Oportun Financial Corp 10-Q

Item 1. Financial Statements OPORTUN FINANCIAL CORPORATION Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and per share data) June 30, December 31, 2023 2022 Assets Cash and cash equivalents $ 73,371 $ 98,817 Restricted cash 128,964 105,000 Loans receivable at fair value 2,985,129 3,143,653 Interest and fees receivable, net 30,852 31,796 Capitalized software and other intangibles, net 133,012 139,801 Right of use assets - operating 26,515 30,448 Other assets 94,200 64,180 Total assets $ 3,472,043 $ 3,613,695 Liabilities and stockholders' equity Liabilities Secured financing $ 486,453 $ 317,568 Asset-backed notes at fair value 2,118,786 2,387,674 Asset-backed borrowings at amortized cost 25,600 — Acquisition and corporate financing 271,507 222,879 Lease liabilities 33,124 37,947 Other liabilities 78,175 100,028 Total liabilities 3,013,645 3,066,096 Stockholders' equity Common stock, $ 0.0001 par value - 1,000,000,000 shares authorized at June 30, 2023 and December 31, 2022; 34,299,366 shares issued and 34,027,343 shares outstanding at June 30, 2023; 33,626,630 shares issued and 33,354,607 shares outstanding at December 31, 2022 7 7 Common stock, additional paid-in capital 575,587 547,799 Retained earnings (accumulated deficit) ( 110,887 ) 6,102 Treasury stock at cost, 272,023 shares at June 30, 2023 and December 31, 2022 ( 6,309 ) ( 6,309 ) Total stockholders’ equity 458,398 547,599 Total liabilities and stockholders' equity $ 3,472,043 $ 3,613,695 See Notes to the Condensed Consolidated Financial Statements. 3 OPORTUN FINANCIAL CORPORATION Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenue Interest income $ 240,463 $ 207,655 $ 478,082 $ 399,892 Non-interest income 26,100 18,147 47,993 40,630 Total revenue 266,563 225,802 526,075 440,522 Less: Interest expense 41,448 17,104 80,445 30,781 Net decrease in fair value ( 106,490 ) ( 63,484 ) ( 322,200 ) ( 59,513 ) Net revenue 118,625 145,214 123,430 350,228 Operating expenses: Technology and facilities 55,116 52,788 111,990 101,977 Sales and marketing 19,195 32,368 38,377 66,909 Personnel 30,762 38,629 68,080 74,555 Outsourcing and professional fees 9,900 17,165 23,702 31,492 General, administrative and other 21,123 16,936 40,285 30,297 Total operating expenses 136,096 157,886 282,434 305,230 Income (loss) before taxes ( 17,471 ) ( 12,672 ) ( 159,004 ) 44,998 Income tax expense (benefit) ( 2,572 ) ( 3,515 ) ( 42,015 ) 8,492 Net income (loss) $ ( 14,899 ) $ ( 9,157 ) $ ( 116,989 ) $ 36,506 Net income (loss) attributable to common stockholders $ ( 14,899 ) $ ( 9,157 ) $ ( 116,989 ) $ 36,506 Share data: Earnings (loss) per share: Basic $ ( 0.41 ) $ ( 0.28 ) $ ( 3.31 ) $ 1.12 Diluted $ ( 0.41 ) $ ( 0.28 ) $ ( 3.31 ) $ 1.10 Weighted average common shares outstanding: Basic 36,691,291 32,831,499 35,342,663 32,525,768 Diluted 36,691,291 32,831,499 35,342,663 33,241,681 See Notes to the Condensed Consolidated Financial Statements. 4 OPORTUN FINANCIAL CORPORATION Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (in thousands, except share data) For the Six Months Ended June 30, 2023 Common Stock Warrants Shares Par Value Additional Paid-in Capital Shares Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Treasury Stock Total Stockholders' Equity Balance – January 1, 2023 33,354,607 $ 7 $ 547,799 $ — $ — $ 6,102 $ ( 6,309 ) $ 547,599 Stock-based compensation expense — — 5,329 — — — — 5,329 Vesting of restricted stock units, net of shares withheld 529,739 — ( 1,364 ) — — — — ( 1,364 ) Issuance of warrants to purchase common stock in connection with debt financing — — — 2,096,727 6,672 — — 6,672 Net loss — — — — — ( 102,090 ) — ( 102,090 ) Balance – March 31, 2023 33,884,346 $ 7 $ 551,764 2,096,727 $ 6,672 $ ( 95,988 ) $ ( 6,309 ) $ 456,146 Issuance of common stock upon exercise of stock options, net of shares withheld 26,458 — ( 95 ) — — — — ( 95 ) Stock-based compensation expense — — 4,754 — — — — 4,754 Vesting of restricted stock units, net of shares withheld 116,539 — ( 267 ) — — — — ( 267 ) Issuance of warrants to purchase common stock in connection with debt financing — — — 2,096,726 12,759 — — 12,759 Net loss — — — — — ( 14,899 ) — ( 14,899 ) Balance – June 30, 2023 34,027,343 $ 7 $ 556,156 4,193,453 $ 19,431 $ ( 110,887 ) $ ( 6,309 ) $ 458,398 See Notes to the Condensed Consolidated Financial Statements. 5 OPORTUN FINANCIAL CORPORATION Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (in thousands, except share data) For the Six Months Ended June 30, 2022 Common Stock Shares Par Value Additional Paid-in Capital Retained Earnings Treasury Stock Total Stockholders' Equity Balance – January 1, 2022 32,004,396 $ 6 $ 526,338 $ 83,846 $ ( 6,309 ) $ 603,881 Issuance of common stock upon exercise of stock options 505,945 1 ( 4,749 ) — — ( 4,748 ) Stock-based compensation expense — — 7,467 — — 7,467 Vesting of restricted stock units, net of shares withheld 296,552 — ( 2,327 ) — — ( 2,327 ) Net income — — — 45,663 — 45,663 Balance – March 31, 2022 32,806,893 $ 7 $ 526,729 $ 129,509 $ ( 6,309 ) $ 649,936 Issuance of common stock upon exercise of stock options 32,345 — 78 — — 78 Repurchase of stock options ( 2,706 ) — ( 28 ) — — ( 28 ) Stock-based compensation expense — — 7,642 — — 7,642 Vesting of restricted stock units, net of shares withheld 63,064 — ( 273 ) — — ( 273 ) Net loss — — — ( 9,157 ) — ( 9,157 ) Balance – June 30, 2022 32,899,596 $ 7 $ 534,148 $ 120,352 $ ( 6,309 ) $ 648,198 See Notes to the Condensed Consolidated Financial Statements. 6 OPORTUN FINANCIAL CORPORATION Condensed Consolidated Statements of Cash Flow (Unaudited) (in thousands) Six Months Ended June 30, 2023 2022 Cash flows from operating activities Net income (loss) $ ( 116,989 ) $ 36,506 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 27,158 22,340 Fair value adjustment, net 322,200 59,513 Origination fees for loans receivable at fair value, net ( 16,981 ) ( 11,351 ) Gain on loan sales ( 3,693 ) ( 5,714 ) Stock-based compensation expense 9,347 13,702 Other, net ( 29,910 ) 20,732 Originations of loans sold and held for sale ( 25,678 ) ( 48,972 ) Proceeds from sale of loans 29,096 55,064 Changes in other assets and other liabilities ( 15,193 ) ( 50,178 ) Net cash provided by operating activities 179,357 91,642 Cash flows from investing activities Originations of loans ( 780,912 ) ( 1,560,495 ) Proceeds from loan sales originated as held for investment 1,653 247,230 Repayments of loan principal 694,963 700,968 Capitalization of system development costs ( 18,731 ) ( 23,580 ) Other, net ( 994 ) ( 2,147 ) Net cash used in investing activities ( 104,021 ) ( 638,024 ) Cash flows from financing activities Borrowings under secured financing 171,300 1,331,000 Repayments of secured financing ( 3,140 ) ( 1,220,000 ) Borrowings under asset-backed notes at fair value — 404,984 Repayments of asset-backed notes at fair value ( 330,406 ) ( 21,093 ) Borrowings