oprt-20220930

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 September 30, 2022

☐ 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 November 2, 2022 was 33,192,703.


TABLE OF CONTENTS

PART I ‑ FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flow	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43

PART II ‑ OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68

	GLOSSARY	69

Item 6.	Exhibit Index	71

Signature		72

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)


	September 30,		December 31,
	2022		2021
Assets
Cash and cash equivalents	$	175,857	$	130,959
Restricted cash	96,350		62,001
Loans receivable at fair value	2,991,334		2,386,807






Interest and fees receivable, net	30,605		20,916
Capitalized software and other intangibles, net	139,069		131,181
Goodwill	—		104,014
Right of use assets - operating	32,080		38,403

Other assets	74,699		72,344
Total assets	$	3,539,994	$	2,946,625

Liabilities and stockholders' equity
Liabilities
Secured financing	$	365,147	$	393,889
Asset-backed notes at fair value	2,238,331		1,651,706
Acquisition and corporate financing	241,838		114,092

Lease liabilities	40,149		47,699

Other liabilities	105,416		135,358
Total liabilities	2,990,881		2,342,744
Stockholders' equity


Common stock, $0.0001 par value - 1,000,000,000 shares authorized at September 30, 2022 and December 31, 2021; 33,460,161 shares issued and 33,188,138 shares outstanding at September 30, 2022; 32,276,419 shares issued and 32,004,396 shares outstanding at December 31, 2021	7		6
Common stock, additional paid-in capital	540,890		526,338


Retained earnings	14,525		83,846
Treasury stock at cost, 272,023 shares at September 30, 2022 and December 31, 2021	(6,309)		(6,309)
Total stockholders’ equity	549,113		603,881
Total liabilities and stockholders' equity	$	3,539,994	$	2,946,625

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)


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

Net decrease in fair value	(76,422)		(8,987)		(135,935)		(26,457)
Net revenue	146,983		139,523		497,211		369,953

Operating expenses:
Technology and facilities	56,113		34,226		158,090		100,274
Sales and marketing	21,781		32,102		88,690		79,743
Personnel	39,959		29,039		114,514		84,412
Outsourcing and professional fees	18,620		13,348		50,112		40,762
General, administrative and other	14,401		2,686		44,698		22,862
Goodwill impairment	108,472		—		108,472		—
Total operating expenses	259,346		111,401		564,576		328,053

Income (loss) before taxes	(112,363)		28,122		(67,365)		41,900
Income tax expense (benefit)	(6,536)		5,143		1,956		8,652
Net income (loss)	$	(105,827)	$	22,979	$	(69,321)	$	33,248

Net income (loss) attributable to common stockholders	$	(105,827)	$	22,979	$	(69,321)	$	33,248

Share data:
Earnings (loss) per share:
Basic	$	(3.21)	$	0.82	$	(2.12)	$	1.19
Diluted	$	(3.21)	$	0.75	$	(2.12)	$	1.11
Weighted average common shares outstanding:
Basic	33,010,107		28,167,686		32,688,988		27,982,273
Diluted	33,010,107		30,503,773		32,688,988		30,059,675

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 Nine Months Ended September 30, 2022
	Common Stock
		Shares	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2022		32,004,396	$	6	$	526,338	$	83,846	$	(6,309)	$	603,881
Issuance of common stock upon exercise of stock options		505,945	1		(4,749)		—		—		(4,748)



Stock-based compensation expense		—	—		7,467		—		—		7,467



Vesting of restricted stock units, net of shares withheld		296,552	—		(2,327)		—		—		(2,327)




Net income		—	—		—		45,663		—		45,663
Balance – March 31, 2022		32,806,893	$	7	$	526,729	$	129,509	$	(6,309)	$	649,936

Issuance of common stock upon exercise of stock options		32,345	—		78		—		—		78
Repurchase of stock options		(2,706)	—		(28)		—		—		(28)


Stock-based compensation expense		—	—		7,642		—		—		7,642



Vesting of restricted stock units, net of shares withheld		63,064	—		(273)		—		—		(273)





Net loss		—	—		—		(9,157)		—		(9,157)
Balance – June 30, 2022		32,899,596	$	7	$	534,148	$	120,352	$	(6,309)	$	648,198

