oprt-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

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

For the transition period from ___________ to ___________

Commission File Number 001-39050

OPORTUN FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		45-3361983
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

2 Circle Star Way
San Carlos,	CA	94070
Address of Principal Executive Offices		Zip Code

(650) 810-8823

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	OPRT	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Smaller reporting company	☒
Accelerated filer	☒	Emerging growth company	☐
Non-accelerated filer	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding as of July 30, 2021 was 28,047,193.


TABLE OF CONTENTS
GLOSSARY

PART I ‑ FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Income	6
	Condensed Consolidated Statements of Changes in Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flow	9
	Notes to the Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44

PART II ‑ OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibit Index	74

Signature		75

GLOSSARY

Terms and abbreviations used in this report are defined below.


Term or Abbreviation						Definition
30+ Day Delinquency Rate						Unpaid principal balance for our owned loans and credit card receivables that are 30 or more calendar days contractually past due as of the end of the period divided by Owned Principal Balance as of such date
Active Customers						Number of customers with an outstanding loan or an active credit card serviced by us at the end of a period. Active Customers include customers whose loans are owned by us or loans and accounts that were originated under an Oportun affiliated program and that we service. Customers with charged-off accounts are excluded from Active Customers
Adjusted EBITDA						Adjusted EBITDA is a non-GAAP financial measure calculated as net income (loss), adjusted for the impact of our election of the fair value option and further adjusted to eliminate the effect of the following items: income tax expense (benefit), stock-based compensation expense, depreciation and amortization, certain non-recurring charges, origination fees for Fair Value Loans, net and fair value mark-to-market adjustments
Adjusted Earnings Per Share ("EPS")						Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income by adjusted weighted-average diluted common shares outstanding
Adjusted Net Income						Adjusted Net Income is a non-GAAP financial measure calculated by adjusting our net income (loss), for the impact of our election of the fair value option, and further adjusted to exclude income tax expense (benefit), stock-based compensation expense, and certain non-recurring charges
Adjusted Operating Efficiency						Adjusted Operating Efficiency is a non-GAAP financial measure calculated by dividing adjusted total operating expenses (excluding stock-based compensation expense and certain non-recurring charges) by total revenue
Adjusted Return on Equity ("ROE")						Adjusted Return on Equity is a non-GAAP financial measure calculated by dividing annualized Adjusted Net Income by average total stockholders’ equity


Aggregate Originations						Aggregate amount disbursed to borrowers and credit granted on credit cards during a specific period. Aggregate Originations exclude any fees in connection with the origination of a loan
Annualized Net Charge-Off Rate						Annualized loan and credit card principal losses (net of recoveries) divided by the Average Daily Principal Balance of owned loans and credit card receivables for the period
AOCI						Accumulated other comprehensive income (loss)
APR						Annual Percentage Rate
Asset-Backed Notes at Fair Value (or "Fair Value Notes")						All asset-backed notes issued by Oportun on or after January 1, 2018
Average Daily Debt Balance						Average of outstanding debt principal balance at the end of each calendar day during the period
Average Daily Principal Balance						Average of outstanding principal balance of owned loans and credit card receivables at the end of each calendar day during the period
Board						Oportun’s Board of Directors


Cost of Debt						Annualized interest expense divided by Average Daily Debt Balance
Customer Acquisition Cost (or "CAC")						Sales and marketing expenses, which include the costs associated with various paid marketing channels, including direct mail, digital marketing and brand marketing and the costs associated with our telesales and retail operations divided by number of loans originated and new credit cards activated to new and returning customers during a period
Emergency Hardship Deferral						Any receivable that currently has one or more payments deferred and added at the end of the loan payment schedule in connection with a local or wide-spread emergency declared by local, state or federal government
Fair Value Loans (or "Loans Receivable at Fair Value")						All loans receivable held for investment that were originated on or after January 1, 2018. Upon the adoption of ASU 2019-05 as of January 1, 2020 all loans receivable held for investment are reported in this line item for all prospective reporting periods
Fair Value Pro Forma						In order to facilitate comparisons to periods prior to January 1, 2018, certain metrics included in this document have been shown on a pro forma basis, or the Fair Value Pro Forma, as if we had elected the fair value option since our inception for all loans originated and held for investment and all asset-backed notes issued

