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LENDINGCLUB CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
[August 14, 2014]

LENDINGCLUB CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations


(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Report. In addition to historical information, this Report contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the following "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in Part II Item 1A, "Risk Factors." Actual results could differ materially. Important factors that could cause actual results to differ materially include, but are not limited to; the level of demand for our products and services; the intensity of competition; our ability to effectively expand and improve internal infrastructure; maintenance of positive cash flows from operations, and adverse financial, customer and employee consequences that might result if litigation were to be initiated and resolved in an adverse manner to us. Readers are cautioned not to place undue reliance on the forward-looking statements, including statements regarding our expectations, beliefs, intentions or strategies regarding the future, which speak only as of the date of this Report. We assume no obligation to update these forward-looking statements.



Overview General Corporate Overview Lending Club is an online marketplace that facilitates loans to consumers and businesses and offers investors an opportunity to invest in the loans. Our mission is to transform the banking system to make it more cost efficient, transparent and customer friendly.

Lending Club is headquartered in San Francisco, California, was incorporated in 2006 and began operations in 2007.


At June 30, 2014, our marketplace had facilitated 379,060 loans totaling approximately $5.0 billion since inception.

At June 30, 2014, we had 628 employees and contractors.

Business Overview We are the world's largest online marketplace connecting borrowers and investors. We believe a technology-powered online marketplace is a more efficient mechanism to allocate capital between borrowers and investors than the traditional banking system. Consumers and small business owners borrow through Lending Club to lower the cost of their credit and enjoy a better experience than through a traditional bank. Investors use Lending Club to earn attractive risk-adjusted returns from an asset class that has historically been closed to individual investors and only available on a limited basis to institutional investors. Since our marketplace launched in 2007, our platform has facilitated over $5 billion in loans, and we have built a trusted brand with a track record of delivering exceptional value and satisfaction to both borrowers and investors.

Key advantages we have over the traditional banking system include: • An innovative marketplace model efficiently connecting the supply and demand of capital; • Online operations that eliminate the need for physical infrastructure and improve convenience; and • Automation that increases efficiency and reduces manual processes.

Our platform offers personal loans, which are unsecured obligations of individual borrowers that are issued in amounts ranging from $1,000 up to $35,000, depending on the applicable policy, with fixed interest rates, and three-year or five-year original maturities. Personal loans that have a FICO score of at least 660 and meet other strict credit criteria are issued under WebBank's standard program policy and can be invested in through member payment dependent notes pursuant to our shelf registration. We and WebBank, a FDIC-insured, state chartered industrial bank organized under the laws of Utah, are also partnering with other sophisticated institutional investors to tailor credit decisioning specifications for personal loans to meet specific credit and investment criteria of these investors that are outside of the standard program policy and therefore are not publicly available. In addition, in March 2014, we launched a program focused on loans to small businesses with loan amounts between $15,000 and $100,000 and fixed interest rates and maturities between one and five years. Small business loans and personal loans are referred to as loans in this Report.

Investors can invest in loans or securities related to loans through one or all of the following channels: • Notes. Pursuant to an effective shelf registration statement, investors may purchase unsecured, borrower payment dependent notes issued by us that correspond to payments received on an underlying loan selected by the investor.

• Certificates and Funds. Investors can purchase trust certificates or interests in limited partnerships that purchase a trust certificate. The trust certificates are settled with cash flows from underlying loans in a manner similar to the notes.

• Whole Loan Purchases. Certain investors seek to hold the actual loan on their balance sheet. To meet this need, we also sell the entire loan to institutions and retain the servicing rights.

21 -------------------------------------------------------------------------------- Table of Contents In addition, through the acquisition of Springstone (detailed below), we can now provide financing options for consumers looking to finance education and elective medical procedures through an active network of over 3,300 schools and healthcare providers, as of August 1, 2014. Springstone facilitates installment loans and deferred interest loans through their platform. Installment loans have loan amounts between $2,000 and $40,000 and fixed interest rates and maturities between 24 - 84 months. Installment loans are originated by NBT Bank, N.A.

Deferred interest loans have loan amounts between $499 and $25,000 and promotional terms of 6, 12, 18 and 24 months. Deferred interest loans are originated by Alliance Data Systems Corporation and have a variable rate if not paid in full by the end of the promotional period. Loans facilitated by Springstone are held by the issuing bank on and after origination and are therefore not recorded on our condensed consolidated balance sheet.

We have funded our operations with proceeds from debt financing, preferred stock issuances and common stock issuances. Currently, we are able to fund our operations with the cash flow generated from operations, which are described under "Liquidity and Capital Resources" in our "Management's Discussion and Analysis of Financial Condition and Results of Operations." From inception through June 30, 2014, we have raised approximately $168.0 million, net of issuance costs through preferred stock equity financings.

For the three and six months ended June 30, 2014, our net loss was $9.2 million and $16.5 million, respectively. For the three and six months ended June 30, 2014, we were cash-flow positive on an operating basis. If our assumptions regarding continued growth and operating plan are incorrect, we may need to slow our investment spending, which could slow our rate of growth or ability to continue operating on a cash-flow positive basis, and our current liquidity resources may be consumed.

We earn revenue primarily from transaction fees paid by the issuing bank, and in the case of Springstone also the provider, to us, as well as from servicing fees and management fees which are charged to investors. We expect that the number of borrowers, service providers, investors and unrelated third party purchasers and the volume of loans we facilitate will continue to increase, and that we will generate increased revenues from these fees.

Stock Split On April 15, 2014, the Board of Directors approved a 2 for 1 equity stock split in which each outstanding share of each series or class of equity capital stock was split into two outstanding shares of such series or class of equity capital stock. All share and per share data has been adjusted to reflect this stock split.

Springstone Acquisition On April 17, 2014, we acquired all of the outstanding limited liability company interests of Springstone. We have included the financial results of Springstone in the consolidated financial statements from the date of acquisition.

Under the terms of the Purchase Agreement, the sellers received at the closing an aggregate of $113 million in cash and $25 million worth of Share Consideration. A total of $25.6 million comprised of cash and stock was placed in a third party escrow, and is subject to certain forfeiture conditions over a 36 month period as applicable. This is accounted for as a compensation arrangement and expensed over the three-year vesting period.

To fund the acquisition, we issued 3,195,278 shares of Series F Preferred Stock, par value $0.01 per share for aggregate gross proceeds of approximately $65.0 million and entered into a Credit Agreement with Lenders, under which the Lenders agreed to make a $50.0 million term loan to Lending Club. In connection with the Credit Agreement, Lending Club entered into a Pledge and Security Agreement with Morgan Stanley Senior Funding, Inc. as Collateral Agent.

Key Operating and Financial Metrics We regularly review a number of metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions.

22 -------------------------------------------------------------------------------- Table of Contents The following table includes key operating and financial data (in thousands except per share data): Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 Originations $ 1,005,946 $ 446,225 $ 1,797,294 $ 799,110 Total Operating Revenue $ 48,621 $ 20,842 $ 87,323 $ 37,085 Total Net Revenue $ 48,225 $ 20,839 $ 86,943 $ 37,090 Total Operating Expenses $ 56,772 $ 19,057 $ 102,789 $ 35,268 Net (Loss) Income $ (9,187 ) $ 1,697 $ (16,486 ) $ 1,737 Adjusted EBITDA $ 4,009 $ 3,047 $ 5,890 $ 3,781 Adjusted EBITDA as % of Net Revenue 8.3 % 14.6 % 6.8 % 10.2 % Basic net loss per share attributable to common stockholders $ (0.32 ) $ - $ (0.58 ) $ - Diluted net loss per share attributable to common stockholders $ (0.32 ) $ - $ (0.58 ) $ - Originations Loans to qualified borrowers are originated by our issuing bank partners. We generate revenue from transaction fees from our role in matching borrowers with investors to enable loans originations. We believe originations are a key indicator of the adoption rate of our platform, growth of our brand, scale of our business, strength of our network effect, economic competitiveness of our products and future growth. Loan originations have increased significantly over time due to the effectiveness of our borrower acquisition channels, a strong track record of loan performance and the expansion of our capital sources.

Factors that could affect loan originations include the current interest rate and economic environment, the competitiveness of our products, our ability to develop new products or enhance existing products for borrowers and investors and the success of borrower and investor acquisition and retention.

Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: provision (benefit) for income taxes, net interest income (expense) and adjustments, acquisition and related expense, depreciation and amortization, amortization of intangible assets and stock-based compensation. This non-GAAP information is not necessarily comparable to non-GAAP information of other companies. Non-GAAP information should not be viewed as a substitute for, or superior to, net income (loss) prepared in accordance with GAAP as a measure of our profitability or liquidity. Users of this financial measure should consider the types of events and transactions for which adjustments have been made.

Adjusted EBITDA is a key measure used by our management and Board of Directors to understand and evaluate our core operating performance and trends. We use Adjusted EBITDA because we believe it facilitates operating performance comparisons from period to period by excluding potential differences primarily caused by variations in tax positions, capital structures, the impact of depreciation and amortization expense on our fixed assets and intangible assets, acquisition-related expenses and the impact of stock-based compensation expense.

Adjusted EBITDA has improved over each of the periods due to our increased revenue and efficiencies in the scale of our operations.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; 23 -------------------------------------------------------------------------------- Table of Contents • Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation and warrant expense; • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses and earn income similar to the adjustments in this presentation.

Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net (loss) income and other GAAP results.

