Oportun Financial Corp 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the stockholders and the Board of Directors of Oportun Financial Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Oportun Financial Corporation and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company ' s management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Fair Value of Financial Instruments — Fair Value Estimate of Unsecured Personal Loans — Refer to Notes 2 and 14 to the financial statements Critical Audit Matter Description The Company’s loans receivable at fair value were valued as Level 3 financial instruments. The Company estimates the fair value of the Level 3 loans receivable using a discounted cash flow model based on estimated future cash flows, which considers unobservable inputs that require significant judgment. The model uses inputs that are not observable and inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate fair value. We identified the Company’s fair value estimate of unsecured personal loans as a critical audit matter because of the subjective process in determining significant inputs used to estimate the fair value. Auditing management’s estimate of unsecured personal loans receivable at fair value involved exercising subjective and complex judgments, required specialized skills and knowledge, and required an increased extent of audit effort, including obtaining audit evidence of the data sources used to estimate fair value and understanding the assumptions applied and the nature of significant inputs utilized. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s fair value estimate of unsecured personal loans receivable included the following, among others: • We tested the effectiveness of management’s controls covering the overall estimate and the review of the accuracy and completeness of the underlying unsecured personal loan data utilized in the model calculations. • We tested the accuracy and completeness of the source information derived from the Company’s loan data, which is used in the valuation model. 60 • We evaluated the valuation model and related assumptions, including significant unobservable inputs, and underlying loan data used by management. • With the assistance of our fair value specialists, we developed independent estimates of the unsecured personal loans receivable at fair value and compared our estimates to the Company’s estimates. /s/ Deloitte & Touche LLP San Francisco, CA February 20, 2025 We have served as the Company's auditor since 2010. 61 OPORTUN FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2024 2023 Assets Cash and cash equivalents $ 59,968 $ 91,187 Restricted cash 154,657 114,829 Loans receivable at fair value 2,778,523 2,962,352 Capitalized software and other intangibles, net 86,588 114,735 Right of use assets - operating 9,775 21,105 Other assets 137,592 107,680 Total assets $ 3,227,103 $ 3,411,888 Liabilities and stockholders' equity Liabilities Secured financing $ 535,469 $ 289,951 Asset-backed notes at fair value 1,080,690 1,780,005 Asset-backed borrowings at amortized cost 984,333 581,468 Acquisition and corporate financing 203,751 258,746 Lease liabilities 18,200 28,376 Other liabilities 50,851 68,938 Total liabilities 2,873,294 $ 3,007,484 Note 15 Leases, Commitments and Contingencies Stockholders' equity Common stock, $ 0.0001 par value - 1,000,000,000 shares authorized at December 31, 2024 and December 31, 2023; 36,383,879 shares issued and 36,111,856 shares outstanding at December 31, 2024; 34,741,076 shares issued and 34,469,053 shares outstanding at December 31, 2023 7 7 Common stock, additional paid-in capital 612,642 584,555 Accumulated deficit ( 252,531 ) ( 173,849 ) Treasury stock at cost, 272,023 and 272,023 shares at December 31, 2024 and December 31, 2023 ( 6,309 ) ( 6,309 ) Total stockholders’ equity 353,809 404,404 Total liabilities and stockholders' equity $ 3,227,103 $ 3,411,888 See Notes to the Consolidated Financial Statements. 62 OPORTUN FINANCIAL CORPORATION Consolidated Statements of Operations (in thousands, except share and per share data) Year Ended December 31, 2024 2023 Revenue Interest income $ 925,468 $ 963,496 Non-interest income 76,307 93,423 Total revenue 1,001,775 1,056,919 Less: Interest expense 238,158 179,414 Net decrease in fair value ( 468,413 ) ( 596,839 ) Net revenue 295,204 280,666 Operating expenses: Technology and facilities 166,177 219,406 Sales and marketing 66,973 75,284 Personnel 87,166 121,843 Outsourcing and professional fees 36,847 45,401 General, administrative and other 53,218 72,385 Total operating expenses 410,381 534,319 Income (loss) before taxes ( 115,177 ) ( 253,653 ) Income tax benefit ( 36,495 ) ( 73,702 ) Net loss $ ( 78,682 ) $ ( 179,951 ) Net loss attributable to common stockholders $ ( 78,682 ) $ ( 179,951 ) Share data: Earnings (loss) per share: Basic $ ( 1.95 ) $ ( 4.88 ) Diluted $ ( 1.95 ) $ ( 4.88 ) Weighted average common shares outstanding: Basic 40,356,025 36,875,950 Diluted 40,356,025 36,875,950 See Notes to the Consolidated Financial Statements. 63 OPORTUN FINANCIAL CORPORATION Consolidated Statements of Changes in Stockholders' Equity (in thousands, except share data) For the Years Ended December 31, 2024 and 2023 Common Stock Warrants Shares Par Value Additional Paid-in Capital Shares Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Stockholders' Equity Balance – January 1, 2024 34,469,053 $ 7 $ 565,124 4,193,453 $ 19,431 $ ( 173,849 ) $ ( 6,309 ) $ 404,404 Stock-based compensation expense — — 13,965 — — — — 13,965 Vesting of restricted stock units, net of shares withheld 1,642,803 — ( 272 ) — — — — ( 272 ) Issuance of warrants to purchase common stock in connection with debt financing — — — 4,853,006 14,394 — — 14,394 Net loss — — — — — ( 78,682 ) — ( 78,682 ) Balance – December 31, 2024 36,111,856 $ 7 $ 578,817 9,046,459 $ 33,825 $ ( 252,531 ) $ ( 6,309 ) $ 353,809 Balance – January 1, 2023 33,354,607 $ 7 $ 547,799 — $ — $ 6,102 $ ( 6,309 ) $ 547,599 Issuance of common stock upon exercise of stock options, net of shares withheld 37,314 — ( 46 ) — — — — ( 46 ) Stock-based compensation expense — — 20,024 — — — — 20,024 Vesting of restricted stock units, net of shares withheld 1,077,132 — ( 2,653 ) — — — — ( 2,653 ) Issuance of warrants to purchase common stock in connection with debt financing — — — 4,193,453 19,431 — — 19,431 Net loss — — — — — ( 179,951 ) — ( 179,951 ) Balance – December 31, 2023 34,469,053 $ 7 $ 565,124 4,193,453 $ 19,431 $ ( 173,849 ) $ ( 6,309 ) $ 404,404 See Notes to the Consolidated Financial Statements. 64 OPORTUN FINANCIAL CORPORATION Consolidated Statements of Cash Flow (in thousands) Year Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 78,682 ) $ ( 179,951 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 51,157 54,885 Fair value adjustment, net 468,413 596,839 Origination fees for loans receivable at fair value, net ( 32,796 ) ( 23,360 ) Gain on loan sales ( 6,010 ) ( 8,481 ) Stock-based compensation expense 12,989 18,593 Other, net 4,197 ( 53,195 ) Originations of loans sold and held for sale ( 119,551 ) ( 56,603 ) Proceeds from sale of loans 124,068 65,088 Changes in operating assets and liabilities ( 30,263 ) ( 21,050 ) Net cash provided by operating activities 393,522 392,765 Cash flows from investing activities Originations and purchases of loans held for investment ( 1,525,656 ) ( 1,580,134 ) Proceeds from loan sales originated as held for investment 54,491 4,055 Repayments of loan principal 1,297,549 1,322,601 Capitalization of system development costs ( 19,187 ) ( 31,261 ) Other, net ( 886 ) ( 1,442 ) Net cash used in investing activities ( 193,689 ) ( 286,181 ) Cash flows from financing activities Borrowings under secured financing 742,066 245,700 Repayments of secured financing ( 493,812 ) ( 274,751 ) Borrowings under asset-backed notes at fair value — — Repayments of asset-backed notes at fair value ( 771,403 ) ( 707,619 ) Borrowings under asset-backed borrowings at amortized cost 771,420 626,405 Repayments of asset-backed borrowings at amortized cost ( 364,035 ) ( 33,615 ) Borrowings under acquisition and corporate financing 223,243 73,355 Repayments of acquisition and corporate financing ( 285,663 ) ( 28,442 ) Payments of deferred financing costs ( 12,768 ) ( 2,719 ) Net payments related to stock-based activities ( 272 ) ( 2,699 ) Net cash used in financing activities ( 191,224 ) ( 104,385 ) Net increase in cash and cash equivalents and restricted cash 8,609 2,199 Cash and cash equivalents and restricted cash, beginning of period 206,016 203,817 Cash and cash equivalents and restricted cash, end of period $ 214,625 $ 206,016 Supplemental disclosure of cash flow information Cash and cash equivalents $ 59,968 $ 91,187 Restricted cash 154,657 114,829 Total cash and cash equivalents and restricted cash $ 214,625 $ 206,016 Cash paid for income taxes, net of refunds $ 1,043 $ ( 1,860 ) Cash paid for interest $ 213,973 $ 183,973 Cash paid for amounts included in the measurement of operating lease liabilities $ 12,518 $ 14,070 Supplemental disclosures of non-cash investing and financing activities Right of use assets obtained in exchange for operating lease obligations $ ( 4,413 ) $ 1,835 Non-cash investment in capitalized assets $ 1,354 $ ( 305 ) Non-cash financing activities $ 58,729 $ 17,807 See Notes to the Consolidated Financial Statements. 