OPORTUN FINANCIAL CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

An index of our MD&A follows:

Topic

   Forward-Looking Statements                                                      21
   Overview                                                                        22

   Key Financial and Operating Metrics                                             24
   Historical Credit Performance                                                   26
   Results of Operations                                                           28
   Fair Value Estimate Methodology for Loans Receivable at Fair Value              35
   Non-GAAP Financial Measures                                                     36
   Liquidity and Capital Resources                                                 39
   Critical Accounting Policies and Significant Judgments and Estimates            42
   Recently Issued Accounting Pronouncements                                       42



You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and the related notes and other financial information
included elsewhere in this report and the audited consolidated financial
statements and the related notes and the discussion under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the fiscal year ended December 31, 2021 included in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission, on March
1, 2022. Some of the information contained in this discussion and analysis,
including information with respect to our plans and strategy for our business,
includes forward-looking statements that involve risks and uncertainties. You
should review the "Risk Factors" section of this report for a discussion of
important factors that could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in
the following discussion and analysis.

Forward-looking statements


This report contains forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), concerning our business, operations and
financial performance and condition, as well as our plans, objectives and
expectations for our business operations and financial performance and
condition. Any statements contained herein that are not statements of historical
facts are forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "aim," "anticipate," "assume,"
"believe," "contemplate," "continue," "could," "due," "estimate," "expect,"
"goal," "intend," "may," "objective," "plan," "predict," "potential,"
"positioned," "seek," "should," "target," "will," "would," and other similar
expressions that are predictions of or indicate future events and future trends,
or the negative of these terms or other comparable terminology, although not all
forward-looking statements contain these words. These forward-looking statements
include, but are not limited to, statements about:

•our ability to increase the volume of loans we grant;

• our ability to manage our net charge rates;

•the successful integration of Hello Digit, Inc. (“Digit”) with our business;


•our expectations and management of future growth, including expanding our
markets served, member base and product and service offerings, including our
digital banking services;

•our ability to successfully adjust our proprietary credit risk models and
products in response to changing macroeconomic conditions and fluctuations in
the credit market;

•our expectations regarding our costs and seasonality;

•our ability to successfully build our brand and protect our reputation from negative publicity;

• our ability to expand our digital origination capabilities and increase the volume of loans originated through our digital channels;

• our ability to increase the effectiveness of our marketing efforts;

• our ability to increase our market share in existing markets or in any new markets we may enter;

•our ability to continue to expand our demographic target;


•our ability to maintain or expand our relationships with our current partners,
including bank partners, and our plans to acquire additional partners using our
Lending as a Service model;

•our ability to successfully manage our interest rate differential relative to our cost of capital;

•our ability to maintain the terms on which we lend to our borrowers;

•our plans and our ability to successfully maintain our diversified financing strategy, including warehousing facilities, loan sales and securitization transactions;

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•our ability to manage the risk of fraud;

• our expectations regarding the adequacy of our cash to meet our operating and cash expenses;

• our ability to effectively estimate the fair value of our loans receivable held for investment and our asset-backed notes;

• our ability to effectively secure and maintain the confidentiality of information provided and used in our systems;

• our ability to compete successfully with companies that are currently present or may enter in the future in the markets in which we operate;

•our ability to attract, integrate and retain qualified employees;

•the effect of macroeconomic conditions on our business, including the impact of the COVID-19 pandemic, rising interest rates and recession or slowing growth;

• our ability to effectively manage and develop the capabilities of our contact centers, outsourcing relationships and other overseas business operations; and

•our ability to adapt successfully to complex and evolving regulatory environments.



Forward-looking statements are based on our management's current expectations,
estimates, forecasts, and projections about our business and the industry in
which we operate and on our management's beliefs and assumptions. In addition,
statements that "we believe" and similar statements reflect our beliefs and
opinions on the relevant subject. These statements are based upon information
available to us as of the date of this Quarterly Report on Form 10-Q, and while
we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read
to indicate we have conducted exhaustive inquiry into, or review of, all
potentially available relevant information. We anticipate that subsequent events
and developments may cause our views to change. Forward-looking statements do
not guarantee future performance or development and involve known and unknown
risks, uncertainties, and other factors that are in some cases beyond our
control. Factors that may cause actual results to differ materially from current
expectations include, among other things, those listed under the heading "Risk
Factors" and elsewhere in this report. We also operate in a rapidly changing
environment and new risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of all factors on
our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in, or implied
by, any forward-looking statements. As a result, any or all of our
forward-looking statements in this report may turn out to be inaccurate.
Furthermore, if the forward-looking statements prove to be inaccurate, the
inaccuracy may be material.

You should read this report keeping in mind that our actual future results, levels of activity, performance and achievements may differ materially from what we expect.


These forward-looking statements speak only as of the date of this report.
Except as required by law, we assume no obligation to update or revise these
forward-looking statements for any reason, even if new information becomes
available in the future. We qualify all of our forward-looking statements by
these cautionary statements.

Insight


We are a financial technology company and digital banking platform driven by our
mission to provide inclusive, affordable financial services that empower our
members to build a better future. By intentionally designing our products with
our members in mind, we are focused on realizing our vision to deliver a
complete set of financial solutions that meet the needs of hardworking people,
from borrowing and banking to savings, investing and more. We take a holistic
approach to serving our members and view it as our purpose to responsibly meet
their current capital needs, help grow our members' financial profiles, increase
their financial awareness and put them on a path to a financially healthy life.
In our 16-year lending history, we have extended more than $14.7 billion in
responsible credit through more than 6.0 million loans and credit cards. We have
been certified as a Community Development Financial Institution ("CDFI") by the
U.S. Department of the Treasury since 2009.

With our recent acquisition of Digit, we believe we now have a strong
competitive advantage over other fintechs and neobanks. As a combined company,
we can now offer access to a comprehensive suite of digital banking products,
offered either directly or through partners, including lending, savings and
investing powered by A.I. and tailored to each member's goals.

Our financial products allow us to meet our members where they are and assist
them with their overall financial health, resulting in opportunities to present
multiple relevant products to our members. Our credit products include personal
loans, secured personal loans and credit cards. Our digital banking products
include digital banking, automated savings, long-term investing and retirement
savings. Consumers are able to become members and access our products through
our digital banking app-the Digit app-and the Oportun.com website, which are our
primary channels for onboarding and serving members. Our personal loan products
are also available over the phone or through over 550 retail locations, which
includes 348 of our Lending as a Service partner locations.

Credit products


Personal Loans - Our personal loan is a simple-to-understand, affordable,
unsecured, fully amortizing installment loan with fixed payments throughout the
life of the loan. We charge fixed interest rates on our loans, which vary based
on the amount disbursed and applicable state law, with a cap of 36% annual
percentage rate ("APR") in all cases. As of September 30, 2022, for all active
loans in our portfolio and at time of disbursement, the weighted average term
and APR at origination was 37 months and 32.1%, respectively. The average loan
size for loans we originated during the three months ended September 30, 2022
was $4,414. Our loans do not have prepayment penalties or balloon payments, and
typically range in size
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from $300 to $12,000 with terms of 12 to 60 months. Generally, loan payments are
structured on a bi-weekly or semi-monthly basis to coincide with our members'
receipt of their income. As part of our underwriting process, we verify income
for all applicants and only approve loans that meet our ability-to-pay criteria.
As of September 30, 2022, we originate unsecured personal loans in 12 states
through state licenses and in 30 through our partnership with Pathward, N.A.
(formerly known as MetaBank, N.A.).

Secured Personal Loans - In April 2020, we launched a personal installment loan
product secured by an automobile, which we refer to as secured personal loans.
Our secured personal loans range in size from $2,525 to $20,000 with terms
ranging from 24 to 63 months. The average loan size for secured personal loans
we originated during the three months ended September 30, 2022 was $8,107. As of
September 30, 2022, for all active loans in our portfolio and at time of
disbursement, the weighted average term and APR at origination was 48 months and
28.5%, respectively. As part of our underwriting process, we evaluate the
collateral value of the vehicle, verify income for all applicants and only
approve loans that meet our ability-to-pay criteria. Our secured personal loans
are currently offered in California, Texas, Florida, Arizona and New Jersey and
we are in the process of considering expansion into other states.

Credit Cards - We launched Oportun® Visa® Credit Card, issued by WebBank, Member
FDIC, in December 2019, and offer credit cards in 45 states as of September 30,
2022. Credit lines on our credit cards range in size from $300 to $3,000 with an
APR between 24.9% to 29.9%. The average APR of the outstanding credit card
receivables was 29.8% as of September 30, 2022. The average credit line for
credit cards activated during the three months ended September 30, 2022 was
$793.

Digital banking products


Digit Savings - Our Digit Savings product is designed to understand a member's
cash flows and save a calculated amount on a regular basis to effortlessly
achieve savings goals. Digit's savings product utilizes machine learning to
analyze a member's transaction activity and build forecasts of the member's
future cash flows to make small, frequent savings decisions according to the
member's financial goals in a personalized manner. Members integrate their
existing bank accounts into the platform or they can make Digit their primary
banking relationship through a bank partner. After one year using the automated
savings product, members have been able to increase their liquid savings by
approximately 50%. Since 2015 Digit has helped members save more than $8.5
billion and pay down more than $330.0 million in debt.

Digit Direct - Our Digit Direct product offers a full checking account, through
a bank partner, that intelligently organizes and budgets a member's money across
bills, savings, and spending. The bank account with a brain™, Digit Direct
leverages the same A.I. engine used for our savings product to automatically
identify and organize recurring bills and guides spending to ensure members'
savings goals are met, and that members know exactly what they can safely spend.
This is on top of what members can expect from a traditional checking account,
including a physical and virtual debit card to use for purchases and ATM
withdrawals and checks.

Digit Investing and Digit Retirement - Our Digit investment and retirement
products are a longer-term savings solution via an A.I.-driven portfolio
allocation into low-cost investments based upon risk-tolerance. Our long-term
investment solutions automatically allocates our members' savings into low-cost
risk-adjusted portfolios held in brokerage accounts or tax-advantaged IRAs.
Since 2020, our members have invested $60.8 million into long-term goals through
low-cost ETF portfolios. The investment products include a general investing
account and a retirement account for our members' longer term goals, utilizing
smart recommendations to invest savings in risk-adjusted portfolios.

The funds in these savings, checking, investment and retirement accounts belong to Digit members and are not the assets of the Company. Accordingly, these funds are not included in the Condensed Consolidated Balance Sheets (unaudited).