under asset-backed borrowings at amortized cost 25,544 — Borrowings under acquisition and corporate financing 73,355 — Repayments of acquisition and corporate financing ( 10,195 ) — Payments of deferred financing costs ( 1,550 ) ( 314 ) Net payments related to stock-based activities ( 1,726 ) ( 7,299 ) Net cash provided by (used in) financing activities ( 76,818 ) 487,278 Net decrease in cash and cash equivalents and restricted cash ( 1,482 ) ( 59,104 ) Cash and cash equivalents and restricted cash, beginning of period 203,817 192,960 Cash and cash equivalents and restricted cash, end of period $ 202,335 $ 133,856 Supplemental disclosure of cash flow information Cash and cash equivalents $ 73,371 $ 66,712 Restricted cash 128,964 67,144 Total cash and cash equivalents and restricted cash $ 202,335 $ 133,856 Cash paid for income taxes, net of refunds $ 1,171 $ ( 3,377 ) Cash paid for interest $ 77,453 $ 27,032 Cash paid for amounts included in the measurement of operating lease liabilities $ 7,430 $ 7,772 Supplemental disclosures of non-cash investing and financing activities Right of use assets obtained in exchange for operating lease obligations $ 1,979 $ 1,862 Non-cash investments in capitalized assets $ ( 507 ) $ 1,852 Non-cash financing activities $ 19,431 $ — See Notes to the Condensed Consolidated Financial Statements. 7 OPORTUN FINANCIAL CORPORATION Notes to the Condensed Consolidated Financial Statements (Unaudited) June 30, 2023 1. Organization and Description of Business Oportun Financial Corporation (together with its subsidiaries, "Oportun" or the "Company") is a mission-driven fintech that puts its members’ financial goals within reach. With intelligent borrowing, savings, and budgeting capabilities, the Company empowers members with the confidence to build a better financial future. Oportun takes a holistic approach to serving its members and views as its purpose to responsibly meet their current capital needs, help grow its members' financial profiles, increase their financial awareness and put them on a path to a financially healthy life. Oportun offers access to a comprehensive suite of digital banking products, offered either directly or through partners, including lending, savings and investing powered by A.I. and tailored to each member's goals to make achieving financial health automated. The Company's credit products include personal loans, secured personal loans and credit cards. The Company's digital banking products include automated savings, long-term investing and retirement savings. The Company is headquartered in San Carlos, California. The Company has been certified by the United States Department of the Treasury as a Community Development Financial Institution ("CDFI") since 2009. Segments Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer and the Company's Chief Financial Officer are collectively considered to be the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s operations constitute a single reportable segment. 2. Summary of Significant Accounting Policies Basis of Presentation ‑ The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These statements are unaudited and reflect all normal, recurring adjustments that are, in management's opinion, necessary for the fair presentation of results. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior-period financial information has been reclassified to conform to current period presentation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "Annual Report"), filed with the Securities and Exchange Commission ("SEC") on March 14, 2023. Use of Estimates ‑ The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates and assumptions. Accounting Policies - There have been no changes to the Company's significant accounting policies from those described in Part II, Item 8 - Financial Statements and Supplementary Data in the Annual Report, except for the new accounting pronouncements subsequently adopted as noted below. Recently Adopted Accounting Standards None. 8 3. Earnings (Loss) per Share Basic and diluted earnings (loss) per share are calculated as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except share and per share data) 2023 2022 2023 2022 Net income (loss) $ ( 14,899 ) $ ( 9,157 ) $ ( 116,989 ) $ 36,506 Net income (loss) attributable to common stockholders $ ( 14,899 ) $ ( 9,157 ) $ ( 116,989 ) $ 36,506 Basic weighted-average common shares outstanding 36,691,291 32,831,499 35,342,663 32,525,768 Weighted average effect of dilutive securities: Stock options — — — 453,695 Restricted stock units — — — 262,218 Diluted weighted-average common shares outstanding 36,691,291 32,831,499 35,342,663 33,241,681 Earnings (loss) per share: Basic $ ( 0.41 ) $ ( 0.28 ) $ ( 3.31 ) $ 1.12 Diluted $ ( 0.41 ) $ ( 0.28 ) $ ( 3.31 ) $ 1.10 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, 2023 2022 2023 2022 Stock options 3,062,442 3,587,839 3,162,156 2,897,171 Restricted stock units 3,730,803 4,705,012 3,842,100 2,852,608 Total anti-dilutive common share equivalents 6,793,245 8,292,851 7,004,256 5,749,779 4. Variable Interest Entities Variable interest entities ("VIEs") are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of equity investment at risk lack the ability to direct the entity's activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity. For all VIEs in which the Company is involved, it assesses whether it is the primary beneficiary of the VIE on an ongoing basis. In circumstances where the Company has both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, it would conclude that it is the primary beneficiary of the VIE, and it consolidates the VIE. In situations where the Company is not deemed to be the primary beneficiary of the VIE, it does not consolidate the VIE and only recognize our interests in the VIE. In addition, on June 16, 2023, the Company entered into a forward flow whole loan sale agreement that is considered a secured borrowing and is not considered a VIE. See Note 8, Borrowings for additional information on the secured borrowing under the caption of asset-backed borrowings at amortized cost. Consolidated VIEs As part of the Company’s overall funding strategy, the Company transfers a pool of designated loans receivable to wholly owned special-purpose subsidiaries ("VIEs") to collateralize certain asset-backed financing transactions. For these VIEs where the Company has determined that it is the primary beneficiary because it has the power to direct the activities that most significantly impact the VIEs’ economic performance and the obligation to absorb the losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs the VIEs assets and related liabilities are consolidated with the results of the Company. Such power arises from the Company’s contractual right to service the loans receivable securing the VIEs’ asset-backed debt obligations. The Company has an obligation