Net (loss) income is the most comparable GAAP measure to Adjusted EBITDA. The following table presents a reconciliation of net (loss) income to Adjusted EBITDA for each of the periods indicated (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 Reconciliation of Adjusted EBITDA: Net (loss) income $ (9,187 ) $ 1,697 $ (16,486 ) $ 1,737 Stock-based compensation 8,319 949 15,352 1,474 Other expense (income), net 640 (4 ) 639 (10 ) Acquisition-related expenses 1,141 - 2,282 - Depreciation and amortization 1,333 320 2,340 495 Amortization of intangible assets 1,123 - 1,123 - Provision for income taxes 640 85 640 85 Adjusted EBITDA $ 4,009 $ 3,047 $ 5,890 $ 3,781 Results of Operations Overview The following table summarizes our net (loss) income for the three and six months ended June 30, 2014 and 2013 (in thousands): Three Months Ended June 30, 2014 2013 $ Change % Change Net Revenue $ 48,225 $ 20,839 $ 27,386 131 % Operating Expenses 56,772 19,057 37,715 198 % (Loss) Income before provision for income taxes (8,547 ) 1,782 (10,329 ) -580 % Provision for income taxes 640 85 555 653 % Net (Loss) Income $ (9,187 ) $ 1,697 $ (10,884 ) -641 % Six Months Ended June 30, 2014 2013 $ Change % Change Net Revenue $ 86,943 $ 37,090 $ 49,853 134 % Operating Expenses 102,789 35,268 67,521 191 % (Loss) Income before provision for income taxes (15,846 ) 1,822 (17,668 ) -970 % Provision for income taxes 640 85 555 653 % Net (Loss) Income $ (16,486 ) $ 1,737 $ (18,223 ) -1049 % Net revenue was $48.2 million for the three months ended June 30, 2014, a 131% increase over the three months ended June 30, 2013 primarily due to higher originations. Operating expenses were $56.8 million for the three months ended June 30, 2014, a 198% increase over the three months ended June 30, 2013 primarily due to higher compensation costs, loan credit decisioning costs, borrower acquisition costs, acquisition-related expenses and operational costs related to Springstone.

Net revenue was $86.9 million for the six months ended June 30, 2014, a 134% increase over the six months ended June 30, 2013 primarily due to higher originations. Operating expenses were $102.8 million for the six months ended June 30, 2014, a 191% increase over the six months ended June 30, 2013 primarily due to higher compensation costs, loan credit decisioning costs, borrower acquisition costs, acquisition-related expenses and operational costs for Springstone.

Revenue Our primary sources of revenue consist of transaction fees paid to us by issuing banks related to loan originations facilitated by us, and for Springstone also the providers, as well as servicing fees and management fees which are charged to investors. During the three months ended June 30, 2014 and 2013, we facilitated $1,005.9 million and $446.2 million of loans, respectively, through our platform. During the six months ended June 30, 2014 and 2013, we facilitated $1,797.3 million and $799.1 million of loans, respectively, through our platform.

24 -------------------------------------------------------------------------------- Table of Contents The following table summarizes our revenue for the three and six months ended June 30, 2014 and 2013 (in thousands): Three Months Ended June 30, 2014 2013 $ Change % Change Transaction fees $ 45,801 $ 16,393 $ 29,408 179 % Servicing fees 1,468 882 586 66 % Management fees 1,461 720 741 103 % Other (expense) revenue (109 ) 2,847 (2,956 ) -104 % Total Operating Revenue 48,621 20,842 27,779 133 % Net Interest Expense after fair value adjustments (396 ) (3 ) (393 ) N/M Net Revenue $ 48,225 $ 20,839 $ 27,386 131 % Six Months Ended June 30, 2014 2013 $ Change % Change Transaction fees $ 81,213 $ 29,975 $ 51,238 171 % Servicing fees 3,248 1,597 1,651 103 % Management fees 2,555 1,214 1,341 110 % Other revenue 307 4,299 (3,992 ) -93 % Total Operating Revenue 87,323 37,085 50,238 135 % Net Interest (Expense) Income after fair value adjustments (380 ) 5 (385 ) N/M Net Revenue $ 86,943 $ 37,090 $ 49,853 134 % N/M - Not meaningful.

Transaction Fees Transaction fees are fees paid by the issuing banks to us for the work we perform in facilitating originations. In addition, transaction fees include fees earned from service providers for education and patient financing products. The amount of these fees is based upon the terms of the loan, including grade, rate, term and other factors. These fees are recognized as a component of operating revenue at the time of loan issuance. As of June 30, 2014, these fees ranged from 1% to 6% of the initial principal amount of a loan.

Transaction fees were $45.8 million and $16.4 million for the three months ended June 30, 2014 and 2013, respectively, an increase of 179%. The increase in these fees was primarily due to an increase in loan volume. Average loan transaction fees were 4.6% and 4.4% of the principal amount of loans facilitated for the three months ended June 30, 2014 and 2013, respectively. The increase in the average loan transaction fee was primarily due to higher percentages of 60 month loans and higher risk loans, which have higher corresponding transaction fees.

Transaction fees were $81.2 million and $30.0 million for the six months ended June 30, 2014 and 2013, respectively, an increase of 171%. The increase in these fees was primarily due to an increase in loan volume. Average loan transaction fees were 4.5% and 4.4% of the principal amount of loans facilitated for the six months ended June 30, 2014 and 2013, respectively. The increase in the average loan transaction fee was primarily due to higher percentages of 60 month loans and higher risk loans, which have higher corresponding transaction fees.

Servicing Fees We earn a fee from investors for servicing the ongoing borrower-investor relationship. The servicing fee compensates us for the costs we incur in servicing the related loan, including managing payments from borrowers, payments to investors and maintaining investors' account portfolios. These fees are typically 1% of each payment amount received from the borrower.

Servicing fees were $1.5 million and $0.9 million for the three months ended June 30, 2014 and 2013, respectively, an increase of 66%, primarily due to increased balances of notes, sold loans and certificates outstanding during the three months ended June 30, 2014, versus the three months ended June 30, 2013, offset by changes in the fair value of servicing assets/liabilities.

Servicing fees were $3.2 million and $1.6 million for the six months ended June 30, 2014 and 2013, respectively, an increase of 103%, primarily due to increased balances of notes, sold loans and certificates outstanding during the six months ended June 30, 2014, versus the six months ended June 30, 2013, offset by changes in the fair value of servicing assets/liabilities.

25-------------------------------------------------------------------------------- Table of Contents Management Fees and Assets Under Management Accredited investors and qualified purchasers can invest in limited partner interests in funds managed by LCA, a registered investment advisor and our wholly owned subsidiary. LCA typically charges certificate holders a management fee based on their assets under management, ranging from 0.70% - 1.25% per year.

This fee may be waived or reduced for individual limited partners at the discretion of the general partner.

LCA earned management fees totaling $1.5 million and $0.7 million for the three months ended June 30, 2014 and 2013, respectively, an increase of 103%. LCA earned management fees totaling $2.6 million and $1.2 million for the six months ended June 30, 2014 and 2013, respectively, an increase of 110%. The increase in management fees was due primarily to an increase in assets under management, which were $845.4 million at June 30, 2014 and $547.2 million at June 30, 2013.

As of June 30, 2014, the funds had $739.7 million in assets with $12.3 million of pending capital contributions from limited partners in escrow, which was contributed to the funds on the first business day of July 2014. As of June 30, 2014, LCA managed $105.7 million in assets in SMAs.

The table below presents our summary of changes in assets under management for LCA (in millions): Balance at December 31, 2013 $ 740.2 Net capital contributions 71.7 Net appreciation 33.5 Balance at June 30, 2014 $ 845.4 Other Revenue (Expense) Other revenue consists of revenue from gains and losses on sales of whole loans and referral revenue. Certain banks investing through our platform acquire loans in their entirety. In connection with these whole loan sales, in addition to the transaction fee earned in respect of the corresponding loan, we recognize a small gain or loss on the sale of that loan (loans are typically sold at par).

From January 1, 2013 through June 30, 2013, we included in the gain calculation on whole loan sales the amount of the transaction fees that was earned in respect of those loans, resulting in higher gains on sale and lower transaction fees.

Other (expense) revenue was $(0.1) million and $2.8 million for the three months ended June 30, 2014 and 2013, respectively, a decrease of 104%. The decrease was primarily due to a $3.4 million decrease in gain on sale of whole loans to third party purchasers.

Other revenue was $0.3 million and $4.3 million for the six months ended June 30, 2014 and 2013, respectively, a decrease of 93%. The decrease was primarily due to a $4.6 million decrease in gain on sale of whole loans to third party purchasers.

Net Interest Income The following table summarizes interest income, interest expense and net interest income for the three and six months ended June 30, 2014 and 2013, as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 Interest Income Loans $ 85,210 $ 41,017 $ 158,257 $ 73,375 Cash and cash equivalents 2 4 3 10 Total Interest Income 85,212 41,021 158,260 73,385 Interest Expense Notes and certificates (85,193 ) (41,032 ) (158,193 ) (73,357 ) Term Loan (401 ) - (401 ) - Total Interest Expense (85,594 ) (41,032 ) (158,594 ) (73,357 ) Net Interest (Expense) Income $ (382 ) $ (11 ) $ (334 ) $ 28 Due to the payment dependent feature of notes and certificates for payments on related loans, interest income earned on loans equals the interest expense on the notes and certificates associated with such loans. Differences between reported interest income earned on loans and interest expense on notes and certificates is due to interest earned on loans in which we have invested for which there is no corresponding note or certificate.

We had net interest expense of $0.38 million and $0.01 million for the three months ended June 30, 2014 and 2013, respectively. Net interest income decreased in the three months ended June 30, 2014, when compared to the same period in the prior year primarily due to the interest expense incurred on the Term Loan. We had net interest (expense) income of $(0.33) million and $0.03 million for the 26 -------------------------------------------------------------------------------- Table of Contents six months ended June 30, 2014 and 2013, respectively. Net interest income decreased in the six months ended June 30, 2014, when compared to the same period in the prior year primarily due to the interest expense incurred on the Term Loan that was drawn by the Company in April 2014.

For the three months ended June 30, 2014 and 2013, interest income from loans was $85.2 million and $41.0 million, respectively. For the six months ended June 30, 2014 and 2013, interest income from loans was $158.3 million and $73.4 million, respectively. The increase in interest income is primarily due to the increase in the outstanding balances of loans. The average balance of loans outstanding during the three months ended June 30, 2014, was $2,251.0 million as compared to an average balance of $1,150.1 million during the three months ended June 30, 2013, an increase of 96%. The average balance of loans outstanding during the six months ended June 30, 2014, was $2,121.5 million as compared to an average balance of $1,034.0 million during the six months ended June 30, 2013, an increase of 105%.

For the three months ended June 30, 2014 and 2013, we recorded interest expense for notes and certificates of $85.2 million and $41.0 million, respectively. For the six months ended June 30, 2014 and 2013, we recorded interest expense for notes and certificates of $158.2 million and $73.4 million, respectively. The increase in interest expense was primarily due to the increase in the outstanding balances of notes and certificates. The average balance of notes and certificates outstanding during the three months ended June 30, 2014, was $2,263.5 million as compared to the average balance of $1,157.4 million during the three months ended June 30, 2013, an increase of 96%. The average balance of notes and certificates outstanding during the six months ended June 30, 2014, was $2,131.8 million as compared to the average balance of $1,041.1 million during the six months ended June 30, 2013, an increase of 105%.

