☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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1.	Organization and Description of Business

Oportun Financial Corporation (together with its subsidiaries, "Oportun" or the " Company") is a technology-powered and mission-driven provider of inclusive, affordable financial services to customers who do not have a credit score, known as credit invisibles, or who may have a limited credit history and are "mis-scored," meaning that the Company believes that traditional credit scores do not properly reflect such customers’ credit worthiness. The Company's primary product offerings are small dollar, unsecured installment loans that are affordably priced and that help customers establish a credit history. The Company has begun to expand beyond its core offering into other financial services that a significant portion of its customers already use, such as auto loans, credit cards and personal loans secured by a vehicle. The Company has developed a proprietary lending platform that enables the Company to underwrite the risk of low-to-moderate income customers that are credit invisible or mis-scored, leveraging data collected through the application process and data obtained from third-party data providers, and a technology platform for application processing, loan accounting and servicing. The Company is headquartered in San Carlos, California. The Company has been certified by the United States Department of the Treasury as a Community Development Financial Institution ("CDFI") since 2009.

The Company uses securitization transactions, warehouse facilities and whole loan sales, to finance the principal amount of most of the loans it makes to its customers.

Segments

Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer and the Company's Chief Financial Officer are collectively considered to be the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s operations constitute a single reportable segment.

Initial Public Offering

On September 30, 2019, the Company completed its initial public offering (“IPO”), in which it issued and sold 4,873,356 shares of common stock and selling stockholders sold 2,314,144 shares of common stock, including the underwriters' over-allotment, at a price of $15.00 per share with net proceeds to the Company of approximately $60.5 million, after deducting underwriting discounts and commissions of $5.1 million and offering expenses paid by the Company of approximately $7.5 million. In connection with the IPO, all 14,043,977 shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into 19,075,167 shares of common stock. Additionally, on September 26, 2019, 3,969 shares of common stock were issued in connection with the cashless exercise of 9,090 Series F-1 convertible preferred stock warrants.

2.	Summary of Significant Accounting Policies

Basis of Presentation ‑ The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These statements are unaudited and reflect all normal, recurring adjustments that are, in management's opinion, necessary for the fair presentation of results. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior-period financial information has been reclassified to conform to current period presentation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 ("the Annual Report"), filed with the Securities and Exchange Commission ("SEC") on February 28, 2020. All share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Company's one-for-eleven reverse stock split. See "Initial Public Offering" above for additional information.

Use of Estimates ‑ The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates and assumptions.

Accounting Policies - There have been no changes to the Company's significant accounting policies from those described in Part II, Item 8 - Financial Statements and Supplementary Data in the Annual Report, except for the new accounting pronouncements subsequently adopted as noted below.

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Recently Adopted Accounting Standards

Allowance for Loan Losses and Fair Value Option ‑ In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. This guidance significantly changes the way entities are required to measure credit losses. Under the new standard, estimated credit losses are based upon an expected credit loss approach rather than an incurred loss approach that was previously required. In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition. This ASU provides an option to irrevocably elect the fair value option applied on an instrument-by-instrument basis for certain financial assets upon the adoption of Topic 326. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted in fiscal years beginning after December 15, 2018, including interim periods in those fiscal years. The Company elected to early adopt ASU 2016-13 and ASU 2019-05 effective January 1, 2020.

The Company previously elected the fair value option for all loans originated after January 1, 2018. Upon adoption of ASU 2019-05, the Company elected the fair value option on all loans receivable originated prior to January 1, 2018 that were previously measured at amortized cost. As a result, adoption of ASU 2016-13 did not have impact on the Company's condensed consolidated financial statements and disclosures. The Company made an accounting policy election not to measure an allowance for credit losses on accrued interest receivable amounts as the Company writes off the uncollectible accrued interest receivable balance in a timely manner and makes relevant disclosures.

The adoption of ASU 2019-05 and fair value election resulted in (i) the release of the remaining allowance for loan losses on Loans Receivable at Amortized Cost as of December 31, 2019; (ii) recognition of the unamortized net originations fee income as of December 31, 2019; and (iii) measurement of the remaining loans originated prior to January 1, 2018 at fair value. These adjustments resulted in an increase to opening retained earnings as of January 1, 2020 of approximately $4.8 million. ASU 2019-05 does not allow for the fair value option to be elected on our asset-backed notes carried at amortized cost.

 

Fair Value Disclosures ‑ In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement. This ASU simplifies the disclosure requirements for fair value measurements. The Company adopted this ASU effective January 1, 2020. The simplified disclosure requirements included a new disclosure for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. These new disclosure requirements were applied prospectively.

 

Cloud Computing Arrangements - In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use-Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted the amendments of this ASU effective January 1, 2020 on a prospective basis with no impact upon adoption. All eligible implementation costs related to cloud computing arrangements are now recorded as part of "prepaid expenses" within "Other assets" on the Condensed Consolidated Balance Sheets (Unaudited). The amortization expense is presented in the same line on the income statement as the fees for the associated hosted service within "Operating expenses" on the Company's Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited), and the cash payments related to implementation of cloud computing arrangements are classified as "cash flows from operating activities" within the Condensed Consolidated Statements of Cash Flow (Unaudited).

Accounting Standards to be Adopted

Income Taxes - In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. The ASU is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and disclosures.

Reference rate reform - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform if certain criteria are met. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The amendments in this ASU must be applied prospectively for all eligible contract modifications. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and disclosures.

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3.	Earnings (Loss) per Share

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

		Three Months Ended March 31,
(in thousands, except share and per share data)		2020				2019
Net income (loss)		$	(13,301	)		$	14,614
Less: Net income allocated to participating securities (1)		—				(12,926		)
Net (loss) income attributable to common stockholders		$	(13,301	)		$	1,688
Basic weighted-average common shares outstanding		27,015,730				2,938,006
Weighted average effect of dilutive securities:
Stock options		—				317,433
Restricted stock units		—				46,512
Warrants		—				12,436
Diluted weighted-average common shares outstanding		27,015,730				3,314,387
Earnings (loss) per share:
Basic		$	(0.49	)		$	0.57
Diluted		$	(0.49	)		$	0.51

⁽¹⁾ In a period of net income, both earnings and dividends (if any) are allocated to participating securities. In a period of net loss, only dividends (if any) are allocated to participating securities.

