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) September 30, December 31, 2024 2023 Assets Cash and cash equivalents $ 71,838 $ 91,187 Restricted cash 156,699 114,829 Loans receivable at fair value 2,728,515 2,962,352 Credit cards receivable held for sale 52,581 — Capitalized software and other intangibles, net 92,045 114,735 Right of use assets - operating 9,666 21,105 Other assets 139,954 107,680 Total assets $ 3,251,298 $ 3,411,888 Liabilities and stockholders' equity Liabilities Secured financing $ 125,393 $ 289,951 Asset-backed notes at fair value 1,386,695 1,780,005 Asset-backed borrowings at amortized cost 1,109,370 581,468 Acquisition and corporate financing 215,697 258,746 Lease liabilities 19,728 28,376 Other liabilities 66,859 68,938 Total liabilities 2,923,742 3,007,484 Stockholders' equity Common stock, $ 0.0001 par value - 1,000,000,000 shares authorized at September 30, 2024 and December 31, 2023; 36,243,060 shares issued and 35,971,037 shares outstanding at September 30, 2024; 34,741,076 shares issued and 34,469,053 shares outstanding at December 31, 2023 7 7 Common stock, additional paid-in capital 595,127 584,555 Accumulated deficit ( 261,269 ) ( 173,849 ) Treasury stock at cost, 272,023 shares at September 30, 2024 and December 31, 2023 ( 6,309 ) ( 6,309 ) Total stockholders’ equity 327,556 404,404 Total liabilities and stockholders' equity $ 3,251,298 $ 3,411,888 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenue Interest income $ 230,044 $ 243,258 $ 692,007 $ 721,340 Non-interest income 19,907 24,962 58,822 72,955 Total revenue 249,951 268,220 750,829 794,295 Less: Interest expense 55,749 46,965 164,458 127,410 Net decrease in fair value ( 131,585 ) ( 136,119 ) ( 384,554 ) ( 458,319 ) Net revenue 62,617 85,136 201,817 208,566 Operating expenses: Technology and facilities 40,561 52,663 128,291 164,653 Sales and marketing 17,403 18,852 49,664 57,229 Personnel 21,038 28,647 67,462 96,727 Outsourcing and professional fees 10,088 10,482 28,704 34,184 General, administrative and other 12,991 11,862 46,784 52,147 Total operating expenses 102,081 122,506 320,905 404,940 Income (loss) before taxes ( 39,464 ) ( 37,370 ) ( 119,088 ) ( 196,374 ) Income tax benefit ( 9,508 ) ( 16,232 ) ( 31,668 ) ( 58,247 ) Net loss $ ( 29,956 ) $ ( 21,138 ) $ ( 87,420 ) $ ( 138,127 ) Net income (loss) attributable to common stockholders $ ( 29,956 ) $ ( 21,138 ) $ ( 87,420 ) $ ( 138,127 ) Share data: Earnings (loss) per share: Basic $ ( 0.75 ) $ ( 0.55 ) $ ( 2.21 ) $ ( 3.80 ) Diluted $ ( 0.75 ) $ ( 0.55 ) $ ( 2.21 ) $ ( 3.80 ) Weighted average common shares outstanding: Basic 39,964,322 38,283,071 39,562,204 36,333,570 Diluted 39,964,322 38,283,071 39,562,204 36,333,570 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 Nine Months Ended September 30, 2024 Warrants Common Stock Shares Additional Paid-in Capital Shares Par Value Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Stockholders' Equity Balance – January 1, 2024 4,193,453 $ 19,431 34,469,053 $ 7 $ 565,124 $ ( 173,849 ) $ ( 6,309 ) $ 404,404 Stock-based compensation expense — — — — 4,239 — — 4,239 Vesting of restricted stock units, net of shares withheld — — 1,120,201 — ( 232 ) — — ( 232 ) Net loss — — — — — ( 26,439 ) — ( 26,439 ) Balance – March 31, 2024 4,193,453 $ 19,431 35,589,254 $ 7 $ 569,131 $ ( 200,288 ) $ ( 6,309 ) $ 381,972 Stock-based compensation expense — — — — 3,169 — — 3,169 Vesting of restricted stock units, net of shares withheld — — 133,467 — — — — — Net loss — — — — — ( 31,025 ) — ( 31,025 ) Balance – June 30, 2024 4,193,453 $ 19,431 35,722,721 $ 7 $ 572,300 $ ( 231,313 ) $ ( 6,309 ) $ 354,116 Stock-based compensation expense — — — — 3,436 — — 3,436 Vesting of restricted stock units, net of shares withheld — — 248,316 — ( 40 ) — — ( 40 ) Net loss — — — — — ( 29,956 ) — ( 29,956 ) Balance – September 30, 2024 4,193,453 $ 19,431 35,971,037 $ 7 $ 575,696 $ ( 261,269 ) $ ( 6,309 ) $ 327,556 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 Nine Months Ended September 30, 2023 Warrants Common Stock Shares Additional Paid-in Capital Shares Par Value 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 2,096,727 $ 6,672 33,884,346 $ 7 $ 551,764 $ ( 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 4,193,453 $ 19,431 34,027,343 $ 7 $ 556,156 $ ( 110,887 ) $ ( 6,309 ) $ 458,398 Issuance of common stock upon exercise of stock options, net of shares withheld — — 10,856 — 49 — — 49 Stock-based compensation expense — — — — 4,706 — — 4,706 Vesting of restricted stock units, net of shares withheld — — 191,973 — ( 652 ) — — ( 652 ) Net loss — — — — — ( 21,138 ) — ( 21,138 ) Balance – September 30, 2023 4,193,453 $ 19,431 34,230,172 $ 7 $ 560,259 $ ( 132,025 ) $ ( 6,309 ) $ 441,363 See Notes to the Condensed Consolidated Financial Statements. 6 OPORTUN FINANCIAL CORPORATION Condensed Consolidated Statements of Cash Flow (Unaudited) (in thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities Net loss $ ( 87,420 ) $ ( 138,127 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 39,677 41,102 Fair value adjustment, net 384,554 458,319 Origination fees for loans receivable at fair value, net ( 12,610 ) ( 19,348 ) Gain on loan sales ( 4,266 ) ( 6,140 ) Stock-based compensation expense 10,141 13,709 Other, net ( 19,980 ) ( 41,344 ) Originations of loans sold and held for sale ( 82,984 ) ( 41,562 ) Proceeds from sale of loans 87,297 47,128 Changes in operating assets and liabilities ( 12,332 ) ( 27,283 ) Net cash provided by operating activities 302,077 286,454 Cash flows from investing activities Originations and purchases of loans held for investment ( 1,104,309 ) ( 1,179,886 ) Proceeds from loan sales originated as held for investment 2,840 2,758 Repayments of loan principal 977,891 1,014,147 Capitalization of system development costs ( 13,129 ) ( 25,180 ) Other, net ( 555 ) ( 1,207 ) Net cash used in investing activities ( 137,262 ) ( 189,368 ) Cash flows from financing activities Borrowings under secured financing 278,266 185,100 Repayments of secured financing ( 440,494 ) ( 80,581 ) Repayments of asset-backed notes at fair value ( 456,923 ) ( 505,778 ) Borrowings under asset-backed borrowings at amortized cost 767,313 257,639 Repayments of asset-backed