to absorb losses or the right to receive benefits that are potentially significant to the VIEs because it retains the residual interest of each asset-backed financing transaction in the form of an asset-backed certificate. Accordingly, the Company includes the VIEs’ assets, including the assets securing the financing transactions, and related liabilities in its condensed consolidated financial statements. Each consolidated VIE issues a series of asset-backed securities that are supported by the cash flows arising from the loans receivable securing such debt. Cash inflows arising from such loans receivable are distributed monthly to the transaction’s lenders and related service providers in accordance with the transaction’s contractual priority of payments. The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets. The Company retains the most subordinated economic interest in each financing transaction through its ownership of the respective residual interest in each VIE. The Company has no obligation to repurchase loans receivable that initially satisfied the financing transaction’s eligibility criteria but subsequently became delinquent or a defaulted loans receivable. 9 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, (in thousands) 2023 2022 Consolidated VIE assets Restricted cash $ 112,106 $ 91,395 Loans receivable at fair value 2,900,345 3,081,557 Interest and fee receivable 29,488 30,443 Total VIE assets 3,041,939 3,203,395 Consolidated VIE liabilities Secured financing (1) 488,160 320,000 Asset-backed notes at fair value 2,118,786 2,387,674 Acquisition financing (1) 75,484 85,679 Total VIE liabilities $ 2,682,430 $ 2,793,353 (1) Amounts exclude deferred financing costs. See Note 8, Borrowings for additional information. 5. Loans Held for Sale and Loans Sold Structured Loan Sales - On March 31, 2022, the Company participated in a securitization whereby the Company and funds managed by Ellington Management Group both contributed collateral and were co-sponsors of the transaction, which totaled $ 400.0 million in issued asset-backed notes. As part of the securitization, the Company sold loans to OPTN Funding Grantor Trust 2022-1 ("Grantor Trust") through the issuance of amortizing asset-backed notes secured by a pool of its unsecured and secured personal installment loans. The Company also sold its share of the residual interest in the pool. The Company's continued involvement in the unconsolidated VIEs is in the form of servicer of these loans. The Company does not have variable interest in the Grantor Trust or the issuer established for this transaction. The sold loans were accounted for under the fair value option and had an aggregate unpaid principal balance of approximately $ 227.6 million, a cumulative fair value mark of $ 15.9 million and unpaid interest of $ 1.5 million. 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 Condensed Consolidated Balance Sheets (Unaudited). Other Loan Sales - The Company enters into agreements to sell certain populations of its personal loans and credit card receivables from time to time. The sold loans were accounted for under the fair value option. The loan sales qualified for sale accounting treatment and the Company derecognized these loans from its Condensed Consolidated Balance Sheets (Unaudited) 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. Pursuant to the agreement, the Company sold at least 10 % of its unsecured loan originations, with an option to sell an additional 5 %, subject to certain eligibility criteria and minimum and maximum volumes. The Company chose not to renew the arrangement and allowed the agreement to expire on its terms on March 4, 2022. In November 2022, the Company entered into a forward flow whole loan sale agreement with an institutional investor. Pursuant to this agreement, the Company has a commitment to sell a minimum of $ 2.0 million of its unsecured loan originations each month, with an option to sell an additional $ 4.0 million each month, over an approximately one-year period, subject to certain eligibility criteria. On June 16, 2023, the Company entered into a forward flow whole loan sale agreement that does not qualify as a sale for accounting purposes and is reported as a secured borrowing. See Note 8, Borrowings for additional information on the secured borrowing under the caption of asset-backed borrowings at amortized cost. The originations of loans sold and held for sale during the three months ended June 30, 2023 was $ 15.6 million and the Company recorded a gain on sale of $ 2.3 million and servicing revenue of $ 2.5 million. The originations of loans sold and held for sale during the three months ended June 30, 2022 was insignificant and the gain on sale that the Company recorded was insignificant as a result of our whole loan sale agreement expiration on March 4, 2022. Servicing revenue during the same time period was $ 6.3 million. The originations of loans sold and held for sale during the six months ended June 30, 2023 was $ 25.7 million and the Company recorded a gain on sale of $ 3.7 million and servicing revenue of $ 5.6 million. The originations of loans sold and held for sale during the six months ended June 30, 2022 was $ 49.0 million and the Company recorded a gain on sale of $ 5.7 million and servicing revenue of $ 10.3 million. 10 6. Capitalized Software and Other Intangibles Capitalized software, net consists of the following: June 30, December 31, (in thousands) 2023 2022 Capitalized software, net: System development costs $ 153,584 $ 135,303 Acquired developed technology 48,500 48,500 Less: Accumulated amortization ( 100,402 ) ( 79,679 ) Total capitalized software, net $ 101,682 $ 104,124 Capitalized software, net Amortization of system development costs and acquired developed technology for three months ended June 30, 2023 and 2022 was $ 10.6 million and $ 8.2 million, respectively. System development costs capitalized in the three months ended June 30, 2023 and 2022 were $ 7.7 million and $ 14.2 million, respectively. Amortization of system development costs and acquired developed technology for six months ended June 30, 2023 and 2022 was $ 20.7 million and $ 15.6 million, respectively. System development costs capitalized in the six months ended June 30, 2023 and 2022 were $ 18.3 million and $ 25.4 million, respectively. Acquired developed technology was $ 48.5 million and is related to the acquisition of Oportun Savings (formerly known as Digit) on December 22, 2021. Intangible Assets The gross carrying amount and accumulated amortization, in total and by major intangible asset class are as follows: June 30, December 31, (in thousands) 2023 2022 Intangible assets: Member relationships $ 34,500 $ 34,500 Trademarks 5,626 6,426 Other 3,000 3,000 Less: Accumulated amortization ( 11,796 ) ( 8,249 ) Total intangible assets, net $ 31,330 $ 35,677 On March 8, 2023, the Company