What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 162 added, 111 removed, 469 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, December 31,

September 30, December 31,

Cash and cash equivalents $ 175,857 $ 130,959

10 unchanged sentences

Asset-backed notes at fair value 2,238,331 1,651,706

Acquisition financing 113,951 114,092

Acquisition and corporate financing 241,838 114,092

Lease liabilities 40,149 47,699

2 unchanged sentences

Stockholders' equity

Common stock, $ 0.0001 par value - 1,000,000,000 shares authorized at June 30, 2022 and December 31, 2021;

33,171,619 shares issued and 32,899,596 shares outstanding at June 30, 2022;

Common stock, $ 0.0001 par value - 1,000,000,000 shares authorized at September 30, 2022 and December 31, 2021;

33,460,161 shares issued and 33,188,138 shares outstanding at September 30, 2022;

32,276,419 shares issued and 32,004,396 shares outstanding at December 31, 2021

1 unchanged sentence

Retained earnings 14,525 83,846

Treasury stock at cost, 272,023 shares at June 30, 2022 and December 31, 2021

Treasury stock at cost, 272,023 shares at September 30, 2022 and December 31, 2021

( 6,309 ) ( 6,309 )

5 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

11 unchanged sentences

General, administrative and other 14,401 2,686 44,698 22,862

Goodwill impairment 108,472 — 108,472 —

Total operating expenses 259,346 111,401 564,576 328,053

9 unchanged sentences

Diluted 33,010,107 30,503,773 32,688,988 30,059,675

See Notes to the Condensed Consolidated Financial Statements.

Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

1 unchanged sentence

(in thousands, except share data)

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Shares Par Value Additional Paid-in Capital Retained Earnings Treasury Stock Total Stockholders' Equity

11 unchanged sentences

Balance – June 30, 2022 32,899,596 $ 7 $ 534,148 $ 120,352 $ ( 6,309 ) $ 648,198

Issuance of common stock upon exercise of stock options 5,261 — 29 — — 29

Stock-based compensation expense — — 7,666 — — 7,666

Vesting of restricted stock units, net of shares withheld 283,281 — ( 953 ) — — ( 953 )

Net loss — — — ( 105,827 ) — ( 105,827 )

Balance – September 30, 2022 33,188,138 $ 7 $ 540,890 $ 14,525 $ ( 6,309 ) $ 549,113

See Notes to the Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands, except share data)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Shares Par Value Additional Paid-in Capital Retained Earnings Treasury Stock Total Stockholders' Equity

10 unchanged sentences

Balance – June 30, 2021 28,033,924 $ 6 $ 444,183 $ 46,701 $ ( 6,309 ) $ 484,581

Issuance of common stock upon exercise of stock options 139,096 — 2,140 — — 2,140

Stock-based compensation expense — — 4,868 — — 4,868

Vesting of restricted stock units, net 211,902 — ( 2,977 ) — — ( 2,977 )

Net income — — — 22,979 — 22,979

Balance – September 30, 2021 28,384,922 $ 6 $ 448,214 $ 69,680 $ ( 6,309 ) $ 511,591

See Notes to the Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

Net income $ 36,506 $ 10,269

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 69,321 ) $ 33,248

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 34,624 20,390

Goodwill impairment 108,472 —

Fair value adjustment, net 135,935 26,457

16 unchanged sentences

Borrowings under secured financing 1,687,050 895,535

Borrowings under asset-backed notes and acquisition financing 404,984 867,462

Borrowings under asset-backed notes, acquisition and corporate financing 967,761 867,251

Repayments of secured financing ( 1,717,050 ) ( 615,994 )

Repayments of asset-backed notes and acquisition financing ( 21,093 ) ( 425,005 )

Repayments of asset-backed notes, acquisition and corporate financing ( 87,253 ) ( 875,007 )

Payments of deferred financing costs ( 6,503 ) —

1 unchanged sentence

Net cash provided by financing activities 835,781 268,178

Net increase (decrease) in cash and cash equivalents and restricted cash ( 59,104 ) 189,379

Net increase in cash and cash equivalents and restricted cash 79,247 55,165

Cash and cash equivalents and restricted cash, beginning of period 192,960 168,590

10 unchanged sentences

Non-cash investments in capitalized assets $ 2,577 $ 1,960

Non-cash financing activities $ 2,325 $ 1,121

See Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2022

September 30, 2022

Organization and Description of Business

5 unchanged sentences

The Company's credit products include personal loans, secured personal loans and credit cards.