Issuance of common stock upon exercise of stock options		5,261	—		29		—		—		29



Stock-based compensation expense		—	—		7,666		—		—		7,666



Vesting of restricted stock units, net of shares withheld		283,281	—		(953)		—		—		(953)





Net loss		—	—		—		(105,827)		—		(105,827)
Balance – September 30, 2022		33,188,138	$	7	$	540,890	$	14,525	$	(6,309)	$	549,113

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 Nine Months Ended September 30, 2021
	Common Stock
		Shares	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2021		27,679,263	$	6	$	436,499	$	36,432	$	(6,309)	$	466,628
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)





Net income		—	—		—		3,019		—		3,019
Balance – March 31, 2021		27,974,583	$	6	$	439,100	$	39,451	$	(6,309)	$	472,248

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)





Net income		—	—		—		7,250		—		7,250
Balance – June 30, 2021		28,033,924	$	6	$	444,183	$	46,701	$	(6,309)	$	484,581

Issuance of common stock upon exercise of stock options		139,096	—		2,140		—		—		2,140



Stock-based compensation expense		—	—		4,868		—		—		4,868



Vesting of restricted stock units, net		211,902	—		(2,977)		—		—		(2,977)





Net income		—	—		—		22,979		—		22,979
Balance – September 30, 2021		28,384,922	$	6	$	448,214	$	69,680	$	(6,309)	$	511,591

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Cash Flow (Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities
Net income (loss)	$	(69,321)	$	33,248
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	34,624		20,390
Goodwill impairment	108,472		—
Fair value adjustment, net	135,935		26,457
Origination fees for loans receivable at fair value, net	(17,699)		(9,070)
Gain on loan sales	(5,708)		(17,083)
Stock-based compensation expense	20,752		14,542


Other, net	32,183		37,609
Originations of loans sold and held for sale	(50,643)		(136,285)
Proceeds from sale of loans	56,800		151,924
Changes in other assets and other liabilities	(86,052)		(18,004)




Net cash provided by operating activities	159,343		103,728
Cash flows from investing activities
Originations of loans	(2,178,675)		(1,113,515)
Proceeds from loan sales originated as held for investment	247,943		—
Repayments of loan principal	1,055,113		817,843
Capitalization of system development costs	(36,824)		(18,508)


Other, net	(3,434)		(2,561)

Net cash used in investing activities	(915,877)		(316,741)
Cash flows from financing activities
Borrowings under secured financing	1,687,050		895,535

Borrowings under asset-backed notes, acquisition and corporate financing	967,761		867,251
Repayments of secured financing	(1,717,050)		(615,994)
Repayments of asset-backed notes, acquisition and corporate financing	(87,253)		(875,007)

Payments of deferred financing costs	(6,503)		—
Net payments related to stock-based activities	(8,224)		(3,607)
Net cash provided by financing activities	835,781		268,178
Net increase in cash and cash equivalents and restricted cash	79,247		55,165
Cash and cash equivalents and restricted cash, beginning of period	192,960		168,590
Cash and cash equivalents and restricted cash, end of period	$	272,207	$	223,755

Supplemental disclosure of cash flow information
Cash and cash equivalents	$	175,857	$	168,407
Restricted cash	96,350		55,348
Total cash and cash equivalents and restricted cash	$	272,207	$	223,755

Cash paid for income taxes, net of refunds	$	(3,944)	$	2,048
Cash paid for interest	$	51,509	$	36,582
Cash paid for amounts included in the measurement of operating lease liabilities	$	7,772	$	13,802
Supplemental disclosures of non-cash investing and financing activities
Right of use assets obtained in exchange for operating lease obligations	$	2,831	$	6,677



Non-cash investments in capitalized assets	$	2,577	$	1,960
Non-cash financing activities	$	2,325	$	1,121

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2022


1.			Organization and Description of Business

Oportun is a financial technology company and digital banking platform driven by its mission to provide inclusive, affordable financial services that empower its members to build a better future. Oportun Financial Corporation (together with its subsidiaries, "Oportun" or the "Company") takes a holistic approach to serving its members and views as its purpose to responsibly meet their current capital needs, help grow its members' financial profiles, increase their financial awareness and put them on a path to a financially healthy life. With its acquisition of Hello Digit, Inc. ("Digit") on December 22, 2021, the Company can now offer access to a comprehensive suite of digital banking products, offered either directly or through partners, including lending, savings and investing powered by A.I. and tailored to each member's goals to make achieving financial health automated. The Company's credit products include personal loans, secured personal loans and credit cards. The Company's digital banking products include automated savings, digital banking, long-term investing and retirement savings. The Company is headquartered in San Carlos, California. The Company has been certified by the United States Department of the Treasury as a Community Development Financial Institution ("CDFI") since 2009.