revealed its rebranding of Oportun and Oportun Savings (formerly known as Digit) as a single brand. Therefore, the Company wrote off its $ 0.8 million Digit trademark. Amortization of intangible assets for the three months ended June 30, 2023 and 2022 was $ 1.9 million and $ 2.0 million, respectively. Amortization of intangible assets for the six months ended June 30, 2023 and 2022 was $ 3.5 million and $ 4.0 million, respectively. Expected future amortization expense for intangible assets as of June 30, 2023 is as follows: (in thousands) Fiscal Years 2023 (remaining six months) $ 3,860 2024 7,539 2025 4,929 2026 4,929 2027 4,929 2028 4,780 Thereafter — Total $ 30,966 11 7. Other Assets Other assets consist of the following: June 30, December 31, (in thousands) 2023 2022 Fixed assets Total fixed assets $ 48,779 $ 48,212 Less: Accumulated depreciation ( 39,918 ) ( 37,688 ) Total fixed assets, net $ 8,861 $ 10,524 Other Assets Prepaid expenses $ 19,334 $ 24,167 Deferred tax assets 19,762 1,793 Current tax assets 8,677 8,245 Receivable from banking partner 12,289 2,878 Derivative asset 8,678 725 Other 16,599 15,848 Total other assets $ 94,200 $ 64,180 Fixed Assets Depreciation and amortization expense related to Other Assets for the three months ended June 30, 2023 and 2022 was $ 0.9 million and $ 1.3 million, respectively, and for the six months ended June 30, 2023 and 2022 it was $ 2.2 million, and $ 2.6 million, respectively. 8. Borrowings The following table presents information regarding the Company's Secured Financing facilities: June 30, 2023 December 31, 2022 Variable Interest Entity Facility Amount Maturity Date Interest Rate Balance Balance (in thousands) Oportun CCW Trust (1) $ 120,000 December 1, 2024 Variable (2) $ 73,556 $ 76,574 Oportun PLW Trust 600,000 September 1, 2024 SOFR (minimum of 0.10 %) + 2.17 % 412,897 240,994 Total secured financing $ 720,000 $ 486,453 $ 317,568 (1) The facility amount and maturity date on the Secured Financing - CCW facility (Oportun CCW Trust) were $ 150.0 million and December 1, 2023, respectively, as of December 31, 2022. (2) The interest rate on the Secured Financing - CCW facility (Oportun CCW Trust) is LIBOR (minimum of 0.00 %) plus 3.41 % on the outstanding principal balance as of June 30, 2023. The interest rate on the CCW was LIBOR (minimum of 1.00 %) plus 6.00 % on the first $ 18.8 million of principal outstanding and LIBOR (minimum of 0.00 %) plus 3.41 % on the remaining outstanding principal balance as of December 31, 2022. 12 The following table presents information regarding asset-backed notes: June 30, 2023 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) (in thousands) Asset-backed notes recorded at fair value: Oportun Issuance Trust (Series 2022-3) $ 300,000 $ 310,993 $ 211,046 $ 235,480 8.79 % N/A Oportun Issuance Trust (Series 2022-2) 400,000 410,212 217,410 243,818 7.52 % N/A Oportun Issuance Trust (Series 2022-A) 400,000 410,211 384,237 415,155 5.44 % 2 years Oportun Issuance Trust (Series 2021-C) 500,000 512,762 448,152 519,859 2.48 % 3 years Oportun Issuance Trust (Series 2021-B) 500,000 512,759 452,363 519,228 2.05 % 3 years Oportun Funding XIV, LLC (Series 2021-A) 375,000 383,632 291,499 318,191 1.79 % 2 years Oportun Funding XIII, LLC (Series 2019-A) 279,412 294,118 114,079 132,600 3.46 % 3 years Total asset-backed notes recorded at fair value $ 2,754,412 $ 2,834,687 $ 2,118,786 $ 2,384,331 December 31, 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) (in thousands) Asset-backed notes recorded at fair value: Oportun Issuance Trust (Series 2022-3) $ 300,000 $ 310,993 $ 285,218 $ 301,967 8.43 % N/A Oportun Issuance Trust (Series 2022-2) 400,000 410,212 313,689 344,218 7.03 % N/A Oportun Issuance Trust (Series 2022-A) 400,000 410,211 380,313 414,293 5.44 % 2 years Oportun Issuance Trust (Series 2021-C) 500,000 512,762 435,951 518,929 2.48 % 3 years Oportun Issuance Trust (Series 2021-B) 500,000 512,759 432,123 519,182 2.05 % 3 years Oportun Funding XIV, LLC (Series 2021-A) 375,000 383,632 348,046 389,740 1.79 % 2 years Oportun Funding XIII, LLC (Series 2019-A) 279,412 294,118 192,334 218,571 3.46 % 3 years Total asset-backed notes recorded at fair value $ 2,754,412 $ 2,834,687 $ 2,387,674 $ 2,706,900 (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. (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 June 30, 2023. The weighted average interest rate for Series 2022-2 and Series 2022-3 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 Series 2021-A ended on March 1, 2023. These asset-backed notes have been amortizing since then. Series 2022-2 and Series 2022-3 are both amortizing deals with no revolving period. 13 Asset-backed borrowings at amortized cost - On June 16, 2023, the Company entered into a forward flow whole loan sale agreement with an institutional investor. Pursuant to this agreement, the Company has agreed to sell up to $ 300.0 million of its personal loan originations over the next twelve months. The Company will continue to service these loans upon transfer of the receivables. While the economics of this transaction are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes. Accordingly, the related assets remain on the Company's balance sheet and cash proceeds received are reported as a secured borrowing under the caption of asset-backed borrowings at amortized cost with related interest expense recognized over the life of the related borrowing. As part of this agreement, during the three months ended June 30, 2023, the Company transferred loans receivable totaling $ 25.0 million. The following table presents information regarding the Company's Acquisition and Corporate Financings: June 30, 2023 December 31, 2022 Entity Original Balance Maturity Date Interest Rate Balance Balance (in thousands) Oportun Financial Corporation (1) $ 150,000 September 14, 2026 SOFR (minimum of 0.00 % + 12.00 % $ 199,442 $ 141,957 Oportun RF, LLC (2) 116,000 October 1, 2024 SOFR (minimum of 0.00 %) + 11.00 % 72,065 80,922 Total acquisition and corporate financing $ 266,000 $ 271,507 $ 222,879 (1) The Corporate Financing facility (Oportun Financial Corporation) was upsized and amended on March 10, 2023 to provide the ability to be able to borrow up to an additional $ 75.0 million. The interest rate on the Corporate Financing facility was SOFR (minimum of 0.00 %) plus 9.00 % as of December 31, 2022. (2) The Acquisition Financing facility (Oportun RF, LLC) was amended and upsized several times in 2022 increasing the size of the facility to $ 119.5 million and amending the maturity date. The maturity date and interest rate of the Acquisition Financing facility was May 1, 2024 and SOFR (minimum of 0.00 %) plus 8.00 % as of December 31, 2022. 