The Company's digital banking products include digital banking, automated savings, long-term investing and retirement savings.

The Company's digital banking products include automated savings, digital banking, long-term investing and retirement savings.

The Company is headquartered in San Carlos, California.

19 unchanged sentences

Basic and diluted earnings (loss) per share are calculated as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except share and per share data) 2022 2021 2022 2021

10 unchanged sentences

The following common share equivalent securities have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

19 unchanged sentences

The following table represents the assets and liabilities of consolidated VIEs recorded on the Company’s Condensed Consolidated Balance Sheets (Unaudited):

June 30, December 31,

September 30, December 31,

(in thousands) 2022 2021

21 unchanged sentences

The Company received $ 245.0 million of net proceeds and by selling both its notes and residual interest, the Company derecognized these loans from its Consolidated Balance Sheets.

Other Loan Sales - In April 2022, the Company entered into an agreement with an institutional investor to sell a population of loans ("Q2 2022 Loan Sale").

The sold loans were accounted for under the fair value option and had an aggregate unpaid principal balance of approximately $ 14.7 million, a cumulative fair value mark of $( 14.1 ) million and unpaid interest and fees of $ 1.6 million.

The Company received $ 2.2 million of net proceeds.

The Q2 2022 Loan Sale qualified for sale accounting treatment and the Company derecognized these loans from its Consolidated Balance Sheets.

Other Loan Sales - The Company enters into agreements to sell certain populations of its loans from time to time.

The sold loans were accounted for under the fair value option.

In April 2022, the Company sold loans that had an aggregate unpaid principal balance, including unpaid interest and fees, of approximately $ 16.3 million, and a cumulative fair value mark of $( 14.1 ) million.

The Company received $ 2.2 million of net proceeds (the "Q2 2022 Loan Sale").

During the third quarter of 2022, the Company sold loans that had an aggregate unpaid principal balance, including unpaid interest and fees, of approximately $ 22.2 million and a cumulative fair value mark of $( 21.1 ) million.

The Company received $ 0.7 million of net proceeds and has recorded a receivable of $ 0.4 million in Other assets on the Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2022 (the "Q3 2022 Loan Sales").

The loan sales qualified for sale accounting treatment and the Company derecognized these loans from its Consolidated Balance Sheets at the end of the quarter in which the loans were sold.

Whole Loan Sale Program ‑ In November 2014, the Company entered into a whole loan sale agreement with an institutional investor.

1 unchanged sentence

The Company chose not to renew the arrangement and allowed the agreement to expire on its terms on March 4, 2022.

The originations of loans sold and held for sale during the three months ended June 30, 2022 was insignificant.

The originations of loans sold and held for sale during the three months ended September 30, 2022 was insignificant.

Servicing revenue during the same time period was $ 5.3 million.

The gain on sale recorded during the three months ended June 30, 2022 was insignificant as a result of our whole loan sale agreement expiring on March 4, 2022.

The originations of loans sold and held for sale during the three months ended June 30, 2021 was $ 41.6 million and the Company recorded a gain on sale of $ 5.3 million and servicing revenue of $ 3.0 million.

The originations of loans sold and held for sale during the six months ended June 30, 2022 related to our loan sale program was $ 49.0 million and the Company recorded a gain on sale of $ 5.7 million and servicing revenue of $ 10.3 million.

The originations of loans sold and held for sale during the six months ended June 30, 2021 was $ 75.0 million and the Company recorded a gain on sale of $ 9.8 million and servicing revenue of $ 6.0 million.

The gain on sale recorded during the three months ended September 30, 2022 was insignificant as a result of our whole loan sale agreement expiring on March 4, 2022.

The originations of loans sold and held for sale during the three months ended September 30, 2021 was $ 61.3 million and the Company recorded a gain on sale of $ 7.3 million and servicing revenue of $ 3.3 million.

The originations of loans sold and held for sale during the nine months ended September 30, 2022 related to our loan sale program was $ 50.6 million and the Company recorded a gain on sale of $ 5.7 million and servicing revenue of $ 15.5 million.

The originations of loans sold and held for sale during the nine months ended September 30, 2021 was $ 136.3 million and the Company recorded a gain on sale of $ 17.1 million and servicing revenue of $ 9.3 million.

On December 22, 2021, the Company completed its acquisition of Hello Digit, Inc.

5 unchanged sentences

The total consideration the Company provided for Digit, which consisted of cash and equity, was approximately $ 205.3 million.