65 OPORTUN FINANCIAL CORPORATION Notes to the Consolidated Financial Statements December 31, 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. 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 reflect all normal, recurring adjustments that are, in management's opinion, necessary for the fair presentation of results. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates ‑ The preparation of the 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 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 consolidated financial statements; therefore, actual results could differ from those estimates and assumptions. Consolidation and Variable Interest Entities ‑ The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s policy is to consolidate the financial statements of entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by evaluating whether the entity is a voting interest entity or variable interest entity ("VIE") and if the accounting guidance requires consolidation. VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The Company determines whether it has a controlling financial interest in a VIE by considering whether its involvement with the VIE is significant and whether it is the primary beneficiary of the VIE based on the following: • The Company has the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; • The aggregate indirect and direct variable interests held by us have the obligation to absorb losses or the right to receive benefits from the entity that could be significant to the VIE; and • Qualitative and quantitative factors regarding the nature, size, and form of the Company’s involvement with the VIE. Foreign Currency Re-measurement ‑ The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities of these subsidiaries are re-measured into U.S. dollars from the local currency at rates in effect at period-end and nonmonetary assets and liabilities are re-measured at historical rates. Revenue and expenses are re-measured at average exchange rates in effect during each period. Foreign currency gains and losses from re-measurement and transaction gains and losses are recorded as general, administrative and other expense in the Consolidated Statements of Operations. Concentration of Credit Risk ‑ Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable at fair value. As of December 31, 2024, 41 %, 27 %, 10 %, 6 % and 4 % of the owned principal balance related to borrowers from California, Texas, Florida, Illinois and New Jersey, respectively. Owned principal balance related to borrowers from each of the remaining states of operation continues to be at or below 3 %. As of December 31, 2023, 46 %, 26 %, 9 %, 5 % and 3 % of the owned principal balance related to borrowers from California, Texas, Florida, Illinois and New Jersey, respectively, and the owned principal balance related to borrowers from each of the remaining states was at or below 3 %. Cash and Cash Equivalents ‑ Cash and cash equivalents consist of unrestricted cash balances and short-term, liquid investments with a maturity date of three months or less at the time of purchase. The Oportun savings platform connects to members’ checking accounts and analyzes their income and spending patterns to find amounts that can safely be set aside towards savings goals. The Company calculates these amounts by identifying upcoming bills and regular spending habits to ensure optimal amounts are flagged for savings and transferred to savings accounts. The 66 funds in these saving accounts are owned by Oportun members and are not the assets of the Company. Therefore, these funds are not included in the Consolidated Balance Sheets. Restricted Cash ‑ Restricted cash represents cash held at a financial institution as part of the collateral for the Company’s Secured Financing, asset-backed notes and loans designated for sale. Additionally, cash held in reserve accounts by the Company and letters of credit held with the Company's banking institutions are presented in our restricted cash. Loans Receivable at Fair Value ‑ Loans that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are considered as loans held for investment. The Company elected the fair value option for all loans receivable held for investment. Under fair value accounting, direct loan origination fees are recognized in income immediately and direct loan origination costs are expensed in the period the loan originates. In addition, the Company recognizes annual fees on credit card receivables into income immediately upon activation of the credit card by the credit card holder and subsequent annual fees when billed upon the anniversary of the credit card account. Loans are charged off at the earlier of when loans are determined to be uncollectible or when loans are 120 days contractually past due, or 180 days contractually past due in the case of credit cards. Recoveries are recorded when cash is received on loans that had been previously charged off. The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as remaining cumulative charge-offs, remaining cumulative prepayments or principal payment rates for our credit card receivables, average life and discount rate. The Company re-evaluates the fair value of loans receivable at the close of each measurement period. Changes in fair value are recorded in "Net decrease in fair value" in the Consolidated Statements of Operations in the period of the fair value changes. Fair Value Measurements ‑ The Company follows applicable guidance that establishes a fair value measurement framework, provides a single definition of fair value and requires expanded disclosure summarizing fair value measurements. Such guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability. Fair value guidance establishes a three-level hierarchy for inputs used in measuring the fair value of a financial asset or financial liability. • Level 1 financial instruments are valued based on unadjusted quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date. • Level 2 financial instruments are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. • Level 3 financial instruments are valued using pricing inputs that are unobservable and reflect the Company’s own assumptions that market participants would use in pricing the asset or liability. Loans Held for Sale ‑ Loans held for sale are recorded at the lower of cost or fair value, until the loans are sold. Loans held for sale are sold within four days of origination. Cost of loans held for sale is inclusive of unpaid principal plus net deferred origination costs. Derivatives - Derivative financial instruments are recognized as either assets or liabilities in the consolidated balance sheet at fair value. Changes in fair value and settlements of derivative instruments are reflected in earnings as a component of "Net decrease in fair value" in the Consolidated Statements of Operations. The Company does not use derivative instruments for trading or speculative purposes. Based on the agreements entered into with Pathward, N.A. for all loans originated and retained by Pathward, Pathward receives a fixed interest rate. Oportun bears the risk of credit loss and has the benefit of any excess interest proceeds after satisfying various obligations under the agreements. Intangible Assets - At the time intangible assets are initially recognized, a determination is made with regard to each asset as it relates to its useful life. We have determined that each of our intangible assets has a finite useful life with the exception of certain trade names, which we have determined have indefinite lives. Intangible assets with a finite useful life are amortized on a straight-line basis over their estimated useful lives. Intangible assets with a finite useful life are presented net of accumulated amortization on the Consolidated Balance Sheets. The Company reviews the intangible assets with finite useful lives for impairment at least annually and whenever changes in circumstances indicate their carrying amounts may not be recoverable. Impairment is indicated if the sum of undiscounted estimated future cash flows is less than the carrying value of the respective asset. Impairment is permanently recognized by writing down the asset to the extent that the carrying value exceeds the estimated fair value. For indefinite-lived intangible assets, we review for impairment at least annually and whenever events occur or circumstances change that would indicate the assets are more likely than not to be impaired. We first complete an annual qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. If the qualitative assessment indicates that the assets are more likely than not to have been impaired, we proceed with the fair value calculation of the assets. If the fair value is less than the carrying value, an impairment loss will be recognized in an amount equal to the difference and the indefinite life classification will be evaluated to determine whether such classification remains appropriate. Fixed Assets ‑ Fixed assets are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets, which is generally three years for computer and office equipment and furniture and fixtures, and three to five years for purchased software and leasehold improvements. When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss, if any, is included in the Consolidated Statements of Operations. Maintenance and repairs are charged to the Consolidated Statements of Operations as incurred. 