Ready as a service


Beyond our core direct-to-consumer lending business, we believe that we can
leverage our proprietary credit scoring and underwriting model to partner with
other consumer brands and expand our member base. With our Lending as a Service
model, our partner markets loans and enters borrower applications into our
system and Oportun underwrites, originates, and services the loans. Our first
Lending as a Service strategic partner was DolEx Dollar Express, Inc. with an
initial launch in December 2020. In October of 2021, we launched another Lending
as a Service partnership with Barri Financial Group in select locations. In
January 2022, we announced our first all-digital Lending as a Service
partnership with Sezzle, a leading provider of Buy Now Pay Later ("BNPL")
financing options. When deployed, Oportun will be available as a checkout
option, through Sezzle, for larger purchases of goods and services on a BNPL
basis, which we believe will allow us to reach more new members. We anticipate
launching as a Sezzle checkout option before the end of 2022.

Capital market financing


To fund our growth at a low and efficient cost, we have built a diversified and
well-established capital markets funding program, which allows us to partially
hedge our exposure to rising interest rates or credit spreads by locking in our
interest expense for up to three years. Over the past eight years, we have
executed 19 bond offerings in the asset-backed securities market, the last 16 of
which include tranches that have been rated investment grade. We have issued
two- and three-year fixed rate bonds which have provided us committed capital to
fund future loan originations at a fixed Cost of Debt. On July 22, 2022, we
issued $400.0 million of amortizing asset-backed notes. On September 14, 2022,
the Company entered into a credit agreement for a $150 million senior secured
term loan. The term loan bears interest, payable in cash, at an amount equal to
1-month term SOFR plus 9.00%. The term loan is scheduled to mature on September
14, 2026, and is not subject to amortization. On November 3, 2022, we issued
$300 million of amortizing asset-backed notes. For additional information, see
Note 9,   Borrowings   of the Notes to the Condensed Consolidated
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Financial statements (unaudited) included elsewhere in this report.


Through March 4, 2022, we were also party to a whole loan sale program whereby
we sold a percentage of our loans to a third-party financial institution. We
allowed the whole loan sale program agreement to expire on its own terms. In
March 2022, we participated in a securitization and sold loans through the
issuance of amortizing asset-backed notes secured by a pool of our unsecured and
secured personal installment loans. We also sold our share of the residual
interest in the pool. The sold loans had an aggregate unpaid principal balance
of approximately $227.6 million ("2022-1 transaction"). In April 2022, we sold a
population of loans that had an aggregate unpaid principal balance, including
unpaid interest and fees, of approximately $16.3 million ("Q2 2022 Loan Sale").
During the third quarter of 2022, we sold populations of loans that had an
aggregate unpaid principal balance, including unpaid interest and fees, of
approximately $22.2 million ("Q3 2022 Loan Sales"). In addition to possible
future whole loan, structured or other loan sales, we also have a $600.0 million
Personal Loan Warehouse facility with a term through September 2024 and a
$150.0 million Credit Card Warehouse facility with a term through December 2023
which also helps to fund our receivables growth.

Acquiring digits


On December 22, 2021, we acquired Digit and it became our wholly-owned
subsidiary. Digit is a digital banking platform that provides automated savings,
banking and investing tools. With Digit, members can keep and integrate their
existing bank accounts into the platform, or with Digit, they can make Oportun
their primary banking relationship by opening new accounts via a bank partner.
By acquiring Digit, we further expanded our A.I. and digital capabilities and
added additional service offerings to provide members a comprehensive suite of
digital banking products, either directly or through our partners.

Retail Network Optimization


During the first quarter of 2021, pursuant to our retail network optimization
plan we closed 136 retail locations and reduced a portion of the employee
workforce who managed and operated these retail locations. The income statement
impact for the three and nine months ended September 30, 2021 was $0.1 million
and $12.8 million, respectively, and was recorded through General,
administrative and other on the Condensed Consolidated Statements of Operations
(Unaudited). These amounts included expenses related to the retail location
closures and all severance and benefits-related costs.

During the first quarter of 2022, we made the decision to close an additional 27
retail locations in April 2022 and reduce a portion of the workforce who manage
and operate these retail locations. The income statement impact for the three
and nine months ended September 30, 2022 was $0.2 million and $1.9 million,
respectively, and was recorded through General, administrative and other on the
Condensed Consolidated Statements of Operations (Unaudited). These amounts
included expenses related to the retail location closures and all severance and
benefits-related costs and we do not expect any significant additional expenses
to be incurred.

Main financial and operational indicators


We monitor and evaluate the following key metrics in order to measure our
current performance, develop and refine our growth strategies, and make
strategic decisions.

                                                    As of or for the Three Months                  As of or for the Nine Months
                                                         Ended September 30,                            Ended September 30,
(in thousands of dollars)                             2022                    2021                   2022                   2021
Key Financial and Operating Metrics
Members (1)                                          1,858,335               772,361               1,858,335               772,361
Products (1)                                         1,981,310               772,361               1,981,310               772,361
Aggregate Originations                         $       634,193           $   662,105          $    2,312,485           $ 1,430,383

30+ Day Delinquency Rate                                   5.4   %               2.8  %                  5.4   %               2.8  %
Annualized Net Charge-Off Rate                             9.8   %               5.5  %                  9.0   %               6.8  %
Return on Equity                                         (70.1)  %              18.3  %                (16.1)  %               9.1  %
Adjusted Return on Equity                                  5.6   %              19.0  %                 15.0   %              14.4  %

Other useful measures


Managed Principal Balance at End of
Period                                         $     3,351,450           $ 2,147,856          $    3,351,450           $ 2,147,856
Owned Principal Balance at End of Period       $     2,969,656           $ 1,862,143          $    2,969,656           $ 1,862,143
Average Daily Principal Balance                $     2,903,928           $ 1,741,358          $    2,633,169           $ 1,654,582


(1) The 772,361 Members and Products reported as of September 30, 2021 reflect
our previously defined and disclosed "Active Customer" metric. Products
presented as of September 30, 2021 represents one product per member as we did
not have members with multiple products at that time. Effective January 1, 2022,
Active Customers is no longer a Key Financial and Operating Metric. See the
definitions of Members and Products in the Glossary at the end of Part II.

See “Glossary” at the end of Part II of this report for formulas and definitions of our key performance measures.

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Members


Reflecting our acquisition of Digit and its users, we define Members as
borrowers with an outstanding or successfully paid off loan, originated by us or
under a bank partnership program that we service, or individuals who have been
approved for a credit card issued under a bank partnership program. Members also
include individuals who have signed-up to use or are using any of our Digit
Savings, Digit Direct, Digit Investing and/or Digit Retirement products. We view
Members as an indication of growth of our business and our ability to establish
long term relationships with the users of our products. Member growth is
generally an indicator of future revenue, but is not directly correlated with
revenue, since not all Members who sign up for one of our products fully utilize
or continue to use our products.

Members numbered 1.9 million at September 30, 2022and includes members acquired as part of the acquisition of Digit on December 22, 2021.

Some products


Products refers to the aggregate number of personal loans and/or credit card
accounts that our Members have had or been approved for that have been
originated by us or through one of our bank partners. Products also include the
aggregate number of digital banking products we offer as a result of our
acquisition of Digit, including Digit Savings, Digit Direct, Digit Investing and
Digit Retirement, that our Members use or have signed-up to use. We view
Products as an indicator of the effectiveness of our member acquisition efforts
and multiproduct adoption.

Products from September 30, 2022 were 2.0 million.

Aggregated origins


Aggregate Originations decreased to $634.2 million for the three months ended
September 30, 2022 from $662.1 million for the three months ended September 30,
2021, representing a 4.2% decrease. The decrease is primarily driven by fewer
loans originated; partially offset by growth in average loan size. We originated
153,680 and 210,731 loans for the three months ended September 30, 2022 and
2021, respectively. The decrease is primarily driven by our tightening of credit
underwriting standards and focusing lending towards existing and returning
members to improve credit outcomes.

Aggregate Originations increased to $2,312.5 million for the nine months ended
September 30, 2022 from $1,430.4 million for the nine months ended September 30,
2021, representing a 61.7% increase. The increase is primarily driven by a
larger number of loans originated and growth in average loan size. We originated
623,664 and 479,183 loans for the nine months ended September 30, 2022 and 2021,
respectively. The increase is primarily driven by an increased number of
applications due to higher demand, partially offset by a reduction in our
approval rate as we tightened credit.

Delinquency rate over 30 days


Our 30+ Day Delinquency Rate was 5.4% and 2.8% as of September 30, 2022 and
2021, respectively. The increase reflects the higher mix of first-time borrowers
and the return to pre-pandemic underwriting criteria later in 2021. In mid-2022,
we focused lending towards existing and returning members to address rising
delinquencies.

Annualized net imputation rate


Annualized Net Charge-Off Rate for the three months ended September 30, 2022 and
2021 was 9.8% and 5.5%, respectively. Annualized Net Charge-Off Rate for the
nine months ended September 30, 2022 and 2021 was 9.0% and 6.8%, respectively.
The increase is primarily driven by a higher mix of first-time borrowers in 2022
compared to 2021. In response to this increase, we focused lending towards
existing and returning members in mid-2022 to improve credit outcomes as
existing and returning members generally have lower loss rates. Further, due to
credit tightening in response to the COVID-19 pandemic and government stimulus
payments our Annualized Net Charge-Off Rate was lower in 2021. We anticipate
that this rate may increase further this year in the current environment due to
the impact of inflation on members.

Return on equity and adjusted return on equity

For the three months ended September 30, 2022 and 2021, return on equity was (70.1)% and 18.3%, respectively, and adjusted return on equity was 5.6% and 19.0%, respectively, for the nine months ended September 30, 2022 and 2021, return on equity was (16.1)% and 9.1%, respectively, and adjusted return on equity was 15.0% and 14.4%, respectively.


The decreases in Return on Equity for the three and nine months ended were
primarily due to lower net income. The lower net income was primarily driven by
the non-cash goodwill impairment charge, the decrease in the fair value of our
loan portfolio as a result of higher loss and discount rate assumptions, an
increase in operating expenses and an increase in interest expense, partially
offset by increased revenue for the three and nine months ended September 30,
2022 compared to the three and nine months ended September 30, 2021.