Fair Value Notes (or "Asset-Backed Notes at Fair Value")						All asset-backed notes issued by Oportun on or after January 1, 2018
FICO® score or FICO®						A credit score created by Fair Isaac Corporation

GAAP						Generally Accepted Accounting Principles

Leverage						Average Daily Debt Balance divided by Average Daily Principal Balance

Loans Receivable at Fair Value (or "Fair Value Loans")						All loans receivable held for investment that were originated on or after January 1, 2018. Upon the adoption of ASU 2019-05 as of January 1, 2020 all loans receivable held for investment are reported in this line item for all prospective reporting periods
Managed Principal Balance at End of Period						Total amount of outstanding principal balance for all loans and credit card receivables, including loans and receivables sold, which we continue to service, at the end of the period
Net Revenue						Net Revenue is calculated by subtracting interest expense from total revenue and adding the net increase (decrease) in fair value
Operating Efficiency						Total operating expenses divided by total revenue
Owned Principal Balance at End of Period						Total amount of outstanding principal balance for all loans and credit card receivables, excluding loans and receivables sold, at the end of the period


Term or Abbreviation						Definition
Portfolio Yield						Annualized interest income as a percentage of Average Daily Principal Balance
Principal Balance						Original principal balance reduced by principal payments received and principal charge-offs to date for our personal loans. Purchases and cash advances, reduced by returns and principal payments received and principal charge-offs to date for our credit cards
Return on Equity						Annualized net income divided by average stockholders' equity for a period


Secured Financing						Asset-backed revolving debt facility
VIEs						Variable interest entities
Weighted Average Interest Rate						Annualized interest expense as a percentage of average debt

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)


	June 30,		December 31,
	2021		2020
Assets
Cash and cash equivalents	$	138,429	$	136,187
Restricted cash	219,540		32,403
Loans receivable at fair value	1,726,914		1,696,526






Interest and fees receivable, net	13,049		15,426
Right of use assets - operating	35,968		46,820

Other assets	87,583		81,689
Total assets	$	2,221,483	$	2,009,051

Liabilities and stockholders' equity
Liabilities
Secured financing	$	—	$	246,385
Asset-backed notes at fair value	1,613,649		1,167,309


Lease liabilities	45,682		49,684

Other liabilities	77,820		79,306
Total liabilities	1,737,151		1,542,684
Stockholders' equity


Common stock, $0.0001 par value - 1,000,000,000 shares authorized at June 30, 2021 and December 31, 2020; 28,305,947 shares issued and 28,033,924 shares outstanding at June 30, 2021; 27,951,286 shares issued and 27,679,263 shares outstanding at December 31, 2020	6		6
Common stock, additional paid-in capital	444,183		436,499

Accumulated other comprehensive loss	(249)		(261)
Retained earnings	46,701		36,432
Treasury stock at cost, 272,023 shares at June 30, 2021 and December 31, 2020	(6,309)		(6,309)
Total stockholders’ equity	484,332		466,367
Total liabilities and stockholders' equity	$	2,221,483	$	2,009,051

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
Interest income	$	128,589	$	136,086	$	255,780	$	286,786
Non-interest income	9,665		6,621		17,787		19,349
Total revenue	138,254		142,707		273,567		306,135
Less:
Interest expense	12,163		15,110		25,667		31,471

Net decrease in fair value	(5,902)		(81,482)		(17,470)		(147,951)
Net revenue	120,189		46,115		230,430		126,713

Operating expenses:
Technology and facilities	33,124		31,512		66,048		62,286
Sales and marketing	23,748		20,060		47,641		44,887
Personnel	28,546		27,681		55,373		53,263
Outsourcing and professional fees	14,789		11,123		27,414		24,741
General, administrative and other	10,179		2,640		20,176		6,453
Total operating expenses	110,386		93,016		216,652		191,630

Income (loss) before taxes	9,803		(46,901)		13,778		(64,917)
Income tax expense (benefit)	2,553		(12,653)		3,509		(17,368)
Net income (loss)	$	7,250	$	(34,248)	$	10,269	$	(47,549)
Change in post-termination benefit obligation	6		5		12		(112)
Total comprehensive income (loss)	$	7,256	$	(34,243)	$	10,281	$	(47,661)

Net income (loss) attributable to common stockholders	$	7,250	$	(34,248)	$	10,269	$	(47,549)