67 The Company does not own any buildings or real estate. The Company enters into term leases for its corporate offices, call center and store locations. Leasehold improvements are capitalized and depreciated over the lesser of their physical life or lease term of the building. Systems Development Costs ‑ The Company capitalizes software developed or acquired for internal use, and these costs are included in Capitalized software and other intangibles, net on the Consolidated Balance Sheets. The Company has internally developed its proprietary Web-based technology platform, which consists of application processing, credit scoring, loan accounting, servicing and collections, debit card processing, data and analytics and digital savings services. The Company capitalizes its costs to develop software when preliminary development efforts are successfully completed; management has authorized and committed project funding; and it is probable the project will be completed and the software will be used as intended. Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred. When the software developed for internal use has reached its technological feasibility, such costs are amortized on a straight-line basis over the estimated useful life of the assets, which is generally three years . Costs incurred for upgrades and enhancements that are expected to result in additional functionality are capitalized and amortized over the estimated useful life of the upgrades. The Company acquired developed technology with its acquisition of Hello Digit, Inc. ("Digit"). Developed technology is included in capitalized software. Such costs are amortized on a straight-line basis over the estimated useful life of the assets, which was determined to be seven years . Impairment ‑ The Company reviews long-lived assets, including fixed assets, right of use assets and system development costs, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The Company determined that there were no events or changes in circumstances that indicated our long-lived assets were impaired for the years ended December 31, 2024 and 2023, except as disclosed. Asset-Backed Notes at Fair Value ‑ Prior to 2023, the Company elected the fair value option to account for all asset-backed notes. 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 re-evaluates the fair value of the asset-backed notes at the close of each measurement period. Changes in fair value are recorded in "Net decrease in fair value" in the Consolidated Statements of Operations in the period of the fair value changes. Asset-Backed Borrowings at Amortized Cost - Beginning 2023, the Company elected the amortized cost method to account for newly issued asset-backed borrowings. The Company determines amortized cost using the effective interest method, which allocates interest expense over the expected life of the financial instrument. Premiums, discounts and debt issuance costs are presented as part of the net carrying amount of the debt on issuance. Premiums are amortized from the carrying amount of the debt as a reduction to interest expense over the term. Discounts and debt issuance costs are accreted into the carrying amount of the debt and included in interest expense. Acquisition and Corporate Financing ‑ Acquisition and Corporate Financing consists of two components, the Acquisition Financing and the Corporate Financing. The Acquisition Financing was used to fund the cash component of the purchase price for the Digit acquisition, as a result, the interest payments are recorded to General, administrative and other in the Consolidated Statements of Operations. The Acquisition Financing was fully repaid on November 14, 2024. The Corporate Financing is used to fund the operations of the Company, and the interest payments are recorded to Interest Expense in the Consolidated Statements of Operations. The Company reports issuance costs associated with these financings on its balance sheet as a direct reduction in the carrying amount of the notes, and they are amortized over the life of the notes using the effective interest method. Revenue Recognition ‑ The Company’s primary sources of revenue consist of interest and non-interest income. Interest Income Interest income includes interest and fees on loans. Generally, the Company’s loans require semi-monthly or biweekly borrower payments of interest and principal. Fees on loans include billed late fees offset by charged-off fees. The Company charges borrowers a late fee if a scheduled installment payment becomes delinquent. Depending on the loan, late fees are assessed when the loan is eight to 16 days delinquent. Late fees are recognized when they are billed. When a loan is charged off, uncollected late fees are also written off. For Loans Receivable at Fair Value, interest income includes (i) billed interest and late fees, plus (ii) origination fees recognized at loan disbursement, less (iii) charged-off interest and late fees. Additionally, direct loan origination expenses are recognized in operating expenses as incurred. For Loans Receivable at Fair Value, loan origination fees and costs are recognized when incurred. Interest income on our personal loans receivable is recognized based upon the amount the Company expects to collect from its borrowers. Delinquent loans are charged off at month-end during the month it becomes 120 days’ delinquent. Previously accrued and unpaid interest is also charged off in the month the Company receives a notification of bankruptcy, a judgment or mediated agreement by the court, or loss of life, unless there is evidence that the principal and interest are collectible. Documentation fees associated with loans purchased from Pathward are presented within interest income. Interest income on our credit card receivables is recognized on the current balance on the account, inclusive of outstanding principal balance plus previously unpaid interest and fees, at the end of the monthly billing cycle. Delinquent credit card accounts, including unpaid interest and fees are charged off at month-end during the month they become 180 days contractually past due. Non-Interest Income 68 Non-interest income includes subscription revenue, servicing fees, gain on loan sales, debit card income, documentation fees, sublease income, interest on member's accounts, and other income. Subscription Revenue - The Company earns revenue on a subscription basis from users of its platform. Revenue is recognized ratably over each month as the performance obligation is satisfied over time. Deferred revenue is recognized when the service period spans into the following month. Servicing Fees ‑ The Company retains servicing rights on sold loans. Servicing fees comprise the contractual annual servicing fee based upon the average daily principal balance of loans sold that the Company earns for servicing loans sold to a third-party financial institution. The servicing fee compensates the Company for the costs incurred in servicing the loans, including providing customer services, receiving borrower payments and performing appropriate collection activities. Management believes the fee approximates a market rate and accordingly has not recognized a servicing asset or liability. Gain on Loan Sales ‑ The Company recognizes a gain on sale from the difference between the proceeds received from the purchaser and the carrying value of the loans on the Company’s books. The Company sells a certain percentage of new loans twice weekly. A transfer of a financial asset, a group of financial assets, or a participating interest in a financial asset is accounted for as a sale if all of the following conditions are met: • The financial assets are isolated from the transferor and its consolidated affiliates as well as its creditors. • The transferee or beneficial interest holders have the right to pledge or exchange the transferred financial assets. • The transferor does not maintain effective control of the transferred assets. The Company records the gain on the sale of a loan at the sale date in an amount equal to the proceeds received less outstanding principal, accrued interest, late fees and net deferred origination costs. Debit card income is the revenue from interchange fees when borrowers use our reloadable debit card for purchases as well as the associated card user fees. Documentation Fees - On a monthly basis Pathward, N.A. pays the Company documentation fees as compensation for its role in facilitation of loan originations by Pathward. The documentation fees are equivalent to loan origination fees charged by Pathward to its borrowers. Documentation fees to which the Company expects to be entitled are variable consideration because loan volume originated over the contractual term is not known at the contract’s inception. The transaction fee is determined each time a loan is issued based on that loan’s initial principal amount and is recognized when performance is complete and upon the successful origination of a borrower's loan. Sublease income is the rental income from subleasing a portion of our existing right of use assets. Interest on member accounts represents income earned on member savings accounts held at partner banks. Other income includes marketing incentives paid directly to us by the merchant clearing company based on transaction volumes, interest earned on cash and cash equivalents and restricted cash, and gain (loss) on asset sales. Interest expense ‑ Interest expense consists of interest expense associated with the Company’s Secured Financing, Asset-backed notes at fair value, Asset-backed borrowings at amortized cost, and Acquisition and Corporate Financing, and it includes the amortization of deferred origination costs for the Corporate Financing and Secured Financing facilities as well as fees for the unused portion of the Secured Financing facility. The Company elected the fair value option for all asset-backed notes at fair value. Accordingly, all origination costs for such asset-backed notes at fair value are expensed as incurred. Income Taxes ‑ The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized. The Company evaluates uncertain tax positions by reviewing against applicable tax law all positions taken by the Company with respect to tax years for which the statute of limitations is still open. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The Company recognizes interest and penalties related to the liability for unrecognized tax benefits, if any, as a component of the Income tax expense line in the accompanying Consolidated Statements of Operations. Stock-Based Compensation ‑ The Company accounts for stock-based employee awards based on the fair value of the award which is measured at grant date. Accordingly, stock-based compensation cost is recognized in operating expenses in the Consolidated Statements of Operations over the requisite service period. The fair value of stock options granted or modified is estimated using the Black-Scholes option pricing model. The Company accounts for forfeitures as they occur and does not estimate forfeitures as of the award grant date. The Company granted restricted stock units ("RSUs") to employees that vest upon the satisfaction of time-based criterion of up to four years and in some cases, an additional market criterion based on the Company’s stock price. These RSUs were not considered vested until both criteria were 69 met and provided that the participant was in continuous service on the vesting date. The fair value for awards with a market criterion is estimated using a Monte Carlo simulation. The Company recognizes stock-based compensation expenses using the straight-line basis over the requisite service period net of forfeitures. Treasury Stock ‑ Treasury stock is reported at cost, and no gain or loss is recorded on stock repurchase transactions. Repurchased shares are held as treasury stock until they are retired or re-issued. The Company did no t retire or re-issue any treasury stock for the years ended December 31, 2024 and 2023. Basic and Diluted Earnings per Share ‑ Basic earnings per share is computed by dividing net income per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. The Company computes earnings per share using the two-class method required for participating securities. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed by dividing net income attributable to common stockholders by the weighted-average common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method or the two-class method, whichever is more dilutive. 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 evaluate the effect of the new guidance and determine when it will be implemented. The ASU expands tax disclosures but it will not have a material impact on the consolidated financial statements. Income Statement - In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disaggregated disclosure of income statement expenses for public business entities (PBEs). The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The ASU is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. While early adoption is permitted, the company will evaluate the effect of the new guidance and determine when it will be implemented. The ASU expands Expense disclosures but it will not have a material impact on the consolidated financial statements. Recently Adopted Accounting Standards 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 Company adopted ASU 2023-07 on December 31, 2024. The adoption of this ASU did not have a material impact on the Company's financial position, results of operations, or cash flows but enhanced the disclosure of its segment reporting disclosures. Early adoption is permitted. See Note 17 , Segment Reporting . 3. Earnings (Loss) per Share Basic and diluted earnings (loss) per share are calculated as follows: Year Ended December 31, (in thousands, except share and per share data) 2024 2023 Net loss $ ( 78,682 ) $ ( 179,951 ) Net loss attributable to common stockholders $ ( 78,682 ) $ ( 179,951 ) Basic weighted-average common shares outstanding 40,356,025 36,875,950 Weighted average effect of dilutive securities: Stock options — — Restricted stock units — — Diluted weighted-average common shares outstanding 40,356,025 36,875,950 Earnings (loss) per share: Basic $ ( 1.95 ) $ ( 4.88 ) Diluted $ ( 1.95 ) $ ( 4.88 ) 70 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: Year Ended December 31, 2024 2023 Stock options 2,192,211 2,953,853 Restricted stock units 4,360,532 3,709,422 Total anti-dilutive common share equivalents 6,552,743 6,663,275 4. Variable Interest Entities 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. 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 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. The following table represents the assets and liabilities of consolidated VIEs recorded on the Company’s consolidated balance sheets: December 31, (in thousands) 2024 2023 Consolidated VIE assets Restricted cash $ 136,572 $ 91,466 Loans receivable at fair value 2,242,568 2,539,186 Total VIE assets 2,379,140 2,630,652 Consolidated VIE liabilities Secured financing (1) 539,204 290,949 Asset-backed notes at fair value 1,080,690 1,780,005 Asset-backed borrowings at amortized cost 476,557 195,057 Acquisition financing (1) — 57,237 Total VIE liabilities $ 2,096,451 $ 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 Consolidated Balance Sheets upon sale. 71 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 year ended December 31, 2024 was $ 119.6 million and the Company recorded a gain on sale of $ 6.0 million and servicing revenue of $ 6.5 million. The originations of loans sold and held for sale during the year ended December 31, 2023 was $ 56.6 million and the Company recorded a gain on sale of $ 8.5 million and servicing revenue of $ 9.6 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 Consolidated Balance Sheets. The Company has elected the fair value option for the credit cards receivable 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. On November 12, 2024, the Company completed the sale of the credit cards receivable portfolio to Continental Purchasing, LLC (the “Credit Cards Receivable Sale Closing”). 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. 6. Capitalized Software and Other Intangibles Capitalized software, net consists of the following: December 31, (in thousands) 2024 2023 Capitalized software, net: System development costs $ 173,444 $ 158,577 Acquired developed technology 48,500 48,500 Less: Accumulated amortization ( 155,286 ) ( 119,810 ) Total capitalized software, net $ 66,658 $ 87,267 Capitalized software, net Amortization of system development costs and acquired developed technology for years ended December 31, 2024 and 2023 was $ 40.1 million and $ 42.3 million, respectively. System development costs capitalized in the years ended December 31, 2024 and 2023 were $ 20.5 million and $ 31.0 million, respectively. In the annual period ended December 31, 2023, the Company recognized a non-cash pre-tax impairment charge of $ 5.6 million related to the write-off of embedded finance, investing and retirement products. The non-cash impairment charge is included in Technology and Facilities in the Consolidated Statements of Operations. Acquired developed technology was $ 48.5 million and is related to the acquisition of 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: December 31, 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 ( 23,196 ) $ ( 15,658 ) Total intangible assets, net 19,930 $ 27,468 Amortization of intangible assets for the years ended December 31, 2024 and 2023 was $ 7.5 million and $ 7.7 million. 