Segments

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


2.			Summary of Significant Accounting Policies

Basis of Presentation ‑ The 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, 2021 (the "Annual Report"), filed with the Securities and Exchange Commission ("SEC") on March 1, 2022.

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

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

Recently Adopted Accounting Standards

None.


3.			Earnings (Loss) per Share

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2022		2021		2022		2021
Net income (loss)	$	(105,827)	$	22,979	$	(69,321)	$	33,248


Net income (loss) attributable to common stockholders	$	(105,827)	$	22,979	$	(69,321)	$	33,248

Basic weighted-average common shares outstanding	33,010,107		28,167,686		32,688,988		27,982,273
Weighted average effect of dilutive securities:
Stock options	—		1,451,687		—		1,351,288
Restricted stock units	—		884,400		—		726,114

Diluted weighted-average common shares outstanding	33,010,107		30,503,773		32,688,988		30,059,675

Earnings (loss) per share:
Basic	$	(3.21)	$	0.82	$	(2.12)	$	1.19
Diluted	$	(3.21)	$	0.75	$	(2.12)	$	1.11

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


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Stock options	3,456,494	1,597,130	3,596,792	2,229,446
Restricted stock units	4,696,244	—	4,285,771	15,102


Total anti-dilutive common share equivalents	8,152,738	1,597,130	7,882,563	2,244,548


4.			Variable Interest Entities

Variable interest entities ("VIEs") are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of equity investment at risk lack the ability to direct the entity's activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity.

For all VIEs in which we are involved, we assess whether we are the primary beneficiary of the VIE on an ongoing basis. In circumstances where we have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, we would conclude that we are the primary beneficiary of the VIE, and we consolidate the VIE. In situations where we are not deemed to be the primary beneficiary of the VIE, we do not consolidate the VIE and only recognize our interests in the VIE.

Consolidated VIEs

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

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

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


	September 30,		December 31,
(in thousands)	2022		2021
Consolidated VIE assets
Restricted cash	$	82,712	$	41,803
Loans receivable at fair value	2,924,567		2,267,205

Interest and fee receivable	29,748		19,869
Total VIE assets	3,037,027		2,328,877
Consolidated VIE liabilities
Secured financing (1)	368,000		398,000
Asset-backed notes at fair value	2,238,331		1,651,706
Acquisition financing (1)	104,764		116,000
Total VIE liabilities	$	2,711,095	$	2,165,706

(1) Amounts exclude deferred financing costs. See Note 9, Borrowings for additional information.


5.			Loans Held for Sale and Loans Sold

Structured Loan Sales - On March 31, 2022, the Company participated in a securitization whereby the Company and funds managed by Ellington Management Group both contributed collateral and were co-sponsors of the transaction, which totaled $400.0 million in issued asset-backed notes. As part of the securitization, the Company sold loans to OPTN Funding Grantor Trust 2022-1 ("Grantor Trust") through the issuance of amortizing asset-backed notes secured by a pool of its unsecured and secured personal installment loans. The Company also sold its share of the residual interest in the pool (collectively referred to as the "2022-1 transaction"). The Company's continued involvement in the unconsolidated VIEs is in the form of servicer of these loans. The Company does not have variable interest in the Grantor Trust or the issuer established for this transaction. The sold loans were accounted for under the fair value option and had an aggregate unpaid principal balance of approximately $227.6 million, a cumulative fair value mark of $15.9 million and unpaid interest of $1.5 million. The Company received $245.0 million of net proceeds and by selling both its notes and residual interest, the Company derecognized these loans from its Consolidated Balance Sheets.