borrowings at amortized cost ( 231,580 ) ( 9,839 ) Borrowings under acquisition and corporate financing — 73,355 Repayments of acquisition and corporate financing ( 51,442 ) ( 17,275 ) Payments of deferred financing costs ( 7,162 ) ( 1,550 ) Net payments related to stock-based activities ( 272 ) ( 2,329 ) Net cash used in financing activities ( 142,294 ) ( 101,258 ) Net increase (decrease) in cash and cash equivalents and restricted cash 22,521 ( 4,172 ) Cash and cash equivalents and restricted cash, beginning of period 206,016 203,817 Cash and cash equivalents and restricted cash, end of period $ 228,537 $ 199,645 Supplemental disclosure of cash flow information Cash and cash equivalents $ 71,838 $ 81,886 Restricted cash 156,699 117,759 Total cash and cash equivalents and restricted cash $ 228,537 $ 199,645 Cash paid for income taxes, net of refunds $ 556 $ 1,420 Cash paid for interest $ 160,492 $ 126,724 Cash paid for amounts included in the measurement of operating lease liabilities $ 9,601 $ 10,772 Supplemental disclosures of non-cash investing and financing activities Right of use assets obtained in exchange for operating lease obligations $ ( 5,589 ) $ 1,382 Non-cash investments in capitalized assets $ 1,108 $ 100 Non-cash financing activities $ 29,144 $ 19,431 See Notes to the Condensed Consolidated Financial Statements. 7 OPORTUN FINANCIAL CORPORATION Notes to the Condensed Consolidated Financial Statements (Unaudited) September 30, 2024 1. Organization and Description of Business Oportun Financial Corporation (together with its subsidiaries unless the context indicates otherwise, "Oportun" or the "Company") is a mission driven financial services company 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 products powered by A.I., offered either directly or through partners, including unsecured and secured lending, and 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 Company meets the SEC's definition of a “Smaller Reporting Company”, and therefore qualifies for the SEC's reduced disclosure requirements for smaller reporting companies. The accompanying 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, 2023 (the "Annual Report"), filed with the Securities and Exchange Commission ("SEC") on March 15, 2024. 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. Accounting Standards to be Adopted Income Taxes - In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU requires entities to disclose in their rate reconciliation table additional categories or information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold and requires annual disclosure of income taxes paid to be disaggregated by federal, state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. The ASU is effective for annual periods beginning after December 15, 2024. While early adoption is permitted, the Company will adopt the standard, effective January 1, 2025. The Company has evaluated the effect of the new guidance and determined the ASU expands tax disclosures but it will not have a material impact on the consolidated financial statements. Segment Reporting - In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures . The ASU enhances disclosures about significant segment expenses, provides new segment disclosure requirements for entities with a single reportable segment, enhances interim disclosure requirements, clarifies circumstances in which an entity is permitted to disclose multiple segment measures of profit or loss and other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2023. Early 8 adoption is permitted. The Company has evaluated the effect of the new guidance and determined that the expanded segment disclosures will not have a material impact on the consolidated financial statements. 3. Earnings (Loss) per Share Basic and diluted earnings (loss) per share are calculated as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2024 2023 2024 2023 Net loss $ ( 29,956 ) $ ( 21,138 ) $ ( 87,420 ) $ ( 138,127 ) Net income (loss) attributable to common stockholders $ ( 29,956 ) $ ( 21,138 ) $ ( 87,420 ) $ ( 138,127 ) Basic weighted-average common shares outstanding 39,964,322 38,283,071 39,562,204 36,333,570 Weighted average effect of dilutive securities: Diluted weighted-average common shares outstanding 39,964,322 38,283,071 39,562,204 36,333,570 Earnings (loss) per share: Basic $ ( 0.75 ) $ ( 0.55 ) $ ( 2.21 ) $ ( 3.80 ) Diluted $ ( 0.75 ) $ ( 0.55 ) $ ( 2.21 ) $ ( 3.80 ) 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Stock options 2,014,626 2,832,953 2,301,996 3,052,422 Restricted stock units 4,904,183 3,438,484 4,196,294 3,707,561 Total anti-dilutive common share equivalents 6,918,809 6,271,437 6,498,290 6,759,983 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 recognizes its interests in the VIE. In addition, on June 16, 2023 and August 3, 2023, the Company entered into forward flow whole loan sale agreements that are considered secured borrowings and are not considered VIEs. 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 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): September 30, December 31, (in thousands) 2024 2023 Consolidated VIE assets Restricted cash $ 131,130 $ 91,466 Loans receivable at fair value 2,129,045 2,539,186 Total VIE assets 2,260,175 2,630,652 Consolidated VIE liabilities Secured financing (1) 128,722 290,949 Asset-backed notes at fair value 1,386,695 1,780,005 Asset-backed borrowings at amortized cost 534,920 195,057 Acquisition financing (1) 22,896 57,237 Total VIE liabilities $ 2,073,233 $ 2,323,248 (1) Amounts exclude deferred financing costs. See Note 8, Borrowings for additional information. 5. Loans Held for Sale and Loans Sold Other Loan Sales - The Company enters into agreements to sell certain populations of its personal loans and credit card receivables from time to time, including non-performing loans and credit card receivables originated as held for investment. 