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

		Three Months Ended March 31,
		2020			2019
Stock options		4,086,128			—
Restricted stock units		1,757,010			—
Warrants		23,512			—
Convertible preferred stock		—			17,201,639
Total anti-dilutive common share equivalents		5,866,650			17,201,639

Restricted stock units granted with performance criterion were not reflected in the computation of diluted earnings (loss) per share for the three months ended March 31, 2019 as the performance condition was not considered probable. Per the provisions of ASC Topic 260, Earnings Per Share, diluted earnings (loss) per share only reflects those shares that would be issued if the reporting period were the end of the contingency period. Accordingly, total outstanding restricted stock units of 0 and 455,821 were not reflected in the denominator in the computation of diluted earnings per share for the three months ended March 31, 2020 and 2019.

The income available to common stockholders, which is the numerator in calculating diluted earnings per share, does not include any compensation cost related to these restricted stock unit awards for the three months ended March 31, 2019.

4.	Variable Interest Entities

As part of the Company’s overall funding strategy, the Company transfers a pool of designated loans receivable to wholly owned special-purpose subsidiaries ("VIEs") to collateralize certain asset-backed financing transactions. The Company has determined that it is the primary beneficiary of these VIEs because it has the power to direct the activities that most significantly impact the VIEs’ economic performance and the obligation to absorb the losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Such power arises from the Company’s contractual right to service the loans receivable securing the VIEs’ asset-backed debt obligations. The Company has an obligation to absorb losses or the right to receive benefits that are potentially significant to the VIEs because it retains the residual interest of each asset-backed financing transaction either in the form of an asset-backed certificate or as an uncertificated residual interest. Accordingly, the Company includes the VIEs’ assets, including the assets securing the financing transactions, and related liabilities in its consolidated financial statements.

Each VIE issues a series of asset-backed securities that are supported by the cash flows arising from the loans receivable securing such debt. Cash inflows arising from such loans receivable are distributed monthly to the transaction’s noteholders and related service providers in accordance with the transaction’s contractual priority of payments. The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets. The Company retains the most subordinated economic interest in each financing transaction through its ownership of the respective residual interest in each VIE. The Company has no obligation

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to repurchase loans receivable that initially satisfied the financing transaction’s eligibility criteria but subsequently became delinquent or a defaulted loans receivable.

 

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

		March 31,				December 31,
(in thousands)		2020				2019
Consolidated VIE assets
Restricted cash		$	25,963			$	28,821
Loans receivable at fair value		1,693,903				1,745,465
Loans receivable at amortized cost		—				41,747
Interest and fee receivable		17,274				15,874
Total VIE assets		1,737,140				1,831,907
Consolidated VIE liabilities
Secured financing (1)		279,999				62,000
Asset-backed notes at fair value		999,113				1,129,202
Asset-backed notes at amortized cost (1)		200,000				360,001
Total VIE liabilities		$	1,479,112			$	1,551,203

 

⁽¹⁾ Amounts exclude deferred financing costs. See Note 8, Borrowings for additional information.

5.	Loans Receivable at Amortized Cost, Net

Upon adoption of ASU 2019-05, effective January 1, 2020, the Company elected the fair value option on all loans receivable previously measured at amortized cost as of December 31, 2019. Accordingly, for the three months ended March 31, 2020, the Company did not have any loans receivable measured at amortized cost. Therefore, the relevant disclosures related to loans receivable at amortized cost, net, such as credit quality information, past due loans receivable, troubled debt restructurings, and allowance for loan losses are not applicable for the three months ended March 31, 2020. The disclosures below relate to the prior year and are disclosed for comparative period purposes.

Loans receivable at amortized cost, net, consisted of the following:

		March 31,				December 31,
(in thousands)		2020				2019
Loans receivable at amortized cost		$	—			$	42,546
Deferred origination costs and fees, net		—				(103		)
Allowance for loan losses		—				(3,972		)
Loans receivable at amortized cost, net		$	—			$	38,471

Loans receivable at amortized cost are the unpaid principal balances of the loans. Accrued and unpaid interest and late fees on the loans estimated to be collected from customers are included in interest and fees receivable in the condensed consolidated balance sheets. At December 31, 2019, accrued and unpaid interest on loans were $0.3 million. Accrued and unpaid late fees were immaterial at December 31, 2019.

Credit Quality Information - The Company uses a proprietary credit scoring algorithm to assess the creditworthiness of individuals who have limited or no credit profile. Data used in the algorithm is obtained from customers, alternative credit reporting agencies, commercially available data sources, as well as information from traditional credit bureaus.

The Company’s proprietary credit scoring platform determines the amount and duration of the loan. The amount of the loan is determined based on the credit risk and cash flow of the individual. Lower risk individuals with higher cash flows are eligible for larger loans with longer duration. Higher risk individuals with lower cash flows are eligible for smaller loans with shorter duration. Larger loans typically have lower interest rates than smaller loans.

After the loan is disbursed, the Company monitors the credit quality of its loans receivable on an ongoing and a total portfolio basis. The following is a credit quality indicator that the Company uses to monitor its exposure to credit risk, to evaluate allowance for loan losses and help set the Company’s strategy in granting future loans:

•	Delinquency Status ‑ The delinquency status of the Company’s loan receivables reflects, among other factors, changes in the mix of loans in the portfolio, the quality of receivables, the success of collection efforts and general economic conditions.

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The recorded investment in loans receivable at amortized cost based on this credit quality indicator was as follows:

		March 31,				December 31,
Credit Quality Indicator (in thousands)		2020				2019
Delinquency Status
30-59 days past due		$	—			$	2,304
60-89 days past due		—				1,615
90-119 days past due		—				1,459
		$	—			$	5,378

Past Due Loans Receivable - In accordance with the Company’s policy, for loans recorded at amortized cost, income from interest and fees continues to be recorded for loans that are delinquent 90 days or more. The Company addresses the valuation risk on loans recorded at amortized cost that are delinquent 90 days or more by reserving them at 100%.

The recorded investment in loans receivable at amortized cost that are 90 or more days delinquent and still accruing income from interest and fees were as follows:

		March 31,				December 31,
(in thousands)		2020				2019
Non-TDRs		$	—			$	720
TDRs		—				739
Total		$	—			$	1,459

Troubled Debt Restructurings ("TDR") - For the three months ended March 31, 2019, TDRs were primarily related to concessions involving interest rate reduction and extension of term.

As of December 31, 2019, TDRs comprised 21% of the Company’s total loan portfolio at amortized cost.