The decrease in Adjusted Return on Equity for the three months ended September
30, 2022 was primarily due to lower Adjusted Net Income for the three months
ended September 30, 2022 compared to the three months ended September 30, 2021.
The improvement in Adjusted Return on Equity for the nine months ended September
30, 2022 was primarily due to higher Adjusted Net Income for the nine months
ended September 30, 2022 compared to the nine months ended September 30, 2021.
For a reconciliation of Return on Equity to Adjusted Return on Equity, see
"Non-GAAP Financial Measures."

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Historical credit performance


Our A.I.-driven credit models enable us to originate loans with low and stable
loss rates. Our Annualized Net Charge-Off Rate ranged between 7% and 9% from
2011 to 2019 and was 9.8% in 2020, a modest variance above this range during the
pandemic. Due to credit tightening in response to the COVID-19 pandemic and
government stimulus payments our Annualized Net Charge-Off Rate decreased to
6.8% in 2021. While we anticipate that the Annualized Net Charge-Off Rate could
increase further in the current environment due to the impact of inflation on
members, we have seen a decrease in early-stage delinquencies, with 8 to 14 day
delinquencies and 15 to 29 day delinquencies of 1.7% and 1.8%, respectively, as
of September 30, 2022 as compared to 1.7% and 2.1%, respectively, as of July 31,
2022 when we further tightened our credit underwriting standards and focused
lending towards existing and returning members to improve credit outcomes.
Consistent with our charge-off policy, we charge a loan off at the earlier of
when the loan is determined to be uncollectible or when the loan is 120 days
contractually past due and charge-off a credit card account when it is 180 days
contractually past due.

                    [[Image Removed: oprt-20220930_g1.jpg]]

*Figures shown reflect year-to-date amounts for the nine months ended September 30for the fiscal year indicated.


In addition to monitoring our loss and delinquency performance on an owned
portfolio basis, we also monitor the performance of our loans by the period in
which the loan was disbursed, generally years or quarters, which we refer to as
a vintage. We calculate net lifetime loan loss rate by vintage as a percentage
of original principal balance. Net lifetime loan loss rates equal the net
lifetime loan losses for a given year through September 30, 2022 divided by the
total origination loan volume for that year.

The below chart and table shows our net lifetime loan loss rate for each annual
vintage of our personal loan product since we began lending in 2006, excluding
loans originated from July 2017 to August 2020 under a loan program for
borrowers who did not meet the qualifications for our core loan origination
program. 100% of those loans were sold pursuant to a whole loan sale agreement.
We were able to stabilize cumulative net loan losses after the financial crisis
that started in 2008. We even achieved a net lifetime loan loss rate of 5.5%
during the peak of the recession in 2009. The evolution of our credit models has
allowed us to increase our average loan size and commensurately extend our
average loan terms. Cumulative net lifetime loan losses for the 2015, 2016,
2017, and 2018 vintages increased partially due to the delay in tax refunds in
2017 and 2019, the impact of natural disasters such as Hurricane Harvey, and the
longer duration of the loans. The 2018 and 2019 vintages are increasing due to
the COVID-19 pandemic. The 2021 vintage is running higher than prior vintages
primarily due to a higher percentage of loan disbursements to new members. We
have tightened credit and began reducing loan volumes to new members in the
third quarter of 2021 and reduced further during 2022.



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                    [[Image Removed: oprt-20220930_g2.jpg]]

                                                                                                                 Year of Origination
                            2007         2008         2009           2010           2011          2012          2013          2014          2015          2016          2017          2018           2019            2020           2021
Dollar weighted
average original
term for vintage in
months                      9.3          9.9          10.2           11.7           12.3          14.5          16.4          19.1          22.3          24.2          26.3          29.0           30.0            32.0           33.3
Net lifetime loan
losses as of
September 30, 2022
as a percentage of
original principal
balance                     7.7%         8.9%         5.5%           6.4%           6.2%          5.6%          5.6%          6.1%          7.1%          8.0%          8.2%          9.8%          10.5%*          6.8%*          6.0%*
Outstanding
principal balance as
of September 30,
2022 as a percentage
of original amount
disbursed                    -%           -%           -%             -%   
         -%            -%            -%            -%            -%            -%            -%           0.6%           3.7%           22.0%          62.6%

* Vintage is not yet fully mature from a loss standpoint.

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Operating results


The following tables and related discussion set forth our Condensed Consolidated
Statements of Operations (Unaudited) for each of the three and nine months ended
September 30, 2022 and 2021.

                                                Three Months Ended September 30,        Nine Months Ended September 30,
(in thousands of dollars)                            2022                2021               2022                2021
Revenue
Interest income                                 $   232,115          $ 145,444          $  632,007          $ 401,224
Non-interest income                                  17,961             13,640              58,591             31,427
Total revenue                                       250,076            159,084             690,598            432,651
Less:
 Interest expense                                    26,671             10,574              57,452             36,241

Total net decrease in fair value                    (76,422)            (8,987)           (135,935)           (26,457)
Net revenue                                         146,983            139,523             497,211            369,953
Operating expenses:
Technology and facilities                            56,113             34,226             158,090            100,274
Sales and marketing                                  21,781             32,102              88,690             79,743
Personnel                                            39,959             29,039             114,514             84,412
Outsourcing and professional fees                    18,620             13,348              50,112             40,762
General, administrative and other                    14,401              2,686              44,698             22,862
Goodwill impairment                                 108,472                  -             108,472                  -
Total operating expenses                            259,346            111,401             564,576            328,053
Income (loss) before taxes                         (112,363)            28,122             (67,365)            41,900
Income tax expense (benefit)                         (6,536)             5,143               1,956              8,652
Net income (loss)                               $  (105,827)         $  22,979          $  (69,321)         $  33,248



Total revenue
                                             Three Months Ended                                                                      Nine Months Ended
                                                September 30,                         Period-to-period Change                          September 30,                       Period-to-period Change
(in thousands, except
percentages)                               2022               2021                      $                        %                2022               2021                    $                     %
Revenue
Interest income                        $ 232,115          $ 145,444          $              86,671              59.6  %       $ 632,007          $ 401,224          $        230,783              57.5  %
Non-interest income                       17,961             13,640                          4,321              31.7  %          58,591             31,427                    27,164              86.4  %
Total revenue                          $ 250,076          $ 159,084          $              90,992              57.2  %       $ 690,598          $ 432,651          $        257,947              59.6  %
Percentage of total revenue:
Interest income                             92.8  %            91.4  %                                                             91.5  %            92.7  %
Non-interest income                          7.2  %             8.6  %                                                              8.5  %             7.3  %
Total revenue                              100.0  %           100.0  %                                                            100.0  %           100.0  %



Interest Income. Total interest income increased by $86.7 million, or 59.6%,
from $145.4 million for the three months ended September 30, 2021 to $232.1
million for the three months ended September 30, 2022. This increase was
primarily attributable to higher Average Daily Principal Balance, which
increased from $1.74 billion for the three months ended September 30, 2021 to
$2.90 billion for the three months ended September 30, 2022. The increase was
partially offset by a decrease in portfolio yield of 143 basis points in the
three months ended September 30, 2022 compared to the three months ended
September 30, 2021 driven by our tightening of credit underwriting standards and
focusing lending towards existing and returning members who generally receive
lower APRs, but have lower loss rates compared to new members.

Total interest income increased by $230.8 million, or 57.5%, from $401.2 million
for the nine months ended September 30, 2021 to $632.0 million for the nine
months ended September 30, 2022. This increase was primarily attributable to
higher Average Daily Principal Balance, which increased from $1.65 billion for
the nine months ended September 30, 2021 to $2.63 billion for the nine months
ended September 30, 2022. The increase was partially offset by a decrease in
portfolio yield of 33 basis points in the nine months ended September 30, 2022
compared to the nine months ended September 30, 2021 driven by our tightening of
credit underwriting standards and focusing lending towards existing and
returning members who generally receive lower APRs, but have lower loss rates
compared to new members.

Non-interest income. Total non-interest income increased by $4.3 million, or
31.7%, from $13.6 million for the three months ended September 30, 2021 to $18.0
million for the three months ended September 30, 2022. This increase is
primarily due to $9.7 million attributable to Digit subscription income and $2.0
million increase in servicing revenue. This was partially offset by decreased
gain on loans sold of $7.3 million under our whole loan sale programs due to the
expiration of our whole loan sale agreement on March 4, 2022.

                                       28
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Total non-interest income increased by $27.2 million, or 86.4%, from $31.4
million for the nine months ended September 30, 2021 to $58.6 million for the
nine months ended September 30, 2022. This increase is primarily due to $28.1
million attributable to Digit subscription income, $6.3 million increase in
servicing revenue, $2.3 million of increased fees related to our credit card
portfolio and $1.8 million increase related to our Pathward, N.A. documentation
fees. This was partially offset by decreased gain on loans sold of $11.4
million, or 66.6% under our whole loan sale programs due to the expiration of
our whole loan sale agreement on March 4, 2022.

See Note 2, Summary of Significant Accounting Policies, and Note 13,

Revenue, notes to the condensed consolidated financial statements (unaudited) included elsewhere in this report for further discussion of our interest revenue, non-interest revenue and revenue.

Interest expense

                                           Three Months Ended                                                                   Nine Months Ended
                                              September 30,                        Period-to-period Change                        September 30,                        Period-to-period Change
(in thousands, except
percentages)                             2022              2021                      $                       %               2022              2021                      $                       %
Interest expense                      $ 26,671          $ 10,574          $              16,097            152.2  %       $ 57,452          $ 36,241          $              21,211             58.5  %
Percentage of total revenue               10.7  %            6.6  %                                                            8.3  %            8.4  %
Cost of Debt                               3.9  %            2.8  %                                                            3.2  %            3.3  %
Leverage as a percentage of
Average Daily Principal Balance           92.7  %           86.4  %                                                           90.9  %           88.8  %



Interest Expense. Interest expense increased by $16.1 million, or 152.2%, from
$10.6 million for the three months ended September 30, 2021 to $26.7 million for
the three months ended September 30, 2022. We financed approximately 92.7% of
our loans receivable through debt for the three months ended September 30, 2022,
as compared to 86.4% for the three months ended September 30, 2021, and our
Average Daily Debt Balance increased from $1.50 billion for the three months
ended September 30, 2021 to $2.69 billion for the three months ended September
30, 2022, an increase of 78.9%. Cost of Debt increased due to increases in
interest rates and wider credit spreads on our most recent asset-backed
securitization issuances.