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. Expected future amortization expense for intangible assets as of December 31, 2024 is as follows: 72 (in thousands) Fiscal Years 2025 $ 4,929 2026 4,929 2027 4,929 2028 4,780 2029 — Thereafter — Total $ 19,567 7. Other Assets Other assets consist of the following: December 31, (in thousands) 2024 2023 Fixed assets Total fixed assets $ 40,607 $ 48,944 Less: Accumulated depreciation ( 37,632 ) ( 41,953 ) Total fixed assets, net $ 2,975 $ 6,991 Other assets Prepaid expenses $ 11,623 $ 15,758 Deferred tax assets, net 82,435 48,123 Current tax assets 3,736 4,731 Receivable from banking partner 4,656 4,050 Derivative asset 13,771 9,307 Other 18,396 18,720 Total other assets $ 137,592 $ 107,680 Fixed Assets Depreciation and amortization expense related to fixed assets for the years ended December 31, 2024 and 2023 was $ 3.5 million and $ 4.3 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 S ecured Financing The following table presents information regarding the Company's Secured Financing facilities: December 31, 2024 December 31, 2023 Variable Interest Entity Facility Amount Maturity Date Interest Rate Balance Balance (in thousands) Oportun CCW Trust (1) $ — December 1, 2024 Adjusted SOFR + 3.41 % $ — $ 68,409 Oportun PLW Trust (2) 429,030 September 1, 2027 Term SOFR + 3.35 % 265,654 221,542 Oportun PLW II Trust 337,100 August 1, 2028 Term SOFR + 3.07 % 269,815 — Total secured financing $ 766,130 $ 535,469 $ 289,951 73 (1) As of December 31, 2023, the facility amount of the Secured Financing - CCW facility (Oportun CCW Trust) was $ 100.0 million. While the contractual maturity date was December 1. 2024, the facility was extinguished on November 10, 2024 as part of the Credit Cards Receivable Sale Closing. (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 %. On November 10, 2024, i n 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, the CCW Indenture was terminated, and the Company repaid the outstanding balance. 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 under the PLW Facility. Following the amendment, the PLW Facility has a two-year term and had a borrowing capacity of $ 306.5 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 %. On November 22, 2024, the Company entered into an another amendment to the loan and security agreement and other related documents to amend certain provisions to increase the borrowing capacity to approximately $ 429.0 million. Under the amendment, borrowings will accrue interest at a rate equal to Term SOFR plus a weighted average spread of 3.35 %. PLW II Facility On August 5, 2024, in connection with the closing of a new warehouse facility, the Company (Oportun PLW II Trust), entered into a loan and security agreement with certain lenders from time to time party thereto, and Wilmington Trust, National Association as collateral agent, administrative agent, paying agent, securities intermediary and depositary bank (the "PLW II Facility"). The PLW II Facility has a three year term and had 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 %. On November 1, 2024, the Company entered into an amendment to the loan and security agreement, and other related documents 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 %. Asset-backed Notes at Fair Value The following table presents information regarding asset-backed notes at fair value: December 31, 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 $ 54,463 $ 62,323 11.43 % N/A Oportun Issuance Trust (Series 2022-2) 400,000 410,212 40,453 46,578 10.82 % N/A Oportun Issuance Trust (Series 2022-A) 400,000 410,211 261,939 280,234 5.65 % 2 years Oportun Issuance Trust (Series 2021-C) 500,000 512,762 427,872 460,500 2.48 % 3 years Oportun Issuance Trust (Series 2021-B) 500,000 512,759 295,963 320,306 2.06 % 3 years Oportun Funding XIV, LLC (Series 2021-A) 375,000 383,632 — — — % 2 years Total asset-backed notes recorded at fair value $ 2,475,000 $ 2,540,569 $ 1,080,690 $ 1,169,941 74 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 December 31, 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. Asset-backed Borrowings at Amortized Cost The following table represents information regarding the Company's asset-backed notes and asset-backed borrowings at amortized cost: December 31, 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 $ 189,401 $ 188,316 $ — $ — Oportun Issuance Trust 2024-1 92,759 92,386 — — Oportun CL Trust 2023-A 197,390 195,855 197,390 195,057 Other Asset-backed borrowings 503,032 507,776 382,712 386,411 Total asset-backed borrowings recorded at amortized cost: $ 982,582 $ 984,333 $ 580,102 $ 581,468 (1) The amount of pledged assets are recognized within the Loans Receivable at Fair Value within the Consolidated Balance Sheet. On August 29, 2024, the Company announced the issuance of $ 223.3 million of series 2024-2 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 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 8.60 % per annum and weighted average coupon of 8.43 % 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 following 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. The legal entities that facilitate these whole loan sales are not considered VIEs. Acquisition and Corporate Financing 75 The following table presents information regarding the Company's Acquisition and Corporate Financings: December 31, 2024 December 31, 2023 Entity Original Balance (1) Maturity Date (2) Interest Rate Balance Balance (in thousands) Oportun Financial Corporation - Refinance (3) $ 235,000 November 14, 2028 15.00 % per annum $ 203,751 $ — Oportun Financial Corporation (1) 150,000 September 14, 2026 SOFR (minimum of 0.00 %) + 12.00 % — 204,100 Oportun RF, LLC (2) 116,000 January 10, 2025 SOFR (minimum of 0.00 %) + 11.00 % — 54,646 Total acquisition and corporate financing $ 501,000 $ 203,751 $ 258,746 (1) The original Corporate Financing facility (Oportun Financial Corporation) was amended and upsized by $ 75.0 million on March 10, 2023. The original Credit Agreement was extinguished on November 14, 2024. (2) As of December 31, 2023, the maturity date of the Acquisition Financing facility (Oportun RF, LLC) was October 10, 2024. In connection with the Term Loan Closing, Oportun RF, LLC was terminated on November 14, 2024. (3) Oportun Financial Corporation - Refinance refers to the Refinancing Term Loans borrowed pursuant to the Refinancing Credit Agreement, which closed on November 14, 2024. Amendments to Corporate Financing On September 14, 2022, the Company entered into a Credit Agreement with certain funds associated with Neuberger Berman Specialty Finance (“Neuberger”) as lenders, and Wilmington Trust, National Association, as administrative agent and collateral agent to borrow $ 150.0 million through a senior secured term loan (the “Original Credit Agreement” and the “Original Term Loan”). On March 12, 2024, the Company entered into Amendment No. 3 to the Original Credit Agreement (the “Third Amended Credit Agreement”). The Third Amended Credit Agreement 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 Amended Credit Agreement 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 Original Credit Agreement. On October 23, 2024, the Company entered into a new Credit Agreement with certain affiliates of Neuberger and McLaren Harbor LLC, pursuant to which the Company borrowed $ 235 million of senior secured term loans (the “Refinancing Credit Agreement” and the “Refinancing Term Loans”). The funding of the Refinancing Term Loans (the “Term Loan Closing”) was subject to certain closing conditions, including the repayment of the Company's existing senior secured term loans under the Original Credit Agreement, as amended, and the Acquisition Financing, and was conditioned upon the completion of the sale of the Company's credit cards receivable portfolio, which occurred on November 12, 2024. The Term Loan Closing occurred on November 14, 2024, and the Original Term Loan under the Original Credit Agreement, as amended, was extinguished and paid in full. 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 Refinancing Term Loans 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 Refinancing Term Loans are scheduled to mature four years from the date of the Term Loan Closing. Under the Refinancing Credit Agreement, the Company is required to repay $ 12.5 million of the Refinancing Term Loans on or prior to July 31, 2025 and an additional $ 27.5 million of the Refinancing 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 one-year anniversary of the Term Loan Closing, in each case not subject to a prepayment premium. Voluntary prepayment of the Refinancing 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 Refinancing 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, the Company issued warrants (the “Warrants”), at an exercise price of $ 0.01 per share, to affiliates of Neuberger and McLaren Harbor LLC to purchase 4,853,006 shares of the Company’s common stock. 76 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. On November 14, 2024, in connection with the Term Loan Closing, the Acquisition Financing was terminated and the associated outstanding loan balance was repaid in full. See Note 10 , Stockholders' Equity for additional information on the Warrants. Debt Covenants - As of December 31, 2024 and 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: December 31, (in thousands) 2024 2023 Accounts payable $ 6,586 $ 5,288 Accrued compensation 12,207 15,359 Accrued expenses 12,441 24,791 Accrued interest 11,030 8,415 Amount due to whole loan buyer 1,759 4,169 Current tax liabilities 3,136 7,139 Other 3,692 3,777 Total other liabilities $ 50,851 $ 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 December 31, 2024 or 2023. Common Stock - As of December 31, 2024 and 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 December 31, 2024, 36,383,879 and 36,111,856 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 Amended Credit Agreement, 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. On November 14, 2024, pursuant to the Refinancing Credit Agreement , the Company issued detachable Warrants to the lenders to purchase 4,853,006 shares of the Company’s common stock at an exercise price of $ 0.01 per share. 