period from month 1 to month N, where i is the recurring monthly period:

In the Adjusted NAR formula, the Note Status Adjustment Amount is calculated by applying an estimated loss rate to the outstanding principal on any Notes for which the corresponding loan is past due at the present point in time.

### The Limitations of Net Annualized Return

NAR is just one way you can calculate the return on funds you have invested through the Lending Club platform. There are other methods for evaluating the historical or potential investment return on fixed-income securities that you could choose to use instead, and you may want to consider such methods as well.

NAR measures the performance of our investors; it does not reflect the performance of loans held by Lending Club as an investment. Lending Club Notes are only offered by Prospectus.

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