Interest expense increased by $21.2 million, or 58.5%, from $36.2 million for
the nine months ended September 30, 2021 to $57.5 million for the nine months
ended September 30, 2022. We financed approximately 90.9% of our loans
receivable through debt for the nine months ended September 30, 2022, as
compared to 88.8% for the nine months ended September 30, 2021, and our Average
Daily Debt Balance increased slightly from $1.47 billion for the nine months
ended September 30, 2021 to $2.39 billion for the nine months ended September
30, 2022, an increase of 62.8%. Cost of Debt decreased due to the refinancing of
older securitizations in 2021 to lower interest rates. Our Cost of Debt has
begun to increase due to increases in interest rates and wider credit spreads on
our new asset-backed securitization issuances. Through the remainder of 2022, we
expect our interest expense to increase as we borrow to fund our portfolio
growth and benchmark rates increase.

See Note 9,   Borrowings  , in the Notes to the Condensed Consolidated Financial
Statements (Unaudited) included elsewhere in this report for further information
on our Interest expense and our borrowings.
                                       29
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Total net increase (decrease) in fair value


Net increase (decrease) in fair value reflects changes in fair value of loans
receivable held for investment and asset-backed notes on an aggregate basis and
is based on a number of factors, including benchmark interest rates, credit
spreads, remaining cumulative charge-offs and borrower payment rates. Increases
in the fair value of loans increase Net Revenue. Conversely, decreases in the
fair value of loans decrease Net Revenue. Increases in the fair value of
asset-backed notes decrease Net Revenue. Decreases in the fair value of
asset-backed notes increase Net Revenue. We also have derivative instruments
related to our bank partnership program with Pathward, N.A. Changes in the fair
value of the derivative instrument are reflected in the total fair value
mark-to-market adjustment below.

                                               Three Months Ended                                                               Nine Months Ended
                                                 September 30,                      Period-to-period Change                       September 30,                       Period-to-period Change
(in thousands, except percentages)           2022              2021                     $                    %               2022                2021                     $                    %
Fair value mark-to-market
adjustment:
Fair value mark-to-market
adjustment on Loans Receivable at        $ (40,723)         $ 12,962          $          (53,685)                *       $  (92,265)         $  52,333          $         (144,598)                *
Fair Value
Fair value mark-to-market                   61,204               700                      60,504                 *          163,952              4,237                     159,715                 *
adjustment on asset-backed notes
Fair value mark-to-market                      906               935                         (29)                *            2,390                639                       1,751                 *
adjustment on derivatives
Total fair value mark-to-market             21,387            14,597                       6,790                 *           74,077             57,209                      16,868                 *

adjustment

Net allowances for recoveries on (71,676) (23,924)

              (47,752)                *         (178,123)           (84,183)                    (93,940)                *
loans receivable at fair value
Net settlements on derivative               (5,059)              340                      (5,399)                *          (12,539)               517                     (13,056)                *

instruments

Fair value mark on loans sold(1)           (21,074)                -                     (21,074)                *          (19,350)                 -                     (19,350)

Total net decrease in fair value ($76,422) ($8,987)

  $          (67,435)                *       $ (135,935)         $ (26,457)         $         (109,478)                *
Percentage of total revenue:
Fair value mark-to-market                      8.6  %            9.2  %                                                        10.7  %            13.2  %
adjustment
Charge-offs, net of recoveries on            (28.7) %          (15.0) %                                                       (25.8) %           (19.5) %
loans receivable at fair value
Total net increase (decrease) in             (20.1) %           (5.9) %                                                       (15.1) %            (6.2) %
fair value
Discount rate                                10.19  %           6.52  %                                                       10.19  %            6.52  %
Remaining cumulative charge-offs             11.67  %           7.53  %                                                       11.67  %            7.53  %
Average life in years                         0.92              0.76                                                           0.92               0.76


* Not meaningful

(1) The fair value mark on loans sold shown for the three and nine months ended
September 30, 2022 includes ($21.1) million related to the cumulative fair value
mark on the loans sold in the Q3 2022 Loan Sales. The fair value mark on loans
sold shown for the nine months ended September 30, 2022 also includes
$15.9 million related to the cumulative fair value mark on the loans sold in the
2022-1 transaction and $(14.1) million related to the cumulative fair value mark
on the Q2 2022 Loan Sale. This fair value mark on loans sold represents the
life-to-date mark-to-market adjustment for the loans sold and is presented
separately for the loans sold to assist in reconciling to our non-GAAP measure,
Adjusted EBITDA. For details regarding the Q3 2022 Loan Sales, the Q2 2022 Loan
Sale and the 2022-1 transaction, refer to Note 5, Loans Held for Sale and Loans
Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited)
included elsewhere in this report.

Net increase (decrease) in fair value. Net decrease in fair value for the three
months ended September 30, 2022 was $76.4 million. This amount represents a
total fair value mark-to-market increase of $21.4 million, and $71.7 million of
charge-offs, net of recoveries on Loans Receivable at Fair Value. The total fair
value mark-to-market adjustment consists of a $(40.7) million mark-to-market
reduction on Loans Receivable at Fair Value due to (a) an increase in remaining
cumulative charge-offs from 11.25% as of June 30, 2022 to 11.67% as of September
30, 2022, (b) an increase in the discount rate from 8.97% as of June 30, 2022 to
10.19% as of September 30, 2022, partially offset by (c) an increase in average
life from 0.90 years as of June 30, 2022 to 0.92 years as of September 30, 2022,
The $61.2 million mark-to-market adjustment on asset-backed notes is due to
rising rates and widening asset-backed securitization spreads. The total net
increase (decrease) in fair value for the three months ended September 30, 2022
also includes a $(21.1) million adjustment related to the fair value mark on the
loans sold as part of the Q3 2022 Loan Sales.

Net decrease in fair value for the nine months ended September 30, 2022 was
$135.9 million. This amount represents a total fair value mark-to-market
increase of $74.1 million, and $178.1 million of charge-offs, net of recoveries
on Loans Receivable at Fair Value. The total fair value mark-to-market
adjustment consists of a $92.3 million mark-to-market reduction on Loans
Receivable at Fair Value due to (a) an increase in remaining cumulative
charge-offs from 9.60% as of December 31, 2021 to 11.67% as of September 30,
2022, (b) an increase in the discount rate from 6.94% as of December 31, 2021 to
10.19% as of September 30, 2022, partially offset by (c) an increase in average
life from 0.86 years as of December 31, 2021 to 0.92 years as of September 30,
2022, The $164.0 million mark-to-market adjustment on asset-backed notes is due
to rising rates and widening asset-backed securitization spreads. The total net
increase (decrease) in fair value for the nine months ended September 30, 2022
includes a $(21.1) million adjustment related to the fair value mark on loans
sold as part of the Q3 2022 Loan Sales completed in the third quarter, $(14.1)
million adjustment related to the fair value mark on the loans sold as part of
the Q2 2022 Loan Sale completed in the second quarter of 2022 and also includes
a $15.9 million adjustment related to the fair value mark on the loans sold as
part of the structured sale completed in the first quarter of 2022. Through the
remainder of 2022, we expect to continue to see volatility in fair value
primarily as a result of macroeconomic conditions.

                                       30
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Charges, net of recoveries

                                                  Three Months Ended                                                                     Nine Months Ended
                                                     September 30,                         Period-to-period Change                         September 30,                         Period-to-period Change
(in thousands, except percentages)             2022                 2021                     $                     %                 2022                 2021                     $                     %

Total charge-offs, net of
recoveries                                $    71,676          $    23,924          $         47,752             199.6  %       $   178,123          $    84,183          $         93,940             111.6  %
Average Daily Principal Balance           $ 2,903,928          $ 1,741,358          $      1,162,570              66.8  %       $ 2,633,169          $ 1,654,582          $        978,587              59.1  %
Annualized Net Charge-Off Rate                    9.8  %               5.5  %                                                           9.0  %               6.8  %



Charge-offs, net of recoveries. Our Annualized Net Charge-Off Rate increased to
9.8% and 9.0% for the three and nine months ended September 30, 2022,
respectively, from 5.5% and 6.8% for the three and nine months ended September
30, 2021, respectively. Net charge-offs for the three months and nine months
ended September 30, 2022 increased primarily due to a higher mix of first-time
borrowers in 2022 compared to 2021. In response to this increase, we tightened
our credit underwriting standards and focused lending towards existing and
returning members to improve credit outcomes. Further, due to credit tightening
in response to the COVID-19 pandemic and government stimulus payments, our
charge-offs were lower in 2021. Consistent with our charge-off policy, we
evaluate our loan portfolio and charge a loan off at the earlier of when the
loan is determined to be uncollectible or when the loan is 120 days
contractually past due and we charge-off a credit card account when it is 180
days contractually past due.

Operating Expenses


Operating expenses consist of technology and facilities, sales and marketing,
personnel, outsourcing and professional fees and general, administrative and
other expense.

Technology and facilities

Technology and facilities expense is the largest segment of our operating
expenses, representing the costs required to build our A.I.-enabled digital
platform, and consisting of three components. The first component comprises
costs associated with our technology, engineering, information security,
cybersecurity, platform development, maintenance, and end user services,
including fees for software licenses, consulting, legal and other services as a
result of our efforts to grow our business, as well as personnel expenses. The
second component includes rent for retail and corporate locations, utilities,
insurance, telephony costs, property taxes, equipment rental expenses, licenses
and fees and depreciation and amortization. Lastly, the third component includes
all software licenses, subscriptions, and technology service costs to support
our corporate operations, excluding sales and marketing.

                                           Three Months Ended                                                                    Nine Months Ended
                                              September 30,                        Period-to-period Change                         September 30,                         Period-to-period Change
(in thousands, except
percentages)                             2022              2021                      $                       %                2022               2021                      $                       %
Technology and facilities             $ 56,113          $ 34,226          $              21,887             63.9  %       $ 158,090          $ 100,274          $              57,816             57.7  %
Percentage of total revenue               22.4  %           21.5  %                                                            22.9  %            23.2  %



Technology and facilities. Technology and facilities expense increased by $21.9
million, or 63.9%, from $34.2 million for the three months ended September 30,
2021 to $56.1 million for the three months ended September 30, 2022. The
increase is primarily due to a $8.8 million increase in salaries and benefits
due to the increase in headcount, a $7.1 million increase in service costs
related to higher usage of software and cloud services, $3.7 million incurred
for India off-shoring services and other temporary contractors to supplement
staffing related to new product investment, $3.5 million of increased
depreciation commensurate with growth in internally developed software and $0.5
million of increased insurance expense for cyber-security. These increases are
partially offset by $1.6 million lower expense due to higher capitalization of
internally developed software in 2022 compared to 2021 and $0.3 million lower
office rent due to retail location closures in early 2021 and early 2022.