77 11. Equity Compensation and Other Benefits 2019 Equity Incentive Plan We currently have one stockholder-approved plan from which we can issue stock-based awards, which was approved by our stockholders in fiscal year 2019 (the "2019 Plan"). The 2019 Plan became effective on September 25, 2019 and replaced the Amended and Restated 2005 Stock Option / Stock Issuance Plan and the 2015 Stock Option/Stock Issuance Plan (collectively, the “Previous Plans”). The Previous Plans solely exist to satisfy outstanding options previously granted under those plans. The 2019 Plan provides for the grant of incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards, and other awards (collectively, "awards"). ISOs may be granted only to the Company's employees, including officers, and the employees of its affiliates. All other awards may be granted to the employees, including officers, non-employee directors and consultants and the employees and consultants of the Company's affiliates. The total number of shares of common stock authorized under the 2019 Plan is 15,195,185 shares. The remaining maximum number of shares of our common stock, net of vested and exercised shares, that may be issued under the 2019 Plan will not exceed 9,903,205 shares, of which, 3,282,515 were available for future awards as of December 31, 2024. The number of shares of the Company's common stock reserved for issuance under its 2019 Plan will automatically increase on January 1 of each year for the remaining term of the plan, by 5 % of the total number of shares of its common stock outstanding on December 31 of the immediately preceding calendar year, or a lesser number of shares determined by the Board prior to the applicable January 1st. The shares available for issuance increased by 1,723,452 shares, on January 1, 2024, pursuant to the automatic share reserve increase provision. 2019 Employee Stock Purchase Plan In September 2019, the Board adopted, and stockholders approved, the Company's 2019 Employee Stock Purchase Plan (the "ESPP"). The ESPP became effective on September 25, 2019. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward the Company's success and that of its affiliates. The ESPP includes two components. One component is designed to allow eligible U.S. employees to purchase common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code. In addition, purchase rights may be granted under a component that does not qualify for such favorable tax treatment when necessary or appropriate to permit participation by eligible employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws. The maximum aggregate number of shares of common stock that may be issued under the ESPP is 2,271,288 shares and as of December 31, 2024, no shares have been issued under the ESPP. The number of shares of the Company's common stock reserved for issuance under its ESPP will automatically increase on January 1 of each calendar year for the remaining term of the plan by the lesser of (1) 1 % of the total number of shares of its capital stock outstanding on December 31 of the preceding calendar year, (2) 726,186 shares, and (3) a number of shares determined by the Board. The shares available for issuance increased by 344,690 shares, on January 1, 2024, pursuant to the automatic share reserve increase provision. Generally, all regular employees, including executive officers, employed by the Company or by any of its designated affiliates, will be eligible to participate in the ESPP and may contribute, normally through payroll deductions, up to 15 % of their earnings (as defined in the ESPP) for the purchase of common stock under the ESPP. Unless otherwise determined by the Board, common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85 % of the fair market value of a share of the Company's common stock on the first date of an offering or (b) 85 % of the fair market value of a share of the common stock on the date of purchase. 2021 Inducement Equity Incentive Plan Effective December 30, 2021, the Company adopted the 2021 Inducement Equity Incentive Plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 1,105,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The remaining maximum number of shares of our common stock that may be issued under the 2021 Inducement Plan net of vested and exercised shares, will not exceed 816,842 shares, of which, 442,014 were available for future awards as of December 31, 2024. The 2021 Inducement Plan was approved by the Company’s Board without stockholder approval in accordance with such rule. Stock Options The term of an option may not exceed 10 years as determined by the Board, and each option generally vests over a four-year period with 25 % vesting on the first anniversary date of the grant and 1/36th of the remaining amount vesting at monthly intervals thereafter. Option holders are allowed to exercise unvested options to acquire restricted shares. Upon termination of employment, option holders have a period of up to three months in which to exercise any remaining vested options. The Company has the right to repurchase at the original purchase price any unvested but issued common shares upon termination of service. Unexercised options granted to participants who separate from the Company are forfeited and returned to the pool of stock options available for grant. The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The fair value is then amortized ratably over the requisite service periods of the awards, which is generally the vesting period. 78 The fair value of stock option grants was estimated with the following assumptions: Year Ended December 31, 2024 (1) 2023 Expected volatility (employee) N/A 71.7 % Risk-free interest rate (employee) N/A 3.9 % Expected term (employee, in years) N/A 6.1 Expected dividend N/A — % (1) No stock options were granted for year ended December 31, 2024. These assumptions are defined as follows: • Expected Volatility ‑ Since the Company does not have enough trading history to use the volatility of its own common stock, the option’s expected volatility is estimated based on historical volatility of a peer group’s common stock. • Risk-Free Interest Rate ‑ The risk-free interest rate is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. • Expected Term ‑ The option’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. • Expected Dividend - The Company has no plans to pay dividends. Stock Option Activity - A summary of the Company's stock option activity under the 2005 Plan, 2015 Plan, and 2019 Plan at December 31, 2024 is as follows: (in thousands, except share and per share data) Options Outstanding Options Weighted-Average Exercise Price Weighted Average Remaining Life (in years) Aggregate Intrinsic Value Balance – January 1, 2024 2,559,153 18.25 4.31 $ — Options granted — — Options exercised — — Options canceled ( 656,940 ) 16.31 Options forfeited ( 39,355 ) 15.80 Balance – December 31, 2024 1,862,858 18.99 4.41 $ — Options vested and expected to vest - December 31, 2024 1,862,858 18.99 4.41 $ — Options vested and exercisable - December 31, 2024 1,730,718 19.46 4.21 $ — Information on stock options granted, exercised and vested is as follows: Year Ended December 31, (in thousands, except per share data) 2024 2023 Weighted average fair value per share of options granted $ — $ 3.85 Cash received from options exercised, net (1) — ( 46 ) Aggregate intrinsic value of options exercised — 268 Fair value of shares vested 1,424 3,500 (1) The amount reflected for the year ended December 31, 2023, is the net of cash received from options exercised of $ 0.8 million, and the cash paid for employee tax withholding settled in shares of $ 0.8 million. As of December 31, 2024 and 2023, the Company’s total unrecognized compensation cost related to nonvested stock-based option awards granted to employees was, $ 0.9 million and $ 2.6 million, respectively, which will be recognized over a weighted-average vesting period of approximately 1.3 years and 1.9 years, respectively. Restricted Stock Units The Company’s restricted stock units ("RSUs") vest upon the satisfaction of time-based criterion of up to three years . In most cases, the service-based requirement will be satisfied in installments as follows: 25 % of the total number of RSUs awarded will have the service-based requirement satisfied during the month in which the 12-month anniversary of the vesting commencement date occurs, and thereafter 1/16th of the total award in a series of 12 successive equal quarterly installments or 1/4th of the total award in a series of three successive equal annual installments following the first anniversary of the initial service vest date. Stock-based compensation cost for RSUs is measured based on the fair market value of the Company’s common stock on the date of grant. 