Share data:
Earnings (loss) per share:
Basic	$	0.26	$	(1.26)	$	0.37	$	(1.75)
Diluted	$	0.24	$	(1.26)	$	0.34	$	(1.75)
Weighted average common shares outstanding:
Basic	28,004,699		27,233,394		27,888,029		27,125,054
Diluted	30,050,847		27,233,394		29,836,089		27,125,054

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(in thousands, except share data)


For the Six Months Ended June 30, 2021
	Common Stock Warrants	Common Stock
		Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2021		—	$	—	27,679,263	$	6	$	436,499	$	(261)	$	36,432	$	(6,309)	$	466,367
Issuance of common stock upon exercise of stock options		—	—		33,526	—		307		—		—		—		307



Stock-based compensation expense		—	—		—	—		5,088		—		—		—		5,088



Vesting of restricted stock units, net		—	—		261,794	—		(2,794)		—		—		—		(2,794)


Change in post-termination benefit obligation		—	—		—	—		—		6		—		—		6


Net income		—	—		—	—		—		—		3,019		—		3,019
Balance – March 31, 2021		—	$	—	27,974,583	$	6	$	439,100	$	(255)	$	39,451	$	(6,309)	$	471,993

Issuance of common stock upon exercise of stock options		—	—		10,114	—		159		—		—		—		159



Stock-based compensation expense		—	—		—	—		5,366		—		—		—		5,366



Vesting of restricted stock units, net		—	—		49,227	—		(442)		—		—		—		(442)


Change in post-termination benefit obligation		—	—		—	—		—		6		—		—		6


Net income		—	—		—	—		—		—		7,250		—		7,250
Balance – June 30, 2021		—	$	—	28,033,924	$	6	$	444,183	$	(249)	$	46,701	$	(6,309)	$	484,332

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(in thousands, except share data)


For the Six Months Ended June 30, 2020
	Convertible Preferred and Common Stock Warrants	Common Stock
		Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2020		23,512	$	63	27,003,157	$	6	$	418,299	$	(162)	$	76,679	$	(6,119)	$	488,766
Issuance of common stock upon exercise of stock options		—	—		3,161	—		20		—		—		—		20



Stock-based compensation expense		—	—		—	—		4,151		—		—		—		4,151



Vesting of restricted stock units, net		—	—		137,479	—		(813)		—		—		—		(813)

Cumulative effect of adoption of ASU 2019-05		—	—		—	—		—		—		4,835		—		4,835
Change in post-termination benefit obligation		—	—		—	—		—		(117)		—		—		(117)


Net loss		—	—		—	—		—		—		(13,301)		—		(13,301)
Balance – March 31, 2020		23,512	$	63	27,143,797	$	6	$	421,657	$	(279)	$	68,213	$	(6,119)	$	483,541

Issuance of common stock upon exercise of stock options		—	—		22,407	—		79		—		—		—		79



Stock-based compensation expense		—	—		—	—		4,972		—		—		—		4,972


Issuance of common stock upon exercise of warrants		(23,512)	(63)		10,972	—		253		—		—		(190)		—
Vesting of restricted stock units, net		—	—		153,624	—		(17)		—		—		—		(17)


Change in post-termination benefit obligation		—	—		—	—		—		5		—		—		5


Net loss		—	—		—	—		—		—		(34,248)		—		(34,248)
Balance – June 30, 2020		—	$	—	27,330,800	$	6	$	426,944	$	(274)	$	33,965	$	(6,309)	$	454,332

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Cash Flow (Unaudited)

(in thousands)


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net income (loss)	$	10,269	$	(47,549)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	14,701		9,761
Fair value adjustment, net	17,470		147,951
Origination fees for loans receivable at fair value, net	(6,677)		4,816
Gain on loan sales	(9,755)		(9,524)
Stock-based compensation expense	10,454		9,123

Deferred tax provision, net	8,484		(22,402)
Other, net	20,758		7,067
Originations of loans sold and held for sale	(75,023)		(94,732)
Proceeds from sale of loans	84,474		104,604
Changes in operating assets and liabilities:
Interest and fee receivable, net	902		(5,228)
Other assets	(7,787)		4,953
Amount due to whole loan buyer	1,732		(2,235)
Other liabilities	(16,164)		(12,588)
Net cash provided by operating activities	53,838		94,017
Cash flows from investing activities
Originations of loans	(595,849)		(434,015)
Repayments of loan principal	552,675		541,890
Purchase of fixed assets, net	(1,845)		(3,175)
Capitalization of system development costs	(12,132)		(11,126)