Fair Value Adjustments on Loans and Notes and Certificates At June 30, 2014, we estimated the fair value of loans and their related notes and certificates using a discounted cash flow valuation methodology. The discounted cash flow valuation methodology uses the historical defaults and losses and recoveries on our loans over the past several years to project future losses and net cash flows on loans.

The fair value adjustments for loans were largely offset by the fair value adjustments of the notes and certificates at fair value due to the member payment dependent design of the notes and certificates, and because the principal balances of the loans are similar to the combined principal balances of the related notes and certificates. Accordingly, the net fair value adjustment (losses) gains for loans and notes and certificates were immaterial for the three months ended June 30, 2014 and 2013 and for the six months ended June 30, 2014 and 2013.

Operating Expenses The following table summarizes our operating expenses for the three and six months ended June 30, 2014 and 2013 (in thousands): Three Months Ended June 30, 2014 2013 $ Change % ChangeSales and marketing $ 19,225 $ 8,410 $ 10,815 129 % Origination and servicing 8,566 3,414 5,152 151 % General and administrative Engineering and Product Development 8,030 3,043 4,987 164 % Other 20,951 4,190 16,761 400 % Total Operating Expenses $ 56,772 $ 19,057 $ 37,715 198 % Six Months Ended June 30, 2014 2013 $ Change % Change Sales and marketing $ 39,807 $ 16,117 $ 23,690 147 % Origination and servicing 15,968 6,048 9,920 164 % General and administrative Engineering and Product Development 13,752 5,291 8,461 160 % Other 33,262 7,812 25,450 326 % Total Operating Expenses $ 102,789 $ 35,268 $ 67,521 191 % Sales and Marketing Sales and marketing expense consists primarily of borrower and investor acquisition costs and salaries, benefits and stock-based compensation expense related to our sales and marketing staff. Sales and marketing expenses for the three months ended June 30, 2014 and 2013 were $19.2 million and $8.4 million, respectively, an increase of 129%. The increase was primarily due to a $9.7 million increase in borrower acquisition costs.

27-------------------------------------------------------------------------------- Table of Contents Sales and marketing expenses for the six months ended June 30, 2014 and 2013 were $39.8 million and $16.1 million, respectively, an increase of 147%. The increase was primarily due to a $20.3 million increase in borrower acquisition costs.

Origination and Servicing Origination and servicing expense consists primarily of salaries, benefits and stock-based compensation expense related to our credit, collections, customer support and payment processing staff and vendor costs associated with facilitating and servicing loans. Origination and servicing expenses for the three months ended June 30, 2014 and 2013 were $8.6 million and $3.4 million, respectively, an increase of 151%. The increase was primarily due to a $3.7 million increase in compensation expense as we expanded our credit and customer support teams due to increasing loan applications and a $1.2 million increase in consumer reporting agency and loan processing costs which was also driven by higher loan volume.

Origination and servicing expenses for the six months ended June 30, 2014 and 2013 were $16.0 million and $6.0 million, respectively, an increase of 164%. The increase was primarily due to a $7.0 million increase in compensation expense as we expanded our credit and customer support teams due to increasing loan applications and a $2.5 million increase in consumer reporting agency and loan processing costs which was also driven by higher loan volume.

General and Administrative General and administrative expenses are incurred by our engineering and product development and other administrative teams to support the overall business.

Engineering and Product Development Engineering and product development expense consists primarily of salaries, benefits and stock-based compensation expense for our technology team and the cost of subcontractors who work on the development and maintenance of our platform. Engineering and product development expense also includes non-capitalized hardware and software costs and depreciation and amortization of technology assets. Engineering and product development expenses for the three months ended June 30, 2014 and 2013 were $8.0 million and $3.0 million, respectively, an increase of 164%. The increase was primarily due to a $3.6 million increase in personnel related expenses resulting from increased headcount and contract labor expense as we enhanced our website tools and functionality and a $1.0 million increase in expensed equipment and software and depreciation expense reflecting our continued investment in technology infrastructure.

Engineering and product development expenses for the six months ended June 30, 2014 and 2013 were $13.8 million and $5.3 million, respectively, an increase of 160%. The increase was primarily due to a $6.1 million increase in personnel related expenses resulting from increased headcount and contract labor expense as we enhanced our website tools and functionality and a $1.9 million increase in expensed equipment and software and depreciation expense reflecting our continued investment in technology infrastructure.

During the three and six months ended June 30, 2014, we capitalized $2.4 million and $4.7 million of software development costs, respectively. During the three and six months ended June 30, 2013, we capitalized $0.6 million and $1.0 million of software development costs, respectively. These costs generally are amortized over a three year period.

Other Other general and administrative expense consists primarily of salaries, benefits and stock-based compensation expense for our accounting and finance, business development, legal, human resources and facilities staff, professional fees related to legal and accounting and facilities expense. Other general and administrative expenses for the three months ended June 30, 2014 and 2013 were $21.0 million and $4.2 million, respectively, an increase of 400%. The increase was primarily due to a $9.8 million increase in compensation expense, $3.1 million of which was the amortization of the compensation arrangement related to certain key continuing employees of Springstone with the remainder primarily related to an increase in headcount and stock based compensation expense, a $1.9 million increase in contingent legal liabilities and a $2.3 million increase in professional services and amortization of intangibles related to the Acquisition.

Other general and administrative expenses for the six months ended June 30, 2014 and 2013 were $33.3 million and $7.8 million, respectively, an increase of 326%.

The increase was primarily due to a $15.0 million increase in compensation expense, $3.1 million of which was the amortization of the compensation arrangement related to certain key continuing employees of Springstone with the remainder primarily related to an increase in headcount and stock based compensation expense, a $3.4 million increase in professional services and amortization of intangibles related to the Acquisition, a $1.8 million increase in audit and legal fees and a $1.9 million increase in contingent legal liabilities.

28 -------------------------------------------------------------------------------- Table of Contents Income Taxes For the three and six months ended June 30, 2014, we recorded $0.6 million of provision for income taxes. The $0.6 million of tax expense relates to the amortization of tax deductible goodwill from the Acquisition which gives rise to an indefinite-lived deferred tax liability. There was no income tax benefit recorded on the pre-tax loss due to an increase in deferred tax asset valuation allowance. The Company recorded a net provision of $0.1 million for income taxes for the three and six months ended June 30, 2013, which represented minimum corporate income tax liabilities due for the Company's taxable income that cannot be offset by usage of prior years' net operating loss and tax credit carryforwards.

Deferred tax assets, such as the future benefit of net operating loss deductions against future taxable income, can be recognized if realization of such tax-related assets is more likely than not. Given our history of operating losses, it is difficult to accurately forecast when and in what amounts future results will be affected by the realization, if any, of the tax benefits of future deductions for our net operating loss carry forwards. Based upon the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in all prior years, we have provided a full valuation allowance against our net deferred tax assets.

Legal We may be subject to legal matters and regulatory actions in the ordinary course of business. Certain of these matters are described below.

In the second quarter of 2014, the Company offered to settle a dispute with a consultant that previously performed work for the Company. The Company offered the claimant a certain number of the Company's common shares and cash consideration. Since part of this offer was in the form of the Company's common shares, the Company valued the liability based on an estimated price of the common shares at June 30, 2014. If such offer is accepted by the claimant, the shares will be valued on the date of such agreement.

Separately, during the second quarter of 2014, the Company received notice from the California Employment Development Department ("EDD") that it had commenced an examination of the Company's records concerning the employment relationship of certain individuals who performed services for the Company from 2011 through 2014. Based on the EDD's preliminary determination, certain of these individuals should have been classified as employees with appropriate tax withholding and employer related taxes incurred and paid. The Company continues to evaluate a submission of a settlement offer to the EDD or whether it will pursue an appeal of any final notice of assessment that the EDD may levy against the Company with respect to misclassified individuals.

Additionally, during the second quarter of 2014, a previous employee asserted a claim of wrongful termination. The Company offered to settle this claim during the second quarter of 2014.

In connection with these matters, the Company recorded a charge in the second quarter of 2014 to operations in the aggregate amount of $1.8 million to establish a liability. This aggregate amount represents the Company's probable estimate of tax and settlement liabilities. The ultimate liability for such matters could differ from the accrued liability at June 30, 2014. As of June 30, 2014, the Company estimates the aggregate range of reasonably possible losses in excess of any amounts accrued for these matters as of such date, to be up to approximately $0.7 million.

The Company received a Civil Investigative Demand from the Consumer Financial Protection Bureau dated June 5, 2014 related to the operations of Springstone.

The purpose of the investigation is to determine whether the Springstone is engaging in unlawful acts or practices in connection with the marketing, issuance, and servicing of installment loans for healthcare related financing.

The Company continues to be in the fact-finding stage related to this matter, and as such, we have concluded that as of June 30, 2014, there are no probable or estimable losses related to this matter.

In addition to the foregoing, the Company may be subject to legal proceedings and regulatory actions in the ordinary course of business. After consultation with legal counsel, the Company does not anticipate that the ultimate liability, if any, arising out of any such matter will have a material effect on its financial condition, results of operations or cash flows.

Liquidity and Capital Resources At June 30, 2014, we had $69.0 million in available cash and cash equivalents.

We primarily hold our excess unrestricted cash in short-term interest-bearing money market funds at highly-rated financial institutions. We believe that our current cash position is sufficient to meet our current liquidity needs.

At June 30, 2014, we had $20.4 million in restricted cash that consisted primarily of pledged cash of $3.0 million as security for WebBank, $3.4 million for an investor as part of a credit support agreement, $12.0 million of investor cash and $1.7 million as security for a correspondent bank that clears our borrowers' and investors' cash transactions.

At June 30, 2014, the net outstanding balance on the term loan was $49.5 million. This term loan matures on April 16, 2017 and requires principal payments of $312,500 per quarter, with the remaining then unpaid principal amount payable at maturity. The weighted average interest rate on the term loan was 2.75% for both the three and six months ended June 30, 2014. At June 30, 2014, we were in compliance with the leverage ratio covenant.

29-------------------------------------------------------------------------------- Table of Contents The following table summarizes our cash flows for the six months ended June 30, 2014 and 2013 (in thousands).