Other Loan Sales - The Company enters into agreements to sell certain populations of its loans from time to time. The sold loans were accounted for under the fair value option. In April 2022, the Company sold loans that had an aggregate unpaid principal balance, including unpaid interest and fees, of approximately $16.3 million, and a cumulative fair value mark of $(14.1) million. The Company received $2.2 million of net proceeds (the "Q2 2022 Loan Sale"). During the third quarter of 2022, the Company sold loans that had an aggregate unpaid principal balance, including unpaid interest and fees, of approximately $22.2 million and a cumulative fair value mark of $(21.1) million. The Company received $0.7 million of net proceeds and has recorded a receivable of $0.4 million in Other assets on the Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2022 (the "Q3 2022 Loan Sales"). The loan sales qualified for sale accounting treatment and the Company derecognized these loans from its Consolidated Balance Sheets at the end of the quarter in which the loans were sold.

Whole Loan Sale Program ‑ In November 2014, the Company entered into a whole loan sale agreement with an institutional investor. Pursuant to the agreement, the Company sold 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. The Company chose not to renew the arrangement and allowed the agreement to expire on its terms on March 4, 2022.

The originations of loans sold and held for sale during the three months ended September 30, 2022 was insignificant. Servicing revenue during the same time period was $5.3 million. The gain on sale recorded during the three months ended September 30, 2022 was insignificant as a result of our whole loan sale agreement expiring on March 4, 2022. The originations of loans sold and held for sale during the three months ended September 30, 2021 was $61.3 million and the Company recorded a gain on sale of $7.3 million and servicing revenue of $3.3 million.

The originations of loans sold and held for sale during the nine months ended September 30, 2022 related to our loan sale program was $50.6 million and the Company recorded a gain on sale of $5.7 million and servicing revenue of $15.5 million. The originations of loans sold and held for sale during the nine months ended September 30, 2021 was $136.3 million and the Company recorded a gain on sale of $17.1 million and servicing revenue of $9.3 million.


6.			Acquisition

On December 22, 2021, the Company completed its acquisition of Hello Digit, Inc. (or "Digit"). Digit is a digital banking platform that provides automated savings, banking and investing tools. Digit members can keep and integrate their existing bank accounts into the platform, or they can make Digit their primary banking relationship by opening new accounts via Digit’s bank partner. By acquiring Digit, Oportun further expanded its A.I. and digital banking capabilities, adding to its services to provide its members a holistic offering built to address their financial needs. The total consideration the Company provided for Digit, which consisted of cash and equity, was approximately $205.3 million.

The Company recognized acquisition and integration related costs of approximately $8.1 million in the three months ended September 30, 2022 and $22.4 million in the nine months ended September 30, 2022 which are included in the General, administrative and other expense in the Condensed Consolidated Statements of Operations (Unaudited).


7.			Capitalized Software, Other Intangibles and Goodwill

Capitalized software, net consists of the following:


	September 30,		December 31,
(in thousands)	2022		2021
Capitalized software, net:
System development costs	$	122,998	$	84,550
Acquired developed technology	48,500		48,500
Less: Accumulated amortization	(70,104)		(45,433)
Total capitalized software, net	$	101,394	$	87,617

Capitalized software, net

Amortization of system development costs and acquired developed technology for three months ended September 30, 2022 and 2021 was $9.0 million and $4.4 million, respectively. System development costs capitalized in the three months ended September 30, 2022 and 2021 were $13.8 million and $7.5 million, respectively.

Amortization of system development costs and acquired developed technology for nine months ended September 30, 2022 and 2021 was $24.7 million and $11.7 million, respectively. System development costs capitalized in the nine months ended September 30, 2022 and 2021 were $39.2 million and $19.9 million, respectively.

Acquired developed technology was $48.5 million and is related to the acquisition of Digit on December 22, 2021.

Intangible Assets

The gross carrying amount and accumulated amortization, in total and by major intangible asset class are as follows:


	September 30,		December 31,
(in thousands)	2022		2021
Intangible assets:
Member relationships	$	34,500	$	34,500
Trademarks	6,426		6,364
Other	3,000		3,000
Less: Accumulated amortization	(6,251)		(300)
Total intangible assets, net	$	37,675	$	43,564

Amortization of intangible assets for the three months ended September 30, 2022 was $2.0 million. There were no intangible assets subject to amortization for the three months ended September 30, 2021.

Amortization of intangible assets for the nine months ended September 30, 2022 was $6.0 million. There were no intangible assets subject to amortization for the nine months ended September 30, 2021.

Expected future amortization expense for intangible assets as of September 30, 2022 is as follows:


(in thousands)	Fiscal Years
2022 (remaining three months)	$	(1,998)
2023	(7,950)
2024	(7,798)
2025	(4,929)
2026	(4,929)
2027	(4,929)
Thereafter	(4,780)
Total	$	(37,313)

Goodwill

The Company recorded goodwill of $104.0 million arising from the acquisition of Digit on December 22, 2021. The Company recorded increases to goodwill of $4.3 million and $4.5 million, during the three and nine months ended September 30, 2022, respectively, as part of the

twelve-month measurement period. These increases were primarily due to changes in deferred taxes resulting from the filing of Digit's pre-acquisition tax returns.

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. The Company performs impairment tests related to its goodwill on an annual basis or when certain triggering events or circumstances are identified that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount.

In response to a sustained decline in the Company’s share price primarily driven by macroeconomic conditions, the Company conducted a quantitative test of its goodwill as of September 30, 2022. The Company considered the income approach, the guideline public company multiples approach and the market approach in determining a fair value for the Company which was determined to be the only reporting unit for purposes of testing the goodwill. Given the uncertain macroeconomic environment there was a wide range of indications of fair value across the approaches. Although the corresponding value was the lowest in the range, the Company utilized the market approach because it was based on market observable inputs. The market approach estimates fair value using the market capitalization of the Company as a basis.

As of September 30, 2022, the market capitalization plus the estimated control premium was less than the carrying value of the Company. As a result, the Company recognized a non-cash pre-tax impairment charge of $108.5 million during the three and nine months ended September 30, 2022 to write down the carrying value of goodwill. The non-cash impairment charge is included in Goodwill impairment in the Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2022. There were no goodwill impairment charges during the three and nine months ended September 30, 2021 because the Company did not have a goodwill balance as of September 30, 2021.

The following table represents the changes in goodwill since December 31, 2021:


(in thousands)	Goodwill
Balance as of December 31, 2021	$	104,014
Measurement adjustments during period	4,458
Impairment	(108,472)
Balance as of September 30, 2022	$	—


8.			Other Assets

Other assets consist of the following:


	September 30,		December 31,
(in thousands)	2022		2021
Fixed assets
Total fixed assets	$	45,794	$	44,100
Less: Accumulated depreciation	(36,352)		(34,185)
Total fixed assets, net	$	9,442	$	9,915

Other Assets

Loans held for sale	42		491
Prepaid expenses	25,057		25,355
Deferred tax assets	1,869		3,923
Current tax assets	17,978		13,330
Other	20,311		19,330
Total other assets	$	74,699	$	72,344

Fixed Assets

Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 was $1.3 million and $1.3 million, respectively, and for the nine months ended September 30, 2022 and 2021 it was $3.8 million, and $8.7 million, respectively.


9.			Borrowings

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


					September 30, 2022		December 31, 2021
Variable Interest Entity	Facility Amount		Maturity Date (1)	Interest Rate	Balance		Balance
(in thousands)
Oportun CCW Trust (1)	$	150,000	December 1, 2023	Variable (1)	$	76,456	$	40,108
Oportun PLW Trust	600,000		September 1, 2024	LIBOR (minimum of 0.00%) + 2.17%	288,691		353,781
Total secured financing	$	750,000			$	365,147	$	393,889

(1) The interest rate on the Secured Financing - CCW facility is LIBOR (minimum of 1.00%) plus 6.00% on the first $18.8 million of principal outstanding and LIBOR (minimum of 0.00%) plus 3.41% on the remaining outstanding principal balance.

The following table presents information regarding asset-backed notes:


	September 30, 2022
Variable Interest Entity	Initial note amount issued (1)		Initial collateral balance (2)		Current balance (1)		Current collateral balance(2)		Weighted average interest rate(3)		Original revolving period (4)
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2022-2)	$	400,000	$	410,212	$	370,417	$	401,227	6.92	%	N/A
Oportun Issuance Trust (Series 2022-A)	400,000		410,211		385,560		414,425		5.44	%	2 years
Oportun Issuance Trust (Series 2021-C)	500,000		512,762		440,585		519,928		2.48	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		444,519		520,100		2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		347,743		390,433		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		249,507		287,753		3.46	%	3 years
Total asset-backed notes recorded at fair value	$	2,454,412	$