Net cash provided by (used in) investing activities	(57,151)		93,574
Cash flows from financing activities
Borrowings under secured financing	150,000		235,000

Borrowings under asset-backed notes	867,462		—
Repayments of secured financing	(396,994)		(199,806)
Repayments of asset-backed notes	(425,005)		(160,001)
Repayments of capital lease obligations	—		(29)
Payments of deferred financing costs	—		(205)
Net payments related to stock-based activities	(2,771)		(731)
Net cash provided by (used in) financing activities	192,692		(125,772)
Net increase in cash and cash equivalents and restricted cash	189,379		61,819
Cash and cash equivalents and restricted cash, beginning of period	168,590		136,141
Cash and cash equivalents and restricted cash, end of period	$	357,969	$	197,960

Supplemental disclosure of cash flow information
Cash and cash equivalents	$	138,429	$	139,218
Restricted cash	219,540		58,742
Total cash and cash equivalents and restricted cash	$	357,969	$	197,960

Cash paid for income taxes, net of refunds	$	1,809	$	720
Cash paid for interest	$	25,588	$	31,034
Cash paid for amounts included in the measurement of operating lease liabilities	$	9,520	$	7,904
Supplemental disclosures of non-cash investing and financing activities
Right of use assets obtained in exchange for operating lease obligations	$	5,187	$	3,683


Non-cash investments in capitalized assets	$	806	$	569

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2021


1.			Organization and Description of Business

Oportun Financial Corporation (together with its subsidiaries, "Oportun" or the " Company") provides 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," primarily because they have a credit history that is too limited to be accurately scored by credit bureaus. The Company's primary product offerings are 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 personal loans secured by a vehicle and credit cards. The Company uses models that are developed with Artificial Intelligence ("A.I.") and built on over 15 years of proprietary consumer insights and billions of data points. The Company's proprietary scoring model and continually evolving data analytics have enabled it to underwrite the risk of the hardworking customers that it serves. 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.


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, 2020 ("the Annual Report"), filed with the Securities and Exchange Commission ("SEC") on February 23, 2021.

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

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

Recently Adopted Accounting Standards

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 adopted this ASU effective January 1, 2021 with no impact on its condensed consolidated financial statements and disclosures.


3.			Earnings (Loss) per Share

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


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share data)	2021		2020		2021		2020
Net income (loss)	$	7,250	$	(34,248)	$	10,269	$	(47,549)


Net (loss) income attributable to common stockholders	$	7,250	$	(34,248)	$	10,269	$	(47,549)

Basic weighted-average common shares outstanding	28,004,699		27,233,394		27,888,029		27,125,054
Weighted average effect of dilutive securities:
Stock options	1,327,358		—		1,301,088		—
Restricted stock units	718,790		—		646,972		—

Diluted weighted-average common shares outstanding	30,050,847		27,233,394		29,836,089		27,125,054

Earnings (loss) per share:
Basic	$	0.26	$	(1.26)	$	0.37	$	(1.75)
Diluted	$	0.24	$	(1.26)	$	0.34	$	(1.75)

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


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Stock options	2,268,423	4,509,662	2,545,604	4,297,895
Restricted stock units	—	2,271,515	22,653	2,014,262
Warrants	—	18,086	—	20,799

Total anti-dilutive common share equivalents	2,268,423	6,799,263	2,568,257	6,332,956


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 condensed 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 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):


	June 30,		December 31,
(in thousands)	2021		2020
Consolidated VIE assets
Restricted cash	$	204,895	$	23,726
Loans receivable at fair value	1,579,458		1,580,061

Interest and fee receivable	11,752		14,191
Total VIE assets	1,796,105		1,617,978
Consolidated VIE liabilities
Secured financing (1)	—		246,994
Asset-backed notes at fair value	1,613,649		1,167,309

Total VIE liabilities	$	1,613,649	$	1,414,303

(1) Amounts exclude deferred financing costs. See Note 7, Borrowings for additional information.