14 On February 10, 2023, the Acquisition Financing facility (Oportun RF, LLC) was further amended, including among other things, revising the interest rate to SOFR plus 11.00 % and adjusting the amortization schedule to defer $ 42.0 million in principal payments through July 2023, with final payment in October 2024. On March 8, 2023, the Credit Card Warehouse (Oportun CCW Trust) was amended. This amendment, among other things, extends the revolving period by a year, to December 31, 2024, and reduces the commitment amount from $ 150.0 million to $ 120.0 million. On March 10, 2023 (the “Second Amendment Closing Date”), the Company amended its Corporate Financing facility by entering into an Amendment No. 2 (the “Second Amendment”) by and among the Company, as borrower, the subsidiaries of the Company party thereto as guarantors, certain funds associated with Neuberger Berman Specialty Finance as lenders, and Wilmington Trust, National Association, as administrative agent and collateral agent (the “Agent”), which amended the Credit Agreement, dated as of September 14, 2022 (as amended, supplemented or otherwise modified, including by the Second Amendment, the “Amended Credit Agreement”), by and among the Company, the lenders from time to time party thereto and the Agent. On the Second Amendment Closing Date, the Company borrowed $ 20.8 million of incremental term loans (the “Incremental Tranche A-1 Loans”) and borrowed an additional $ 4.2 million of incremental term loans (the “Incremental Tranche A-2 Loans”) on March 27, 2023. Pursuant to the Second Amendment, the Company issued warrants (the “Warrants”) to the lenders providing the Incremental Tranche A-1 Loans to purchase 1,980,242 shares of the Company’s common stock at an exercise price of $ 0.01 per share. On March 27, 2023, in connection with the funding of the Incremental Tranche A-2 Loans, the Company issued Warrants to the lenders providing the Incremental Tranche A-2 Loans to purchase 116,485 shares of the Company’s common stock at an exercise price of $ 0.01 per share. On May 5, 2023, under the Amended Credit Agreement, the Company borrowed an additional $ 25.0 million of incremental term loans (the "Incremental Tranche B Loans") and issued Warrants to the lenders to purchase 1,048,363 shares of the Company's common stock at an exercise price of $ 0.01 per share. The Company determined that the terms of the new debt instrument upon issuance of Tranche B was substantially different when compared to the Original Credit Agreement resulting in an insignificant net loss on debt extinguishment. Accordingly, the Company extinguished the carrying value of the corporate financing facility prior to issuance of Tranche B and recorded the new corporate financing facility upon issuance of Tranche B at fair value of $ 179.5 million. This resulted in an insignificant net loss on extinguishment. On June 30, 2023, under the Amended Credit Agreement, the Company borrowed an additional $ 25.0 million of incremental term loans (the "Incremental Tranche C Loans") and issued Warrants to the lenders to purchase 1,048,363 shares of the Company's common stock at an exercise price of $ 0.01 per share. The loans (the “Loans”) and other obligations under the Amended Credit Agreement are secured by the assets of the Company and certain of its subsidiaries guaranteeing the Loans, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by the Company, subject to customary exceptions. Following the Second Amendment Closing Date the Loans bear interest, at (a) an amount equal to 1-month term SOFR plus 9.00 % plus (b) an amount payable in cash or in kind, at the Company's option, equal to 3.00 %. The Loans are scheduled to mature on September 14, 2026, and are not subject to amortization. Certain prepayments of the Loans are subject to a prepayment premium. See Note 10, Stockholders' Equity for additional information on the Warrants. As of June 30, 2023, and December 31, 2022, the Company was in compliance with all covenants and requirements of the Secured Financing, Acquisition and Corporate Financing facilities and asset-backed notes. 9. Other Liabilities Other liabilities consist of the following: June 30, December 31, (in thousands) 2023 2022 Accounts payable $ 11,310 $ 9,670 Accrued compensation 17,060 12,502 Accrued expenses 24,245 26,193 Accrued interest 8,914 8,445 Amount due to whole loan buyer 1,980 3,073 Deferred tax liabilities 4,514 30,575 Current tax liabilities 6,802 5,912 Other 3,350 3,658 Total other liabilities $ 78,175 $ 100,028 15 10. Stockholders' Equity 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, 2023 or December 31, 2022. Common Stock - As of June 30, 2023 and December 31, 2022, 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, 2023, 34,299,366 and 34,027,343 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock. As of December 31, 2022, 33,626,630 and 33,354,607 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock. Warrants - On March 10, 2023, pursuant to the Second Amendment of the Corporate Financing facility, the Company issued detachable Warrants to the lenders providing the Incremental Tranche A-1 Loans to purchase 1,980,242 shares of the Company’s common stock at an exercise price of $ 0.01 per share. On March 27, 2023, in connection with the funding of the Incremental Tranche A-2 Loans, the Company issued Warrants to the lenders providing the Incremental Tranche A-2 Loans to purchase 116,485 shares of the Company’s common stock at an exercise price of $ 0.01 per share. On May 5, 2023, in connection with the funding of the Incremental Tranche B Loans, the Company issued Warrants to the lenders providing the Incremental Tranche B loans to purchase 1,048,363 shares of the Company's common stock at an exercise price of $ 0.01 per share. On June 30, 2023, in connection with the funding of the Incremental Tranche C Loans, the Company issued Warrants to the lenders providing the Incremental Tranche C Loans to purchase 1,048,363 shares of the Company’s common stock at an exercise price of $ 0.01 per share. See Note 8, Borrowings for additional information on the Second Amendment of the Corporate Financing facility. 