Technology and facilities expense increased by $57.8 million, or 57.7%, from
$100.3 million for the nine months ended September 30, 2021 to $158.1 million
for the nine months ended September 30, 2022. The increase is primarily due to a
$23.4 million increase in salaries and benefits due to the increase in
headcount, a $21.5 million increase in service costs related to higher usage of
software and cloud services, $10.0 million incurred for India off-shoring
services and other temporary contractors to supplement staffing related to new
product investment, $8.3 million of increased depreciation commensurate with
growth in internally developed software and $1.4 million of increased insurance
expense for cyber-security. These increases are partially offset by $6.0 million
lower expense due to higher capitalization of internally developed software in
2022 compared to 2021 and $1.7 million lower office rent due to retail location
closures in early 2021 and early 2022.

Sales and Marketing


Sales and marketing expense consists of two components and represents the costs
to acquire our customers. The first component is comprised of the expense to
acquire a customer through various paid marketing channels including direct
mail, digital marketing and brand marketing. The second component is comprised
of the costs associated with our telesales, lead generation and retail
operations, including personnel expenses, but excluding costs associated with
retail locations.
                                       31
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                                            Three Months Ended                                                               Nine Months Ended
                                               September 30,                      Period-to-period Change                      September 30,                         Period-to-period Change
(in thousands, except
percentages and CAC)                      2022              2021                    $                     %               2022              2021                       $                        %
Sales and marketing                    $ 21,781          $ 32,102          $        (10,321)            (32.2) %       $ 88,690          $ 79,743          $         8,947                     11.2  %
Percentage of total revenue                 8.7  %           20.2  %                                                       12.8  %           18.4  %
Customer Acquisition Cost (CAC)        $    142          $    152          $            (10)             (6.6) %       $    142          $    166          $           (24)                   (14.5) %



Sales and marketing. Sales and marketing expenses to acquire our customers
decreased by $10.3 million, or 32.2%, from $32.1 million for the three months
ended September 30, 2021 to $21.8 million for the three months ended September
30, 2022. In an effort to reduce our operating expense growth, we decreased our
investment in marketing initiatives by $13.2 million across various marketing
channels, including direct mail, digital advertising, lead aggregators and our
referral programs. This decrease was partially offset by an increase of $1.3
million related to professional fees primarily related to outsourced telesales
FTEs as a result of an increase in demand for new applications and $1.3 million
higher salaries and benefit costs due to an increase in retail hours worked and
salary raises. As a result of the decline in our sales and marketing expenses
during the three months ended September 30, 2022, our CAC decreased by 6.6% as
compared to the three months ended September 30, 2021.

Sales and marketing expenses to acquire our customers increased by $8.9 million,
or 11.2%, from $79.7 million for the nine months ended September 30, 2021 to
$88.7 million for the nine months ended September 30, 2022. To grow our loan
originations, we increased our investment in marketing initiatives early in 2022
before decreasing our spend in the third quarter. Our net increase during the
nine months ended September 30, 2022 was $1.6 million across various marketing
channels, including digital advertising, lead aggregators, our referral
programs. We also incurred $4.0 million related to outsourcing and professional
fees primarily due to outsourced telesales FTEs as a result of an increase in
demand for new applications, $2.0 million higher salaries and benefit costs due
to higher sales incentives driven by more retail locations reaching sales goals
and $0.8 million higher services costs related to new data sources. As a result
of our increased loan originations during the nine months ended September 30,
2022, our CAC decreased by 14.5% as compared to the nine months ended September
30, 2021.

Personnel

Personnel expense represents compensation and benefits that we provide to our
employees and includes salaries, wages, bonuses, commissions, related employer
taxes, medical and other benefits provided and stock-based compensation expense
for all of our staff with the exception of our telesales, lead generation,
retail operations which are included in sales and marketing expenses and
technology which is included in technology and facilities.
                                           Three Months Ended                                                                   Nine Months Ended
                                              September 30,                        Period-to-period Change                        September 30,                         Period-to-period Change
(in thousands, except
percentages)                             2022              2021                      $                       %                2022              2021                      $                       %
Personnel                             $ 39,959          $ 29,039          $              10,920             37.6  %       $ 114,514          $ 84,412          $              30,102             35.7  %
Percentage of total revenue               16.0  %           18.3  %                                                            16.6  %           19.5  %



Personnel. Personnel expense increased by $10.9 million, or 37.6%, from $29.0
million for the three months ended September 30, 2021 to $40.0 million for the
three months ended September 30, 2022, driven by increased compensation expense
due to a 36.7% increase in U.S. headcount.

Personnel expense increased by $30.1 million, or 35.7%, from $84.4 million for
the nine months ended September 30, 2021 to $114.5 million for the nine months
ended September 30, 2022, primarily driven by increased compensation expense due
to a 36.7% increase in U.S. headcount.

Outsourcing and professional fees


Outsourcing and professional fees consist of costs for various third-party
service providers and contact center operations, primarily for the sales,
customer service, collections and store operation functions. Our contact centers
located in Mexico and our third-party contact centers located in Colombia,
Jamaica and the Philippines provide support for the business including
application processing, verification, customer service and collections. We
utilize third parties to operate the contact centers in Colombia, Jamaica and
the Philippines and include the costs in outsourcing and professional fees.
Professional fees also include the cost of legal and audit services, credit
reports, recruiting, cash transportation, collection services and fees and
consultant expenses. Direct loan origination expenses related to application
processing are expensed when incurred. In addition, outsourcing and professional
fees include any financing expenses, including legal and underwriting fees,
related to our asset-backed notes.

                                               Three Months Ended                                                                     Nine Months Ended
                                                  September 30,                         Period-to-period Change                         September 30,                         Period-to-period Change
(in thousands, except percentages)           2022              2021                       $                        %               2022              2021                       $                        %

Outsourcing and professional fees $18,620 $13,348

   $         5,272                     39.5  %       $ 50,112          $ 40,762          $         9,350                     22.9  %
Percentage of total revenue                    7.4  %            8.4  %                                                              7.3  %            9.4  %



Outsourcing and professional fees. Outsourcing and professional fees increased
by $5.3 million, or 39%, from $13.3 million for the three months ended September
30, 2021 to $18.6 million for the three months ended September 30, 2022. The
increase is primarily attributable to $2.8 million increase in debt financing
fees and expenses related to 2022-2, not present in the three months ended
September 30, 2021, $1.8 million of higher professional service costs related to
credit card programs and data integrity and infrastructure, $1.0 million related
to 77.0% growth in contact
                                       32
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center outsourced FTEs due to an increase in demand for new applications and the new Philippines contact center, partially offset by $0.6 million
lower credit report expenses due to lower application volumes.


Outsourcing and professional fees increased by $9.4 million, or 23%, from $40.8
million for the nine months ended September 30, 2021 to $50.1 million for the
nine months ended September 30, 2022. The increase is primarily attributable to
$5.9 million of higher professional service costs related to credit card
programs and data integrity and infrastructure, $2.2 million increase in credit
report expense due to higher application volume and $2.0 million related to
77.0% growth in contact center outsourced FTEs as a result of an increase in
demand for new applications and the new Philippines contact center. These
increases were partially offset by a $1.8 million decrease in debt financing
fees and expenses incurred in the nine months ended September 30, 2022 related
to 2022-A and 2022-2 compared to 2021-A and 2021-B in the nine months ended
September 30, 2021.

General, administrative and other


General, administrative and other expense includes non-compensation expenses for
employees, who are not a part of the technology and sales and marketing
organization, which include travel, lodging, meal expenses, political and
charitable contributions, office supplies, printing and shipping. Also included
are franchise taxes, bank fees, foreign currency gains and losses, transaction
gains and losses, debit card expenses, litigation reserve, retail network
optimization expenses and Digit-related acquisition and integration expenses.

                                            Three Months Ended                                                                   Nine Months Ended
                                               September 30,                        Period-to-period Change                        September 30,                        Period-to-period Change
(in thousands, except
percentages)                               2022              2021                     $                       %               2022              2021                      $                       %
General, administrative and
other                                  $  14,401          $ 2,686          $              11,715            436.2  %       $ 44,698          $ 22,862          $              21,836             95.5  %
Percentage of total revenue                  5.8  %           1.7  %                                                            6.5  %            5.3  %



General, administrative and other. General, administrative and other expense
increased by $11.7 million, or 436%, from $2.7 million for the three months
ended September 30, 2021 to $14.4 million for the three months ended September
30, 2022, primarily due to $8.1 million of transaction and integration related
expenses as a result of the Digit acquisition, $2.4 million of charge-offs
related to fraud and $1.3 million increase in postage and printing expenses,
travel expenses and other general and administrative expenses due to new
products and services and continuing growth of the business.

General, administrative and other expense increased by $21.8 million, or 96%,
from $22.9 million for the nine months ended September 30, 2021 to $44.7 million
for the nine months ended September 30, 2022, primarily due to $22.4 million of
transaction and integration related expenses as a result of the Digit
acquisition, $5.1 million of charge-offs related to fraud, $2.7 million increase
in litigation expense and $5.9 million increase in postage and printing
expenses, travel expenses and other general and administrative expenses due to
new products and services and continuing growth of the business. These increases
were partially offset by a $3.3 million decrease attributable to an impairment
charge recognized in 2021 on a right-of-use asset related to our leased office
space in San Carlos, California, not present in the current year and a $10.9
million decrease in retail network optimization expenses incurred in the nine
months ended September 30, 2022 compared to the nine months ended September 30,
2021. In the nine months ended September 30, 2022, we incurred $1.9 million in
expenses related to the retail location closures.

Goodwill impairment

                                         Three Months Ended                                                               Nine Months Ended
                                            September 30,                      Period-to-period Change                      September 30,                      Period-to-period Change
(in thousands, except
percentages)                             2022               2021                  $                    %                 2022               2021                  $                    %
Goodwill impairment                $     108,472          $   -          $        108,472            100.0  %       $    108,472          $   -          $        108,472            100.0  %
Percentage of total revenue                 43.4  %           -  %                                                          15.7  %           -  %



Goodwill impairment. In response to a sustained decline in our share price
primarily driven by macroeconomic conditions, we conducted a quantitative test
of our goodwill as of September 30, 2022. As a result of this quantitative test,
we identified an impairment to goodwill resulting in recognition of a $108.5
million non-cash goodwill impairment charge for the three and nine months ended
September 30, 2022. There were no goodwill impairment charges during the three
and nine months ended September 30, 2021 because we did not have a goodwill
balance as of September 30, 2021.