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 ‑ The Company enters into whole loan sale agreements with third parties in which we agree to sell newly originated unsecured personal loans and secured personal loans. The originations of loans sold and held for sale during the three months ended September 30, 2024 was $ 32.3 million and the Company recorded a gain on sale of $ 0.7 million and servicing revenue of $ 1.6 million. The originations of loans sold and held for sale during the three months ended September 30, 2023 was $ 15.9 million. The gain on sale recorded during the three months ended September 30, 2023 was $ 2.4 million. Servicing revenue during the same time period was $ 2.2 million. The originations of loans sold and held for sale during the nine months ended September 30, 2024 was $ 83.0 million and the Company recorded a gain on sale of $ 4.3 million and servicing revenue of $ 4.8 million. The originations of loans sold and held for sale during the nine months ended September 30, 2023 was $ 41.6 million. The gain on sale recorded during the nine months ended September 30, 2023 was $ 6.1 million. Servicing revenue during the same time period was $ 7.7 million. Oportun® Visa® Credit Card - On June 21, 2024, the Company entered into a nonbinding letter of intent with a third-party to sell the credit cards receivable portfolio originated under the Company's credit card program. Following the execution of the nonbinding letter of intent, the portfolio was considered to be held for sale and is presented within credit cards receivable held for sale on the Condensed Consolidated Balance Sheet (Unaudited). The Company has elected the fair value option for the credit card portfolio and, as a result, the Company recorded a net decrease in fair value of $ 36.2 million associated with the terms contained within the nonbinding letter of intent. On September 24, 2024, the Company entered into a definitive agreement to sell its credit cards receivable portfolio. 6. Capitalized Software and Other Intangibles Capitalized software, net consists of the following: September 30, December 31, (in thousands) 2024 2023 Capitalized software, net: System development costs $ 172,772 $ 158,577 Acquired developed technology 48,500 48,500 Less: Accumulated amortization ( 150,930 ) ( 119,810 ) Total capitalized software, net $ 70,342 $ 87,267 10 Capitalized software, net Amortization of system development costs and acquired developed technology for the three months ended September 30, 2024 and 2023 was $ 10.8 million and $ 10.8 million, respectively. System development costs capitalized in the three months ended September 30, 2024 and 2023 were $ 5.0 million and $ 7.0 million, respectively. Amortization of system development costs and acquired developed technology for the nine months ended September 30, 2024 and 2023 was $ 31.1 million and $ 31.6 million, respectively. System development costs capitalized in the nine months ended September 30, 2024 and 2023 were $ 14.2 million and $ 25.3 million, respectively. Acquired developed technology was $ 48.5 million and is related to the acquisition of Hello Digit, Inc. (“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: September 30, December 31, (in thousands) 2024 2023 Intangible assets: Member relationships $ 34,500 $ 34,500 Trademarks 5,626 5,626 Other 3,000 3,000 Less: Accumulated amortization ( 21,423 ) ( 15,658 ) Total intangible assets, net $ 21,703 $ 27,468 Amortization of intangible assets for the three months ended September 30, 2024 and 2023 was $ 1.9 million and $ 1.9 million, respectively. Amortization of intangible assets for the nine months ended September 30, 2024 and 2023 was $ 5.8 million and $ 5.5 million, respectively. On March 8, 2023, the Company revealed its rebranding of Oportun and Digit as a single brand. Therefore, the Company wrote off its $ 0.8 million Digit trademark. Expected future amortization expense for intangible assets as of September 30, 2024 is as follows: (in thousands) Fiscal Years 2024 (remaining three months) $ 1,773 2025 4,929 2026 4,929 2027 4,929 2028 4,780 2029 — Thereafter — Total $ 21,340 11 7. Other Assets Other assets consist of the following: September 30, December 31, (in thousands) 2024 2023 Fixed assets Total fixed assets $ 42,436 $ 48,944 Less: Accumulated depreciation ( 38,547 ) ( 41,953 ) Total fixed assets, net $ 3,889 $ 6,991 Other Assets Prepaid expenses $ 11,967 $ 15,758 Deferred tax assets, net 81,830 48,123 Current tax assets 3,619 4,731 Receivable from banking partner 4,922 4,050 Derivative asset 12,732 9,307 Other 20,995 18,720 Total other assets $ 139,954 $ 107,680 Fixed Assets Depreciation and amortization expense related to fixed assets for the three months ended September 30, 2024 and 2023 was $ 0.8 million and $ 0.9 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $ 2.8 million, and $ 3.2 million, respectively. During the second quarter of 2024, the Company recognized an impairment of the right-of-use asset related to the leased office space in San Carlos, California due to a significant decrease in observed market rents for commercial office space, and the inability to find a sub-lessee given the remaining lease term and market conditions. As a result, the Company disposed of all related fixed assets of $ 3.7 million and related accumulated depreciation of $ 3.5 million resulting in a loss on disposal of $ 0.2 million. 8. Borrowings Secured Financing The following table presents information regarding the Company's Secured Financing facilities: September 30, 2024 December 31, 2023 Variable Interest Entity Facility Amount Maturity Date Interest Rate Balance Balance (in thousands) Oportun CCW Trust (1) $ 60,000 December 1, 2024 Adjusted SOFR + 3.41 % $ 53,223 $ 68,409 Oportun PLW Trust (2) 306,452 September 1, 2026 Term SOFR + 3.40 % 4,710 221,542 Oportun PLW II Trust 245,200 August 1, 2027 Term SOFR + 3.08 % 67,460 — Total secured financing $ 611,652 $ 125,393 $ 289,951 (1) As of December 31, 2023, the facility amount of the Secured Financing - CCW facility (Oportun CCW Trust) was $ 100.0 million. (2) As of December 31, 2023, the facility amount of the Secured Financing - PLW facility (Oportun PLW Trust) was $ 600.0 million and the interest rate was adjusted SOFR plus 2.17 %. CCW Warehouse Facility On January 31, 2024, the Company entered into an amendment to the Credit Card Warehouse facility to reduce the commitment amount from $ 100.0 million to $ 80.0 million and adjusted the minimum payment rate requirement, advance rate. On September 24, 2024, the Company entered into an amendment to the Credit Card Warehouse facility to reduce the commitment amount from $ 80.0 million to $ 60.0 million and adjusted the minimum payment rate requirement for the months of September and October 2024 from 8.60 % to 8.00 %. 12 PLW Facility On August 29, 2024, the Company (Oportun PLW Trust) entered into the Seventh Amendment to the PLW facility (the “PLW Facility”) to modify certain terms of the loan and security agreement to reduce the number of lenders thereunder and to extend the PLW Facility Termination Date until October 8, 2024, during which time no draws were available, and no unused fees accrued. On September 20, 2024, the Company entered into an amendment to the loan and security agreement and other related documents (the “Master Amendment”) under the PLW Facility. Following the Master Amendment, the PLW Facility has a two-year term and a borrowing capacity of $ 306.45 million. Borrowings under the PLW Facility loan and security agreement accrue interest at a rate equal to Term SOFR plus a weighted average spread of 3.40 % and the advance rate for the PLW Facility is 95.0 %, subject to certain triggers that could lower the advance rate to 92.0 %. PLW II Facility On August 5, 2024, in connection with the closing of a new warehouse facility (the “PLW II Facility”), Oportun PLW II Trust, entered into a loan and security agreement with certain lenders from time to time party thereto, Wilmington Trust, National Association as collateral agent, administrative agent, paying agent, securities intermediary and depositary bank. The PLW II Facility has a three year term and a borrowing capacity of $ 245.2 million. Borrowings under the loan and security agreement accrue interest at a rate equal to Term SOFR plus a weighted average spread of 3.08 %. The advance rate for the PLW II Facility is 95.0 %, subject to certain triggers that could lower the advance rate to 92.0 %. Asset-backed Notes at Fair Value The following table presents information regarding asset-backed notes at fair value: September 30, 2024 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 $ 72,982 $ 83,284 10.86 % N/A Oportun Issuance Trust (Series 2022-2) 400,000 410,212 56,595 65,372 10.40 % N/A Oportun Issuance Trust (Series 2022-A) 400,000 410,211 324,055 343,150 5.53 % 2 years Oportun Issuance Trust (Series 2021-C) 500,000 512,762 483,332 519,381 2.48 % 3 years Oportun Issuance Trust (Series 2021-B) 500,000 512,759 371,047 398,159 2.05 % 3 years Oportun Funding XIV, LLC (Series 2021-A) 375,000 383,632 78,684 89,564 1.79 % 2 years Total asset-backed notes recorded at fair value $ 2,475,000 $ 2,540,569 $ 1,386,695 $ 1,498,910 December 31, 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 $ 145,732 $ 165,079 9.34 % N/A Oportun Issuance Trust (Series 2022-2) 400,000 410,212 135,825 156,027 8.46 % N/A Oportun Issuance Trust (Series 2022-A) 400,000 410,211 390,755 415,448 5.44 % 2 years Oportun Issuance Trust (Series 2021-C) 500,000 512,762 459,212 519,612 2.47 % 3 years Oportun Issuance Trust (Series 2021-B) 500,000 512,759 466,317 519,115 2.05 % 3 years Oportun Funding XIV, LLC (Series 2021-A) 375,000 383,632 182,164 200,758 1.78 % 2 years Oportun Funding XIII, LLC (Series 2019-A) 279,412 294,118 — — — % 3 years Total asset-backed notes recorded at fair value $ 2,754,412 $ 2,834,687 $ 1,780,005 $ 1,976,039 (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 September 30, 2024. The weighted average interest rate for Series 2022-A, 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 2021-A ended on March 1, 2023, Series 2021-B ended on May 1, 2024, and Series 2022-A ended on June 1, 2024. 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 The following table represents information regarding the Company's Asset-backed borrowings at amortized cost: September 30, 2024 December 31, 2023 Balance Balance Asset-backed borrowings at amortized cost Pledged Asset (1) Associated Liability Pledged Asset (1) Associated Liability (in thousands) Oportun Issuance Trust 2024-2 $ 223,250 $ 221,843 $ — $ — Oportun Issuance Trust 2024-1 118,020 117,430 — — Oportun CL Trust 2023-A 197,390 195,647 197,390 195,057 Other Asset Backed Borrowings 570,801 574,450 382,712 386,411 Total asset-backed borrowings recorded at amortized cost: $ 1,109,461 $ 1,109,370 $ 580,102 $ 581,468 (1) The amount of pledged assets is recognized within the Loans Receivable at Fair Value on the Consolidated Balance Sheet. On August 29, 2024, the Company announced the issuance of $ 223.3 million of series 2024-2 fixed-rate asset-backed notes secured by a pool of its unsecured and secured personal installment loans (the "2024-2 Securitization"). The 2024-2 Securitization included four classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 8.22 % per annum and weighted average coupon of 8.07 % per annum. On February 13, 2024, the Company announced the issuance of $ 199.5 million of Series 2024-1 fixed-rate asset-backed notes secured by a pool of its unsecured and secured personal installment loans (the "2024-1 Securitization"). The 2024-1 Securitization included four classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 8.600 % per annum and weighted average coupon of 8.434 % per annum. On October 20, 2023, the Company entered into a Receivables Loan and Security Agreement (the “Receivables Loan and Security Agreement”), pursuant to which the Company borrowed $ 197 million. Borrowings under the Receivables Loan and Security Agreement accrue interest at a weighted average interest rate equal to 10.05 %. On June 16, 2023, and August 3, 2023, the Company entered into forward flow whole loan sale agreements and has agreed to sell up to $ 300 million and $ 400 million of its personal loan originations over the next twelve months, respectively. The Company will continue to service these loans upon transfer of the receivables. While the economics of these transactions 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. Acquisition and Corporate Financing The following table presents information regarding the Company's Acquisition and Corporate Financings: September 30, 2024 December 31, 2023 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 % $ 193,791 $ 204,100 Oportun RF, LLC (2) 116,000 January 10, 2025 SOFR (minimum of 0.00 %) + 11.00 % 21,906 54,646 Total acquisition and corporate financings $ 266,000 $ 215,697 $ 258,746 (1) The Corporate Financing facility (Oportun Financial Corporation) was amended and upsized by $ 75.0 million on March 10, 2023. (2) As of December 31, 2023, the maturity date of the Acquisition Financing facility (Oportun RF, LLC) was October 10, 2024. 14 Amendments to Corporate Financing On March 12, 2024, the Company entered into Amendment No. 3 to the Corporate Financing (the “Third Amendment”). The Third Amendment included modifications to the minimum asset coverage ratio covenant levels, provided for an interest rate step-up of 3.00 % per annum for certain months beginning in August 2024 in which the asset coverage ratio is less than 1.00 to 1.00, and required certain principal payments in amounts equal to $ 5.7 million per month to be made on the last business day of each of March, April and May 2024. In addition, the Third Amendment required principal payments equal to 100 % of the net cash proceeds of any future issuance of indebtedness junior in priority to the obligations under the Corporate Financing. Amendments to Acquisition Financing On March 8, 2024, the Acquisition Financing facility (Oportun RF, LLC) was amended to provide for a three-month principal payment holiday for the months of March, April and May 2024, in amounts equal to $ 5.7 million per month. In addition, the amendment extended the term of the Acquisition Financing facility to January 10, 2025. See Note 10, Stockholders' Equity for additional information on the Warrants. As of September 30, 2024, and December 31, 2023, 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: September 30, December 31, (in thousands) 2024 2023 Accounts payable $ 4,522 $ 5,288 Accrued compensation 8,153 15,359 Accrued expenses 24,022 24,791 Accrued interest 10,621 8,415 Amount due to whole loan buyer 8,751 4,169 Current tax liabilities 7,872 7,139 Other 2,918 3,777 Total other liabilities $ 66,859 $ 68,938 10. Stockholders' Equity Preferred Stock - The board of directors of the Company (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 September 30, 2024 or December 31, 2023. Common Stock - As of September 30, 2024 and December 31, 2023, 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, 2024, 36,243,060 and 35,971,037 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock. As of December 31, 2023, 34,741,076 and 34,469,053 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 Liquidity and Capital Resources section 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. 15 Stock-based Compensation - Total stock-based compensation expense included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Technology and facilities $ 714 $ 1,158 $ 2,642 $ 3,366 Sales and marketing 38 19 91 62 Personnel 2,465 3,185 7,408 10,281 Total stock-based compensation (1) $ 3,217 $ 4,362 $ 10,141 $ 13,709 (1) Amounts shown are net of $ 0.2 million and $ 0.7 million of capitalized stock-based compensation for the three and nine months ended September 30, 2024, respectively, and net of $ 0.3 million and $ 1.1 million of capitalized stock-based compensation for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, and December 31, 2023, the Company’s total unrecognized compensation cost related to unvested stock-based option awards granted to employees was $ 1.2 million and $ 2.6 million, respectively, which will be recognized over a weighted-average vesting period of approximately 1.5 years and 1.9 years, respectively. As of September 30, 2024 and December 31, 2023, the Company's total unrecognized compensation cost related to time-based and performance-based unvested restricted stock unit awards granted to employees was $ 16.3 million and $ 24.8 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.0 years and 2.1 years, respectively. Cash flows from the tax benefits for tax deductions resulting from the exercise of stock options in excess of the compensation expense recorded for those options (excess tax benefits) are required to be classified as cash from financing activities. The Company recognized $ 2.8 million and $ 3.8 million of income tax benefit in its consolidated statement of operations related to stock-based compensation expense during the nine months ended September 30, 2024 and 2023, respectively. Additionally, the total income tax expense (benefit) recognized in the income statement for share-based compensation exercises was $ 0.4 million and $ 2.2 million for the three and nine months ended September 30, 2024, respectively. The total income tax expense recognized in the income statement for share-based compensation exercises was $ 0.4 million and $ 3.0 million for the three and nine months ended September 30, 2023, respectively. 12. Revenue Interest Income - Total interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Interest income Interest on loans $ 226,199 $ 238,824 $ 680,124 $ 707,052 Fees on loans 3,845 4,434 11,883 14,288 Total interest income 230,044 243,258 692,007 721,340 Non-interest Income - Total non-interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Non-interest income Servicing fees $ 3,440 $ 3,809 $ 10,312 $ 11,033 Subscription revenue 6,346 6,233 18,302 19,412 Interest on member accounts 5,707 5,227 19,403 16,656 Gain on loan sales and other 4,414 9,693 10,805 25,854 Total non-interest income $ 19,907 $ 24,962 $ 58,822 $ 72,955 13. Income Taxes For the three and nine months ended September 30, 2024 and 2023, the Company calculated 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, 2024, the Company recorded income tax benefit of $ 9.5 million and $ 31.7 million, respectively, related to continuing operations, representing an effective tax rate of 24.1 % and 26.6 %, respectively. Income tax benefit for the three and nine months ended September 30, 2023 was $ 16.2 million and $ 58.2 million, representing an effective income tax rate of 43.4 % and 29.7 %, respectively. 16 Income tax benefit decreased by $ 6.7 million or 41 %, from $ 16.2 million for the three months ended September 30, 2023 to $ 9.5 million benefit for the three months ended September 30, 2024, primarily as a result of the discrete tax impacts of unrecognized tax benefits and return to provision adjustments for the three months ended September 30, 2023. Income tax benefit decreased by $ 26.6 million or 46 %, from $ 58.2 million for the nine months ended September 30, 2023 to $ 31.7 million for the nine months ended September 30, 2024, primarily as a result of having a lower pretax loss for the nine months ended September 30, 2024. The Company's effective tax rates for the three and nine months ended September 30, 2024 and 2023 differ from the statutory tax rates primarily due to the impacts of the research and development tax credit, and stock-based compensation. The Company’s policy is to recognize interest and penalties associated with unrecognized tax positions in income tax expense. At the end of 2024, the Company expects it will no longer be subject to any significant U.S. federal tax examinations by tax authorities for all years prior to 2021. Thus, the Company expects to release $ 3.4 million of uncertain tax positions within the next twelve months due to the expiration of various statute of limitations. In December 2021, the Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion Profit Shifting released Model Global Anti-Base Erosion rules (“Model Rules”) under Pillar Two. The Model Rules set forth the “common approach” for a Global Minimum Tax at 15 percent for multinational enterprises with a turnover of more than 750 million euros. Rules under Pillar Two were effective from January 1, 2024. The Company does not expect adoption of Pillar Two rules to have a significant impact on its consolidated financial statements during fiscal year 2024. 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: September 30, 2024 December 31, 2023 (in thousands) Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value Assets Loans receivable - personal loans $ 2,677,885 $ 2,728,515 $ 2,824,342 $ 2,853,186 Loans receivable - credit cards — — 111,145 109,166 Total Loans Receivable at Fair Value $ 2,677,885 $ 2,728,515 $ 2,935,487 $ 2,962,352 Credit cards receivable held for sale 84,980 52,581 — — Liabilities Asset-backed notes 1,417,483 1,386,695 1,874,406 1,780,005 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 loans receivable balance at fair value as of September 30, 2024, consists of $ 2,572.7 million of unsecured personal loans receivable and $ 155.8 million of secured personal loans receivable. September 30, 2024 December 31, 2023 Personal Loans Receivable Minimum Maximum Weighted Average (2) Minimum Maximum Weighted Average (2) Remaining cumulative charge-offs (1) 8.68 % 52.90 % 11.94 % 6.87 % 51.00 % 11.80 % Remaining cumulative prepayments (1) 0.00 % 35.66 % 25.53 % 0.00 % 28.17 % 23.83 % Average life (years) 0.10 1.71 1.11 0.18 1.37 1.01 Discount rate 8.33 % 8.33 % 8.33 % 10.10 % 10.10 % 10.10 % (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). 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, 2024 and 2023. 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 loans receivable, 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. 17 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. September 30, 2024 December 31, 2023 Credit Cards Receivables Range (2) Range Remaining cumulative charge-offs (1) N/A 20.16 % Principal payment rate (1) N/A 7.06 % Average life (years) N/A 1.00 Discount rate N/A 10.20 % (1) Figure disclosed as a percentage of outstanding principal balance. (2) On September 24, 2024, the Company entered into a definitive agreement to sell its credit cards receivable portfolio to a third-party credit card marketer and servicer. As of September 30, 2024, the Company determined the fair value of the credit cards receivable portfolio based on the terms outlined in the definitive agreement signed September 24, 2024. 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 as of September 30, 2024 and December 31, 2023, were $ 12.7 million and $ 9.3 million, respectively. The underlying cash flows as of September 30, 2024 and December 31, 2023, were $ 16.1 million and $ 12.2 million, respectively. 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): September 30, 2024 December 31, 2023 Low High Weighted Average Low High Weighted Average Remaining cumulative charge-offs 1.62 % 34.28 % 11.32 % 1.09 % 30.38 % 10.56 % Remaining cumulative prepayments 1.47 % 44.61 % 22.13 % 0.01 % 3.89 % 0.92 % Average life (years) 0.43 2.29 1.70 0.36 2.00 1.64 Discount rate 17.09 % 17.09 % 17.09 % 17.00 % 17.00 % 17.00 % On September 24, 2024, the Company signed a definitive agreement to sell the credit cards receivable portfolio originated under the Company's Credit Card program. Following the decision to sell the credit cards receivable portfolio the Company used the agreed upon sale price to determine the fair value. Prior to this decision, the Company used 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 loans receivable, 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. 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 September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Balance – beginning of period $ 2,714,410 $ 3,015,981 $ 2,962,352 $ 3,175,449 Principal disbursements 687,386 722,426 1,949,588 2,120,110 Principal and interest payments from members ( 553,428 ) ( 623,738 ) ( 1,741,425 ) ( 1,840,564 ) Other loan sales ( 14,164 ) ( 32,471 ) ( 68,255 ) ( 127,059 ) Gross charge-offs ( 98,459 ) ( 103,348 ) ( 303,041 ) ( 325,953 ) Credit card receivables reclassified as held for sale — — ( 55,720 ) — Net increase (decrease) in fair value ( 7,230 ) ( 8,971 ) ( 14,984 ) ( 32,104 ) Balance – end of period $ 2,728,515 $ 2,969,879 $ 2,728,515 $ 2,969,879 18 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: September 30, 2024 Carrying value Estimated fair value Estimated fair value (in thousands) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 71,838 $ 71,838 $ 71,838 $ — $ — Restricted cash 156,699 156,699 156,699 — — Liabilities Accounts payable 4,522 4,522 4,522 — — Secured financing (Note 8) 128,722 126,972 — 126,972 — Asset-backed borrowings at amortized cost (Note 8) 1,109,461 1,119,562 — 548,761 570,801 Acquisition and corporate financing (Note 8) 234,222 230,772 — 230,772 — December 31, 2023 Carrying value Estimated fair value Estimated fair value (in thousands) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 91,187 $ 91,187 $ 91,187 $ — $ — Restricted cash 114,829 114,829 114,829 — — Liabilities Accounts payable 5,288 5,288 5,288 — — Secured financing (Note 8) 290,949 285,231 — 285,231 — Asset-backed borrowings at amortized cost (Note 8) (1) 580,101 580,101 — — 580,101 Acquisition and corporate financing (Note 8) 285,682 286,865 — 286,865 — As of December 31, 2023, the Company estimates the carrying value of asset-backed borrowings at amortized cost to approximate their fair value as the underlying cash flows and associated assumptions are reviewed and updated each period. 