The Company recognized acquisition and integration related costs of approximately $ 6.9 million in the three months ended June 30, 2022 and $ 14.2 million in the six months ended June 30, 2022 which are included in the General, administrative and other expense in the Condensed Consolidated Statements of Operations (Unaudited).

The Company recognized acquisition and integration related costs of approximately $ 8.1 million in the three months ended September 30, 2022 and $ 22.4 million in the nine months ended September 30, 2022 which are included in the General, administrative and other expense in the Condensed Consolidated Statements of Operations (Unaudited).

Capitalized Software, Other Intangibles and Goodwill

Capitalized software, net consists of the following:

June 30, December 31,

September 30, December 31,

(in thousands) 2022 2021

5 unchanged sentences

Capitalized software, net

Amortization of system development costs and acquired developed technology for three months ended June 30, 2022 and 2021 was $ 8.2 million and $ 3.9 million, respectively.

System development costs capitalized in the three months ended June 30, 2022 and 2021 were $ 14.2 million and $ 6.6 million, respectively.

Amortization of system development costs and acquired developed technology for six months ended June 30, 2022 and 2021 was $ 15.6 million and $ 7.4 million, respectively.

System development costs capitalized in the six months ended June 30, 2022 and 2021 were $ 25.4 million and $ 12.4 million, respectively.

Amortization of system development costs and acquired developed technology for three months ended September 30, 2022 and 2021 was $ 9.0 million and $ 4.4 million, respectively.

System development costs capitalized in the three months ended September 30, 2022 and 2021 were $ 13.8 million and $ 7.5 million, respectively.

Amortization of system development costs and acquired developed technology for nine months ended September 30, 2022 and 2021 was $ 24.7 million and $ 11.7 million, respectively.

System development costs capitalized in the nine months ended September 30, 2022 and 2021 were $ 39.2 million and $ 19.9 million, respectively.

Acquired developed technology was $ 48.5 million and is related to the acquisition of Digit on December 22, 2021.

1 unchanged sentence

The gross carrying amount and accumulated amortization, in total and by major intangible asset class are as follows:

June 30, December 31,

September 30, December 31,

(in thousands) 2022 2021

5 unchanged sentences

Total intangible assets, net $ 37,675 $ 43,564

Amortization of intangible assets for the three months ended June 30, 2022 was $ 2.0 million.

There were no intangible assets subject to amortization for the three months ended June 30, 2021.

Amortization of intangible assets for the six months ended June 30, 2022 was $ 4.0 million.

There were no intangible assets subject to amortization for the six months ended June 30, 2021.

Expected future amortization expense for intangible assets as of June 30, 2022 is as follows:

Amortization of intangible assets for the three months ended September 30, 2022 was $ 2.0 million.

There were no intangible assets subject to amortization for the three months ended September 30, 2021.

Amortization of intangible assets for the nine months ended September 30, 2022 was $ 6.0 million.

There were no intangible assets subject to amortization for the nine months ended September 30, 2021.

Expected future amortization expense for intangible assets as of September 30, 2022 is as follows:

(in thousands) Fiscal Years

2022 (remaining six months) $ ( 3,996 )

2022 (remaining three months) $ ( 1,998 )

2024 ( 7,798 )

4 unchanged sentences

The Company recorded goodwill of $ 104.0 million arising from the acquisition of Digit on December 22, 2021.

During the three months ended June 30, 2022, the Company recorded no adjustments to goodwill.

During the six months ended June 30, 2022, the Company recorded $ 0.1 million adjustments to goodwill.

There was no impairment for the periods presented.

The Company recorded increases to goodwill of $ 4.3 million and $ 4.5 million, during the three and nine months ended September 30, 2022, respectively, as part of the

twelve-month measurement period.

These increases were primarily due to changes in deferred taxes resulting from the filing of Digit's pre-acquisition tax returns.

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed.

The Company performs impairment tests related to its goodwill on an annual basis or when certain triggering events or circumstances are identified that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount.

In response to a sustained decline in the Company’s share price primarily driven by macroeconomic conditions, the Company conducted a quantitative test of its goodwill as of September 30, 2022.

The Company considered the income approach, the guideline public company multiples approach and the market approach in determining a fair value for the Company which was determined to be the only reporting unit for purposes of testing the goodwill.

Given the uncertain macroeconomic environment there was a wide range of indications of fair value across the approaches.