The amount of unamortized origination fees, net of origination costs, that were written off as a result of TDR restructurings of loans recorded at amortized cost during the three months ended March 31, 2019 was not material.

The Company’s TDR loans receivable at amortized cost based on delinquency status were as follows:

		March 31,				December 31,
(in thousands)		2020				2019
TDRs current to 29 days delinquent		$	—			$	6,367
TDRs 30 or more days delinquent		—				2,462
Total		$	—			$	8,829

A loan that has been classified as a TDR remains so until the loan is paid off or charged off. A TDR loan that misses its first two scheduled payments is charged off at the end of the month upon reaching 30 days' delinquency. A TDR loan that makes the first two scheduled payments is charged off according to the Company’s normal charge-off policy at 120 days' delinquency.

For loans recorded at amortized cost, previously accrued but unpaid interest and fees are also written off when the loan is charged off upon reaching 120 days' delinquency or when collection is not deemed probable.

Information on TDRs that defaulted and were charged off during the periods indicated were as follows:

		Three Months Ended March 31,
(in thousands)		2020				2019
Recorded investment in TDRs that subsequently defaulted and were charged off		$	—			$	3,254
Unpaid interest and fees charged off		—				419

When a loan recorded at amortized cost is restructured as a TDR, a portion of all of the accrued but unpaid interest and late fees may be forgiven. The following table shows the financial effects of TDRs that occurred during the periods indicated:

		Three Months Ended March 31,
(in thousands)		2020				2019
Contractual interest and fees forgiven		$	—			$	—

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Allowance for Loan Losses - For loans receivable at amortized cost, the Company sets the allowance for loan losses on a total portfolio by analyzing historical charge-off rates for the loan portfolio and the credit quality indicators discussed earlier.

The provision (release) for loan losses reflects the activity for the applicable period and provides an allowance at a level that management believes is adequate to cover probable loan losses at the balance sheet date. The Company estimates an allowance for loan losses only for loans receivable at amortized cost.

Activity in the allowance for loan losses was as follows:

		Three Months Ended March 31,
(in thousands)		2020				2019
Balance - beginning of period		$	3,972			$	26,326
Adjustment upon adoption of ASU 2019-05		(3,972		)		—
Provision (release) for loan losses		—				(366		)
Loans charged off		—				(12,083		)
Recoveries		—				3,315
Balance - end of period		$	—			$	17,192

6.	Loans Held for Sale

The originations of loans sold and held for sale during the three months ended March 31, 2020 was $74.5 million and the Company recorded a gain on sale of $7.5 million and servicing revenue of $4.5 million. The originations of loans sold and held for sale during the three months ended March 31, 2019 was $70.7 million and the Company recorded a gain on sale of $7.3 million and servicing revenue of $3.5 million.

Whole Loan Sale Program ‑ In November 2014, the Company entered into a whole loan sale agreement with an institutional investor, which agreement has been amended from time to time. The term of the current agreement expires on November 10, 2020. Pursuant to this agreement, the Company has committed to sell at least 10% of its unsecured loan originations, with an option to sell an additional 5%, subject to certain eligibility criteria and minimum and maximum volumes.

7.	Other Assets

Other assets consist of the following:

		March 31,				December 31,
(in thousands)		2020				2019
Fixed assets
Computer and office equipment		$	10,697			$	10,432
Furniture and fixtures		10,805				10,768
Purchased software		4,900				4,527
Vehicles		79				171
Leasehold improvements		28,673				27,701
Total cost		55,154				53,599
Less: Accumulated depreciation		(33,086		)		(30,765		)
Total fixed assets, net		$	22,068			$	22,834
System development costs:
System development costs		$	42,194			$	36,795
Less: Accumulated amortization		(20,624		)		(18,456		)
Total system development costs, net		$	21,570			$	18,339
Servicer fee and whole loan receivables		2,295				6,621
Prepaid expenses		16,209				12,217
Tax receivable and other		17,974				15,197
Total other assets		$	80,116			$	75,208

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Fixed Assets

Depreciation and amortization expense for the three months ended March 31, 2020 and 2019 was $2.5 million and $1.7 million, respectively.

System Development Costs

Amortization of system development costs for the three months ended March 31, 2020 and 2019 were $2.2 million and $0.9 million, respectively. System development costs capitalized for the three months ended March 31, 2020 and 2019 were $5.4 million and $2.6 million, respectively.

8.	Borrowings

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

March 31, 2020

Variable Interest Entity

Current Balance

Commitment Amount

Maturity Date

Interest Rate

(in thousands)

Oportun Funding V, LLC

$

279,064

$

400,000

10/1/2021

LIBOR (minimum of 0.00%) + 2.45%

December 31, 2019

Variable Interest Entity

Current Balance

Commitment Amount

Maturity Date

Interest Rate

(in thousands)

Oportun Funding V, LLC

$

60,910

$

400,000

10/1/2021

LIBOR (minimum of 0.00%) + 2.45%

The Company elected the fair value option for all asset-backed notes issued on or after January 1, 2018. The following table presents information regarding asset-backed notes:

		March 31, 2020
Variable Interest Entity		Initial note amount issued (1)				Initial collateral balance (2)				Current balance (1)				Current collateral balance(2)				Weighted average interest rate(3)			Original revolving period
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Funding XIII, LLC (Series 2019-A)		$	279,412			$	294,118			$	216,255			$	299,008			3.22	%		3 years
Oportun Funding XII, LLC (Series 2018-D)		175,002				184,213				156,504				187,188				4.50	%		3 years
Oportun Funding X, LLC (Series 2018-C)		275,000				289,474				245,320				294,090				4.39	%		3 years
Oportun Funding IX, LLC (Series 2018-B)		225,001				236,854				195,355				240,866				4.09	%		3 years
Oportun Funding VIII, LLC (Series 2018-A)		200,004				222,229				185,679				226,052				3.83	%		3 years
Total asset-backed notes recorded at fair value		$	1,154,419			$	1,226,888			$	999,113			$	1,247,204
Asset-backed notes recorded at amortized cost:
Oportun Funding VII, LLC (Series 2017-B)		$	200,000			$	222,231			$	199,602			$	225,867			3.51	%		3 years
Total asset-backed notes recorded at amortized cost		$	200,000			$	222,231			$	199,602			$	225,867