11. Equity Compensation and Other Benefits The Company's stock-based plans are described and informational disclosures are provided in the Notes to the Consolidated Financial Statements included in the Annual Report. S tock-based Compensation - Total stock-based compensation expense included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Technology and facilities $ 1,159 $ 1,567 $ 2,208 $ 3,435 Sales and marketing 10 38 43 69 Personnel 3,300 5,324 7,096 10,198 Total stock-based compensation (1) $ 4,469 $ 6,929 $ 9,347 $ 13,702 (1) Amounts shown are net of $ 0.3 million and $ 0.7 million of capitalized stock-based compensation for the three and six months ended June 30, 2023, respectively, and 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. As of June 30, 2023, and December 31, 2022, the Company’s total unrecognized compensation cost related to unvested stock-based option awards granted to employees was $ 4.1 million and $ 6.2 million, respectively, which will be recognized over a weighted-average vesting period of approximately 2.2 years and 2.6 years, respectively. As of June 30, 2023 and December 31, 2022, the Company's total unrecognized compensation cost related to unvested restricted stock unit awards granted to employees was $ 30.9 million and $ 51.6 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.5 years and 2.7 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 Company recognized $ 2.6 million and $ 4.0 million of income tax benefit in its consolidated statement of operations related to stock-based compensation expense during the six months ended June 30, 2023 and 2022, respectively. Additionally, the total income tax expense (benefit) recognized in the income statement for share-based compensation exercises was $ 0.3 million and $ 2.7 million for the three and six months ended June 30, 2023, respectively. The total income tax expense (benefit) recognized in the income statement for share-based compensation exercises was $ 0.2 million and $ 0.9 million for the three and six months ended June 30, 2022, respectively. 16 12. Revenue 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, (in thousands) 2023 2022 2023 2022 Interest income Interest on loans $ 236,028 $ 201,904 $ 468,228 $ 389,291 Fees on loans 4,435 5,751 9,854 10,601 Total interest income 240,463 207,655 478,082 399,892 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, (in thousands) 2023 2022 2023 2022 Non-interest income Gain on loan sales $ 2,341 $ ( 1 ) $ 3,667 $ 5,714 Servicing fees 3,544 6,321 7,224 10,278 Subscription revenue 6,301 7,205 13,179 16,545 Other income 13,914 4,622 23,923 8,093 Total non-interest income $ 26,100 $ 18,147 $ 47,993 $ 40,630 13. Income Taxes For the three and six months ended June 30, 2023 and 2022, 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, 2023, the Company recorded income tax benefit of $ 2.6 million and $ 42.0 million, respectively, related to continuing operations, representing an effective income tax rate of 14.7 % and 26.4 %, respectively. Income tax expense (benefit) for the three and six months ended June 30, 2022 was $( 3.5 ) million and $ 8.5 million, respectively, representing an effective income tax rate of 27.7 % and 18.9 %, respectively. Income tax benefit decreased by $ 0.9 million or 27 %, from $ 3.5 million for the three months ended June 30, 2022 to $ 2.6 million benefit for the three months ended June 30, 2023, primarily resulting from having lower pretax income and discrete tax expense for the three months ended June 30, 2023. Income tax expense decreased by $ 50.5 million or 595 %, from $ 8.5 million for the six months ended June 30, 2022 to $( 42.0 ) million for the six months ended June 30, 2023, primarily resulting from having lower pretax income and discrete tax expense associated with stock-based compensation for the six months ended June 30, 2023. The Company's effective tax rates for the three and six months ended June 30, 2023 and 2022 differ from the statutory tax rates primarily due to the impacts of a one-time exercise of stock-based awards and research and development tax credits. It is reasonably possible that the balance of gross unrecognized tax benefits could change in the next twelve months, although the timing of the resolution and/or closure of audits is highly uncertain. Given the number of years remaining subject to examination and the number of matters being examined, the Company is unable to estimate a range at this time. 14. Fair Value of Financial Instruments Financial Instruments at Fair Value The table below compares the fair value of loans receivable and asset-backed notes to their contractual balances for the periods shown: June 30, 2023 December 31, 2022 (in thousands) Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value Assets Loans receivable - personal loans $ 2,845,599 $ 2,871,802 $ 2,967,266 $ 3,027,401 Loans receivable - credit cards 117,618 113,327 131,343 116,252 Total Loans Receivable at Fair Value $ 2,963,217 $ 2,985,129 $ 3,098,609 $ 3,143,653 Liabilities Asset-backed notes 2,251,619 2,118,786 2,582,025 2,387,674 17 The Company calculates the fair value of the asset-backed notes using independent pricing services and broker price indications, which are based on quoted prices for identical or similar notes, which are Level 2 input measures. The Company primarily uses a discounted cash flow model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate fair value. 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. The personal loan receivables balance at fair value as of June 30, 2023, consists of $ 2,742.7 million of unsecured personal loan receivables and $ 129.1 million of secured personal loan receivables. June 30, 2023 December 31, 2022 Personal Loans Receivables Minimum Maximum Weighted Average (2) Minimum Maximum Weighted Average (2) Remaining cumulative charge-offs (1) 7.64 % 52.48 % 11.03 % 5.06 % 51.45 % 9.86 % Remaining cumulative prepayments (1) — % 31.55 % 26.87 % — % 33.59 % 28.73 % Average life (years) 0.05 1.44 0.96 0.05 1.52 1.01 Discount rate 11.10 % 11.10 % 11.10 % 11.34 % 11.34 % 11.34 % (1) Figure disclosed as a percentage of outstanding principal balance. (2) Unobservable inputs were weighted by outstanding principal balance, which are grouped by risk (type of customer, original loan maturity terms). June 30, 2023 December 31, 2022 Credit Card Receivables Range Range Remaining cumulative charge-offs (1) 19.54 % 22.80 % Principal payment rate (1) 7.90 % 9.28 % Average life (years) 0.88 0.69 Discount rate 11.15 % 14.84 % (1) Figure disclosed as a percentage of outstanding principal balance. The Company has derivative instruments in connection with its bank partnership program with Pathward, N.A. related to excess interest proceeds it expects to receive on loans retained by Pathward, N.A. Based on the agreement underlying the bank partnership program, for all loans originated and retained by Pathward, Pathward receives a fixed interest rate. The Company bears the risk of credit loss and has the benefit of any excess interest proceeds after satisfying various obligations under the agreement. The fair value of the derivative instrument was $ 8.7 million as of June 30, 2023. The underlying cash flows were $ 11.8 million as of June 30, 2023. The fair value of the derivative instrument and underlying cash flows were not material as of December 31, 2022. The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for derivative instruments presented within Other Assets in the Condensed Consolidated Balance Sheets (Unaudited): June 30, 2023* Low High Weighted Average Remaining cumulative charge-offs 3.71 % 18.31 % 9.11 % Remaining cumulative prepayments — % 34.87 % 23.75 % Average life (years) 0.34 1.56 1.28 Discount rate 24.00 % 24.00 % 24.00 % * Inputs as of December 31, 2022 were not disclosed as the balance was not yet material 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, 2023 and 2022. 