Income taxes


Income taxes consist of U.S. federal, state and foreign income taxes, if any.
For the periods ended September 30, 2022 and 2021, we recognized tax expense
(benefit) attributable to U.S. federal, state and foreign income taxes.
                                       33
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                                           Three Months Ended                                                              Nine Months Ended
                                              September 30,                      Period-to-period Change                     September 30,                        Period-to-period Change
(in thousands, except
percentages)                              2022              2021                   $                     %               2022              2021                     $                       %

Income tax expense (benefit) ($6,536) $5,143 $

        (11,679)           (227.1) %       $  1,956          $ 8,652          $              (6,696)            77.4  %
Percentage of total revenue                (2.6) %           3.2  %                                                        0.3  %           2.0  %
Effective tax rate                          5.8  %          18.3  %                                                       (2.9) %          20.7  %



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

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

See note 2, Summary of significant accounting policies and note 14,

Income Taxes, notes to the condensed (unaudited) consolidated financial statements included elsewhere in this report for further discussion of our income taxes.

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Fair value estimation methodology for loans receivable at fair value

Summary


Fair value is an electable option under GAAP to account for any financial
instruments, including loans receivable and debt. It differs from amortized cost
accounting in that loans receivable and debt are recorded on the balance sheet
at fair value rather than on a cost basis. Under the fair value option credit
losses are recognized through income as they are incurred rather than through
the establishment of an allowance and provision for losses. The fair value of
instruments under this election is updated at the end of each reporting period,
with changes since the prior reporting period reflected in the Condensed
Consolidated Statements of Operations (Unaudited) as net increase (decrease) in
fair value which impacts Net Revenue. Changes in interest rates, credit spreads,
realized and projected credit losses and cash flow timing will lead to changes
in fair value and therefore impact earnings. These changes in the fair value of
the Loans Receivable at Fair Value may be partially offset by changes in the
fair value of the asset-backed notes, depending upon the relative duration of
the instruments.

Fair value estimation methodology for loans receivable at fair value

We calculate the fair value of loans receivable at fair value using a model that projects and discounts expected cash flows. The fair value is a function of:


•Portfolio yield;

•Average life;

•Prepayments (or principal repayment rate for our credit card receivables);

• Remaining cumulative charges; and

•Discount rate.



Portfolio yield is the expected interest and fees collected from the loans as an
annualized percentage of outstanding principal balance. Portfolio yield is based
upon (a) the contractual interest rate, reduced by expected delinquencies and
interest charge-offs and (b) late fees, net of late fee charge-offs based upon
expected delinquencies. Origination fees are not included in portfolio yield
since they are generally capitalized as part of the loan's principal balance at
origination.

Average life is the time-weighted average of expected principal payments divided
by outstanding principal balance. The timing of principal payments is based upon
the contractual amortization of loans, adjusted for the impact of prepayments,
Good Customer Program refinances, and charge-offs.

Prepayments are the expected remaining cumulative principal payments that will
be repaid earlier than contractually required over the life of the loan, divided
by the outstanding principal balance. For credit card receivables we estimate
principal payment rates which are the expected amount and timing of principal
payments over the life of the receivable.

Remaining cumulative charges are the expected net principal charges over the remaining life of the loans, divided by the outstanding principal balance.


Discount rate is the sum of the interest rate and the credit spread. The
interest rate is based upon the interpolated treasury curve rate that
corresponds to the average life. The credit spread is based upon the credit
spread implied by the loan purchase price at the time loans are sold, updated
for observable changes in the fixed income markets, which serve as a proxy for
how a potential loan buyer would adjust their yield requirements relative to the
originally agreed price.

Our internal valuation committee includes members from our risk, legal, finance,
capital markets and operations departments and provides governance and oversight
over the fair value pricing and related financial statement disclosures.
Additionally, this committee provides a challenge of the assumptions used and
outputs of the model, including the appropriateness of such measures and
periodically reviews the methodology and process to determine the fair value
pricing. Any significant changes to the process must be approved by the
committee.

It is also possible to estimate the fair value of our loans using a simplified
calculation. The table below illustrates a simplified calculation to aid
investors in understanding how fair value may be estimated using the last six
quarters:

• By subtracting the management fees from the weighted average yield of the portfolio over the remaining life of the loans to calculate the net yield of the portfolio;


•Multiplying the net portfolio yield by the weighted average life in years of
the loans receivable, which is based upon the contractual amortization of the
loans and expected remaining prepayments and charge-offs, to calculate pre-loss
net cash flow;

• Subtracting the remaining cumulative charges from the net portfolio return to calculate the net cash flow;

• Subtracting the product of the discount rate and the average life from the net cash flow to calculate the gross fair value premium as a percentage of the loan principal balance; and


•Subtracting the accrued interest and fees as a percentage of loan principal
balance from the gross fair value premium as a percentage of loan principal
balance to calculate the fair value premium as a percentage of loan principal
balance.

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The table below reflects the application of this methodology for the seven
quarters since March 1, 2021, on loans held for investment. The data for the
periods ending on or after December 31, 2021 in the table below represents all
of our credit products. The data for the three months ended September 30, 2021
in the table below represents our secured and unsecured loan portfolio. For
prior quarters, the data in the table below represents only our unsecured
personal loan portfolio which was the primary driver of fair value during those
periods.

                                                                                                                     Three Months Ended
                                             Sep 30, 2022             Jun 30, 2022             Mar 31, 2022             Dec 31, 2021             Sep 30, 2021             Jun 30, 2021             Mar 31, 2021
Weighted average portfolio yield
over the remaining life of the                      29.90  %                 30.27  %                 30.15  %                 30.14  %                 30.35  %                 30.28  %                 30.25  %
loans
Less: Servicing fee                                 (5.00) %                 (5.00) %                 (5.00) %                 (5.00) %                 (5.00) %                 (5.00) %                 (5.00) %
Net portfolio yield                                 24.90  %                 25.27  %                 25.15  %                 25.14  %                 25.35  %                 25.28  %                 25.25  %
Multiplied by: Weighted average                     0.924                    0.895                    0.847                    0.859                    0.761                    0.769                    0.778
life in years
Pre-loss cash flow                                  23.01  %                 22.61  %                 21.30  %                 21.60  %                 19.26  %                 19.43  %                 19.64  %
Less: Remaining cumulative                         (11.67) %                (11.25) %                (10.37) %                 (9.60) %                 (7.53) %                 (7.59) %                 (8.60) %
charge-offs
Net cash flow                                       11.34  %                 11.37  %                 10.93  %                 12.00  %                 11.73  %                 11.84  %                 11.04  %
Less: Discount rate multiplied by                   (9.42) %                 (8.03) %                 (5.73) %                 (5.96) %                 (4.96) %                 (5.03) %                 (5.17) %
average life
Gross fair value premium as a
percentage of loan principal                         1.92  %                  3.34  %                  5.21  %                  6.04  %                  6.77  %                  6.81  %                  5.87  %

balance

Less: Accrued interest and fees as
a percentage of loan principal                      (1.19) %                 (1.10) %                 (1.09) %                 (1.03) %                 (0.90) %                 (0.87) %                 (0.92) %

balance

Fair value premium as a percentage                   0.73  %                  2.24  %                  4.12  %                  5.01  %                  5.87  %                  5.94  %                  4.95  %
of loan principal balance
Discount Rate                                       10.19  %                  8.97  %                  6.76  %                  6.94  %                  6.52  %                  6.54  %                  6.65  %


The illustrative table included above is designed to help investors understand the impact of our choice of the fair value option.

Non-GAAP Financial Measures


We believe that the provision of non-GAAP financial measures in this report,
including Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Adjusted Operating
Efficiency and Adjusted Return on Equity, can provide useful measures for
period-to-period comparisons of our core business and useful information to
investors and others in understanding and evaluating our operating results.
However, non-GAAP financial measures are not calculated in accordance with
United States generally accepted accounting principles, or GAAP, and should not
be considered as an alternative to any measures of financial performance
calculated and presented in accordance with GAAP. There are limitations related
to the use of these non-GAAP financial measures versus their most directly
comparable GAAP measures, which include the following:

“Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.

“These measures do not take into account the potentially dilutive impact of stock-based compensation.


?Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future and Adjusted
EBITDA does not reflect cash capital expenditure requirements for such
replacements or for new capital expenditure requirements.

?Although the fair value mark-to-market adjustment is a non-cash adjustment, it
does reflect our estimate of the price a third party would pay for our loans
receivable held for investment or our asset-backed notes.

“Adjusted EBITDA does not reflect tax payments which may represent a reduction in the cash available to us.

Reconciliations of non-GAAP measures to GAAP measures are provided below.

Adjusted EBITDA


Adjusted EBITDA is a non-GAAP financial measure defined as our net income,
adjusted to eliminate the effect of certain items as described below. We believe
that Adjusted EBITDA is an important measure because it allows management,
investors and our Board to evaluate and compare our operating results, including
our return on capital and operating efficiencies, from period-to-period by
making the adjustments described below. In addition, it provides a useful
measure for period-to-period comparisons of our business, as it removes the
effect of taxes, certain non-cash items, variable charges and timing
differences.

•We believe it is useful to exclude the impact of the income tax expense, as reported, as it has historically included irregular income tax items that do not reflect the ongoing business transactions.

•We believe it is useful to exclude the impact of depreciation and amortization and stock-based compensation expense as these are non-cash expenses.

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•We believe it is useful to exclude the impact of interest expense associated
with the Company's Corporate Financing, as this expense is a function of our
capital structure.

•We believe it is useful to exclude the impact of certain non-recurring charges,
such as expenses associated with a litigation reserve, our retail network
optimization plan, impairment charges and acquisition and integration related
expenses because these items do not reflect ongoing business operations.

•We also reverse origination fees for Loans Receivable at Fair Value, net. We
recognize the full amount of any origination fees as revenue at the time of loan
disbursement in advance of our collection of origination fees through principal
payments. As a result, we believe it is beneficial to exclude the uncollected
portion of such origination fees, because such amounts do not represent cash
that we received.

•We are also reversing the fair value adjustment to market value as it is a non-cash adjustment as shown in the table below.

Components of fair value to market Three months ended September 30nine months ended September 30Adjustment (in thousands)

                            2022                2021               2022                2021
Fair value mark-to-market adjustment on
loans receivable at fair value (1)               $  (40,723)         $  12,962          $  (92,265)         $  52,333
Fair value mark-to-market adjustment on
asset-backed notes                                   61,204                700             163,952              4,237
Fair value mark-to-market adjustment on
derivatives                                             906                

935 $2,390 $639
Total adjustment from fair value to market price $21,387 $14,597 $74,077 $57,209



(1) The fair value mark-to-market adjustment on loans receivable at fair value
shown for the three and nine months ended September 30, 2022 excludes
($21.1) million related to the cumulative fair value mark on the loans sold in
the Q3 2022 Loan Sales. The fair value mark-to-market adjustment on loans
receivable at fair value shown for the nine months ended September 30, 2022 also
excludes $15.9 million related to the cumulative fair value mark on the loans
sold in the 2022-1 transaction and $(14.1) million related to the cumulative
fair value mark on the loans sold in the Q2 2022 Loan Sale. For details
regarding the Q3 2022 Loan Sales, the Q2 2022 Loan Sale and the 2022-1
transaction, refer to Note 5, Loans Held for Sale and Loans Sold of the Notes to
the Condensed Consolidated Financial Statements (Unaudited) included elsewhere
in this report.

The following table provides a reconciliation of net income and adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021:



                                                Three Months Ended 

September 30nine months ended September 30Adjusted EBITDA (in thousands)

                       2022                2021               2022                2021
Net income                                      $  (105,827)         $  22,979          $  (69,321)         $  33,248
Adjustments:

Income tax expense (benefit)                         (6,536)             5,143               1,956              8,652

Interest on corporate financing                         871                  -                 871                  -
Depreciation and amortization                         9,229              5,690              25,329             16,992
Stock-based compensation expense                      7,050              4,598              20,752             14,542
Litigation reserve                                        -                  -               2,750                  -
Retail network optimization expenses, net               183                114               1,881             12,787
Impairment                                          108,472                  -             108,472              3,324
Acquisition and integration related
expenses                                              8,132                  -              22,363                  -
Origination fees for loans receivable at
fair value, net                                      (6,348)            (5,863)            (17,699)            (9,070)
Fair value mark-to-market adjustment                (21,387)           (14,597)            (74,077)           (57,209)
Adjusted EBITDA                                 $    (6,161)         $  18,064          $   23,277          $  23,266



Adjusted Net Income

We define Adjusted Net Income as our net income, adjusted to exclude income tax
expense, stock-based compensation expenses and certain non-recurring charges. We
believe that Adjusted Net Income is an important measure of operating
performance because it allows management, investors, and our Board to evaluate
and compare our operating results, including our return on capital and operating
efficiencies, from period to period.

•We believe it is useful to exclude the impact of income tax expense, as reported, as it has historically included irregular tax items that do not reflect our ongoing business operations.


•We believe it is useful to exclude the impact of certain non-recurring charges,
such as expenses associated with a litigation reserve, our retail network
optimization plan, impairment charges and acquisition and integration related
expenses, because these items do not reflect ongoing business operations.

•We believe it is useful to exclude stock-based compensation expense as it is a non-cash expense.

•We include the impact of normalized statutory income tax expense by applying the tax rate shown in the table.

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The following table provides a reconciliation of net earnings and adjusted net earnings for the three and nine months ended September 30, 2022 and 2021:


                                                Three Months Ended 

September 30nine months ended September 30Adjusted net income (in thousands)

                  2022                 2021                2022                2021
Net income                                     $  (105,827)          $  22,979          $  (69,321)          $  33,248
Adjustments:

Income tax expense (benefit)                        (6,536)              5,143               1,956               8,652

Stock-based compensation expense                     7,050               4,598              20,752              14,542
Litigation reserve                                       -                   -               2,750                   -
Retail network optimization expenses,
net                                                    183                 114               1,881              12,787
Impairment                                         108,472                   -             108,472               3,324
Acquisition and integration related
expenses                                             8,132                   -              22,363                   -
Adjusted income before taxes                        11,474              32,834              88,853              72,553
Normalized income tax expense                        3,098               8,997              23,990              19,880
Adjusted Net Income                            $     8,376           $  23,837          $   64,863           $  52,673
Income tax rate (1)                                   27.0   %            27.4  %             27.0   %            27.4  %

(1) Income tax rate for the three and nine months ended September 30, 2022 and 2021 is based on a normalized legal rate.

Adjusted earnings per share (“Adjusted EPS”)

Adjusted earnings per share is a non-GAAP financial measure that allows management, investors and our Board of Directors to assess the company’s operating results, operating trends and profitability by to the diluted adjusted weighted average number of shares outstanding.


The following table presents a reconciliation of Diluted EPS to Diluted Adjusted
EPS for the three and nine months ended September 30, 2022 and 2021. For the
reconciliation of net income to Adjusted Net Income, see the immediately
preceding table "Adjusted Net Income."

                                                     Three Months Ended September 30,                 Nine Months Ended September 30,
(in thousands, except share and per share
data)                                                   2022                    2021                    2022                    2021
Diluted earnings (loss) per share                $          (3.21)         $       0.75          $          (2.12)         $       1.11
Adjusted EPS
Adjusted Net Income                              $          8,376          $     23,837          $         64,863          $     52,673

Basic weighted-average common shares
outstanding                                            33,010,107            28,167,686                32,688,988            27,982,273

Weighted average effect of dilutive
securities:
Stock options                                              72,714             1,451,687                   326,702             1,351,288
Restricted stock units                                    101,363               884,400                   208,600               726,114

Diluted adjusted weighted-average common
shares outstanding                                     33,184,184            30,503,773                33,224,290            30,059,675
Adjusted Earnings Per Share                      $           0.25          $       0.78          $           1.95          $       1.75



Adjusted Return on Equity

We define Adjusted Return on Equity as annualized Adjusted Net Income divided by
average stockholders' equity. Average stockholders' equity is an average of the
beginning and ending stockholders' equity balance for each period. We believe
Adjusted Return on Equity is an important measure because it allows management,
investors and our Board to evaluate the profitability of the business in
relation to stockholders' equity and how efficiently we generate income from
stockholders' equity.

The following table presents a reconciliation of Return on Equity to Adjusted
Return on Equity as of and for the three and nine months ended September 30,
2022 and 2021. For the reconciliation of net income to Adjusted Net Income, see
the immediately preceding table "Adjusted Net Income."

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                                                    As of or for the Three Months Ended       As of or for the Nine Months Ended
                                                               September 30,                             September 30,
(in thousands)                                            2022                 2021                 2022                 2021
Return on Equity                                          (70.1)   %            18.3  %             (16.1)   %             9.1  %
Adjusted Return on Equity
Adjusted Net Income                                 $     8,376            $  23,837          $    64,863            $  52,673
Average stockholders' equity                        $   598,656            $ 497,876          $   576,497            $ 489,110
Adjusted Return on Equity                                   5.6    %            19.0  %              15.0    %            14.4  %



Adjusted operational efficiency


We define Adjusted Operating Efficiency as total operating expenses adjusted to
exclude stock-based compensation expense and certain non-recurring charges such
as expenses associated with a litigation reserve, our retail network
optimization plan, impairment charges and acquisition and integration related
expenses divided by total revenue. We believe Adjusted Operating Efficiency is
an important measure because it allows management, investors and our Board to
evaluate how efficiently we manage costs relative to revenue.

The following table presents a reconciliation of Operating Efficiency to
Adjusted Operating Efficiency for the three and nine months ended September 30,
2022 and 2021:

                                               As of or for the Three Months Ended        As of or for the Nine Months Ended
                                                          September 30,                             September 30,
(in thousands)                                       2022                 2021                 2022                  2021
Operating Efficiency                                 103.7    %            70.0  %               81.8    %            75.8  %
Adjusted Operating Efficiency
Total revenue                                      250,076              159,084               690,598              432,651

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

Stock-based compensation expense                    (7,050)              (4,598)              (20,752)             (14,542)
Litigation reserve                                       -                    -                (2,750)                   -
Retail network optimization expenses,
net                                                   (183)                (114)               (1,881)             (12,787)

Impairment                                        (108,472)                   -          $   (108,472)           $  (3,324)
Acquisition and integration related
expenses                                            (8,132)                   -          $    (22,363)           $       -
Total adjusted operating expenses              $   135,509            $ 106,689          $    408,358            $ 297,400
Adjusted Operating Efficiency                         54.2    %            67.1  %               59.1    %            68.7  %



Cash and capital resources


To date, we fund the majority of our operating liquidity and operating needs
through a combination of cash flows from operations, securitizations, secured
borrowings, Corporate Financing and whole loan sales. We may utilize these or
other sources in the future. Our material cash requirements relate to funding
our lending activities, our debt service obligations, our operating expenses,
and investments in the long-term growth of the company.

During the three months ended September 30, 2022, available liquidity increased
primarily due to the execution of our Corporate Financing facility and the
issuance of another asset-backed securitization. We generally target liquidity
levels to support at least twelve months of our expected net cash outflows,
including new originations, without access to new debt financing transactions or
other capital markets activity. Rising interest rates, credit trends and other
macroeconomic conditions could continue to have an impact on market volatility
which could adversely impact our business, liquidity, and capital resources.
Future decreases in cash flows from operations resulting from delinquencies,
defaults, losses, would decrease the cash available for the capital uses
described above. We may incur additional indebtedness or issue equity in order
to meet our capital spending and liquidity requirements, as well as to fund
growth opportunities that we may pursue.

Cash and cash flow

The following table summarizes our cash and cash equivalents, restricted cash and cash flows for the periods indicated:


                                                                     Nine Months Ended September 30,
(in thousands)                                                          2022                    2021
Cash, cash equivalents and restricted cash                       $        272,207          $   223,755
Cash provided by (used in)
Operating activities                                                      159,343              103,728
Investing activities                                                     (915,877)            (316,741)
Financing activities                                                      835,781              268,178



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Our cash is held for working capital and lending purposes. Our restricted cash represents collections held in our securitizations and is currently applied after month end to pay interest expense and settle any amount due to the buyer of the entire loan together with any excess amount returned to us.

Operational activities


Our net cash provided by operating activities was $159.3 million and $103.7
million for the nine months ended September 30, 2022 and 2021, respectively.
Cash flows from operating activities primarily include net income or losses
adjusted for (i) non-cash items included in net income or loss, including
depreciation and amortization expense, goodwill impairment charges, fair value
adjustments, net, origination fees for loans at fair value, net, gain on loan
sales, stock-based compensation expense and deferred tax provision, net, (ii)
originations of loans sold and held for sale, and proceeds from sale of loans
and (iii) changes in the balances of operating assets and liabilities, which can
vary significantly in the normal course of business due to the amount and timing
of various payments.

Investing Activities

Our net cash provided by (used in) investing activities was $(915.9) million and
$(316.7) million for the nine months ended September 30, 2022 and 2021,
respectively. Our investing activities consist primarily of loan originations
and loan repayments. Our net cash provided by (used in) investing activities for
the nine months ended September 30, 2022, includes $247.9 million of proceeds
related to a structured loan sale in the first quarter, the Q2 2022 Loan Sale in
the second quarter and the Q3 2022 Loan Sales in the third quarter. We invest in
purchases of property and equipment and incur system development costs.
Purchases of property and equipment, and capitalization of system development
costs may vary from period to period due to the timing of the expansion of our
operations, the addition of employee headcount and the development cycles of our
system development. The change in our net cash provided by (used in) investing
activities is due to disbursements on originations of loans increasing by
$1,065.2 million while repayments of loan principal increased by $237.3 million
for the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021.

Financing Activities

Our net cash provided by (used in) financing activities was $835.8 million and
$268.2 million for the nine months ended September 30, 2022 and 2021,
respectively. For the nine months ended September 30, 2022, net cash provided by
financing activities was primarily driven the issuance of our Series 2022-A and
Series 2022-2 asset-backed notes and the borrowings under our Secured Financing
facilities and Acquisition and Corporate Financing facilities, partially offset
by repayments of borrowings on our Secured Financing facilities and scheduled
amortization payments on our Acquisition Financing facility and our Series
2019-A and Series 2022-2 asset-backed notes. For the nine months ended September
30, 2021, net cash provided by financing activities was primarily driven by the
issuance of our Series 2021-A and Series 2021-B asset-backed notes and the
borrowings under our Secured Financing facilities, partially offset by
redemptions of our Series 2018-A, 2018-B and 2018-C asset-backed notes and
repayments of borrowings on our Secured Financing facility.

Sources of Funds

Debt and Available Credit

Asset-Backed Securitizations

From September 30, 2022we have had $2.24 billion of outstanding asset-backed notes. Moreover, on November 3, 2022we finished the show $300 million amortize asset-backed notes. For more information, see Note 9,

  Borrowings   of the Notes to the Condensed Consolidated Financial Statements
(Unaudited) included elsewhere in this report. Our securitizations utilize
special purpose entities (SPEs) which are also variable interest entities
(VIEs). For VIEs where we have determined we are the primary beneficiary, the
financial results of the VIE are consolidated in our financial statements. For
VIEs where we have determined we are not the primary beneficiary, the financial
results of the VIE are not consolidated in our financial statements. For more
information regarding our VIEs and asset-backed securitizations, see Note 4,
  Variable Interest Entities   and Note 9,   Borrowings  , respectively, of the
Notes to the Condensed Consolidated Financial Statements (Unaudited) included
elsewhere in this report.

Our ability to utilize our asset-backed securitization facilities as described
herein is subject to compliance with various requirements including eligibility
criteria for the loan collateral and covenants and other requirements. As of
September 30, 2022, we were in compliance with all covenants and requirements of
all our asset-backed notes.

Secured financing


As of September 30, 2022, we had Secured Financing facilities with warehouse
lines of $750.0 million in the aggregate with undrawn capacity of $382.0
million. Our ability to utilize our Secured Financing facilities as described
herein is subject to compliance with various requirements, including eligibility
criteria for collateral, concentration limits for our collateral pool, and
covenants and other requirements.

Acquisition financing


On December 20, 2021, Oportun RF, LLC, a wholly-owned subsidiary of the Company
issued a $116.0 million asset-backed floating rate variable funding note, and an
asset-backed residual certificate, both of which are secured by certain residual
cash flows from the Company's securitizations and guaranteed by Oportun, Inc.
The note was used to fund the cash consideration paid for the acquisition of
Digit. On May 24, 2022, pursuant to an amended indenture, Oportun RF, LLC issued
an additional $20.9 million asset-backed floating rate variable funding note,
and an asset-
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backed residual certificate, both of which are secured by Class D Notes and
residual cash flows from the Company's 2022-A Securitization and guaranteed by
Oportun, Inc. The amendment also replaced the Acquisition Financing interest
rate based on LIBOR with an interest rate based on SOFR. The notes bear interest
at a rate of SOFR plus 8.00%. On July 28, 2022, pursuant to an amended
indenture, the facility was upsized for an additional $9.1 million. The
amendments did not modify the maturity date of the Acquisition Financing
facility, it is still structured to pay down based on an amortization schedule
with a final payment in October 2024.

Corporate financing


On September 14, 2022, the Company entered into an agreement to borrow
$150.0 million of a senior secured term loan (the "Corporate Financing"). The
term loan bears interest, payable in cash, at an amount equal to 1-month term
SOFR plus 9.00%. The term loan is scheduled to mature on September 14, 2026, and
is not subject to amortization. Certain prepayments of the term loan is subject
to a prepayment premium. The obligations under the Credit Agreement are secured
by the assets of the Company and certain of its subsidiaries guaranteeing the
term loan, including pledges of the equity interests of certain subsidiaries
that are directly or indirectly owned by the Company, subject to customary
exceptions.

As of September 30, 2022, we were in compliance with all covenants and
requirements on our outstanding debt and available credit. For more information
regarding our Secured Financing facilities and Acquisition and Corporate
Financing, see Note 9,   Borrowings   of the Notes to the Condensed Consolidated
Financial Statements (Unaudited) included elsewhere in this report.

Structured loan sales


In March 2022, we participated in a securitization and sold loans through the
issuance of amortizing asset-backed notes secured by a pool of our unsecured and
secured personal installment loans. We also sold our share of the residual
interest in the pool. The sold loans had an aggregate unpaid principal balance
of approximately $227.6 million. For further information on the structured loan
sale transactions, see Note 5,   Loans Held for Sale and Loans Sold   of the
Notes to the Condensed Consolidated Financial Statements (Unaudited) included
elsewhere in this report.

Other loan sales

In April 2022, the Company entered into an agreement to sell a population of
loans. The sold loans had an aggregate unpaid principal balance of approximately
$14.7 million (the "Q2 2022 Loan Sale"). During the third quarter of 2022, the
Company entered into agreements to sell populations of loans. The sold loans had
an aggregate unpaid principal balance of approximately $20.7 million (the "Q3
2022 Loan Sales"). For further information on these sales, see Note 5,   Loans
Held for Sale and Loans Sold   of the Notes to the Condensed Consolidated
Financial Statements (Unaudited) included elsewhere in this report.

Whole loan sales


Through March 4, 2022, the Company had a commitment to sell to a third-party
institutional investor 10% of its unsecured loan originations that satisfy
certain eligibility criteria, and an additional 5% subject to certain
eligibility criteria and minimum and maximum volumes. The Company chose not to
renew the arrangement and allowed the agreement to expire on its terms on March
4, 2022. The originations of loans sold and held for sale during the three
months ended September 30, 2022 was insignificant. For further information on
the whole loan sale transactions, see Note 5,   Loans Held for Sale and Loans
Sold   of the Notes to the Condensed Consolidated Financial Statements
(Unaudited) included elsewhere in this report.

Banking partnership program and service agreement


We 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.

Contractual obligations and commitments


The material cash requirements for our contractual and other obligations
primarily include those related our outstanding borrowings under our
asset-backed notes, Acquisition Financing and Secured Financing, corporate and
retail leases, and purchase commitments for technology used in the business. See
Note 9,   Borrowings   and Note 16,   Leases, Commitments and Contingencies 

of

the notes to the condensed (unaudited) consolidated financial statements included elsewhere in this report for more information.

Liquidity risks


We believe that our existing cash balance, anticipated positive cash flows from
operations and available borrowing capacity under our credit facilities will be
sufficient to meet our anticipated cash operating expense and capital
expenditure requirements through at least the next 12 months. We do not have any
significant unused sources of liquid assets. If our available cash balances are
insufficient to satisfy our liquidity requirements, we will seek additional debt
or equity financing. In a rising interest rate environment, our ability to issue
additional equity or incur debt may be impaired and our borrowing costs may
increase. If we raise additional funds through the issuance of additional debt,
the agreements governing such debt could contain covenants that would restrict
our operations and such debt would rank senior to shares of our common stock.
The sale of equity may result in dilution to our stockholders and those
securities may have rights senior to those of our common stock. We may require
additional capital beyond our currently anticipated amounts and additional
capital may not be available on reasonable terms, or at all.

                                       41
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Critical Accounting Policies and Significant Judgments and Estimates


Our Management's Discussion and Analysis of Financial Condition and Results of
Operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of these condensed
consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue, expenses and
the related disclosures. In accordance with GAAP, we base our estimates on
historical experience and on various other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.

Goodwill is tested for impairment annually and more frequently if events and
circumstances indicate that the asset might be impaired. We have a single
reporting unit for the purpose of conducting the goodwill impairment assessment.
A goodwill impairment charge is recognized for the amount that the our carrying
value, including goodwill, exceeds the fair value, limited to the total amount
of goodwill. Factors that could lead to a future impairment include material
uncertainties such as a significant reduction in projected revenues, a
deterioration of projected financial performance, future acquisitions and/or
mergers, and a decline in our market value as a result of a significant decline
in the our stock price.

In response to a sustained decline in our share price driven by macroeconomic
conditions, we conducted a quantitative test of its goodwill as of September 30,
2022. We recognized a $108.5 million non-cash impairment charge for the three
and nine months ended September 30, 2022. There were no triggering events or
goodwill impairment charges during the three and nine months ended September 30,
2021 because we did not have a goodwill balance as of September 30, 2021 (see
Note 7 of the Notes to the Condensed Consolidated Financial Statements
(Unaudited) included elsewhere in this report for further details).

There have been no material changes in our critical accounting policies from
those disclosed in our Annual Report on Form 10-K dated December 31, 2021, filed
with the Securities and Exchange Commission on March 1, 2022 ("2021 Form 10-K"),
under the heading Management's Discussion and Analysis of Financial Condition
and Results of Operations. For additional information about our critical
accounting policies and estimates, see the disclosure included in our 2021 Form
10-K.

Recently issued accounting pronouncements

See Note 2 of the Notes to the Condensed Consolidated Financial Statements (unaudited) included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards.

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