Six Months Ended June 30, 2014 2013 Cash provided by (used in) Operating activities $ 22,137 $ 6,532 Investing activities (673,817 ) (483,398 ) Financing activities 671,339 478,909 Net increase in cash $ 19,659 $ 2,043 Net cash provided by operating activities for the six months ended June 30, 2014 was positive primarily due to collection of investor receivables outstanding at December 31, 2013 and the impact of non-cash expenses including stock-based compensation and warrant expense. Net cash used in investing primarily represents acquisitions of loans (excluding acquisition of loans sold to unrelated third parties which is included in cash flow from operations along with the corresponding proceeds from sale of loans) and the acquisition of Springstone, offset by repayment of loans. Net cash provided by financing activities primarily represents proceeds from the issuance of notes and certificates, partially offset by payments on notes and certificates.

Additionally, in the second quarter of 2014 the Company issued debt of $49.8 million, net of discount related to the Acquisition and raised additional preferred stock of $64.8 million, net of issuance cost (see Note 10 - Term Loan and Note 11 - Stockholders' Equity in the Notes to the condensed consolidated financial statements).

Critical Accounting Policies The Company's significant accounting policies are included in Note 2 - Summary of Significant Accounting Policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. There have been no changes to these accounting policies during the first six months of 2014 except for the application of the acquisition method in accounting for a business combination, the accounting for intangible assets, including goodwill and the accounting for servicing assets and liabilities, as described below.

Goodwill and Intangible Assets Goodwill represents the fair value of acquired businesses in excess of the fair value of the individually identified net assets acquired. Goodwill is not amortized but is tested for impairment annually or whenever indications of impairment exist. The Company's annual impairment testing date is April 1. The Company can elect to qualitatively assess goodwill for impairment if it is more likely than not that the fair value of a reporting unit exceeds its carrying value. A qualitative assessment may consider macroeconomic and other industry-specific factors, such as trends in short-term and long-term interest rates and the ability to access capital, or company-specific factors such as market capitalization in excess of net assets, trends in revenue generating activities and merger or acquisition activity.

If the Company elects to bypass qualitatively assessing goodwill, or it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, management estimates the fair values of each of the Company's reporting units (defined as the Company's businesses for which financial information is available and reviewed regularly by management) and compares it to their carrying values. The estimated fair values of the reporting units are established using an income approach based on a discounted cash flow model that includes significant assumptions about the future operating results and cash flows of each reporting unit, a market approach which compares each reporting unit to comparable companies in their respective industries, and a market capitalization analysis.

Intangible assets are amortized over their useful lives in a manner that best reflects their economic benefit. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company does not have any indefinite-lived intangible assets.

Servicing Asset/Liability For whole loans sold to unrelated third party purchasers with servicing retained, we use a discounted cash flow model to estimate the fair value of the loan servicing asset or liability which considers the contractual servicing fee revenue we earn on the sold loans, an estimated market servicing rate to service such loans, the current principal balances of the loans and projected servicing revenues over the remaining terms of the loans. We record servicing assets and liabilities at their estimated fair values at the time the loans are sold.

Changes in the fair value of servicing assets and liabilities are reported in "Servicing Fees" in the period in which the change occurs. Servicing assets and liabilities are recorded in "Other Assets" and "Accrued Expenses and Other Liabilities", respectively, on the condensed consolidated balance sheets.

30-------------------------------------------------------------------------------- Table of Contents Statistical Information on the Standard Program Loan Portfolio The tables and charts set forth below relate only to loans issued under the standard program.

In regards to the following historical information, prior performance is no guarantee of future results or outcomes.

From inception to June 30, 2014, we facilitated standard program loans with an average original principal amount of $14,056 and an aggregate original principal amount of $4.7 billion. Out of 333,475 facilitated standard program loans, 56,380 standard program loans with an aggregate original principal amount of $669.8 million, or 14.29%, were fully paid as of June 30, 2014.

The following table presents aggregated information about standard program loans for the period from inception to June 30, 2014, grouped by the loan grade assigned by us: Standard Program Loans Issued from Inception to June 30, 2014 by Grade Number of Average Total Amount Loan Grade Loans Interest Rate Issued A1 6,941 5.99 % $ 82,891,375 A2 7,510 6.58 % 89,761,975 A3 9,123 7.50 % 119,070,575 A4 13,831 7.86 % 181,347,375 A5 15,545 8.76 % 213,040,800 B1 16,954 9.83 % 211,144,425 B2 20,318 10.87 % 265,805,625 B3 24,570 11.80 % 311,263,425 B4 23,088 12.60 % 303,777,975 B5 18,165 13.18 % 229,287,275 C1 19,212 13.81 % 250,576,350 C2 18,906 14.46 % 255,467,450 C3 17,799 15.01 % 254,678,425 C4 16,730 15.61 % 247,167,750 C5 15,760 16.26 % 239,100,350 D1 13,291 16.94 % 190,681,000 D2 11,922 17.51 % 165,257,475 D3 10,208 18.01 % 145,526,925 D4 9,633 18.56 % 148,622,600 D5 8,067 19.21 % 130,056,650 E1 5,874 19.66 % 100,496,800 E2 5,879 20.30 % 102,118,875 E3 4,735 20.86 % 84,333,850 E4 4,110 21.49 % 74,804,150 E5 3,501 22.02 % 63,564,950 F1 2,797 22.65 % 50,619,500 F2 2,188 23.04 % 42,007,525 F3 1,950 23.59 % 35,166,325 F4 1,499 23.86 % 29,065,450 F5 1,098 24.09 % 23,146,075 G1 783 24.42 % 16,455,125 G2 564 24.52 % 11,622,100 G3 397 24.63 % 8,547,700 G4 279 23.87 % 5,951,000 G5 248 23.89 % 4,878,200 Total 333,475 13.98 % $ 4,687,303,425 31 -------------------------------------------------------------------------------- Table of Contents The following table presents aggregated consumer reporting agency information for standard program loans issued from our inception to June 30, 2014, grouped by the loan grade assigned by us. This information is reported in the table as of the time of the loan application. As used in this table, "Delinquencies in the Last Two Years" means the number of 30+ days past-due incidences of delinquency in the borrower's credit file for the preceding two years from the date of loan application. We do not independently verify this information. All figures other than loan grade are agency reported at the time of application.

Consumer Reporting Agency Information for Standard Program Loans Issued from Inception to June 30, 2014, Grouped by Grade Average Average Average Average Average Total Revolving Revolving Average Delinquencies in Average Months Average Open Credit Credit Credit Line Inquiries in the the Last Two Since Last Loan Grade FICO Lines Lines Balance Utilization Last Six Months Years Delinquency A1 770 11 27 $ 14,070 25.75 % 0 0 41 A2 751 11 26 14,987 32.02 % 1 0 39 A3 740 11 26 16,726 37.25 % 1 0 38 A4 730 11 25 16,361 42.45 % 1 0 37 A5 722 11 25 17,590 46.47 % 1 0 37 B1 713 11 25 15,733 49.38 % 1 0 36 B2 707 11 25 16,168 52.57 % 1 0 35 B3 701 11 24 15,400 55.17 % 1 0 35 B4 698 11 25 15,459 56.42 % 1 0 35 B5 695 11 24 14,729 57.72 % 1 0 35 C1 693 11 24 15,259 58.42 % 1 0 34 C2 692 11 24 15,060 59.80 % 1 0 34 C3 691 11 25 15,685 59.88 % 1 0 34 C4 688 11 25 15,992 61.64 % 1 0 34 C5 687 11 25 16,093 62.27 % 1 0 33 D1 684 11 24 15,531 63.32 % 1 0 34 D2 684 11 24 15,372 63.50 % 1 0 34 D3 684 11 24 15,253 63.73 % 1 0 34 D4 684 11 24 15,582 64.71 % 1 0 34 D5 684 11 24 16,541 65.24 % 1 0 34 E1 683 11 25 16,315 65.74 % 1 0 33 E2 683 11 25 16,573 65.53 % 1 0 32 E3 681 11 25 17,181 66.83 % 1 0 33 E4 681 11 25 17,632 67.25 % 1 0 33 E5 680 11 25 17,857 67.45 % 1 0 32 F1 679 11 25 17,615 68.25 % 1 0 32 F2 679 11 25 17,451 68.16 % 1 0 31 F3 678 11 24 16,617 67.93 % 1 0 31 F4 677 12 25 17,452 68.87 % 2 0 31 F5 677 12 26 18,617 69.51 % 2 0 32 G1 676 12 26 18,206 68.58 % 2 1 29 G2 675 12 26 20,885 70.61 % 2 0 28 G3 675 12 26 19,490 71.79 % 2 1 28 G4 673 13 29 23,623 70.09 % 2 0 31 G5 671 13 28 30,452 71.08 % 3 0 29 Average 700 11 25 $ 15,868 56.44 % 1 0 34 32 -------------------------------------------------------------------------------- Table of Contents The following table presents additional aggregated information for standard program loans issued from our inception to June 30, 2014, about current and paid off standard program loans, grouped by the loan grade assigned by us.