5.			Loans Held for Sale

The originations of loans sold and held for sale during the three months ended June 30, 2021 was $41.6 million and the Company recorded a gain on sale of $5.3 million and servicing revenue of $3.0 million. The originations of loans sold and held for sale during the three months ended June 30, 2020 was $20.2 million and the Company recorded a gain on sale of $2.0 million and servicing revenue of $4.0 million.

The originations of loans sold and held for sale during the six months ended June 30, 2021 was $75.0 million and the Company recorded a gain on sale of $9.8 million and servicing revenue of $6.0 million. The originations of loans sold and held for sale during the six months ended June 30, 2020 was $94.7 million and the Company recorded a gain on sale of $9.5 million and servicing revenue of $8.5 million.

Whole Loan Sale Program ‑ In November 2014, the Company entered into a whole loan sale agreement with an institutional investor, which agreement was amended in March 2021 in which the term of the current agreement is set to expire on March 4, 2022. Pursuant to the agreement, the Company sells 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.

In addition, from July 2017 to August 2020, the Company was party to a separate whole loan sale arrangement with an institutional investor providing for a commitment to sell 100% of the Company’s loans originated under its Access Loan Program. The Company chose not to renew the arrangement and allowed the agreement to expire on its terms on August 5, 2020.


6.			Other Assets

Other assets consist of the following:


	June 30,		December 31,
(in thousands)	2021		2020
Fixed assets
Computer and office equipment	$	12,043	$	11,182
Furniture and fixtures	8,892		11,019
Purchased software	2,025		1,992
Vehicles	53		53
Leasehold improvements	20,114		29,543
Total cost	43,127		53,789
Less: Accumulated depreciation	(32,899)		(37,939)
Total fixed assets, net	$	10,228	$	15,850

System development costs:
System development costs	$	68,354	$	55,943
Less: Accumulated amortization	(35,879)		(28,524)
Total system development costs, net	$	32,475	$	27,419


Loans held for sale	1,463		1,158
Prepaid expenses	16,458		17,241
Deferred tax assets	1,921		1,716
Tax assets and other	25,038		18,305
Total other assets	$	87,583	$	81,689

Fixed Assets

Depreciation and amortization expense for the three months ended June 30, 2021 and 2020 was $3.9 million and $2.6 million, respectively, and for the six months ended June 30, 2021 and 2020 it was $7.3 million, and $5.1 million, respectively. As of June 30, 2021, the Company retired $11.6 million of fixed assets associated with retail locations that were closed as a result of the retail network optimization plan.

System Development Costs

Amortization of system development costs for the three months ended June 30, 2021 and 2020 was $3.9 million and $2.5 million, respectively, and for the six months ended June 30, 2021 and 2020 they were $7.4 million and $4.7 million, respectively. System development costs capitalized in the three months ended June 30, 2021 and 2020, were $6.6 million and $5.7 million, respectively, and for the six months ended June 30, 2021 and 2020 they were $12.4 million and $11.1 million, respectively.


7.			Borrowings

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

June 30, 2021

Variable Interest Entity

Current Balance

Commitment Amount

Maturity Date

Interest Rate

(in thousands)

Oportun Funding V, LLC

—

400,000

October 1, 2021

LIBOR (minimum of 0.00%) + 2.45%

December 31, 2020

Variable Interest Entity

Current Balance

Commitment Amount

Maturity Date

Interest Rate

(in thousands)

Oportun Funding V, LLC

246,385

400,000

October 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:


	June 30, 2021
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 Issuance Trust (Series 2021-B)	$	500,000	$	512,759	$	502,435	$	519,757	2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		375,965		392,701		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		284,144		300,251		3.46	%	3 years
Oportun Funding XII, LLC (Series 2018-D)	175,002		184,213		175,899		188,106		4.50	%	3 years
Oportun Funding X, LLC (Series 2018-C)	275,000		289,474		275,206		295,723		4.39	%	3 years

Total asset-backed notes recorded at fair value	$	1,604,414	$	1,664,196	$	1,613,649	$	1,696,538


	December 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	$	283,299	$	299,237	3.46	%	3 years
Oportun Funding XII, LLC (Series 2018-D)	175,002		184,213		178,182		187,570		4.50	%	3 years
Oportun Funding X, LLC (Series 2018-C)	275,000		289,474		279,171		294,710		4.39	%	3 years
Oportun Funding IX, LLC (Series 2018-B)	225,001		236,854		226,653