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 include both securitizations carried at amortized cost and secured borrowings. We obtain indicative pricing on comparable debt securities for securitizations carried at amortized cost, which is a Level 2 input measure. Fair values of secured borrowings included in 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 nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023. 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 less than 7 years. During the second quarter of 2024, the Company recognized an impairment of the right-of-use asset related to the leased office space in San Carlos, California of $ 6.2 million due to a significant decrease in observed market rents for commercial office space, and the inability to find sub- 19 lessee given the remaining lease term and market conditions. The impairment charges were recognized in General, administrative and other in the Consolidated Statements of Operations. 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). 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 September 30, 2024, 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 2024 (remaining three months) $ 3,117 2025 11,329 2026 5,319 2027 2,107 2028 796 2029 247 Thereafter 95 Total lease payments 23,010 Imputed interest ( 1,947 ) Total leases $ 21,063 Sublease income 2024 (remaining three months) $ ( 145 ) 2025 ( 587 ) 2026 ( 605 ) 2027 ( 153 ) 2028 and thereafter — Total lease payments ( 1,490 ) Imputed interest 155 Total sublease income $ ( 1,335 ) Net lease liabilities $ 19,728 Weighted average remaining lease term 2.4 years Weighted average discount rate 4.98 % 20 As of December 31, 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 2024 12,786 2025 10,851 2026 4,700 2027 1,661 2028 435 2029 40 Thereafter — Total lease payments 30,473 Imputed interest ( 2,097 ) Total leases $ 28,376 Weighted average remaining lease term 2.7 years Weighted average discount rate 4.72 % Rental expenses under operating leases for the three and nine months ended September 30, 2024, were $ 2.6 million, and $ 9.8 million, respectively, and for the three and nine months ended September 30, 2023, were $ 4.3 million, and $ 13.4 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 $ 11.0 million for the remainder of 2024, $ 33.4 million in 2025, $ 17.7 million in 2026, $ 2.1 million in 2027 and $ 0.0 million in 2028. 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. After Pathward has met its retention requirement, the Company has a commitment to purchase all additional program loans. Unfunded Loan and Credit Card Commitments - Unfunded loan and credit card commitments at September 30, 2024 and December 31, 2023 were $ 27.2 million and $ 32.9 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. Mexico Value-added Tax - In October 2023, the Company's Mexico subsidiary received notice from Mexico's Servicio de Administración Tributaria, the Mexican federal tax authority, for claims related to the alleged underpayment of value-added tax, including inflationary adjustments, fines and penalties for tax years 2017-2019. The Company disputes that there were underpayments in any of those years, and intends to pursue all available administrative and legal avenues of appeal to assert its position. No accrual related to this matter has been recorded as of September 30, 2024, as the Company believes it is not probable to be incurred. However, it is reasonably possible the Company will be unsuccessful in asserting at least some of these claims, and for those claims, the Company believes it may be exposed to a liability ranging from zero to $ 3.8 million, consisting of $ 1.2 million of value-added tax and $ 2.6 million of inflationary adjustments, fines and penalties. These estimates are subject to change based on the results of the administrative and legal appeal processes, however, timing of the resolution of this issue is unknown. 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 21 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 agreed to sell up to $ 300.0 million of its personal loan originations over the subsequent twelve months. On April 26, 2024, we amended the agreement to extend the term and revised the commitment amount to sell $ 370.9 million of personal loan originations in aggregate through October 2024. The Company will continue to service these loans upon transfer of the receivables. As part of this agreement, during the three and nine months ended September 30, 2024 the Company transferred loans receivable totaling $ 75.1 million and $ 145.7 million, respectively. See Liquidity and Capital Resources section for additional information on the forward flow whole loan sale agreement. For the three months ended September 30, 2024 and 2023 the Company recorded interest expense of $ 10.9 million and $ 11.3 million, respectively, related to the Corporate Financing facility. In addition, the Company recorded interest expense of $ 7.9 million and $ 3.2 million, respectively, related to the secured borrowings associated with the forward flow whole loan sale agreement. The expected cash flows are used to calculate interest expense on the secured borrowing, using the effective interest method. Related to transferred loans, the Company also recorded $ 18.9 million and $ 6.7 million of interest income in the Company's Condensed Consolidated Statements of Operations (Unaudited) for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded interest expense of $ 33.5 million and $ 26.7 million, respectively, related to the Corporate Financing facility. In addition, the Company recorded interest expense of $ 21.5 million and $ 3.2 million, respectively, related to the secured borrowings associated with the forward flow whole loan sale agreement. The expected cash flows are used to calculate interest expense on the secured borrowing, using the effective interest method. Related to the transferred loans, the Company also recorded $ 38.4 million and $ 6.9 million of interest income in the Company's Condensed Consolidated Statements of Operations (Unaudited) for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, loans receivable at fair value underlying the secured borrowing with Neuberger was $ 272.6 million and $ 200.8 million, respectively, The Company had Asset-backed borrowings at amortized costs of $ 276.6 million and corporate financing of $ 193.8 million due to Neuberger as of September 30, 2024 and, $ 201.8 million and $ 204.1 million, respectively, as of December 31, 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 September 30, 2024 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 Credit Cards Receivable Sale On November 12, 2024, (the “Credit Cards Receivable Sale Closing”) the Company completed the sale of the credit cards receivable portfolio to Continental Finance, a leading U.S. credit card marketer and servicer. As a result, the Company de-recognized its Credit Card Receivables Held for Sale in exchange for cash proceeds of $ 51.2 million. The Company used the proceeds from the sale to pay off the Credit Card Warehouse facility. Termination of the Card Program Agreements - In connection with the Credit Cards Receivable Sale Closing and pursuant to a program winddown agreement, the Amended and Restated Credit Card Program and Servicing Agreement, dated as of February 5, 2021, by and between the Company and WebBank, and other related documents, terminated effective November 10, 2024. Termination of the CCW Facility - In connection with the Credit Cards Receivable Sale Closing, the Indenture Termination Date as defined in the Indenture by and between Oportun CCW Trust and Wilmington Trust, National Association, dated as of December 20, 2021 (as may from time to time have been amended, restated, or otherwise modified, the “CCW Indenture”), occurred and the CCW Indenture was terminated effective November 10, 2024. Refinance of Corporate Financing On October 23, 2024, the Company entered into a Credit Agreement with the Company's wholly-owned subsidiary Oportun, Inc., as borrower, certain affiliates of Castlelake and funds managed by Neuberger as lenders, and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent (the “Refinancing Credit Agreement”), pursuant to which the Company will borrow $ 235 million of senior secured term loans (the “Term Loans”). The funding of the Term Loans (the “Closing”) shall be subject to certain closing conditions, including the repayment of the Company's existing senior secured term loans and residual financing facility , and is conditioned upon the completion of the sale of the Company's credit cards receivable portfolio, which occurred on November 12, 2024. The Refinancing Credit Agreement contains certain representations, warranties and covenants, as well as indemnification obligations, in respect of the Company and certain of its subsidiaries, subject to specified exceptions and qualifications contained in the Refinancing Credit Agreement. The Term Loans will bear interest at an amount equal to 15 % per year, of which 2.5 % may be payable in-kind at the Company’s election. The Term Loans are scheduled to mature four years from the date of the Closing. Under the Refinancing Credit Agreement, the Company will be required to repay $ 12.5 million of the Term Loans on or prior to July 31, 2025 and an additional $ 27.5 million of the Term Loans on or prior to January 31, 2026. In addition, the Company has the flexibility to make additional prepayments of $ 10 million at any time, and an additional $ 10 million after the 22 one-year anniversary of the Closing, in each case not subject to a prepayment premium. Voluntary prepayment of the Term Loans in excess of certain thresholds and with certain other exceptions as set forth in the Refinancing Credit Agreement, will be subject to a prepayment premium. The obligations under the Refinancing Credit Agreement are secured by the assets of the Company and certain of its subsidiaries guaranteeing the Term Loans, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by the Company, subject to customary exceptions. The Refinancing Credit Agreement contains financial covenants requiring the maintenance of minimum liquidity and a maximum adjusted EBITDA-based corporate leverage covenant, together with other customary affirmative and negative covenants, representations and warranties and events of default. Under the Refinancing Credit Agreement, at the Closing the Company will also issue warrants (the “Warrants”), at an exercise price of $ 0.01 per share, to affiliates of Castlelake and Neuberger to purchase an aggregate amount of shares of the Company’s common stock equal to 9.8 % of the fully-diluted shares outstanding of the Company, excluding out-of-the-money options, on a pro-forma basis for the warrants. The Company also entered into a Registration Rights Agreement with the applicable holders of the Warrants (the “Registration Rights Agreement”), which stipulates that the Company will file a registration statement with the Securities and Exchange Commission with respect to the shares underlying the Warrants. PLW II Facility Amendment On November 1, 2024, Oportun PLW II Trust, a subsidiary of the Company, Wilmington Trust, National Association as collateral agent, administrative agent, paying agent, securities intermediary and depositary bank and certain lenders from time to time party thereto, entered into an Amendment to the Loan and Security Agreement (the “PLW II Amendment”), and other related documents (together with the PLW II Amendment, the “Amendment”) to amend certain provisions to increase the borrowing capacity to $ 337.1 million. Under the Amendment, borrowings will accrue interest at a rate equal to Term SOFR plus a weighted average spread of 3.07 %. 23