Number of Current Loan Number of Fully Paid (%) of Number of Total Origination Current Outstanding Loans Fully Originated All Issued Amount for All Loan Grade Loans Principal ($) Paid Fully Paid ($) Issued Loans Loans Issued Loans A1 4,802 $ 42,536,991 1,629 $ 14,550,625 17.55 % 6,941 $ 82,891,375 A2 5,034 48,112,822 1,989 16,670,225 18.57 % 7,510 89,761,975 A3 6,274 66,875,229 2,346 21,706,975 18.23 % 9,123 119,070,575 A4 9,383 96,155,788 3,421 35,246,400 19.44 % 13,831 181,347,375 A5 10,930 120,918,573 3,449 37,384,000 17.55 % 15,545 213,040,800 B1 12,802 125,884,391 2,840 30,490,025 14.44 % 16,954 211,144,425 B2 15,427 156,999,071 3,375 38,902,000 14.64 % 20,318 265,805,625 B3 18,156 173,109,258 4,368 51,191,475 16.45 % 24,570 311,263,425 B4 17,023 174,914,895 3,866 45,401,050 14.95 % 23,088 303,777,975 B5 12,931 129,981,257 3,351 38,155,675 16.64 % 18,165 229,287,275 C1 14,031 146,408,953 3,126 35,880,750 14.32 % 19,212 250,576,350 C2 13,713 153,388,040 3,043 36,012,425 14.10 % 18,906 255,467,450 C3 13,410 166,402,489 2,362 28,160,950 11.06 % 17,799 254,678,425 C4 12,608 163,835,750 2,250 27,411,500 11.09 % 16,730 247,167,750 C5 11,818 159,520,359 2,074 25,593,900 10.70 % 15,760 239,100,350 D1 9,644 120,438,635 1,840 22,313,950 11.70 % 13,291 190,681,000 D2 8,344 99,360,797 1,803 21,374,200 12.93 % 11,922 165,257,475 D3 7,229 87,785,225 1,533 19,495,200 13.40 % 10,208 145,526,925 D4 6,737 89,849,685 1,408 18,868,375 12.70 % 9,633 148,622,600 D5 5,667 78,369,572 1,204 17,932,100 13.79 % 8,067 130,056,650 E1 4,075 61,134,898 801 12,385,175 12.32 % 5,874 100,496,800 E2 4,086 62,227,058 821 12,952,150 12.68 % 5,879 102,118,875 E3 3,304 52,480,590 666 10,649,350 12.63 % 4,735 84,333,850 E4 2,814 44,601,059 584 10,165,450 13.59 % 4,110 74,804,150 E5 2,414 38,140,459 498 8,717,825 13.71 % 3,501 63,564,950 F1 1,931 30,032,087 386 6,722,725 13.28 % 2,797 50,619,500 F2 1,511 25,230,686 325 6,018,200 14.33 % 2,188 42,007,525 F3 1,345 21,027,640 269 4,938,650 14.04 % 1,950 35,166,325 F4 1,010 17,234,832 198 3,662,300 12.60 % 1,499 29,065,450 F5 725 13,283,448 152 3,117,900 13.47 % 1,098 23,146,075 G1 502 9,434,457 121 2,493,225 15.15 % 783 16,455,125 G2 361 6,582,725 84 1,641,600 14.12 % 564 11,622,100 G3 244 4,817,971 69 1,406,600 16.46 % 397 8,547,700 G4 145 2,747,442 63 1,221,800 20.53 % 279 5,951,000 G5 117 2,418,298 66 953,550 19.55 % 248 4,878,200 Total 240,547 $ 2,792,241,430 56,380 $ 669,788,300 14.29 % 333,475 $ 4,687,303,425 33 -------------------------------------------------------------------------------- Table of Contents The following graph presents the dollar weighted average interest rate for standard program loans issued from inception to June 30, 2014, by grade.

[[Image Removed: LOGO]] 34 -------------------------------------------------------------------------------- Table of Contents The following table presents outstanding standard program loan balances in dollars, delinquent standard program loan balances in dollars, principal amount of standard program loans charged-off during the quarter, delinquency rate and annualized charge-off rate as of June 30, 2014. This information excludes standard program loans that we classified as identity theft. In cases of verified identity theft, we write-off the standard program loan and pay the holder of the related notes or certificates an amount equal to the unpaid principal balances due. Dollars presented below in thousands.

Outstandings (1) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total $ 3,118,617 $ 2,630,408 $ 2,189,446 $ 1,750,365 $ 1,377,064 $ 1,058,994 $ 805,763 $ 614,889 $ 464,367 $ 372,220 $ 300,982 $ 242,941 Grade A 409,525 352,276 295,722 230,596 199,205 167,636 130,845 108,620 89,352 74,014 56,698 45,181 Grade B 829,946 741,021 645,779 524,253 416,396 328,331 241,219 184,015 136,785 108,647 86,459 69,078 Grade C 878,362 736,004 595,967 471,686 351,184 253,472 169,706 122,985 89,615 70,357 57,785 47,470 Grade D 548,745 423,880 325,608 249,749 199,912 153,861 127,701 94,518 67,603 53,708 44,555 37,435 Grade E 299,648 239,745 200,315 166,245 130,030 99,329 86,250 65,673 50,562 41,236 34,243 26,804 Grade F 121,781 110,870 102,390 88,311 66,519 46,617 40,439 30,864 23,707 18,277 15,680 12,230 Grade G 30,610 26,612 23,665 19,525 13,818 9,748 9,603 8,214 6,743 5,981 5,562 4,743 Outstandings of Delinquent Loans (2) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total $ 39,498 $ 33,644 $ 32,904 $ 24,628 $ 17,262 $ 14,850 $ 12,789 $ 9,587 $ 7,375 $ 5,527 $ 5,850 $ 5,502 Grade A 1,276 1,290 1,373 1,172 1,037 986 845 646 502 244 356 273 Grade B 6,064 5,981 6,243 4,975 3,485 2,866 2,283 1,852 1,449 1,283 1,110 1,061 Grade C 10,197 7,894 7,994 5,763 3,588 3,026 2,552 1,991 1,300 1,163 1,172 1,204 Grade D 8,752 7,599 7,215 5,393 3,964 3,605 2,870 2,070 1,492 1,163 1,364 1,279 Grade E 7,275 5,938 5,623 4,298 2,681 2,335 2,329 1,613 1,240 1,009 951 849 Grade F 4,778 3,719 3,552 2,502 1,970 1,450 1,461 1,014 1,086 438 582 532 Grade G 1,156 1,223 904 525 537 582 449 401 306 227 315 304 Charge-Off Amount (3) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total $ 26,610 $ 25,788 $ 18,425 $ 12,500 $ 10,598 $ 8,950 $ 6,117 $ 4,878 $ 3,342 $ 3,366 $ 2,888 $ 1,757 Grade A 1,005 1,052 906 849 858 655 516 361 130 226 157 107 Grade B 4,908 5,228 3,692 2,731 2,156 1,833 1,265 932 709 602 551 366 Grade C 6,422 6,639 4,645 2,574 2,122 1,672 1,252 972 868 722 728 500 Grade D 6,007 5,531 4,105 2,724 2,585 1,880 1,283 853 694 653 588 378 Grade E 4,554 4,066 3,113 1,921 1,468 1,608 963 854 632 554 470 289 Grade F 2,718 2,707 1,661 1,261 992 1,029 607 736 220 372 288 64 Grade G 996 565 303 440 417 273 232 170 89 237 106 53 Delinquent Rate (4) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total 1.27 % 1.28 % 1.50 % 1.41 % 1.25 % 1.40 % 1.59 % 1.56 % 1.59 % 1.48 % 1.94 % 2.26 % Grade A 0.31 % 0.37 % 0.46 % 0.51 % 0.52 % 0.59 % 0.65 % 0.59 % 0.56 % 0.33 % 0.63 % 0.60 % Grade B 0.73 % 0.81 % 0.97 % 0.95 % 0.84 % 0.87 % 0.95 % 1.01 % 1.06 % 1.18 % 1.28 % 1.54 % Grade C 1.16 % 1.07 % 1.34 % 1.22 % 1.02 % 1.19 % 1.50 % 1.62 % 1.45 % 1.65 % 2.03 % 2.54 % Grade D 1.59 % 1.79 % 2.22 % 2.16 % 1.98 % 2.34 % 2.25 % 2.19 % 2.21 % 2.17 % 3.06 % 3.42 % Grade E 2.43 % 2.48 % 2.81 % 2.59 % 2.06 % 2.35 % 2.70 % 2.46 % 2.45 % 2.45 % 2.78 % 3.17 % Grade F 3.92 % 3.35 % 3.47 % 2.83 % 2.96 % 3.11 % 3.61 % 3.29 % 4.58 % 2.40 % 3.71 % 4.35 % Grade G 3.78 % 4.60 % 3.82 % 2.69 % 3.89 % 5.97 % 4.67 % 4.88 % 4.54 % 3.79 % 5.66 % 6.41 % Annualized Charge-off Rate (5) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total 3.41 % 3.92 % 3.37 % 2.86 % 3.08 % 3.38 % 3.04 % 3.17 % 2.88 % 3.62 % 3.84 % 2.89 % Grade A 0.98 % 1.19 % 1.23 % 1.47 % 1.72 % 1.56 % 1.58 % 1.33 % 0.58 % 1.22 % 1.11 % 0.95 % Grade B 2.37 % 2.82 % 2.29 % 2.08 % 2.07 % 2.23 % 2.10 % 2.03 % 2.07 % 2.22 % 2.55 % 2.12 % Grade C 2.92 % 3.61 % 3.12 % 2.18 % 2.42 % 2.64 % 2.95 % 3.16 % 3.87 % 4.11 % 5.04 % 4.22 % Grade D 4.38 % 5.22 % 5.04 % 4.36 % 5.17 % 4.89 % 4.02 % 3.61 % 4.11 % 4.86 % 5.28 % 4.04 % Grade E 6.08 % 6.78 % 6.22 % 4.62 % 4.52 % 6.47 % 4.47 % 5.20 % 5.00 % 5.37 % 5.49 % 4.32 % Grade F 8.93 % 9.77 % 6.49 % 5.71 % 5.97 % 8.83 % 6.00 % 9.54 % 3.72 % 8.14 % 7.35 % 2.09 % Grade G 13.02 % 8.49 % 5.13 % 9.02 % 12.06 % 11.21 % 9.65 % 8.27 % 5.26 % 15.83 % 7.63 % 4.44 % 1) Principal balance at quarter-end.

2) Principal balance as of quarter-end for standard program loans that are "Late 31-120" or in Default status at quarter-end.

3) Principal balance charged off during the quarter.

4) Principal balance at quarter-end for standard program loans that are "Late 31-120" or in Default status at quarter-end divided by Principal balance at quarter-end.

5) Principal balance charged off during the quarter multiplied by four then divided by principal balance at quarter-end.

35 -------------------------------------------------------------------------------- Table of Contents The following table presents dollars collected on delinquent standard program loans and recoveries received on charged-off standard program loans (which include collection recoveries on charged-off standard program loans and proceeds from the sale of charged-off standard program loans), in the quarter presented.

This information excludes standard program loans that we classified as identity theft. In cases of verified identity theft, we write-off the standard program loan and pay the holder of the related notes or certificates an amount equal to the unpaid principal balances due. Dollars presented below in thousands.