Although the corresponding value was the lowest in the range, the Company utilized the market approach because it was based on market observable inputs.

The market approach estimates fair value using the market capitalization of the Company as a basis.

As of September 30, 2022, the market capitalization plus the estimated control premium was less than the carrying value of the Company.

As a result, the Company recognized a non-cash pre-tax impairment charge of $ 108.5 million during the three and nine months ended September 30, 2022 to write down the carrying value of goodwill.

The non-cash impairment charge is included in Goodwill impairment in the Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2022.

There were no goodwill impairment charges during the three and nine months ended September 30, 2021 because the Company did not have a goodwill balance as of September 30, 2021.

The following table represents the changes in goodwill since December 31, 2021:

(in thousands) Goodwill

Balance as of December 31, 2021 $ 104,014

Measurement adjustments during period

Impairment ( 108,472 )

Balance as of September 30, 2022

Other assets consist of the following:

June 30, December 31,

September 30, December 31,

(in thousands) 2022 2021

8 unchanged sentences

Total other assets $ 74,699 $ 72,344

Depreciation and amortization expense for the three months ended June 30, 2022 and 2021 was $ 1.3 million and $ 3.9 million, respectively, and for the six months ended June 30, 2022 and 2021 it was $ 2.6 million, and $ 7.3 million, respectively.

Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 was $ 1.3 million and $ 1.3 million, respectively, and for the nine months ended September 30, 2022 and 2021 it was $ 3.8 million, and $ 8.7 million, respectively.

The following table presents information regarding the Company's Secured Financing facilities:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Variable Interest Entity Facility Amount Maturity Date (1)

9 unchanged sentences

The following table presents information regarding asset-backed notes:

June 30, 2022

Variable Interest Entity Initial note amount issued (a)

Initial collateral balance (b)

Current balance (a)

Current collateral balance (b)

Weighted average interest rate (c)

September 30, 2022

Variable Interest Entity Initial note amount issued (1)

Initial collateral balance (2)

Current balance (1)

Current collateral balance (2)

Weighted average interest rate (3)

Original revolving period (4)

1 unchanged sentence

Asset-backed notes recorded at fair value:

Oportun Issuance Trust (Series 2022-2) $ 400,000 $ 410,212 $ 370,417 $ 401,227 6.92 % N/A

Oportun Issuance Trust (Series 2022-A) 400,000 410,211 385,560 414,425 5.44 % 2 years

5 unchanged sentences

December 31, 2021

Variable Interest Entity Initial note amount issued (a)

Initial collateral balance (b)

Current balance (a)

Current collateral balance (b)

Weighted average interest rate ( c)

Variable Interest Entity Initial note amount issued (1)

Initial collateral balance (2)

Current balance (1)

Current collateral balance (2)

Weighted average interest rate ( 3)

Original revolving period

6 unchanged sentences

Total asset-backed notes recorded at fair value $ 1,654,412 $ 1,703,271 $ 1,651,706 $ 1,737,245

(a) Initial note amount issued includes notes retained by the Company as applicable.

(1) Initial note amount issued includes notes retained by the Company as applicable.

The current balances are measured at fair value for asset-backed notes recorded at fair value.

(b) Includes the unpaid principal balance of loans receivable, cash, cash equivalents and restricted cash pledged by the Company.

The following table presents information regarding the Company's Acquisition Financing:

June 30, 2022 December 31, 2021

Variable Interest Entity Original Balance (1)

(2) Includes the unpaid principal balance of loans receivable, the balance of required reserve funds, cash, cash equivalents and restricted cash pledged by the Company.

(3) Weighted average interest rate excludes notes retained by the Company.

There were no notes retained by the Company as of September 30, 2022.

The weighted average interest rate for Series 2022-2 will change over time as the notes pay sequentially (in class priority order).

(4) The revolving period for Series 2019-A ended on August 1, 2022 and the asset-backed notes have been amortizing since then.

Series 2022-2 is an amortizing deal with no revolving period.

The following table presents information regarding the Company's Acquisition and Corporate Financings:

September 30, 2022 December 31, 2021

Entity Original Balance (1)

Maturity Date Interest Rate (2)

1 unchanged sentence

(in thousands)

Oportun Financial Corporation $ 150,000 September 14, 2026 SOFR (minimum of 0.00 % + 9.00 %

$ 141,701 $ —

Oportun RF, LLC 116,000 October 1, 2024 SOFR (minimum of 0.00 %) + 8.00 %

100,137 114,092

(1) The Acquisition Financing Facility was amended on May 24, 2022 and upsized for an additional $ 20.9 million.