79 A summary of the Company’s RSU activity under the 2015 Plan, 2019 Plan and 2021 Inducement Plan for the year ended December 31, 2024 is as follows: RSU Outstanding Weighted Average Grant-Date Fair Value Balance – January 1, 2024 4,041,874 8.43 Granted 3,076,090 3.16 Vested (1) ( 1,723,805 ) 8.49 Forfeited ( 939,172 ) 7.22 Balance – December 31, 2024 4,454,987 5.03 Expected to vest after December 31, 2024 4,386,647 4.98 (1) Prior to 2024, the Company allowed its Board to defer all or a portion of monetary remuneration paid to the Director. As of December 31, 2024, there were 68,340 restricted stock units vested for which the holders elected to defer delivery of the Company's shares. As of December 31, 2024 and 2023, the Company's total unrecognized compensation cost related to nonvested restricted stock unit awards granted to employees was, $ 15.3 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. Stock-based Compensation - Total stock-based compensation expense included in the Consolidated Statements of Operations, net of amounts capitalized to system development costs is as follows: Year Ended December 31, (in thousands of dollars) 2024 2023 Technology and facilities $ 3,362 $ 4,602 Sales and marketing 127 63 Personnel 9,500 13,928 Total stock-based compensation (1) $ 12,989 $ 18,593 (1) Amounts shown are net of $ 1.0 million and $ 1.4 million of capitalized stock-based compensation for the year ended December 31, 2024 and 2023, 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 $ 3.7 million and $ 5.1 million of income tax benefit in its Consolidated Statements of Operations related to stock-based compensation expense during the years ended December 31, 2024 and 2023, respectively. Additionally, the total income tax expense recognized in the income statement for share-based compensation exercises was $ 2.2 million and $ 3.5 million for the years ended December 31, 2024 and 2023, respectively. Retirement Plan The Company maintains a 401(k) Plan, which enables employees to make pre-tax or post-tax deferral contributions to the participating employees account. Employees may contribute a portion of their pay up to the annual amount as set periodically by the Internal Revenue Service. Prior to 2024, the Company provided for an employer 401(k) contribution match of up to 4 % of an employee’s eligible compensation. In addition, the Company provides a contribution to various savings funds for India and Mexico-based employees. The total expense related to the contributions recognized by the Company for the year ended December 31, 2024 and the total employer match and contributions recognized by the Company for the year ended December 2023 was $ 2.0 million and $ 6.2 million, respectively. All employee and employer contributions will be invested according to participants’ individual elections. 12. Revenue Interest Income - Total interest income included in the Consolidated Statements of Operations is as follows: Year Ended December 31, (in thousands) 2024 2023 Interest income Interest on loans $ 910,385 $ 945,118 Fees on loans 15,083 18,378 Total interest income $ 925,468 $ 963,496 80 Non-interest Income - Total non-interest income included in the Consolidated Statements of Operations is as follows: Year Ended December 31, (in thousands) 2024 2023 Non-interest income Servicing fees $ 13,814 $ 14,685 Subscription revenue 22,668 25,569 Interest on member accounts 24,221 21,075 Gain on loan sales and other 15,604 32,094 Total non-interest income $ 76,307 $ 93,423 13. Income Taxes The following are the domestic and foreign components of the Company’s income before taxes: Year Ended December 31, (in thousands) 2024 2023 Domestic $ ( 119,475 ) $ ( 261,620 ) Foreign 4,298 7,967 Income (loss) before taxes $ ( 115,177 ) $ ( 253,653 ) The provision for income taxes consisted of the following: Year Ended December 31, (in thousands) 2024 2023 Current Federal $ ( 3,385 ) $ 200 State $ 1,509 $ 260 Foreign $ ( 307 ) $ 2,743 Total current $ ( 2,183 ) $ 3,203 Deferred Federal ( 26,087 ) ( 52,885 ) State ( 8,355 ) ( 23,553 ) Foreign 130 ( 467 ) Total deferred $ ( 34,312 ) $ ( 76,905 ) Total provision for income taxes $ ( 36,495 ) $ ( 73,702 ) Income tax expense (benefit) was $( 36.5 ) million and $( 73.7 ) million for the years ended December 31, 2024 and 2023, which represents an effective tax rate of 31.7 % and 29.1 %, respectively. A reconciliation of income tax expense with the amount computed by applying the statutory U.S. federal income tax rates to income before provision for income taxes is as follows: Year Ended December 31, (in thousands) 2024 2023 Income tax (benefit) expense computed at U.S. federal statutory rate $ ( 24,187 ) $ ( 53,267 ) State tax ( 9,269 ) ( 19,209 ) Foreign rate differential ( 1,078 ) 603 Federal tax credits ( 4,284 ) ( 3,030 ) Share based compensation expense 1,795 2,870 Change in unrecognized tax benefit reserves 1,793 3,038 Return to provision adjustment ( 2,351 ) ( 5,674 ) Other 1,086 967 Income tax expense $ ( 36,495 ) $ ( 73,702 ) Effective tax rate 31.7 % 29.1 % 81 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating losses and tax credit carryforwards. The primary components of the Company’s net deferred tax assets and liabilities are composed of the following: December 31, (in thousands) 2024 2023 Deferred tax assets: Net operating loss & credit carryforward $ 70,534 $ 68,677 System development costs 25,665 5,619 Share-based compensation 6,276 6,618 Leases 4,772 7,494 Accrued expenses and reserves 3,371 3,032 Other 2,613 972 Total deferred tax assets $ 113,231 $ 92,412 Valuation allowance $ — $ — Deferred tax liabilities: Fair value adjustment - Loans Receivable $ ( 16,135 ) $ ( 7,095 ) Fair value adjustment - Bonds Payable ( 5,851 ) ( 24,930 ) Derivative instrument ( 3,611 ) ( 2,458 ) Depreciation and amortization ( 2,636 ) ( 4,232 ) Right of use assets ( 2,563 ) ( 5,574 ) Total deferred tax liabilities $ ( 30,796 ) $ ( 44,289 ) Net deferred taxes $ 82,435 $ 48,123 As provided for in the Tax Cuts and Jobs Act of 2017, our historical earnings were subject to the one-time transition tax and can now be repatriated to the U.S. with a de minimis tax cost due to the participation exemption put in place by the 2017 Tax Act. The Company continues to assert that both its historical and current earnings in its foreign subsidiaries are permanently reinvested and therefore no deferred taxes have been provided. As of December 31, 2024, the Company had federal net operating loss carryforwards of $ 172.3 million, of which $ 17.7 million expires beginning in 2033 and $ 154.6 million carries forward indefinitely. Additionally, the Company had state net operating loss carryforwards of $ 186.5 million which are set to begin expiring in 2030. As of December 31, 2024, the Company had federal and California research and development tax credit carryforwards of $ 21.9 million and $ 10.4 million, respectively. The federal research and development tax credit expires beginning in 2041, and the California research and development tax credits are not subject to expiration. The following table summarizes the activity related to the unrecognized tax benefits: Year Ended December 31, (in thousands) 2024 2023 Balance as of January 1, $ 8,648 $ 6,608 Increases related to current year tax positions 1,927 1,146 Increases related to prior year tax positions 4,654 1,844 Decreases related to prior year tax positions ( 2,790 ) ( 950 ) Balance as of December 31, $ 12,439 $ 8,648 Interest and penalties related to the Company’s unrecognized tax benefits accrued as of December 31, 2024 and 2023 were $ 0.2 million and $ 1.2 million, respectively. The Company’s policy is to recognize interest and penalties associated with income taxes in income tax expense and the Company recognized $ 0.3 million for both years ended December 31, 2024 and 2023, respectively. The Company does not expect uncertain tax positions to significantly increase or decrease within the next twelve months. The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, is $ 10.7 million. Due to the net operating loss carryforwards, the Company’s United States federal and significant state returns are open to examination by the Internal Revenue Service and state jurisdictions for years ended December 31, 2021 and 2014, respectively, and forward. For Mexico, all tax years ended December 31, 2019 and forward remain open for examination by the Mexico taxing authorities. For India, all tax years remain open for examination by the India taxing authorities. 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 adoption of Pillar Two rules does not have a significant impact to the consolidated financial statements during fiscal year 2024. 82 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: December 31, 2024 December 31, 2023 (in thousands) Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value Assets Loans receivable - personal loans $ 2,716,992 $ 2,778,523 $ 2,824,342 $ 2,853,186 Loans receivable - credit cards — — 111,145 109,166 Total loans receivable at Fair Value $ 2,716,992 $ 2,778,523 $ 2,935,487 $ 2,962,352 Liabilities Asset-backed notes $ 1,103,002 $ 1,080,690 $ 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 December 31, 2024 consists of $ 2,598.2 million of unsecured personal loans receivable and $ 180.3 million of secured personal loans receivable. December 31, 2024 December 31, 2023 Personal Loans Receivable Minimum Maximum Weighted Average (2) Minimum Maximum Weighted Average (2) Remaining cumulative charge-offs (1) 8.92 % 54.72 % 11.68 % 6.87 % 51.00 % 11.80 % Remaining cumulative prepayments (1) — % 34.55 % 24.70 % — % 28.17 % 23.83 % Average life (years) 0.29 1.74 1.11 0.18 1.37 1.01 Discount rate 7.92 % 7.92 % 7.92 % 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 years ended December 31, 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. 