Dollars Collected From Delinquent Loans (1) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total $ 2,448 $ 2,660 $ 1,892 $ 1,207 $ 943 $ 1,029 $ 739 $ 652 $ 507 $ 681 $ 533 $ 424 Grade A 129 165 82 81 66 96 66 45 44 40 30 38 Grade B 492 533 392 244 159 237 151 161 128 143 109 78 Grade C 575 588 467 242 228 188 154 105 77 171 149 103 Grade D 539 609 410 291 187 191 156 139 106 137 122 106 Grade E 402 397 227 185 168 137 121 106 77 136 74 58 Grade F 233 256 251 141 71 111 51 62 61 33 27 27 Grade G 78 112 63 23 64 69 40 34 14 21 22 14 Recoveries (2) 2014-Q2 2014-Q1 2013-Q4 2013-Q3 2013-Q2 2013-Q1 2012-Q4 2012-Q3 2012-Q2 2012-Q1 2011-Q4 2011-Q3 Total $ 2,566 $ 1,733 $ 704 $ 463 $ 460 $ 549 $ 105 $ 78 $ 383 $ 89 $ 36 $ 91 Grade A 81 66 42 30 35 39 9 8 15 3 3 19 Grade B 462 377 126 83 66 120 10 2 76 10 6 5 Grade C 576 375 178 90 101 107 39 27 84 22 10 23 Grade D 533 369 150 104 103 113 11 14 110 15 6 15 Grade E 472 317 117 88 76 88 14 13 54 12 4 3 Grade F 355 199 68 47 59 58 8 2 24 18 4 23 Grade G 87 30 23 21 20 24 14 12 20 9 3 3 1) Dollars collected during the quarter for standard program loans that are in "Late 31-120" or in Default status.

2) Total payments received from borrowers of charged-off standard program loans and proceeds from sale of charged-off standard program loans.

36 -------------------------------------------------------------------------------- Table of Contents Cumulative Charge-off Rate - 36 Month Standard Program Loans The graph and corresponding tables below show the cumulative net lifetime charge-offs for standard program loans with original terms of 36 months by grade and by annual vintage booked from January 1, 2008 through June 30, 2014, as a percentage of the aggregate principal amount of originations. The charge-offs are tracked by annual vintage, meaning each line represents all 36 month standard program loans originated in that year.