(2) The interest rate on the Acquisition Financing facility was LIBOR (minimum of 0.00 %) plus 8.00 % as of December 31, 2021.

Total acquisition and corporate financing $ 266,000 $ 241,838 $ 114,092

(1) The Acquisition Financing Facility (Oportun RF, LLC) was amended on May 24, 2022 and upsized for an additional $ 20.9 million and was amended again on July 28, 2022 and upsized for an additional $ 9.1 million.

(2) The interest rate on the Acquisition Financing Facility (Oportun RF, LLC) was LIBOR (minimum of 0.00 %) plus 8.00 % as of December 31, 2021.

On May 24, 2022 the Company completed the issuance of $ 400.0 million of two-year asset-backed notes in a private asset-backed securitization secured by a pool of its unsecured and secured personal installment loans (the “2022-A Securitization”).

9 unchanged sentences

On July 22, 2022 the Company completed the issuance of $ 400.0 million of Series 2022-2 fixed rate asset-backed notes in a private asset-backed securitization transaction secured by a pool of unsecured and secured installment loans.

The notes were priced with a weighted average yield of 8.00 % per annum and weighted average interest rate over the term of the transaction of 7.77 % per annum.

On September 14, 2022, the Company entered into a credit agreement to borrow $ 150.0 million of a senior secured term loan (the “Corporate Financing”).

The term loan bears interest, payable in cash, at an amount equal to 1-month term SOFR plus 9.00 %.

The term loan is scheduled to mature on September 14, 2026, and is not subject to amortization.

Certain prepayments of the term loan is subject to a prepayment premium.

The obligations under the credit agreement are secured by the assets of the Company and certain of its subsidiaries guaranteeing the term loan, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by the Company, subject to customary exceptions.

On November 3, 2022, the Company completed the issuance of $ 300 million of Series 2022-3 fixed rate asset-backed notes in a private asset-backed securitization transaction secured by a pool of unsecured and secured installment loans.

The notes were priced with a weighted average yield of 10.94 % per annum and weighted average interest rate of 9.51 % per annum.

As of June 30, 2022, and December 31, 2021, the Company was in compliance with all covenants and requirements of the Secured Financing and Acquisition Financing facilities and asset-backed notes.

As of September 30, 2022, and December 31, 2021, the Company was in compliance with all covenants and requirements of the Secured Financing, Acquisition and Corporate Financing facilities and asset-backed notes.

Other Liabilities

Other liabilities consist of the following:

June 30, December 31,

September 30, December 31,

(in thousands) 2022 2021

9 unchanged sentences

Preferred Stock - The Board has the authority, without further action by the Company's stockholders, to issue up to 100,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the Board.

There were no shares of undesignated preferred stock issued or outstanding as of June 30, 2022 or December 31, 2021.

Common Stock - As of June 30, 2022 and December 31, 2021, the Company was authorized to issue 1,000,000,000 shares of common stock with a par value of $ 0.0001 per share.

As of June 30, 2022, 33,171,619 and 32,899,596 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock.

There were no shares of undesignated preferred stock issued or outstanding as of September 30, 2022 or December 31, 2021.

Common Stock - As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 1,000,000,000 shares of common stock with a par value of $ 0.0001 per share.

As of September 30, 2022, 33,460,161 and 33,188,138 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock.

As of December 31, 2021, 32,276,419 and 32,004,396 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock.

2 unchanged sentences

Stock-based Compensation - Total stock-based compensation expense included in the Condensed Consolidated Statements of Operations (Unaudited), net of amounts capitalized to system development costs is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

$ 7,050 $ 4,598 $ 20,752 $ 14,542

(1) Amounts shown are net of $ 0.7 million and $ 1.4 million of capitalized stock-based compensation for the three and six months ended June 30, 2022, respectively, and net of $ 0.3 million and $ 0.5 million of capitalized stock-based compensation for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, and December 31, 2021, the Company’s total unrecognized compensation cost related to nonvested stock-based option awards granted to employees was $ 8.2 million and $ 6.9 million, respectively, which will be recognized over a weighted-average vesting period of approximately 2.8 years and 2.2 years, respectively.

As of June 30, 2022 and December 31, 2021, the Company's total unrecognized compensation cost related to nonvested restricted stock unit awards granted to employees was $ 66.6 million and $ 54.1 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.9 years and 2.6 years, respectively.