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		December 31, 2019
Variable Interest Entity		Initial note amount issued (1)				Initial collateral balance (2)				Current balance (1)				Current collateral balance(2)				Weighted average interest rate(3)			Original revolving period
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Funding XIII, LLC (Series 2019-A)		$	279,412			$	294,118			$	251,090			$	299,813			3.22	%		3 years
Oportun Funding XII, LLC (Series 2018-D)		175,002				184,213				178,980				187,447				4.50	%		3 years
Oportun Funding X, LLC (Series 2018-C)		275,000				289,474				280,852				294,380				4.39	%		3 years
Oportun Funding IX, LLC (Series 2018-B)		225,001				236,854				216,306				241,000				4.09	%		3 years
Oportun Funding VIII, LLC (Series 2018-A)		200,004				222,229				201,974				225,945				3.83	%		3 years
Total asset-backed notes recorded at fair value		$	1,154,419			$	1,226,888			$	1,129,202			$	1,248,585
Asset-backed notes recorded at amortized cost:
Oportun Funding VII, LLC (Series 2017-B)		$	200,000			$	222,231			$	199,413			$	225,925			3.51	%		3 years
Oportun Funding VI, LLC (Series 2017-A)		160,001				188,241				159,698				191,223				3.36	%		3 years
Total asset-backed notes recorded at amortized cost		$	360,001			$	410,472			$	359,111			$	417,148

⁽¹⁾ Initial note amount issued includes notes retained by the Company as applicable. The current balances are measured at fair value for asset-backed notes recorded at fair value and measured at carrying amount for asset-back notes recorded at amortized cost.

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

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

On March 9, 2020, the Company redeemed its asset-backed notes (Series 2017-A). An advance under the Company’s VFN was the primary source of funds for the redemption.

As of March 31, 2020, and December 31, 2019, the Company was in compliance with all covenants and requirements of the Secured Financing facility and asset-backed notes.

9.	Other Liabilities

Other liabilities consist of the following:

		March 31,				December 31,
(in thousands)		2020				2019
Accounts payable		$	7,843			$	5,919
Accrued compensation		14,262				22,226
Accrued expenses		17,124				15,110
Taxes payable		1,022				4,233
Accrued interest		3,179				3,842
Other		820				976
Total other liabilities		$	44,250			$	52,306

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10.	Stockholders' Equity

Convertible Preferred Stock - Immediately prior to the completion of the IPO, all 14,043,977 shares of convertible preferred stock were converted into 19,075,167 shares of the Company's common stock. The conversion of all of the Company's convertible preferred stock included an additional 1,873,355 shares of common stock issued for the conversion of the Series G convertible preferred stock to reflect the conversion rate of the Series G convertible preferred stock. The additional 1,873,355 shares issued to Series G convertible preferred stock holders resulted in a $37.5 million reduction to retained earnings and a corresponding increase to additional paid-in capital. There were no shares of convertible preferred stock issued or outstanding as of March 31, 2020 or December 31, 2019.

Preferred Stock - The Board has the authority, without further action by the Company's stockholders, to issue up to 100,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the Board. There were no shares of undesignated preferred stock issued or outstanding as of March 31, 2020 or December 31, 2019.

Common Stock - As of March 31, 2020 and December 31, 2019, the Company was authorized to issue 1,000,000,000 shares of common stock with a par value of $0.0001 per share. As of March 31, 2020, 27,403,279 and 27,143,797 shares were issued and outstanding, respectively, and 259,482 shares were held in treasury stock. As of December 31, 2019, 27,262,639 and 27,003,157 shares were issued and outstanding, respectively, and 259,482 shares were held in treasury stock.

Warrants - On September 26, 2019, 3,969 shares of convertible preferred stock were issued in connection with the cashless exercise of 9,090 Series F-1 convertible preferred stock warrants. All 3,969 shares were converted to common stock in connection with the IPO. Additionally, at the closing of the IPO, the outstanding 15,869 Series G convertible preferred stock warrants automatically converted into warrants exercisable for 23,512 shares of common stock.

11.	Equity Compensation and Other Benefits

2019 Equity Incentive Plan

The Company currently has one stockholder-approved plan from which stock-based awards can be issued, which was approved by the Company's stockholders in fiscal year 2019 (the "2019 Plan"). The 2019 Plan became effective on September 25, 2019 and is the successor to the Company's Amended and Restated 2005 Stock Option / Stock Issuance Plan (the "2005 Plan") and the 2015 Stock Option/Stock Issuance Plan (the "2015 Plan," and collectively with the 2005 Plan, the “Previous Plans”). The Previous Plans exist solely to satisfy outstanding options previously granted under those plans. The 2019 Plan provides for the grant of incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards, and other awards, or collectively, awards. ISOs may be granted only to the Company's employees, including officers, and the employees of its affiliates. All other awards may be granted to the employees, including officers, non-employee directors and consultants and the employees and consultants of the Company's affiliates. The maximum number of shares of Company common stock that may be issued under the 2019 Plan will not exceed 8,677,294 shares.

On March 4, 2020, the Company registered an additional 1,350,157 shares of common stock that became issuable under the 2019 Plan by reason of the automatic increase provision. The number of shares reserved under the 2019 Plan will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the preceding year; provided, however that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser amount than the 5% of the total number of shares of common stock.

2019 Employee Stock Purchase Plan

In September 2019, the Board adopted, and stockholders approved, the Company's 2019 Employee Stock Purchase Plan (the "ESPP"). The ESPP became effective on September 25, 2019. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward the Company's success and that of its affiliates. The ESPP includes two components. One component is designed to allow eligible U.S. employees to purchase common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code. In addition, purchase rights may be granted under a component that does not qualify for such favorable tax treatment when necessary or appropriate to permit participation by eligible employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws. The maximum aggregate number of shares of common stock that may be issued under the ESPP is 996,217 shares.

On March 4, 2020, the Company registered an additional 270,031 shares of common stock reserved for future issuance under the ESPP. The number of shares reserved under the ESPP will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31 of the preceding year or (b)726,186 shares of common stock; provided, however that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock.

Generally, all regular employees, including executive officers, employed by the Company or by any of its designated affiliates, will be eligible to participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of common stock under the ESPP. Unless otherwise determined by the Board, common stock will be purchased for the accounts of employees participating

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in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of the Company's common stock on the first date of an offering or (b) 85% of the fair market value of a share of the common stock on the date of purchase.