[[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: All Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.3 % 0.1 % 0.1 % 0.1 % 0.1 % 6 0.0 % 0.9 % 0.3 % 0.3 % 0.3 % 0.2 % 7 0.1 % 1.3 % 0.7 % 0.5 % 0.5 % 0.4 % 8 0.4 % 1.6 % 0.9 % 0.7 % 0.8 % 0.6 % 9 1.2 % 2.2 % 1.1 % 0.9 % 1.2 % 0.7 % 10 1.7 % 2.8 % 1.4 % 1.1 % 1.5 % 0.9 % 11 2.7 % 3.2 % 1.8 % 1.4 % 1.9 % 1.1 % 12 3.0 % 3.6 % 2.3 % 1.6 % 2.3 % 13 3.3 % 4.0 % 2.5 % 1.9 % 2.7 % 14 3.8 % 4.5 % 3.0 % 2.1 % 3.1 % 15 4.9 % 4.8 % 3.2 % 2.4 % 3.5 % 16 5.7 % 5.3 % 3.5 % 2.6 % 3.9 % 17 6.6 % 5.5 % 3.8 % 2.8 % 4.2 % 18 7.1 % 6.0 % 4.0 % 3.1 % 4.5 % 19 8.1 % 6.2 % 4.2 % 3.4 % 4.8 % 20 8.9 % 6.4 % 4.4 % 3.5 % 5.0 % 21 10.2 % 6.8 % 4.6 % 3.7 % 5.2 % 22 10.9 % 7.0 % 4.8 % 3.9 % 5.3 % 23 11.9 % 7.3 % 5.0 % 4.0 % 24 12.3 % 7.6 % 5.1 % 4.2 % 25 12.6 % 7.9 % 5.3 % 4.3 % 26 13.1 % 8.1 % 5.4 % 4.5 % 27 13.3 % 8.2 % 5.5 % 4.6 % 28 13.6 % 8.4 % 5.6 % 4.8 % 29 13.9 % 8.5 % 5.7 % 4.9 % 30 14.0 % 8.6 % 5.8 % 4.9 % 31 14.1 % 8.7 % 5.9 % 5.0 % 32 14.2 % 8.8 % 5.9 % 5.0 % 33 14.3 % 8.9 % 6.0 % 5.1 % 34 14.5 % 8.9 % 6.1 % 5.1 % 35 14.6 % 9.0 % 6.1 % 36 14.7 % 9.0 % 6.2 % 37 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: A Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.0 % 0.0 % 0.0 % 0.1 % 0.0 % 6 0.0 % 0.0 % 0.0 % 0.0 % 0.2 % 0.1 % 7 0.0 % 0.0 % 0.0 % 0.2 % 0.4 % 0.1 % 8 0.1 % 0.1 % 0.0 % 0.3 % 0.6 % 0.1 % 9 0.1 % 0.1 % 0.1 % 0.4 % 0.7 % 0.2 % 10 0.1 % 0.2 % 0.2 % 0.5 % 0.8 % 0.2 % 11 0.1 % 0.4 % 0.2 % 0.6 % 1.0 % 0.2 % 12 0.6 % 0.7 % 0.4 % 0.8 % 1.2 % 13 0.6 % 0.8 % 0.5 % 0.9 % 1.4 % 14 0.6 % 1.5 % 0.6 % 1.2 % 1.6 % 15 0.8 % 1.6 % 0.6 % 1.4 % 1.8 % 16 1.1 % 1.8 % 0.8 % 1.5 % 2.0 % 17 1.1 % 1.8 % 0.9 % 1.6 % 2.2 % 18 1.1 % 2.1 % 0.9 % 1.7 % 2.3 % 19 1.8 % 2.3 % 1.0 % 1.9 % 2.4 % 20 2.0 % 2.4 % 1.2 % 2.0 % 2.5 % 21 2.0 % 2.5 % 1.3 % 2.2 % 2.6 % 22 2.0 % 2.5 % 1.3 % 2.3 % 2.6 % 23 2.1 % 2.6 % 1.4 % 2.3 % 24 2.3 % 2.8 % 1.4 % 2.4 % 25 2.3 % 2.8 % 1.4 % 2.4 % 26 2.3 % 3.0 % 1.5 % 2.5 % 27 2.6 % 3.1 % 1.5 % 2.6 % 28 2.6 % 3.3 % 1.6 % 2.6 % 29 2.7 % 3.4 % 1.6 % 2.7 % 30 3.3 % 3.4 % 1.7 % 2.8 % 31 3.3 % 3.5 % 1.7 % 2.8 % 32 3.3 % 3.5 % 1.8 % 2.8 % 33 3.3 % 3.6 % 1.8 % 2.8 % 34 3.3 % 3.6 % 1.8 % 2.9 % 35 3.3 % 3.6 % 1.8 % 36 3.3 % 3.6 % 1.9 % 38 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: B Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.2 % 0.1 % 0.1 % 0.1 % 0.0 % 6 0.0 % 0.8 % 0.2 % 0.2 % 0.2 % 0.1 % 7 0.0 % 1.2 % 0.5 % 0.4 % 0.5 % 0.2 % 8 0.4 % 1.4 % 0.7 % 0.6 % 0.7 % 0.3 % 9 0.6 % 1.6 % 0.9 % 0.8 % 0.9 % 0.4 % 10 0.7 % 2.4 % 1.1 % 1.1 % 1.2 % 0.6 % 11 1.3 % 2.9 % 1.3 % 1.3 % 1.5 % 0.7 % 12 1.7 % 3.0 % 1.9 % 1.4 % 1.9 % 13 1.7 % 3.4 % 2.1 % 1.6 % 2.2 % 14 2.3 % 3.8 % 2.7 % 1.7 % 2.6 % 15 2.8 % 4.2 % 2.8 % 2.0 % 2.9 % 16 3.0 % 4.5 % 3.0 % 2.3 % 3.3 % 17 4.1 % 4.8 % 3.1 % 2.5 % 3.6 % 18 4.3 % 5.5 % 3.2 % 2.7 % 3.9 % 19 5.1 % 5.5 % 3.3 % 3.0 % 4.1 % 20 6.5 % 5.7 % 3.5 % 3.1 % 4.4 % 21 7.5 % 5.8 % 3.6 % 3.3 % 4.5 % 22 7.9 % 6.0 % 3.8 % 3.5 % 4.7 % 23 8.3 % 6.3 % 3.9 % 3.6 % 24 8.7 % 6.6 % 4.1 % 3.7 % 25 9.1 % 6.8 % 4.2 % 3.9 % 26 9.5 % 7.0 % 4.2 % 4.0 % 27 9.6 % 7.1 % 4.3 % 4.1 % 28 9.7 % 7.3 % 4.3 % 4.3 % 29 10.0 % 7.3 % 4.4 % 4.4 % 30 10.1 % 7.4 % 4.5 % 4.5 % 31 10.2 % 7.5 % 4.6 % 4.6 % 32 10.2 % 7.6 % 4.7 % 4.6 % 33 10.2 % 7.6 % 4.7 % 4.7 % 34 10.3 % 7.7 % 4.8 % 4.7 % 35 10.5 % 7.7 % 4.8 % 36 10.6 % 7.7 % 4.9 % 39 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: C Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.2 % 0.3 % 0.4 % 0.1 % 0.1 % 6 0.2 % 1.2 % 0.5 % 0.8 % 0.3 % 0.2 % 7 0.2 % 1.9 % 0.7 % 0.9 % 0.5 % 0.4 % 8 0.2 % 2.3 % 1.0 % 1.5 % 0.9 % 0.6 % 9 0.9 % 3.2 % 1.1 % 1.8 % 1.4 % 0.8 % 10 1.6 % 3.6 % 1.4 % 1.9 % 1.8 % 1.0 % 11 1.9 % 3.9 % 2.1 % 2.5 % 2.2 % 1.2 % 12 2.2 % 4.4 % 2.5 % 3.4 % 2.7 % 13 2.4 % 4.9 % 2.8 % 3.8 % 3.2 % 14 3.5 % 5.1 % 3.4 % 4.1 % 3.8 % 15 4.1 % 5.5 % 3.7 % 4.5 % 4.3 % 16 4.8 % 5.9 % 4.0 % 4.8 % 4.7 % 17 6.1 % 6.3 % 4.5 % 5.3 % 5.1 % 18 7.4 % 6.4 % 4.9 % 5.5 % 5.6 % 19 8.0 % 6.5 % 5.2 % 5.7 % 5.9 % 20 8.5 % 6.7 % 5.3 % 6.0 % 6.2 % 21 9.9 % 7.1 % 5.5 % 6.2 % 6.4 % 22 10.8 % 7.5 % 5.8 % 6.6 % 6.6 % 23 11.7 % 7.8 % 5.9 % 6.8 % 24 12.1 % 8.0 % 6.1 % 7.0 % 25 12.2 % 8.4 % 6.3 % 7.3 % 26 12.8 % 8.4 % 6.7 % 7.4 % 27 12.9 % 8.6 % 6.8 % 7.6 % 28 13.0 % 8.8 % 6.9 % 7.8 % 29 13.5 % 9.0 % 7.1 % 7.8 % 30 13.6 % 9.1 % 7.2 % 7.9 % 31 13.8 % 9.2 % 7.3 % 8.0 % 32 13.8 % 9.4 % 7.3 % 8.1 % 33 14.0 % 9.4 % 7.4 % 8.1 % 34 14.1 % 9.6 % 7.5 % 8.1 % 35 14.1 % 9.6 % 7.5 % 36 14.1 % 9.6 % 7.5 % 40 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: D Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.5 % 0.1 % 0.2 % 0.2 % 0.2 % 6 0.0 % 1.0 % 0.5 % 0.4 % 0.4 % 0.6 % 7 0.3 % 1.3 % 1.4 % 0.9 % 0.8 % 1.0 % 8 0.6 % 1.7 % 2.1 % 1.1 % 1.2 % 1.6 % 9 2.4 % 2.8 % 2.6 % 1.4 % 1.9 % 2.0 % 10 2.7 % 3.6 % 3.1 % 1.7 % 2.5 % 2.3 % 11 4.2 % 4.3 % 3.6 % 2.1 % 3.0 % 2.7 % 12 4.4 % 4.6 % 4.3 % 2.6 % 3.7 % 13 5.3 % 5.2 % 4.5 % 3.1 % 4.3 % 14 5.3 % 5.6 % 5.1 % 3.4 % 4.9 % 15 7.8 % 5.9 % 5.3 % 3.6 % 5.5 % 16 8.3 % 6.6 % 5.7 % 3.8 % 6.1 % 17 9.4 % 6.8 % 6.3 % 4.1 % 6.5 % 18 9.4 % 7.3 % 6.5 % 4.8 % 7.0 % 19 10.7 % 7.5 % 6.6 % 5.4 % 7.5 % 20 11.8 % 8.0 % 7.1 % 5.7 % 7.8 % 21 13.0 % 8.6 % 7.6 % 5.8 % 8.2 % 22 14.5 % 9.0 % 7.8 % 6.3 % 8.3 % 23 16.2 % 9.5 % 8.2 % 6.6 % 24 16.8 % 9.8 % 8.3 % 6.8 % 25 17.1 % 10.1 % 8.5 % 7.0 % 26 17.4 % 10.3 % 8.6 % 7.7 % 27 18.1 % 10.3 % 8.8 % 7.8 % 28 19.2 % 10.5 % 8.9 % 8.1 % 29 19.3 % 10.6 % 9.1 % 8.2 % 30 19.3 % 10.7 % 9.2 % 8.3 % 31 19.5 % 10.8 % 9.3 % 8.4 % 32 19.8 % 10.9 % 9.3 % 8.4 % 33 19.9 % 11.0 % 9.4 % 8.5 % 34 20.1 % 11.0 % 9.6 % 8.5 % 35 20.2 % 11.0 % 9.7 % 36 20.2 % 11.0 % 9.8 % 41 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: E Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.7 % 0.2 % 0.1 % 0.0 % 0.5 % 6 0.0 % 2.0 % 0.4 % 0.3 % 0.5 % 1.1 % 7 0.0 % 2.2 % 0.7 % 0.8 % 0.6 % 1.4 % 8 0.1 % 3.3 % 1.0 % 0.8 % 1.4 % 1.9 % 9 0.6 % 3.9 % 1.1 % 1.4 % 2.1 % 2.6 % 10 1.1 % 4.3 % 1.2 % 1.8 % 2.5 % 3.1 % 11 3.6 % 4.8 % 1.8 % 1.9 % 3.4 % 3.5 % 12 4.5 % 5.9 % 2.3 % 2.1 % 4.2 % 13 4.8 % 7.0 % 3.4 % 2.8 % 5.4 % 14 4.8 % 7.5 % 4.2 % 3.0 % 6.1 % 15 5.6 % 7.7 % 5.8 % 3.4 % 6.9 % 16 7.3 % 8.8 % 6.1 % 3.4 % 7.1 % 17 7.8 % 9.6 % 6.6 % 3.8 % 7.4 % 18 8.2 % 10.4 % 7.5 % 4.5 % 8.2 % 19 8.9 % 11.2 % 8.2 % 5.0 % 8.5 % 20 9.7 % 11.2 % 8.5 % 5.5 % 9.0 % 21 10.7 % 11.4 % 8.7 % 5.7 % 9.2 % 22 11.7 % 11.7 % 8.7 % 6.0 % 9.5 % 23 12.2 % 12.1 % 8.7 % 6.0 % 24 12.7 % 12.1 % 9.1 % 6.2 % 25 13.0 % 12.5 % 9.5 % 6.6 % 26 13.7 % 12.9 % 9.8 % 7.4 % 27 13.7 % 13.4 % 9.8 % 7.6 % 28 14.0 % 13.5 % 9.9 % 7.6 % 29 14.3 % 13.7 % 10.1 % 8.1 % 30 14.5 % 14.0 % 10.2 % 8.2 % 31 14.5 % 14.0 % 10.3 % 8.2 % 32 14.8 % 14.0 % 10.5 % 8.3 % 33 15.1 % 14.2 % 10.6 % 8.3 % 34 15.4 % 14.2 % 10.6 % 8.3 % 35 15.4 % 14.2 % 11.0 % 36 15.5 % 14.2 % 11.0 % 42 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 36 Months Grade: F+G Mo # Y2008 Y2009 Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.0 % 0.0 % 0.0 % 0.6 % 1.1 % 6 0.0 % 1.2 % 0.4 % 1.1 % 0.6 % 2.8 % 7 0.0 % 2.7 % 3.6 % 1.1 % 1.0 % 3.7 % 8 1.6 % 3.5 % 5.1 % 1.1 % 2.2 % 3.9 % 9 2.6 % 3.8 % 5.8 % 1.1 % 4.3 % 4.9 % 10 4.6 % 5.1 % 6.2 % 6.8 % 4.3 % 5.1 % 11 6.0 % 6.0 % 9.4 % 6.8 % 4.9 % 5.3 % 12 6.0 % 6.6 % 11.7 % 6.8 % 7.6 % 13 6.0 % 7.0 % 11.7 % 6.8 % 8.6 % 14 7.4 % 7.9 % 11.7 % 10.4 % 9.6 % 15 9.5 % 9.9 % 13.4 % 10.4 % 10.5 % 16 11.3 % 10.2 % 14.6 % 10.4 % 10.5 % 17 11.9 % 10.2 % 14.6 % 10.4 % 10.5 % 18 12.8 % 10.8 % 14.6 % 10.8 % 10.5 % 19 15.5 % 12.3 % 15.4 % 11.1 % 10.5 % 20 16.0 % 13.0 % 15.4 % 11.1 % 10.5 % 21 19.2 % 13.9 % 15.4 % 11.1 % 11.4 % 22 19.3 % 13.9 % 17.3 % 14.4 % 11.4 % 23 21.7 % 14.3 % 17.7 % 14.4 % 24 21.7 % 15.1 % 18.2 % 15.4 % 25 22.9 % 16.5 % 19.5 % 15.4 % 26 23.5 % 17.0 % 19.7 % 16.6 % 27 23.9 % 18.2 % 20.2 % 16.6 % 28 23.9 % 18.4 % 20.4 % 17.2 % 29 24.0 % 18.5 % 20.4 % 17.2 % 30 24.0 % 18.8 % 20.4 % 17.8 % 31 24.2 % 18.8 % 20.4 % 17.8 % 32 24.2 % 18.9 % 20.7 % 17.8 % 33 24.2 % 19.5 % 20.8 % 17.8 % 34 24.7 % 19.5 % 20.9 % 17.8 % 35 25.1 % 19.5 % 21.1 % 36 25.3 % 19.5 % 21.1 % 43 -------------------------------------------------------------------------------- Table of Contents Cumulative Charge-off Rate - 60 Month Standard Program Loans The graph and corresponding tables below show the cumulative net lifetime charge-offs for standard program loans with original terms of 60 months by grade and by annual vintage booked from May 1, 2010 through June 30, 2014, as a percentage of the aggregate principal amount of originations. The charge-offs are tracked by annual vintage, meaning each line represents all 60 month standard program loans originated in that year.