(1) Amounts shown are net of $ 0.6 million and $ 2.0 million of capitalized stock-based compensation for the three and nine months ended September 30, 2022, respectively, and net of $ 0.3 million and $ 0.8 million of capitalized stock-based compensation for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, and December 31, 2021, the Company’s total unrecognized compensation cost related to nonvested stock-based option awards granted to employees was $ 7.2 million and $ 6.9 million, respectively, which will be recognized over a weighted-average vesting period of approximately 2.7 years and 2.2 years, respectively.

As of September 30, 2022 and December 31, 2021, the Company's total unrecognized compensation cost related to nonvested restricted stock unit awards granted to employees was $ 58.5 million and $ 54.1 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.9 years and 2.6 years, respectively.

Cash flows from the tax shortfalls or benefits for tax deductions resulting from the exercise of stock options in comparison to the compensation expense recorded for those options are required to be classified as cash from financing activities.

The total income tax expense recognized in the income statement for stock-based compensation arrangements for the three and six months ended June 30, 2022 was $ 0.2 million and $ 0.9 million, respectively.

The total income tax expense recognized in the income statement for stock-based compensation arrangements for the three and six months ended June 30, 2021 was insignificant.

The total income tax expense recognized in the income statement for stock-based compensation arrangements for the three and nine months ended September 30, 2022 was $ 1.4 million and $ 2.4 million, respectively.

The total income tax expense recognized in the income statement for stock-based compensation arrangements for the three and nine months ended September 30, 2021 was $ 0.3 million and $ 0.2 million, respectively.

Interest Income - Total interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

Non-interest Income - Total non-interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

Non-interest income

Gain on loan sales $ ( 1 ) $ 5,321 $ 5,714 $ 9,755

Gain (loss) on loan sales $ ( 6 ) $ 7,328 $ 5,708 $ 17,083

Servicing fees 5,266 3,250 15,544 9,291

1 unchanged sentence

Total non-interest income $ 17,961 $ 13,640 $ 58,591 $ 31,427

For the three and six months ended June 30, 2022 and 2021, the Company calculates its year-to-date income tax expense (benefit) by applying the estimated annual effective tax rate to the year-to-date income from operations before income taxes and adjusts the income tax expense (benefit) for discrete tax items recorded in the period.

During the three and six months ended June 30, 2022, the Company recorded income tax expense (benefit) of $( 3.5 ) million and $ 8.5 million, respectively, related to continuing operations, representing an effective income tax rate of 27.7 % and 18.9 %, respectively.

Income tax expense for the three and six months ended June 30, 2021 was $ 2.6 million and $ 3.5 million, respectively, representing an effective income tax rate of 26.0 % and 25.5 %, respectively.

Our effective tax rates for the three and six months ended June 30, 2022 and 2021 differ from the statutory tax rates primarily due to the impacts of the research and development tax credit and a one-time exercise of stock-based awards.

For the three and nine months ended September 30, 2022 and 2021, the Company calculates its year-to-date income tax expense (benefit) by applying the estimated annual effective tax rate to the year-to-date income from operations before income taxes and adjusts the income tax expense (benefit) for discrete tax items recorded in the period.

During the three and nine months ended September 30, 2022, the Company recorded income tax expense (benefit) of $( 6.5 ) million and $ 2.0 million, respectively, related to continuing operations, representing an effective income tax rate of 5.8 % and ( 2.9 )%, respectively.

Income tax expense for the three and nine months ended September 30, 2021 was $ 5.1 million and $ 8.7 million, respectively, representing an effective income tax rate of 18.3 % and 20.7 %, respectively.

Income tax expense decreased by $ 11.7 million or 227 %, from $ 5.1 million for the three months ended September 30, 2021 to $ 6.5 million benefit for the three months ended September 30, 2022, primarily resulting from having lower pretax income and discrete tax benefits for the three months ended September 30, 2022.

Income tax expense decreased by $ 6.7 million or 77 %, from $ 8.7 million for the nine months ended September 30, 2021 to $ 2.0 million for the nine months ended September 30, 2022, primarily as a result of the discrete tax benefit of the return-to-provision adjustments for the nine months ended September 30, 2022.

The Company's effective tax rates for the three and nine months ended September 30, 2022 and 2021 differ from the statutory tax rates primarily due to the impacts of the non-deductible goodwill impairment, return-to-provision adjustments associated with tax optimization and planning, a one-time exercise of stock-based awards, and research and development tax credits.