Stock Options

The term of an option may not exceed 10 years as determined by the Board, and each option generally vests over a four-year period with 25% vesting on the first anniversary date of the grant and 1/36th of the remaining amount vesting at monthly intervals thereafter. Option holders are allowed to exercise unvested options to acquire shares. Upon termination of employment, option holders have a period of up to three months in which to exercise any remaining vested options. The Company has the right to repurchase at the original purchase price any unvested but issued common shares upon termination of service. Unexercised options granted to participants who separate from the Company are forfeited and returned to the pool of stock options available for grant.

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The fair value is then amortized ratably over the requisite service periods of the awards, which is generally the vesting period.

As of March 31, 2020, and December 31, 2019, the Company’s total unrecognized compensation cost related to nonvested stock-based option awards granted to employees was $14.4 million and $10.1 million, respectively, which will be recognized over a weighted-average vesting period of approximately 3.0 years and 2.4 years, respectively.

Restricted Stock Units

The Company’s restricted stock units ("RSUs") vest upon the satisfaction of time-based criterion of up to four years. The service-based requirement will be satisfied in installments as follows: 25% of the total number of RSUs awarded will have the service-based requirement satisfied during the month in which the 12-month anniversary of the vesting commencement date occurs, and thereafter 1/16th of the total award in a series of 12 successive equal quarterly installments or 1/4th of the total award in a series of three successive equal annual installments following the first anniversary of the initial service vest date. Some awards also include a performance criterion, a liquidity event in connection with the Company's initial public offering or a change in control. The liquidity event requirement will be satisfied as to any then-outstanding RSUs on the first to occur of the following events prior to the expiration date: (1) the closing of a change in control; or (2) the first trading day following the expiration of the lock-up period in connection with an IPO. These RSUs are not considered vested until both criteria have been met, if applicable, and provided that participant is providing continuous service on the vesting date. The performance-based condition of such RSUs was considered probable on the effective date of the IPO completed in September 2019. As a result, $7.9 million of compensation expense was recognized in connection with these performance-based awards upon completion of the IPO.

As of March 31, 2020 and December 31, 2019, the Company's total unrecognized compensation cost related to nonvested restricted stock unit awards granted to employees was $35.8 million and $21.2 million, respectively, which will be recognized over a weighted average vesting period of approximately 3.2 years and 3.0 years, respectively.

Stock Option Exchange Offer

On August 22, 2019, the Company completed a one-time voluntary stock option exchange offer that allowed eligible participants the opportunity to exchange certain stock options for RSUs, subject to a new vesting schedule (the "RSU Exchange Offer"), or for a cash payment (the "Cash Exchange Offer," and together with the RSU Exchange Offer, the "Exchange Offers").

As a result of the Exchange Offers, options to purchase 1,040,154 shares of the Company’s common stock were accepted for exchange and 455,218 replacement RSUs were issued. The replacement RSUs have a vesting commencement date of August 1, 2019 and vesting schedule of two to four years. The RSUs will first vest on August 1, 2020, with the remainder vesting on a quarterly basis thereafter. The RSUs were granted under, and subject to, the terms and conditions of the 2015 Plan. The incremental compensation cost from the exchange is $3.2 million, recognized over the vesting period of the replacement award. The amount of cash payments provided in the Cash Exchange Offer was insignificant.

Stock-based Compensation - Total stock-based compensation expense included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) is as follows:

		Three Months Ended March 31,
(in thousands)		2020				2019
Technology and facilities		$	752			$	329
Sales and marketing		30				20
Personnel		3,369				1,631
Total stock-based compensation		$	4,151			$	1,980

The Company accounts for forfeitures as they occur and does not estimate forfeitures as of the award grant date. The Company capitalized compensation expense related to stock-based compensation the three months ended March 31, 2020 and 2019 of $0.1 million and $0.1 million, respectively.

Cash flows from the tax benefits for tax deductions resulting from the exercise of stock options in excess of the compensation expense recorded for those options (excess tax benefits) are required to be classified as cash from financing activities. The total income tax benefit recognized in the

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12.	Revenue

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

		Three Months Ended March 31,
(in thousands)		2020				2019
Interest income
Interest on loans		$	148,522			$	124,224
Fees on loans		2,178				2,522
Total interest income		150,700				126,746

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

		Three Months Ended March 31,
(in thousands)		2020				2019
Non-interest income
Gain on loan sales		$	7,532			$	7,312
Servicing fees		4,451				3,548
Other income		745				722
Total non-interest income		$	12,728			$	11,582

13.	Income Taxes

Income tax benefit was $(4.7) million for the three months ended March 31, 2020, representing an effective tax rate of 26.2%. Income tax expense was $5.4 million for the three months ended March 31, 2019, representing an effective tax rate of 26.8%.

14.	Fair Value of Financial Instruments

Financial Instruments at Fair Value

The Company previously elected the fair value option to account for all loans receivable held for investment that were originated on or after January 1, 2018 (the "Initial Fair Value Loans"), and for all asset-backed notes issued on or after January 1, 2018 (the "Fair Value Notes"). Upon adoption of ASU 2019-05, effective January 1, 2020, the Company elected the fair value option on all loans receivable previously measured at amortized cost (the "Subsequent Fair Value Loans" and together with the Initial Fair Value Loans, the "Fair Value Loans"). Accordingly, for the three months ended March 31, 2020, the Company did not have any loans receivable measured at amortized cost. Asset-backed notes issued prior to January 1, 2018 are accounted for at amortized cost, net. Loans that the Company designates for sale will continue to be accounted for as held for sale and recorded at the lower of cost or fair value until the loans receivable are sold.

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

		March 31, 2020								December 31, 2019
(in thousands)		Unpaid Principal Balance				Fair Value				Unpaid Principal Balance				Fair Value
Assets
Loans receivable		$	1,833,159			$	1,760,481			$	1,800,418			$	1,882,088
Liabilities
Asset-backed notes		1,113,165				999,113				1,113,165				1,129,202

The Company calculates the fair value of the Fair Value Notes using independent pricing services and broker price indications, which are based on quoted prices for identical or similar notes, which are Level 2 input measures.

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The Company primarily uses a discounted cash flow model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate fair value. The following tables present quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements:

		March 31, 2020						December 31, 2019
		Minimum		Maximum		Weighted Average (2)		Minimum (3)		Maximum (3)		Weighted Average
Remaining cumulative charge-offs (1)		7.43%		57.58%		14.56%		*		*		9.61%
Remaining cumulative prepayments (1)		—%		40.39%		26.00%		*		*		34.95%
Average life (years)		0.17		1.91		0.90		*		*		0.81
Discount rate		-		-		12.78%		-		-		7.77%

⁽¹⁾ Figure disclosed as a percentage of outstanding principal balance.

⁽²⁾ Unobservable inputs were weighted by outstanding principal balance, which are grouped by risk (type of customer, original loan maturity terms).

⁽³⁾ The Company adopted ASU 2018-13 on a prospective basis, effective January 1, 2020, therefore, these disclosures are not required as of December 31, 2019.

Fair value adjustments related to financial instruments where the fair value option has been elected are recorded through earnings for the three months ended March 31, 2020 and 2019. Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques for loans, a change in one input in a certain direction may be offset by an opposite change from another input.

The Company developed an internal model to estimate the Fair Value Loans. To generate future expected cash flows, the model combines receivable characteristics with assumptions about borrower behavior based on the Company’s historical loan performance. These cash flows are then discounted using a required rate of return that management estimates would be used by a market participant.

The Company tested the fair value model by comparing modeled cash flows to historical loan performance to ensure that the model was complete, accurate and reasonable for the Company’s use. The Company also engaged a third party to create an independent fair value estimate for the Fair Value Loans, which provides a set of fair value marks using the Company’s historical loan performance data and whole loan sale prices to develop independent forecasts of borrower behavior. Their model generates expected cash flows which were then aggregated and compared to the Company’s within an acceptable range.

The Company's internal valuation committee provides governance and oversight over the fair value pricing calculations 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.

The table below presents a reconciliation of loans receivable at fair value on a recurring basis using significant unobservable inputs:

		Three Months Ended March 31,
(in thousands)		2020				2019
Balance – beginning of period		$	1,882,088			$	1,227,469
Adjustment upon adoption of ASU 2019-05		43,323				—
Principal disbursements		371,433				355,114
Principal payments from customers		(335,008		)		(197,055		)
Gross charge-offs		(46,230		)		(23,250		)
Net increase (decrease) in fair value		(155,125		)		2,675
Balance – end of period		$	1,760,481			$	1,364,953

As of March 31, 2020, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status is $2.3 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due is $17.3 million. As of December 31, 2019, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status is $3.6 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due is $15.8 million.

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Financial Instruments Disclosed But Not Carried at Fair Value

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

		March 31, 2020
		Carrying value				Estimated fair value				Estimated fair value
(in thousands)										Level 1				Level 2				Level 3
Assets
Cash and cash equivalents		$	144,836			$	144,836			$	144,836			$	—			$	—
Restricted cash		61,258				61,258				61,258				—				—
Loans receivable at amortized cost, net (Note 5)		—				—				—				—				—
Loans held for sale (Note 6)		141				141				—				—				141
Liabilities
Accounts payable		7,843				7,843				7,843				—				—
Secured financing (Note 8)		279,999				264,789				—				264,789				—
Asset-backed notes at amortized cost (Note 8)		199,602				189,011				—				189,011				—

		December 31, 2019
		Carrying value				Estimated fair value				Estimated fair value
(in thousands)										Level 1				Level 2				Level 3
Assets
Cash and cash equivalents		$	72,179			$	72,179			$	72,179			$	—			$	—
Restricted cash		63,962				63,962				63,962				—				—
Loans receivable at amortized cost, net (Note 5)		38,471				43,482				—				—				43,482
Loans held for sale (Note 6)		715				772				—				—				772
Liabilities
Accounts payable		5,919				5,919				5,919				—				—
Secured financing (Note 8)		62,000				62,000				—				62,000				—
Asset-backed notes at amortized cost (Note 8)		359,111				360,668				—				360,668				—

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

•	Cash, cash equivalents, restricted cash and accounts payable ‑ The carrying values of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash and accounts payable, approximate Level 1 fair values of these financial instruments due to their short-term nature.

•	Loans receivable ‑ The fair value of loans receivable recorded at amortized cost were estimated by discounting the future expected cash flows using a required rate of return that management estimates would be used by a market participant.

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

•

Secured financing and asset-backed notes ‑ The fair values of secured financing and asset-backed notes recorded at carrying value have been calculated using discount rates equivalent to the weighted-average market yield of comparable debt securities. The Company's asset-backed notes are valued by independent pricing services and brokers using quoted prices for identical or similar notes, which are Level 2 input measures.

There were no transfers in or out of Level 3 assets and liabilities for the three months ended March 31, 2020 and 2019 and the year ended December 31, 2019.

15.	Leases, Commitments and Contingencies

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

The Company has elected the practical expedient to keep leases with terms of 12 months or less off the balance sheet as no recognition of a lease liability and a right-of-use asset is required. Operating lease expense is recognized on a straight-line basis over the lease term in "Technology and facilities" in the Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited).

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Most of the Company’s existing lease arrangements are classified as operating leases under the new standard. At the inception of a contract, the Company determines if the contract is or contains a lease. At the commencement date of a lease, the Company recognizes a lease liability equal to the present value of the lease payments and a right-of-use asset representing the Company's right to use the underlying asset for the duration of the lease term. The Company’s leases include options to extend or terminate the arrangement at the end of the original lease term. The Company generally does not include renewal or termination options in its assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. Variable lease payments and short-term lease costs were deemed immaterial. The Company’s leases do not provide an explicit rate. The Company uses its contractual borrowing rate to determine lease discount rates.

As of March 31, 2020, maturities of lease liabilities, excluding short-term leases and leases on a month-to-month basis, were as follows:

(in thousands)		Operating Leases
Lease expense
2020 (remaining nine months)		$	11,822
2021		13,331
2022		10,453
2023		9,004
2024		8,166
2025		6,201
Thereafter		1,407
Total lease payments		60,384
Imputed interest		(6,126		)
Total leases		$	54,258
Sublease income
2020 (remaining nine months)		$	(435	)
2021		—
2022 and thereafter		—
Total lease payments		(435		)
Imputed interest		2
Total sublease income		$	(433	)
Net lease liabilities		$	53,825
Weighted average remaining lease term		4.8 years
Weighted average discount rate		4.48		%

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As of December 31, 2019, maturities of lease liabilities, excluding short-term leases and leases on a month-to-month basis, were as follows:

(in thousands)		Operating Leases
Lease expense
2020		15,227
2021		12,439
2022		9,663
2023		8,340
2024		7,488
Thereafter		7,293
Total lease payments		60,450
Imputed interest		(6,240		)
Total leases		$	54,210
Sublease income
2020		(861		)
2021 and thereafter		—
Total lease payments		(861		)
Imputed interest		8
Total sublease income		$	(853	)
Net lease liabilities		$	53,357
Weighted average remaining lease term		5.0 years
Weighted average discount rate		4.49		%

Rental expenses under operating leases for the three months ended March 31, 2020 and 2019, was $5.2 million and $4.3 million, respectively.

Purchase Commitment ‑ The Company has commitments to purchase information technology and communication services in the ordinary course of business, with various terms through 2023. These amounts are not reflective of the Company’s entire anticipated purchases under the related agreements; rather, they are determined based on the non-cancelable amounts to which the Company is contractually obligated. The Company’s purchase obligations are $4.9 million for the remainder of 2020, $8.9 million in 2021, $5.1 million in 2022, $0.2 million in 2023, and $0.0 million thereafter.

Whole Loan Sale Program ‑ The Company has a commitment to sell to a third-party financial institution 10% of its unsecured loan originations that satisfy certain eligibility criteria, and an additional 5% at the Company’s sole option. For details regarding the whole loan sale program, refer to Note 6, Loans Held for Sale.

Access Loan Sale Program ‑ In July 2017, the Company entered into a whole loan sale transaction with a financial institution with a commitment to sell 100% of the originations pursuant to the Company’s Access Loan Program and service the sold loans. For details regarding the Access Loan Sale Program, refer to Note 6, Loans Held for Sale.

Unfunded Loan and Credit Card Commitments - Unfunded loan and credit card commitments at March 31, 2020 and December 31, 2019 were $2.7 million and $2.3 million, respectively.

Litigation - On January 2, 2018, a complaint, captioned Opportune LLP v. Oportun, Inc. and Oportun, LLC, Civil Action No. 4:18-cv-00007 (the "Opportune Lawsuit"), was filed by plaintiff Opportune LLP in the United States District Court for the Southern District of Texas, against the Company and its wholly-owned subsidiary, Oportun, LLC. The complaint alleged various claims for trademark infringement, unfair competition, trademark dilution and misappropriation against the Company and Oportun, LLC and called for injunctive relief requiring the Company and Oportun, LLC to cease using its marks, as well as monetary damages related to the claims. In addition, on January 2, 2018, the plaintiff initiated a cancellation proceeding, Proceeding No. 92067634, before the Trademark Trial and Appeal Board seeking to cancel certain of the Company's trademarks, (the "Cancellation Proceeding" and, together with the Opportune Lawsuit, the "Opportune Matter"). On March 5, 2018, the Trademark Trial and Appeal Board granted the Company's motion to suspend the Cancellation Proceeding pending final disposition of the Opportune Lawsuit. On April 24, 2018, the District Court granted the Company's motion to partially dismiss the complaint, dismissing the plaintiff's misappropriation claim. On February 22, 2019, the plaintiff filed an amended complaint adding an additional claim under the Anti-Cybersquatting Protection Act to the remaining claims in the original complaint. On August 30, 2019, the Company filed a motion for summary judgment on all of the plaintiff's claims. On January 22, 2020, the District Court issued its decision denying the Company's motion for summary judgment. No trial date has been set. In connection with discussions regarding settlement of the Opportune Matter, the Company has recorded a liability of $1.9 million within Other liabilities and a corresponding insurance recovery receivable of $1.0 million within Other assets on the Condensed Consolidated Balance Sheets as of December 31, 2019. The income statement impact of $0.9 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2019. Actual results could differ from these estimates.

See Part II. Item 1. Legal Proceedings for additional information regarding legal proceedings in which the Company is involved.

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

•	our ability to manage our net charge-off rates;

•	our ability to successfully manage the potential adverse impact of the COVID-19 pandemic on our business, results and operations;

•	our plans and timing for new product launches;

•	our ability to successfully adjust our proprietary credit risk models and products in response to changing macroeconomic conditions and fluctuations in the credit market, including as a result of the COVID-19 pandemic;

•	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 capabilities for mobile loan and online origination and increase the volume of loans originated through our mobile and online channels;

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

•	our ability to expand our presence in states in which we operate, as well as expand into new states;

•	our plans and ability to enter into new markets and introduce new products and services;

•	our ability to continue to expand our demographic focus;

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

•	our plans for and our ability to successfully maintain our diversified funding strategy, including loan warehouse facilities, whole loan sales and securitization transactions;

•	our ability to successfully manage our interest rate spread against our cost of capital;

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•	our ability to manage fraud risk;

•	our ability to efficiently manage our Customer Acquisition Cost;

•	our expectations regarding the sufficiency of our cash to meet our operating and cash expenditures;

•	our ability to effectively estimate the fair value of our Fair Value Loans and Fair Value Notes;

•	our ability to effectively secure and maintain the confidentiality of the information provided and utilized across our systems;

•	our ability to successfully compete with companies that are currently in, or may in the future enter, the business of providing consumer loans to low-to-moderate income customers underserved by traditional, mainstream financial institutions;

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

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

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

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•	Loans and notes are recorded at their fair value, not their principal balance or cost basis;

•	The fair value of the loans takes into consideration net charge-offs for the remaining life of the loans, thus no separate allowance for loan loss is required;

•	Upfront fees and expenses of loans and notes are no longer deferred but recognized at origination in income or expense, respectively;

•	Changes in the fair value of loans and notes impact Net Revenue; and

•	Net charge-offs are recognized as they occur as part of the change in fair value for loans.

•	Portfolio yield;

•	Average life;

•	Prepayments;

•	Remaining cumulative charge-offs; and

•	Discount rate.

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•	Subtracting the servicing fee from the weighted average portfolio yield over the remaining life of the loans to calculate net portfolio yield;

•	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 net cash flow;

•	Subtracting the remaining cumulative charge-offs from the net portfolio yield 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 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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•	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 consider 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 excess provision represents the portion of provision for loan losses not attributable to net principal charge-offs occurring in the current period, it is expected that net principal charge-offs in the amount of the excess provision will occur in future periods.

•	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 Fair Value Loans or our Fair Value Notes.

•	Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us.

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

•	We believe it is useful to exclude the impact of depreciation and amortization and stock-based compensation expense because they are non-cash charges.

•	We believe it is useful to exclude the impact of the litigation reserve because this item does not reflect ongoing business operations.

•

We also reverse origination fees for Fair Value Loans, net. As a result of our election of the fair value option for our Fair Value Loans, 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 also reverse the fair value mark-to-market adjustment because it is a non-cash adjustment as shown in the table below.

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

•	We believe it is useful to exclude stock-based compensation expense, net of tax, because it is a non-cash charge.

•	We believe it is useful to exclude the impact of the litigation reserve, net of tax, because this item does not reflect ongoing business operations.

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

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•	Eligibility Criteria. In order for our loans to be eligible for purchase by Oportun Funding V, they must meet all applicable eligibility criteria;

•	Concentration Limits. The collateral pool is subject to certain concentration limits that, if exceeded, would reduce our borrowing base availability by the amount of such excess; and

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Covenants and Other Requirements. The Secured Financing facility contains several financial covenants, portfolio performance covenants and other covenants or requirements that, if not complied with, may result in an event of default and/or an early amortization event causing the accelerated repayment of amounts owed. The Secured Financing facility also requires us to get lender consent prior to making material changes to our credit and collection policies. If we are unable to get consent to make changes, it may restrict our ability to offer deferred or reduced payment options to our borrowers.

•	Eligibility Criteria. In order for our loans to be eligible for purchase by our wholly owned special purpose subsidiaries they must meet all applicable eligibility criteria; and

•	Covenants and Other Requirements. Our securitization facilities contain pool concentration limits, pool performance covenants and other covenants or requirements that, if not complied with, may result in an event of default, and/or an early amortization event causing the accelerated repayment of amounts owed.

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•	increase the volume of loans originated through our various origination channels, including retail locations, direct mail marketing, contact centers and online, which includes our mobile origination solution;

•	increase the effectiveness of our direct mail marketing, radio advertising, digital advertising and other marketing strategies;

•	efficiently manage and expand our presence and activities in states in which we operate, as well as expand into new states;

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

•	manage our Annualized Net Charge-Off Rate;

•	maintain the terms on which we lend to our customers;

•	protect against increasingly sophisticated fraudulent borrowing and online theft;

•	enter into new markets and introduce new products and services;

•	continue to expand our customer demographic focus from our original customer base of Spanish- speaking customers;

•	successfully maintain our diversified funding strategy, including loan warehouse facilities, whole loan sales and securitization transactions;

•	successfully manage our interest rate spread against our cost of capital;

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

•	effectively manage and expand the capabilities of our contact centers, outsourcing relationships and other business operations abroad;

•	effectively secure and maintain the confidentiality of the information provided and utilized across our systems;

•	successfully compete with companies that are currently in, or may in the future enter, the business of providing consumer financial services to low-to-moderate income customers underserved by traditional, mainstream financial institutions;

•	attract, integrate and retain qualified employees; and

•	successfully adapt to complex and evolving regulatory environments.

•	loan volumes, loan mix and the channels through which our loans are originated;

•	the effectiveness of our direct marketing and other marketing channels;

•	the timing and success of new products and origination channels;

•	the amount and timing of operating expenses related to acquiring customers and the maintenance and expansion of our business, operations

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•	net charge-off rates;

•	adjustments to the fair value of our Fair Value Loans and Fair Value Notes;

•	our cost of borrowing money and access to the capital markets; and

•	general economic, industry and market conditions, including those stemming from the COVID-19 pandemic.

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•	identification of new locations and negotiation of acceptable lease terms; and

•	incurrence of additional indebtedness (if necessary to finance new retail locations).

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•	risks related to government regulation or required compliance with local laws;

•	local licensing and reporting obligations;

•	difficulties in developing, staffing and simultaneously managing a number of varying foreign operations as a result of distance, language and cultural differences;

•	different, uncertain, overlapping or more stringent local laws and regulations;

•	political and economic instability, tensions, security risks and changes in international diplomatic and trade relations;

•	state or federal regulations that restrict offshoring of business operational functions or require offshore partners to obtain additional licenses, registrations or permits to perform services on our behalf;

•	geopolitical events, including natural disasters, public health issues, epidemics or pandemics, acts of war and terrorism;

•	the impact of, and response of local governments to, the COVID-19 pandemic;

•	compliance with applicable U.S. laws and foreign laws related to consumer protection, intellectual property, privacy, data security, corruption, money laundering and export/trade control;

•	misconduct by our outsourcing partners and their employees or even unsubstantiated allegations of misconduct;

•	risks due to lack of direct involvement in hiring and retaining personnel; and

•	potentially adverse tax developments and consequences.

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•	default and foreclosure on our and our subsidiaries’ assets if asset performance and our operating revenue are insufficient to repay debt obligations;

•	mandatory repurchase obligations for any loans conveyed or sold into a debt financing or under a whole loan purchase facility if the representations and warranties we made with respect to those loans were not correct when made;

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acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do not obtain a waiver for such breach or renegotiate our covenant;

•	our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;

•	our inability to obtain necessary additional financing if changes in the characteristics of our loans or our collection and other loan servicing activities change and cease to meet conditions precedent for continued or additional availability under our debt financings;

•	diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes;

•	creating limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

•	defaults based on loan portfolio performance or default in our collection and loan servicing obligations could result in our being replaced by a third-party or back-up servicer and notification to our customers to redirect payments;

•	downgrades or revisions of agency ratings for our debt financing; and

•	monitoring, administration and reporting costs and expenses, including legal, accounting and other monitoring reporting costs and expenses, required under our debt financings.

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•	failure to meet quarterly or annual guidance with regard to revenue, margins, earnings or other key financial or operational metrics;

•	fluctuations in the trading volume of our share or the size of our public float;

•	price and volume fluctuations in the overall stock market from time to time;

•	changes in operating performance and stock market valuations of similar companies;

•	failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•	public reaction to our press releases, other public announcements and filings with the SEC;

•	any major change in our management;

•	sales of shares of our common stock by us or our stockholders;

•	rumors and market speculation involving us or other companies in our industry;

•	actual or anticipated changes in our results of operations or fluctuations in our results of operations;

•	changes in prevailing interest rates;

•	quarterly fluctuations in demand for our loans;

•	actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

•	litigation, government investigations and regulatory actions;

•	developments or disputes concerning our intellectual property or other proprietary rights;

•	new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

•	changes in accounting standards, policies, guidelines, interpretations or principles;

•	other general market, political and economic conditions, including any such conditions and local conditions in the markets in which our customers, employees, and contractors are located.

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•	a classified Board with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board;

•	our Board has the right to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill Board vacancies;

•	our stockholders may not act by written consent or call special stockholders’ meetings;

•	our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

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stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and

•	our Board may issue, without stockholder approval, shares of undesignated preferred stock, which may make it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

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