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. December 31, 2024 December 31, 2023 Credit Card 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 November 12, 2024, the Company completed the sale of its credit cards receivable portfolio to a third-party credit card marketer and servicer. 83 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 December 31, 2024 and 2023 were $ 13.8 million and $ 9.3 million, respectively. The underlying cash flows as of December 31, 2024 and 2023 were $ 16.9 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 Consolidated Balance Sheets: December 31, 2024 December 31, 2023 Low High Weighted Average Low High Weighted Average Remaining cumulative charge-offs — % 30.92 % 10.43 % 1.09 % 30.38 % 10.56 % Remaining cumulative prepayments 1.53 % 42.63 % 21.16 % 0.01 % 3.89 % 0.92 % Average life (years) 0.44 2.05 1.45 0.36 2.00 1.64 Discount rate 17.29 % 17.29 % 17.29 % 17.00 % 17.00 % 17.00 % On November 12, 2024, the Company completed the sale of 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: December 31, (in thousands) 2024 2023 Balance – beginning of period $ 2,962,352 $ 3,175,449 Principal disbursements 2,662,305 2,841,916 Principal and interest payments from members ( 2,305,839 ) ( 2,440,365 ) Other loan sales ( 78,522 ) ( 159,138 ) Gross charge-offs ( 401,971 ) ( 437,330 ) Credit card receivables reclassified as held for sale ( 55,720 ) — Net (decrease) increase in fair value ( 4,082 ) ( 18,180 ) Balance ‑ end of period $ 2,778,523 $ 2,962,352 84 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: December 31, 2024 Carrying value Estimated fair value Estimated fair value (in thousands) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 59,968 $ 59,968 $ 59,968 $ — $ — Restricted cash 154,657 154,657 154,657 — — Liabilities Accounts payable 6,586 6,586 6,586 — — Secured financing (Note 8) 539,204 537,646 — 537,646 — Asset-backed borrowings at amortized cost (Note 8) 982,582 984,687 — 481,655 503,032 Acquisition and corporate financing (Note 8) 235,768 236,105 — 236,105 — 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 — (1) 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. • 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 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. As of the year ended December 31, 2024, Oportun CL Trust 2023-A asset-backed note transferred from Level 3 to Level 2. There were no other transfers in or out of Level 3 assets and liabilities for the years ended December 31, 2024 and 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 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-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 Consolidated Statements of Operations. 85 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 December 31, 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 2025 $ 11,561 2026 5,663 2027 2,433 2028 1,007 2029 415 Thereafter 134 Total lease payments 21,213 Imputed interest ( 1,797 ) Total leases $ 19,416 Sublease income 2025 $ ( 586 ) 2026 ( 604 ) 2027 ( 153 ) 2028 — 2029 — 2023 and thereafter — Total lease payments ( 1,343 ) Imputed interest 127 Total sublease income $ ( 1,216 ) Net lease liabilities $ 18,200 Weighted average remaining lease term 2.4 years Weighted average discount rate 5.16 % 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 years ended December 31, 2024 and 2023 were $ 12.3 million and $ 17.4 million, respectively. Purchase Commitment ‑ 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 86 Company’s purchase obligations are $ 39.9 million in 2025, $ 19.2 million in 2026, $ 2.1 million in 2027, $ 0.0 million in 2028, and $ 0.0 million in 2029 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 December 31, 2024, the Company has a commitment to purchase an additional $ 32.3 million of program loans based on originations through December 31, 2024. Unfunded Loan and Credit Card Commitments - Unfunded loan and credit card commitments at December 31, 2024 were insignificant due to the termination of the Amended and Restated Credit Card Program and Servicing Agreement, dated as of February 5, 2021, by and between the Company and WebBank, effective November 10, 2024. In addition, unfunded loan and credit card commitments at December 31, 2023 were $ 32.9 million. 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 December 31, 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. 16. Related Party Transactions On September 14, 2022, the Company entered into the Original Credit Agreement to borrow $ 150.0 million through a senior secured term loan. On March 10, 2023, the Company upsized and amended the Original Credit Agreement and borrowed an additional $ 75.0 million over four separate tranches from March 10, 2023 to June 30, 2023. In connection with the amendment of the Original Credit Agreement, 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”). On October 23, 2024, the Company entered into the Refinancing Credit Agreement with certain affiliates of Neuberger and McLaren Harbor LLC, pursuant to which the Company borrowed $ 235 million through a senior secured term loan. Upon the closing of the Refinancing Term Loan, the Company repaid all amounts due under the Original Credit Agreement in full. In connection with the Refinancing Credit Agreement, the lenders retained the previously issued Warrants and the Company issued the Neuberger affiliated lenders additional Warrants to purchase a total of 2,426,503 shares of its common stock at an exercise price of $ 0.01 per share. Accordingly, Neuberger is 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 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, the Company amended the agreement to extend the term and revised the commitment amount to instead sell $ 370.9 million of personal loan originations in aggregate through October 2024. In October 2024, the Company fulfilled its commitment under the agreement. The Company will continue to service these loans upon transfer of the receivables. As part of this agreement, during the years ended December 31, 2024 and 2023, the Company transferred loans receivable totaling $ 151.0 million and $ 220.5 million, respectively. See Liquidity and Capital Resources section for additional information on the forward flow whole loan sale agreement. For the years ended December 31, 2024 and 2023, the Company recorded interest expense of $ 57.0 million and $ 38.3 million, respectively, related to the Corporate Financing facility. In addition, the Company recorded interest expense of $ 29.9 million and $ 8.7 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 $ 57.7 million and $ 20.0 million, of interest income in the Company’s Consolidated Statements of Operations for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, loans receivable at fair value underlying the secured borrowing were $ 241.3 million and $ 200.8 million, respectively. The Company had Asset-backed borrowings at amortized cost of $ 247.9 million and Corporate Financing of $ 101.9 million due to Neuberger as of December 31, 2024 and $ 201.8 million and $ 204.1 million, respectively, due as of December 31, 2023. The Company also had an insignificant amount of Interest and fee receivable, net and Other liabilities in its Consolidated Balance Sheets as of December 31, 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. 87 17. Segment Reporting 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 Company has one reportable segment. The segment provides unsecured and secured borrowings, savings and budgeting products to its members. The Company derives revenue within North America and manages the business activities on a consolidated basis. Interest income is derived from the Company's lending products and includes loan interest and associated fees, while non-interest income is largely driven by the Company's savings product and includes subscription revenue, and interest on member accounts. Net income is the primary measure of segment profit and loss reviewed by CODM to assess business performance and strategy on allocation of resources, such as new product development and management’s compensation. They also use to Net Income to review and approve the Company’s operating budget and financial forecasts. Net income is reported on the unaudited Condensed Consolidated Statement of Operations as consolidated net income (loss). The measure of segment assets is presented on the unaudited Condensed Consolidated Balance Sheet as Total Assets. 18. Subsequent Events 2025-A Securitization On January 16, 2025, the Company announced the issuance of approximately $ 425.1 million one-year asset-backed notes secured by a pool of its unsecured and secured personal installment loans (the “2025-A Securitization”). The 2025-A Securitization included five 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 6.95 % per annum and a weighted average coupon of 6.15 % per annum. 88 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.