[[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: All Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.2 % 0.1 % 0.1 % 6 0.2 % 0.5 % 0.4 % 0.3 % 7 0.4 % 0.9 % 0.8 % 0.5 % 8 0.9 % 1.4 % 1.3 % 0.8 % 9 1.3 % 2.0 % 1.9 % 1.1 % 10 1.6 % 2.7 % 2.5 % 1.4 % 11 2.2 % 3.4 % 3.2 % 1.6 % 12 2.8 % 3.8 % 3.7 % 13 3.3 % 4.6 % 4.4 % 14 4.1 % 5.1 % 5.1 % 15 4.6 % 5.7 % 5.9 % 16 5.3 % 6.3 % 6.6 % 17 5.7 % 6.9 % 7.3 % 18 6.1 % 7.5 % 7.9 % 19 6.6 % 8.0 % 8.5 % 20 6.9 % 8.6 % 9.0 % 21 7.3 % 9.0 % 9.4 % 22 7.6 % 9.4 % 9.7 % 23 7.9 % 9.9 % 24 8.3 % 10.4 % 25 8.7 % 10.8 % 26 9.2 % 11.3 % 27 9.6 % 11.6 % 28 10.1 % 12.1 % 29 10.4 % 12.3 % 30 10.6 % 12.7 % 31 10.9 % 12.9 % 32 11.1 % 13.1 % 33 11.4 % 13.2 % 34 11.5 % 13.3 % 35 11.7 % 13.4 % 36 11.9 % 37 12.1 % 38 12.3 % 39 12.4 % 40 12.7 % 41 12.8 % 42 13.0 % 43 13.1 % 44 13.1 % 45 13.2 % 44 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: A Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.0 % 0.0 % 0.0 % 6 0.0 % 0.0 % 0.0 % 0.0 % 7 0.0 % 0.0 % 1.1 % 0.0 % 8 0.3 % 0.0 % 1.1 % 0.2 % 9 0.3 % 0.0 % 1.1 % 0.2 % 10 0.3 % 0.0 % 1.1 % 0.3 % 11 0.6 % 0.0 % 1.1 % 0.5 % 12 0.9 % 0.0 % 1.1 % 13 1.3 % 0.6 % 1.1 % 14 1.3 % 0.6 % 1.1 % 15 1.5 % 0.6 % 1.4 % 16 1.5 % 0.6 % 1.4 % 17 1.7 % 0.6 % 1.4 % 18 1.9 % 0.6 % 1.4 % 19 1.9 % 0.6 % 1.4 % 20 1.9 % 1.2 % 2.0 % 21 1.9 % 1.7 % 2.0 % 22 1.9 % 1.7 % 2.0 % 23 2.1 % 2.2 % 24 2.1 % 2.2 % 25 2.1 % 2.2 % 26 2.1 % 2.7 % 27 2.1 % 2.9 % 28 2.1 % 2.9 % 29 2.4 % 2.9 % 30 2.4 % 3.2 % 31 2.4 % 3.7 % 32 2.5 % 3.7 % 33 2.5 % 3.7 % 34 2.5 % 3.7 % 35 2.5 % 3.7 % 36 2.7 % 37 2.7 % 38 2.7 % 39 2.8 % 40 2.9 % 41 2.9 % 42 2.9 % 43 3.5 % 44 3.5 % 45 3.5 % 45 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: B Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.0 % 0.1 % 0.0 % 6 0.0 % 0.2 % 0.2 % 0.1 % 7 0.1 % 0.4 % 0.4 % 0.2 % 8 0.5 % 0.6 % 0.6 % 0.4 % 9 1.0 % 1.0 % 1.1 % 0.6 % 10 1.4 % 1.4 % 1.4 % 0.7 % 11 1.8 % 1.7 % 1.8 % 0.8 % 12 2.4 % 1.9 % 2.1 % 13 2.7 % 2.2 % 2.4 % 14 3.1 % 2.5 % 2.8 % 15 3.4 % 2.9 % 3.2 % 16 3.7 % 3.2 % 3.4 % 17 4.2 % 3.7 % 3.7 % 18 4.7 % 3.9 % 4.0 % 19 5.3 % 3.9 % 4.2 % 20 5.5 % 4.2 % 4.6 % 21 5.7 % 4.4 % 4.8 % 22 6.2 % 4.7 % 5.0 % 23 6.3 % 5.3 % 24 6.5 % 5.6 % 25 6.9 % 5.8 % 26 7.4 % 6.4 % 27 7.6 % 6.6 % 28 7.6 % 6.8 % 29 7.8 % 7.0 % 30 8.3 % 7.3 % 31 8.6 % 7.5 % 32 8.7 % 7.6 % 33 8.9 % 7.7 % 34 8.9 % 7.8 % 35 8.9 % 7.8 % 36 9.2 % 37 9.3 % 38 9.5 % 39 9.7 % 40 9.9 % 41 10.0 % 42 10.2 % 43 10.2 % 44 10.3 % 45 10.3 % 46 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: C Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.3 % 0.1 % 0.1 % 6 0.0 % 0.9 % 0.3 % 0.2 % 7 0.2 % 1.3 % 0.6 % 0.3 % 8 0.8 % 1.6 % 1.0 % 0.5 % 9 1.0 % 2.3 % 1.4 % 0.7 % 10 1.3 % 3.0 % 1.9 % 0.9 % 11 2.2 % 3.4 % 2.5 % 1.1 % 12 2.7 % 3.8 % 2.8 % 13 3.2 % 4.3 % 3.2 % 14 3.8 % 4.8 % 3.6 % 15 4.4 % 5.4 % 4.3 % 16 5.1 % 5.7 % 4.8 % 17 5.4 % 6.1 % 5.3 % 18 5.7 % 6.7 % 6.0 % 19 6.0 % 6.8 % 6.3 % 20 6.2 % 7.2 % 6.8 % 21 6.6 % 7.5 % 6.9 % 22 7.0 % 7.9 % 7.0 % 23 7.2 % 8.2 % 24 7.4 % 8.8 % 25 8.0 % 9.3 % 26 8.5 % 9.6 % 27 8.9 % 10.0 % 28 9.2 % 10.4 % 29 9.5 % 10.8 % 30 9.7 % 11.1 % 31 9.8 % 11.4 % 32 9.9 % 11.4 % 33 10.0 % 11.6 % 34 10.1 % 11.6 % 35 10.4 % 11.7 % 36 10.7 % 37 11.0 % 38 11.2 % 39 11.3 % 40 11.3 % 41 11.4 % 42 11.5 % 43 11.6 % 44 11.6 % 45 11.6 % 47 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: D Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.1 % 0.1 % 0.0 % 6 0.4 % 0.4 % 0.4 % 0.3 % 7 0.8 % 1.0 % 0.9 % 0.5 % 8 1.4 % 1.6 % 1.6 % 0.7 % 9 1.9 % 2.3 % 2.3 % 1.0 % 10 2.5 % 3.2 % 3.0 % 1.2 % 11 3.0 % 4.2 % 3.7 % 1.3 % 12 3.6 % 4.6 % 4.2 % 13 4.5 % 5.3 % 5.2 % 14 5.1 % 5.9 % 5.9 % 15 5.6 % 6.5 % 6.6 % 16 6.6 % 7.3 % 7.6 % 17 7.1 % 8.1 % 8.5 % 18 7.3 % 8.8 % 9.2 % 19 7.6 % 9.7 % 9.8 % 20 7.9 % 10.2 % 10.5 % 21 8.4 % 10.6 % 10.7 % 22 8.6 % 11.0 % 11.0 % 23 8.8 % 11.5 % 24 9.5 % 11.9 % 25 9.5 % 12.5 % 26 10.0 % 13.0 % 27 10.3 % 13.2 % 28 11.0 % 13.7 % 29 11.2 % 14.0 % 30 11.4 % 14.5 % 31 11.7 % 14.7 % 32 12.0 % 15.0 % 33 12.2 % 15.1 % 34 12.4 % 15.3 % 35 12.4 % 15.3 % 36 12.5 % 37 12.7 % 38 12.8 % 39 12.8 % 40 13.0 % 41 13.0 % 42 13.3 % 43 13.4 % 44 13.4 % 45 13.6 % 48 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: E Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.0 % 0.0 % 5 0.0 % 0.6 % 0.1 % 0.1 % 6 0.0 % 0.7 % 0.3 % 0.4 % 7 0.7 % 1.3 % 0.6 % 0.6 % 8 1.4 % 1.7 % 1.3 % 1.0 % 9 1.4 % 2.6 % 2.0 % 1.5 % 10 1.4 % 3.1 % 2.5 % 1.9 % 11 2.1 % 3.9 % 3.0 % 2.1 % 12 3.0 % 4.5 % 3.7 % 13 3.7 % 5.4 % 4.6 % 14 5.1 % 5.6 % 5.4 % 15 5.8 % 6.6 % 6.4 % 16 7.1 % 7.3 % 7.2 % 17 7.4 % 8.0 % 8.0 % 18 7.9 % 8.8 % 8.7 % 19 8.5 % 9.5 % 9.6 % 20 8.9 % 10.3 % 10.2 % 21 9.5 % 10.7 % 10.7 % 22 9.6 % 11.2 % 11.1 % 23 10.2 % 11.8 % 24 11.0 % 12.4 % 25 11.6 % 12.9 % 26 12.1 % 13.3 % 27 12.8 % 13.7 % 28 13.5 % 14.3 % 29 13.9 % 14.5 % 30 14.1 % 14.7 % 31 14.3 % 15.1 % 32 14.5 % 15.1 % 33 14.8 % 15.3 % 34 15.0 % 15.5 % 35 15.5 % 15.6 % 36 15.6 % 37 15.7 % 38 16.2 % 39 16.2 % 40 16.6 % 41 16.9 % 42 17.2 % 43 17.4 % 44 17.4 % 45 17.4 % 49 -------------------------------------------------------------------------------- Table of Contents [[Image Removed: LOGO]] Net Cumulative Lifetime Charge-off Rates by Booking Year All Standard Program Loans - Term: 60 Months Grade: F+G Mo # Y2010 Y2011 Y2012 Y2013 Y2014 1 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 2 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 3 0.0 % 0.0 % 0.0 % 0.0 % 4 0.0 % 0.0 % 0.1 % 0.0 % 5 0.1 % 0.2 % 0.4 % 0.2 % 6 0.8 % 0.2 % 0.7 % 0.5 % 7 0.8 % 0.7 % 1.4 % 1.1 % 8 0.8 % 1.5 % 2.1 % 1.8 % 9 1.6 % 2.3 % 2.8 % 2.5 % 10 2.4 % 3.4 % 3.9 % 3.2 % 11 2.4 % 4.7 % 4.8 % 3.7 % 12 3.0 % 5.5 % 5.4 % 13 3.4 % 7.1 % 6.6 % 14 5.1 % 8.1 % 7.7 % 15 6.0 % 8.9 % 8.9 % 16 6.4 % 9.7 % 9.9 % 17 6.5 % 10.7 % 10.6 % 18 7.2 % 12.0 % 11.2 % 19 7.8 % 12.9 % 11.9 % 20 8.7 % 13.7 % 12.5 % 21 9.4 % 14.9 % 13.2 % 22 10.0 % 15.4 % 13.7 % 23 10.7 % 15.7 % 24 10.8 % 16.6 % 25 11.5 % 16.7 % 26 11.9 % 17.5 % 27 12.8 % 18.2 % 28 13.9 % 18.7 % 29 14.4 % 19.0 % 30 14.9 % 19.3 % 31 15.2 % 19.5 % 32 15.9 % 19.7 % 33 16.6 % 19.9 % 34 16.9 % 20.1 % 35 17.0 % 20.3 % 36 17.3 % 37 17.7 % 38 18.1 % 39 18.4 % 40 18.9 % 41 18.9 % 42 19.2 % 43 19.3 % 44 19.5 % 45 19.6 % 50 -------------------------------------------------------------------------------- Table of Contents

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