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. When multiple inputs are used within the valuation techniques for loans, a change in one input in a certain direction may be offset by an opposite change from another input. For personal loan receivables, the Company developed an internal model to estimate the fair value of loans receivable held for investment. To generate future expected cash flows, the model combines receivable characteristics with assumptions about borrower behavior based on the Company’s historical loan performance. These cash flows are then discounted using a required rate of return that management estimates would be used by a market participant. The Company tested the unsecured personal loan fair value model by comparing modeled cash flows to historical loan performance to ensure that the model was complete, accurate and reasonable for the Company’s use. The Company also engaged a third party to create an independent fair value estimate for the Loans Receivable at Fair Value, which provides a set of fair value marks using the Company’s historical loan performance data and whole loan sale prices to develop independent forecasts of borrower behavior. For credit card receivables, the Company uses historical data to derive assumptions about certain loan portfolio characteristics such as principal payment rates, interest yields and fee yields. Similar to the model used for personal loan receivables, the Company engaged a third party to create an independent fair value estimate, which provides a range of fair values that are compared for reasonableness. 18 For the derivative, the Company uses a base set of cash flows derived from historical data and management assumptions. From this base set of cash flows, funds that are projected to be released to the Company according to the contractual terms outlined in the waterfall agreement are calculated on an aggregate basis then discounted at a rate that is representative of equity yield. 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, (in thousands) 2023 2022 2023 2022 Balance – beginning of period $ 3,012,726 $ 2,450,987 $ 3,143,653 $ 2,386,807 Principal disbursements 506,065 940,116 958,465 1,719,835 Principal payments from customers ( 446,959 ) ( 436,028 ) ( 898,929 ) ( 1,072,072 ) Gross charge-offs ( 100,889 ) ( 65,876 ) ( 194,927 ) ( 128,434 ) Net increase (decrease) in fair value 14,186 ( 34,605 ) ( 23,133 ) ( 51,542 ) Balance – end of period $ 2,985,129 $ 2,854,594 $ 2,985,129 $ 2,854,594 As of June 30, 2023, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $ 10.0 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $ 39.1 million. As of December 31, 2022, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $ 4.1 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $ 35.2 million. Pursuant to the Second Amendment of the Corporate Financing facility, the Company issued detachable warrants to the lenders. See Note 8, Borrowings for additional information on the Second Amendment of the Corporate Financing facility and Note 10, Stockholders' Equity for additional information on the warrants. The fair value of the of non-recurring (Level 3) warrants to purchase shares of the Company’s common stock were estimated using a Black Scholes valuation model with the following significant unobservable inputs at the date of issuance: June 30, 2023 Range Expected Term (years) 5.0 Risk free rate 3.41 % - 4.13 % Expected Volatility 72.00 % - 78.00 % 19 Financial Instruments Disclosed But Not Carried at Fair Value 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, 2023 Carrying value Estimated fair value Estimated fair value (in thousands) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 73,371 $ 73,371 $ 73,371 $ — $ — Restricted cash 128,964 128,964 128,964 — — Loans held for sale (Note 5) 325 353 — — 353 Liabilities Accounts payable 11,310 11,310 11,310 — — Secured financing (Note 8) 488,160 476,569 — 476,569 — Asset-backed borrowings at amortized cost (Note 8) (1) 24,920 24,920 — — 24,920 Acquisition and corporate financing (Note 8) 302,141 301,755 — 301,755 — (1) The Company estimates the fair value of the asset-backed borrowings at amortized cost to approximate par value as of June 30, 2023 given the close proximity of the transaction to quarter end. December 31, 2022 Carrying value Estimated fair value Estimated fair value (in thousands) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 98,817 $ 98,817 $ 98,817 $ — $ — Restricted cash 105,000 105,000 105,000 — — Liabilities Accounts payable 9,670 9,670 9,670 — — Secured financing (Note 8) 320,000 306,574 — 306,574 — Acquisition and corporate financing (Note 8) 235,679 233,166 — 233,166 — The Company uses the following methods and assumptions to estimate fair value: • Cash, cash equivalents, restricted cash and accounts payable ‑ The carrying values of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash and accounts payable, approximate Level 1 fair values of these financial instruments due to their short-term nature. • Loans held for sale ‑ The fair values of loans held for sale are based on a negotiated agreement with the purchaser. • Secured financing, 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. • Asset-backed borrowings at amortized cost ‑ The fair values of the asset-backed borrowings at amortized cost have been calculated by discounting the contractual cash flows at the interest rate the Company estimates such arrangement would bear if executed in the current market, which is a Level 3 input measure. There were no transfers in or out of Level 3 assets and liabilities for the three and six months ended June 30, 2023 and 2022 and the year ended December 31, 2022. 15. 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. 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. Operating lease expense is recognized on a straight-line basis over the lease term in "Technology and facilities" in the Condensed Consolidated Statements of Operations (Unaudited). 