Fair Value of Financial Instruments

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The table below compares the fair value of loans receivable and asset-backed notes to their contractual balances for the periods shown:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands) Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value

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The following tables present quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for Loans Receivable at Fair Value.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Minimum Maximum Weighted Average (3)

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(3) Unobservable inputs were weighted by outstanding principal balance, which are grouped by risk (type of customer, original loan maturity terms).

Fair value adjustments related to financial instruments where the fair value option has been elected are recorded through earnings for the six months ended June 30, 2022 and 2021.

Fair value adjustments related to financial instruments where the fair value option has been elected are recorded through earnings for the nine months ended September 30, 2022 and 2021.

Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input.

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The table below presents a reconciliation of Loans Receivable at Fair Value on a recurring basis using significant unobservable inputs:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

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Balance – end of period $ 2,991,334 $ 1,971,375 $ 2,991,334 $ 1,971,375

As of June 30, 2022, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $ 3.1 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $ 25.3 million.

As of September 30, 2022, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $ 7.0 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $ 39.2 million.

As of December 31, 2021, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $ 3.5 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $ 20.7 million.

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The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy:

June 30, 2022

September 30, 2022

Carrying value Estimated fair value Estimated fair value

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Secured financing (Note 9) 368,000 359,406 — 359,406 —

Acquisition financing (Note 9) 115,814 115,814 — 115,814 —

Acquisition and corporate financing (Note 9) 254,764 250,997 — 250,997 —

December 31, 2021

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Secured financing (Note 9) 398,000 396,081 — 396,081 —

Acquisition financing (Note 9) 116,000 116,000 — 116,000 —

Acquisition and corporate financing (Note 9) 116,000 116,000 — 116,000 —

The Company uses the following methods and assumptions to estimate fair value:

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• Loans held for sale ‑ The fair values of loans held for sale are based on a negotiated agreement with the purchaser.

• Secured financing and acquisition financing ‑ The fair values of the secured financing and acquisition financing facilities have been calculated using discount rates equivalent to the weighted-average market yield of comparable debt securities, which is a Level 2 input measure.

There were no transfers in or out of Level 3 assets and liabilities for the three and six months ended June 30, 2022 and 2021 and the year ended December 31, 2021.

• Secured financing and acquisition and corporate financing ‑ The fair values of the secured financing and acquisition and corporate financing facilities have been calculated using discount rates equivalent to the weighted-average market yield of comparable debt securities, which is a Level 2 input measure.

There were no transfers in or out of Level 3 assets and liabilities for the three and nine months ended September 30, 2022 and 2021 and the year ended December 31, 2021.

Leases, Commitments and Contingencies

Leases - The Company’s leases are primarily for real property consisting of retail locations and office space and have remaining lease terms of 10 years or less.

During the first quarter of 2022, we made the decision to close an additional 27 retail locations in April 2022 and we have incurred $ 1.2 million and $ 1.4 million for the three and six months ended June 30, 2022 in expenses related to the accelerated amortization of right of use assets.

During the first quarter of 2022, we made the decision to close an additional 27 retail locations in April 2022.

These activities were substantially complete through the second quarter of 2022 and as such we incurred no additional expenses related to the accelerated amortization of right of use assets for the three months ended September 30, 2022.

We incurred in $ 1.4 million in expenses related to the accelerated amortization of right of use assets for the nine months ended September 30, 2022.

The Company has elected the practical expedient to keep leases with terms of 12 months or less off the balance sheet as no recognition of a lease liability and a right-of-use asset is required.

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The Company uses its contractual borrowing rate to determine lease discount rates.

As of June 30, 2022, maturities of lease liabilities, excluding short-term leases and leases on a month-to-month basis, were as follows:

As of September 30, 2022, maturities of lease liabilities, excluding short-term leases and leases on a month-to-month basis, were as follows:

(in thousands) Operating Leases

Lease expense

2022 (remaining six months) $ 7,375

2022 (remaining three months) $ 3,721

Thereafter 14

Total lease payments 43,343

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Sublease income

2022 (remaining six months) $ —

2023 and thereafter —

Total lease payments —

Imputed interest —

Total sublease income $ —

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Weighted average discount rate 4.01 %

Rental expenses under operating leases for the three and six months ended June 30, 2022, were $ 5.7 million, and $ 10.1 million, respectively, and for the three and six months ended June 30, 2021, were $ 6.2 million, and $ 15.6 million, respectively.