20 All of the Company’s existing lease arrangements are classified as operating leases. At the inception of a contract, the Company determines if the contract is or contains a lease. At the commencement date of a lease, the Company recognizes a lease liability equal to the present value of the lease payments and a right-of-use asset representing the Company's right to use the underlying asset for the duration of the lease term. The Company’s leases include options to extend or terminate the arrangement at the end of the original lease term. The Company generally does not include renewal or termination options in its assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. Variable lease payments and short-term lease costs were deemed immaterial. The Company’s leases do not provide an explicit rate. The Company uses its contractual borrowing rate to determine lease discount rates. As of June 30, 2023, 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 2023 (remaining six months) $ 6,635 2024 12,291 2025 10,364 2026 4,293 2027 1,325 2028 177 Thereafter 7 Total lease payments 35,092 Imputed interest ( 1,968 ) Total leases $ 33,124 Weighted average remaining lease term 3.0 years Weighted average discount rate 4.28 % As of December 31, 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 2023 13,879 2024 11,940 2025 9,969 2026 3,918 2027 1,032 Thereafter 25 Total lease payments 40,763 Imputed interest ( 2,816 ) Total leases $ 37,947 Weighted average remaining lease term 3.2 years Weighted average discount rate 4.06 % Rental expenses under operating leases for the three and six months ended June 30, 2023, were $ 4.7 million, and $ 9.1 million, respectively, and for the three and six months ended June 30, 2022, were $ 5.7 million, and $ 10.1 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 2027. These amounts are not reflective of the Company’s entire anticipated purchases under the related agreements; rather, they are determined based on the non-cancelable amounts to which the Company is contractually obligated. The Company’s purchase obligations are $ 19.8 million for the remainder of 2023, $ 24.5 million in 2024, $ 16.3 million in 2025, $ 2.5 million in 2026 and $ 0.0 million in 2027 and thereafter. Bank Partnership Program and Servicing Agreement - The Company entered into a bank partnership program with Pathward, N.A. on August 11, 2020. 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, 2023, the Company has a commitment to purchase an additional $ 15.2 million of program loans based on originations through June 30, 2023. 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. The Company chose not to renew the arrangement and allowed the agreement to expire on its terms on March 4, 2022. In November 2022, the Company entered into a forward flow whole loan sale agreement with an institutional investor. Pursuant to this agreement, the Company has a commitment to sell a minimum of 21 $ 2.0 million of its unsecured loan originations each month, with an option to sell an additional $ 4.0 million each month, over an approximately one-year period, subject to certain eligibility criteria. For details regarding the whole loan sale programs, 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, 2023 and December 31, 2022 were $ 46.7 million and $ 45.0 million, respectively. WebBank has a direct obligation to borrowers to fund such credit card commitments subject to the respective account agreements with such borrowers; however, pursuant to the Receivables Purchase Agreement between WebBank and Oportun, Inc., the Company has the obligation to purchase receivables from WebBank representing these unfunded amounts. Litigation 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. The Company is not presently a party to any other legal proceedings that, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, financial condition, cash flows or results of operations. See Part II. Item 1. Legal Proceedings for additional information regarding legal proceedings in which the Company is involved. 16. Related Party Transactions On September 14, 2022, the Company entered into an agreement to borrow $ 150.0 million of a senior secured term loan with certain funds associated with Neuberger Berman Specialty Finance ("Neuberger"). On March 10, 2023, the Company upsized and amended its Corporate Financing facility and borrowed an additional $ 75.0 million over four separate tranches from March 10, 2023 to June 30, 2023. In connection with the additional $ 75.0 million, the Company issued warrants to the lenders with each tranche to purchase a total of 4,193,453 shares of its common stock at an exercise price of $ 0.01 per share (the "Warrants"). Following the issuance of the Warrants, Neuberger is now deemed to be a beneficial owner of greater than ten percent of the Company's outstanding stock pursuant to generally accepted accounting principles. See Note 8, Borrowings for additional information on the Second Amendment of the Corporate Financing facility and Note 10, Stockholders' Equity for additional information on the Warrants. In addition, on June 16, 2023, the Company entered into a forward flow whole loan sale agreement with Neuberger. Pursuant to this agreement, the Company has agreed to sell up to $ 300.0 million of its personal loan originations over the next twelve months. The Company will continue to service these loans upon transfer of the receivables. As part of this agreement, during the three months ended June 30, 2023, the Company transferred loans receivable totaling $ 25.0 million. See Note 8, Borrowings - Asset-backed borrowings at amortized cost for additional information on the forward flow whole loan sale agreement. For the three and six months ended June 30, 2023, the Company recorded interest expense under these agreements of $ 9.1 million and $ 15.4 million, respectively, primarily related to the Corporate Financing facility. The expected cash flows are used to calculate interest expense on the secured borrowing, using the effective interest method. The Company also recorded an insignificant amount of Interest income in the Company's Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2023 related to transferred loans. Loans receivable at fair value underlying the secured borrowing with Neuberger was $ 24.9 million as of June 30, 2023. The Company had Asset-backed borrowings at amortized costs of $ 25.6 million and corporate financing of $ 199.4 million due to Neuberger as of June 30, 2023. The Company also had an insignificant amount of Interest and fee receivable, net and Other liabilities in its Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2023 related to these transactions. The Company believes that it has executed all the transactions described herein on terms no less favorable to it than it could have obtained from unaffiliated third parties. 17. Subsequent Events Asset-backed borrowings at amortized cost - On August 3, 2023, the Company entered into a forward flow whole loan sale agreement with an institutional investor. Pursuant to this agreement, the Company has a commitment to sell up to $ 400.0 million of its personal loan originations over the next twelve months. The Company will continue to service these loans upon transfer of the receivables. While the economics of this transaction are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes. Accordingly, the related assets remain on the Company's balance sheet and cash proceeds received are reported as a secured borrowing under the caption of asset-backed borrowings at amortized cost with related interest expense recognized over the life of the related borrowing. 22