Rental expenses under operating leases for the three and nine months ended September 30, 2022, were $ 4.2 million, and $ 14.2 million, respectively, and for the three and nine months ended September 30, 2021, were $ 4.3 million, and $ 19.9 million, respectively.

Purchase Commitments ‑ The Company has commitments to purchase information technology and communication services in the ordinary course of business, with various terms through 2026.

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In accordance with the agreements underlying the bank partnership program, Oportun has a commitment to purchase an increasing percentage of program loans originated by Pathward based on thresholds specified in the agreements.

Lending under the partnership was launched in August of 2021 and as of June 30, 2022, the Company has a commitment to purchase an additional $ 1.2 million of program loans based on originations through June 30, 2022.

Lending under the partnership was launched in August of 2021 and as of September 30, 2022, the Company has a commitment to purchase an additional $ 0.2 million of program loans based on originations through September 30, 2022.

Whole Loan Sale Program ‑ Through March 4, 2022, the Company had a commitment to sell to a third-party institutional investor 10 % of its unsecured loan originations that satisfy certain eligibility criteria, and an additional 5 % at the Company’s sole option.

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For details regarding the whole loan sale program, refer to Note 5, Loans Held for Sale and Loans Sold .

Unfunded Loan and Credit Card Commitments - Unfunded loan and credit card commitments at June 30, 2022 and December 31, 2021 were $ 58.5 million and $ 39.8 million, respectively.

Unfunded Loan and Credit Card Commitments - Unfunded loan and credit card commitments at September 30, 2022 and December 31, 2021 were $ 49.9 million and $ 39.8 million, respectively.

WebBank has a direct obligation to borrowers to fund such credit card commitments subject to the respective account agreements with such borrowers;

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The information requests are focused on the Company's legal collection practices from 2019 to 2021 and hardship treatments offered to members during the COVID-19 pandemic.

The Company is cooperating fully with the CFPB with respect to this matter and the Company believes that its

business practices have been in full compliance with applicable laws.

Because the CFPB has broad authority to determine what it views as potentially unfair, deceptive or abusive acts or practices, at this time, the Company is unable to predict the outcome of the Oportun investigation.

On September 15, 2022, the Company received a Notice and Opportunity to Respond and Advise (“NORA”) letter from the staff of the CFPB in connection with the CID, stating that it is considering whether to recommend that the CFPB take legal action against the Company based on alleged violations focused on the Company's failure to timely dismiss certain lawsuits and the hardship treatments offered during the COVID-19 pandemic, including credit reporting related thereto.

On October 14, 2022, the Company provided the CFPB with its written response to the NORA letter disputing the allegations.

The Company is cooperating fully with the CFPB with respect to this matter and the Company believes that its business practices have been in full compliance with applicable laws.

Because the CFPB has broad authority to determine what it views as potentially unfair, deceptive or abusive acts or practices, at this time, the Company is unable to predict the ultimate outcome of this matter.

Digit received a CID from the CFPB in June 2020.

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The stated purpose of the CID is to determine whether Digit, in connection with offering its products or services, misrepresented the terms, conditions, or costs of the products or services in a manner that is unfair, deceptive, or abusive.

The Company, including Digit, have cooperated fully with the CFPB with respect to this matter and, while the Company believes that the business practices of the Company, including Digit, have been in full compliance with applicable laws, the Company and the CFPB have reached an agreement in principle with respect to resolution of the Digit matter.

The settlement will include a civil monetary penalty and the Company has established a reserve of approximately $ 2.8 million that was recorded in the Condensed Consolidated Statements of Operations (Unaudited) for the six months ended June 30, 2022.

While the Company believes that the business practices of the Company, including Digit, have been in full compliance with applicable laws, in the interest of resolving this matter, on August 11, 2022, Digit agreed to a consent order with the CFPB resolving such CID.

In connection with such consent order, Digit agreed to implement a redress and compliance plan to pay at least $ 68,145 in consumer redress to consumers who may have been harmed and paid a $ 2.7 million civil penalty to the CFPB.

The Company had previously established a reserve for the redress and civil penalty in the second quarter of 2022 .

From time to time, the Company may bring or be subject to other legal proceedings and claims in the ordinary course of business, including legal proceedings with third parties asserting infringement of their intellectual property rights, consumer litigation, and regulatory proceedings.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements