UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20212023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Prosper-logo.jpg
333-179941-01 333-204880 333-225797-01 333-257739
PROSPER MARKETPLACE, INC.
a Delaware corporation
221 Main Street, 3rd Floor
San Francisco, CA 94105
Telephone: (415) 593-5400593-5426
73-1733867
333-179941
333-204880-01 333-225797
333-225797333-257739-01
PROSPER FUNDING LLC
a Delaware limited liability company
221 Main Street, 3rd Floor
San Francisco, CA 94105
Telephone: (415) 593-5400593-5426
45-4526070
Commission File NumberExact Name of Registrant as Specified in its Charter
State or Other Jurisdiction of Incorporation or Organization
Address of Principal Executive Offices, Zip Code
Registrant's Telephone Number (Including Area Code)		I.R.S. Employer Identification Number
Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
   Prosper Marketplace, Inc.NoneNoneNone
   Prosper Funding LLCNoneNoneNone
Securities registered pursuant to Section 12(g) of the Act:
   Prosper Marketplace, Inc.NoneNoneNone
   Prosper Funding LLCNoneNoneNone
Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
   Prosper Marketplace, Inc.
Yes ¨ No ý
   Prosper Funding LLC
Yes ¨ No ý
Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
   Prosper Marketplace, Inc.
Yes ¨ No ý
   Prosper Funding LLC
Yes ¨ No ý
Indicate by check mark whether each 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.
   Prosper Marketplace, Inc.
Yes ý No ¨
   Prosper Funding LLC
Yes ý No ¨
Indicate by check mark whether each 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).
   Prosper Marketplace, Inc.
Yes ý No ¨
   Prosper Funding LLC
Yes ý No ¨





Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
Accelerated
 Filer
Non-accelerated Filer
Smaller
 Reporting
 Company
Emerging Growth Company
   Prosper Marketplace, Inc.☐☐x☐☐
   Prosper Funding LLC☐☐x☐☐
If an emerging growth company, indicate by check mark if each 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.
   Prosper Marketplace, Inc.¨
   Prosper Funding LLC¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.
   Prosper Marketplace, Inc.¨
   Prosper Funding LLC¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
   Prosper Marketplace, Inc.¨
   Prosper Funding LLC¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
   Prosper Marketplace, Inc.¨
   Prosper Funding LLC¨
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act).
   Prosper Marketplace, Inc.
  Yes ☐ No ý
   Prosper Funding LLC
  Yes ☐ No ý
Prosper Funding LLC meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format specified in General Instruction I(2) of Form 10-K.
Aggregate Market Value of Voting and Non-Voting Common Equity Held by Non-Affiliates of the Registrant atNumber of Shares of Common Stock of the Registrant Outstanding at
June 30, 20212023March 21, 202219, 2024
Prosper Marketplace, Inc.(a)72,398,85977,164,623
($0.01 par value)
Prosper Funding LLC(a)(b)None
(a) Not applicable
(b) All voting and non-voting common equity is owned by Prosper Marketplace, Inc.
THIS COMBINED FORM 10-K IS SEPARATELY FILED BY PROSPER MARKETPLACE, INC. AND PROSPER FUNDING LLC. INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EACH REGISTRANT MAKES NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER REGISTRANT.

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TABLE OF CONTENTS
ITEM Page
PART I 
ITEM 1
6
ITEM 1A
16
ITEM 1B
4041
ITEM 1C
42
ITEM 2
4044
ITEM 3
4044
ITEM 4
4144
PART II 
ITEM 5
4144
ITEM 6
4144
ITEM 7
4245
ITEM 7A
5966
ITEM 8
6168
ITEM 9
6168
ITEM 9A
6168
ITEM 9B
6269
ITEM 9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
69
PART III 
ITEM 10
6370
ITEM 11
6875
ITEM 12
7986
ITEM 13
8289
ITEM 14
8592
PART IV 
ITEM 15
8693

XBRL Content

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Except as the context requires otherwise, as used herein, “Registrants” refers to Prosper Marketplace, Inc. (“PMI”), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC (“PFL”), a Delaware limited liability company; “we,” “us,” “our,” “Prosper,” and the “Company” referrefers to (i) PMI, and(ii) its wholly owned subsidiaries, PFL, BillGuard, Inc. (“BillGuard”), a Delaware corporation, and Prosper Healthcare Lending LLC (“PHL”), a Delaware limited liability company, and (iii) its variable interest entities, Prosper Warehouse I Trust (“PWIT”), a Delaware statutory trust, Prosper Warehouse II Trust (“PWIIT”)PWIIT,” terminated September 25, 2023), a Delaware statutory trust, Prosper Marketplace Issuance Trust, Series 2019-12023-1 (“PMIT 2019-1”, deconsolidated on September 27, 2021), a Delaware statutory trust, Prosper Marketplace Issuance Trust, Series 2019-2 (“PMIT 2019-2”, deconsolidated on September 27, 2021), a Delaware statutory trust and Prosper Marketplace Issuance Trust, Series 2019-4 (“PMIT 2019-4”, deconsolidated on September 27, 2021)2023-1”), a Delaware statutory trust, and Prosper Grantor Trust (“PGT”), a Delaware statutory trust, on a consolidated basis; and “Prosper Funding” refers to PFL and its wholly owned subsidiary, Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis. Prosper Asset Holdings LLC (“PAH”), a Delaware limited liability company was dissolved on November 28, 2018. As a result, references to Prosper Funding do not include PAH for periods subsequent to the year ended December 31, 2018. In addition, the unsecured personal loans originated through our marketplace are referred to as “Borrower Loans,” and the borrower payment dependent notes issued through our marketplace, whether issued by PMI or PFL, are referred to as “Notes.” Investors currently invest in Borrower Loans through two channels: (i) the “Note Channel,” which allows investors to purchase Notes from PFL, the payments of which are dependent on the payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows accredited and institutional investors to purchase Borrower Loans in their entirety directly from PFL. The Notes available to Note Channel investors are distinguishable from notes held by certain third party investors pursuant to Prosper’s securitization transactions, which are referred to herein as “Notes Issued by Securitization Trust.” Finally, although historically the Company has referred to investors as “lender members,” PFL calls them “investors” herein to avoid confusion since WebBank is the lender for Borrower Loans originated through our marketplace.
Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. These statements may appear throughout this Annual Report on Form 10-K, including the sections titled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, PMIPFL or PFLPMI expresses an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of ourtheir respective managements, is expressed in good faith, and is believed to have a reasonable basis. Nevertheless, managementthere can givebe no assurancesassurance that anythe expectation or belief will result or be achieved or accomplished.

The following include some, but not all, of the events anticipated by these forward-looking statements will occur or, if any of them does occur, what impact they will have on Prosper or Prosper Funding’s results of operations and financial condition.
There are a number of important factors that could cause actual results or events to differ materially from those indicated in the forward-looking statements, including, among other things:anticipated:
•the performance of the Notes, which, in addition to being speculative investments, are special, limited obligations that are not guaranteed or insured;
•PFL’s ability to make payments on the Notes, including in the event that borrowers fail to make payments on the corresponding Borrower Loans;
•our ability to attract potential borrowers and investors to our personal loan marketplace;marketplace, and borrowers to our unsecured credit card (“Credit Card”) product, and secured digital home equity line of credit and home equity loan (together, the “Home Equity Products”);
•the reliability of the information about borrowers that is supplied by borrowers including actions by some borrowers to defraud investors;
•our ability to service the Borrower Loans, and our ability or the ability of a third party debt collector to pursue collection against any borrower, including in the event of fraud or identity theft;
•credit risks posed by the credit worthiness of borrowers of our Personal Loan and Credit Card products and the effectiveness of our credit rating systems;
•potential efforts by state regulators or litigants to impose liability that could affect PFL’s (or any subsequent assignee’s) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their loans;
•the impact of future economic conditions on the performance of the Notes and the loss rates for the Notes;
•the growth and performance of the recently-launched Credit Card product and the Home Equity Products;

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•the performance of our recently-launched unsecured credit card (“Credit Card”) product and secured digital Home Equity Line of Credit (“HELOC”) product that was launched in 2019;

•our compliance with applicable local, state and federal law, including the Investment Advisers Act of 1940, the Investment Company Act of 1940 and other laws;
•our compliance with applicable regulations and regulatory developments or court decisions affecting our business;
•potential efforts by state regulators or litigants to characterize PFL or PMI, rather than WebBank, as the lender of the loans originated through our marketplace;
•the application of federal and state bankruptcy and insolvency laws to borrowers and to PFL and PMI;
•the impact of borrower delinquencies, defaults and prepayments on the returns on the Notes;
•the impact of the COVID-19 pandemicrising interest rates and inflation on our business, results of operations, financial condition and future prospects;
•the lack of a public trading market for the Notes and the current lack of any trading platform on which investors can resell the Notes;
•the federal income tax treatment of an investment in the Notes and the PMI Management Rights;
•our ability to prevent security breaches, disruptions in service, and comparable events that could compromise the personal and confidential information held on our data systems, reduce the attractiveness of the platform or adversely impact our ability to service Borrower Loans; and
•the other risks discussed under the “Risk Factors” section of this Annual Report on Form 10-K.  
There may also be other factors that couldmay cause our actual results to differ materially from the forward-looking statements in this Annual Report on Form 10-K. Given these risksWe can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does occur, what impact they will have on our results of operations and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.financial condition. You should carefully read the factors described in the “Risk Factors” section of this Annual Report on Form 10-K for a description of certain risks that could, among other things, cause PMI or PFL’sour actual results to differ from these forward-looking statements.
All forward-looking statements included in this report speak only as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this Annual Report on Form 10-K. PMI and PFLWe undertake no obligation to update or revise such forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

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PART I
ITEM 1. BUSINESS
Overview
Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to three lending products, each of which supports our vision: (i) unsecured personal loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, (ii) an unsecureda Credit Card product available to eligible borrowers, and (iii) a secured HELOC productHome Equity Products available to eligible homeowners.

Personal Loan

We are a pioneer of peer-to-peer lending in the U.S. and first launched our personal loan lending product in 2006. Our personal loan marketplace facilitated $1.9facilitated $2.2 billion in Borrower Loan originations during 20212023 and $20.1$25.6 billion in BorrowerBorrower Loan originations since launch.
We believe our business model has key advantages relative to traditional banks, including:including (i) an innovative marketplace model that efficiently connects qualified supply and demand of capital, (ii) online operations that substantially reduce the need for physical infrastructure and improve convenience, and (iii) use of advanced technology and artificial intelligence to deliver simple, fast, personalized, and transparent solutions that can improve consumers’ financial health as they move across the credit spectrum. We do not operate physical branches or incur expenses related to infrastructure like traditional banks or consumer finance institutions. As part of operating our marketplace, we verify the identity of borrowers and assess borrowers’ credit risk profile using a combination of public and proprietary data. Our proprietary technology automates several loan origination and servicing functions, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection.
To consumer borrowers, we believe that we offer generally better pricing, on average, than the pricing those loan borrowers would pay on outstanding credit card balances or unsecured installment loans from a traditional lender. To individual and institutional investors, we offer an asset class (personal loans) that we believe has attractive risk adjusted returns, transparency, and lower duration risk.
Our personal loan marketplace offers fixed rate, fully amortizing, unsecured personal loans ranging from $2,000 to $40,000$50,000 with no prepayment penalty. Loan termsterms of three24, 36, 48 and five years60 months are available, dependingdepending in large part upon the Prosper Rating assigned to the borrower at issuance and loan amount being sought. All Borrower Loans are originated and funded by WebBank, an FDIC-insured, state chartered industrial bank organized under the laws of Utah. After origination, WebBank sells the Borrower Loans to PFL, which either holds them or sells them to accredited institutional investors.
Investors invest in Borrower Loans through two channels – (i) the “Note Channel,” which allows investors to purchase Notes from PFL, the payments of which are dependent on PFL’s receipt of payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows accredited institutional investors to purchase a Borrower Loan in its entirety directly from PFL. PFL continues to own the Borrower Loans originated through the Note Channel. We service all of the Borrower Loans made through our marketplace.
Credit Card
In December 2021, we launched our Prosper Credit Card product in partnership with Coastal Community Bank (“Coastal”), through which eligible consumers are extended unsecured credit through Prosper-branded Credit Cards. Both we andIn accordance with our program agreement with Coastal, receive ongoing payments based on sales transacted on Credit Cards and net interest income based on the credit performance of receivables allocated to each party under the contract. We also receive annual fees and late fees from some consumers that are issued Credit Cards. Our Credit Card product did not have a material impact on our revenue as of and for the year ended December 31, 2021.associated with these Credit Cards are maintained on the balance sheet of Coastal. Customer accounts are then randomly designated as either Prosper Allocations or Coastal Allocations on an approximate 90% to 10% split, respectively. Each party receives 100% of the interest income and is responsible for the credit losses on its allocated customer accounts. Credit Card receivables are not available on our personal loan marketplace for investment purposes.
HELOCHome Equity
In March 2019, weWe launched the HELOC product.product and the HELoan product in March 2019 and October 2022, respectively. Currently, we partner with Spring EQ, LLC (“Spring EQ”and Citizens Bank, N.A. (collectively, our “Home Lending Partners”) to provide a variety of Home Equity services, including accepting online applications, counseling and non-counseling services, and verification, technology and processing services. The HELOC product isHome Equity Products are available through our website in Alabama, Arizona, Arkansas, California, Colorado, Delaware, Florida, Illinois, Kansas, Kentucky, Maryland, Nebraska, New Hampshire, New Mexico, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas29 states and Vermont, as wethe District of Columbia. Neither of the Home Equity Products are a licensed mortgage broker in each of theavailable for investment purposes.
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foregoing states. The HELOC product did notSegment Reporting
We have a material impact on our revenue as ofthree reportable segments: Personal Loan, Home Equity and for the year ended December 31, 2021. The HELOC product is not available on our personal loan marketplace for investment purposes.Credit Card.
Company Background and History
PMI was incorporated in the state of Delaware on March 22, 2005. PFL was formed as a limited liability company in the state of Delaware on February 17, 2012, and is a wholly-owned subsidiary of PMI.
PMI developed our personal loan marketplace and, until February 1, 2013, owned the proprietary technology that makes operation of our personal loan marketplace possible. On February 1, 2013, PMI transferred the personal loan marketplace to PFL. PFL has been organized and is operated in a manner that is intended (i) to minimize the likelihood that it will become subject to a voluntary or involuntary bankruptcy or similar proceeding, and (ii) to minimize the likelihood that, in the event of PMI’s bankruptcy, PFL would be substantively consolidated with PMI and thus have its assets subjected to claims of PMI’s creditors. We believe we have achieved this by imposing through PFL’s organizational documents and covenants in the Amended and Restated Indenture (as defined below in Item 13, “Certain Relationships and Related Transactions, and Director Independence”) certain restrictions on PFL’s activities and certain formalities designed to reinforce PFL’s status as a distinct entity from PMI. In addition, under the Administration Agreement, dated February 1, 2013, between PMI and PFL (as amended to date, the “Administration Agreement”), PMI has agreed, in its dealings with PFL and with third parties, to observe certain “separateness covenants” related to its corporate formalities. PMI has also adopted resolutions limiting its own activities and interactions with PFL in order to further reduce the likelihood that PFL would be substantively consolidated with PMI in the event of PMI’s bankruptcy.  
PFL has retained PMI, pursuant to the Administration Agreement, to provide certain administrative services relating to our personal loan marketplace. Specifically, the Administration Agreement contains a license granted by PFL to PMI that entitles PMI to use the marketplace for and in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and Note servicing, and marketing, and (ii) PMI’s performance of its duties and obligations to WebBank in relation to loan origination and funding. The license is terminable in whole or in part upon the failure by PMI to pay PFL the licensing fee, or upon PMI’s termination as the provider of some or all of the aforementioned services. See Item 13, “Certain Relationships and Related Transactions, and Director Independence—Prosper Marketplace, Inc.—Agreements with PFL” for more information.
How our Personal Loan Marketplace Works
Our personal loan marketplace is an online marketplace that matches individuals who wish to obtain unsecured personal loans with individuals and institutions who are willing to commit funds to those loans. A borrower who wishes to obtain a loan through our marketplace must apply and, if accepted, post a loan listing to our marketplace. Each time we post a group of listings on our personal loan marketplace, we determine the relative proportions of such listings that will be allocated to the Note Channel and the Whole Loan Channel, respectively, based on our estimate of the relative overall demand in each channel. We then use a random allocation methodology to allocate individual listings between the two channels based on those proportions. If a listing receives enough investor commitments, WebBank will originate the Borrower Loan requested and then sell it to PFL.  
Borrowers
Any natural person at least 18 years of age who is a U.S. resident in a state where loans through our marketplace are available with a U.S. bank account and a social security number may apply to become a borrower. All potential borrowers are subject to anti-fraud, anti-terrorism and identity verification processes and a potential borrower cannot obtain a loan without passing those processes.
When a borrower requests a loan, we first evaluate whether the borrower meets the underwriting criteria required by WebBank. WebBank originates loans to borrowers and then sells and assigns the loans to PFL. The underwriting criteria apply to all loansBorrower Loans originated through our marketplace and may not be changed without WebBank'sWebBank’s consent. For the Note Channel, all borrowers who request a loan are subject to the following minimum eligibility criteria: (1) have at least a 640 FICO08600 FICO 08 score, (2) have nine or fewer than five credit bureau inquiries (after excluding duplicate inquiries) within the last 6 months, (3) have an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50%, (5) have at least threetwo open trades reported on their credit report, and (6) have not filed for bankruptcy within the last 12 months.
We also allow two borrowers to apply together as joint applicants for a co-borrower loan. We currently offer loans with 36-month and 60-month terms to co-borrowers, although we may additionally choose to offer loans with 24-month and 48-month terms to co-borrowers in the future. Each borrower applicant is held jointly and severally liable for the obligations under the loan. In the case of co-borrower loans, the primary (or “specified”) borrower must satisfy the abovefollowing minimum eligibility criteria: (1) have at least a 640 FICO 08 score, (2) have fewer than five credit criteria (exceptbureau inquiries (after excluding duplicate
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inquiries) within the last 6 months, (3) have an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50% (the debt-to-income ratio for joint loans is calculated using the combined debt-to-income ratio of the primary and secondary borrowers without duplication of combined debt). The secondary borrower
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must also satisfy certain additional credit criteria, including a minimum FICO08 score of, (5) have at least 600, at least onethree open tradetrades reported on the secondary borrower’stheir credit report, and no(6) have not filed for bankruptcy filings within the last 12 months.

In addition, a borrower may have up to two loans through Prosper outstanding at one time, provided that (1) the first loan is current, (2) the aggregate outstanding principal balance of both loans does not exceed the then-current maximum allowable loan amount for loans (currently $40,000)$50,000), (3) the borrower’sborrower has held their first loan has been outstandingBorrower Loan for at least 6 months, and (4) the borrower complies with the prior-borrower constraints below. For co-borrower loans, the foregoing additional requirements will apply if either the primary or secondary borrower has a currently outstanding loan.

If a borrower has previously obtained a Borrower Loan through our personal loan marketplace, then in addition to the foregoing requirements (as applicable), the borrower must also (1) have no prior charge-offs on Borrower Loans originated through our marketplace, and (2) have never been more than 15 days delinquent on any Borrower Loan obtained through our marketplace within 12 months of his or hertheir application.

From time to time, we have, with WebBank’s consent, tested new products that include features which are outside the standard eligibility criteria discussed above. These products are available on a limited basis, exclusively through our Whole Loan Channel.    
Investors
Investors are individuals and institutions that have the opportunity to buy Notes or Borrower Loans after registering on our personal loan marketplace. However, investors do not have the ability to invest in the Credit Card and HELOC productsHome Equity Products on our personal loan marketplace. An individual investor must be a natural person at least 18 years of age and a U.S. resident, must provide his or hertheir social security number, and may be required to provide his or hertheir state driver’s license or state identification card number. An institutional investor must provide its taxpayer identification number and entity formation documentation. All potential investors are subject to anti-fraud, anti-terrorism and identity verification processes and a potential investor cannot invest in Notes or Borrower Loans without passing those processes.  
At the time an individual investor registers to participate in the Note Channel, such investor must satisfy any minimum financial suitability standards established for the Note Channel by the state in which the investor resides. Investors who participate in the Note Channel must enter into an investor registration agreement, which governs all sales of Notes to such investors.
Only investors who are approved by us are eligible to participate in the Whole Loan Channel. At a minimum, to participate in the Whole Loan Channel, an investor must meet the definition of an “accredited investor” set forth in Regulation D under the Securities Act. Investors who participate in the Whole Loan Channel must enter into loan purchase and loan servicing agreements with us.
Individual investors can also create a Prosper IRA account to invest onin our marketplace using tax-deferred funds from an individual retirement account (“IRA”). Prosper IRA accounts are not maintained on our personal loan marketplace. Rather, Prosper IRA accounts are managed by third-party custodians who direct Prosper to make deposits and withdrawals to the individual’s Prosper IRA account on behalf of the investor and/or their beneficiaries and who ensure IRA accounts remain compliant with applicable U.S. Internal Revenue Service (“IRS”) regulations. Investors have the ability to select their third-party custodian or utilize a Prosper preferred third-party custodian partner for account management purposes. 
Relationship with WebBank
WebBank is an FDIC-insured, Utah-chartered industrial bank that originates all Borrower Loans made through our personal loan marketplace. WebBank and PMI are parties to an agreement under which PMI manages the operations of our marketplace that relate to the submission of loan applications by borrowers and the making of related Borrower Loans by WebBank in exchange for a fee. WebBank makes each Borrower Loan with its own funds. A joint WebBank-Prosper Credit Policy, which can be changed only with WebBank’s approval, constitutes the policy we must follow in reviewing, approving and administering Borrower Loans made by WebBank through the marketplace. WebBank, PMI and PFL are parties to a Loan Sale Agreement, under which WebBank sells and assigns the promissory notes evidencing the Borrower Loans to PFL. As consideration for WebBank's agreement to sell and assign the promissory notes, PFL pays WebBank the purchase price of the promissory notes, as well as a monthly fee, which is partially tied to the terms and performance of the loans. PMI receives payments from WebBank as compensation for the activities it undertakes on WebBank's behalf.


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Risk Management
Each loan listing is assigned a letter grade that indicates the expected level of risk associated with the listing, which we refer to as a Prosper Rating. Each Prosper Rating corresponds to an estimated average annualized loss rate range. The Prosper Rating associated with a loan listing reflects the loss expectations for that listing as of the time the rating is given. This means
8



that otherwise similar borrowers may have different Prosper Ratings at different points in time as the Prosper Rating is updated to incorporate more recent information.
The estimated average annualized loss rate for each loan listing is based primarily on the historical performance of Borrower Loans with similar characteristics and is primarily determined by the following scores: (i) one or more custom Prosper scores (“Prosper Score”), as may be supplemented by additional proprietary scoring models, and (ii) a credit score obtained from a credit reporting agency. A Prosper Score is also updated periodically to include new information that is predictive of borrower risk as such information becomes available or as the evidence supporting a particular variable becomes strong enough to merit its inclusion in a Prosper Score.
To create a Prosper Score, we have developed and refined custom, Artificial Intelligence (“AI”)-drivenartificial intelligence driven risk models using our historical data as well as a data archive from a consumer credit bureau. We built the Prosper Score models on our borrower population, and included information provided directly by the borrowers as well as information from their credit reports and other data sources, so that the models would incorporate behavior that is unique to that population. In addition to a Prosper Score, another major element used to determine the Prosper Rating for a loan listing is a credit score from a consumer reporting agency. We currently use either or both of TransUnion’s FICO08 score and VantageScore. We obtain a borrower’s credit score at the time the loan listing is created, unless we already have a credit score on file that is not more than thirty days old.
Sale of Notes and Borrower Loans
If an investor successfully bids on a loan listing, the principal amount of the loan will be set aside in the investor’s account and may not be used for other bids. In the event a listing does not result in a loan being originated, the funds are again made available for bidding by the investor.
For loan listings allocated to the Note Channel, a bid on a listing is an investor’s commitment to purchase a Note from PFL. PFL generally issues and sells a series of Notes for each Borrower Loan that is originated through the Note Channel. The Notes are sold to the investors who successfully bid on the corresponding loan listing in the principal amounts of their respective bids. Each series of Notes is dependent for payment on PFL’s receipt of payments on the corresponding Borrower Loan. PFL uses the proceeds of each series of Notes to purchase the corresponding Borrower Loan from WebBank on the second business day after WebBank has originated the Borrower Loan. Each Note comes attached with an inseparable PMI Management Right issued by PMI. Each PMI Management Right constitutes an "investment contract," a concept under federal securities law that refers to an arrangement where investors invest money in a common enterprise with the expectation of profits, primarily from the efforts of others.
ForGenerally, for listings allocated to the Whole Loan Channel, a bid on a listing is an investor’s commitment to purchase the Borrower Loan from PFL after origination by WebBank and sale to PFL. On the second business day after WebBank has originated the Borrower Loan, PFL purchases the Borrower Loan from WebBank and re-sells the Borrower Loan that same day to the corresponding investor. In some cases, certain investors in the Whole Loan Channel purchase Borrower Loans that WebBank retains beyond the second business day. PFL records the investor as the owner of the Borrower Loan.
Loan Servicing and Collection
We are responsible for servicing the Borrower Loans made through our personal loan marketplace. We will pay each Note holder principal and interest on the Note in an amount equal to each such Note’s pro-rata portion of the principal and interest payments, if any, which we receive on the corresponding Borrower Loan, net of our servicing fee. We will also pay Note holders their pro-rata portion of any other amounts we receive on the corresponding Borrower Loans, including late fees and prepayments, subject to our servicing fee; provided, that we will not pay Note holders any non-sufficient funds fees we receive for failed borrower payments. In addition, the funds available for payment on the Notes will be reduced by the amount of any attorneys’ fees or collection fees we, a third-party servicer or a collection agency imposes in connection with collection efforts related to the corresponding Borrower Loan. We will have no further obligation to make payments on any Note after its final maturity date.
We will pay each investor who has purchased a Borrower Loan through the Whole Loan Channel principal and interest on the Borrower Loan purchased in an amount equal to the principal and interest payments, if any, that we receive, net of our servicing fee. We will also pay these investors any other amounts we receive on the Borrower Loans, including late fees and prepayments, subject to our servicing fee, provided that we will not pay these investors any non-sufficient funds fees we receive for failed borrower payments or any payment processing fees we may collect. In addition, the funds available for payment on
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the Borrower Loans will be reduced by the amount of any attorneys' fees or collection fees we, a third-party servicer or a collection agency imposes in connection with collection efforts related to the Borrower Loan.
If a Borrower Loan becomes past due, we may collect on it directly or refer it to a third-party collection agency. Our in-house collections department and third-party collection agencies are compensated by keeping a portion of the payments they collect based on a predetermined schedule.  
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Customers


Customers
A relatively small number of investors provide the funding commitments for a large percentage of all listings that result in Borrower Loans originated through our personal loan marketplace. Of all Borrower Loans originated in the year ended December 31, 2021,2023, the largest party purchased a total of 26.7%15.1% of thosethose loans.
Industry Background and Trends
According to the Board of Governors of the Federal Reserve System, as of December 2021,2023, the balance of outstanding consumer credit (excluding loans secured by real estate) in the United States totaled $4.4totaled $5.0 trillion. This amount included $1.0$1.3 trillion ofof revolving consumer credit, primarily credit card, and $3.4$3.7 trillion of non-revolving loans. A portion of the revolving balances are also refinanced by consumers at lower interest rates and fixed terms through personal loans.

The market for consumer lending is competitive and rapidly evolving, and there is an opportunity for our business model to transform the traditional lending process. We believe our marketplace offers a superior solution for both borrowers and investors.
For borrowers, we believe our marketplace offers the following principal competitive factors: better terms versus other alternatives; a simple, easy and intuitive customer experience; a fast and efficient process; and trust and transparency.
For investors, we believe our marketplace offers the following principal competitive factors: attractive risk-adjusted returns; low duration risk; diversification from other asset classes; a simple, easy and intuitive customer experience; and trust and transparency.
Competition
We compete for borrowers and investors against other financial products and companies. For borrowers, our competition includes banking institutions, credit unions, credit card issuers, mortgage and home equity lenders, and other online consumer lending companies, including publicly traded companies such as LendingClub Corporation, Social Finance Inc., and Upstart Holdings, Inc. For investors in our personal loan product, our competition includes other investment vehicles such as consumer lending platforms, alternative asset funds, and asset classes such as equities, bonds and commodities. We may also face potential competition from new market entrants, or business expansion from established companies, such as Goldman Sachs.companies. These companies may have significantly greater financial, technical, marketing and other resources and may be able to devote greater resources to the development, promotion, sale and support of their offerings. 
Our Competitive Strengths
We believe the following strengths differentiate us from our competitors and provide us with sustainable competitive advantages:
•Leading Online Personal Loan Marketplace. Since inception, our personal loan marketplace has facilitated $20.1facilitated $25.6 billion in loan originations, of which $1.9$2.2 billion was for the year-ended December 31, 2021.2023. As our business grows, our brand, reputation and scale strengthens. This allows us to attract top talent, speed up product innovation,innovation, launch additional personalconsumer finance products, attract marketplace participants and drive down our cost structure, all of which further benefit borrowers and investors. For the year ended December 31, 2023, 54.5% of Borrower Loans originated from borrowers who previously borrowed on our personal loan marketplace, evidence of our strong customer experience.
•Robust Network Effect. The attractiveness of our personal loan marketplace increases as the number of participants on our marketplace increases, yielding a classic network effect. Our personal loan marketplace offers consumer borrowers access to affordable credit, and allows individual and institutional investors to invest in an asset class with attractive risk-adjusted returns. The diversity of investors brings scale and breadth of funding to our marketplace and makes credit more affordable. As both sides of the equation grow, the advantages (reduced risk, lower cost) scale accordingly, attracting even more borrowers and investors. The increased participant pool reduces costs and generates more data which we use to improve the effectiveness of our credit decisioning and scoring models. This enhances our aggregate loan performance and builds increased trust in our marketplace, which in turn attracts more borrowers and investors.
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We believe our strength in the personal loan marketplace will also attract customers to seek out the Credit Card and HELOC products.Home Equity Products.
•Technology Platform. Our technology platform automates key aspects of our operations, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection. This provides a significant time and cost advantage over traditional consumer lending business models and, we believe, enables us to provide a superior user experience to our borrowers and investors.customers. Using our accumulated performance data, we continually invest in incremental improvements in our algorithms thus extending our technological advantage.
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•Proprietary Risk Management Capabilities. We have developed AI-drivenartificial intelligence driven proprietary risk models based on personal loan and credit card performance data, which we believe allows us to accurately assess the credit risk profile of borrowers and which we believe also allows investors to earn attractive risk-adjusted returns. We leverage the results from our growing data stream to continually refine these AI-drivenartificial intelligence driven risk models and more accurately predict credit performance.
•Unique Corporate Structure. Our corporate structure was designed to offer our investors extra protection. The organization and operation of PFL and PMI as separate and distinct entities should serve to protect our Note investors in the event of a bankruptcy filing by or against PMI. This organizational structure, along with the federal and state registration process, is expensive and time consuming to undertake, and is not easily duplicated by competitors.
•Efficient and Attractive Financial Model. We have multiple revenue streams and an efficient cost model. For personal loans, we generate revenue from transaction fees from our marketplace’s role in matching borrowers with investors to enable loan originations, servicing fees related to Borrower Loans for which we retain the servicing rights, net interest income from Borrower Loans and Loans Held for Sale, credit referral fees and other ancillary revenue sources. We also earn revenue from transaction fees generated by our Home Equity Products and interest income and a variety of fees provided under the Credit Card program, including interchange fees, annual fees and late fees, net of a program fee and a portion of the interchange fees that must be remitted to Coastal. Additionally, our technology platform significantly reduces the need for physical infrastructure and therefore allows our business to grow with a lower cost operating model, providing us with significant operating leverage.
Sources of Revenues
We earn revenue in a variety of ways from our personal loan, Credit Card, and Home Equity Products. We have three primary sources of personal loan revenues: transaction fees, servicing fees, and net interest income. We earn transaction fees from WebBank by facilitating the origination of Borrower Loans through the personal loan marketplace, and we earn servicing fees from investors for processing principal and interest payments made by borrowers and passing such payments on to investors and also earn net interest income from Borrower Loans and Loans Held for Sale. TheWe also earn revenue from interest income and various fees generated by our Credit Card program, including interchange fees, annual fees and late fees, net of program fees and a portion of the Credit Card and HELOC products was not material as of and for the year ended December 31, 2021.interchange fees that must be remitted to Coastal. Finally, we earn revenue from our Home Equity Products through broker fees paid by our Home Lending Partners.
Sales and Marketing
Our sales and marketing efforts are designed to attract individuals and institutions to our products, encourage their enrollment and participation as users, and facilitate and enhance their understanding and utilization of each product. We employ a wide range of marketing channels to reach potential customers and build our brand and value proposition. These channels include referrals, online marketing, direct mail, partner and affiliate introductions, and email. We are constantly seeking new methods to reach more potential members, while testing and optimizing the end-to-end customer experience.
Origination and Servicing
We have efficient and scalable systems for credit risk assessment, loan underwriting, and servicing.servicing of the Borrower Loans and Credit Card product. Our risk models take borrowers’ supplied information and combine that information with public and proprietary data to make real time decisions. Our verification agents use several tools to efficiently verify borrower information. Our personal loan servicing platform calculates a loan’s amortization and processes payments received from borrowers and passes such payments on to investors. In addition, we have a back-up servicing agreement for personal loans with Vervent, Inc. (“Vervent”) (f/k/a First Associates Loan Servicing, LLC), a loan servicing company that is willing and able to assume servicing responsibilities in the event that we are no longer able to service the Borrower Loans and Notes. Vervent is a financial services company that has entered into numerous successor loan servicing agreements.

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Technology
We have made, and continue to make, substantial investment in our customer acquisition capability, customer experience, and credit underwriting, loan servicing and payment systems. Our personal loan marketplace utilizes proprietary software to process electronic cash movements, record book entries and calculate cash balances in users’ funding accounts. Electronic deposits and payments are mostly done via Automated Clearing House (“ACH”) transactions. The technology platform allows us to economically acquire and service Borrower Loans and Notes and allows WebBank to efficiently originate and fund Borrower Loans.
The system hardware for our personal loan marketplace is located in hosting facilities in Scottsdale, Arizona, Las Vegas, Nevada, The Dalles, Oregon and Council Bluffs, Iowa. We own the hardware deployed in support of our personal loan marketplace. We continuously monitor the performance and availability of our marketplace. The infrastructure is scalable and utilizes standard techniques such as load-balancing and redundancies.
Key aspects of our technology include:
•Scalability. Our personal loan marketplace is designed and built as a real-time, highly scalable, multi-tier, redundant system. It incorporates technologies designed to prevent any single point of failure within the data center from taking the entire system offline. This is achieved by utilizing load-balancing technologies at the front end and business layer
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tiers and clustering technologies in the back-end tiers to allow scaling both horizontally and vertically depending on marketplace utilization. 
•Data Integrity and Security. We are committed to protecting our users' information and we take the integrity and security of the data provided by them very seriously. To that end, we have established data protection policies which are implemented and enforced using the latest technologies. All sensitive information is transmitted on secure channels using SSL technology, with SSL certificates issued by Symantec or DigiCert. We employ principles of least privilege and layered security to protect stored sensitive information. Sensitive information at rest is encrypted using the industry levelstandard encryption technologies with appropriate controls to access the data. We protect the network perimeter using the latest technologies including but not limited to firewall and anti-virus threat management techniques. We use strong multi-factor authentication to protect and monitor remote access. We back up all data securely and would expect to recover operations in a short period of time in the event of a disaster. Logging and monitoring of the systems and security controls enables usare designed to ensure that the controls are functional and that alerts are triggered on security violations.
•Fraud Detection. We employ a combination of proprietary technologies and commercially available licensed technologies and solutions to prevent and detect fraud. These include knowledge-based authentication, behavioral analytics and digital fingerprinting to prevent identity fraud. We use services from third-party vendors for user identification, credit checks and for checking customer names against the list of Specially Designated Nationals and other lists maintained by the Office of Foreign Assets Control (“OFAC”). In addition, we use specialized third-party software to augment the identity fraud detection systems. We also have a dedicated team which conducts additional investigations of cases flagged for high fraud risk. Finally, we enable users to report suspicious activity, which we may then evaluate further.
•Targeted Risk Assessment. Our AI-driven credit risk models, which utilize artificial intelligence via machine learning, include flags and characteristics which are unique to our platform. We believe this resultsthese models result in a risk assessment that is more targeted and accurate than the traditional lenders,models, leading to higher approval rates, lower interest rates and highly automated identity and income verification. We are continuing to improveenhance the AI technology embedded within our models to facilitate and improve access to credit and the application experience for borrowers. We have been building and enhancing AIthese machine learning models since 2015 and currently have AI models for underwriting, early payment default, third party fraud, income verification, collections and our direct mail program.2015.
Intellectual Property
We rely on a combination of copyright, patent, trade secret, trademark, and other rights, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes and other intellectual property. We enter into confidentiality and other written agreements with our employees, consultants and service providers, and through these and other written agreements, attempt to control access to and distribution of the software, documentation and other proprietary technology and information. We also utilize a robust multi-layered monitoring program, including third party domain monitoring services, web search engine alerts and our outside counsel, which we leverage to actively enforce our intellectual property rights. Despite these efforts to protect our proprietary rights, third parties may, in an authorized or unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a product with the same functionality. Policing all unauthorized use of intellectual property rights is nearly impossible. Therefore, we cannot be certain that the steps we have taken or will take in the future will prevent misappropriations of our technology or intellectual property rights.
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We have registered several trademarks in the United States, including “Prosper,” “FAAS,” “Make Healthcare Affordable,” “Powered by Prosper” and numerous stylized marks, including the Prosper and Prosper Healthcare Lending logos.
We have invested in a research and development program and, as of December 31, 2021,2023, we had twoeight issued patents and six patent applications filed and pending beforeby the United States Patent and Trademark Office. We may file additional patent applications or pursue additional patent protection in the future to the extent we believe it will be beneficial.
Human Capital Resources
Employee Profile
At Prosper, our mission is to advance financial well-being and our employees are critical to achieving this mission. We are committed to hiring and developing employees who embody our core values: accountability, collaboration, excellence, curiosity, diversity, simplicity, and integrity. As of December 31, 2021,2023, we had 384had 404 full-time employees, all of whom were based in the United States. Our employees are split into the following four functions: 121classified as either “local” to either our San Francisco, California and Phoenix, Arizona offices or “remote national” if they work remotely. As of December 31, 2023, we had 139 local employees based in originationour San Francisco, California office, 134 local employees based in our Phoenix, Arizona office, and servicing, 20 in sales and marketing, 101 in general and administrative – research and development, and 142 in general and administrative –
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 131

 remote national employees.

other. None of our employees are represented by labor unions. We have not experiencedexperienced any work stoppages, and we believe that our relations with our employees are good.
Employee Health & Wellness
During the COVID-19 pandemic, the safety and well-being of our employees and their families has been a top priority as we continue to serve our customers. We transitioned our entire workforce to remote working arrangements and provide a monthly stipend to cover added remote costs. We also keep our employees informed with frequent communications on health and community resources and information along with updates regarding our own response to COVID-19. We continue to monitor and update our practices to remain aligned and ahead of federal, state and local laws, regulations, guidelines and recommendations.
Our employees have access to several programs and benefits related to employee wellness including: traditional life and health (medical, dental, vision) insurance, flexible paid time off, free membership to physical, mental and emotional health resources, and parental leave programs, among others. We have also introduced specific programs and benefits for caregivers during the pandemic including free tutoring for school-aged children. We believe our progressive human resources policies, learning and development, talent acquisition, and community engagement and support activities enable us to attract and retain key personnel.
Employee Recognition and Talent Development
We understand that to attract and retain great people, we must listen to and engage them regularly. We conduct an anonymous, company-wide employee engagement survey twice a year to gauge our progress and identify the areas where we excel and areas for improvement in the employee experience. Following each survey, we identify areas where we would like to focus to support engagement within the company and create action plans to support those initiatives. We have implemented two award programs to recognize and honor our employees who exemplify our values.
Because we operate in a highly regulated industry, we require ongoing regulatory and compliance training for our employees. Additionally, we provide a series of leadership training for all people managers. We also offer employees free access to on-demand training on an array of subjects from technical to business management to build thetheir skills and advance their careers as well as opportunities for employees to pursue their passion projects and leadership development in alignment with our values.
Diversity, Equity, Inclusion and Belonging
Diversity and collaboration are among our company’sCompany’s core values and we believe our efforts in diversity, equity, inclusion and belonging (“DEIB”) fuel our innovation and drive our success. Our goal is to foster a diverse and inclusive workplace where our employees feel that their identities and experiences are represented, embraced and celebrated. We are also committed to our efforts to increase diversity through our hiring practices by using gender-neutral job postings and recruiting policies that promote diverse candidates. We recruit the best people for the job regardless of differences that include gender, ethnicity and other protected traits and it is our policy to comply fully with all federal, state and local laws relating to discrimination in the workplace. We have several employee resource groups that help us to identify opportunities and actions related to DEIB and to better engage underrepresented populations. Our DEIB principles are also reflected in our employee training, and in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace. We continue to enhance our DEIB policies, with guidance byfrom our executive leadership team.

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Government Regulation
Overview
The lending and securities industries are highly regulated. Each of the financial products offered by us are subject to extensive and complex rules and regulations. We also are subject to licensing and examination by various federal, state and local government authorities. These authorities impose obligations and restrictions on our activities, WebBank’s activities and the Borrower Loans acquired and Notes issued through our marketplace, Coastal’s activities and the Credit Card product, and Spring EQour Home Lending Partners and the HELOC product.Home Equity Products. In particular, these rules may limit the fees that may be assessed, require extensive disclosure to, and consents from, borrowers, prohibit discrimination, and impose multiple qualification and licensing obligations on our activities. Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, voiding of loan contracts, indemnification liabilities to contract counterparties, class action lawsuits, administrative enforcement actions and civil and criminal liabilities. While compliance with such requirements is at times complicated by our novel business model, we believe we are in substantial compliance with these rules and regulations. These rules and regulations are subject to continuous change, however, and a material change could have an adverse effect on our compliance efforts and ability to operate.

From time to time, various types of federal and state legislation are proposed and new regulations are introduced that could result in additional regulation of, and restrictions on, the business of consumer lending. We cannot predict whether any such legislation or regulations will be adopted or how this would affect our business or our important relationships with third parties. In addition, the interpretation of existing legislation may change or may prove different than anticipated when applied to our novel business model. Compliance with such requirements could involve additional costs, which could have a material adverse effect on our business. As a consequence of the extensive regulation of consumer lending in the United States, our business is particularly susceptible to being affected by federal and state legislation and regulations that may increase the cost of doing business.
Personal Loan State and Federal Laws and Regulations
State Licensing Requirements. In most states we believe that WebBank, as originator of all Borrower Loans originated through our marketplace, satisfies any relevant licensing requirements with respect to the origination of such Borrower Loans. In addition, as needed, we seek licenses and/or authorizations of various types so that we may conduct activities such as servicing and marketing in all states and the District of Columbia, with the exceptions of Iowa and West Virginia. We are subject to supervision and examination by the state regulatory authorities that administer these state lending laws. The licensing statutes vary from state to state and prescribe or impose different requirements, including: restrictions on loan origination and servicing practices, limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review.
State Usury Laws. Section 521 of the Depository Institution Deregulation and Monetary Control Act of 1980 (12 U.S.C. § 1831d) (“DIDA”) and Section 85 of the National Bank Act (“NBA”) (12 U.S.C. § 85), federal case law interpreting the NBA such as Tiffany v. National Bank of Missouri and Marquette National Bank of Minneapolis v. First Omaha Service Corporation, and FDIC advisory opinion 92-47 permit FDIC-insured depository institutions, such as WebBank, to “export” the interest rate permitted under the laws of the state where the bank is located, regardless of the usury limitations imposed by the state law of the borrower’s state of residence unless the state has chosen to opt out of the exportation regime. WebBank is located in Utah, and Title 70C of the Utah Code does not limit the amount of fees or interest that may be charged by WebBank on loans of the type offered through our marketplace. Only Iowa and Puerto Rico have opted out of the exportation regime under Section 525 of DIDA and we do not operate in either jurisdiction. However, ifIn June 2023, Colorado enacted a state inDIDA opt-out law which we did operate opted out of rate exportation, wewill be effective on July 1, 2024. We believe that judicial interpretations support the view that such opt outs only apply to loans “made” in those states.  
In May 2015, the U.S. Court of Appeals for the Second Circuit issued a decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the NBA and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. On November 10, 2015, the defendant in the Madden case filed a petition for a writ of certiorari with the United States Supreme Court for further review of the Second Circuit’s decision. On June 27, 2016, the United States Supreme Court denied the petition and refused to review the case, leaving the decision of the Second Circuit intact and binding on federal courts in Connecticut, New York and Vermont. The Madden decision has created some uncertainty as to whether non-bank entities purchasing loans originated by a bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the NBA, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential
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litigation, or the possible impact of the litigation on our marketplace, we believe the Madden case addressed facts that are not presented by our marketplace lending platform and thus would not apply to Borrower Loans.  
In June 2020, the FDIC issued a final regulation entitled “Federal Interest Rate Authority” that, among other things, addressed the uncertainty resulting from the Madden decision, including uncertainty affecting marketplace lenders that partner with banks. Under the FDIC’s rule, which applies to FDIC-insured state-chartered industrial banks such as WebBank, interest on a loan originated by WebBank that was permissible under DIDA at origination is not affected by WebBank’s subsequent sale of the loan to PFL. Seven states and the District of Columbia sued the FDIC, however, seeking to have the regulation set aside on Administrative Procedure Act grounds. Three states brought a similar challenge in the same court to a similar regulation issued by the OCC under the NBA. Both suits were decided in February 8, 2022, with the United States District Court for the Northern District of California ruling that the FDIC and OCC had not exceeded their statutory authority when promulgating their respective rules. The court deferred to each federal agency's interpretation, and thus concluded that each agency’s rule was not unreasonable or arbitrary or capricious. The states havehad until April 11, 2022 to appeal the rulings to the U.S. Court of Appeals for the Ninth Circuit. Circuit and did not do so.If
On August 18, 2020, WebBank, the states appeal,originator and lender of the loans offered through the personal loan marketplace, was among the parties that reached a decision by the Ninth Circuit overturning the District Court’s rulings could subject Borrower Loans and PFL purchases from WebBank to state usury laws.
In January 2017,settlement with the Administrator of the Colorado Uniform Consumer Credit Code filed suits against online loanwhich provides a safe harbor for the platforms operated by Marlette Funding, LLC and Avant, Inc. The Administrator claimed that loans to Colorado residents facilitated through these platforms were required to comply with Colorado laws regarding interest rates and fees, and that such laws were not preempted by the federal laws that apply to loans originated by Cross River Bank and WebBank, the federally regulated issuing banks that originate loans through the platforms operated by Marlette and Avant, respectively. In response to the Colorado regulator’s lawsuits, Cross River Bank and WebBank each intervened in the state court case filed against Marlette and Avant, respectively. On August 18, 2020, the parties reached a settlement that provides a safe harbor for the Marlette and Avant lending platforms,, such that if the lending programs meet certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure, the programs will be deemed to be in compliance with Colorado’s usury limits. On November 9, 2020, we amended our agreements with WebBank to addressmeet the requirements of the safe harbor for extending credit to borrowers in Colorado.
We had separately been in discussions with the Colorado Administrator during the Marlette and Avant litigation regarding certain terms of Borrower Loans offered through the personal loan marketplace to Colorado residents. Effective as of July 30, 2019, we and the Administrator entered into a stipulation (the “Stipulation”) to allow loans to continue to be offered through the personal loan marketplace to Colorado residents, subject to certain financing charge and late fee restrictions during the period that the Stipulation is in effect with respect to acquired loans, but excluding loans retained by WebBank or sold to a state-chartered, FDIC-insured bank or a federally-chartered bank. Effective as of February 6, 2024, we entered into a Stipulation and Final Agency Order (“FAO”) pursuant to which Prosper agreed to continue to be subject to such financing charge and late fee restrictions set forth in the Stipulation through July 1, 2024.
If a Borrower Loan made through our marketplace was deemed to be subject to the usury laws of a state that has opted-out of the exportation regime or becomes bound by the Second Circuit’s or a similar judicial decision (including a judicial decision setting aside the FDIC’s regulation governing permissible interest on loans sold by banks to non-banks), we could become subject to fines, penalties, and possible forfeiture of amounts charged to borrowers, and we may decide not to originate Borrower Loans through our marketplace in that applicable jurisdiction, which may adversely impact our growth. For more information, see Item 1A, “Risk Factors—If our marketplace were found to violate a state’s usury laws, we may have to alter our business model and our business could be harmed.”
State Securities Laws. We are subject to the securities laws of each state in which the registration or qualification to offer and sell the Notes and PMI Management Rights has been approved. Certain of these state laws require us to renew the registration or qualification of Notes and PMI Management Rights on an annual basis.
The Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) created many new restrictions and an expanded framework of regulatory oversight for the financial services industry. Among other things, the Dodd-Frank Act centralized responsibility for consumer financial protections by creating the Consumer Financial Protection Bureau (the “CFPB”), which has broad authority to write regulations under federal consumer financial protection laws, such as the Truth-in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act, and to enforce those laws against and examine large financial institutions, such as our issuing bank,banks, for compliance. The CFPB is authorized to prevent “unfair, deceptive or abusive acts or practices” through its regulatory, supervisory and enforcement authority. We are subject to the CFPB’s jurisdiction, including its enforcement authority and may become subject to their supervisory authority, as a servicer and acquirer of consumer credit. The CFPB may request reports concerning our organization, business conduct, markets and activities, and also conduct on-site examinations of our business on a periodic basis.
Truth-in-Lending Act. The federal Truth-in-Lending Act (“TILA”), and Regulation Z, which implements TILA, require creditors to provide consumers with uniform, understandable information concerning certain terms and conditions of their loan and credit transactions. These rules apply to WebBank as the creditor for Borrower Loans facilitated through our marketplace, but because the transactions are carried out on our hosted website, we facilitate compliance at WebBank’s direction. For closed-end credit transactions of the type provided through our marketplace, these disclosures include providing the annual percentage rate, the finance charge, the amount financed, the number of payments and the amount of the monthly payment. The creditor must provide the disclosures before the Borrower Loan is closed. TILA also regulates the advertising of
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credit and gives borrowers, among other things, certain rights regarding updated disclosures and the treatment of credit
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balances. Our marketplace provides borrowers with a TILA disclosure prior to the time a Borrower Loan is originated. We also seek to comply with TILA’s disclosure requirements related to credit advertising.
Equal Credit Opportunity Act. The federal Equal Credit Opportunity Act (“ECOA”) prohibits creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, or the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act or any applicable state law. Regulation B, which implements ECOA, restricts creditors from requesting certain types of information from applicants and from making statements that would discourage on a prohibited basis a reasonable person from making or pursuing an application. These requirements apply both to lenders such as WebBank and other parties like us that regularly implement and communicate credit decisions. Investors may also be subject to the ECOA in their capacity as purchasers of Notes, if they are deemed to regularly participate in credit decisions. In the underwriting of Borrower Loans on our marketplace, both WebBank and we seek to comply with ECOA’s provisions prohibiting discouragement and discrimination. ECOA also requires creditors to provide consumers with timely notices of adverse action taken on credit applications. WebBank and we provide prospective borrowers who apply for a Borrower Loan through our marketplace but are denied credit with an adverse action notice which is in compliance with applicable requirements (see also below regarding “Fair Credit Reporting Act”).
Fair Credit Reporting Act. The federal Fair Credit Reporting Act (“FCRA”) and its implementing regulations, including Regulation V, promote the accuracy, fairness and privacy of information in the files of consumer reporting agencies. FCRA requires a permissible purpose to obtain a consumer credit report, and requires persons to report loan payment information to credit bureaus accurately. FCRA also imposes disclosure requirements on creditors who take adverse action on credit applications based on information contained in a credit report. WebBank and we have a permissible purpose for obtaining credit reports on potential borrowers and WebBank and we also obtain explicit consent from borrowers to obtain such reports. As the servicer for the Borrower Loan, we have systems in place to report Borrower Loan payment and delinquency information to appropriate reporting agencies. We provide an adverse action notice to a rejected borrower on WebBank’s behalf at the time the borrower is rejected that includes all the required disclosures. We have also implemented an identity theft prevention program as required by law.  
Fair Debt Collection Practices Act. The federal Fair Debt Collection Practices Act (“FDCPA”) and its implementing regulation, Regulation F, provide guidelines and limitations on the conduct of third-party debt collectors in connection with the collection of consumer debts. The FDCPA limits certain communications with third parties, imposes notice and debt validation requirements, and prohibits threatening, harassing or abusive conduct in the course of debt collection. We are not a “debt collector” under the FDCPA, which the statute defines as a person who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another. The CFPB retained the statute’s “debt collector” definition in its November 2020 final rules implementing the FDCPA. As the servicer for Borrower Loans originated by WebBank and owned by investors, we are not a debt collector based on our facilitation of loans in the origination process and/or its servicing of the Borrower Loans after the time of origination and prior to any default. While the FDCPA applies to third-party debt collectors, debt collection laws of certain states impose similar requirements on creditors who collect their own debts. Our agreement with our investors prohibits investors from attempting to collect directly on the Borrower Loan. We use our internal collection team and professional external debt collection agents to collect delinquent accounts. They are required to comply with all other applicable laws in collecting delinquent accounts of our borrowers.  
Servicemembers Civil Relief Act. The federal Servicemembers Civil Relief Act (“SCRA”) allows military members to suspend or postpone certain civil obligations so that the military member can devote his or hertheir full attention to military duties. The SCRA, as well as certain state laws with similar protections for military members, require us to adjust the interest rate of borrowers who qualify for and request relief. If a borrower with an outstanding Borrower Loan qualifies for protection under the SCRA or similar state laws, we will reduce the interest rate on the Borrower Loan to 6% for the duration of the borrower’s active duty. During this period, the investors who have invested in such Borrower Loan will not receive the difference between 6% and the Borrower Loan’s original interest rate. For a borrower to obtain an interest rate reduction on a Borrower Loan due to military service, we require the borrower to send us a written request and written documentation of active duty. We do not take military service into account in assigning Prosper Ratings to borrower loan requests and we do not disclose the military status of borrowers to investors.  
Military Lending Act. The federal Military Lending Act (“MLA”) provides specific protections for active duty service members and their dependents (or covered borrowers) in consumer credit transactions. Although originally enacted in 2006, the MLA applies to persons engaged in the business of extending consumer credit subject to the disclosure requirements of the TILA and Regulation Z with respect to loans made on or after October 3, 2016. The MLA prohibits creditors from imposing a Military Annual Percentage Rate (“MAPR”) greater than 36% in any consumer credit transaction involving a covered borrower. It also requires certain oral and written disclosures to be provided to covered borrowers. Additionally, the MLA prohibits creditors from requiring covered borrowers to waive rights to legal recourse, submit to arbitration, or pay a prepayment penalty
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or fee. Both we and WebBank have ensured that the loan program complies with the MLA requirements for covered borrowers,
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including but not limited to the restriction on MAPR, the delivery of required disclosures and the prohibition of mandatory arbitration and waiver of legal recourse.
Other Lending Regulations. We are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending, including additional requirements relating to loan disclosure, credit discrimination, credit reporting, debt collection and unfair, deceptive or abusive business practices. These laws and regulations may be enforced by state consumer credit regulatory agencies, state attorneys general, the CFPB and private litigants, among others. Given our novel business model and the subjective nature of some of these laws and regulations, particularly laws regulating unfair, deceptive or abusive business practices, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements.
Electronic Funds Transfer Act. The federal Electronic Fund Transfer Act (“EFTA”), and Regulation E, which implements it, provide guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts. In addition, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (“NACHA”). Most transfers of funds in connection with the origination and repayment of the Borrower Loans are performed by ACH. We obtain necessary electronic authorization from borrowers and investors for such transfers in compliance with such rules. Transfers of funds through our marketplace are currently executed by Wells Fargo and conform to the EFTA, its regulations and NACHA guidelines.  
Electronic Signatures in Global and National Commerce Act/Uniform Electronic Transactions Act. The federal Electronic Signatures in Global and National Commerce Act (“ESIGN”) and similar state laws, particularly the Uniform Electronic Transactions Act (“UETA”), authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures. ESIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to obtain the consumer’s consent to receive information electronically. When a borrower or individual investor registers with our marketplace, we obtain his or hertheir consent to transact business electronically and maintain electronic records in compliance with ESIGN and UETA requirements.  
Privacy and Data Security Laws. The federal Gramm-Leach-Bliley Act (“GLBA”) limits the disclosure of nonpublic personal information about a consumer to nonaffiliated third parties and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities as well as to safeguard personal customer information. Additional state and federalAs of December 31, 2023, a total of thirteen states have passed comprehensive privacy and data security laws require safeguards to protect the privacy and security of consumers’ personally identifiable information, require notification to affected customers in the eventUnited States: California, Virginia, Colorado, Connecticut, Utah, Iowa, Indiana, Tennessee, Texas, Florida, Montana, Oregon, and Delaware. As of a breach,December 31, 2023, California, Colorado, Connecticut, Utah, and restrict certain sharing of nonpublic personal information about a consumer with affiliated entities. For example,Virginia’s laws are effective. In particular, the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020, provides consumers in the state with rights to know about the use, to request deletion and correction, and to opt out of the sale of their personal information by businesses that are a certain size or that generate at least half of their revenue by selling personal information. In turn, the CCPA requires subject businesses to notify consumers of their data collection practices and to implement procedures for timely responding to consumer requests submitted in exercise of their rights under the statute, although the CCPA includes certain exceptions for personal information that is protected under GLBA or other federal and state privacy laws. We maintain a detailed privacy policy that is designed to address GLBA and the CCPA and is accessible from our website. These provisions of the CCPA will bewere further strengthened by provisions of the California Privacy Rights Act that will become operative(the “CPRA”), which took effect on January 1, 2023. We maintain a detailed privacy policy that is accessible from our website and is designed to comply with applicable privacy laws.

In addition, state and federal privacy and data security laws require safeguards to protect the privacy and security of consumers’ personally identifiable information, require notification to affected customers in the event of a breach, and restrict certain sharing of nonpublic personal information about a consumer with affiliated entities. We maintain security measures designed to protect participants’ personal information, and we do not sell, rent or share such information with nonaffiliated third parties for marketing purposes unless previously agreed to by the participant or otherwise permitted by applicable law. In addition, we take a number of measures to safeguard the personal information of our borrowers and investors and to protect it against unauthorized access.  
Bank Secrecy Act. In cooperation with WebBank, we have implemented an anti-money laundering policy and various anti-money laundering procedures to comply with applicable federal law. With respect to new borrowers and investors, we apply the customer identification and verification program rules and screen names against the list of Specially Designated Nationals maintained by the U.S. Department of the Treasury Office of Foreign Asset Control’s (“OFAC”) pursuant to the USA PATRIOT Act amendments to the Bank Secrecy Act (“BSA”) and its implementing regulation.
Credit Card State and Federal Laws and Regulations
The Credit Card product operates under a similar bank partnership model as our personal loan marketplace, whereby through the application of Section 521 of DIDA, Section 85 of the NBA, and federal case law, Coastal may “export” the interest rate permitted under the laws of the State of Washington, where Coastal is located, regardless of the usury limitations imposed
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by the state law of the cardholder’s state of residence unless the state has chosen to opt out of the exportation regime. State privacy and data security laws includingsuch as the CCPA also apply to the Credit Card product.
The Credit Card product is subject to the same federal laws and regulations applicable to our personal loan marketplace and as summarized above, including the Dodd-Frank Act, TILA, ECOA, FCRA, FDCPA, SCRA, MLA, EFTA, ESIGN, UETA, GLBA, BSA and OFAC. TILA and Regulation Z contain specific disclosure requirements for credit cards and
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advertising rules for credit cards. Please refer to the “Government Regulations—Personal Loan State and Federal Laws and Regulations” section above for a summary of these federal laws and regulations. Certain amendments to TILA also govern the Credit Card product, including the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”), which amended TILA to prescribe, among other things, additional procedures, disclosures, fee limits, and other protections for consumers applying for or holding credit cards, and the Fair Credit Billing Act (“FCBA”), which governs creditor obligations with respect to billing complaints and errors. For the Credit Card product, we take a similar approach to compliance for our personal loan marketplace, with adjustments for application of the rules to open-ended, unsecured credit cards as opposed to closed-end personal loans. We work with Coastal to facilitate compliance.
HELOCHome Equity State and Federal Laws and Regulations
The HELOC product isHome Equity Products are subject to many of the same federal laws and regulations as the personal loan marketplace, including the Dodd-Frank Act, TILA, ECOA, FCRA, ESIGN, GLBA, BSA and OFAC. TILA, and Regulation Z, and applicable state laws contain specific disclosure requirements for HELOCsthe Home Equity Products and mortgage advertising rules. State mortgage broker and mortgage lender licensing and registration requirements also apply to the HELOC product,Home Equity Products, which must satisfy the minimum standards set forth in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and Regulation H, as well as state usury laws. State privacy and data security laws includingsuch as the CCPA also apply to the HELOC product.Home Equity Products.
The HELOC product isHome Equity Products are also subject to the Real Estate Settlement Procedures Act (“RESPA”) and its implementing regulation, Regulation X, as well as related guidance issued by the CFPB and the Department of Housing and Urban Development (“HUD”). RESPA, among other things, prohibits the payment or acceptance of referral fees or kickbacks, or any splitting of fees except for actual services performed. The TILA-RESPA Integrated Disclosure does not apply to HELOCs. The RESPA and Regulation X mortgage servicing rules do notHELOCs, but does apply to HELOCs.HELoans. Prosper does not service any of the Home Equity Products.
Finally, the HELOC product isHome Equity Products are subject to the data collection and reporting requirements of the Home Mortgage Disclosure Act (the “HMDA”) and its implementing regulation, Regulation C. Prosper is not directly subject to the HMDA data collection and reporting requirements, but collects data to support the reporting requirements applicable to its financial institutionlending partner.
Foreign Laws and Regulations
We do not permit non-U.S. based individuals to register as borrowers on our marketplace and the marketplace does not operate outside the United States. Therefore, we do not believe that our marketplace is subject to foreign laws or regulations.
Summary of Risk Factors
We are subject to various risks, the most significant of which are summarized below. For more information about these and other risks that may affect us, you should carefully read the factors described in the “Risk Factors” section below.

Risks related to personal loan borrower default

•The Notes are risky and speculative investments suitable only for suitable investors only.of adequate financial means.
•Payments on the Notes depend entirely on payments PFL receives on corresponding Borrower Loans. If a borrower fails to make any payments on the corresponding Borrower Loan related to a Note, payments on such Note will be correspondingly reduced. If payments on the Borrower Loan corresponding to an investor’s Note become more than 30 days overdue, such investor will be unlikely tomay not receive the full principal and interest payments that were expected on the Note.
•Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.
•The credit information of an applicant may be inaccurate or may not accurately reflect the applicant’s creditworthiness, which may cause an investor to lose all or part of the price paid for a Note. The fact that we have the exclusive right and ability to investigate claims of identity theft in the origination of Borrower Loans creates a significant conflict of interest between us and our investors.
•The Borrower Loans are not secured by any collateral or guaranteed or insured by any third party, and investors must rely on us or a third-party collection agency to pursue collection against any borrower.
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•The Prosper Rating may not accurately set forth the risks of investing in the Notes, no assurances can be provided that actual loss rates for the Notes will come within the estimated average annualized loss rates indicated by the Prosper Rating, and investors have limited rights to cause Prosper to repurchase the Notes.
•We may not set appropriate interest rates for Borrower Loans.
•Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.
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•The Borrower Loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the Borrower Loan, which may reduce the likelihood that an investor will receive the full principal and interest payments that such investor expects to receive on a Note.
•In general, the Borrower Loans do not contain any cross-default or similar provisions. If a borrower defaults on any of his or hertheir other debt obligations, our ability to collect on the Borrower Loan on which an investor’s Note is dependent for payment may be substantially impaired.

Risks Inherent in investing in the Notes

•The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.
•PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.
•Our marketplace allows a borrower to prepay a Borrower Loan at any time without penalty. Borrower Loan prepayments will extinguish or limit an investor’s ability to receive additional interest payments on a Note.
•We may choose or be required to implement payment and collections relief programs in response to the COVID-19 pandemic and other public health emergencies or crises, which may extend or otherwise alter the repayment schedule of Borrower Loans and reduce the expected return on the corresponding Notes.
•The Notes will not be listed on any securities exchange and can be held only by registered Prosper investors. Further, no trading platform for the transfer of Notes exists. Therefore, investors should be prepared to hold the Notes they purchase until maturity.
•Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.

Risks related to PFL and PMI, our marketplace and our ability to service the notes

•Human error in the operation of our platform has resulted in the allocation of Borrower Loans to our Note Channel which did not conform to the eligibility criteria applicable to Borrower Loans at the time of allocation. If we are unable to prevent the reoccurrence of similar errors, our business and investors could be adversely impacted.
•We have experienced errors on our platform that have resulted in incorrect reporting of performance returns to Note investors. If we are unable to prevent the reoccurrence of similar errors, investors could be adversely impacted.
•Arrangements for back-up servicing are limited. If PMI fails to maintain operations or the Administration Agreement is rejected or terminated (in bankruptcy or otherwise), investors may experience a delay and increased cost in respect of their expected principal and interest payments on Notes, and PFL may be unable to collect and process repayments from borrowers.
•PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.
•We have incurred operating losses in prior years and may continue to incur net losses in the future.
•The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.
•PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.
•Any significant disruption in service in our marketplace or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement. If the security of PFL’s investors’ and borrowers’ confidential information stored in our systems is breached, users’ secure information may be stolen, our reputations may be harmed, and we may be exposed to liability.
•Increasing interest rates have adversely impacted and could materially and adversely impact our business.

Risks related to compliance and regulation

•Our marketplace represents a novel approach to borrowing and investing that may fail to comply with federal and state securities laws, borrower protection laws and the state counterparts to such consumer protection laws. Borrowers may dispute the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws. Investors may attempt to rescind their Note purchases under securities laws. Regulatory agencies and their state counterparts may investigate our compliance with these regulatory obligations, and may take enforcement action with respect to alleged law violations. There continues to be uncertainty as to how the actions of the Consumer Financial Protection Bureau or any other new agency could impact our business or that of our issuing bank. If our marketplace were found to violate a state’s usury laws, we may have to alter our
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business model and our business could be harmed. If one or both of PMI and PFL is required to register under the Investment Company Act or the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected. Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.
•We rely on agreements with WebBank, pursuant to which WebBank originates loans to qualified borrowers on a uniform basis throughout the United States and sells and assigns those loans to PFL. If our relationship with WebBank were to end, we may need to rely on individual state lending licenses to originate Borrower Loans.
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•PMI's administration of Quick Invest under its previous offering and PFL’s administration of Quick Invest, Recurring Investment, and Auto Invest under its current offering, could create additional liability for PFL and such liability could be material.
Recent Developments
COVID-19
We continue to track the impact of COVID-19 and its variants on our communities, and are offering assistance to qualified borrowers who are facing financial hardship as a result of the COVID-19 pandemic. These relief options include, among other things, the ability to delay up to 4 monthly loan payments, the ability to reduce minimum monthly payments for up to 12 months and extend the term of the loan by up to 11 months, and waived late and non-sufficient funds fees. Since COVID-19 relief was first offered in March 2020 and through December 31, 2021, approximately 9.1% of our current outstanding loan balances on a cumulative basis have enrolled in at least one of these COVID-19 relief programs. Approximately 1.2% of our outstanding loan balances are actively enrolled in at least one relief program as of December 31, 2021. Overall requests for COVID-19 relief are declining; however, enrollment may continue as long as the pandemic continues to trigger financial hardship for borrowers.
Available Information
The following filings are available for download free of charge at www.prosper.com as soon as reasonably practicable after such filings are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”): Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports. Our SEC filings are also available to the public on the SEC’s website, at www.sec.gov. The information contained on our website and our blog is not incorporated by reference into this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, when evaluating our business. Any of the following risks, either alone or taken together, could materially and adversely affect our business, financial condition, operating results and prospects. While we believe the risks and uncertainties described below include all material risks currently known by us, it is possible that these may not be the only ones we face.
RISKS RELATED TO PERSONAL LOAN BORROWER DEFAULT
The Notes are risky and speculative investments suitable only for suitable investors only.of adequate financial means.
Investors should be aware that the Notes offered through our marketplace are risky and speculative investments. The Notes are special, limited obligations of PFL and depend entirely for payment on PFL’s receipt of payments under the corresponding Borrower Loans. Notes are suitable only for investors of adequate financial means. If an investor cannot afford to lose the entire amount of such investor’s investment in the Notes, the investor should not invest in the Notes.
Payments on the Notes depend entirely on payments PFL receives on corresponding Borrower Loans. If a borrower fails to make any payments on the corresponding Borrower Loan related to a Note, payments on such Note will be correspondingly reduced.
PFL will only make payments pro-rata on a series of Notes after it receives a borrower’s payment on the corresponding Borrower Loan, net of servicing fees. PFL also will retain from the funds received from the relevant borrower and otherwise available for payment on the Notes any non-sufficient funds fees and the amounts of any attorneys’ fees or collection fees our in-house collections department, a third-party servicer or collection agency imposes in connection with collection efforts. Under the terms of the Notes, if PFL does not receive any or all payments on the corresponding Borrower Loan, payments on the Note will be correspondingly reduced in whole or in part. If the relevant borrower does not make a payment on a specific monthly loan payment date, no payment will be made on the Note on the corresponding succeeding Note payment date.
The Borrower Loans are not secured by any collateral or guaranteed or insured by any third party, and investors must rely on us or a third-party collection agency to pursue collection against any borrower.
Borrower Loans are unsecured obligations of borrowers. They are not secured by any collateral, and they are not guaranteed or insured by PFL, PMI or any third party, or backed by any governmental authority in any way. We and our third-party collection agencies will, therefore, be limited in our ability to collect on Borrower Loans. Moreover, Borrower Loans are obligations of borrowers to PFL as successor to WebBank, not obligations to the holders of Notes. Holders of the Notes will
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have no recourse to the borrowers and no ability to pursue borrowers to collect payments under Borrower Loans. Holders of the Notes may look only to PFL for payment of the Notes. Furthermore, if a borrower fails to make any payments on the Borrower Loan, the holders of the Notes corresponding to that Borrower Loan will not receive any payments on their Notes. The holders of such Notes will not be able to pursue collection against the borrower and will not be able to obtain the identity of the borrower in order to contact the borrower about the defaulted Borrower Loan.
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The credit information of an applicant may be inaccurate or may not accurately reflect the applicant’s creditworthiness, which may cause an investor to lose all or part of the price paid for a Note.
We obtain applicant credit information from consumer reporting agencies, and assign Prosper Ratings to listings based in part on the applicant’s credit score. A credit score that forms a part of the Prosper Rating assigned to a listing may not reflect the applicant’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data. Similarly, the credit data taken from the applicant’s credit report and displayed in listings may also be based on outdated, incomplete or inaccurate consumer reporting data. We do not verify the information obtained from the applicant’s credit report. Moreover, investors do not, and will not, have access to financial statements of applicants or to other detailed financial information about applicants.
The Prosper Rating may not accurately set forth the risks of investing in the Notes, no assurances can be provided that actual loss rates for the Notes will come within the estimated average annualized loss rates indicated by the Prosper Rating, and investors have limited rights to cause Prosper to repurchase the Notes.
The Prosper Rating assigned to a loan listing may not accurately reflect the risks of investing in the Notes, and is not a recommendation by us to buy or hold a Note. For example, the Prosper Rating for a listing could be inaccurate because the applicant’s credit report contained incorrect information. Similarly, although some of the information provided by applicants that is relevant to the Prosper Rating is verified by us before calculating the Prosper Rating, we do not verify all such information. For example, we do not verify the income or employment information on all applications. Further, the Prosper Rating does not reflect PFL’s credit risk as a debtor (such credit risk exists even though, as the debtor on the Notes, PFL’s only obligation is to pay to the Note holders their pro-rata shares of collections received on the related Borrower Loans net of applicable fees). In addition, no assurances can be provided that actual loss rates for the Notes will fall within the expected loss rates indicated by the Prosper Rating. The interest rates on the Notes might not adequately compensate Note investors for these additional risks.
If we include in a listing a Prosper Rating that is different from the Prosper Rating calculated by us or calculate the Prosper Rating for a listing incorrectly, and such error materially and adversely affects a holder’s interest in the related Note, PFL will indemnify the holder or repurchase the Note. PFL will not, however, have any indemnity or repurchase obligation under the Amended and Restated Indenture, the Notes, the Investor Registration Agreement or any other agreement associated with the Note Channel as a result of any other inaccuracy with respect to a listing’s Prosper Score or Prosper Rating. PFL’s contractual repurchase obligations do not affect a Note holder’s rights under federal or state securities laws.
Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.
Since it was first implemented in July 2011 throughthrough December 31, 2021,2023, the Recurring Investment (formerly known as Auto Quick Invest) tool has experienced programming errors that affected 8,630 Notes and PMI Notes out of the 11,999,55613,491,750 Notes and PMI Notes purchased. The Auto Invest tool was first implemented on June 2, 2016. Since such time through December 31, 2021,2023, the Auto Invest tool has experienced programming errors that affected 2 Notes out of the 8,583,286 Notes18,528,380 Notes purchased.
In the event of any errors in Recurring Investment or Auto Invest that cause an investor to purchase a Note from PFL that such investor would not otherwise have purchased or that differs materially from the Note such investor would have purchased had there been no error, PFL will either repurchase the Note, indemnify the investor against losses suffered on that Note or cure such error. See “Risk Factors—Risks Related to PFL and PMI, Our Marketplace and Our Ability to Service the Notes” for more information.
Some borrowers may use our marketplace to defraud investors, which could adversely affect investors’ ability to recoup their investment.
We use identity and fraud checks with external databases to authenticate each borrower’s identity. There is a risk, however, that these checks could fail and fraud may occur. In addition, applicants may misrepresent their intentions regarding loan purpose or other information contained in listings, and we do not verify the majority of this information. While PFL will indemnify an investor or repurchase Notes in limited circumstances (including, e.g., a material payment default on the Borrower Loan resulting from verifiable identity theft), it is not obligated to indemnify an investor or repurchase a Note from an investor if the investment is not realized in whole or in part due to fraud (other than verifiable identity theft) in connection with a loan listing, or due to false or inaccurate statements or omissions of fact in a listing, whether in credit data, a borrower’s
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representations, similar indicators of borrower intent and ability to repay the Borrower Loan. If PFL repurchases a Note, the repurchase price will be equal to the Note's outstanding principal balance and will not include accrued interest. If PFL repurchases any Notes, PMI will concurrently repurchase the related PMI Management Rights for zero consideration.
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The fact that we have the exclusive right and ability to investigate claims of identity theft in the origination of Borrower Loans creates a significant conflict of interest between us and our investors.
We have the exclusive right to investigate claims of identity theft and determine, in our sole discretion, whether verifiable identity theft has occurred. Such a determination of verifiable identity theft may trigger an obligation by PFL to either repurchase the related Notes or Borrower Loans or indemnify the applicable Note holders. The denial of a claim under PFL’s identity theft guarantee would save PFL from its indemnification or repurchase obligation. Because investors rely solely on us to investigate incidents that might require PFL to indemnify the applicable Note holders or repurchase the related Notes or Borrower Loans, a conflict of interest exists between us and such investors.
If payments on the Borrower Loan corresponding to an investor’s Note become more than 30 days overdue, such investor will be unlikely tomay not receive the full principal and interest payments that were expected on the Note, and such investor may not recover the original purchase price on the Note.
We may refer Borrower Loans that become past due to a third party collection agency for collection or we may collect on such Borrower Loans directly. If a borrower fails to make a required payment on a Borrower Loan, within 30 days of the due date, we will pursue reasonable collection efforts in respect of the Borrower Loan. Referral of a delinquent Borrower Loan to a collection agency within five business days after it becomes 30 days past due will be considered reasonable collection efforts. If payment amounts on a delinquent Borrower Loan are received from a borrower after the loan has been referred to our in-house collections department or an outside collection agency, we or that collection agency may retain a percentage of that payment as a fee before any principal or interest becomes payable to an investor. Collection fees may be up to 40% of recovered amounts, in addition to any legal fees and transaction fees associated with accepting payments incurred in the collection effort.
For some non-performing Borrower Loans, we may not be able to recover any of the unpaid loan balance and, as a result, an investor who has purchased a corresponding Note may receive little, if any, of the unpaid principal and interest payable under the Note. In all cases, investors must rely on our collection efforts or the applicable collection agency to which such Borrower Loans are referred, and are not permitted to collect or attempt collection of payments on the Borrower Loans in any manner.
Loss rates on the Borrower Loans may increase as a result of economic conditions beyond our control and beyond the control of the borrower, such as the COVID-19 pandemic.borrower.
Borrower Loan loss rates may be significantly affected by economic downturns or general economic conditions beyond our control and beyond the control of individual borrowers. In particular, loss rates on Borrower Loans may increase due to factors such as prevailing interest rates, the rate of unemployment, the level of consumer confidence, residential real estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets, natural disasters, the impact of the COVID-19 pandemic,pandemics, and other factors.
The Borrower Loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the Borrower Loan, which may reduce the likelihood that an investor will receive the full principal and interest payments that such investor expects to receive on a Note.
If a borrower incurs additional debt after the date a loan listing is posted, the additional debt may impair the ability of that borrower to make payments on his or hertheir Borrower Loan and, as such, reduce the likelihood that an investor will receive the principal and interest payments that such investor expects to receive on a corresponding Note. Moreover, the additional debt may adversely affect the borrower’s creditworthiness generally, and could result in the financial distress, insolvency, or bankruptcy of the borrower. To the extent that the borrower has or incurs other indebtedness and cannot pay all of his or hertheir indebtedness, the borrower may choose to make payments to other creditors, rather than to PFL.
To the extent borrowers incur other indebtedness that is secured, such as a mortgage, a home equity line or an auto loan, the ability of the secured creditors to exercise remedies against the assets of the borrower may impair the borrower’s ability to repay the Borrower Loan on which an investor’s Note is dependent for payment. Borrowers may also choose to repay obligations under secured indebtedness or other unsecured indebtedness before repaying Borrower Loans because there is no collateral securing the Borrower Loans. An investor will not be notified if a borrower incurs additional debt after the date a loan listing is posted.
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Borrowers may be more likely to incur additional unsecured or secured debt in an effort to mitigate economic disruption, which may further reduce their likelihood of repaying Borrower Loans.
The economic disruption caused by inflation, issues in the supply chain of goods, and changes in the labor market due to the global spread of COVID-19 have affected both consumers and small businesses, self-employed individuals and independent contractors whose livelihoods depend on providing in-person goods and services.
In response to the global spread of COVID-19, in March 2020 Congress enacted and the president signed into law the Coronavirus Preparedness and Response Supplemental Appropriations Act and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The relief measures provided by these laws include expanding eligibility criteria for Small Business Administration loan programs. To the extent the COVID-19 pandemic and legislation passed in response to the pandemic result in borrowers incurring additional debt above and beyond ordinary levels, borrowers’ overall ability to repay Borrower Loans may be further impaired.
Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.
The investment return on the Notes depends on borrowers fulfilling their payment obligations in a timely and complete manner under the corresponding Borrower Loan. Borrowers may not view marketplace lending obligations originated through our marketplace as having the same significance as other credit obligations arising under more traditional circumstances. If a borrower neglects his or hertheir payment obligations on a Borrower Loan upon which payment of an investor’s Note is dependent or
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chooses not to repay his or hertheir Borrower Loan entirely, such investor may not be able to recover any portion of the investment in a Note.
Our marketplace may fail to comply with applicable law,laws, which could limit our ability to collect on Borrower Loans.
The Borrower Loans are subject to federal and state consumer protection, licensing, and privacy laws. Our marketplace may not always be, and may not always have been, in compliance with these laws. Failure to comply with the laws and regulatory requirements applicable to our marketplace may, among other things, limit our or a collection agency's ability to collect all or part of the principal of or interest on Borrower Loans.
We regularly review the requirements of these laws and take measures aimed at ensuring that the Borrower Loans originated through our marketplace meet the requirements of all applicable laws. However, determining compliance with all applicable laws is a complex matter and it is possible that our determination may be inaccurate or incorrect. Also, changes in law, either due to court decisions, regulatory interpretations or rulings, or new legislation, may adversely affect the collectability of a Borrower Loan.
In general, the Borrower Loans do not contain any cross-default or similar provisions. If a borrower defaults on any of his or hertheir other debt obligations, our ability to collect on the Borrower Loan on which an investor’s Note is dependent for payment may be substantially impaired.
The Borrower Loans do not contain cross-default provisions. A cross-default provision makes a default under certain debt of a borrower an automatic default on other debt of that borrower. Because the Borrower Loans do not contain cross-default provisions, a Borrower Loan will not be placed automatically in default upon that borrower’s default on any of the borrower’s other debt obligations. If a borrower defaults on debt obligations owed to a third party and continues to satisfy the payment obligations under the Borrower Loan, the third party may seize the borrower’s assets or pursue other legal action against the borrower before the borrower defaults on the Borrower Loan, which may affect our ability to collect from the borrower when or if the Borrower Loan becomes delinquent.
Borrowers may seek the protection of debtor relief under federal bankruptcy or state insolvency laws, which may result in the nonpayment of an investor’s Notes.
Borrowers may seek protection under federal bankruptcy law or similar laws. If a borrower files for bankruptcy (or becomes the subject of an involuntary petition), a stay will go into effect that will automatically put any pending collection actions on the Borrower Loan on hold and prevent further collection action absent bankruptcy court approval. If we receive notice that a borrower has filed for protection under the federal bankruptcy laws, or has become the subject of an involuntary bankruptcy petition, we will put the borrower’s account into “bankruptcy status.” When this occurs, we terminate automatic monthly ACH debits on the Borrower Loan and we will not undertake collection activity without bankruptcy court approval. Whether any payment will ultimately be made or received on a Borrower Loan after a bankruptcy status is declared depends on the borrower’s particular financial situation. In most cases, however, unsecured creditors such as PFL receive nothing, or only a fraction of their outstanding debt and, as a result, an investor who has purchased a corresponding Note may receive none or very little of the unpaid principal and interest payable on the Note.
Federal law entitles borrowers who enter active military service to an interest rate cap and certain other rights that may inhibit the ability to collect on Borrower Loans and reduce the amount of interest paid on the corresponding Notes.
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Federal law provides borrowers on active military service with rights that may delay or impair our ability to collect on a Borrower Loan corresponding to an investor’s Note. The Servicemembers Civil Relief Act (“SCRA”) and other similar state laws require that the interest rate on preexisting debts, such as Borrower Loans, be set at no more than 6% while the qualified service member or reservist is on active duty. A holder of a Note that is dependent on such a Borrower Loan for payment will not receive the difference between 6% and the original stated interest rate for the Borrower Loan during any such period. The SCRA also permits courts to stay proceedings and the execution of judgments against service members and reservists on active duty, which may delay recovery on any Borrower Loans in default, and, accordingly, payments on the corresponding Notes.
Beginning October 3, 2016, the Military Lending Act (“MLA”) prohibits requiring covered borrowers, which include active military servicemembers and their dependents, to waive the right to legal recourse or to submit to arbitration. This may delay recovery on any relevant Borrower Loans in default, and, accordingly, payments on the corresponding Notes.
If there are any amounts under such a Borrower Loan still due and owing to PFL after the final maturity of the corresponding Notes, PFL will have no further obligation to make payments on such Notes, even if it receives payments on the Borrower Loan after the final maturity of such Notes. We do not take military service into account in assigning a Prosper Rating to loan listings. In addition, as part of the borrower registration process, we do not request borrowers to confirm if they are qualified service members or reservists within the meaning of the SCRA or the MLA. See Item 1, “Business—Government Regulation” for more information.
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As of December 31, 2021, 762023, 162 Borrower Loans, with a total outstanding balance of $0.6$1.3 million are subject to the SCRA.
The Federal Trade Commission's Holder in Due Course Rule may substantially impair an investor’s ability to recoup the full purchase price of a Note or to receive the interest payments that such investor expects to receive on the Note.
The Federal Trade Commission's Holder in Due Course Rule, which in certain circumstances permits borrowers to assert any claims and defenses that they would have had against a seller of goods or services obtained with the proceeds of a loan against an originator or subsequent purchaser of the loan, could allow certain borrowers to raise such defenses against PFL to the extent of the outstanding loan balance. If such defenses are successfully raised, PFL will be unable to collect on the loan and it is unlikely that any further payment will be made on the corresponding Notes.
The death of a borrower may substantially impair an investor’s ability to recoup the full purchase price of a Note or to receive the interest payments that such investor expects to receive on the Note.
If a borrower dies with an outstanding Borrower Loan, PFL is required, upon receiving notice of the death, to stop accepting automatic loan payments and to refund any payments that were automatically debited after the borrower's date of death. Though we may seek to work with the executor of the borrower’s estate to obtain repayment of the loan, the borrower’s estate may not contain sufficient assets to repay the loan, or its executor may prioritize repayment of other creditors. In addition, if a borrower dies near the end of the term of his or hertheir Borrower Loan, the time required for the probate of the borrower’s estate will likely extend beyond the Notes’ final maturity date, after which date PFL will cease to have any obligation to make payments on the Notes.
RISKS INHERENT IN INVESTING IN THE NOTES
The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.
The Notes will not represent an obligation of borrowers, PMI or any other party except PFL, and are special, limited obligations of PFL. The Notes are not guaranteed or insured by PMI, any governmental agency or instrumentality, or any third party. Although PFL has granted the indenture trustee, for the benefit of the Note holders, a security interest in the Borrower Loans corresponding to the Notes, the payments and proceeds that PFL receives on such Borrower Loans, the bank account in which such Borrower Loan payments are deposited, and the accounts in which investors’ funding amounts are deposited, the Note holders do not themselves have a direct security interest in the Borrower Loans or the right to payment thereunder. If an event of default under the Amended and Restated Indenture were to occur, the Note holders would be dependent on the indenture trustee’s ability to realize on the collateral and make payments on the Notes in the manner contemplated by the Amended and Restated Indenture. In addition, although PFL will take all actions that it believes are required under applicable law to perfect the security interest of the indenture trustee in the collateral, if its analysis of the required actions is incorrect or if it fails to take any required action in a timely manner, the indenture trustee’s security interest may not be effective and holders of the Notes could be required to share the collateral (and any proceeds thereof) with PFL’s other creditors, or, if a bankruptcy court were to order the substantive consolidation of PMI and PFL (as described below), PMI’s creditors.
PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.
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PFL is only obligated to repurchase Notes or indemnify holders of Notes in limited circumstances. These circumstances include if (i) a material payment default under the corresponding Borrower Loan occurs as a result of verifiable identify theft; (ii) we include a Prosper Rating in a listing that is different from the Prosper Rating we calculated, or we calculate the Prosper Rating incorrectly; or (iii) any errors in Quick Invest, Recurring Investment, or Auto Invest cause an investor to purchase a Note from PFL that such investor would not otherwise have purchased or that differs materially from the Note, in which cases PFL also has the option to cure such error. PFL is not required to repurchase Notes or indemnify holders of Notes, however, if the Note holder’s investment is not realized in whole or in part due to fraud other than verified identity theft, or due to other false or inaccurate statements or omissions of fact in a listing, whether in credit data, borrower representations or similar indicia of borrower intent and ability to repay the loan. Further, PFL is under no obligation to repurchase a Note or indemnify any holder of Notes if a correctly determined Prosper Rating fails to accurately predict the actual losses on a Borrower Loan.
PFL might incur indemnification and repurchase obligations that exceed its projections, in which case it may not have sufficient liquidity to meet its indemnification and repurchase obligations.
PFL believes its liquidity will be sufficient to meet its reasonably anticipated indemnification and repurchase obligations. In determining its expected liquidity needs with respect to indemnification and repurchase obligations, PFL considers the history of such obligations incurred by it and PMI. Nonetheless, there can be no assurance that if PFL is obligated to repurchase a Note or indemnify a Note holder, that it will be able to meet its repurchase or indemnification obligations. If PFL is unable to meet its indemnification and repurchase obligations with respect to a Note, the investor in such Note may lose
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all of such investor’s investment in the Note. For more information about Prosper’s existing repurchase and indemnification obligations, please see “Repurchase Obligations” in Note 17 of the accompanying consolidated financial statements.
Our marketplace allows a borrower to prepay a Borrower Loan at any time without penalty. Borrower Loan prepayments will extinguish or limit an investor’s ability to receive additional interest payments on a Note.
Borrower Loan prepayment occurs when a borrower decides to pay some or all of the principal amount on a Borrower Loan earlier than originally scheduled. Borrowers may decide to prepay all or a portion of the remaining principal amount due under a Borrower Loan at any time without penalty. In the event of a prepayment of the entire remaining unpaid principal amount of a Borrower Loan, each of the holders of the Notes corresponding to the Borrower Loan will receive his or hertheir share of such prepayment but further interest will not accrue on such Borrower Loan or on such Note after the date on which the payment is made. If the borrower prepays a portion of the remaining unpaid principal balance, the term of the Borrower Loan will not change, but interest will cease to accrue on the prepaid portion. If a borrower prepays a Borrower Loan in whole or in part, an investor will not receive all of the interest payments that such investor originally expected to receive on the Note corresponding to such Borrower Loan. In addition, such investor may not be able to find a similar rate of return on another investment at the time at which the Borrower Loan is prepaid. Prepayments are subject to PFL’s servicing fee, even if the prepayment occurs immediately after issuance of a Note.
Prevailing interest rates may change during the term of the Notes. If this occurs, investors may receive less value from the purchase of Notes in comparison to other ways they may invest their money. Additionally, borrowers may prepay their Borrower Loans due to changes in interest rates, and investors may not be able to redeploy the amounts received from prepayments in a way that offers the return expected from the Notes.
The Borrower Loans on which the Notes are dependent for payment bear fixed, not floating, rates of interest. If prevailing interest rates increase, the interest rates on Notes investors purchase might be less than the rate of return they could earn if they had invested the purchase price in a different investment.
We may not set appropriate interest rates for Borrower Loans.
We set interest rates for all Borrower Loans based on Prosper Ratings, as well as additional factors such as Borrower Loan terms, the economic environment and competitive conditions. If we set interest rates for Borrower Loans too low, investors may not be compensated appropriately for the level of risk that they are assuming in purchasing Notes, while setting the interest rate too high may increase the risk of non-payment. In either case, a failure by us to set rates appropriately may adversely impact the ability of investors to receive returns on their Notes that are commensurate with the risks they have assumed in acquiring such Notes.
The Notes will not be listed on any securities exchange and can be held only by registered Prosper investors. Further, no trading platform for the transfer of Notes exists and there can be no assurance a trading platform for the transfer of Notes will develop in the future. Therefore, investors should be prepared to hold the Notes they purchase until maturity.
The Notes and PMI Management Rights will not be listed on any securities exchange and all Notes and PMI Management Rights must be held by registered Prosper investors. Further, in connection with the termination of our relationship with FOLIO Investments, Inc. in October 2016, a trading platform for the transfer of Notes and PMI Management Rights no longer exists. While we may, in our sole discretion, permit the establishment of another platform on which a secondary market may be made with respect to the Notes, there can be no assurance a trading platform for the Notes and PMI
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Management Rights will develop in the future. Therefore, Note purchasers must be prepared to hold their Notes and PMI Management Rights to maturity.
The U.S. federal income tax consequences of an investment in the Notes are uncertain.
There are no statutory provisions, regulations, published rulings or judicial decisions that directly address the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes. However, although the matter is not free from doubt because payments on the Notes are dependent on payments on the corresponding Borrower Loan, PFL treats the Notes as debt instruments that have original issue discount (“OID”) for U.S. federal income tax purposes. Where required, PFL intends to file informational returns with the IRS in accordance with such treatment unless there is a change or clarification in the law, by regulation or otherwise, that would require a different characterization of the Notes. Investors should be aware, however, that the IRS is not bound by PFL’s characterization of the Notes and the IRS or a court may take a different position with respect to the Notes’ proper characterization. For example, the IRS could determine that, in substance, each investor owns a proportionate interest in the corresponding Borrower Loan for U.S. federal income tax purposes or, for example, the IRS could instead treat the Notes as a different financial instrument (including an equity interest or a derivative financial instrument). Any different characterization could significantly affect the amount, timing, and character of income, gain or loss recognized in respect of a Note. For example, if the Notes are treated as PFL’s equity, (i) PFL would be subject to U.S. federal income tax on income, including interest, accrued on the corresponding Borrower Loans but would not be entitled to deduct interest or OID on the Notes, and (ii) payments on the Notes would be treated by the Note holder for U.S. federal
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income tax purposes as dividends (that may be ineligible for reduced rates of U.S. federal income taxation or the dividends-received deduction) to the extent of PFL’s earnings and profits as computed for U.S. federal income tax purposes. A different characterization may significantly reduce the amount available to pay interest on the Notes. Investors are strongly advised to consult their own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the Notes (including any possible differing treatments of the Notes).
PFL’s ability to pay principal and interest on a Note may be affected by its ability to match the timing of its income and deductions for U.S. federal income tax purposes.
Investors should be aware that PFL’s ability to pay principal and interest on a Note may be affected by its ability, for U.S. federal income tax purposes, to match the timing of income it receives from a corresponding Borrower Loan that it holds and the timing of deductions that it may be entitled to in respect of payments made on the Notes that it issues. For example, if the Notes are treated as contingent payment debt instruments for U.S. federal income tax purposes but the corresponding Borrower Loans are not, there could be a potential mismatch in the timing of PFL’s income and deductions for U.S. federal income tax purposes, and PFL’s resulting tax liabilities could affect its ability to make payments on the Notes.
Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.
As is the practice with other marketplace lending companies, from time to time, we may fund portions of qualified loan requests in our marketplace and hold any Notes purchased as a result of such funding for our own individual accounts. Even though we will participate in funding Borrower Loans listed in our marketplace under the same terms and conditions and through the use of the same information that is made available to other potential investors in our marketplace, such participation may be perceived as involving a conflict of interest. For example, our funding of a Borrower Loan may cause the loan to fund, and in some cases, fund faster, than it would fund in the absence of our participation, which could benefit us to the extent that it ensures that we generate the revenue associated with the loan.
During the year ended December 31, 2021,2023, we purchased $0.1$0.3 million in Notes for investment.
We may choose or be required to implement payment and collections relief programs in response to the COVID-19 pandemic and other public health emergencies or crises, which may extend or otherwise alter the repayment schedule of Borrower Loans and reduce the expected return on the corresponding Notes.
The global spread of COVID-19 has caused significant market volatility and workforce disruptions. We recognize the serious economic hardship triggered by COVID-19, and are offering assistance to qualified borrowers who are facing financial hardship as a result of the COVID-19 pandemic. These relief options include, among other things, the ability to delay up to 4 monthly loan payments, the ability to reduce minimum monthly payments for up to 12 months total and extend the term of the loan by up to 11 months, and waived late and non-sufficient funds fees. We are also complying with new state mandates that may temporarily impact collections activity with respect to delinquent loans.
Our COVID-19 payment relief programs may impact the repayment schedule and terms of Borrower Loans and the returns received on corresponding Notes. Since COVID-19 relief was first offered in March 2020 and through December 31, 2021, approximately 9.1% of our current outstanding loan balances on a cumulative basis have enrolled in at least one of these COVID-19 relief programs. Approximately 1.2% of our outstanding loan balances are actively enrolled in at least one relief program as of December 31, 2021. Overall requests for COVID-19 relief are declining; however, enrollment and subsequent loan performance may fluctuate as long as the pandemic continues to trigger increased work stoppages and unemployment.
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Likewise, to the extent we are required to comply with state mandates to pause collections activity on delinquent loans, investors will not receive recoveries on any Notes corresponding to Borrower Loans that cannot be collected upon while such mandates are in effect. We continue to actively monitor the impact of COVID-19 on economic conditions.   
RISKS RELATED TO PFL AND PMI, OUR MARKETPLACE AND OUR ABILITY TO SERVICE THE NOTES
Human error in the operation of our platform has resulted in the allocation of Borrower Loans to our Note Channel which did not conform to the eligibility criteria applicable to Borrower Loans at the time of allocation. If we are unable to prevent the reoccurrence of similar errors, our business and investors could be adversely impacted.
In August 2022, we became aware of an error which resulted in the allocation of certain Borrower Loans intended for our Whole Loan Channel to our Note Channel. These Borrower Loans corresponded to Borrower Loan listings with attributes which, at the time of allocation, did not conform to the eligibility criteria applicable to Borrower Loans offered for investment in our Note Channel. The error impacted a total of approximately $14 million out of the approximately $182 million of Borrower Loans allocated to the Note Channel from January 2022 to August 2022. The error did not affect any other parts of Note investors’ accounts or the platform, including the receipt and distribution of loan payments, the Note and loan level information provided to investors, or the enforceability of the Borrower Loans. Following discovery of the error, we repurchased the impacted Notes from investors for the full outstanding principal balance, allowing such investors to retain all interest, principal and other payments received on such Notes prior to their repurchase, and have implemented new measures designed to avoid similar issues in the future.

This error illustrates the risks of human error on our processes to allocate loan listings to the Note Channel. If similar errors were to occur in the future, it could result in repurchase or indemnification obligations, negative publicity and unfavorable media coverage, harm to our reputation, litigation, regulatory inquiries or proceedings, loss of or damage to our relationships with borrowers or investors, loss of income and/or liability for damages, any of which could adversely affect our business and financial results.

We have experienced errors on our platform that have resulted in incorrect reporting of performance returns to Note investors. If we are unable to prevent the reoccurrence of similar errors, investors could be adversely impacted.
In April 2017, we became aware of an error in the annualized net return and seasoned annualized net return numbers displayed to Note investors, which resulted from errors in the code forming part of our calculation framework. On average, the error resulted in Note investors being shown annualized net return information that was approximately 260 basis points higher than the actual performance of Notes in their accounts. The error did not affect any other part of Note investors’ accounts, nor did it affect any other aspects of the platform, including the receipt and distribution of loan payments, deposits, monthly statements or tax documentation, or the Note and loan level information provided to investors. Following an SEC investigation, we entered into a settlement with the SEC to resolve the matter on April 19, 2019. Under the settlement, the SEC alleged a negligence-based violation of Section 17(a)(2) of the Securities Act and ordered PFL to cease and desist from any future
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violations of that provision. PFL neither admitted nor denied any wrongdoing, and agreed to pay a civil monetary penalty of $3.0 million. PFL paid the penalty in full on April 24, 2019.
The error reveals a risk associated with the complex programs, algorithms and inputs that support our platform. We depend on these programs, algorithms and inputs to store, retrieve, process and manage data, as well as to provide marketplace features such as our credit assessments and underwriting, the Prosper Rating, historical returns, and individual Note, Note portfolio and platform-wide performance data. Errors or other design defects within these programs, algorithms and inputs may result in a negative experience for borrowers and investors, delay introductions of new features or enhancements, or impact the information displayed on our website. They could also result in negative publicity and unfavorable media coverage, harm to our reputation, litigation, regulatory inquiries or proceedings, loss of or damage to our relationships with borrowers or investors, or loss of revenue or liability for damages, any of which could adversely affect our business and financial results.
Arrangements for back-up servicing are limited. If PMI fails to maintain operations or the Administration Agreement is rejected or terminated (in bankruptcy or otherwise), investors may experience a delay and increased cost in respect of their expected principal and interest payments on Notes, and PFL may be unable to collect and process repayments from borrowers.
If the Administration Agreement (or the loan servicing provisions thereof) are terminated for any reason (whether as a result of PMI’s bankruptcy, non-performance or otherwise), PFL would attempt to transfer the loan servicing obligations on the Borrower Loans and Notes to a third party pursuant to its contractual agreements with investors.
PFL has entered into a back-up servicing agreement with a loan servicing company that is willing and able to transition servicing responsibilities from PMI. There can be no assurance, however, that this back-up servicer will be able to adequately perform the servicing of the outstanding Borrower Loans and Notes. If this back-up servicer assumes the servicing of the Borrower Loans and Notes, the back-up servicer may impose additional servicing fees (up to the maximums we have negotiated), reducing the amounts available for payments on the Notes. Additionally, transferring these servicing obligations to the back-up servicer may result in delays in the processing of collections on Borrower Loans and information with respect to amounts owed on Borrower Loans. If the back-up servicer is not able to service the Borrower Loans and Notes effectively, investors’ ability to receive principal and interest payments on their Notes may be substantially impaired, even if their portfolio of Notes is well diversified and the corresponding Borrower Loans are paying on schedule.
In addition, it is unlikely that the back-up servicer would be able to perform functions other than servicing the outstanding Borrower Loans and Notes, such as facilitating the creation of new Borrower Loans through our marketplace, or managing PFL’s marketing efforts. PFL believes that it could find one or more other parties who could perform these and any other functions necessary to fully operate our marketplace in the absence of PMI. However, this process, and any related onboarding of such party or parties, will take time. Any such delay or impairment that does not affect existing Note holders, because PFL or its back-up servicer proves able to continue servicing outstanding Borrower Loans and Notes, could nonetheless delay PFL’s ability to facilitate the origination of new Borrower Loans and issue new Notes through our marketplace, which could adversely affect PFL’s finances and customer relationships.
A decline in economic conditions may adversely affect our customers, which may negatively impact our business and results of operations.
As a lending marketplace, we believe our customers are highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers’ ability or desire to
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participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations. For more information about risks related to the COVID-19 pandemic, see “—Public health emergencies and other events beyond our control may damage our ability to continue operations without disruptions, including our ability to attract new borrowers and investors, retain existing investors, as well as the ability of existing borrowers to repay their loans. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.”
A relatively small number of investors provide the funding for a large percentage of all Borrower Loans originated through our marketplace.
A relatively small number of investors provide the funding for a large percentage of all Borrower Loans originated through our marketplace. If these investors cease or significantly decrease their investment in Borrower Loans through our personal loan marketplace and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, then our business and results of operations may be adversely affected.
Our business could be adversely affected by a weakening market for securities backed by consumer assets.
PFL is involved in the securitization market through: (i) its business of selling loans to investors who, in turn, sell asset backed securities based on accumulated loan portfolios and (ii) securitization of loans retained by affiliates of PFL. If the market for asset backed securities based on consumer assets weakens, investors may cease or significantly decrease their funding of Borrower Loans through our marketplace and if PFL has been unable to attract sufficient investor purchase commitments from new and existing investors, then our business and results of operations may be adversely affected.
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Although PFL has been organized in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy proceeding, if this were to occur, the rights of holders of the Notes could be uncertain, and payments on the Notes may be limited, suspended or stopped. The recovery, if any, of a holder on a Note may therefore be substantially delayed and substantially less than the principal and interest due and to become due on the Note.
Although PFL has been organized and is operated in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy or similar proceeding, if this were to occur, the recovery, if any, of a holder of a Note may be substantially delayed in time (for example, due to the imposition of a stay on payments by the bankruptcy court) and may be substantially less in amount than the principal and interest due and to become due on the Note even if a Note holder’s portfolio of Notes is well diversified and the Borrower Loans are paying on schedule. Further, although PFL has granted the indenture trustee, for the benefit of the Note holders, a security interest in all of the Borrower Loans, in all payments and proceeds it receives on the corresponding Borrower Loans and in the bank account in which the Borrower Loan payments are deposited, the holders of the Notes would still be subject to risks associated with PFL’s insolvency, bankruptcy or a similar proceeding.
If PFL becomes subject to a bankruptcy or similar proceeding, borrowers may delay payments or cease making payments at all.
Borrowers may delay or suspend making payments to PFL because of the uncertainties associated with PFL becoming subject to a bankruptcy or similar proceeding, even if the borrowers have no legal right to do so, and such delay would reduce, at least for a time, the funds that might otherwise be available to pay the Notes corresponding to those Borrower Loans. In addition, the commencement of the bankruptcy or similar proceeding may, as a matter of law, prevent PFL from making regular payments on the Notes, even if the funds to make such payments are available. Because the Indenture trustee would be required to enforce its security interest in the Borrower Loans in a bankruptcy or similar proceeding, the Indenture trustee's ability to make payments under the Notes would be delayed, which may effectively reduce the value of any recovery that a holder of a Note may receive (and no such recovery can be assured) by the time any recovery is available.
If PFL becomes subject to a bankruptcy or similar proceeding, interest accruing on the Notes upon and following such bankruptcy or similar proceeding may not be paid.
In a bankruptcy or similar proceeding of PFL, interest accruing on the Notes during the proceeding may not be part of the allowed claim of a holder of a Note. If the Note holder receives a recovery on the Note (and no such recovery can be assured), any such recovery may be based on, and limited to, the Note holder’s claim for principal and for interest accrued up to the date of the bankruptcy or similar proceeding, but not thereafter. Because a bankruptcy or similar proceeding may take months or years to complete, a claim based on principal and on interest only up to the start of the bankruptcy or similar
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proceeding may be substantially less than a claim based on principal and on interest through the end of the bankruptcy or similar proceeding.
If PFL becomes subject to a bankruptcy or similar proceeding, a Note holder may not have any priority right to payment from the corresponding Borrower Loan, may not have any right to payment from funds in the applicable servicing account, and may not have any ability to access funds in the applicable funding accounts (the “FBO Funding accounts”).
In a bankruptcy or similar proceeding, if PFL has failed to perfect the security interest in Borrower Loans, investors may be required to share the proceeds of the Borrower Loans upon which their Notes are dependent for payment with PFL’s other creditors, including holders of other Notes or Borrower Loans. To the extent that proceeds of the Borrower Loans would be shared with PFL’s other creditors, any secured or priority rights of such other creditors may cause the proceeds to be distributed to such other creditors before any distribution is made to investors on the corresponding Notes.
If a payment is made on a Borrower Loan corresponding to a Note before PFL’s bankruptcy or similar proceeding is commenced, and those funds are held in the servicing account PFL maintains with Wells Fargo to collect borrower payments and have not been used by PFL to make payments on the Note as of the date the bankruptcy or similar proceeding is commenced, there can be no assurance that PFL will or will be able to use such funds to make payments on such Note. Other creditors of PFL (including holders of other Notes or Borrower Loans) may be deemed to have rights to such funds or interests in the applicable servicing account and monies credited thereto that are equal to or greater than the rights of the holder of such Note.
Although PFL believes that amounts funded by both Whole Loan Channel and Note Channel investors into the applicable FBO Funding accounts should not be subject to claims of its creditors other than the investors for whose benefit the funds are held, the legal title to the FBO Funding accounts, and the attendant right to administer the FBO Funding accounts, would be property of PFL’s bankruptcy estate. As a result, if PFL were to file for bankruptcy protection, the legal right to administer the funds in the FBO Funding accounts would vest with the bankruptcy trustee or debtor in possession. In that case, while neither PFL nor its creditors should be able to reach those funds, the indenture trustee or the investors may have to seek a bankruptcy court order lifting the automatic stay and permitting them to withdraw their funds. Investors may suffer delays in accessing their funds in the FBO Funding accounts as a result. Moreover, United States bankruptcy courts have broad powers at
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law and in equity and, if PFL has failed to properly segregate or handle investors’ funds, a bankruptcy court could determine that some or all of such funds were beneficially owned by PFL and should therefore be made available to PFL’s creditors generally.
In a bankruptcy or similar proceeding of PFL, a holder of a Note may be delayed or prevented from enforcing PFL’s repurchase obligations with respect to such Note.
In a bankruptcy or similar proceeding of PFL, any right of a Note holder to require PFL to repurchase the Note or indemnify such Note holder under the circumstances set forth in the Investor Registration Agreement or the Note might not be enforceable, and such holder’s claim for such repurchase may be treated less favorably than a general unsecured obligation of PFL.
Although PFL has been organized in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI’s bankruptcy, if PFL were substantively consolidated in this manner, the rights of the holders of the Notes could be uncertain, and payments on the Notes may be limited, suspended or stopped. The recovery, if any, of a holder on a Note may therefore be substantially delayed and substantially less than the principal and interest due and to become due on the Note.
Although PFL has been organized and is operated in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI’s bankruptcy, if PMI became subject to a bankruptcy or similar proceeding and PFL were substantively consolidated with PMI, the risks described in the immediately preceding risk factors regarding (i) payment delays, (ii) uncollectability of interest accrued during the bankruptcy proceeding, (iii) being subordinated to the interests of PFL’s other creditors, and (iv) the indenture trustee’s inability to access funds in the deposit account or the FBO Funding accounts, would all be present and, in addition, the same considerations would apply in relation to the claims of creditors of PMI, including that such creditors of PMI may be determined to have perfected security interests or unsecured claims that take precedence over or are at least equal in priority to those of creditors of PFL (including holders of Notes).
In addition, in the event of a bankruptcy or similar proceeding of PMI, (i) the implementation of back-up servicing arrangements may be delayed or prevented, and (ii) PMI’s ability to transfer its servicing obligations to a back-up servicer or its other corporate and marketplace administration services and marketing services to third parties may be limited and subject to the approval of the bankruptcy court or other presiding authority. The bankruptcy process may delay or prevent the implementation of back-up servicing, which may impair the collection on Borrower Loans to the detriment of Note holders.
PMI owns and did not transfer to PFL ownership of the computer hardware that it uses to host and maintain the website or agreements with third parties relating to the hosting and maintenance of the website. Although PMI’s retention of
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such hardware and agreements should not bear on a bankruptcy court’s analysis of the legal separateness of PMI and PFL (or their respective assets and liabilities), the cessation of or substantial reduction of the day-to-day operations of PMI (because of or during its bankruptcy or otherwise) would materially impair and delay the ability of PFL or a back-up service provider to retrieve data and information in the possession of PMI and to operate our marketplace or elements thereof relevant to Borrower Loan and Note servicing.
PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.
Pursuant to the Administration Agreement, PMI is obligated to use commercially reasonable efforts to service and collect on the Borrower Loans in accordance with industry standards. Subject to that obligation, the Administration Agreement grants PMI the authority to waive or modify any non-material term of a Borrower Loan, consent to the postponement of strict compliance with any such term, or in any manner grant a non-material indulgence to any borrower. In addition, if a Borrower Loan is in default, or PMI determines a default is reasonably foreseeable or that such action is consistent with its servicing obligation, the Administration Agreement grants PMI the authority to waive or modify a material term of a Borrower Loan, to accept payment of an amount less than the principal balance in final satisfaction of a Borrower Loan and to grant any indulgence to a borrower, provided that PMI has reasonably and prudently determined that such action will not be materially adverse to the interests of the relevant Note holders. If PMI approves a modification to the terms of any Borrower Loan it must promptly notify the corresponding Note holders in each Note holder's account.
There can be no assurance that PMI, in its capacity as servicer, will be able to collect the principal amount or interest rate agreed to and/or sell charged off Borrower Loans in the future as a result of business, regulatory or other considerations.
We have incurred operating losses in prior years and may continue to incur net losses in the future.
We have incurred operating losses in prior years, including 2023, and may continue to incur net losses in the future. For the years ended December 31, 2021 and 2020, we incurred a loss of $138.3 million and generated income of $18.6 million, respectively. Additionally, from our inception through December 31, 2021, we have had an accumulated deficit of $554.3 million.
We have financed our operations to date primarily with proceeds from the sale of equity securities. At December 31, 2021,In addition, we had approximately $67.7borrowed $75.0 million unrestricted cash and cash equivalents.under the Term Loan in November 2022. PMI is dependent upon raising additional capital or debt financing to fund its current operating plan if it cannot generate sufficient positive cash flow from operations. PMI’s failure to achieve
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positive cash flow from operations or obtain sufficient debt and equity financing, could adversely affect its ability to perform its obligations under the Administration Agreement and, in suchsuch event, PFL’s ability to continue to make payments on the Notes could be materially impaired.
The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.
In November 2022, we entered into the Term Loan, which provides for $75.0 million in debt financing that matures in November 2026.
Our ability to make payments on the Term Loan, to repay the Term Loan when due, and to fund our business, operations and significant planned capital expenditures will depend on our ability to pay with available cash or generate cash in the future. The Term Loan, and any additional indebtedness we may incur in the future, could require us to divert funds identified for other purposes to service the Term Loan. If we cannot generate sufficient cash flow from our operations to service the Term Loan, we may need to refinance the Term Loan, dispose of assets, or issue additional equity to obtain the necessary funds. If required to do so, we may be unable to take any of these actions on a timely basis, on terms satisfactory to us or at all.
In addition, the Term Loan contains certain financial covenants, including a minimum tangible net worth covenant, minimum net liquidity covenant, maximum leverage ratio, and minimum asset coverage ratio, together with other customary affirmative and negative covenants and events of default. The obligations under the Term Loan are also secured by assets of PMI and certain of its subsidiaries. Compliance with these covenants may require us to divert funds intended for other uses and limit our flexibility to take certain actions.
See Note 11 of the accompanying consolidated financial statements for more information about the Term Loan.
Although our business has grown, we may be unable to manage our growth effectively and meet the demands that such growth places on our facilities, employees and infrastructure.  
As the number of borrowers, investors and Borrower Loans originated through our marketplace increases, PMI will need to increase its facilities, personnel and infrastructure in order to continue performing effectively its obligations under the Administration Agreement and to accommodate the effects that such growth will have on our servicing and marketplace needs. PMI must constantly add new hardware and update its software and our personal loan marketplace, expand customer support services, and add new employees to maintain the operations of our personal loan marketplace as well as to satisfy its servicing obligations on the Borrower Loans and the Notes and its other obligations under the Administration Agreement. If PMI is unable to increase the capacity of our marketplace and maintain the necessary infrastructure to perform its duties under the Administration Agreement, PFL, or one or more other third-party service providers engaged by PFL, will have to perform the duties otherwise performed by PMI, and investors may experience delays in receipt of payments on their Notes and periodic downtime of our marketplace.
The Credit Card and HELOC productsHome Equity Products are new products within a competitive market which are complex and require us to allocate significant resources to the development, launch and growth of these new products. If these new products are unable to attract borrowers and generate revenue, our business and results of operations could suffer.
The HELOC product was launched in March 2019, and ourthe Credit Card product was launched in December 2021.2021, and the HELoan product was launched in October 2022. The launch of these new and complex products requires us to allocate significant resources in hiring new employees to support each product, ensuring each product complies with newapplicable laws and regulations, and integrating the products into our online platform. See Item 1, “Business—Government Regulation” for more information about the laws and regulations which affect the Credit Card and HELOCHome Equity Products. Our Home Equity and Credit Card products also face intense competition from other new market entrants or business expansion from established companies which may have more experience and resources operating these products. There is no guarantee that we will attract the borrowers necessary to generate sufficient revenue to recoup the investment of resources into the development, launch, and growth of these new products. The products may also divert management’s time and effort from other initiatives.
The Credit Card and Home Equity Products are not available on our personal loan marketplace for investment purposes.
Our Credit Card product has a limited performance history and, as we are responsible for verified fraud losses and most straight charegeoffs across the portfolio and for credit losses on accounts allocated to us, any failure to accurately capture credit and market risks could have a negative impact on our business, operating results and financial condition.
Our Credit Card product was launched in December 2021 and has a limited performance history. The performance of the Credit Card product is also subject tosignificantly dependent on the ability of the application process and credit risk of fraud or borrower identity theft andmodels we may experience losses on, or inability to recoup losses resulting from, fraudulentuse for the Credit Card applications or fraudulent transactions made onproduct to prevent fraud, evaluate an applicant’s credit profile and determine the likelihood of default. There is no assurance that our Credit Card application process and credit risk models can accurately verify Credit Card applicants and
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Cards. predict repayment and loss profiles. Pursuant to our program agreement with Coastal, we are responsible for verified fraud losses and most straight charge-offs across the entire Credit Card portfolio and for credit losses for approximately 90% of the Credit Card accounts. If our application process and risk models do not accurately prevent fraud or reflect credit risk on the Credit Card product, greater than expected losses may result and our business, operating results and financial condition could be materially and adversely affected.
Our Credit Card product is also currently focused on higher risk borrowers, who may have higher exposure to economic downturns and general economic conditions beyond our control and beyond the control of these borrowers. AsThe risk of exposure faced by these borrowers may be even higher amidst recent market conditions, including a result, we may experience significant delinquencyrising rate of inflation and increase in interest rates. See “A rising rate of inflation and increase in interest rates could materially and fraudadversely impact our personal loan marketplace, our Credit Card program, and credit losses. Our borrower profile andour investments in Borrower Loans” for more information about these recent entry into the credit card market could increase these risks and potential losses.conditions.
The Credit Card and HELOC productsHome Equity Products are not available on our personal loan marketplace for investment purposes.
We rely on our program agreement with Coastal to offer our Credit Card product. If our relationship with Coastal were to end, the ability to continue to offer our Credit Card product would be affected, which could affect our financial and business results.

We offer our Credit Card product to eligible consumers through a program agreement with Coastal, our bank partner for the Credit Card product. If our relationship with Coastal were to end or if Coastal were to cease operations, our ability to continue to offer our Credit Card product would be affected, which could adversely affect our financial and business results. In such an event, one or both of PMI and PFL would need to either partner with a different bank or rely on individual state lending licenses (to the extent necessary) to continue to offer the Credit Card product. Because neither of PMI or PFL currently possess all required licenses to offer the Credit Card product in every state, we might be forced to limit the rates of interest charged on the Credit Card product in some states and might not be able to offer the Credit Card in certain states altogether. If we partner with a new bank, issuance and servicing of the Credit Card product could be disrupted and delayed as we transition to a different bank partner. We also may face increased costs and compliance burdens if the program agreement with Coastal is terminated.

In addition, Prosper’s allocation of Credit Card receivables are maintained on the balance sheet of Coastal and Coastal holds a cash reserve account funded by Prosper which applies to Prosper’s allocation of Credit Card charge-off losses and all fraud losses. The Credit Card and HELOC products did not have a material impact on our revenue as of andprogram agreement contains provisions that provide for the year ended December 31, 2021transition to a new bank partner and wind down of the agreement, but if our relationship with Coastal were to end due to unforeseen circumstances or if Coastal were to cease operations, the Credit Card receivables and the cash reserve account could be affected.
.
PFL’s reliance on PMI or other third-party service providers, lack of employees, limited operating history, and capitalization levels could make it difficult to operate at a sustainable level.
PFL was formed in 2012 as a limited purpose vehicle. Under the Administration Agreement, PFL receives a license fee from PMI for granting PMI a non-exclusive, worldwide license to access and use our marketplace. In addition, PFL earns servicing fees in relation to the servicing of the Borrower Loans and Notes that it retains from collections on the Borrower Loans. PFL believes this fee income is sufficient to cover its reasonably anticipated obligations. While PFL believes that it is adequately capitalized to meet its foreseeable obligations, and that its fee income is sufficient to meet its ongoing operating costs, its financial resources are limited and could prove to be insufficient. In addition, PFL has no employees and relies on PMI, as servicer, or other third-party service providers, to perform most of its day-to-day operations. The lack of PFL’s own employees, its limited operating history, and capitalization that is less than that of PMI could make it difficult for PFL to operate at a level that will be sustainable. Absent the services to be provided to PFL by PMI pursuant to the Administration Agreement, PFL's risk management process, ability to predict loss rates and the general operation of our marketplace would have a smaller margin for error than does PMI.
The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
The consumer lending market is competitive and rapidly changing. With the introduction of new technologies and the influx of new entrants, we expect competition to persist and intensify in the future, which could harm our ability to increase volume in our marketplace.
Our principal competitors include banking institutions, credit unions, credit card issuers, mortgage lenders, consumer finance companies, and online lending platforms. Competition could result in reduced volumes, reduced fees or the failure of our marketplace to achieve or maintain more widespread market acceptance, any of which could harm our business. In addition, in the future we may experience new competition including companies possessing large, existing customer bases, substantial financial resources and established distribution channels. If any of these companies or any major financial institution decides to
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enter our online lending sector, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed.
Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their marketplaces and distribution channels. Our potential competitors may also have longer operating histories, more extensive customer bases, greater brand recognition and broader customer relationships than we have. These competitors may be better able to develop new products, to respond quickly to new technologies and to undertake more extensive marketing campaigns. Our industry is driven by constant innovation. If we are unable to compete with such companies and meet the need for innovation, the use of our marketplace could stagnate or substantially decline.
If we fail to promote and maintain our brand in a cost-effective manner, we may lose market share and our revenue may decrease.
To succeed, we must increase transaction volumes in our marketplace by attracting a large number of borrowers and investors in a cost-effective manner. If we are not able to attract qualified borrowers and sufficient investor purchase commitments, we will not be able to increase our transaction volumes. PFL believes that developing and maintaining awareness of its brand in a cost-effective manner is critical to achieving widespread acceptance of our marketplace and attracting new borrower and investors. Furthermore, we believe that the importance of brand recognition will increase as competition in our industry increases. Successful promotion of our brand will depend largely on the effectiveness of marketing efforts, and the user experience on our marketplace.marketplace and our ability to maintain and defend a differentiated brand identity. These brand promotion activities may not yield increased revenues. If we fail to successfully promote, defend, and maintain our brand, we may lose our existing users to competitors or be unable to attract new users, which would cause our revenue to decrease and may impair our ability to maintain our marketplace.
The proprietary technology that makes operation of our marketplace possible is not fully protected by patents. It may be difficult and costly for PFL to protect its intellectual property rights in relation thereto, or to continue to develop or obtain new technologies, which could adversely affect its ability to operate competitively.
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On February 1, 2013, PMI transferred ownership of the marketplace, including the proprietary technology and all of the rights related to the operation of the marketplace, to PFL. PFL’s ability to maintain our marketplace depends, in part, upon this proprietary technology. We have taken steps to protect our proprietary interests in such technology, including through patent filings, and intend to continue to vigorously protect these interests. Despite our best efforts, however, we may not protect the proprietary technology effectively, which would allow competitors to duplicate our products and adversely affect our ability to compete. A third party may attempt to reverse engineer or otherwise obtain and use the proprietary technology without PFL’s consent. In addition, our marketplace may infringe upon claims of third-party patents and PFL or PMI may face intellectual property challenges from such other parties. PFL or PMI may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any intellectual property disputes. Furthermore, the technology may become obsolete, and there is no guarantee that PFL will be able to successfully develop, obtain or use new technologies to adapt our marketplace to compete with other companies. If PFL cannot protect the proprietary technology embodied in and used by our marketplace from intellectual property challenges, or if our marketplace becomes obsolete, PFL’s ability to maintain our marketplace and perform its servicing obligations could be adversely affected and, in such event, its ability to continue to make payments on the Notes could be materially impaired.
PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.
Because PFL is not a bank, it cannot belong to or directly access the Automated Clearing House (ACH) payment network. As a result, it currently relies on an FDIC-insured depository institution to process its transactions. If PFL cannot continue to obtain such services from this institution or elsewhere, or if it cannot transition to another processor quickly, its ability to process payments will suffer and investors’ ability to receive principal and interest payments on the Notes will be delayed or impaired.
If the security of PFL's investors' and borrowers' confidential information stored in our systems is breached or otherwise subjected to unauthorized access, users' secure information may be stolen, our reputations may be harmed, and we may be exposed to liability.
As with any entity with a significant Internet presence, we and thecertain third parties that we use for website hosting and mobile technologiesparty vendors occasionally have experienced cyber-attacks, breaches of our and their systems and other similar incidents, which to-date have not had a material effect on our business, operations or reputation. Future attacks are likely to occur. Our marketplace stores PFL’s investors’ and borrowers’ bank information and other personally identifiable sensitive data. Any accidental or willful security breaches or other unauthorized access could cause users’ secure information to be stolen and used for criminal purposes. Security breaches or unauthorized access to secure information could also expose us to liability related to the loss of the information, time-consumingtime-
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consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee or contractor error, malfeasance, faulty password management or otherwise, or if design flaws in the relevant software are exposed and exploited, and, as a result, a third party or disaffected employee obtains unauthorized access to any investors’ or borrowers’ data, PFL’s relationships with its users could be severely damaged, and PFL (or PMI) could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and PMI’s third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our users to lose confidence in the effectiveness of PFL’s and PMI’s data security measures. Further, California has recentlythe CCPA, which was enacted thein California, Consumer Privacy Act, a comprehensive bill that affords individuals in the state affected by data breaches a private right of action against companies that have allegedly been the target of such breaches due to a failure to implement and maintain appropriate cybersecurity policies and procedures. Any security breach, whether actual or perceived, would harm our reputations, and we could lose users.
In addition, we face an increased risk of cyber-attacks during the COVID-19 pandemic, which has forced us and many other companies to institute remote work protocols in order to protect the health and safety of employees. We use industry standard technologies to maintain secure remote work protocols and protect sensitive data within our control, and we require employees to complete security awareness training at regular intervals. However, we are necessarily limited in our ability to control or ensure the security of networks that employees use to work remotely. Further, cybersecurity experts and officials are reporting increased phishing, spoofing and other cyber-attack efforts during COVID-19, as hackers seek to take advantage of the uptick in remote work.
Any significant disruption in service in our marketplace or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement.
PMI's ability to perform its obligations under the Administration Agreement could be materially and adversely affected by events outside of its control. The satisfactory performance, reliability and availability of PMI's technology and its
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underlying network infrastructure are important to our respective operations, level of customer service, reputation and ability to attract new users and retain existing users. PMI's system hardware is hosted in several hosting facilities located in Las Vegas, Nevada; Scottsdale, Arizona; The Dalles, Oregon; and Council Bluffs, Iowa. Our hosting facilities service providers do not guarantee that access to our marketplace or to PMI's own systems will be uninterrupted, error-free or secure. The operation of our marketplace and PMI's operation of its own systems depends on our service providers' ability to protect the relevant systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity or other environmental concerns, computer viruses or other attempts to harm them, criminal acts and similar events. As noted above, there is an increased risk of cyber-attacks during the COVID-19 pandemic, which has forced many companies to implement remote work protocols and resulted in greater attempts by malicious actors to carry out cyber-attacks. If PMI's arrangement with any hosting facilities service provider is terminated, or there is a lapse of service or damage to such provider's facilities, PMI could experience interruptions in providing its services under the Administration Agreement, PFL could experience interruptions in the operations of our marketplace, and both could experience delays and additional expense in arranging new facilities. Any interruptions or delays in PMI’s performance of its services or in the functioning of and accessibility of our marketplace, whether as a result of a hosting facility service provider or other third-party error, PMI's error, natural disasters or security breaches, whether accidental or willful, could harm PFL’s relationships with users and its reputation. Additionally, in the event of damage or interruption, PMI's insurance policies may not be sufficient for PMI to adequately compensate PFL for any losses that it may incur. PMI's disaster recovery plan has not been tested under actual disaster conditions, and PMI may not have sufficient capacity to recover all data and services in the event of an outage at one or more hosting facilities. These factors could prevent PMI from processing or posting payments on the Borrower Loans or the Notes, damage PFL's brand and reputation, divert the attention of PMI's employees, reduce PFL's revenue, subject PMI or PFL to liability and cause users to abandon our marketplace, any of which could adversely affect our respective businesses, financial condition and results of operations. 
Our marketplace may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.
Our marketplace may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions. If a hacker were able to infiltrate our marketplace, users would be subject to the increased risk of fraud or borrower identity theft and may experience losses on, or delays in the recoupment of amounts owed on, a fraudulently induced purchase of a Note. Additionally, if a hacker were able to access our secure files, they might be able to gain access to users’ personal information. While we have taken steps to prevent such activity from affecting our marketplace, if we are unable to prevent such activity, the value of investors’ investment in the Notes could be adversely affected.
Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees we need to perform under the Administration Agreement.
Competition for highly skilled technical and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment.
In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and
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training their replacements and the quality of our services and our ability to serve borrower and investors could diminish, resulting in a material adverse effect on PMI's ability to perform its obligations under the Administration Agreement and, in such event, PFL’s ability to continue to make payments on the Notes could be materially impaired. See Item 1, “Business—Human Capital Resources” for more information about Prosper’s employees.
Purchasers of Notes will have no control over us and will not be able to influence our corporate matters.
PFL is not offering and will not offer equity interests in its company. Investors who purchase Notes offered through our marketplace will have no equity interest in either of us and no ability to vote on or influence our decisions. As a result, PMI, which owns all of PFL's outstanding equity interests, will continue to have sole control over PFL's governance matters, subject to the presence of PFL's independent directors, whose consent will be required before PFL can take certain extraordinary actions, and subject to the limitations specified in PFL's organizational documents and the Amended and Indenture.
PMI completed its first two acquisitions in 2015, and in the future PMI may continue to enter into acquisitions that may be difficult to integrate, fail to achieve theirour strategic objectives, disrupt our business or divert management attention.
PMI completed its first two acquisitions in 2015,has entered, and in the future PMI may continue to enter, into acquisitions of businesses, technologies and products that it intendsintended to complement its existing business, solutions, services and technologies. PMI cannot provide assurance that the acquisitions it has made or will make in the future will provide it with the benefits or achieve the results anticipated in entering into the transaction. Acquisitions are typically accompanied by a number of risks, including: difficulties assimilating and retaining the management and other personnel, culture and operations of the acquired
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businesses; potential disruption of ongoing business and distraction of management; difficulties in maintaining acceptable standards, controls, procedures and policies, including integrating financial reporting and operating systems, particularly with respect to foreign and/or public subsidiaries; potential loss of existing or acquired strategic operating partners, users and customers following an acquisition; difficulties in integrating acquired technologies and products into our solutions and services; and unexpected costs and expenses resulting from the acquisition, and potential unknown liabilities associated with acquired businesses.
In addition, acquisitions may result in the incurrence of debt, acquisition-related costs and expenses, restructuring charges and write-offs. Acquisitions may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.
PMI may enter into negotiations for acquisitions that are not ultimately consummated. Those negotiations could result in diversion of management time and significant out-of-pocket costs. If PMI fails to evaluate and execute acquisitions successfully, PMI may not be able to achieve its anticipated level of growth and its business and operating results could be adversely affected.
Events beyond our control may damage our ability to maintain adequate records, maintain our marketplace or perform the servicing obligations. If such events result in a system failure, investors’ ability to receive principal and interest payments on the Notes would be substantially harmed.
If a catastrophic event resulted in a marketplace outage and physical data loss and/or affected our electronic data storage and back-up storage systems, PFL’s ability (and PMI’s ability as servicer under the Administration Agreement) to perform its servicing obligations would be materially and adversely affected. Such events include, but are not limited to, fires, earthquakes, terrorist attacks, natural disasters, computer viruses and telecommunications failures. In the event of any marketplace outage or physical data loss described in this paragraph, PFL cannot guarantee that investors would be able to recoup their investment in the Notes.
Events beyond our control, such as public health emergencies, international conflicts, natural disasters, or other catastrophic events, may damage our ability to continue operations without disruptions, including our ability to attract new borrowers and investors, retain existing investors, as well as the ability of existing borrowers to repay their loans. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.
Our business is subject to the risk that external events, such as public health emergencies, natural disasters, or other catastrophic events, could disrupt our day-to-day operations and impair the activities of borrowers and investors on our marketplace. Unforeseen events, or the prospect of such events, including acts of war (including the recent invasion of Ukraine by Russia), terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as COVID-19, and natural disasters such as fires, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our vendors or result in political or economic instability. These events could reduce demand for our products or make it difficult or impossible to receive services from our vendors. Any such disruption could also damage our reputation, which would further lower investor or borrower demand for our products. We could also be subject to claims or litigation with respect to losses caused by such disruptions. Our property and business interruption insurance may not cover a particular event at all or be sufficient to fully cover our losses.
For example, the COVID-19 pandemic forced many companies, including us, to adopt wide-scale remote work protocols in an attempt to protect workforce health and slow community spread of the disease. While we have business continuity procedures in place to guide our response to a crisis, our attention may be diverted away from normal operations and our resources may be constrained. Likewise, borrowers and investors living in areas impacted by COVID-19 or other crises may also experience work slowdowns or stoppages, diminishing their capacity to apply for loans or invest through our marketplace. For existing borrowers, work slowdowns or stoppages may directly result in the inability to make loan payments, and may impair investors’ ability to receive principal and interest payments on the corresponding Notes. Additionally, a potential recession or volatility in capital markets as a result of public health emergencies may cause existing investors to cease or significantly decrease their investment in Borrower Loans through our marketplace. For existing borrowers, any resulting work slowdowns or stoppages may directly result in the inability to make loan payments, and may impair investors’ ability to receive principal and interest payments on the corresponding Notes. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.
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Increasing interest rates have adversely impacted and could materially and adversely impact our personal loan marketplace, our Credit Card program, and our investments in Borrower Loans.
Various economic factors have resulted in a significant increase in interest rates. Such an increase has had, and could continue to have, a negative impact on our personal loan marketplace by decreasing the ability of borrowers to repay their current loan obligations on Borrower Loans, decreasing the ability of borrowers under our Credit Card program to repay the obligations on their Credit Card, and reducing Borrower Loan origination volume. Borrowers may also be more likely to incur additional unsecured or secured debt in an effort to mitigate the effects of the increase in interest rates, which may further reduce their likelihood of repaying Borrower Loans. The increase in interest rates has, and could continue to, also reduce investor demand for Borrower Loans, as investors may have less capital to invest in Borrower Loans and may seek alternative investment options. Although we have adjusted our pricing to account for the increase in the cost of funds and increased credit risk and may continue to do so in the future, we may not be able to fully offset higher costs through rate increases, which may affect the ability of our investors to generate the risk adjusted returns expected for their investment.
In addition, we also invest in Borrower Loans as Loans Held for Sale through our PWIT Warehouse Line. We were also previously invested in Borrower Loans as Loans Held for Sale through our PWIIT Warehouse Line, which was terminated on September 25, 2023 in connection with a securitization transaction. Our investment in Borrower Loans is subject to the interest rate risk applicable to investors outlined above, and as a result our future investment income may fall short of expectations, or we may suffer a loss in principal if we are forced to sell Loans Held for Sale that have declined in market value due to changes in interest rates, loss assumptions or overall market conditions. To reduce the impact of large fluctuations in interest rates, we hedge a portion of our interest rate risk by entering into a derivative agreement with a financial institution. The derivative agreement that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes. Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the United States. Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, our results of operations and financial condition could be adversely affected. The fair value of Loans Held for Sale was $161.5 million and $499.8 million as of December 31, 2023 and 2022, respectively.
See “Quantitative and Qualitative Disclosures about Market Risk” for more information regarding the potential impact of the various market risks on our business.
RISKS RELATED TO COMPLIANCE AND REGULATION
Our marketplace must comply with regulatory regimes applicable to consumer credit transactions as well as with regulatory regimes applicable to securities transactions. Certain state laws generally regulate interest rates and other charges and require certain disclosures, and also require licensing for certain activities. In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of Borrower Loans in our marketplace. We are also subject to other laws, such as:
•the federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to borrowers regarding the terms of their loans;
•the Credit Card Accountability Responsibility and Disclosure Act of 2009, which amended the federal Truth-in-Lending Act and requires additional procedures, disclosures, fee limits and other protections for consumers applying for or holding open end credit cards;
•the Fair Credit Billing Act, which amended the federal Truth-in-Lending Act and creates creditor obligations with respect to billing complaints and errors for credit card customers;
•the federal Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination in the extension of credit on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act;
•the federal Fair Credit Reporting Act and Regulation V, which regulates the use, reporting and disclosure of information related to each applicant’s credit history;
•the federal Fair Debt Collection Practices Act and Regulation F, which regulates debt collection practices by “debt collectors” and prohibits debt collectors from engaging in certain practices in collecting, and attempting to collect, outstanding personal loans;
•state counterparts to the above consumer protection laws;
•state and federal securities laws, which require that any non-exempt offers and sales of the Notes be registered;
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•Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair, deceptive or abusive acts or practices in connection with any consumer financial product or service;
•the federal Gramm-Leach-Bliley Act, which includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities as well as to safeguard personal customer information, and other privacy laws and regulations;
•the California Consumer Privacy Act, which provides consumers in the state with extensive rights to know about the use, to request deletion and correction, and to opt out of the sale of their personal information by certain businesses, and which obligates such businesses to notify consumers of their data collection practices and to implement procedures for addressing consumer requests regarding their personal data;
•the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy protection;
•the federal Servicemembers Civil Relief Act, which allows military members to suspend or postpone certain civil obligations so that the military member can devote their full attention to military duties;
•the federal Military Lending Act, which provides specific protections for active duty service members and their dependents (or covered borrowers) in consumer credit transactions;
•the federal Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide disclosure requirements, guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts;
•the federal Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures;
•the federal Bank Secrecy Act, which relates to compliance with anti-money laundering, customer due diligence and record-keeping policies and procedures;
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•the federal Real Estate Settlement Procedures Act and Regulation X, which applies to the HELOC product;Home Equity Products;
•the federal Home Mortgage Disclosure Act and Regulation C, which applies to the HELOC product;Home Equity Products; and
•state mortgage broker and licensing and registration requirements that meet the minimum standards set forth in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and Regulation H.
We may not always be in compliance with these laws. Borrowers may make counterclaims regarding the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws. Investors may attempt to rescind their Note purchases under securities laws, and PFL or PMI’s failure to comply with such laws could also result in civil or criminal liability. Compliance with these requirements is also costly, time-consuming and limits operational flexibility. See Item 1, “Business—Government Regulation” for more information.
There continues to be uncertainty as to how the actions of the Consumer Financial Protection Bureau or any other new agency could impact our business or that of our issuing bank.
The Consumer Financial Protection Bureau (“CFPB”), which commenced operations in July 2011, has broad authority over the businesses in which we engage. This includes authority to write regulations under federal consumer financial protection laws, such as the Truth in Lending Act and the Equal Credit Opportunity Act, and to enforce those laws against and examine large financial institutions for compliance. The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices through its regulatory, supervisory, and enforcement authority. To assist in its enforcement, the CFPB maintains an online complaint system that allows consumers to log complaints with respect to various consumer finance products, including the loan products we facilitate. This system could inform future CFPB decisions with respect to its regulatory, enforcement or examination focus.
We are subject to the CFPB's jurisdiction, including its enforcement authority. The CFPB may therefore request reports concerning our organization, business conduct, markets and activities. In addition, the CFPB may conduct on-site examinations of our business on a periodic basis if the CFPB were to determine, based on, for example, consumer complaints, judicial opinions, or administrative decisions, that we are engaging in activities that pose risks to consumers. In addition, the
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CFPB has announced that it plans to makefinalized a rule for the direct supervision of nonbank installment lenders, which may permit the CFPB to conduct periodic examinations of our business.
There continues to be uncertainty as to how the CFPB's strategies and priorities, including in both its examination and enforcement processes, will impact our businesses and our results of operations going forward. Actions by the CFPB could result in requirements to alter or cease offering affected loan products and services, making them less attractive and restricting our ability to offer them.
Although we have committed resources to enhancing our compliance programs, actions by the CFPB or other regulators against us, our issuing banks or our competitors that discourage the use of the marketplace model or suggest to consumers the desirability of other loan products or services could result in reputational harm and a loss of borrowers or investors. Our compliance costs and litigation exposure could increase materially if the CFPB or other regulators enact new regulations, change regulations that were previously adopted, modify, through supervision or enforcement, past regulatory guidance, or interpret existing regulations in a manner different or stricter than have been previously interpreted.
Noncompliance with laws and regulations may impair our ability to facilitate the origination of or service Borrower Loans.
Generally, failure to comply with applicable laws and regulatory requirements may, among other things, limit our or a third party collection agency's ability to collect all or part of the principal amount of or interest on the Borrower Loans on which the Notes are dependent for payment. In addition, non-compliance could subject us to damages, revocation of required licenses, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm PFL's business and ability to maintain our marketplace and may result in borrowers rescinding their Borrower Loans.
Where applicable, we seek to comply with state lending, servicing and similar statutes, and we continually evaluate our licensing needs. In U.S. jurisdictions with licensing or other requirements that we believe may be applicable to our marketplace, we have obtained necessary licenses or comply with the relevant requirements. Nevertheless, if we are found to not comply with applicable laws, we could lose one or more of our licenses or face other sanctions, which may have an adverse effect on our ability to continue to facilitate the origination of Borrower Loans through our marketplace, and on our ability to perform servicing obligations or make our marketplace available to borrowers in particular states, which may impair investors' ability to receive the payments of principal and interest on the Notes that they expect to receive.
If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed.
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If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed. The interest rates that are charged to borrowers and that form the basis of payments to investors through our marketplace are based upon the ability under federal law of the issuing bank that originates the loan to export the interest rates of the state where it is located and on our ability to assist the bank in arranging such loans. WebBank, the bank that issues personal loans through our marketplace, exports the interest rates of Utah, which allows parties to generally agree by contract to any interest rate. The interest rates offered by WebBank through our marketplace for Borrower Loans asrate. As of December 31, 20212023, the Borrower Loans carried interest rates that range from 5.31%5.46% to 31.82%33.00%, which equate to an effective interest ratesrate for Note investors that range from 4.31%4.46% to 30.82%32.00%. Some states where borrowers are located, including Utah, have no statutory interest rate limitations on personal loans, while other jurisdictions have a maximum rate less than the current maximum rate offered by WebBank through our marketplace. If a borrower were to successfully bring claims against us for state usury or other state law violations, we could be subject to fines and penalties. Further, if the current structure under which WebBank makes personal loans through our marketplace were successfully challenged, we may have to substantially modify our business operations and may be required to maintain state-specific licenses and only provide a limited range of interest rates for Borrower Loans, all of which may substantially reduce our operating efficiency and attractiveness to investors and possibly result in a decline in our operating results. Recent litigation has successfully challenged lending arrangements in which banks or other exempt entities make loans and sell those loans to a third party charged with servicing the loans.
In addition, it is possible that state usury laws may impose liability that could affect an assignee's (i.e., PFL's and/or an investor who purchases Borrower Loans from PFL) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their Borrower Loans.
As discussed in Part I, Item 1, “Business—Government Regulation—State Usury Laws” above, in Madden v. Midland Funding, LLC, in May 2015, the U.S. Court of Appeals for the Second Circuit issued a decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the National Bank Act and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. On November 10, 2015, the defendant in the Madden case filed a petition for a writ of certiorari with the United States Supreme Court for further review of the Second Circuit’s decision. On June 27, 2016, the United States Supreme Court denied the petition and refused to review the case, leaving the decision of the Second Circuit intact and binding on federal courts in Connecticut, New York and Vermont. The Madden decision has created some uncertainty as to whether non-bank entities purchasing loans originated by a
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bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the National Bank Act, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential litigation, or the possible impact of the litigation on our marketplace, we believe the Madden case addressed facts that are not presented by our marketplace lending platform and thus would not apply to Borrower Loans.
In June 2020, the FDIC issued a final regulation entitled “Federal Interest Rate Authority” that, among other things, addressed the uncertainty resulting from the Madden decision, including uncertainty affecting marketplace lenders that partner with banks. Under the FDIC’s rule, which applies to FDIC-insured state-chartered industrial banks such as WebBank, interest on a loan originated by WebBank that was permissible under DIDA at origination is not affected by WebBank’s subsequent sale of the loan to PFL. Seven states and the District of Columbia sued the FDIC, however, seeking to have the regulation set aside on Administrative Procedure Act grounds. Three states brought a similar challenge in the same court to a similar regulation issued by the OCC under the NBA. Both suits were decided in February 8, 2022, with the United States District Court for the Northern District of California ruling that the FDIC and OCC had not exceeded their statutory authority when promulgating their respective rules. The court deferred to each federal agency's interpretation, and thus concluded that each agency’s rule was not unreasonable or arbitrary or capricious. The states havehad until April 11, 2022 to appeal the rulings to the U.S. Court of Appeals for the Ninth Circuit. Circuit and did not do so.If
On August 18, 2020, WebBank, the states appeal,originator and lender of loans offered through the personal loan marketplace, was among the parties that reached a decision by the Ninth Circuit overturning the District Court’s rulings could subject Borrower Loans and PFL purchases from WebBank to state usury laws.
In January 2017,settlement with the Administrator of the Colorado Uniform Consumer Credit Code filed suits against online loanwhich provides a safe harbor for the platforms operated by Marlette Funding, LLC and Avant, Inc. The Administrator claimed that loans to Colorado residents facilitated through these platforms were required to comply with Colorado laws regarding interest rates and fees, and that such laws were not preempted by the federal laws that apply to loans originated by Cross River Bank and WebBank, the federally regulated issuing banks that originate loans through the platforms operated by Marlette and Avant, respectively. In response to the Colorado regulator’s lawsuits, Cross River Bank and WebBank each intervened in the state court case filed against Marlette and Avant, respectively. On August 18, 2020, the parties reached a settlement that provides a safe harbor for the Marlette and Avant lending platforms,, such that if the lending programs meet certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure, the programs will be deemed to be in compliance with Colorado’s usury limits. On November 9, 2020, we amended our agreements with WebBank to addressmeet the requirements of the safe harbor for extending credit to borrowers in Colorado.
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We had separately been in discussions with the Colorado Department of LawAdministrator during the Marlette and Avant litigation regarding certain terms of Borrower Loans offered through the personal loan marketplace to Colorado residents. Effective as of July 30, 2019, we and the Administrator entered into a stipulation for(the “Stipulation”) to allow loans to continue to be offered through the continued operation of thepersonal loan program inmarketplace to Colorado residents, subject to certain financing charge and late fee restrictions during the period that the stipulationStipulation is in effect. The stipulation remainseffect with respect to acquired loans, but excluding loans retained by WebBank or sold to a state-chartered, FDIC-insured bank or a federally-chartered bank. Effective as of February 6, 2024, we entered into a Stipulation and Final Agency Order (“FAO”) pursuant to which Prosper agreed to continue to be subject to such financing charge and late fee restrictions set forth in place but may be terminated with 21 days’ notice by either party. No further assurance can be provided as to the timing or outcome of the stipulation.Stipulation through July 1, 2024.
We and our counsel are monitoring these matters closely and, as developments warrant, we will consider any necessary changes to our marketplace required to avoid the impact of these cases on our business model. Because of investor demand, the maximum annual percentage rates offered through our marketplace may be lower in some states than others.
We rely on agreements with WebBank, pursuant to which WebBank originates personal loans on a uniform basis to qualified borrowers throughout the United States and sells and assigns those loans to PFL. If our relationships with WebBank were to end, we may need to rely on individual state lending licenses or partner with a different bank to offer Borrower Loans.
Borrower Loan requests take the form of an application to WebBank submitted through our marketplace. WebBank currently makes all personal loans to borrowers through our marketplace, which allows our marketplace to be available to borrowers on a uniform basis throughout the United States. If our relationships with WebBank were to end or if WebBank were to cease operations, one or both of PMI and PFL may need to rely on individual state lending licenses or we would need to partner with a different bank to originate Borrower Loans. Because neither of us currently possesses all required licenses to lend in every state, we might be forced to limit the rates of interest charged on Borrower Loans in some states and we might not be able to originate personal loans in some states altogether. If we partner with a new bank, service on our marketplace could be disrupted and delayed as we transition to a different bank partner. We also may face increased costs and compliance burdens if the agreements with WebBank are terminated.
Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.
Several lawsuits in the lending industry primarily involving high-interest “payday loan” marketers have brought under scrutiny the association between those firms and out-of-state banks. These lawsuits assert the loan marketers use out-of-state lenders in order to evade the consumer protection laws imposed by the states where they do business. Such litigation has sought
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to re-characterize the loan marketer as the lender for purposes of state consumer protection law and usury restrictions. Similar civil actions have been brought in the context of gift cards and retail purchase finance. Although we believe that our activities are generally distinguishable from the activities involved in these cases, a court or regulatory authority could disagree.
Additional state consumer protection laws would be applicable to the Borrower Loans facilitated through our marketplace if one or both of us were re-characterized as a lender, and the Borrower Loans could be voidable or unenforceable. In addition, we could be subject to claims by borrowers, as well as enforcement actions by regulators. Even if we were not required to cease doing business with residents of certain states or to change our business practices to comply with applicable laws and regulations, we could be required to register or obtain licenses or regulatory approvals that could impose a substantial cost on us.
As online commerce develops, federal and state governments may draft and propose new laws to regulate commerce over the Internet, which may negatively affect our businesses.
As online commerce continues to evolve, increasing regulation by federal and state governments becomes more likely. Our businesses could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to marketplace lending. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our users in the form of increased fees. In addition, federal and state governmental or regulatory agencies may decide to impose taxes on services provided online. These taxes could discourage the use of the Internet as a means of consumer lending, which would adversely affect the viability of our marketplace.
If one or both of PMI and PFL is required to register under the Investment Company Act, either of our ability to conduct business could be materially adversely affected.
The Investment Company Act of 1940 (the “Investment Company Act”) contains substantive legal requirements that regulate the manner in which “investment companies” are permitted to conduct their business activities. PFL and PMI believe each has conducted its business in a manner that does not result in being characterized as an investment company. If, however, PFL is deemed to be an investment company under the Investment Company Act, it may be required to institute burdensome compliance requirements and its activities may be restricted, which would materially adversely affect its business, financial
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condition and results of operations. Any determination that PMI is an investment company under the Investment Company Act similarly could impair its ability to perform its obligations under the Administration Agreement and thereby impair PFL’s ability to make payments on the Notes. If PFL or PMI were deemed to be an investment company, PFL or PMI may also attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on their businesses.
If one or both of PMI and PFL is required to register under the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected.
The Investment Advisers Act of 1940, or the “Investment Advisers Act,” contains substantive legal requirements that regulate the manner in which “investment advisers” are permitted to conduct their business activities. PFL believes that its business consists of providing a platform for marketplace lending for which investment adviser registration and regulation do not apply under applicable federal or state law, and does not believe that it is required to register as an investment adviser with either the SEC or any of the various states. The SEC or a state securities regulator could reach a different conclusion, however. Registration as an investment adviser could adversely affect PFL’s method of operation and revenues. For example, the Investment Advisers Act requires that an investment adviser act in a fiduciary capacity for its clients. Among other things, this fiduciary obligation requires that an investment adviser manage a client’s portfolio in the best interests of the client, have a reasonable basis for its recommendations, fully disclose to its client any material conflicts of interest that may affect its conduct and seek best execution for transactions undertaken on behalf of its client. It could be difficult for PFL to comply with this obligation without meaningful changes to its business operations, and there is no guarantee that it could do so successfully. If PFL were ever deemed to be in non-compliance with applicable investment adviser regulations, it could be subject to various penalties, including administrative or judicial proceedings that might result in censure, fine, civil penalties (including treble damages in the case of insider trading violations), the issuance of cease-and-desist orders or other adverse consequences. Similarly, any determination by regulators that PMI must register as an investment adviser could materially adversely affect PMI and impair its ability to continue to administer our marketplace on PFL’s behalf.
PMI's administration of Quick Invest under its previous offering and PFL’s administration of Quick Invest, Recurring Investment, and Auto Invest under its current offering, could create additional liability for PFL and such liability could be material.
Quick Invest was a loan search tool that allowed investors to identify Notes that met their investment criteria. An investor using Quick Invest was asked to indicate (i) the Prosper Rating or Ratings they wished to use as search criteria, (ii) the total amount they wished to invest, and (iii) the amount they wished to invest per Note. Quick Invest then compiled a basket of Notes for their consideration that met their search criteria.
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Recurring Investment (formerly known as Auto Quick Invest) is an automated loan search tool that allows investors to easily invest in Notes that meet their specific investment criteria by automatically bidding any available funds in their account on Notes that match their selected parameters, in accordance with their specified instructions. An investor using Recurring Investment is asked to indicate (i) the Prosper Rating or Ratings and term of the Notes they wish to use as search criteria, and (ii) the amount they wish to invest per Note. If they wish, the investor can further customize their investment criteria by applying one or more of several dozen additional search criteria, such as loan amount, debt-to-income ratio and credit score. The investor can also set aside a specific amount of their funds as a cash reserve that will not be invested by the Recurring Investment tool. After the investor has entered and saved the parameters of their search, Recurring Investment automatically (i) runs searches on the designated criteria as new listings are posted on the marketplace, and (ii) places bids on any Notes identified by each such search. Currently, the Recurring Investment tool is available only through our website, and is not available through our mobile app, Prosper Invest.
Auto Invest is an automated loan search tool that makes it easier for investors to build their desired portfolio of Notes by automatically investing any available funds in an investor’s account in Notes that match the investor’s specified investment criteria and allocation targets. An investor using Auto Invest is asked to select (i) a loan allocation target, or a target mix of loans based on Prosper Ratings, and (ii) the amount they wish to invest per Note. The investor has the option of selecting a target from Prosper’s series of preset loan allocations based on the recent historical loan inventory on the marketplace, any of which may be customized by changing the individual allocation targets for each Prosper Rating, or they can create a custom loan allocation target across Prosper Ratings based on their specific risk tolerance. If they wish, the investor can further customize their investment criteria by applying additional filters, such as loan term and employment status. The investor can also set aside a percentage of their portfolio as a cash reserve that will not be invested by Auto Invest. Investors may update their target allocations, cash reserve and other investment criteria, and pause and restart Auto Invest, at any time. Once the investor turns on Auto Invest, the tool may immediately begin placing orders for Notes in accordance with the investor’s current and target allocations and other criteria. The mix of Notes in any particular order may not match the investor’s individual loan allocation targets, but over time Auto Invest will place orders so that the aggregate holdings in the investor’s portfolio will approximate, to the extent possible, the allocation specified in their investment criteria.
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Since the Notes purchased through Recurring Investment, Auto Invest and Quick Invest are the same as Notes purchased manually, they present the same risks of non-payment as all Notes that may be purchased through our marketplace. For example, there is a risk that a Borrower Loan identified through Recurring Investment, Auto Invest or Quick Invest may become delinquent or default, and that the estimated return or historical return (as applicable) for that loan individually, or the estimated return or historical return (as applicable) for the allocation target or the basket of Notes selected by Recurring Investment, Auto Invest or Quick Invest as a whole, may not accurately reflect the actual return on such loan or Notes. If this were to occur, an investor who purchased a Note from PFL through Recurring Investment, Auto Invest or Quick Invest could pursue a claim against PFL in connection with its representations regarding the performance of the Borrower Loans bid upon through Recurring Investment, Auto Invest or Quick Invest, respectively. An investor could pursue such a claim under various anti-fraud theories under federal and state securities law.
We may face liability under state and federal securities law for statements in our prospectus and in other communications that could be deemed to be an offer to the extent that such statements are deemed to be false or misleading.
Loan listings and other borrower information available on PFL's website as well as in sales and listing reports are statements made in connection with the purchase and sale of securities that are subject to the antifraud provisions of the Exchange Act and the Securities Act. In general, these liability provisions provide a purchaser of the Notes with a right to bring a claim against one or both of us for damages arising from any untrue statement of material fact or failure to state a material fact necessary to make any statements made not misleading. Even though PFL and PMI have advised investors of what they believe to be the material risks associated with an investment in the Notes and PMI management rights, the SEC or a court could determine that they have not advised investors of all of the material facts regarding an investment in the Notes and PMI Management Rights, which could give investors the right to rescind their investment and obtain damages, and could subject PFL and PMI to civil fines or criminal penalties in addition to any such rescission rights or damages.
PMI and PFL’s activities in connection with the offer and sale of securities through our marketplace could result in potential violations of federal securities law and result in material liability to PFL and/or PMI.
PFL and PMI’s respective businesses are subject to federal and state securities laws that may limit the kinds of activities in which PFL and PMI may engage and the manner in which they engage in such activities. For example, changes to the manner in which PFL offers and sells Notes or other securities through our marketplace could be viewed by the SEC or a state securities regulator as involving the creation or sale of new, unregistered securities. In such circumstances, the failure to register such securities could subject PFL to liability and the amount of such liability could be meaningful. In addition, in 2008, PMI entered into a settlement with the SEC pursuant to which PMI agreed to cease and desist from committing or causing any violations or any future violations of Sections 5(a) and (c) of the Securities Act. Failure to comply with that order could result in material civil or criminal liability, which could materially adversely affect PMI’s business and PFL’s offering of Notes.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Prosper recognizes the critical importance of protecting the company’s assets and customer data against new and existing risks using appropriate organizational measures, policies, procedures, and technical solutions while maintaining robust cybersecurity measures to safeguard our information systems and protect the security, confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
Prosper has strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our information security (“InfoSec”) team works closely with our information technology team to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.
Third-Party Risk Management Engagement
Prosper engages with a range of external experts, including external auditors, cybersecurity assessors and penetration testers as part of our InfoSec and cybersecurity programs. Our collaboration with these third-parties includes services such as external audits, threat assessments and guidance on key security initiatives. These partnerships allow us to leverage specialized knowledge and insights, consistent with our aim for industry-best practices.
Oversee Third-Party Risk
Prosper maintains stringent processes to oversee and manage the risks associated with third-party service providers, including a team focused on vendor, enterprise, and procurement risk management. We conduct diligence and security assessments of material third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. This monitoring includes an initial review of their information security program, annual re-assessments, and ongoing monitoring for security incidents. This approach is designed to mitigate risks related to data breaches or other security incidents originating from our material vendors and partners.
Risks from Cybersecurity Threats
For a description of the cybersecurity risks which could materially affect Prosper’s business strategy, results of operations, or financial condition, please refer to the following: (i) “Risk Factors—If the security of PFL's investors' and borrowers' confidential information stored in our systems is breached or otherwise subjected to unauthorized access, users' secure information may be stolen, our reputations may be harmed, and we may be exposed to liability,”; (ii) “Risk Factors—Any significant disruption in service in our marketplace or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement,”; and (iii) “Risk Factors—Our marketplace may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.” We and certain third party vendors occasionally have experienced cyber-attacks, breaches of our and their systems and other similar incidents, which to-date have not had a material effect on Prosper’s business strategy, results of operations, or financial condition.
Governance
The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats.
Board of Directors Oversight of Risks
The Board is directly responsible for overseeing risks related to cybersecurity and is composed of board members with diverse expertise, including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.
The Board is informed of cybersecurity risks by our Chief Executive Officer (“CEO”) and General Counsel (“GC”), who are kept updated on an ongoing basis of cybersecurity risks through our Chief Technology Officer (“CTO”) and Head of Information Security (the “InfoSec Director”). Our InfoSec Director also prepares a quarterly update for each Board meeting that updates the Board of any information security and cybersecurity risks and threats to our systems. The InfoSec Director also
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will meet with the Board directly for training focused exclusively on our cybersecurity and information security program and risks, beginning in 2024.
Risk Management Personnel
Primary responsibility for assessing, monitoring, and managing our cybersecurity risks rests with our InfoSec Director. Our InfoSec Director has experience building global Information Security programs and has advised organizations across several highly- regulated industries, including financial services, technology, healthcare, government, non-profit, and retail. Our InfoSec Director, with oversight from the CTO, manages Prosper’s information security risk management program and informs Prosper’s Enterprise Risk & Information Security Committee (“eRISC”), which consists of members of Prosper’s management team and includes our CEO, Chief Financial Officer (“CFO”), CTO, and GC, regarding the prevention, detection, mitigation, and remediation of cyber risks and incidents. The cybersecurity team has decades of experience in selecting, deploying, and operating cybersecurity technologies, initiatives, and processes. eRISC meets on at least a quarterly basis to discuss any cybersecurity incident reports, as applicable, ongoing cybersecurity initiatives and strategies, take any actions approved by the voting members of eRISC, and discuss escalation and reporting to the Board, as needed.
Process for Monitoring Cybersecurity Incidents
The InfoSec Director and eRISC, as applicable, are continually informed about the latest developments in cybersecurity including potential threats and innovative risk management techniques. The InfoSec Director is an active thought leader and speaker within the CISO community, regularly participating in cybersecurity conferences such as FS-ISAC, and CISO summits. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The InfoSec Director implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the InfoSec Director is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
Reporting to Board of Directors
As discussed above in “Cybersecurity Board of Directors Oversight of Risks,” our InfoSec Director regularly updates our eRISC committee regarding all aspects related to cybersecurity risks and incidents and also maintains direct communication with the CEO, CFO, CTO, and GC for escalation of such incidents directly to the Board. This ensures that the highest levels of management and the Board are kept informed of the cybersecurity posture and potential risks facing Prosper.


43



ITEM 2. PROPERTIES
Our corporate headquarters, including our principal administrative, marketing, technical support and engineering functions, is located in San Francisco, California, where we lease approximately 50,00035,200 square feet of office space under leases that will expire February 28, 2023.May 31, 2028. We have also entered into leases for approximately 44,500 square feet of office space located in Arizona and Utah. We believe that our facilities are adequate to meet our current needs and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
Our disclosure set forth under Note 17, Commitments and Contingencies—West Virginia Matter, of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K is incorporated herein by reference.

Prosper Funding's disclosure set forth under Note 8, Commitments and Contingencies—West Virginia Matter, of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K is incorporated herein by reference.
In March 2021, PMI and PFL accepted service of a complaint via email. PMI, PFL and Velocity Investments, LLC, an accounts receivable management company (“Velocity”), were each named in a purported class action lawsuit brought by two individual plaintiffs in the Circuit Court for Montgomery County, Maryland, filed on February 3, 2021 (the “Jones Litigation”). The complaint asserts, on behalf of the plaintiffs and the class members, claims for violation of certain Maryland state laws and seeks damages. The plaintiffs also seek a declaration of requirement for Maryland licensure and that PMI, PFL, and Velocity did not have the right to collect money from the plaintiffs and the class members on the loan accounts. The Jones Litigation was accompanied by a related petition to stay arbitration and demand declaratory judgement in the Circuit Court for Montgomery County, Maryland (the “Jones Petition”). On April 8, 2021, the Jones Litigation was removed to the United States District
40



Court for the District of Maryland (the “Federal District Court”). In March 2021, a similar class action lawsuit, Khan v. Crown Asset Management LLC, was filed in the Circuit Court for Montgomery County, Maryland (the “Khan Litigation”) accompanied by a related petition to stay arbitration (the “Khan Petition”). Prosper was not a named defendant in the Khan Litigation or the Khan Petition. In May 2021, the Khan Litigation was removed to the Federal District Court. On July 15, 2021, plaintiff dismissed the Jones Petition but joined PMI, PFL, and Velocity to the Khan Petition (the “Combined Petition”). The Combined Petition was removed on July 29, 2021 to the Federal District Court. On March 21, 2022, the Federal District Court issued a ruling to compel arbitration in the Jones Litigation and the Khan Litigation, stay the Combined Petition, and combine all cases. At this time, we cannot predict the outcome of this matter or estimate the amount of damages, if any, that may be awarded.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information; Holders of Record
There is no established public trading market for PMI's or PFL's common equity. As of December 31, 2021,2023, there were approximately 358 holdersapproximately 470 holders of record of PMI’s common stock. As of December 31, 2021,2023, PMI owns 100% of PFL's membership interests.
Dividend Policy
PMI has not paid cash dividends since inception and does not anticipate paying cash dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 in Part III of this Annual Report for information about securities authorized for issuance under our equity compensation plans.
Recent Sales of Unregistered Securities
For the year ended December 31, 2019,2023, PMI issued 173,356issued 2,637,479 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.15. $0.04. For the year ended December 31, 2020,2022, PMI issued 687,4712,133,921 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.02. For the year ended December 31, 2021, PMI issued 3,014,622 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.02. These$0.03. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder relative to sales by an issuer not involving a public offering.
Issuer Purchases of Equity Securities
During the year ended December 31, 2021,2023, we did not repurchase any common andor preferred stock.

ITEM 6. [Reserved]
Not applicable.
41
44



ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Annual Report on Form 10-K. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those included in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 20212023 and 20202022 items and year-to-year comparisons between 20212023 and 2020.2022, except for the material addition of the results of operations by segment, which was not presented in prior periods and now includes year-to-year comparisons between 2022 and 2021. For discussions related to 2019other 2021 items and year-to-year comparisons between 20202022 and 2019,2021, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2020.2022.
PROSPER MARKETPLACE, INC.
Overview
Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to three lending products, each of which supports our vision: (i) unsecured personal loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, (ii) a Credit Card product available to eligible borrowers, and (iii) a HELOC productHome Equity Products available to eligible homeowners.
We believe our business model has key advantages relative to traditional banks, including (i) an innovative marketplace model that efficiently connects qualified supply and demand of capital, (ii) online operations that substantially reduce the need for physical infrastructure and improve convenience, and (iii) use of advanced technology and artificial intelligence to deliver simple, fast, personalized, and transparent solutions that can improve consumers’ financial health as they move across the credit spectrum. We do not operate physical branches or incur expenses related to infrastructure like traditional banks or consumer finance institutions. As part of operating our marketplace, we verify the identity of borrowers and assess borrowers’ credit risk profile using a combination of public and proprietary data. Our proprietary technology automates several loan origination and servicing functions, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection.
DuringFor the year ended December 31, 2021,2023, our personal loan marketplace facilitated $1.9facilitated $2.2 billion in Borrower Loan originations, of which $1.7$1.9 billion were funded through our Whole Loan Channel, representing 89% of the total Borrower Loans originated through our marketplace during this period. For the quarter ended December 31, 2023, our marketplace facilitated $442.8 million in Borrower Loan originations, of which $391.2 million were originated through our Whole Loan Channel, representing 88% of the total Borrower Loans originated through our marketplace during this period. During the quarter ended December 31, 2021, our marketplace facilitated $524 million in Borrower Loan originations, of which $464 million were originated through our Whole Loan Channel, representing 89% of the total Borrower Loans originated through our marketplace during this period. From inception through December 31, 20212023 our marketplace has facilitated $20.1facilitated $25.6 billion in Borrower Loan originations, of which $18.0$23.0 billion were originatedfunded through our Whole Loan Channel, representing 89%90% of the total Borrower Loans originated through our marketplace during thisthis period.
As a credit marketplace, we believe our customers are highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers’ ability or desire to participate on our marketplace as borrowers or investors and, consequently, could negatively affect our business and results of operations.
Recent Developments
We continue to track the impact of COVID-19 and its variants on our communities, and are offering assistance to qualified borrowers who are facing financial hardship as a result of the COVID-19 pandemic. These relief options include, among other things, the ability to delay up to 4 monthly loan payments, the ability to reduce minimum monthly payments for up to 12 months and extend the term of the loan by up to 11 months, and waived late and non-sufficient funds fees. Since COVID-19 relief was first offered in March 2020 and through December 31, 2021, approximately 9.1% of our current outstanding loan balances on a cumulative basis have enrolled in at least one of these COVID-19 relief programs. Approximately 1.2% of our outstanding loan balances are actively enrolled in at least one relief program as of December 31, 2021. Overall requests for COVID-19 relief are declining; however, enrollment may continue as long as the pandemic continues to trigger financial hardship for borrowers.
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Key Operating and Financial Metrics (in thousands)
The following table displays our key operating and financial metrics for the years ended December 31, 2021, 20202023, 2022 and 2019:2021:
Years Ended December 31,
202120202019
Loan Originations$1,946,974 $1,486,238 $2,666,085 
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2023
Personal Loan Originations
Personal Loan Originations
Personal Loan Originations
Transaction Fees, Net
Transaction Fees, Net
Transaction Fees, NetTransaction Fees, Net$89,364 $67,335 $119,282 
Whole Loans Outstanding (1)
Whole Loans Outstanding (1)
$2,529,814 $2,816,586 $3,659,601 
Whole Loans Outstanding (1)
Whole Loans Outstanding (1)
Prosper Credit Card Portfolio(1)
Prosper Credit Card Portfolio(1)
Prosper Credit Card Portfolio(1)
Servicing Fees, Net
Servicing Fees, Net
Servicing Fees, NetServicing Fees, Net$15,024 $18,517 $23,406 
Total Net RevenuesTotal Net Revenues$144,626 $103,236 $153,570 
Total Net Revenues
Total Net Revenues
Net (Loss) IncomeNet (Loss) Income$(138,341)$18,551 $(13,711)
Core Revenue (2)
$144,626 $103,236 $171,123 
Net (Loss) Income
Net (Loss) Income
Adjusted Net Revenue (2)
Adjusted Net Revenue (2)
Adjusted Net Revenue (2)
Adjusted EBITDA (2)
Adjusted EBITDA (2)
Adjusted EBITDA (2)
Adjusted EBITDA (2)
$12,814 $(8,587)$3,920 
(1) Balance as of December 31
(1) Balance as of December 31
(2) Core Revenue and Adjusted EBITDA are non-GAAP Financial measures. For more information regarding these measures and reconciliations of these measures to the most comparable GAAP measures, see “Non-GAAP Financial Measures”.
(1) Balance as of December 31
(1) Balance as of December 31
(2) Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial measures. For more information regarding these measures and the reconciliation to Total Net Revenue and Net (Loss) Income, respectively, the most comparable US GAAP measures, see “Non-GAAP Financial Measures.”
(2) Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial measures. For more information regarding these measures and the reconciliation to Total Net Revenue and Net (Loss) Income, respectively, the most comparable US GAAP measures, see “Non-GAAP Financial Measures.”
(2) Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial measures. For more information regarding these measures and the reconciliation to Total Net Revenue and Net (Loss) Income, respectively, the most comparable US GAAP measures, see “Non-GAAP Financial Measures.”
Personal Loan Originations
Total personal loan originations on the platform increased 31%platform decreased 35% for the year ended December 31, 20212023 when compared to the year ended December 31, 2020,2022, which resulted in an increasea decrease in Transaction Fees of 33%,$34.9 million, or $22.0 million.21%. The personal loan originations increasedecrease for the year ended December 31, 20212023 versus the year ended December 31, 20202022 was primarily due primarily to increasedreduced investor demand lowergiven the rapid increase in interest rates offered to borrowers and less restrictive underwriting requirements, which is also reflective of the general economic recovery since the startfirst quarter of the COVID-19 pandemic.2022 and uncertain economic environment.
From inception of the Company through December 31, 2021,2023, a total of 1,594,197of 2,057,160 Borrower Loans, totaling $20.1$25.6 billion, were originated through our marketplace. For the year ended December 31, 2021, 183,0412023, 157,840 Borrower Loans totaling $1.9$2.2 billion were originated through our marketplace, as compared to 119,711 Borrower305,123 Borrower Loans totaling $1.5$3.3 billion originatedoriginated in 2020,2022, which represented a unit increase of 53% and a dollar increase of 31%. For the year ended December 31, 2020, 119,711 Borrower Loans totaling $1.5 billion were originated through our marketplace, as compared to 195,656 Borrower Loans totaling $2.7 billion originated in 2019, which represented a unitunit decrease of 39%48% and a dollar decrease of 44%35%.
LoanPersonal loan origination volume by Prosper Rating was as follows for the periods presented (in millions, except percentage):
Year Ended December 31,
 202320222021
Amount%Amount%Amount%
AA$288.8 13 %$460.3 14 %$246.2 13 %
A293.8 14 %507.0 15 %373.8 19 %
B563.0 26 %601.3 18 %318.8 16 %
C304.1 14 %410.0 12 %245.8 14 %
D227.6 11 %300.2 9 %104.0 5 %
E268.7 12 %338.3 10 %35.7 2 %
HR21.7 1 %29.4 1 %0.9 — %
Other (1)
196.4 9 %693.9 21 %621.8 32 %
Total$2,164.1 100 %$3,340.4 100 %$1,947.0 101 %
(1) Represents personal loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings.

Year Ended December 31,
 202120202019
Amount%Amount%Amount%
AA$246 13 %$270 18 %$348 13 %
A374 19 %437 29 %639 24 %
B319 16 %311 21 %669 25 %
C246 13 %211 15 %606 22 %
D104 5 %60 4 %227 9 %
E36 2 %16 1 %63 2 %
HR1 — %2 — %17 1 %
Other (1)
621 32 %179 12 %97 4 %
Total$1,947 100 %$1,486 100 %$2,666 100 %
(1) Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors.
For the year ended December 31, 2021,2023, compared to 2022, the mix of personal loan originations on the Prosper platform was generally reflective of less restrictive underwriting standards as compared toreflects a significant decrease in investor appetite for whole loan purchases under the corresponding period in 2020, as the economy continued to recover from the COVID-19 pandemic. There has also been a significant increase in the number and dollar amount ofcurrent economic environment, specifically for personal loans not assigned Prosper ratings as the Company continues to sell higher riskratings. These personal loans through the Whole Loan Channelare sold only to institutional investors that relyand based on their ownspecific underwriting criteria and custom risk models to underwrite the loans.developed by these investors.
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Whole Loans Outstanding
We sell Borrower Loans through our Whole Loan Channel, and the outstanding balance of these personal loans serves as a primary driver of our Servicing Assets. Whole loans outstanding decreased $286.8 million$0.2 billion, or 10%5%, from December 31, 20202022 to December 31, 2021, and $843.0 million or 23% from December 31, 20192023. This decrease is primarily due to December 31, 2020. These decreases are due primarily todecreased year-over-year personal loan originations, as discussed above, as well as the dropdecrease in originations from 2019 to 2020 as a resultpurchases of the economic impact of the COVID-19 pandemic, partially offset by the increase in originations from 2020 to 2021 discussed above. We have also continued to purchase and holdpersonal loans inthrough our consolidated warehouse trusts, reducing the balance of outstanding whole loans.trusts.
Net (Loss) Income
See the section titled “Results of Operations” below, for the discussion on significant changes in Net (Loss) Income year-over-year.
Results of Operations
Overview
The following table summarizes our net (loss) income for the years ended December 31, 2021, 20202023, 2022 and 20192021 (in thousands, except percentage):
Years Ended December 31,
20212020Change% Change20202019Change% Change
Years Ended December 31,Years Ended December 31,
202320232022Change% Change20222021Change% Change
Total Net RevenuesTotal Net Revenues$144,626 $103,236 $41,390 40 %$103,236 $153,570 $(50,334)(33)%Total Net Revenues$137,700 $$199,881 $$(62,181)(31)(31)%$199,881 $$144,626 $$55,255 38 38 %
Total ExpensesTotal Expenses282,896 84,669 198,227 n/m84,669 167,181 (82,512)(49)%Total Expenses244,084 129,004 129,004 115,080 115,080 89 89 %129,004 282,896 282,896 (153,892)(153,892)(54)(54)%
Net (Loss) Income Before Income TaxesNet (Loss) Income Before Income Taxes(138,270)18,567 (156,837)n/m18,567 (13,611)32,178 n/mNet (Loss) Income Before Income Taxes(106,384)70,877 70,877 (177,261)(177,261)n/mn/m70,877 (138,270)(138,270)209,147 209,147 n/mn/m
Income Tax ExpenseIncome Tax Expense(71)(16)(55)n/m(16)(100)84 (84)%Income Tax Expense(78)(295)(295)217 217 (74)(74)%(295)(71)(71)(224)(224)315 315 %
Net (Loss) IncomeNet (Loss) Income$(138,341)$18,551 $(156,892)n/m$18,551 $(13,711)$32,262 n/mNet (Loss) Income$(106,462)$$70,582 $$(177,044)n/mn/m$70,582 $$(138,341)$$208,923 n/mn/m
n/m: not meaningful
Total Net Revenues for the year ended December 31, 2021 increased $41.42023 decreased $62.2 million, or 40%31%, as compared to the year ended December 31, 2020. 2022. The increasedecrease was primarilylargely attributable to a $34.9 million decrease in Transaction Fees, Net, due to the decrease in personal loan originations during this time, as discussed above. Additionally, Total Net Revenues from Change in Fair Value of Financial Instruments, Net which was a $3.2decreased $13.2 million losswhen compared to 2022, due primarily to higher delinquencies and charge-offs of Loans Held for Sale and securitized Borrower Loans, as the year ended December 31, 2021,average outstanding balance of these loans has increased from the prior year. Higher interest rates have also led to negative fair value adjustments on these loans held in consolidated warehouse and securitization trusts. These negative fair value adjustments were partially offset by an increase in fair value gains of $11.4 million on the Credit Card Derivative as compared to a $34.2 million loss for the year ended December 31, 2021, a $31.0 million change. The loss in the prior year was largely due to the economic impact ofoverall growth in the COVID-19 pandemic, which negatively impacted the fair value of our Borrower Loans and Loans Held for Sale. Additionally, thereunderlying portfolio. There was also a $22.0$11.3 million increase in Transaction Fees, Net, and a $2.4 million increase indecrease from (Loss) Gain on Sale of Borrower Loans, both of which were due to the increase in originations during this time. Other Revenues also increased $1.3 million, related primarily to additional credit referralincentives provided to whole loan investors (“incentives”) driven by market volatility and incentive fee revenue due to increased application volume. These increases were partially offsetincentives offered by competitors, as well as a $11.7decrease in whole loan originations from the prior year. Finally, there was a $2.6 million decrease in Total Interest Income (Expense), Net, due primarilyin part to loweraccelerated debt issuance costs recognized upon the termination of the PWIIT Warehouse Line in September 2023 (see Note 11, Debt), as well as increased Warehouse Line interest expense due to higher interest rates and increased average outstanding principal balances on securitized Borrower Loans (prior to their deconsolidation from the balance sheet on September 27, 2021), and a $3.5 million decrease in Servicing Fees, Net, as the servicing book of whole loans declined.through our consolidated warehouse trusts for the past year.
Total expenses for the year ended December 31, 20212023 increased $198.2$115.1 million as compared to the year ended December 31, 2020,2022, which is primarily due to a $138.6 million loss from the Change in Fair Value of Convertible Preferred Stock Warrants, which compared to a $37.7 million gain for the year ended December 31, 2021. The lossis in 2021 isturn driven by an increasechanges in the fair value of the underlying Convertible Preferred Stock. Specifically, the loss for the year ended December 31, 2023 totals $48.7 million, which compares to a gain of $84.6 million for 2022, a change of $133.3 million. Total Expenses also increased due to the one-time $8.6 million Gain on Forgiveness of PPP Loan in 2022, as the U.S. Small Business Administration (“SBA”) formally forgave our Paycheck Protection Program (“PPP”) loan in March 2022 (Note 11). We also incurred $12.3 million in Interest Expense for the year ended December 31, 2023 on the Term Loan we closed in November 2022 (Note 11). Only $1.5 million in Interest Expense was incurred on that Term Loan in 2022. These increases were partially offset by a combined $36.2 million decrease in Origination and Servicing, Sales and Marketing and General and Administrative expenses, increased a combined $20.7 million from the prior year, as costs increased to support the higher origination volume in 2021. Additionally, various cost reductions were achieved in 2020decreased in response to the COVID-19 pandemic, including lower compensation and professional services costs. For the year ended December 31, 2021, we also recognized a $1.5 million loss related to the deconsolidation of our securitization variable interest entities (“VIEs”), which is more fully discussed in Note 6 of the accompanying consolidated financial statements. Accordingly,personal loan originations. Accordingly, the net loss for the year ended December 31, 2021 2023 increased $156.9 million$177.0 million when compared to the net income generated for the year ended December 31, 2020.2022.
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Revenues
The following table summarizes our revenues for the years ended December 31, 2021, 20202023, 2022 and 20192021 (in thousands, except percentage)percentages):
Years Ended December 31,
Years Ended December 31,Years Ended December 31,
20212020Change% Change20202019Change% Change 20232022Change% Change20222021Change% Change
Operating Revenues:Operating Revenues:   
Transaction Fees, NetTransaction Fees, Net$89,364 $67,335 $22,029 33 %$67,335 $119,282 $(51,947)(44)%
Transaction Fees, Net
Transaction Fees, Net$127,838 $162,742 $(34,904)(21)%$162,742 $89,364 $73,378 82 %
Servicing Fees, NetServicing Fees, Net15,024 18,517 (3,493)(19)%18,517 23,406 (4,889)(21)%Servicing Fees, Net15,364 15,113 15,113 251 251 2 2 %15,113 15,024 15,024 89 89 1 1 %
Gain on Sale of Borrower Loans7,196 4,816 2,380 49 %4,816 10,946 (6,130)(56)%
Fair Value of Warrants Vested on Sale of Borrower Loans— — — n/a— (17,553)17,553 100 %
(Loss) Gain on Sale of Borrower Loans(Loss) Gain on Sale of Borrower Loans(12,380)(1,039)(11,341)n/m(1,039)7,196 (8,235)n/m
Other Revenues
Other Revenues
Other RevenuesOther Revenues3,992 2,711 1,281 47 %2,711 5,953 (3,242)(54)%6,108 6,452 6,452 (344)(344)(5)(5)%6,452 3,992 3,992 2,460 2,460 62 62 %
Total Operating RevenuesTotal Operating Revenues115,576 93,379 22,197 24 %93,379 142,034 (48,655)(34)%Total Operating Revenues136,930 183,268 183,268 (46,338)(46,338)(25)(25)%183,268 115,576 115,576 67,692 67,692 59 59 %
Interest Income (Expense):Interest Income (Expense):
Interest Income (Expense):
Interest Income (Expense):
Interest Income on Borrower Loans and Loans Held for Sale
Interest Income on Borrower Loans and Loans Held for Sale
Interest Income on Borrower Loans and Loans Held for SaleInterest Income on Borrower Loans and Loans Held for Sale83,107 104,150 (21,043)(20)%104,150 100,786 3,364 3 %115,663 86,350 86,350 29,313 29,313 34 34 %86,350 83,107 83,107 3,243 3,243 4 4 %
Interest Expense on Financial InstrumentsInterest Expense on Financial Instruments(50,816)(60,127)9,311 (15)%(60,127)(63,736)3,609 (6)%Interest Expense on Financial Instruments(91,983)(60,025)(60,025)(31,958)(31,958)53 53 %(60,025)(50,816)(50,816)(9,209)(9,209)18 18 %
Total Interest Income (Expense), Net32,291 44,023 (11,732)(27)%44,023 37,050 6,973 19 %
Change in Fair Value of Financial Instruments, Net(3,241)(34,166)30,925 91 %(34,166)(25,514)(8,652)(34)%
Total Interest Income, Net
Total Interest Income, Net
Total Interest Income, Net23,680 26,325 (2,645)(10)%26,325 32,291 (5,966)(18)%
Change in Fair Value of Financial InstrumentsChange in Fair Value of Financial Instruments(22,910)(9,712)(13,198)(136)%(9,712)(3,241)(6,471)(200)%
Total Net RevenuesTotal Net Revenues$144,626 $103,236 $41,390 40 %$103,236 $153,570 $(50,334)(33)%
Total Net Revenues
Total Net Revenues$137,700 $199,881 $(62,181)(31)%$199,881 $144,626 $55,255 38 %
n/m: not meaningful
Transaction Fees, Net
We earn a transaction fee upon the successful origination of all Borrower Loans facilitated through our marketplace. WeSpecifically, we receive payments from WebBank as compensation for the activities we perform on behalf of WebBank. Our fee is determined by the term and credit grade of the Borrower Loans that we facilitate on our marketplace and WebBank originates. We record the transaction fee revenue net of any fees paid by us to WebBank.
We also earn various program fees from our Credit Card product, such as interchange fees, annual fees and late fees, and broker fees from our Home Equity Products. These program and broker fees are recorded within Transaction Fees, Net.
Transaction Fees increaseddecreased by $22.0$34.9 million, or 33%21%, for the year ended December 31, 2021,2023, as compared to 2020.2022. This increase wasdecrease is generally consistent with the higherlower personal loan origination volume discussed above.above, with some offsetting benefit from the revised WebBank transaction fee schedule starting in the fourth quarter of 2023. Under the revised WebBank transaction fee schedule, transaction fees now range from 1% to 7.99%, depending on the term and credit grade of the Borrower Loan, as compared to 1% to 5% under the previous schedule. Transaction fees above 5% are refundable on a pro-rated basis upon the full prepayment of the related personal loan under Utah law, where WebBank is domiciled, and thus the impact of these increased transaction fees is reduced by expected refunds. The decrease was also partially offset by growth in our Credit Card product, as we recognized approximately $18.1 million in program fees under our Credit Card product for the year ended December 31, 2023, as compared to $7.0 million for 2022, an increase of $11.1 million.
Servicing Fees, Net
Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is generally set at 1.075%1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment.payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The servicing feeServicing Fee compensates us for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, payments to investors and maintaining investors’ account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. The decreaseWe also include any collection fees received, net of $3.5 million, or 19%,collection agency expenses, in Servicing Fees for the year ended December 31, 2021 as compared to 2020 was primarily due to a lower average principal balance of whole loans serviced, which was in turn due primarily to (a) the reduced originations in the prior year as a result of the COVID-19 pandemic, and (b) an increase in the average principal balance of loans held in consolidated warehouse trusts.
We also increased our base market servicing rate from 0.625% to 0.648% in the third quarter of 2021, which further decreased our Servicing Fees, Net balance for the year ended December 31, 2021. This change was developed with the assistance of a valuation specialist, and was primarily due to observations of increased market servicing compensation rates.
Gain on Sale of Borrower Loans
Gain on Sale of Borrower Loans consists of net gains on Borrower Loans sold through the Whole Loan Channel. The $2.4 million or 49%, increase in the gain for the year ended December 31, 2021 compared to 2020 was primarily due to increases in the volume of whole loans sold due to higher originations, as discussed above.Fees.
4548



Fair ValueIn addition, we are contractually obligated to service the entire portfolio under our Credit Card product. Our banking partner, Coastal, pays us a servicing fee of Warrants Vested1% per annum of the daily outstanding principal balance of all cards designated as Coastal allocations (approximately 10% of the portfolio). To the extent that these contractual fees are less than the market servicing rate that would be required by a market participant to service the entire portfolio, a servicing obligation is recorded. Changes to this servicing obligation are included in Servicing Fees, Net.
For the year ended December 31, 2023, Servicing Fees, Net remained relatively flat year-over-year with an increase of $0.3 million, or 2%. This increase is primarily due to a combined increase of $5.8 million in whole loan servicing revenues and debt sale fees during this period, as well as a $0.4 million increase in net loan trailing fees, due to the increase in the balance of whole loans outstanding. These increases were partially offset by a $3.5 million net decrease in collection fees, generally due to an increase in charge-offs and additional spend on collection agencies compared to 2022. Additionally, there was a $2.3 million increase in the net Credit Card servicing obligation (reducing Servicing Fees) for the year ended December 31, 2023, as compared to 2022, due to the growth in the portfolio.
(Loss) Gain on Sale of Borrower Loans
Fair Value of Warrants Vested(Loss) Gain on Sale of Borrower Loans relatesconsists of net (losses) gains on Borrower Loans sold through the Whole Loan Channel, net of any incentives provided at the time of sale. Starting in the second half of 2022, due to warrantsmarket volatility and incentives offered by competitors, we provided additional incentives to purchase Series F Convertible Preferred Stock issuedour whole loan investors. For the year ended December 31, 2023, these incentives increased $7.2 million from the prior year. Excluding the impact of these incentives, the remaining decrease in (Loss) Gain on Sale of Borrower Loans of $4.1 million for the year ended December 31, 2023, as compared to 2022, was primarily due to decrease in the Consortium that vested when the Consortium purchasedvolume of whole loans under the Consortium Purchase Agreement, which ended in May 2019. Since that date, no further warrants have been issued.sold due to lower personal loan originations, as discussed above.
Other Revenues
Other Revenues consistconsists primarily of credit referral and incentive fees. Credit referral fees are earned from partner companies for the referral of customers on our platform, while incentive fees are earned from partner companies through our incentive programs. The $1.3$0.3 million, or 47% increase5%, decrease in Other Revenues for the year ended December 31, 20212023 as compared to 20202022 was due primarily related to increased application volume referred to our credit referral partners, and additional incentive fees earned for this period.due to a specific program that terminated in June 2022.
Interest Income on Borrower Loans and Loans Held for Sale and Interest Expense on Financial Instruments
We recognize Interest Income on Borrower Loans and Loans Held for Sale using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record interest expense on the corresponding Notes, Notes Issued by Securitization Trust Certificates Issued by Securitization Trust, and Warehouse Lines based on the contractual interest rates. The interest rate on Notes is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans. Additionally, Interest Expense associated with Term Loan proceeds used to purchase Loans Held for Sale through our Warehouse Lines is allocated to Net Interest Income. For the year ended December 31, 2023, we allocated $0.2 million in Interest Expense on the Term Loan to Net Interest Income.
The decrease of $11.7$2.6 million, or 27%10%, in Total Interest Income (Expense) for the year ended December 31, 20212023 as compared to 20202022 was primarily due to lower outstanding principal balances on Borrower Loans, Notes Issued by Securitization Trust and Certificates Issued by Securitization Trust associatedthe $1.9 million of accelerated debt issuance costs recorded upon the termination of the PWIIT Warehouse Line, combined with our consolidated securitization VIEs prior to their deconsolidation from our balance sheet on September 27, 2021. After that date, no interest was accrued on those financial instruments. There have been no new securitizations since 2019. Net interest income from the securitizations decreased approximately $17.3a net $4.8 million as compared to the prior year. This was partially offset by a $4.2 million increase in Net Interest Incomedecrease from Loans Held for Sale as we increased the usage of ourand Warehouse Lines, and the average outstanding principal balance on these loans increased from the prior year. Additionally, there was a $1.4 millionas market interest rates drove an increase in Net Interest Income due to a decrease in the amortizationcost of securitization set up costs, due toborrowing on the timingvariable interest Warehouse Lines. These were partially offset by additional net interest income from securitized Borrower Loans and Notes of when these costs were incurred in 2019.$3.0 million, collections accounts of $0.9 million and Borrower Loans funded through the Note Channel of $0.4 million.
Change in Fair Value of Financial Instruments Net
We record Borrower Loans, Loans Held for Sale, Notes and Certificates Issued by Securitization Trustthe Credit Card Derivative (see Note 5 of the accompanying consolidated financial statements) at fair value. Changes in the fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the Notes due to their borrower payment-dependent structure. Our obligation to pay principal and interest on Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of the servicing fee, which is generally 1.0% of the outstanding balance.
We use Warehouse Lines to finance the purchase of Loans Held for Sale for the purpose of earning Net Interest Income and contributing to securitization transactions. Loans Held for Sale consist primarily of loans held in warehouse trusts. Changes in the fair value of Loans Held for Sale are not offset by changes in the fair value of Warehouse Lines because Warehouse Lines are carried at amortized cost. See Note 1011 of the accompanying notes to PMI’s consolidated financial statements for more details on Warehouse Lines.
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In 2019,September 2023, we co-sponsoredsponsored and consolidated threea securitization transactions. On September 27, 2021, we sold our interest in residual certificates issued by these three consolidated securitizations and ceased to betransaction, the primary beneficiary. As a result, we deconsolidated these entities from our financial statements on that date, including the Borrower Loans and Certificates Issued by Securitization TrustPMIT 2023-1 Transaction, with loans that were carried at fair value. All necessary fair value adjustments were recorded up to the date of deconsolidation.previously funded through our PWIIT Warehouse Line. Refer also to Note 67, Securitization, of the accompanying notes to PMI’s consolidated financial statements for additional information on the deconsolidation of these entities. Changesthis securitization transaction. We expect that changes in the fair value of Borrower Loans held in consolidated securitization trusts are historicallyby PMIT 2023-1 will be negative due to actualdelinquencies and charge-offs, but they could ultimately be negative or positive due to changes in fair value adjustments that are attributable to changes inassumptions, such as expected credit performance, prepayment rates and implied market discount rates. Notes issued by PMIT 2023-1 are carried at amortized cost on the accompanying condensed consolidated balance sheet, and thus do not impact the Change in Fair Value of Financial Instruments.
We earn interest income on loans held in warehouse and securitization trusts during the period we own or consolidate the loans, which partially offsets changes in the fair value of those loans. The following table illustratestables illustrate the composition of the loans held in warehouse and securitization trusts by Prosper Rating, which is an indicator of thetheir credit quality:
Years Ended December 31,
20232022
Loans Held for Sale(1):
AA28 %28 %
A27 %27 %
B22 %22 %
C12 %13 %
D6 %6 %
E4 %4 %
HR1 %— %
Grand Total100 %100 %
(1) The percentages are calculated as the weighted average of month-end principal balances of Loans Held for Sale by Prosper Rating.
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Year Ended December 31, 2023
Borrower Loans - Securitization(2):
AA24 %
A26 %
B23 %
C13 %
D7 %
E6 %
HR1 %
Total100 %
(2) The percentages are calculated using the weighted-average of month-end principal balances of Borrower Loans by Prosper Rating.


Years Ended December 31,
20212020
Loans Held for Sale(1):
AA22 %16 %
A33 %35 %
B28 %34 %
C14 %11 %
D3 %4 %
E— %— %
HR— %— %
Grand Total100 %100 %
(1) The percentages are calculated as the weighted average of month-end principal balances of Loans Held for Sale by Prosper Rating.
Fair values of Borrower Loans, Loans Held for Sale Notes and Certificates Issued by Securitization TrustNotes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The key assumptions used include default and prepayment rates derived primarily from historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. For the years ended December 31, 2023 and 2022, the Change in Fair Value of Financial Instruments, Net were losses of $22.9 million and $9.7 million, respectively.
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The increase in the loss for the year ended December 31, 2023 as compared to the prior year is largely driven by Loans Held for Sale, due to higher delinquencies and charge-offs combined with the impact from higher interest rates as the outstanding balance of Loans Held for Sale continued to increase until the PMIT 2023-1 Transaction was completed on September 25, 2023. The loss from changes in fair value for the year ended December 31, 2023 was $39.3 million, due to a $11.3 million loss on fair value and $28.0 million in net charge-offs. This compares to 2022, when there was a loss from changes in fair value of $25.0 million, due to a $13.2 million loss on fair value and $11.8 million in net charge-offs.
For fractional Borrower Loans and Notes, the net impact to the Change in Fair Value of Financial Instruments was a $0.1 million gain for the year ended December 31, 2023, due to the borrower payment-dependent structure described above. In 2022, the net impact from these fractional Borrower Loans and Notes was a $0.4 million gain. For Borrower Loans held in PMIT 2023-1, the loss from changes in fair value was $8.1 million for theyear ended December 31, 2023 and related primarily to delinquencies and charge-offs.
The Credit Card Derivative is recorded at fair value and is primarily reflective of discounted future cash flows from certain features of our Credit Card program that were determined to meet the definition of freestanding derivatives, including interest income, program fees paid to our banking partner Coastal, credit losses and fraud losses. These cash flows are estimated based upon a set of valuation assumptions, including default and prepayment rates derived primarily from comparable companies and our own historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. ForSee Note 5 of the years ended December 31, 2021accompanying consolidated financial statements for further details.
Fair value changes related to future cash flows underlying the Credit Card Derivative resulted in a gain of $26.1 million and 2020, the Change in Fair Valuenet impact of Financial Instruments, Netrealized transactions was a loss of $3.2 million and a loss of $34.2 million, respectively.
The decrease in the loss for the year ended December 31, 2021 as compared to the prior year was largely due to improvements in the economic landscape since the start of the COVID-19 pandemic in 2020, which negatively impacted the fair value of the financial instruments due to changes in valuation assumptions, including increased discount and default rates. There has also been an overall decrease in net charge-offs due to government stimulus, COVID-19 payment relief programs and tighter underwriting standards that we implemented in response to the COVID-19 pandemic.
For Loans Held for Sale, the gain from changes in fair value was $0.4 million for the year ended December 31, 2021, due to a $7.6 million gain on fair value, partially offset by $7.2 million in net charge-offs. This compares to 2020, when the fair value losses were $3.3 million and net charge-offs totaled $8.6 million. The improvement from the prior year is due in part to the $1.4 million decrease in net charge-offs, primarily reflective of decreases in projected future default rates.
For Borrower Loans, the gain from changes in fair value was $0.6 million for the year ended December 31, 2021, as compared2023. This compares to the prior year, when fair value changes related to projected future cash flows were $9.8 million, while the net impact of realized transactions was a $48.6 million lossgain of $4.3 million. These fluctuations in gains and losses on the Credit Card Derivative for the year ended December 31, 2020. This change consisted primarily2023, as compared to prior year, are largely reflective of the significant growth in the Credit Card portfolio, given that the Credit Card program was launched in December 2021, partially offset by increased charge-offs.
We also hold a $18.7 million increaseswaption to limit our exposure to fluctuations in fair value adjustments, driven by more favorable fair value assumptions and the receipt of borrower payments on previously discounted loans, as well as decreased net charge-offs of $30.6 million. Charge-offs increased in 2020SOFR due to the economic impactour PWIT Warehouse Line, which consists of the COVID-19 pandemic. Additionally, as the portfoliotwo classes of securitized Borrower Loans continued to season (prior to their deconsolidation from our balance sheet), the outstanding balance of these loans was reduced and the level of charge-offs decreased.
The fair value adjustment gains related to securitized Borrower Loans also contributed tothat bear interest at SOFR plus a $6.1 million loss fromdefined spread (see Note 11 for further information). The change in fair value associated with Certificates Issued by Securitization Trustof the swaption was a loss of $1.2 million and a gain of $0.8 million for the yearyears ended December 31, 2021. Specifically,2023 and 2022, respectively. The decrease in the value of these certificates increased asthe swaption year-over-year is largely driven by an increase in the strike price of September 27, 2021 to reflect the price at which we sold our residual certificate holdings to an unrelated third party. Finally, the gain on changesswaption in fair value from Notes of $1.9 million for the year ended December 31, 2021 was generally consistent with charge-offs exceeding positive fair value adjustments for loans funded through the Note Channel. For the year ended December 31, 2020, the gain on changes in fair value from Notes was $19.7 million. As charge-offs have decreased from the prior year, the fair value gain on Notes has decreased as well.2023.
4751



The following table details the change in fair value of our financial instruments for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, respectively (in thousands):
Years Ended December 31,
202120202019
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2023
Assets:
Assets:
Assets:Assets:
Borrower LoansBorrower Loans$595 $(48,620)$(50,845)
Borrower Loans
Borrower Loans
Loans Held for SaleLoans Held for Sale422 (11,883)(6,894)
Loans Held for Sale
Loans Held for Sale
Credit Card Derivative (includes gains and losses from settled transactions)
Credit Card Derivative (includes gains and losses from settled transactions)
Credit Card Derivative (includes gains and losses from settled transactions)
SOFR rate swaption (included in Prepaid and Other Assets)
SOFR rate swaption (included in Prepaid and Other Assets)
SOFR rate swaption (included in Prepaid and Other Assets)
Liabilities:
Liabilities:
Liabilities:Liabilities:
NotesNotes1,910 19,664 22,812 
Notes
Notes
Certificates Issued by Securitization Trust
Certificates Issued by Securitization Trust
Certificates Issued by Securitization TrustCertificates Issued by Securitization Trust(6,110)6,679 7,621 
TotalTotal$(3,183)$(34,160)$(27,306)
Total
Total
Expenses
The following table summarizes our expenses for the years ended December 31, 2021, 20202023, 2022 and 20192021 (dollar amounts in thousands):
Years Ended December 31, Years Ended December 31,
20212020$ Change% Change20202019$ Change% Change
202320232022$ Change% Change20222021$ Change% Change
Expenses:Expenses:
Origination and Servicing
Origination and Servicing
Origination and ServicingOrigination and Servicing$35,056 $29,897 $5,159 17 %$29,897 $34,915 $(5,018)(14)%$46,669 $$56,457 $$(9,788)(17)(17)%$56,457 $$35,056 $$21,401 61 61 %
Sales and MarketingSales and Marketing35,065 29,259 5,806 20 %29,259 73,824 (44,565)(60)%Sales and Marketing53,585 81,896 81,896 (28,311)(28,311)(35)(35)%81,896 35,065 35,065 46,831 46,831 134 134 %
General and Administrative - Research and DevelopmentGeneral and Administrative - Research and Development17,172 14,925 2,247 15 %14,925 17,246 (2,321)(13)%General and Administrative - Research and Development19,069 20,670 20,670 (1,601)(1,601)(8)(8)%20,670 17,172 17,172 3,498 3,498 20 20 %
General and Administrative - OtherGeneral and Administrative - Other55,950 48,459 7,491 15 %48,459 54,342 (5,883)(11)%General and Administrative - Other66,464 62,988 62,988 3,476 3,476 6 6 %62,988 55,950 55,950 7,038 7,038 13 13 %
Change in Fair Value of Convertible Preferred Stock WarrantsChange in Fair Value of Convertible Preferred Stock Warrants138,622 (37,677)176,299 468 %(37,677)(11,235)(26,442)235 %Change in Fair Value of Convertible Preferred Stock Warrants48,695 (84,595)(84,595)133,290 133,290 n/mn/m(84,595)138,622 138,622 (223,217)(223,217)n/mn/m
Impairment Expenses— 445 (445)(100)%445 — 445 100 %
Restructuring Charges, Net— — — n/a— 34 (34)(100)%
Gain on Forgiveness of PPP LoanGain on Forgiveness of PPP Loan— (8,604)8,604 (100)%(8,604)— (8,604)n/a
Loss on Deconsolidation of VIEsLoss on Deconsolidation of VIEs1,494 — 1,494 100 %— — — n/aLoss on Deconsolidation of VIEs— — — — — n/an/a— 1,494 1,494 (1,494)(1,494)(100)(100)%
Impairment ExpenseImpairment Expense196 — 196 n/a— — — n/a
Interest Expense on Term LoanInterest Expense on Term Loan12,265 1,527 10,738 703 %1,527 — 1,527 n/a
Other Income, NetOther Income, Net(463)(639)176 (28)%(639)(1,945)1,306 (67)%Other Income, Net(2,859)(1,335)(1,335)(1,524)(1,524)114 114 %(1,335)(463)(463)(872)(872)188 188 %
Total ExpensesTotal Expenses$282,896 $84,669 $198,227 234 %$84,669 $167,181 $(82,512)(49)%Total Expenses$244,084 $$129,004 $$115,080 89 89 %$129,004 $$282,896 $$(153,892)(54)(54)%

n/a: not applicable
n/m: not meaningful
The following table reflects full-time employees as of December 31, 2021, 20202023, 2022 and 20192021 by functional area:
December 31, December 31,
202120202019 202320222021
Origination and ServicingOrigination and Servicing121 119 145 
Sales and MarketingSales and Marketing20 15 17 
General and Administrative - Research and DevelopmentGeneral and Administrative - Research and Development101 93 101 
General and Administrative - OtherGeneral and Administrative - Other142 126 141 
Total HeadcountTotal Headcount384 353 404 
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Origination and Servicing
Origination and Servicing costs consist primarily of salaries, benefits and stock-based compensation expense related to our capital markets, collections, customer support and payment processing employees and vendor costs associated with facilitatingfacilitating and servicing loans.personal loans and our Credit Card product. The increasedecrease for the year ended December 31, 20212023 of $5.2$9.8 million, or 17%, as compared to 20202022 was primarily due to a $2.8$9.0 million combined increasedecrease in personal loan servicing and origination costs, consistent with the increase
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decrease in personal loan originations discussed above. Additionally, compensation expense increased $1.2costs decreased $4.0 million, duedriven primarily by decreased headcount, while software and subscription costs decreased $0.7 million. These decreases are partially offset by a $3.5 million increase in third-party servicing costs associated with our Credit Card product, as the underlying portfolio continues to elimination of salary reductions we institutedgrow, and a $0.6 million increase in 2020 in response to the COVID-19 pandemic and amounts accrued under our long-term incentive plan. Internal-use software amortization also increased $1.3 million during this perioddepreciation due to the deploymentincrease in the balance of various marketplace features over the past year.internal-use software during this time.
Sales and Marketing
Sales and Marketing costs consist primarily of affiliate marketing, search engine marketing, online and offline campaigns, email marketing, public relations and direct mail marketing, as well as compensation expenses such as wages, benefits and stock-based compensation for the employees who support these activities. For the year ended December 31, 2021, the increase2023, the decrease of $5.8$28.3 million, or 20%35%, from the prior year wasis due primarily to a $6.2 million increasean overall reduction in marketing and advertising costs, which is generally in line with the decrease in personal loan originations during this time. This includes decreases in marketing partnership costs of $31.1 million, digital advertising spend and email advertising costs of a combined $2.3 million and direct-to-site advertising costs of $0.4 million. Additionally, marketing consulting costs decreased $0.3 million during this time. These decreases were partially offset by a $1.0$5.4 million decreaseincrease in direct mail marketing costs. Additionally, compensation expense increased $0.7$0.6 million, due primarily to eliminationthe hiring of salary reductions we institutedour new Chief Marketing Officer in 2020 in response to the COVID-19 pandemic and amounts accrued under our long-term incentive plan.May 2023.
General and Administrative – Research and Development
General and Administrative – Research and Development costs consist primarily of salaries, benefits and stock-based compensation expense related to our engineering and product development employees, andas well as related vendor costs. The increase in General and Administrative – Research and Development forFor the year ended December 31, 20212023, the decrease of $2.2$1.6 million, or 15%8%, as compared to 20202022, was primarily due largely to a $1.4an increase of $3.3 million increase in compensation expense and a $0.1 million increase in outsourced services, primarily related to the development and launch of our Credit Card product and elimination of salary reductions we instituted in 2020 in response to the COVID-19 pandemic. There was also a $0.3 million increase in software licenses and subscription costs, as we continue to invest in our marketplace technology. Additionally, we incurred $0.2 million in executive search costs. Weadditional capitalized internal-use software and web development costs in(reducing the amounts of $9.8expense). Specifically, these capitalized costs were $14.3 million and $8.3$11.0 million for the years ended December 31, 20212023 and 2020,2022, respectively. This decrease was partially offset by a $1.0 million increase in compensation expense, $0.4 million increase in software and subscriptions and $0.3 million increase in outsourced services.
General and Administrative – Other
General and Administrative – - Other expenses consist primarily of salaries, benefits and stock-based compensation expense related to our accounting and finance, risk, legal, compliance, human resources and facilities employees, professional fees related to legal and accounting and facilities expenses. The increase in General and Administrative - Other for the year ended December 31, 20212023 of $7.5 $3.5 million, or 15%6%, as compared to 20202022 was due primarily to a $5.4$2.9 million increase in compensation expense, driven by increased headcount, elimination of salary reductions we instituted in 2020 in response to the COVID-19 pandemic as well as amounts accrued under our long-term incentive plan.headcount. There was also a $1.7 million increase in software licenses and subscriptions costs to support the overall operations, including the increased headcount. Additionally, various professional services primarily relatedcosts, including accounting, tax and legal, contributed a $0.7 million increase for the year ended December 31, 2023, as compared to contracts2022. Finally, decreases in various facilities, maintenance and litigation matters. Ofdepreciation costs in the total increases attributableamount of $1.6 million partially offset the increase for the year ended December 31, 2023, as compared to compensation expense and professional services, approximately $1.4 million related to the launch of our new Credit Card product. Additionally, depreciation and executive search costs each increased $0.2 million from the prior year.
Change in Fair Value of Convertible Preferred Stock Warrants
Change in Fair Value of Convertible Preferred Stock Warrants was a loss of $138.6$48.7 million for the year ended December 31, 20212023 due to an increase in the fair value of the underlyingunderlying Convertible Preferred Stock in 2021.2023.
Change in Fair Value of Convertible Preferred Stock Warrants was a gain of $37.7$84.6 million for the year ended December 31, 20202022 due to a decrease in the fair value of the underlying Convertible Preferred Stock in 2020.2022.
Impairment ExpenseGain on Forgiveness of PPP Loan
We recorded no impairment chargeAs discussed in Note 11 of the accompanying consolidated financial statements, on March 21, 2022, we were notified by the SBA that all principal and interest under our PPP loan, totaling $8.6 million, was forgiven through a full forgiveness payment made on March 15, 2022 by the SBA to the lender of our PPP loan. As a result, we recognized the entire forgiven principal and interest as Gain on Forgiveness of PPP Loan for the year ended December 31, 2021.2022.


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Impairment Expense
We recorded a $0.4$0.2 million impairment charge for the year ended December 31, 20202023 related to our operating lease right-of-use assets. This impairment was triggered by the non-renewalvacancy of certain sublease agreements for a portion of our leased office space.space and the time expected to find a new subtenant. No impairment charge was recorded for the year ended December 31, 2022.
LossInterest Expense on Deconsolidation of VIEsTerm Loan
As discussedWe incurred $12.3 million and $1.5 million in interest costs for the years ended December 31, 2023 and 2022, respectively, related to the Term Loan we closed with a third-party financial institution in November 2022. Refer to Note 611 of the accompanying consolidated financial statements we sold our holdings of residual certificates issued by three consolidated securitization trust VIEs to an unrelated third partyfor further information on September 27, 2021. As a result of that sale, we determined that we were no longer the primary beneficiary of those VIEs and they were deconsolidated on that date. We recognized a loss on deconsolidation totaling $1.5 million, which consistsTerm Loan, including details of the $4.1interest rates. We allocated $0.2 million in cash consideration received for the sale of the residual certificates, less net assets deconsolidated of $5.6 million.
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OtherTerm Loan interest costs to Net Interest Income Net
Other Income, Net was $0.5 million for the year ended December 31, 20212023, as the related Term Loan proceeds were used to purchase Loans Held for Sale through our Warehouse Lines.
Other Income, Net
Other Income, Net was $2.9 million for the year ended December 31, 2023 and primarily consists of sublease income, interest income on Cash, Cash Equivalents, as well as sublease income. The decreasecash and cash equivalents and other miscellaneous items. The increase of $0.2$1.5 million in Other Income, Net for the year ended December 31, 2021,2023, as compared to 20202022 was primarily due to a decreasean increase in interest income of $0.2 million, asdriven by higher average cash balances (including proceeds from the Term Loan that closed in November 2022) and higher interest rates, declined throughout 2020 and into the beginning of 2021, and a decrease in sublease income of $0.1 million. These decreases were partially offset by a $0.1 million gain recognized as part of the dissolution of our BillGuard Ltd. entity in January 2021.decreased sublease income.
Non-GAAP Financial MeasuresMeasure
CoreAdjusted Net Revenue
CoreAdjusted Net Revenue is a non-GAAP financial measure that we define as our Total Net Revenue adjusted to exclude the Fair Valueimpact of Warrants Vestedinterest rates on Salethe fair value of Borrower Loans.loans held in consolidated trusts and certain infrequent or unusual transactions such as the accelerated amortization of PWIIT debt issuance costs. As a result of the termination of the PWIIT Warehouse Line in September 2023 (see Note 11, Debt), we accelerated the remaining amortization of the related deferred debt issuance costs into interest expense. We exclude the impact of this accelerated amortization because it is non-cash and because of the infrequent nature of the transaction. Management does not believe that it is reflective of our ongoing operating results. We believe it is useful to exclude the Fair Value of Warrants Vested on Sale of Borrower Loans from Total Net Revenueinvestors to derive a better measurement of our business performance. We believe that this adjustment also affords greater comparability to other companies.
The underlying Fair Value of Warrants Vested on the Sale of Borrower Loans relates to the Consortium Purchase Agreement. This agreement expired in May 2019 and we currently do not expect to sign a similar agreement to replace it. As a result, we believe that providing the Core Revenue metric that excludesexclude the impact of Fair Valueinterest rates on the fair value of Warrants Vested on Saleloans held in consolidated trusts to gain insight into the performance of Borrower Loans is useful to investors.our consolidated loans, independent of market factors that are beyond management’s control.
CoreAdjusted Net Revenue has limitations as a financial measure, should be considered as supplemental in nature and is not meant as a substitute for Total Net Revenue, which has been prepared in accordance with U.S. GAAP. These limitations include the following:
•CoreAdjusted Net Revenue excludes Fair Valuethe impact of Warrants Vested on Sale of Borrower Loans,interest rates, which ismay influence the price that a willing buyer would be willing to pay for our largest contra revenue item (no amount has been recorded since May 2019, when the Consortium Purchase Agreement ended);personal loans in a hypothetical arm’s length transaction; and
•Other companies, including companies in our industry, may calculate CoreAdjusted Net Revenue differently or not at all, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider CoreAdjusted Net Revenue alongside other financial performance measures, including Total Net Revenue and our financial results presented in accordance with U.S. GAAP. The following table presents a reconciliation of Total Net Revenue to CoreAdjusted Net Revenue for each of the periods indicated (in thousands):
 Year Ended December 31,
 202120202019
Total Net Revenues$144,626 $103,236 $153,570 
Fair Value of Warrants Vested on Sale of Borrower Loans— — (17,553)
Core Revenue$144,626 $103,236 $171,123 
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Years Ended December 31,
202320222021
Total Net Revenue$137,700 $199,881 $144,626 
Impact of interest rates on fair value of loans held in consolidated trusts(1)
2,629 7,248 3,084 
Accelerated amortization of PWIIT debt issuance costs(2)
1,880 — — 
Adjusted Net Revenue$142,209 $207,129 $147,710 
(1) Component of Change in Fair Value of Financial Instruments on the consolidated statements of operations
(2) Component of Interest Expense on Financial Instruments on the consolidated statements of operations
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as Net Income (Loss) adjusted for interest income on Available for Sale Investments and Cash and Cash Equivalents, SEC Settlement Costs,Interest Expense on Term Loan, Income Tax Expense, depreciation and amortization, impairment of long-lived assets and goodwill, stock basedGoodwill, stock-based compensation expense, Fair Value of Warrants Vested on the Sale of Borrower Loans, Restructuring Charges, and Change in Fair Value of Convertible Preferred Stock Warrants and certain infrequent or unusual transactions. Starting with the second quarter of 2023, it is also adjusted for the impact of interest rates on the fair value of loans held in consolidated trusts. Prior periods have been updated to match current period presentation. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.
We consider Adjusted EBITDA to be a helpful indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Management uses Adjusted EBITDA, to, among other things, to understand and compare operating results across accounting periods, evaluate our operations and financial performance and for internal planning and forecasting purposes. Inclusion of Adjusted EBITDA is intended to provide investors insight into the manner in which management views the performance of the Company, enhance investors’ evaluation of our operating results, and to facilitate meaningful comparisons of our results between periods. TheseThis non-GAAP financial measuresmeasure should not be considered an alternative to, or more meaningful than, the GAAP financial information provided herein.
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Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
•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;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted EBITDA does not consider the potentially dilutive impact of equity-based charges;
•Adjusted EBITDA does not reflect interest and tax payments that may represent a reduction in cash available to us; and
•Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
The major non-GAAP adjustments, and our basis for excluding them, are outlined below:
•Fair value of warrants vested on the sale of Borrower Loans and changesChanges in the fair value of Convertible Preferred Stockconvertible preferred stock warrants liability - : We exclude these chargesfair value changes primarily because they are non-cash chargesitems and the fair value varies based on the fair value of the underlying preferred stock, varying valuation methodologies and subjective assumptions. Their inclusion makes the comparison of our current financial results to previous and future periods difficult to evaluate.
•Impairment of Operating Lease Right-of-Use Assets Stock-based compensation expense- We have recognized impairment on our operating lease right-of-use assets related to vacant sublease space and the expected timing of finding new subtenants. We exclude these charges because they are non-cash and because management does not believe they are reflective of our ongoing operating results.
•Stock-Based Compensation Expense -: This consists of expenses for equity awards under our equity incentive plans. Although stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to evaluate; therefore, we believe it is useful to exclude stock-based compensation. We also excluded these expenses because they are non-cash.
•Amortization or impairment of acquired Intangible Assetsintangible assets and impairment of Goodwill -goodwill: We incur amortization or impairment of acquired Intangible Assets and impairment of Goodwill in connection with acquisitions and therefore
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exclude these amounts from our non-GAAP measures. We exclude these items because management does not believe they are reflective of our ongoing operating results.
•Restructuring Charges - We have incurred Restructuring Charges that are included in our GAAP financial statements, related to workforce reductions and estimated costsGain on Forgiveness of existing facility lease commitments due to our May 2016 restructuring. We exclude these items from our non-GAAP financial measures when evaluating our continuing business performance as these costs do not reflect expected future operating expenses. In addition, these costs do not necessarily provide meaningful insight into the fundamentals of current or historical operations of our business.
•Loss on deconsolidation of VIEsPPP Loan: We incurredrecorded a non-cash lossgain on forgiveness when our PPP loan was forgiven by the deconsolidationSBA in the first quarter of three securitization trust VIEs in September 2021, consisting of the net consideration received and net assets deconsolidated.2022. We exclude the impact of this lossgain because of the infrequent nature of the transaction. Management does not believe that it is reflective of our ongoing operating results.
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•Impairment of Operating Lease Right-of-Use Assets - We have recognized impairment on our operating lease right-of-use assets related to vacant sublease space and the expected timing of finding new subtenants. We exclude these charges because they are non-cash and because management does not believe they are reflective of our ongoing operating results.

•Impact of interest rates on the fair value of loans held in consolidated trusts: See discussion on Adjusted Net Revenue, above.

•Accelerated amortization of PWIIT debt issuance costs: See discussion on Adjusted Net Revenue, above.
•Interest Expense on Term Loan: We incur interest expense on the Term Loan we closed in November 2022, which is more fully described in Note 11 of the accompanying consolidated financial statements. Proceeds from the Term Loan are used to fund the operations of the business at our discretion, within certain limitations. This may include, but is not limited to, making investments in our Credit Card product, investing in loans held in our warehouse facilities or meeting operational obligations. We exclude the Term Loan interest expense not associated with proceeds used to invest in loans held in our warehouse facilities from Adjusted EBITDA, as it is based on the overall financing structure of PMI. This differs from Interest Expense on Financial Instruments (part of Total Net Revenues), as the proceeds from those instruments are used exclusively for the purposes of purchasing loans on our marketplace.
The following table presents a reconciliation of Net (Loss) Income to Adjusted EBITDA for each of the periods indicated (in thousands):
Years Ended December 31,
 202320222021
Net (Loss) Income$(106,462)$70,582 $(138,341)
Depreciation expense:
Origination and Servicing8,774 8,132 7,167 
General and Administrative - Other2,108 2,656 2,501 
Amortization of Intangibles107 136 172 
Stock-Based Compensation1,575 1,326 1,136 
Change in Fair Value of Convertible Preferred Stock Warrants48,695 (84,595)138,622 
Impact of Interest Rates on Fair Value of Loans Held in Consolidated Trusts2,629 7,248 3,084 
Gain on Forgiveness of PPP Loan— (8,604)— 
Loss on Deconsolidation of VIEs— — 1,494 
Impairment Expense196 — — 
Interest Income on Cash and Cash Equivalents(2,473)(511)(8)
Interest Expense on Term Loan12,265 1,527 — 
Accelerated Amortization of PWIIT Debt Issuance Costs1,880 — — 
Income Tax Expense78 295 71 
Adjusted EBITDA$(30,628)$(1,808)$15,898 
Years Ended December 31,
 202120202019
Net (Loss) Income$(138,341)$18,551 $(13,711)
Fair Value of Warrants Vested on Sale of Borrower Loans— — 17,553 
Depreciation expense:
    Servicing and Origination7,167 5,830 5,111 
    General and Administrative - Other2,501 2,300 2,286 
Amortization of Intangibles172 219 279 
Impairment Expenses— 445 — 
Stock-Based Compensation1,136 1,913 4,528 
Restructuring Charges, Net— — 34 
Change in Fair Value of Convertible Preferred Stock Warrants138,622 (37,677)(11,235)
Interest Income on Available for Sale Securities, Cash and Cash Equivalents(8)(184)(1,025)
Loss on Deconsolidation of VIEs1,494 — — 
Income Tax Expense71 16 100 
Adjusted EBITDA$12,814 $(8,587)$3,920 
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The decrease in Adjusted EBITDA for the year ended December 31, 2023, as compared to 2022, is primarily reflective of decreased personal loan originations, changes in the fair value of securitized Borrower Loans and Loans Held for Sale (other than the impact of market interest rates) and incentives provided to whole loan investors as described above, partially offset by a significant increase in Credit Card net revenues due to growth in the underlying portfolio since the Credit Card program launched at the end of 2021.
Expenses on the Consolidated Statement of Operations include the following amounts of stock-based compensation expense for the periods presented (in thousands):
Years Ended December 31, Years Ended December 31,
202120202019 202320222021
Servicing and OriginationServicing and Origination$123 $35 $417 
Sales and MarketingSales and Marketing62 69 243 
General and AdministrativeGeneral and Administrative951 1,809 3,868 
Total Stock-Based Compensation Expense Total Stock-Based Compensation Expense$1,136 $1,913 $4,528 
Total Stock-Based Compensation Expense
Total Stock-Based Compensation Expense
Segment Net Revenues and Segment Adjusted EBITDA
Refer to Note 21 of the accompanying consolidated financial statements for information on our segment reporting. The following table summarizes our segment net revenues and segment Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands).
Years Ended December 31,
20232022Change% Change20222021Change% Change
Segment Net Revenues
Personal Loan$100,921 $180,717 $(79,796)(44)%$180,717 $143,670 $37,047 26 %
Home Equity1,875 2,821 (946)(34)%2,821 946 1,875 198 %
Credit Card34,904 16,343 18,561 114 %16,343 10 16,333 n/m
Total Net Revenues$137,700 $199,881 $(62,181)(31)%$199,881 $144,626 $55,255 38 %
Segment Adjusted Net Revenues
Personal Loan$105,430 $187,965 $(82,535)(44)%$187,965 $146,754 $41,211 28 %
Home Equity1,875 2,821 (946)(34)%2,821 946 1,875 198 %
Credit Card34,904 16,343 18,561 114 %16,343 10 16,333 n/m
Total Adjusted Net Revenues$142,209 $207,129 $(64,920)(31)%$207,129 $147,710 $59,419 40 %
Segment Adjusted EBITDA
Personal Loan$(32,027)$9,301 $(41,328)n/m$9,301 $22,303 $(13,002)(58)%
Home Equity(2,483)(2,163)(320)(15)%(2,163)(2,556)393 15 %
Credit Card3,882 (8,946)12,828 n/m(8,946)(3,849)(5,097)(132)%
Total Adjusted EBITDA$(30,628)$(1,808)$(28,820)n/m$(1,808)$15,898 $(17,706)n/m
n/a: not applicable
n/m: not meaningful
Segment Adjusted EBITDA is our primary segment profitability metric and is calculated as segment revenue less operating expenses that are directly attributable to the segments’ products. Refer to Note 21 of the accompanying consolidated financial statements for a reconciliation of Segment Adjusted EBITDA to Net (Loss) Income Before Income Taxes. Segment Adjusted Net Revenue is calculated as segment revenue less the impact of changes in interest rates on the fair value of loans held in consolidated trusts and certain unusual or infrequent transactions. For the periods presented above, these adjustments only impact the Personal Loan segment.
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Comparison of 2023 and 2022
Personal Loan
Personal Loan segment net revenues decreased 44% to $100.9 million in 2023 from $180.7 million in 2022, primarily as a result of (a) a $45.0 million decrease in Transaction Fees, Net, due to the decrease in personal loan originations during this time; (b) a $24.6 million decrease in net revenues from Change in Fair Value of Financial Instruments, as described above, (c) a $11.3 million decrease in (Loss) Gain on Sale of Borrower Loans, due primarily to additional incentives provided to whole loan investors driven by market volatility and incentives offered by competitors, combined with the impact from decreases in the volume of whole loans sold due to lower originations; (d) a $0.6 million decrease in Other Revenues, due to the termination of a partner incentive agreement in June 2022; and (e) a $2.6 million decrease in Total Interest Income (Expense), Net, primarily due to the $1.9 million accelerated recognition of debt issuance costs upon the termination of the PWIIT Warehouse Line in September 2023, combined with the impact from higher Warehouse Line interest expense due to increases in market interest rates, which increased the cost of borrowing on the variable interest Warehouse Lines. These decreases were partially offset by a $4.4 million increase in Servicing Fees, Net, due to the increase in whole loans outstanding during this period, as discussed above.
Segment Adjusted Net Revenue associated with the Personal Loan segment decreased $82.5 million in 2023 compared to 2022. This is reflective of the same factors that drove the decrease in net revenues discussed above, excluding the impact of interest rates on the fair value of loans held in consolidated trusts and the accelerated recognition of debt issuance costs upon the termination of the PWIIT Warehouse Line in September 2023.
Adjusted EBITDA associated with the Personal Loan segment decreased $41.3 million in 2023 as compared to 2022. This is primarily reflective of the decrease in net revenues and segment Adjusted Net Revenue discussed above, which was not fully offset by the corresponding decrease in operating expenses.
Home Equity
For the year ended December 31, 2023, the decrease in Home Equity segment net revenues and segment Adjusted Net Revenue of $0.9 million is reflective of lower Transaction Fees, Net, due to the decreases in originations during this time. Home Equity segment net revenues consist of broker fees from our lending partners, and Adjusted EBITDA is reflective of these net revenues, offset by operating expenses.
Credit Card
For the year ended December 31, 2023, Credit Card segment net revenues and segment Adjusted Net Revenue increased $18.6 million or 114% as compared to 2022, primarily as a result of (a) a $11.0 million increase in Transaction Fees, Net; (b) a $11.4 million increase in fair value gains on our Credit Card Derivative, generally due to the overall growth in the Credit Card portfolio during this time; and (c) a $0.3 million increase in other revenue, mainly consisting of credit referral fees earned from partner companies for the referral of customers on our platform. These increases were partially offset by a $4.2 million decrease in Servicing Fees, Net, as a result of an increase in the net servicing obligation related to the Credit Card portfolio.
Adjusted EBITDA associated with Credit Card increased $12.8 million in 2023, as compared to 2022, which is primarily reflective of the increase in net revenues discussed above, partially offset by our continued investments in the Credit Card product’s growth.
Comparison of 2022 and 2021
Personal Loan
Personal Loan segment net revenues increased 26% to $180.7 million in 2022 from $143.7 million in 2021, primarily as a result of a $64.4 million increase in Transaction Fees, Net, due to the increase in originations during this time, as discussed above. This increase was partially offset by a $8.2 million decrease in Gain on Sale of Borrower Loans, due primarily to additional incentives provided to whole loan investors driven by market volatility and incentives offered by competitors. There was also a $20.6 million decrease in net revenues from Change in Fair Value of Financial Instruments, Net, due primarily to volatility in the capital markets and higher interest rates, which led to negative fair value adjustments on the loans we hold in consolidated warehouse trusts.
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Adjusted EBITDA associated with the Personal Loan segment decreased 58% to $9.3 million in 2022 from $22.3 million in 2021, which is primarily reflective of the net revenues discussed above and higher operating expenses to support the higher originations.
Home Equity
Home Equity segment net revenues increased 198% to $2.8 million in 2022 from $0.9 million in 2021 due to increased broker fees from our Home Lending Partners.
Home Equity Adjusted EBITDA was a loss of $2.2 million in 2022, which is reflective of the net revenues discussed above, offset by our continued investments in the Home Equity product, particularly with regards to operations and marketing. In 2021, Home Equity Adjusted EBITDA was a loss of $2.6 million and consisted primarily of the net revenues reflected above, offset by research and development expenses, operations costs and professional fees incurred to ramp up the product after establishing our partnership with Spring EQ in October 2020.
Credit Card
Credit Card net revenues in 2022 of $16.3 million are primarily reflective of (a) $14.1 million in fair value gains on our Credit Card Derivative and (b) $7.0 million in transaction fees, partially offset by (c) a $3.7 million increase in the servicing obligation related to the Credit Card portfolio. Because we launched our Credit Card product in December 2021, Credit Card segment net revenues were not material in 2021.
Adjusted EBITDA associated with Credit Card was a loss of $8.9 million in 2022, which is reflective of the net revenues discussed above, offset by our continued investments in the Credit Card product’s success, particularly with regards to research and development expenses, operations and marketing. In 2021, Credit Card Adjusted EBITDA was a loss of $3.8 million and consisted primarily of research and development expenses and professional fees incurred to prepare the product for launch in December 2021.
LIQUIDITY AND CAPITAL RESOURCES
We anticipatehave incurred operating losses in prior years and may continue to incur net losses in the future. For the years ended December 31, 2023 and 2022, we incurred a net loss of $106.5 million and generated net income of $70.6 million, respectively. Additionally, from our inception through December 31, 2023, we have had an accumulated deficit of $590.1 million.
We believe our liquidity needs for the next twelve months, and for the foreseeable future beyond that period, can be met through transaction fees, servicing fees, net interest income, other revenue, proceeds from sales of loans, drawsrealized gains on Warehouse Lines, proceeds from our $8.4 million loan provided by the Paycheck Protection Program (the “PPP loan”),Credit Card Derivative and Cash and Cash Equivalents. For further details related to our Term Loan and warehouse lines, and PPP loan, see Note 1011 of the accompanying consolidated financial statements. The table in the section titled “Contractual Obligations” below summarizes our current and long-term material cash requirements as of December 31, 2021.2023. Management monitors our financial results and operations. If the financial results anticipated are not achieved or we fail to maintain compliance with the debt covenants under our Term Loan, our sources of liquidity may not be sufficient to meet our operating and liquidity requirements without obtaining additional liquidity which may not be available on favorable terms or at all.

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The following table summarizes our cash flow activities for the periods presented (in thousands):
Year Ended December 31,
Year Ended December 31,Year Ended December 31,
202120202019 202320222021
Net (Loss) IncomeNet (Loss) Income$(138,341)$18,551 $(13,711)
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities$113,563 $(32,334)$(68,078)
Net cash (used in) provided by investing activities(7,178)137,655 96,480 
Net cash used in financing activities(84,628)(111,861)(15,053)
Net increase (decrease) in Cash, Cash Equivalents and Restricted Cash21,757 (6,540)13,349 
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash
Cash, Cash Equivalents and Restricted Cash at the beginning of the periodCash, Cash Equivalents and Restricted Cash at the beginning of the period213,868 220,408 207,059 
Cash, Cash Equivalents and Restricted Cash at the end of the periodCash, Cash Equivalents and Restricted Cash at the end of the period$235,625 $213,868 $220,408 

Cash, Cash EquivalentsEquivalents and Restricted Cash increaseddecreased by $21.8$41.3 million for the year ended December 31, 2021,2023, based on the following components:
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Operating Activities: $113.6$47.8 million in cashcash was provided by operating activities, driven by (a) $58.1$68.0 million in net proceeds from Loans Held for Sale, partially offset by (b) $33.2 million in cash provided by working capital and (c) $22.3$10.3 million in net loss, net of non-cash items. These non-cash items include the $1.5 million Loss on Deconsolidation of VIEs, which is more fully described in Note 6 of the accompanying consolidated financial statements.
Investing Activities:$7.2and (c) $9.9 million in cash was used in investing activities due to (a) $232.0 million in purchases of Borrower Loans and (b) $12.0 million purchases of property and equipment, primarily consisting of internal-use software, offset by (c) $236.9 million in principal payments on Borrower Loans.
Financing Activities:$84.6 million in cash was used in financing activities, due primarily to (a) $102.6 million in payments on Notes and Certificates Issued by Securitization Trusts, (b) $33.1 million in net payments on Warehouse Lines and (c) $6.8 million in net cash and restricted cash outflows from the deconsolidation of the securitization VIEs. The $6.8 million consists of $4.1 million in cash proceeds from the sale of residual certificates, offset by $10.9 million in restricted cash retained by the deconsolidated VIEs. These are offset by $59.7 million in proceeds, net of payments, from Notes, at Fair Value. We also incurred $1.7 million in debt issuance costs related to the extension of the PWIIT Warehouse Line in March 2021 and the PWIT Warehouse Line in May 2021 (Note 10).
Cash, Cash Equivalents and Restricted Cash decreased by $6.5 million for the year ended December 31, 2020, based on the following components:
Operating Activities: $32.3 million in cash was used in operating activities, driven by (a) $83.6 million in purchases, net of proceeds from sales and principal payments, of Loans Held for Sale offset by (b) $17.0 million in cash provided by working capital, primarily due to the timing of payments to investors and third-party vendors, as well as a $9.3 million reclassification of Restricted Cash to Prepaid and (c) $34.3 million in net income, netOther Assets during the year (see Note 2 of non-cash items.the accompanying consolidated financial statements).
Investing Activities: $137.7$57.0 million in cash was provided byused in investing activities primarily due to (a) $279.7 million from sales and principal payments of Borrower Loans, offset by (b) $133.6$232.3 million in purchases of Borrower Loans, and (c) $8.4(b) $15.7 million in purchases of property and equipment, primarily consisting of internal-use software.software, partially offset by (c) $191.1 million from sales and principal payments of Borrower Loans.
Financing Activities: $111.9$32.2 million in cash was used in financing activities, due primarily due to (a) $16.2$224.0 million paid for the extinguishment of principal and interest on the PWIIT Warehouse Line, (b) $63.3 million in principal payments on Warehouse Lines, net of proceeds and (c) $3.9 million in debt issuance costs related to the extensions of our PWIIT warehouse facility in February 2023, PWIT warehouse facility in May 2023 and PMIT 2023-1 securitization in September 2023, partially offset by (d) $216.0 million in proceeds, net of payments, from the issuance onof PMIT 2023-1 securitization notes and (e) $42.9 million in proceeds, net of payments, from the issuance of Notes, at Fair Value and (b) $214.9 million in payments on Notes and Certificates Issued by Securitization Trusts, offset by (c) $110.8 million in net proceeds from Warehouse Lines and (d) $8.4 million in proceeds from the PPP loan.Value.
Income Taxes
We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax
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assets. Based on the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in prior years, we have provided a full valuation allowance against our net deferred tax assets.
We recordedreport a reserveliability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. We are required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.
Off-Balance Sheet Arrangements
As a result of retaining servicing rights on the sale of Borrower Loans, we are an interest holder in certain special purpose entities that purchase these Borrower Loans. None of these special purpose entities are consolidated as we are not the primary beneficiary. Other than these special purpose entities, as of December 31, 2021,2023, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.
Contractual Obligations
As of December 31, 2021,2023, the following table summarizes our contractual obligations and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):
Payments Due by PeriodPayments Due by Period
TotalTotalLess Than 1 Year1 - 3 Years3 - 5 YearsMore Than 5 Years
Term Loan
Operating lease obligations
Payments Due by Period
TotalLess Than 1 Year1 - 3 Years3 - 5 YearsMore Than 5 Years
Operating lease obligations$11,930 $5,833 $3,484 $2,613 $— 
Financing lease obligations78 78 — — — 
WebBank purchase obligations
WebBank purchase obligations
WebBank purchase obligationsWebBank purchase obligations13,767 13,767 — — — 
WebBank minimum origination feesWebBank minimum origination fees3,744 1,244 2,500 — 
Total contractual obligationsTotal contractual obligations$29,519 $20,922 $5,984 $2,613 $— 
Term Loan
As discussed in Note 11 of the accompanying consolidated financial statements, the full principal balance and any unpaid interest on the Term Loan is payable upon maturity in November 2026. We incur daily interest that is payable at the end of each month, as well as payment-in-kind interest that is added to the outstanding principal balance if it remains unpaid at the end of the month.
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WebBank Purchase Obligations
Under our loan account program with WebBank, a Utah-charted industrial bank that serves as our primary issuing bank, WebBank retains ownership of loans facilitated through our marketplace for two business days after origination. As part of this arrangement, we have committed to purchase the loans at the conclusion of the two business days.
WebBank Minimum Origination Fees
We are required to pay WebBank a minimum fee to the extent monthly loan originations due to not meetmeeting certain contractual thresholds. This obligation is more fully discussed in Note 17 of the accompanying consolidated financial statements.
CRITICAL ACCOUNTING POLICIES
The accounting policies discussed below reflect our most significant judgments, assumptions and estimates which we believe are critical in understanding and evaluating our reported financial results including: (i)including fair value measurementmeasurements of (i) Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization Trust (prior to their deconsolidation in September 2021);Notes; (ii) Loan Servicing AssetsAsset and Credit Card Servicing Obligation; (iii) fair value measurement ofCredit Card Derivative and (iv) Convertible Preferred Stock Warrants. These judgments, estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. For a full description of all accounting policies adopted by us, please see Note 2 to our consolidated financial statements.
Valuation of Borrower Loans, Loans Held for Sale Notes and Certificates Issued by Securitization TrustNotes
We have elected the fair value option for Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization Trust.Notes. We primarily use a discounted cash flow model to estimate the fair value of Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization Trust.Notes. The key assumptions used in the valuation include default rates and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics. All these assumptions require
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significant management judgment. For further information on fair value measurement of Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization Trust,Notes, refer to Note 78 - Fair Value of Assets and Liabilities of the accompanying notes to PMI’sour consolidated financial statements.
Valuation of Loan Servicing Asset and Credit Card Servicing Obligation
We have elected to adopt the fair value method to measure the loan Servicing AssetsAsset for all classes of Servicing Assets subsequent to initial recognition. We use a discounted cash flow model to estimate the fair value of the loan Servicing Assets, which incorporates significant unobservableobservable inputs ofsuch as the contractual projected servicing fee revenue that we earn on the Borrower Loans and the current principal balances of the loans, as well as significant unobservable inputs such as the estimated market Servicing Feesservicing rate to service such loans, the prepayment rates, the default rates discount rate and the current principal balances of the loans.discount rate. For further information on fair value measurement of the loan Servicing Assets, refer to Note 56 - Servicing Assets and Note 78 - Fair Value of Assets and Liabilities of the accompanying notes to PMI’sour consolidated financial statements.
Similarly, we are responsible for servicing the entire portfolio related to our Credit Card product and recognize a servicing obligation liability to the extent servicing fees we expect to earn do not exceed the estimated market servicing rate a market participant would require to service the portfolio. We again use a discounted cash flow model to estimate the fair value of the Credit Card Servicing Obligation which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Credit Card portfolio and the current outstanding principal balances of the credit card receivables, as well as significant unobservable inputs such as the estimated market servicing rate to service the portfolio, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the Credit Card Servicing Obligations, refer to Note 5 - Credit Card and Note 8 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.
Valuation of Credit Card Derivative
We evaluated the terms of the Credit Card program agreement and determined that it contained features that met the definition of derivatives under U.S. GAAP. These features are freestanding financial instruments and have been valued separately as derivatives. A right of offset exists between the derivatives, and they are presented net on the accompanying consolidated balance sheets. We use a discounted cash flow model to estimate the fair value of the various components of the Credit Card Derivative. The key assumptions used in the valuation include default and prepayment rates derived primarily from relevant market data and historical performance, adjusted as necessary based on the perceived credit risk of the underlying cardholder. In addition, discount rates based on estimates of the rates of return that investors would require when investing in similar credit card portfolios are applied to the individual freestanding derivatives. For further information on fair value
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measurement of the Credit Card Derivative, refer to Note 5 - Credit Card and Note 8 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.
Valuation of Convertible Preferred Stock Warrants
Convertible Preferred Stock Warrants primarily consist of warrants to purchase Series E and Series F Convertible Preferred StockStock. Series F Warrants were issued to the Consortium thatand vested when the Consortium purchased whole loans under the Consortium Purchase Agreement, which ended in May 2019.
We estimate the fair value of the Series E and Series F Warrants using valuation methods appropriate at each balance sheet date. Generally, this includes determining the business enterprise value of the Company using methods that may include a discounted cash flow model, comparable public company analysis, and comparable acquisition analysis, which require significant management judgment. Additionally, we review and consider any recent transactions involving the Company's equity in determining whether such transactions should be considered in the valuation. Once the business enterprise value has been estimated, an option pricing model is used to allocate the value to the various classes of our equity. The concluded per share value for the Series E and Series F Convertible Preferred Stock Warrant is then determined using a Black-Scholes option pricing model that requires us to make key assumptions such as volatility and expected warrant term. For further information on fair value measurement of the Convertible Preferred Stock Warrants, refer to Note 78 - Fair Value of Assets and Liabilities and Note 1213 - Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock of the accompanying notes to PMI’sour consolidated financial statements.
PROSPER FUNDING LLC
Overview
Prosper Funding was formed in the state of Delaware in February 2012 as a limited liability company with PMI as its sole equity member. Prosper Funding was formed by PMI to hold Borrower Loans originated through the Note Channel and issue related Notes. Although Prosper Funding is consolidated with PMI for accounting and tax purposes, Prosper Funding has been organized and is operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding. Prosper Funding’s intention is to minimize the likelihood that its assets would be subject to claims by PMI’s creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that Prosper Funding will become subject to bankruptcy proceedings directly. Prosper Funding seeks to achieve this by placing certain restrictions on its activities and by implementing certain formal procedures designed to expressly reinforce its status as a distinct corporate entity from PMI.
As a credit marketplace, we believe our customers are more highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers’ ability or desire to participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations.
Recent Developments
We continue to track the impact of COVID-19 and its variants on our communities, and are offering assistance to qualified borrowers who are facing financial hardship as a result of the COVID-19 pandemic. These relief options include, among other things, the ability to delay up to four monthly loan payments, the ability to reduce minimum monthly payments for up to 12 months and extend the term of the loan by up to 11 months, and waived late and non-sufficient funds fees. Since COVID-19 relief was first offered in March 2020 and through December 31, 2021, approximately 9.1% of our current outstanding loan balances on a cumulative basis have enrolled in at least one of these COVID-19 relief programs. Approximately 1.2% of our outstanding loan balances are actively enrolled in at least one relief program as of December 31,
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2021. Overall requests for COVID-19 relief are declining; however, enrollment may continue as long as the pandemic continues to trigger financial hardship for borrowers.
Results of Operations
Overview
The following table summarizes Prosper Funding’s net income for the years ended December 31, 2021,2023, December 31, 20202022 and December 31, 20192021 (in thousands):
Year Ended December 31,
20212020Change% Change20202019Change% Change
Year Ended December 31,Year Ended December 31,
202320232022Change% Change20222021Change% Change
Total Net RevenuesTotal Net Revenues$62,757 $52,153 $10,604 20 %$52,153 $73,562 $(21,409)(29)%Total Net Revenues$63,224 $$86,987 $$(23,763)(27)(27)%$86,987 $$62,757 $$24,230 39 39 %
Total ExpensesTotal Expenses59,547 50,752 8,795 17 %50,752 67,620 (16,868)(25)%Total Expenses65,290 83,464 83,464 (18,174)(18,174)(22)(22)%83,464 59,547 59,547 23,917 23,917 40 40 %
Net Income$3,210 $1,401 $1,809 129 %$1,401 $5,942 $(4,541)(76)%
Net (Loss) IncomeNet (Loss) Income$(2,066)$3,523 $(5,589)n/m$3,523 $3,210 $313 10 %

Total revenues for the year endedended December 31, 2021 increased $10.62023 decreased $23.8 million, or 20%27%, from the year ended December 31, 2020,2022, primarily due to increaseddecreased administration fee revenue driven by an increasea decrease in the number of personal loan listings on theour marketplace during the period. Additionally, increased originations have ledperiod, partially offset by an increase in incentives provided to additionalwhole loan investors (for which PFL bills PMI). Because of the growth in our servicing assets and thusbook, there was a largerresulting increase in Servicing Fees, Net. There was also a decrease in (Loss) Gain on Sale of Borrower Loans. These increases were partially offsetLoans, due to the increase in incentives provided to whole loan investors, as well as decreased whole loan originations. Because these incentives are reimbursed through the administration fee
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revenue, there is no net impact on total net revenues. Other Revenues decreased by decreased Servicing Fees, Net,$0.5 million primarily due to a lower outstanding Borrower Loan balancepartner incentive program that terminated in the servicing portfolio. TotalJune 2022. Total expenses for the year ended December 31, 2021 increased $8.82023 decreased $18.2 million, or 17%22%, from 2022, largely due to a decrease in administrative fee expense during the year ended December 31, 2020 primarily due to an increaseresulting from a decrease in the number ofpersonal loans funded duringfor the period, which resulted in increased administration fee expense. The increases in loan listings and originations are due to increased investor demand, lower rates offered to borrowers and less restrictive underwriting requirements, reflecting the general economic recovery since the start of the COVID-19 pandemic.period.

Revenues
The following table summarizes Prosper Funding’s revenue for the years ended December 31, 2021, 20202023, 2022 and 20192021 (dollars in thousands):
Year Ended December 31, Year Ended December 31,
20212020Change% Change20202019Change% Change 20232022Change% Change20222021Change% Change
REVENUES:REVENUES:
Operating Revenues:Operating Revenues:     
Operating Revenues:
Operating Revenues:    
Administration Fee Revenue – Related PartyAdministration Fee Revenue – Related Party$34,017 $21,618 $12,399 57 %$21,618 $49,818 $(28,200)(57)%Administration Fee Revenue – Related Party$44,211 $$60,256 $$(16,045)(27)(27)%$60,256 $$34,017 $$26,239 77 77 %
Servicing Fees, NetServicing Fees, Net15,770 20,791 (5,021)(24)%20,791 26,368 (5,577)(21)%Servicing Fees, Net26,208 20,641 20,641 5,567 5,567 27 27 %20,641 15,770 15,770 4,871 4,871 31 31 %
Gain (Loss) on Sale of Borrower Loans8,450 6,430 2,020 31 %6,430 (5,058)11,488 227 %
Loss (Gain) on Sale of Borrower LoansLoss (Gain) on Sale of Borrower Loans(11,285)1,678 (12,963)n/m1,678 8,450 (6,772)(80)%
Other RevenueOther Revenue1,312 552 760 138 %552 155 397 256 %Other Revenue356 894 894 (538)(538)(60)(60)%894 1,312 1,312 (418)(418)(32)(32)%
Total Operating RevenuesTotal Operating Revenues59,549 49,391 10,158 21 %49,391 71,283 (21,892)(31)%Total Operating Revenues59,490 83,469 83,469 (23,979)(23,979)(29)(29)%83,469 59,549 59,549 23,920 23,920 40 40 %
Interest Income on Borrower Loans
Interest Income on Borrower Loans
Interest Income on Borrower LoansInterest Income on Borrower Loans36,952 36,765 187 1 %36,765 41,146 (4,381)(11)%52,188 45,289 45,289 6,899 6,899 15 15 %45,289 36,952 36,952 8,337 8,337 23 23 %
Interest Expense on NotesInterest Expense on Notes(34,514)(34,457)(57)— (34,457)(38,492)4,035 (10)%Interest Expense on Notes(48,572)(42,165)(42,165)(6,407)(6,407)15 15 (42,165)(42,165)(34,514)(34,514)(7,651)(7,651)22 22 %
Total Interest Income (Expense), NetTotal Interest Income (Expense), Net2,438 2,308 130 6 %2,308 2,654 (346)(13)%Total Interest Income (Expense), Net3,616 3,124 3,124 492 492 16 16 %3,124 2,438 2,438 686 686 28 28 %
Change in Fair Value of Financial Instruments, NetChange in Fair Value of Financial Instruments, Net770 454 316 70 %454 (375)829 221 %Change in Fair Value of Financial Instruments, Net118 394 394 (276)(276)(70)(70)%394 770 770 (376)(376)(49)(49)%
Total Net RevenuesTotal Net Revenues$62,757 $52,153 $10,604 20 %$52,153 $73,562 $(21,409)(29)%Total Net Revenues$63,224 $$86,987 $$(23,763)(27)(27)%$86,987 $$62,757 $$24,230 39 39 %
n/m: not meaningful
Administration Fee Revenue - Related Party
Prosper FundingWe primarily generates revenuegenerate revenues through license fees it earnswe earn under itsour Administration Agreement with PMI. The Administration Agreement contains a license granted by PFLwe grant to PMI that entitles PMI to use the marketplace for, and
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in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement, and (ii) PMI’s performance of its duties and obligations to WebBank under the Loan Account Program Agreement. The Administration Agreement requires PMI to pay PFLus a monthly license fee that is partially based on the number of personal loan listings posted on the marketplace in that month, as well as a rebate fee based on rebates givenincentives provided to investors as an incentive to incentivize the purchase of Borrower Loans from PFL. The increasedecrease in Administrative Fee Revenue of $12.4$16.0 million for the year ended December 31, 20212023 as compared to in 20202022 was primarily due to an increasea decrease in personal loan listings generated on the marketplace, duringwhich resulted in a decrease in Administrative Fee Revenue of $22.5 million for the respective periods.year ended December 31, 2023. This decrease was partially offset by a $6.5 million increase related to reimbursements received from PMI for incentives provided to whole loan investors, as discussed above.
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Servicing Fees, Net
Investors who purchase Borrower Loans from Prosper Funding through the Whole Loan Channel typically pay Prosper Fundingus a servicing fee which is currently set at 1.075%1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment.payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The servicing feeServicing Fee compensates Prosper Fundingus for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, managing payments to investors and maintaining investors’ account portfolios. Prosper Funding recordsWe record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, in Servicing Fees, Net.
The decreaseincrease in Servicing Fees of $5.0$5.6 million in the year ended December 31, 20212023 as compared to 20202022 was primarilylargely due to a lower outstanding Borrower Loan balancethe growth in the servicing portfolio.book as compared to the prior year, which resulted in approximately $6.0 million in additional Servicing Fees for the year ended December 31, 2023. This increase in 2023 was partially offset by increases in collection agency costs, net of collections and debt sale fees, as we increased our spend on these agencies in response to higher delinquencies.
(Loss) Gain (Loss) on Sale of Borrower Loans
(Loss) Gain (Loss) on Sale of Borrower Loans consists of net(losses) gains (losses) on Borrower Loans sold through the Whole Loan Channel.Channel, net of any incentives provided to investors at the time of sale. For the year ended December 31, 2021,2023, PFL recognized a gainloss of $8.5$11.3 million, an increasea decrease of $2.0$13.0 million over 2020.from 2022. This increasedecrease was primarily due to increasedadditional incentives provided to whole loan investors, due to market volatility and incentives offered by competitors. These incentives resulted in a $7.2 million decrease in (Loss) Gain on Sale of Borrower Loans as compared to 2022. Excluding the impact of these incentives, the remaining decrease in (Loss) Gain on Sale of Borrower Loans of $5.8 million for the year ended December 31, 2023, as compared to 2022, was primarily due to decrease in the volume of whole loans sold due to lower personal loan originations, during that period.as discussed above.
Other Revenues
Other Revenues consists primarily of credit referral and incentive fees. Credit referral fees are earned from partner companies for the referral of customers on our platform, while incentive fees, which are earned from partner companies through our incentive programs. The $0.8$0.5 million increasedecrease in Other Revenues for the year ended December 31, 2021,2023, as compared to 20202022, is primarily due to increaseda decrease in these incentive fees generated from a whole loan purchaser.as we terminated an incentive program in June 2022.
Interest Income on Borrower Loans and Interest Expense on Notes
Prosper Funding recognizesWe recognize Interest Income on Borrower Loans using the accrual method based on the stated interest rate to the extent Prosper Funding believeswe believe it to be collectible. Prosper Funding records interest expenseWe record Interest Expense on the corresponding Notes based on the contractual interest rates. The interest rate on Notes is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate Prosper Fundingus for servicing the underlying Borrower Loans.
Overall, the $0.5 million increase in net interest income for the year ended December 31, 2021,2023, as compared to 2020,2022, was not significant.due to an increase in the average outstanding principal balance of Borrower Loans and Notes.
Change in Fair Value of Financial Instruments, Net
Change in Fair Value of Financial Instruments, Net captures gains (losses) in fair value estimates using discounted cash flow methodologies that are based upon a set of valuation assumptions. The key assumptions used in these valuations include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. Changes in fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the corresponding Notes due to the borrower payment-dependent structure, though differences will arise due to the actual and projected impact of cash flows related to charge-offs, debt sales and miscellaneous fees.
The following table summarizes the fair value adjustments for the years ended December 31, 2021, 20202023, 2022 and 20192021 respectively (in thousands):
Year Ended December 31,
202120202019
Year Ended December 31,
Year Ended December 31,
Year Ended December 31,
2023
Borrower Loans
Borrower Loans
Borrower LoansBorrower Loans$(1,141)$(19,210)$(23,185)
NotesNotes1,911 19,664 22,810 
Notes
Notes
TotalTotal$770 $454 $(375)
Total
Total

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The increase in net revenues from Change in Fair Value of Financial Instruments for the year ended December 31, 2023, as compared to 2022, is primarily reflective of increased debt sale fees on charged-off Borrower Loans in 2023. This includes the impact of Borrower Loans transferred to PFL in conjunction with the PMIT 2023-1 Transaction, as discussed in Note 4, Borrower Loans and Notes, at Fair Value, of the accompanying consolidated financial statements. Other fair value changes are generally not material, which is consistent with the borrower payment structure described above.
Expenses
The following table summarizes Prosper Funding’s expenses for the years ended December 31, 2021, 20202023, 2022 and 20192021 (in thousands):
Year Ended December 31, Year Ended December 31,
20212020Change% Change20202019Change% Change 20232022Change% Change20222021Change% Change
Expenses:Expenses:
Administration Fee – Related PartyAdministration Fee – Related Party$52,641 $45,472 $7,169 16 %$45,472 $62,575 $(17,103)(27)%
Servicing6,409 4,900 1,509 31 %4,900 5,012 (112)(2)%
General and Administrative497 380 117 31 %380 33 347 n/a
Administration Fee – Related Party
Administration Fee – Related Party$57,683 $74,382 $(16,699)(22)%$74,382 $52,641 $21,741 41 %
Servicing and Other, NetServicing and Other, Net7,607 9,082 (1,475)(16)%9,082 6,906 2,176 32 %
Total ExpensesTotal Expenses$59,547 $50,752 $8,795 17 %$50,752 $67,620 $(16,868)(25)%
Total Expenses
Total Expenses$65,290 $83,464 $(18,174)(22)%$83,464 $59,547 $23,917 40 %
Administration Fee Expense - Related Party
Pursuant to theour Administration Agreement between Prosper Funding andwith PMI, PMI manages the marketplace on behalf of Prosper Funding.our behalf. Accordingly, each month Prosper Funding iswe are required to pay PMI (a) a corporate administration fee of $500,000 per month, (b) a fee for each Borrower Loan originated through the marketplace, (c) 62.5% of all Servicing Fees collected by us or on our behalf of Prosper Funding, and (d) all nonsufficient funds fees collected by us or on behalf of Prosper Funding. The increase of Administration Fee expense of $7.2 million for the year ended December 31, 2021 as compared to 2020 was due to the increased origination volume of Borrower Loans in 2021.our behalf. In general, the Administrative Fee Expense will not fluctuate directly in line with the Administrative Fee Revenue due to both the flat corporate administrative fee, as well as the fact that Prosper Funding payswe pay fees for three different services, but receivesreceive a fee based only on the number of personal loans listed on the platform.
The decrease in Administration Fee expense of $16.7 million for the year ended December 31, 2023, as compared to 2022, was due to a drop in the number of Borrower Loans originated through the marketplace during these periods, which contributed a $21.3 million decrease, partially offset by the increase in Servicing Fees, Net, discussed above, which resulted in a $4.4 million increase in Administration Fee - Related Party for the year ended December 31, 2023.
Servicing and Other, Net
Servicing costs consist primarily of vendor and borrower costs, as well as depreciation of internal-use software associated with servicing Borrower Loans. The increasedecrease in Servicing costs for the year ended December 31, 2021,2023, as compared to 2020,2022, was primarily driven by the increasedecrease in originations and the depreciation of internal-use software during this time.personal loan originations.
General and Administrative
General and AdministrativeOther costs consist primarily of bank service charges and professional fees. The change in General and AdministrativeOther costs for the year ended December 31, 2021,2023, as compared to 20202022 was not significant.
Servicing and Other costs are offset by the interest income of $0.6 million and $0.1 million generated from cash invested on our platform during the years ended December 31, 2023 and 2022, respectively. The increase from the prior year is primarily related to the change in interest rates.

LIQUIDITY AND CAPITAL RESOURCES
We anticipate that our available funds and cash flow from operations will be sufficient to meet our operational cash needs for at least the next 12 months.
The following table summarizes Prosper Funding’sour cash flow activities for the years ended December 31, 2021, 20202023, 2022 and 20192021 (in thousands):

 Years Ended December 31,
 202120202019
Net Income$3,210 $1,401 $5,942 
Net cash provided by (used in) operating activities$32,685 $30,750 $(12,819)
Net cash (used in) provided by investing activities(65,416)12,994 (11,219)
Net cash provided by (used in) financing activities59,683 (20,681)(5,282)
Net increase (decrease) in Cash, Cash Equivalents and Restricted Cash26,952 23,063 (29,320)
Cash, Cash Equivalents and Restricted Cash at the beginning of the period140,924 117,861 147,181 
Cash, Cash Equivalents and Restricted Cash at the end of the period$167,876 $140,924 $117,861 

Cash, Cash Equivalents and Restricted Cash increased by $27.0 million for the year ended December 31, 2021, based on the following components:
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 Years Ended December 31,
 202320222021
Net (Loss) Income$(2,066)$3,523 $3,210 
Net cash provided by (used in) operating activities$3,664 $(57,439)$32,685 
Net cash used in investing activities(47,324)(90,345)(65,416)
Net cash provided by financing activities42,850 77,757 59,683 
Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash(810)(70,027)26,952 
Cash, Cash Equivalents and Restricted Cash at the beginning of the period97,849 167,876 140,924 
Cash, Cash Equivalents and Restricted Cash at the end of the period$97,039 $97,849 $167,876 

Cash, Cash Equivalents and Restricted Cash decreased by $0.8 million for the year ended December 31, 2023, based on the following components:
Operating Activities: $32.73.7 million in cash was provided by operating activities, driven by net income, net of non-cash adjustments of $5.2 million, partially offset by cash fromused in working capital of $24.1$1.6 million, primarily due to the timing of payments to PMI and investors, and $8.6 million from net income, net of non-cash adjustments.investors.
Investing ActivitiesActivities: $65.447.3 million net cash used in investing activities, due to $232.0$232.3 million in purchases of Borrower Loans and $6.1 million in purchases of property and equipment, partially offset by $172.7$191.1 million of principal payments under Borrower Loans.
Financing ActivitiesActivities: $59.742.9 million net cash was provided by financing activities, due to $231.9$231.5 million in proceeds from the issuance of Notes, at Fair Value, partially offset by $172.3$188.7 million in payments for Notes, at Fair Value.
Cash, Cash Equivalents and Restricted Cash increased by $23.1 million for the year ended December 31, 2020, based on the following components:
Operating Activities: $30.8 million in cash was provided by operating activities, primarily driven by cash from working capital of $21.8 million, primarily due to the timing of payments to PMI and investors, and $9.0 million from net income, net of non-cash adjustments.
Investing Activities: $13.0 million net cash provided by investing activities was primarily due to $149.9 million in principal payments under Borrower Loans, partially offset by purchases of Borrower Loans of $133.6 million and property and equipment of $3.3 million.
Financing Activities: $20.7 million net cash was used in financing activities, primarily due to $149.4 million in payments for Notes, at Fair Value and $4.5 million in distributions to PMI, partially offset by $133.2 million from proceeds from the issuance of Notes, at Fair Value.
Income Taxes
Prosper FundingWe incurred no income tax provision for the years ended December 31, 20212023 and 2020. Prosper Funding is2022. We are a U.S.US disregarded entity for income tax purposes and theour income and loss is included in the return of our parent, PMI. Given PMI’s history of taxable losses, it is difficult to accurately forecast how Prosper’s and Prosper Funding’sour results will be affected by the realization and use of net operating loss carry forwards.
Off-Balance Sheet Arrangements
As a result of retaining servicing rights on the sale of Borrower Loans, Prosper Funding is anwe are a variable interest holder in certain special purposepurposes entities that purchase these Borrower Loans. None of these special purposeinterest entities are consolidated as Prosper Funding iswe are not the primary beneficiary. Otherwise as of December 31, 2023, we have not engaged in any off-balance sheet financing activities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PROSPER MARKETPLACE, INC.
Market Risk
Market risk is the risk of loss to future earnings, values, or future cash flows that may result from changes in financial market prices and interest rates.
Through the Warehouse Lines we invest in Loans Held for Sale. InvestmentsSale and through the securitization trust (formed in interest-earning instruments carry a degree of interest rate risk.September 2023) we hold Borrower Loans. Changes in U.S. interest rates affect the market value of these Loans Held for Sale heldand Borrower Loans on our balance sheet. Our future investment income may fall short of expectations, or we may suffer a loss in principal if we are forced to sell Loans Held for Sale that have declined in market value due to changes in interest rates, loss assumptions or overall market conditions. Recent interest rate increases, due in part to ongoing inflation, may increase the risks of our investments in Loans Held for Sale and Borrower Loans, and additional fluctuations in interest rates may exacerbate such risks. Changes in the market value of Loans Held for Sale are recorded on the Consolidated Statement of Operations. The fair value of Loans Held for Sale was $243.2$161.5 million and $274.6$499.8 million as of December 31, 20212023 and 2020, respectively.2022, respectively, while the fair value of Borrower Loans held in the consolidated securitization trust was $220.7 million as of December 31, 2023.

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The fair values of Borrower Loans, Loans Held for Sale, Notes and Certificates Issued by the Securitization TrustNotes are determined using discounted cash flow methodologies based upon a set of valuation assumptions such as default rate, prepayment rate and discount rate. Default rate, prepayment rate and discount rate may change due to expected loan performance or changes in the expected returns of similar financial instruments available in the market. We are exposed to the risk of a decrease in the fair value of loans held in the warehouse and securitization trusts (prior to deconsolidation in September 2021).trusts. For Borrower Loans and Notes presented on our Balance Sheet on behalf of our Note Channel investors, the fair value adjustments for Borrower Loans are largely offset by the fair value adjustments of the Notes due to the borrower payment
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dependent design of the Notes and due to the total principal balances of the Borrower Loans being very close to the total principal balances of the Notes.
We are also exposed to variable interest rate risk under the debt from the Warehouse Lines, which had an outstanding balance of $209.3$160.2 million and $242.5$446.8 million as of December 31, 20212023 and 2020,2022, respectively. To reduce the impact of large fluctuations in interest rates, we hedged a portion of our interest rate risk by entering into a derivative agreement with a financial institution, which is currently out of the money.institution. The derivative agreement that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes. Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the United States. Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, we could experience a material adverse effect on our results of operations and financial condition.
PMIWe had cash and cash equivalents of $67.7$35.0 million and $50.1$83.4 million as of December 31, 20212023 and 2020,2022, respectively. These amounts were held in various unrestricted deposits with highly rated financial institutions and short-term, highly liquid marketable securities which may include money market funds, U.S. Treasury securities, and U.S. agency securities. Cash and Cash Equivalents are held for working capital purposes. Due to their short-term nature, we believe that we do not have any material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will moderately reduce interest income on these Cash and Cash Equivalents. Increases in short-term interest rates will moderately increase the interest income earned on the Cash and Cash Equivalents.
Interest Rate Sensitivity
As more fully described in Note 7 -8, Fair Value of Assets and Liabilities, of our financial statements attached to this Annual Report on Form 10-K, the combined fair value of Borrower Loans and Loans Held for Sale is $510.8$706.5 million as of December 31, 2023, determined using a weighted-average discount rate of 6.88%. The combined fair value of Borrower Loans and Loans Held for Sale was $820.4 million as of December 31, 2021,2022, determined using a weighted-average discount rate of 5.64%. The combined fair value of Borrower Loans (including securitized Borrower Loans, which were deconsolidated from our balance sheet on September 27, 2021) and Loans Held for Sale was $652.9 million as of December 31, 2020, determined using a weighted-average discount rate of 8.26%6.72%. A hypothetical 100 basis point increase in interest rates would result inin a decrease of approximately $5.1$6.8 million and $5.8$8.3 million in the fair value of PMI’s investment in Borrower Loans and Loans Held for Sale as of December 31, 20212023 and 2020,2022, respectively. A hypothetical 100 basis point decrease in interest rates would result in an increase of approximately $5.3$6.9 million and $5.9$8.6 million in the fair value of our investment in Borrower Loans and Loans Held for Sale as of December 31, 20212023 and 2020,2022, respectively. Any realized or unrealized gains or losses resulting from such interest rate change would be recorded in our statement of operations so long as we hold these Borrower Loans and Loans Held for Sale on our balance sheet.
A portion of the interest rate charged on our Warehouse Lines is currently based on LIBOR. LIBOR has been the subject of reform and was expected to phase out by the end of fiscal 2021; however, on November 30, 2020, the ICE Benchmark Administration Limited (“ICE”) announced plans to delay the phase out of LIBOR to June 30, 2023. The consequences of the discontinuation of LIBOR cannot be entirely predicted but could impact the interest expense incurred on these debt instruments. We have negotiated alternatives to LIBOR on the PWIT and PWIIT Warehouse Lines, which we may renegotiate before LIBOR ceases to be a widely available reference rate.
PROSPER FUNDING LLC
Market Risk
Market risk is the risk of loss to future earnings, values, or future cash flows that may result from changes in financial market prices and interest rates.
Because balances, interest rates, and maturities of Borrower Loans are matched and offset by an equal balance of Notes with the exact same interest rates (net of our servicing fee) and initial maturities, we believe that we do not have any material exposure to changes in the net fair value of the combined Borrower Loan and Note portfolios as a result of changes in interest rates. We do not hold or issue financial instruments for trading purposes.
The fair values of Borrower Loans Loans Held for Sale and the related Notes are determined using discounted cash flow methodologies based upon a set of valuation assumptions. The fair value adjustments for Borrower Loans are largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and due to the total principal balances of the Borrower Loans being very close to the total principal balances of the Notes.
Prosper Funding had Cash and Cash Equivalents of $10.8$3.4 million and $8.6$6.3 million as of December 31, 20212023 and 2020,2022, respectively. These amounts were held in various unrestrictedunrestricted deposits with highly rated financial institutions and short term, highly liquid marketable securities which may include money market funds, U.S. treasury securities and U.S. agency securities. Cash and cash equivalents are held for working capital purposes. Due to their short-term nature, Prosper Funding believes that it does not have any material exposure to changes in the fair value of these liquid investments as a result of changes in interest
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rates. Decreases in short-term interest rates will moderately reduce interest income on these Cashcash and Cash Equivalents,cash equivalents, while increases in short-term interest rates will moderately increase the interest income earned on these Cashcash and Cash Equivalentcash equivalent balances.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Prosper Marketplace, Inc.
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Prosper Funding LLC
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Members' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

The supplementary financial information required by this Item 8 is included in Item 7 under the caption “Quarterly Results of Operations.”
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
In connection with the preparation of this Annual Report on Form 10-K, each Registrant’s management, under the supervision and with the participation of such Registrant’s Principal Executive Officer (PEO) and Principal Financial Officer (PFO), evaluated the effectiveness of the design and operation of such Registrant’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2021.2023. Based upon this evaluation, the PEO and the PFO of each Registrant have concluded that these disclosure controls and procedures are effective to provide reasonable assurance that material information relating to each Registrant and its subsidiaries that is required to be disclosed in reports filed with, or submitted to, the SEC under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and (ii) is accumulated and communicated to management, including its PEO and PFO, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), each Registrant’s management is required to assess the effectiveness of such Registrant’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether such Registrant’s internal control over financial reporting is effective.
Management of each Registrant is responsible for establishing and maintaining adequate internal control over financial reporting. Each Registrant’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of such Registrant’s financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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The Registrants’ management has assessed the effectiveness of the Registrants’ internal control over financial reporting as of December 31, 2021.2023. In making this assessment the Registrants used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework (2013).” These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. Each
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Registrant’s assessment included documenting and evaluating the effectiveness of its internal control over financial reporting. Based on this evaluation, the person serving as each Registrant’s PEO and PFO has concluded that such Registrant’s internal controls were effective as of December 31, 2021.2023.
Changes in Internal Control over Financial Reporting
During the fourth quarter of 2021,2023, there were no changes in the internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Attestation Report of Registered Public Accounting Firm
The Dodd-Frank Wall Street Reform and Consumer Protection Act exempts any company that is not a “large accelerated filer” or an “accelerated filer” (as defined by SEC rules) from the requirement that such company obtain an external audit of the effectiveness of its internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. As a result, the Registrants are exempt from the requirement that they include in their Annual Report on Form 10-K an attestation report on internal control over financial reporting by an independent registered public accounting firm; however, management’s annual report on internal control over financial reporting, pursuant to Section 404(a) of the Sarbanes-Oxley Act, is still required with respect to the Registrants.
ITEM 9B. OTHER INFORMATION
In April 2020, we obtained an $8.4 million loan fromEffective March 21, 2024, PMI amended the Paycheck Protection Program (“PPP”Long-Term Cash Incentive Plan (the “LTCIP”), which was established to amend certain eligibility criteria for participation in the LTCIP (the “Third Amendment to the LTCIP”). The Third Amendment to the LTCIP provides that participants must be employed by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and sponsored byCompany for at least 36 months as of March 15th of the U.S. Small Business Administration (“SBA”)calendar year following the end of a performance period in order to provide small businesses with assistancebe eligible to participate in coveringthe LTCIP.

The foregoing description of the Third Amendment to the LTCIP does not purport to be complete and is qualified payroll costs, mortgage obligations, leases,in its entirety by reference to the full text of the Third Amendment to the LTCIP, which is filed as an exhibit hereto and utilities during the economic downturn triggeredis incorporated herein by the COVID-19 pandemic. On March 21, 2022, we received notice from the SBA that our PPP loan was forgiven in full through a forgiveness payment made on March 15, 2022 by the SBA to Broadway National Bank, the lender of our PPP loan.reference.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Prosper Marketplace, Inc.
Executive Officers, Directors and Key Employees
The following table sets forth information about PMI’s current and imminent executive officers and directors as of the date of this Annual Report on Form 10-K:
NameAgePosition(s)
David Kimball5153Chief Executive Officer and Chairman of the Board
Usama Ashraf4547President and Chief Financial Officer
Edward R. Buell III4244General Counsel, Secretary and Chief Compliance Officer
Pete Woodhouse5658Chief Technology Officer
Ashish AgarwalJeff Killian4751Executive Vice President of Operations
Melinda Marchesi51Chief Marketing Officer (as of January 2022)
Claire A. Huang5961Director
Thomas R. Kearney6365Director
Peter J. deSilva6062Director
David Kimball has served as Chief Executive Officer and a director of PMI since December 2016. From March 2016 to February 2017, Mr. Kimball served as PMI's Chief Financial Officer. In May 2019, Mr. Kimball was appointed Chairman of the Board. He also currently serves as Chief Executive Officer and a director of PFL. Prior to joining PMI, Mr. Kimball was Senior Financial Officer of United Services Automobile Association's (USAA) Chief Operating Office, with financial responsibility for the real estate unit, the bank, the P&C and life insurance companies, the investment management company, and the call centers/distribution functions. Before his position as Senior Financial Officer of USAA's Chief Operating Office, Mr. Kimball spent eight years in various finance roles at USAA, including Senior Vice President of Corporate Finance; Corporate Treasurer; Chief Financial Officer of USAA Federal Savings Bank; and Assistant Vice President of Capital Markets. Prior to his time at USAA, Mr. Kimball spent ten years at Ford Motor Company and Ford Motor Credit Company in both the U.S. and U.K., working on their securitization programs, debt issuance, and a variety of financial planning and analysis positions. Mr. Kimball holds an M.B.A. and a B.A. in English from Brigham Young University. PMI believes that Mr. Kimball's financial and business expertise give him the qualifications and skills to serve as a director.
Usama Ashraf has served as PMI’s President since March 2021 and as its Chief Financial Officer since February 2017. He is currently responsible for Prosper's finance, capital markets, risk and business intelligence functions. He also currently serves as President, Chief Financial Officer, Treasurer and a director of PFL. Prior to joining PMI, from February 2016 to February 2017, Mr. Ashraf served as Deputy Chief Financial Officer and Treasurer at Annaly Capital Management, Inc. (“Annaly”). Prior to his time at Annaly, Mr. Ashraf worked at United Services Automobile Association (“USAA”), where he served as Corporate Treasurer from November 2014 to February 2016 and Assistant Corporate Treasurer from January 2014 to October 2014. Before joining USAA, Mr. Ashraf spent 13 years at CIT Group, where he held various positions in the Treasury and Corporate M&A departments, most recently serving as Deputy Treasurer with responsibility for the firm’s Treasury activities in the United States. He started his career in the investment banking division of Citigroup focused on M&A. Mr. Ashraf received a B.S. in Economics, with concentrations in Finance and Accounting, from The Wharton School of the University of Pennsylvania.
Edward “Ted” R. Buell III has served as PMI’s General Counsel and Secretary since March 2021, and its Chief Compliance Officer since June 2018. Mr. Buell also currently serves as PFL’s Secretary, a position he has held since March 2021. Prior to that, Mr. Buell served as PMI’s Deputy General Counsel from June 2018 to March 2021, its Assistant General Counsel and Deputy Chief Compliance Officer from January 2017 to June 2018 and its Senior Corporate Counsel from September 2015 to January 2017. Before joining PMI in September 2015, Mr. Buell served as an attorney at Severson & Werson P.C., advising and representing financial services clients in regulatory matters and litigation, from April 2010 to September 2015. Prior to that, Mr. Buell served as Assistant General Counsel at GreenPoint Mortgage Funding, Inc., a national mortgage bank that originated, sold and serviced mortgage loans, from September 2005 to April 2010. Mr. Buell holds a J.D. from the University of Miami School of Law and a B.A. degree in Criminology, Law and Society from the University of California, Irvine.
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Pete Woodhouse has served as PMI’s Chief Technology Officer since July 2021. Before joining PMI, Mr. Woodhouse was the Chief Technology Officer and Head of Product at Sibly, an employee mental health coaching text-based platform. Prior to his time at Sibly, Mr. Woodhouse spent 7 years in a variety of technology roles at PayPal, including as the Chief Technology Officer at PayPal Credit and as the Senior Director at PayPal Global Solutions Engineering. In Mr. Woodhouse’s role as Chief Technology Officer at PayPal Credit, he was responsible for building and integrating multiple credit products into the PayPal platform structure. Prior to his time at PayPal, Mr. Woodhouse held various product development and technology roles at PRTM, a management consulting subsidiary of PwC, Agilent Technologies, an analytical instrumentation development and manufacturing company, and spent 10 years at Hewlett-Packard Company. Mr. Woodhouse also currently serves as an Engineering Leadership Mentor at Plato, a mentorship program that aims to build soft skills in engineering and product managers. Mr. Woodhouse holds an MBA from Santa Clara University and a Bachelor of Science in Electrical Engineering from the University of Plymouth (England).

Jeff Killian has served as PMI’s Executive Vice President of Operations, since August 2022. Before joining PMI, Mr. Killian was the Vice President of Customer Success at Spot Insurance, an insurtech that provides on-demand injury insurance policies. Prior to his time at Spot Insurance, Mr. Killian led Customer Operations for North America and Australia for eBay Inc. At eBay, Mr. Killian led customer experience improvements, and customer channel strategy, while also supporting the company's changes to its payments processing platform. Prior to his time at eBay, Mr. Killian spent five years at New York Life Insurance Company as the Head of Service and Operations, a role in which he oversaw the company’s shift to digital strategies and advancing the company’s customer experience capabilities. Prior to his time at New York Life Insurance Company, Mr. Killian worked in a variety of service, sales, risk management, analytics, and strategy roles at Capital One. Mr. Killian also founded a digital consulting firm, Axeom Consulting, which he operated from 2019 to 2022. Mr. Killian holds an MBA from Southern Methodist University and a Bachelor of Business Administration (Finance) degree from Baylor University.
Ashish AgarwalMelinda Marchesi has served as PMI’s Chief Marketing Officer since January 2022. Mr. Agarwal has experience leading growth forMay 2023. Before joining PMI, Ms. Marchesi served as the Chief Operating Officer and Chief Commercial Officer at Momentum Financial Services Group, an alternative financial services company with multiple lending products. In her role at Momentum, Ms. Marchesi was responsible for all revenue-generating activities and payment fintech companies.operations. Prior to joining PMI, Mr. Agarwal served as Chief Marketing Officerher time at Plastiq, a business-to-business payment platform. Prior to Plastiq, Mr. AgarwalMomentum, Ms. Marchesi spent 3ten years at Humana,JPMorgan Chase & Co. in a Fortune 50 health insurance and healthcare company, as the line-of-businessvariety of Managing Director positions, including Chief Marketing Officer for Humana’s Pharmacy division.the Chase Auto and Home Lending businesses, and Head of Digital Marketing for Credit Cards. In her roles at JPMorgan Chase, Ms. Marchesi managed digital and traditional marketing activities across multiple product lines and managed both the direct lending activities and marketing activities for the Chase Auto business. Prior to Humana, Mr. Agarwal served as Chief Growth Officer for 4her time at JPMorgan Chase & Co., Ms. Marchesi spent thirteen years at Remitly,Willis Towers Watson (formerly Towers Watson), a digital remittance company. During his timeglobal B-to-B consultancy, including four years as Chief Growth Officer, Mr. Agarwal builtthe Global Digital Marketing Director. In her role as Global Digital Marketing Director, she oversaw all online communication and led Remitly’s global marketing strategy from its early stages through several financing rounds. Prior to his time at Remitly, Mr. Agarwal held various marketing, strategy and analytics roles for 7 years at Capital One Financial Corporation, including as Vice President of Marketing and Analytics and as Director of Partnerships Deal Valuations. Mr. Agarwalstrategies. Ms. Marchesi also currently serves as strategic advisor for Wealthmore, an alternative investment platform start-up, and as a Venture Partner with NextGen Venture Partners, which invests in early-stage technology companies. Mr. Agarwallimited partner for How Women Invest, an investment fund that focuses on female and minority entrepreneurs. Ms. Marchesi holds an MBAM.A. in Professional Communication from VanderbiltLa Salle University and a Bachelor of TechnologyB.A. in Mechanical EngineeringEnglish and Journalism from the Indian InstituteUniversity of Technology, Madras (India).Richmond.
Claire A. Huang has served as a director of PMI since December 2017. Ms. Huang is currently a member of the board of directors of SigFig, a robo-investing and customer engagement software provider, Zions Bancorporation N.A., a regional bank, Filinvest Development Corporation, a Philippines-based real estate development company, and PODS, a leading storage and moving company. She is a member of the audit committee and compensation committee of Zions Bancorporation N.A. She is also a member of the corporate governance committee, the related-party transaction committee, and chairwoman of the digital committee of Filinvest Development Corporation. She previously served as a director of Mirador Financial, Inc., a small business lending platform, from 2017 to 2018, and Scottrade, a leading online brokerage firm, from 2015 to 2017.2018. Ms. Huang has extensive experience in marketing and brand management. She served as the first global Chief Marketing Officer of JP Morgan Chase from 2012 to 2014, where she worked with the marketing teams across all Chase retail and JP Morgan wholesale businesses to build brands and businesses with a customer focus. Before joining JP Morgan Chase, from 2008 to 2012, Ms. Huang held global head of marketing positions at Bank of America Merrill Lynch, where she was responsible for a number of high profile marketing initiatives, including the integration of Merrill Lynch and Bank of America and the launch of Merrill Edge, the company’s brokerage platform. Prior to her time at Bank of America Merrill Lynch, Ms. Huang held marketing leadership positions at Fidelity Investments, American Express Company, Wise Foods, and The Häagen-Dazs Company. Ms. Huang received a B.A. in Economics from De La Salle University in Manila, Philippines. PMI believes that Ms. Huang’s marketing and brand management expertise, as well as her experience at several leading financial institutions, give her the qualifications and skills to serve as a director.
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Thomas R. Kearney was appointed as a director of PMI in May 2020. Mr. Kearney is currently a member of the Board of Directors and Finance Committee of the Plattsburgh College Foundation, a non-profit organization affiliated with the State University of New York at Plattsburgh. Mr. Kearney is also a member of the Board of Directors of the YMCA of San Francisco, a non-profit organization (“YSF”). Additionally, he is YSF Finance Committee Chair and a member of the YSF Board Executive Committee. Mr. Kearney is a CPA with extensive technical accounting and auditing experience. He previously worked at PricewaterhouseCoopers LLP for nearly 35 years and served as Assurance Partner for 20 years. In this role, Mr. Kearney helped financial services clients navigate a wide range of complex financial instruments, credit arrangements and operational processes and controls. Prior to PwC, Mr. Kearney conducted periodic reserve reporting for the Federal Reserve Bank of San Francisco and assisted with the implementation of Regulation D and Contemporaneous Reserve Reporting. Mr. Kearney holds a B.S. in Accounting from State University of New York at Plattsburgh. PMI believes that Mr. Kearney’s financial, business, and regulatory expertise givegives him the qualification and skills to serve as a director. Mr. Kearney qualifies as an “audit committee financial expert” under SEC guidelines.

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Peter J. deSilva was appointed as a director of PMI in April 2021. Mr. deSilva is currently a Harvard University Senior Fellow in the Advanced Leadership Initiative through May 2022. His fellowship includes participating in an advanced leadership curriculum with more than 50 other fellows from around the world, participating in various courses, mentoring other graduate and undergraduate students and developing a program with significant social impact potential. Mr. deSilva also currently serves as a director on the Board of Directors at IRALOGIX, Inc., an IRA financial technology company, at Edelman Financial Engines, a financial planning and investment advisory company, at Infosel Financiero SA de CV, a financial technological platform and business news agency that operates in Mexico and Latin America, and currently serves as a director on the Board of Directors at Fidelity Security Life Insurance Company, an insurance services provider. Mr. deSilva also serves as a director ofprovider, and at Fidelity Security Assurance Company, a subsidiary of Fidelity Security Life Insurance Company. In addition, Mr. deSilva serves as a director on the Board of Directors and as a member of the Compensation Committee of Onepak, Inc., a logistics technology company focused on return shipment tracking. Mr. deSilva previously served as the President of TD Ameritrade’s retail business and as President of TD Ameritrade, Inc. the firms broker dealer from September 2017 to December 2020. In his role, Mr. deSilva directed all facets of the division’s business strategy and operations, and integration with Scottrade Financial Services, another leading online brokerage firm. Prior to joining TD Ameritrade, from February 2015 to August 2017, Mr. deSilva served as the President of the Retail and Institutional divisions of Scottrade Financial Services, where he was responsible for the corporate strategy and distribution, sales, digital transformation, investment management, and institutional custody functions. Mr. deSilva also served on Scottrade, Inc.’s Board of Directors from February 2015 - to August 2017. Before joining Scottrade Financial Services, from 2004 to 2015, Mr. deSilva served as the President and Chief Operating Officer of UMB Financial Corporation, a financial services provider. Mr. deSilva also served on UMB Financial Corporation’s Board of Directors from February 2004 to December 2015. Prior to his time at UMB Financial Corporation, Mr. deSilva worked at Fidelity Investments, a leading online brokerage firm, where he held several leadership positions, including Senior Vice President and General Manager of Fidelity Investments’ Retail division and Senior Vice President of Fidelity Brokerage Company. Mr. deSilva holds a B.S. in Business Administration and Management from the University of Massachusetts, Dartmouth. Mr. deSilva also holds Series 7, 24, 63 and 66 licenses from the Financial Industry Regulatory Authority. PMI believes that Mr. deSilva’s financial, business and regulatory expertise give him the qualifications and skills to serve as a director.
Election of Directors
PMI’s board of directors currently consists of eight seats, with one vacancy to be filled by a designee of the Series A Holders, one vacancy to be filled by a designee of the Series A-1 Holders, one vacancy to be filled by a designee of Francisco Partners III, L.P., and one vacancy to be filled by a designee of the Series F Holders. All of the current members of PMI's board of directors were elected as directors pursuant to the terms of a voting rights agreement entered into among certain of PMI’s stockholders. In selecting the composition of its board of directors, PMI seeks to ensure that its board of directors collectively has a balance of expertise in the following areas: internet-based business, consumer financial products, business operations, and experience directing public and start-up companies. Based on these criteria, PMI believes that its board of directors has been effective in identifying diverse directors. The board of directors’ composition provisions of PMI’s voting rights agreement are still in effect. For more information regarding the terms of the voting rights agreement, see Item 13, “Certain Relationships and Related Transactions, and Director Independence.” Holders of the Notes offered through our marketplace, and the accompanying PMI Management Rights, will have no ability to elect or influence PMI’s directors or approve significant corporate transactions, such as a merger or other sale of PMI or its assets.
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Board Leadership
Because PMI’s common stock is not listed on a national exchange, PMI is not required to maintain a board of directors consisting of a majority of independent directors, or to maintain an audit, nominating or compensation committee. PMI does not have a lead independent director.
Code of Ethics
Our Board of Directors is committed to a high standard of corporate governance practices and, through its oversight role, believes that it has encouraged and promoted a requisite culture of ethical business conduct among PMI’s officers and employees. To memorialize its commitment to these standards, the Board of Directors of PMI adopted a “Code of Ethics and Business Conduct” that applies to all of PMI's employees, directors and officers, including the Chief Executive Officer, Chief Financial Officer and other executive officers. A copy of the Code of Ethics and Business Conduct is available on our website at www.prosper.com/plp/legal. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, certain provisions of the Code of Ethics and Business Conduct by posting such information on our website or in public filings.
Director Independence
Because PMI’s common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities, PMI is not required to maintain a board of directors consisting of a majority of independent directors or to maintain an audit committee, nominating committee or compensation committee consisting solely of independent directors. Nevertheless, PMI’s board of directors has determined the
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independence of each director based on the independence criteria set forth in the listing standards of the New York Stock Exchange (“NYSE”). In making its determinations, the Board considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances the board of directors deemed relevant in determining their independence, including any transactions between each director or any member of his or hertheir family, and us, our senior management or our independent registered public accounting firm. Based upon information requested from and provided by each director concerning his or hertheir background, employment and affiliations, including family relationships, the board of directors determined that Ms. Huang and each of Messrs. Kearney and deSilva do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the listing requirements and rules of the NYSE. PMI’s board of directors has also determined that our former director, Rajeev V. Date, was independent under those standards during the period in 2021 that he served on the board. Mr. Date resigned from PMI’s board of directors effective March 26, 2021.
Board Committees
Nominating Committee
PMI is not a “listed issuer” as defined under Section 10A-3 of the Exchange Act. Therefore, PMI is not required to have a nominating committee comprised of independent directors. PMI currently does not have a standing nominating committee and accordingly, there are no charters for such committee. PMI believes that a nominating committee is not necessary for a company of its size with its type of business. PMI also believes that its directors collectively have the requisite background, experience, and knowledge to fulfill the limited duties and obligations that a nominating committee may have.
Compensation Committee
PMI’s board of directors approved the formation of a Compensation Committee in August 2011. The current members of the Compensation Committee are Claire A. Huang (Chairwoman) and Thomas R. Kearney. The Compensation Committee oversees PMI’s executive officer compensation arrangements, plans, policies and programs maintained by PMI and administers PMI’s equity-based compensation plan for employees generally (including issuance of stock options, RSUs and other equity-based awards granted other than pursuant to a plan). The Compensation Committee meets at such times as determined appropriate by the Chair of the Compensation Committee.
The Compensation Committee is exempt from independence listing standards because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities. Nevertheless, the board of directors of PMI has determined that each of the current members of PMI’s Compensation Committee is independent under the applicable rules and regulations of the SEC and NYSE.
Audit Committee
PMI’s board of directors approved the formation of an Audit Committee in January 2010. The current members of the Audit Committee are Thomas R. Kearney (Chairman) and Peter J. deSilva. The Audit Committee oversees financial risk exposures, including monitoring the integrity of PMI’s consolidated financial statements, internal controls over financial reporting and the independence of PMI’s Independent Registered Public Accounting Firm. The Audit Committee receives
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internal control related assessments and reviews and discusses PMI’s annual and quarterly consolidated financial statements with management. In fulfilling its oversight responsibilities with respect to compliance matters, the Audit Committee meets at least quarterly with management, PMI’s Independent Registered Public Accounting firm and PMI’s internal legal counsel to discuss risks related to PMI’s financial reporting function.
The Audit Committee is exempt from independence listing standards because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities. Nevertheless, the board of directors of PMI has determined that each of the current members of PMI's Audit Committee is independent under the listing requirements and rules of the NYSE, and also satisfies the independence requirements of Section 10(m)(3) of the Exchange Act. Additionally, PMI's board of directors has determined that each of the current members of the Audit Committee is an audit committee financial expert as defined under SEC regulations and the listing requirements and rules of the NYSE. The board of directors has also determined that Rajeev V. Date, who served as a member of the Audit Committee until March 2021, was independent under those standards during the period in 2021 that he served on the Audit Committee. Mr. Date resigned from PMI’s board of directors and Audit Committee effective March 26, 2021.
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Limitations on Officers’ and Directors’ Liability and Indemnification Agreements
As permitted by Delaware law, PMI’s amended and restated certificate of incorporation and bylaws contain provisions that limit or eliminate the personal liability of its directors for breaches of duty to the corporation. PMI’s amended and restated certificate of incorporation and bylaws limit the liability of directors to the fullest extent permitted under Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of their fiduciary duties as directors, except liability for:
•any breach of the director’s duty of loyalty to PMI or PMI’s stockholders;
•any act or omission not in good faith, believed to be contrary to the interests of PMI or its shareholders, involving reckless disregard for the director’s duty, for acts that involve an unexcused pattern of inattention that amounts to an abdication of duty, or that involves intentional misconduct or knowing or culpable violation of law;
•any unlawful payments related to dividends, unlawful stock repurchases, redemptions, loans, guarantees or other distributions; or
•any transaction from which the director derived an improper personal benefit.
These limitations do not affect the availability of equitable remedies, including injunctive relief or rescission. As permitted by Delaware law, PMI’s amended and restated certificate of incorporation and bylaws also provide that:
•PMI will indemnify its directors and officers to the fullest extent permitted by law;
•PMI may indemnify its other employees and other agents to the same extent that PMI indemnifies its officers and directors; and
•PMI will advance expenses to its directors and officers in connection with a legal proceeding, and may advance expenses to any employee or agent; provided, however, that such advancement of expenses shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person was not entitled to be indemnified.
The indemnification provisions contained in PMI’s amended and restated certificate of incorporation and bylaws are not exclusive.
In addition to the indemnification provided for in PMI’s amended and restated certificate of incorporation and bylaws, PMI has entered into indemnification agreements with each of its directors and officers. The indemnification agreements require PMI, among other things, to indemnify such persons for all expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement (if such settlement is approved in advance by PMI) (collectively, “Expenses”), actually and reasonably incurred by such person in connection with the investigation, defense or appeal of any proceeding to which such person may be made a party, a potential party, a non-party witness, or otherwise by reason of: (i) such person’s service as a director or officer of PMI; (ii) any action or inaction taken by such person or on such person’s part while acting as director, officer, employee or agent of PMI; or (iii) such person’s actions while serving at the request of PMI as a director, officer, employee, trustee, general partner, managing member, agent or fiduciary of PMI or any other entity, in each case, whether or not serving in any such capacity at the time any liability or expense is or was incurred. In addition, PMI is required to indemnify against any Expenses actually and reasonably incurred in connection with any action establishing or enforcing a right to indemnification or advancement of expenses under the indemnification agreement or under any directors’ and officers’ liability insurance policies maintained by PMI to the extent that such person is successful in such action. The indemnification agreements also provide that PMI agrees to indemnify such persons to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of the agreement or PMI’s amended and restated certificate of incorporation or bylaws. Moreover, the indemnification agreements provide that any future changes under
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Delaware law that expand the ability of a Delaware corporation to indemnify its officers and directors are automatically incorporated into the agreements.
Under the indemnification agreements, PMI is not obligated to provide indemnification on account of any proceeding unless such person acted in good faith and in a manner reasonably believed to be in the best interests of PMI, and with respect to criminal proceedings, such person had no reasonable cause to believe histheir conduct was unlawful. The termination of a proceeding by judgment, settlement, or conviction or upon a plea of nolo contendere or its equivalent does not, by itself, create the presumption that such person did not satisfy the above standards. In addition, under the indemnification agreements, PMI is not obligated to provide indemnification for: (i) any proceedings or claims initiated or brought voluntarily by such person and not by way of defense, unless such indemnification is authorized by PMI, other than a proceeding to establish such person’s right to indemnification; (ii) any expenses incurred by such person with respect to any proceeding instituted by such person to enforce and interpret the terms of histheir indemnification agreement, unless such person is successful in such action; (iii) which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid; (iv) an accounting or disgorgement of profits pursuant to
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Section 16(b) of the Exchange Act, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); and (v) any reimbursement of PMI by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of PMI, as required in each case under the Exchange Act, as amended (including any such reimbursements that arise from an accounting restatement of PMI pursuant to Section 304 of the Sarbanes-Oxley Act, or the payment to PMI of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements).
PMI also maintains an insurance policy that covers certain liabilities of its directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.
PMI believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers. To the extent these provisions permit PMI to indemnify its officers and directors for liabilities arising under the Securities Act, however, PMI has been informed by the SEC that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 11. EXECUTIVE COMPENSATION
Prosper Marketplace, Inc. - Compensation Discussion and Analysis
Overview
This section describes PMI's executive compensation objectives, compensation-setting process, executive compensation components and significant 20212023 compensation decisions for PMI's named executive officers (“NEOs”). The compensation provided to PMI's NEOs for 20212023 is set forth in detail in the Summary Compensation Table and other tables and the accompanying footnotes and narrative that follow this section.
PMI's named executive officers for 20212023 are as follows:
•David Kimball, our Chief Executive Officer;
•Usama Ashraf, our President and Chief Financial Officer;
•Pete Woodhouse, our Chief Technology Officer as of July 1, 2021;Officer;
•Edward R. Buell III, our General Counsel, Secretary and Chief Compliance Officer; and
•Nasos Topakas,Melinda Marchesi, our Chief TechnologyMarketing Officer through March 15, 2021.as of May 2023.
Executive Compensation Objectives
The objectives of PMI's executive compensation are to:
•attract, retain and motivate senior leaders who are capable of advancing PMI's mission and strategy and ultimately, creating and maintaining its long-term equity value;
•align the interests of PMI's executive officers with its stockholders’ long-term interests; and
•reward executive officers for their contributions to PMI's overall performance as well as for their individual performance.

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Compensation-Setting Process
Role of Our Compensation Committee. The Compensation Committee has primary responsibility for overseeing all aspects of our executive compensation program, including evaluating and approving executive salaries, annual bonus awards and the size and structure of equity awards for PMI's executive officers, including the NEOs.
Role of Management. In setting 20212023 compensation, PMI's Chief Executive Officer worked closely with the Compensation Committee in making recommendations and attending Committee meetings. Because of his daily involvement with PMI's executive team, the Chief Executive Officer was involved in the determination of compensation for all of PMI's executive officers other than himself. The Compensation Committee also delegated to the Chief Executive Officer the authority to make compensation decisions for senior management and executive officers (other than the Chief Executive Officer, Chief Financial Officer President and Chief Operating Officer)President), subject to certain compensation limits set by the Compensation Committee.
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Executive Compensation Components
PMI's executive compensation package includes: (1) base salary; (2) cash bonuses; and (3) long term incentives, generally in the form of cash and equity-based compensation, such as stock options and restricted stock units. PMI believes that this compensation mix supports its objective of attracting, motivating and retaining a talented and entrepreneurial executive team who will provide leadership for PMI’s success in dynamic and competitive markets. PMI's compensation program is balanced among all three components in order to attract top talent and maximize retention, while ensuring that an appropriate portion of the executives’ compensation is tied to the Company's and its stockholders’ long-term interests.
Base Salary 
Base salary is a fixed amount and is not tied to any metric relating to the performance of PMI's business as a whole. The base salary of each executive officer is initially established in the executive officer's offer letter and reviewed annually by the Compensation Committee. In determining base salaries for 2021,2023, PMI's Compensation Committee, together with the Chief Executive Officer, considered the individual executive officer's scope of responsibilities, contributions, prior salary level and position (in case of a promotion), and financial and market conditions.

The following table summarizes information regarding the base salaries for PMI's named executive officers for 2021:2023:
20212023 Base Salaries
David Kimball 1
$550,000600,000 
Usama Ashraf 2
$447,000488,000 
Pete Woodhouse 3
$375,000415,000 
Edward R. Buell III 4
$335,000365,000 
Nasos TopakasMelinda Marchesi 5
$385,000365,000 

1.In March 2021,2023, PMI’s Compensation Committee reviewed executive base salaries and decided to keepincrease Mr. Kimball’s annual base salary at $550,000, the same level as last year.from $577,500 to $600,000.
2.In March 2021,2023, PMI’s Compensation Committee reviewed executive base salaries and decided to keepincrease Mr. Ashraf'sAshraf’s annual base salary at $447,000, the same level as last year.from $469,350 to $488,000.
3.In July 2021,March 2023, Mr. Woodhouse’s base salary was increased from $384,375 to $415,000.
4.In March 2023, Mr. Buell’s base salary was increased from $351,750 to $365,000.
5.In May 2023, Ms. Marchesi joined PMI hired Mr. Woodhouse as its Chief TechnologyMarketing Officer, with an annual base salary of $375,000.
4.In March 2021, Mr. Buell’s annual base salary was increased from $275,625 to $335,000 in connection with his promotion to General Counsel and Secretary of PMI.
5.In March 2021, PMI’s Compensation Committee reviewed executive base salaries and decided to keep Mr. Topakas’ annual base salary at $385,000, the same level as last year. Mr. Topakas departed from his role as Chief Technology Officer of PMI effective March 15, 2021.$365,000.
Cash Bonuses
PMI uses cash bonuses primarily to motivate and retain senior management leaders that are critical to advancing the Company's short-term and long-term strategic goals. In 2021,2023, we based annual NEO bonuses on both the achievement of certain Board-approved financial, operational and strategic performance objectives as well as other factors, including the NEO’s contribution towards the successful development and launch of the Credit Card product.factors.
In January 2022,2024, the Compensation Committee reviewed the Company’s performance and progress towards the established 20212023 objectives, and approved a bonus award of up to 100%40% of the annual target bonus amount for each NEO.
The amounts and terms of the bonuses awarded to each of our NEOs for 20212023 are disclosed below, in the sections titled “Summary Compensation Table” and “Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table.”


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Long-Term Incentives
Equity Compensation. PMI has used stock options and restricted stock units (“RSUs”) as the principal components of its executive long-term incentive equity compensation. Consistent with its compensation objectives, PMI believes this approach aligns the interests of its grantees with the long-term interests of PMI’s stockholders. PMI believes that stock options and RSUs also serve as effective retention tools due to vesting requirements that are based on continued service with the company. In granting equity awards, PMI has customarily considered, among other things, the executive officers' cash compensation, the need to retain and motivate executive officers and to create a meaningful opportunity for reward predicated on the creation of
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long-term stockholder value, PMI's financial results, and each executive officer's individual contributions and responsibilities. The amounts and terms of the awards granted to each such NEO in 20212023 are disclosed in the 20212023 Grants of Plan-Based Awards table and accompanying footnotes to the table of Outstanding Equity Awards at 20212023 Fiscal Year End.
Long-Term Cash Incentive Compensation. PMI’s Long-Term Cash Incentive Plan (“LTCIP”) is designed to reward our executives, including our named executive officers, for the achievement of strategic and operational objectives and the creation of long-term value. Under the LTCIP, eligible executive officers and vice presidents will receive long-term cash incentive awards based on their performance during pre-established rolling two-year periods, the firstmost recent of which ran from January 1, 20202022 to December 31, 20212023 (the “2020-2021“2022-2023 Performance Period”). PaymentsPayments will be made by March 15, following the end of a performance period, unless otherwise determined by the Compensation Committee. The incentive targets range from 75% to 150% of the participant’s base salary, unless otherwise determined by the Compensation Committee. PMI’s executive officers and vice presidents are eligible to participate in the LTCIP if, as of March 15th of calendar year following the date the award is paid,end of a performance period, they have been employed with PMI for at least three years, are currently full or part time employees of PMI, and are in good standing. PMI believes that the LTCIP will complement its annual equity awards by focusing its senior executives on specific long-term financial performance goals, while providing an opportunity for more immediate liquidity. In January 2022,2024, the Compensation Committee considered the Company’s performance and progress towards its established objectives during the 2020-20212022-2023 Performance Period, and approved a payout of up to 90%70% of the LTCIP incentive target amount for each NEO. The amounts of the LTCIP awards paidpayable to eligible NEOs in connection with the 2020-20212022-2023 Performance Period are set forth in the “Summary Compensation Table” below.
Employment Agreements
PMI has entered into employment arrangements with each of its NEOs, which are comprised of an offer letter and an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement. Each of these arrangements was approved or authorized on PMI’s behalf by the Compensation Committee or, in certain instances, its Board of Directors.
Each of the offer letters provides for “at-will” employment and sets forth the initial compensation arrangements for the NEO, generally including an initial base salary, an annual cash bonus opportunity, and an equity award. Certain of the offer letters provide for payments or an acceleration of the executive’s equity award grant upon termination of their employment in specified situations, including following a change in control. These arrangements (including potential payments and terms) are discussed in more detail in the “Narrative Discussion of the Summary Compensation TableTable” and Grants“Grants of Plan-Based Awards Table” and the “Potential Payments Upon Termination or a Change In Control of PMI” sections and related tables below.
Other Compensation Information
Benefits Programs
PMI’s employee benefit programs, including its 401(k) plan, health and welfare programs, and incentive programs, including the Amended and Restated 2005 Stock Option Plan, the 2015 Equity Incentive Plan and the Long-Term Cash Incentive Plan, are designed to provide a competitive level of benefits to PMI’s employees generally, including its named executive officers and their families.
PMI’s 401(k) plan covers all employees meeting certain eligibility requirements. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees are allowed to contribute a percentage of their eligible compensation to the 401(k) plan, up to the annual maximum as determined by the Internal Revenue Service, and PMI may make discretionary matching contributions of a portion of the employees’ eligible wage deferrals, subject to certain limitations and conditions. PMI temporarily suspended its discretionary matching contributions from July 1, 2020 through December 31, 2020 in an effort to reduce costs and mitigate the operating and financial impact of the COVID-19 pandemic on the Company. The 401(k) discretionary matching contributions were partially reinstated effective January 1, 2021 and fully reinstated effective April 1, 2021. During the year ended December 31, 2021,2023, PMI contributed $2.0$3.0 million to the 401(k) plan. The amount of PMI’s matching contributions for each of our NEOs is set forth in footnotes to the “Summary Compensation Table” below. On January 1, 2024, PMI temporarily suspended its discretionary matching contributions, which PMI may reinstate in the future upon the Company meeting certain business objectives.

All full-time employees, including PMI’s named executive officers, may participate in its health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance.
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Perquisites and Other Personal Benefits
Currently, PMI does not view perquisites or other personal benefits as a significant component of its compensation. Accordingly, PMI does not generally provide perquisites, such as company cars and paid parking spaces, to its executive officers. PMI does reimburse its executive officers for certain relocation expenses, subject to the terms and conditions prescribed by the Compensation Committee.
In the future, PMI may provide additional perquisites or other personal benefits in limited circumstances, such as where PMI believes it is appropriate to assist an individual executive in the performance of his or hertheir duties and for recruitment, motivation or retention purposes.
Post-Employment Compensation
The Compensation Committee recognizes that a possible, threatened, or pending change of control transaction could result in the departure or distraction of PMI’s senior executives. To establish a meaningful financial incentive for PMI’s senior executive officers to work diligently through and beyond a proposed transaction that may involve a change in control of the company, certain of the stock options and restricted stock units granted to PMI’s NEOs will fully vest upon a change in control of PMI, while others will fully vest in the event that, within 12 months after a change in control of PMI, such officer is subject to a termination of employment without cause or resigns for good reason (each as defined in the applicable option agreement).
In addition, PMI entered into severance and change in control agreements (the “severance agreements”) with each of Messrs. Kimball and Ashraf in November 2020 and with Mr. Woodhouse in February 2022, the terms and conditions of which restate and replace any severance arrangements set forth in their respective offer letters. Under the severance agreements, each of Messrs. Kimball, Ashraf, and Woodhouse, would be entitled to the following in the event that such officer’s employment is terminated by PMI without “cause” or by the applicable officer for “good reason” (each as defined in the severance agreement) and the officer meets certain tenure requirements as of the date of such termination: (i) a lump sum severance payment equal to one year base salary; (ii) any unpaid annual bonus and long-term cash incentive award for the year(s) preceding the year of termination; (iii) continued coverage for the participants and eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for 12 months, unless such coverage is earlier terminated in accordance with the terms of the severance agreement; (iv) a pro-rated annual bonus payment for the year of termination; and (v) with respect to any long-term performance period under the LTCIP that commenced more than one year prior to the executive’s termination date, a pro-rated long-term cash incentive payment for the performance period in which the termination occurs. Until certain tenure requirements are met, Mr. Woodhouse would only be entitled to a lump sum severance payment equal to 6 months base salary in the event that his employment is terminated by PMI without “cause” or by him for “good reason” prior to the one year anniversary of his employment start date and a lump sum severance payment equal to 12 months base salary in the event that his employment is terminated by PMI without “cause” or by him for “good reason” after the one year anniversary of his employment start date. In the event that Messrs. Kimball, Ashraf, or Woodhouse, is terminated by PMI or its successor without cause or by the applicable officer for good reason and such termination occurs within 24 months following a change in control of PMI, then, subject to certain tenure requirements, such officer would be entitled to receive the severance set forth in items (i) through (iii) above, as well as such officer’s (x) target annual bonus for the year of termination; and (y) their target long-term cash incentive payment for the year of termination. Receipt of these severance benefits is conditioned on the officer’s signing a release of claims in favor of PMI.
PMI also entered into a severance agreement with Mr. TopakasMs. Marchesi in November 2020March 2023 which replaced any severance arrangements in Mr. Topakas’s offer letter and contained the same terms and conditions as the severance agreements signed by Messrs. Kimball, Ashraf, and Ashraf which are described above. Mr. Topakas departed from his role as Chief Technology Officer of PMI effective March 15, 2021 and as a result,Woodhouse, provided that under the terms of hisMs. Marchesi’s severance agreement, are no longer applicable.until certain tenure requirements were met, Ms. Marchesi would only be entitled to a lump sum severance payment equal to six months base salary in the event that her employment was terminated by PMI without “cause” or by her for “good reason” prior to the one year anniversary of her employment start date.
For additional information regarding these severance and change in control arrangements, see “Potential Payments Upon Termination or a Change in Control of PMI.”PMI” below.
Compensation Risk Assessment
PMI's management evaluates and mitigates any risk that may exist relating to its compensation plans, practices and policies for all employees, including PMI's NEOs. PMI's management has concluded that PMI's compensation policies and practices do not create or promote inappropriate or excessive risk taking.
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Summary Compensation Table
The following table provides information regarding the compensation earned during the years ended December 31, 2021, 20202023, 2022 and 20192021 by each of PMI’s named executive officers (in thousands): 
 
YearSalary ($)Bonus ($)
Option Awards
($) 1
 Non-Equity Incentive Plan Compensation ($)
All Other
Compensation ($) 2
Totals ($)
YearYearSalary ($)Bonus ($)
Option Awards
($) 1
 Non-Equity Incentive Plan Compensation ($) 2
All Other
Compensation ($) 3
Totals ($)
Name and Principal PositionName and Principal Position
David KimballDavid Kimball2021$550 550— 731 6131,844
David Kimball
David Kimball2023$596 239 — 602 17 1,453
Chief Executive OfficerChief Executive Officer2020498 3427 4220 5— 121,157Chief Executive Officer2022573 574 574 — — 825 825 15 15 1,9871,987
2019500 450 — — 14 964
20212021550 550— 731 13 1,844
Usama AshrafUsama Ashraf2021447 37369 600 6131,502
President andPresident and2020409 3268442 5— 14 733President and2022466 396 396 438 438 670 670 15 15 1,9851,985
Chief Financial OfficerChief Financial Officer2019428 289 40 — 14771Chief Financial Officer2021447 37337369 600 600 13 13 1,5021,502
Pete Woodhouse 7
2021188 141786 — 91,124
Pete Woodhouse 4
Pete Woodhouse 4
2023410 123 — — 17 550
Chief Technology OfficerChief Technology OfficerChief Technology Officer2022383 287 287 — — — — 15 15 685685
Edward R. Buell III 8
2021323 19126 185 613738
Edward R. Buell III 5
General Counsel, Secretary andGeneral Counsel, Secretary and2020252 366 48 5— 10336General Counsel, Secretary and2022349 227 227 — — 315 315 15 15 906906
Chief Compliance OfficerChief Compliance Officer2019260 7831 — 10379Chief Compliance Officer2021323 19119126 185 185 13 13 738738
Nasos Topakas 9
202180 — — — 989
Chief Technology Officer2020352 3228432 5— 14 626
2019368 249 — — 14 631
Melinda Marchesi 6
Chief Marketing Officer
1.The amounts reported represent the grant date fair value of the restricted stock units and stock options granted to the named executive officers as calculated in accordance with the Financial Accounting Board’s Topic ASC 718, Compensation–Stock Compensation (“(“ASC 718”) using a Black-Scholes model to purchase shares of PMI’s common stock.  The key assumptions used in PMI’s ASC 718 calculation are discussed in Note 2 of PMI’s consolidated financial statements, which are incorporated by reference into this Annual Report.
2.The amount reported reflects non-equity incentive compensation earned under the Long Term Cash Incentive Plan.
3.“All Other Compensation” consists of compensation received from employer matching contributions to PMI’s 401(k) plan.  
3.Reflects the temporary reductions in base salaries implemented in response to the COVID-19 pandemic.
4.Bonus payouts for 2020 were calculated based on our NEOs’ non-reduced base salaries and do not reflect the temporary reduction in base salaries implemented in response to the COVID-19 pandemic.
5.Represents the incremental fair value of options that were granted in prior periods and repriced in connection with the stock option reprice implemented in 2020.
6.The amount reported reflects non-equity incentive compensation earned over 2020 and 2021 under the Long Term Cash Incentive Plan.
7.Mr. Woodhouse joined PMI in July 2021 as its Chief Technology Officer.
8.5.Mr. Buell was promoted to General Counsel and Secretary of PMI in March 2021.
6.Ms. Marchesi joined PMI in May 2023 as its Chief Marketing Officer.
9.Mr. Topakas departed from his role as Chief Technology Officer of PMI effective March 15, 2021.

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20212023 Grants of Plan-Based Awards 1 , 2
The following table sets forth certain information regarding grants of plan-based awards to the listed PMI named executive officers during 20212023 (dollar amounts in thousands, except per share information):
Grant Date
All Other Option Awards: Number of Securities Underlying Options
(#)
Exercise or Base Price of Option Awards
($/Sh)
Grant Date Fair Value of
Stock and Option Awards ($) 3
Usama Ashraf3/10/20212,000,000$0.06 $69 
Pete Woodhouse8/10/20215,584,793$0.24 $786 
Edward R. Buell III3/10/2021756,638$0.06 $26 
Grant Date
All Other Option Awards: Number of Securities Underlying Options
(#)
Exercise or Base Price of Option Awards
($/Sh)
Grant Date Fair Value of
Stock and Option Awards ($) 3
Melinda Marchesi5/11/20235,584,793$0.32 $1,124 
1.The following columns are intentionally omitted from this table: Estimated Future Payouts under Non-Equity Incentive Plan Awards, and Estimated Future Payouts under Equity Incentive Plan Awards.
2.The equity awards granted to NEOs in 20212023 were granted under, and governed by the terms of, PMI's 2015 Equity Incentive Plan and the applicable award agreements. See the footnotes to the Outstanding Equity Awards at 20212023 Fiscal Year-End table below for a description of the vesting schedule of the equity awards granted in 20212023 and reported in the table above.

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3.The amounts reported represent the grant date fair value of the stock options granted to the named executive officers as calculated in accordance with the Financial Accounting Board’s Topic ASC 718, Compensation–Stock Compensation (“(“ASC 718”) using a Black-Scholes model to purchase shares of PMI’s common stock.  The key assumptions used in PMI’s ASC 718 calculation are discussed in Note 2 of PMI’s consolidated financial statements, which are incorporated by reference into this Annual Report.
CEO Pay Ratio
In accordance with Item 402(u) of Regulation S-K, PMI is providing the following information for the year ended December 31, 2021:2023:
•The median of total compensation of all employees, excluding our CEO: $141,761;$140,712;
•The annual total compensation of our CEO: $1,844,300;$1,452,813; and
•The ratio of CEO total compensation to median employee total compensation: 13.0110.32 to 1.
Our CEO pay ratio information is a reasonable good faith estimate calculated in a manner consistent with the SEC pay ratio rules and methods for disclosure. In order to determine the median employee from a compensation perspective, PMI examined cash compensation (salary, wages and cash bonuses) paid for the 20212023 calendar year for all employees, excluding our CEO, employed as of December 31, 20212023 (the “Determination Date”). On the Determination Date, Prosper’s employee population consisted of 384404 individuals, all of whom were located in the United States. This population consisted of our full-time, part-time, and temporary employees. We did not include any contractors or workers employed through a third-party provider in our employee population.
To identify the “median employee,” we utilized the amount of base salary,annualized earnings, wages and cash bonus our employees received, as reflected in our payroll records through the Determination Date and annualized such amounts for any individual hired during 2021.2023. Once we identified our median employee, we combined all of the elements of such employee’s compensation for 20212023 to determine the median employee total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K and compared such total compensation to the total compensation of PMI’s CEO, as reported in the Summary Compensation Table.
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Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table
Offer Letters and Arrangements
David Kimball. In November 2016, PMI entered into an offer letter with Mr. Kimball in connection with his appointment as its Chief Executive Officer. In addition to his initial base salary, Mr. Kimball's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 100% of his base salary, payable on a quarterly basis; (ii) reimbursement of certain relocation expenses; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI. PMI also committed to grant Mr. Kimball an equity award of options exercisable into shares of PMI common stock representing up to 5% of PMI’s capitalization on a fully diluted basis, subject to the terms and conditions of the offer letter.
Mr. Kimball's November 2016 offer letter replaced the offer letter PMI entered into with Mr. Kimball in March 2016 in connection with his appointment as its Chief Financial Officer. In addition to the severance, reimbursement and benefits arrangements included in the November 2016 offer letter, Mr. Kimball's March 2016 offer letter included his initial base salary and equity grant as CFO and provided for a one-time sign-on bonus of $125,000, subject to certain repayment requirements in the event of Mr. Kimball’s termination from PMI within 12 months of his employment.
In November 2020, PMI and Mr. Kimball executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Kimball’s offer letter. The terms of Mr. Kimball’s severance and change in control agreement are described under “Post-Employment Compensation” above.
Usama Ashraf. In February 2017, PMI entered into an offer letter with Mr. Ashraf in connection with his appointment as its Chief Financial Officer. In addition to his initial base salary and equity grant, Mr. Ashraf's offer letter provided for (i) a one-time sign-on bonus of $20,000, subject to certain repayment requirements in the event of Mr. Ashraf's termination from PMI within 12 months of his employment; (ii) eligibility to receive an annual performance bonus in a target amount of 50% of his base salary; (iii) reimbursement of certain relocation expenses; (iv) reimbursement of certain short-term housing expenses and (v) eligibility to participate in the benefit programs generally available to employees of PMI.
In addition to the terms of Mr. Ashraf's offer letter, in January 2018, the Compensation Committee approved a one-time retention bonus payment in an amount equal to 25% of his base salary. In August 2018, in connection with Mr. Ashraf's expanded scope of responsibilities in the role of Chief Financial Officer, the Compensation Committee increased his annual
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performance bonus target from 50% to 60% of his base salary. In March 2019, the Compensation Committee increased Mr. Ashraf's annual performance bonus target to 75% of his annual base salary. In March 2020, the Compensation Committee confirmed Mr. Ashraf's annual performance bonus target for 2020 would remain at 75% of his annual base salary. On February 24, 2021, Mr. Ashraf was appointed as President of PMI effective March 1, 2021. In connection with his appointment, Mr. Ashraf: (i) will be eligible to receive an annual performance bonus in a target amount of 85% of his base salary; and (ii) was granted an option to purchase 2,000,000 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date. The option will vest over a four year period, subject to and in accordance with the terms of the stock option agreement.
In November 2020, PMI and Mr. Ashraf executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Ashraf’s offer letter. The terms of Mr. Ashraf’s severance and change in control agreement are described under “Post-Employment Compensation” above.
Pete Woodhouse. In May 2021, PMI entered into an offer letter with Mr. Woodhouse in connection with his appointment as its Chief Technology Officer. In addition to his initial base salary and equity grant, Mr. Woodhouse’s offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 75% of his base salary; (ii) eligibility to participate in PMI’s Long Term Cash Incentive Plan, subject to the tenure and other requirements set forth therein; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI. In February 2022, PMI and Mr. Woodhouse executed a severance and change in control agreement that replaces any prior agreements regarding severance set forth in Mr. Woodhouse’s offer letter. The terms of Mr. Woodhouse’s severance and change in control agreement are described under “Post-Employment Compensation” above.
Edward R. Buell III. In September 2015, PMI entered into an offer letter with Mr. Buell in connection with his appointment as Compliance Counsel. In addition to his initial base salary and equity grant, Mr. Buell’s offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 20% of his base salary; and (ii) eligibility to participate in the benefit programs generally available to employees of PMI. In June 2018, Mr. Buell was promoted to Chief Compliance Officer and Deputy General Counsel. In connection with this promotion, Mr. Buell’s annual performance bonus target was increased to 30% of his annual base salary and Mr. Buell was granted an option to purchase 149,700 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date. In March 2021, Mr. Buell was appointed as General Counsel and Secretary of PMI. In connection with this appointment, Mr. Buell: (i) will be eligible to receive an annual performance bonus in a target amount of 65% of his base salary; and (ii) was granted options to
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purchase 756,638 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date.
Nasos TopakasMelinda Marchesi. In April 2017,March 2023, PMI entered into an offer letter with Mr. TopakasMs. Marchesi in connection with hisher appointment as its Chief TechnologyMarketing Officer. In addition to hisher initial base salary and equity grant, Mr. Topakas'sMs. Marchesi’s offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 75% of hisher base salary (which will be prorated for the fiscal year ended December 31, 2023 equal to the period of her employment between her start date and December 31, 2023); (ii) eligibility to participate in his first year of employmentPMI’s Long Term Cash Incentive Plan, subject to the tenure and 50% of his base salary in subsequent years;other requirements set forth therein; and (ii)(iii) eligibility to participate in the benefit programs generally available to employees of PMI. In addition to the terms of Mr. Topakas’ offer letter, in January 2018, the Compensation Committee approved a one-time retention bonus payment in an amount equal to 25% of his base salary. In March 2019, the Compensation Committee increased Mr. Topakas’s annual performance bonus target to 75% of his annual base salary. In March 2020, the Compensation Committee confirmed Mr. Topakas’s annual performance bonus target for 2020 would remain at 75% of his annual base salary.
In November 2020,2023, PMI and Mr. TopakasMs. Marchesi also executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Topakas’s offer letter.agreement. The terms of Mr. Topakas’sMs. Marchesi’s severance and change in control agreement are described under “Post-Employment Compensation” above. Mr. Topakas departed from his role as Chief Technology Officer of PMI, effective March 15, 2021.
Equity Incentive Plans     
PMI grants equity awards primarily through its 2015 Equity Incentive Plan, which was approved by PMI's Board of Directors on April 7, 2015 and subsequently amended by an Amendment No. 1, Amendment No. 2, and Amendment No. 3, which were approved by PMI's Board of Directors on February 15, 2016, May 19, 2016, and January 23, 2018, respectively (as amended, the “2015 Plan”). PMI also previously granted equity awards through its Amended and Restated 2005 Stock Option Plan (the “2005 Plan”), which was approved as amended and restated by its stockholders on December 1, 2010, and expired in March 2015. The 2005 Plan and 2015 Plan are collectively referred to in this Annual Report as the “Equity Plans.”
Any awards granted under the 2005 Plan prior to its expiration remain in effect pursuant to their terms. Unless sooner terminated by PMI’s Board of Directors, the 2015 Plan will expire ten years from the date of its adoption. All stock options granted to NEOs are incentive stock options, to the extent permissible under the Internal Revenue Code, as amended. All equity awards to PMI’s employees and directors were granted at no less than the fair market value of its common stock on the date of each award. In the absence of a public trading market for PMI common stock, PMI’s Board of Directors, acting on its own or through the Compensation Committee, has determined the fair market value of its common stock in good faith based upon consideration of a number of relevant factors including the status of its development efforts, financial status and market conditions. See Item 15, “Notes to Consolidated Financial Statements.”
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The 2005 Plan provided for grants in the form of non-qualified stock options and stock purchase rights, which were available for grant to PMI’s directors, consultants or employees, including officers, and incentive stock options, which were available for grant solely to its employees, including officers. The 2015 Plan provides for grants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and unrestricted stock. Under the 2015 Plan, incentive stock options may be granted solely to PMI’s employees, including officers. Awards other than incentive stock options may be granted to its directors, consultants or employees, including officers. The Equity Plans are administered by PMI’s Board of Directors, which in turn has delegated authority to administer the plans to the Compensation Committee.
Shares of PMI’s common stock subject to options that have expired or otherwise terminate under the 2015 Plan or the 2005 Plan without having been exercised in full will become available for grant under the 2015 Plan. Shares of PMI’s common stock issued under the 2015 Plan may include previously unissued shares or reacquired shares bought on the market or otherwise.
As of December 31, 2021,2023, an aggregate of 96,855,91392,084,513 options to purchase our common stock were outstanding or authorized for issuance under the Equity Plans. Of these outstanding and authorized options, a total of 72,186,15182,113,271 options and 2,636,3432,574,633 restricted stock units were outstanding under the Equity Plans and 22,033,4197,396,609 equity awards were available for grant under the 2015 Plan. No equity awards are available for grant under the 2005 Plan. As ofDuring the year ended December 31, 2021,2023, an aggregate of 86,235,5204,063,543 options and 27,750 RSUs granted under the 2015 PlanEquity Plans either expired or were forfeited. As of December 31, 2021, 48,561,623 2023, 60,741,572 options under the Equity Plans were vested and outstanding and 49,887,709 54,659,109 were exercised.

The NEOs identified herein have been granted equity awards upon employment with PMI, for merit increases, and for retention purposes.
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Outstanding Equity Awards at 20212023 Fiscal Year End
The following table sets forth certain information regarding outstanding equity awards granted to PMI’s named executive officers (“NEOs”) that remained outstanding as of December 31, 2021:2023:
Grant DateVesting Commencement DateNumber of Securities Underlying Unexercised Options (#) ExercisableNumber of Securities Underlying Unexercised Options (#) UnexercisableOption Exercise Price ($)Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested (#) 1
Grant DateGrant DateVesting Commencement DateNumber of Securities Underlying Unexercised Options (#) ExercisableNumber of Securities Underlying Unexercised Options (#) UnexercisableOption Exercise Price ($)Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested (#) 1
David KimballDavid Kimball5/3/201623/18/20161,410,925 — 0.025/3/2026
5/3/201633/18/2016705,465 
6/17/201644/28/20162,115,703 — 0.026/17/2026
3/17/2017512/1/201621,156,579 — 0.023/17/2027
3/20/201823/1/20182,376,836 158,456 0.023/20/2028
5/3/2016
5/3/2016
5/3/2016
6/17/2016
3/17/2017
3/17/2017
3/17/2017
3/20/2018
3/20/2018
3/20/2018
Usama Ashraf
Usama Ashraf
Usama AshrafUsama Ashraf3/17/201792/27/20173,397,242 — 0.023/17/2027
11/7/201792/27/2017402,758 — 0.0211/7/2027
3/20/201863/1/20181,784,793 
8/8/201897/1/2018715,551 122,168 0.028/8/2028
11/5/2019911/5/2019260,416 239,584 0.0211/5/2029
3/10/202193/1/2021— 2,000,000 0.063/10/2031
3/20/2018
3/20/2018
3/20/2018
8/8/2018
11/5/2019
11/5/2019
11/5/2019
3/10/2021
3/10/2021
3/10/2021
3/25/2022
3/25/2022
3/25/2022
3/25/2022
3/25/2022
3/25/2022
Pete Woodhouse
Pete Woodhouse
Pete WoodhousePete Woodhouse8/10/202197/1/2021— 5,584,793 0.248/10/2031
Edward R. BuellEdward R. Buell11/4/201579/28/201575,000 — 0.0211/4/2025
Edward R. Buell
Edward R. Buell
6/17/2016
6/17/2016
6/17/2016
3/17/2017
3/17/2017
3/17/2017
3/17/2017
3/17/2017
3/17/2017
3/20/2018
3/20/2018
3/20/2018
3/20/2018
3/20/2018
3/20/2018
8/8/2018
8/8/2018
8/8/2018
5/7/2019
5/7/2019
5/7/2019
11/5/2019
11/5/2019
11/5/2019
3/10/2021
3/10/2021
3/10/2021
Melinda Marchesi
Melinda Marchesi
Melinda Marchesi
6/17/201684/28/201630,325 — 0.026/17/2026
3/17/201771/1/201737,800 — 0.023/17/2027
3/17/201781/1/201730,250 — 0.023/17/2027
3/20/201873/1/2018107,695 7,180 0.023/20/2028
3/20/201873/1/2018117,187 7,813 0.023/20/2028
8/8/201876/1/2018130,987 18,713 0.028/8/2028
5/7/201973/1/201938,396 17,454 0.025/7/2029
11/5/2019711/5/2019156,250 143,750 0.0211/5/2029
3/10/202193/15/2021— 756,638 0.063/10/2031
Nasos Topakas
1.Represents restricted stock units (“RSUs”),RSUs in each case that remained unvested as of December 31, 2021.2023.
2.This option vests over four years, with 1/4 vesting on the first anniversary of the applicable vesting commencement date set forth in the table above (the “Vesting Commencement Date”) and 1/48 vesting each month thereafter for the following three years, provided that, any unvested options will vest in full immediately prior to the effective time of a change in control of PMI, a sale of all or substantially all of PMI's assets, or a liquidation, dissolution or winding up of PMI (each, a “Corporate Transaction”).
3.These RSUs initially vest, if at all, when PMI files for an initial public offering and the lock-up period expires or there is a Corporate Transaction (which, as defined in the RSU grant notice, does not include a liquidation, dissolution or winding up of PMI), whichever occurs first (each, a “Triggering Event”). The RSUs will immediately and fully vest in connection with the occurrence of such Triggering Event.
4.This option vests over three years, with 1/36 vesting on the one month anniversary of the applicable Vesting Commencement Date and 1/36 vesting each month thereafter for the following two years, provided that, any unvested options will vest in full immediately prior to the effective time of a Corporate Transaction.
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5.This option vests over three years, with 1/2 vesting on the first anniversary of the applicable Vesting Commencement Date and 1/48 vesting each month thereafter for the following two years, provided that, any unvested options will vest in full immediately prior to the effective time of the Corporate Transaction.
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6.These RSUs initially vest, if at all, upon the occurrence of a Triggering Event. The number of RSUs that vest upon a Triggering Event will be equal to the number of RSUs that would have vested had the RSUs been subject to the four-year Time-Based Vesting Schedule (1/4 vesting on first-year anniversary of applicable Vesting Commencement Date and 1/48 vesting monthly thereafter). If the NEO provides continuous service through the Triggering Event, the remaining RSUs will vest pursuant to the Time-Based Vesting Schedule until the RSUs are fully vested.
7.This option vests over four years, with 1/4 vesting on the first anniversary of the applicable Vesting Commencement Date and 1/48 vesting each month thereafter for the following three years.
8.This option vests over three years, with 1/36 vesting on the one month anniversary of the applicable Vesting Commencement Date and 1/36 vesting each month thereafter for the following two years.
9.This option vests over four years, with 1/4 vesting on the first anniversary of the applicable Vesting Commencement Date and 1/48 vesting each month thereafter for the following three years, except that, in the event the NEO is terminated without cause, or if Optionee resigns for Good Reason, in each case within 12 months of a Corporate Transaction, any unvested options will vest in full immediately.
The following table sets forth information regarding equity awards held by PMI's named executive officers that were exercised, vested or settled during 20212023 (dollar amounts in thousands):
Option AwardsStock Awards
Number of
Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)
Number of
Shares
Acquired
on Vesting
(#)
Value
Realized on
Vesting/Settlement
($)
David Kimball————
Usama Ashraf————
Pete Woodhouse————
Edward R. Buell III————
Nasos TopakasMelinda Marchesi————
Potential Payments Upon Termination or a Change In Control of PMI
The following table provides the estimated value of the payments that PMI would provide to its named executive officers in connection with a change in control of PMI and/or a termination of employment, including any options, RSUs and Stock Awards accelerated as a result of the change in control and/or termination. In determining amounts payable, we have assumed in all cases that the change in control or termination of employment, as applicable, occurred on December 31, 2021.2023.
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With respect to a termination of employment, we have assumed in all cases that the termination was without cause.
NameNameCash Severance ($)Number of Unvested Options (#)Estimated Value of Unvested Options at December 31, 2021 ($)Number of Unvested RSUs and Stock Awards (#)Estimated Value of Unvested RSUs and Stock Awards at December 31, 2021 ($)Total Estimated Value ($)NameCash Severance ($)Number of Unvested Options (#)Estimated Value of Unvested Options at December 31, 2023 ($)Number of Unvested RSUs and Stock Awards (#)Estimated Value of Unvested RSUs and Stock Awards at December 31, 2023 ($)Healthcare Benefits ($)Total Estimated Value ($)
(dollar amounts in thousands)
(dollar amounts in thousands)(dollar amounts in thousands)
David KimballDavid Kimball
David Kimball
David Kimball
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good ReasonInvoluntary Termination or Resignation for Good Reason$1,831 — — — — $1,831 
Change in ControlChange in Control— 158,456 109 705,465 501 610 
Involuntary Termination or Resignation for Good Reason following Change in ControlInvoluntary Termination or Resignation for Good Reason following Change in Control1,831 — — — — 1,831 
Usama AshrafUsama Ashraf
Involuntary Termination or Resignation for Good ReasonInvoluntary Termination or Resignation for Good Reason1,427 — — — — 1,427 
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good Reason
Change in ControlChange in Control— — — 1,710,427 1,214 1,214 
Involuntary Termination or Resignation for Good Reason following Change in ControlInvoluntary Termination or Resignation for Good Reason following Change in Control1,427 2,361,752 1,550 — — 2,977 
Pete WoodhousePete Woodhouse
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good ReasonInvoluntary Termination or Resignation for Good Reason188 — — — — 188 
Change in ControlChange in Control— — — — — — 
Involuntary Termination or Resignation for Good Reason following Change in ControlInvoluntary Termination or Resignation for Good Reason following Change in Control375 5,584,793 2,625 — — 3,000 
Edward R. Buell IIIEdward R. Buell III
Involuntary Termination or Resignation for Good ReasonInvoluntary Termination or Resignation for Good Reason— — — — — — 
Change in Control— — — — — — 
Involuntary Termination or Resignation for Good Reason following Change in Control185 756,638 492 — — 677 
Nasos Topakas
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good ReasonInvoluntary Termination or Resignation for Good Reason— — — — — — 
Change in ControlChange in Control— — — — — — 
Involuntary Termination or Resignation for Good Reason following Change in ControlInvoluntary Termination or Resignation for Good Reason following Change in Control— — — — — — 
Melinda Marchesi
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good Reason
Involuntary Termination or Resignation for Good Reason
Change in Control
Involuntary Termination or Resignation for Good Reason following Change in Control
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2021,2023, Claire A. Huang and Thomas R. Kearney served as members of the Compensation Committee. None of these directors is or has been an officer or employee of PMI at any time or had any relationship with PMI requiring disclosure by PMI under Item 404 of Regulation S-K. During the fiscal year ended December 31, 2021,2023, none of PMI's executive officers served as a member of the Board of Directors or Compensation Committee (or other board committee serving an equivalent function) of any unrelated entity that had one or more of its executive officers serving on PMI’s Board of Directors or Compensation Committee (or other board committee serving an equivalent function).
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Director Compensation
The following table shows compensation for the year ended December 31, 20212023 to PMI’s directors who were not also named executive officers at the time they received compensation as directors (in thousands):
Fees
earned or
paid in
cash ($)
Equity
awards ($)
Total
Fees earned or paid in cash ($)Fees earned or paid in cash ($)
Equity
awards ($)
Total ($)
Claire A. HuangClaire A. Huang$75 $75 
Thomas R. Kearney (1)Thomas R. Kearney (1)$75 $75 
Peter J. deSilva (2)Peter J. deSilva (2)$56 220 $276 
Rajeev V. Date (3)$18.8 $18.8 
1.Mr. Kearney held 604,167104,167 unvested stock options at December 31, 2021.2023.
2.Mr. deSilva was appointed as a director of PMI effective April 1, 2021. Mr. deSilva held 1,000,000333,334 unvested stock options at December 31, 2021.
3.Mr. Date resigned as a director of PMI effective March 26, 2021.2023.

From time to time, PMI reimburses certain of its non-employee directors for travel and other expenses incurred in connection with attending board of directors meetings.
Compensation Committee Report
The Compensation Committee of PMI has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the Compensation Committee recommended to PMI's Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

    COMPENSATION COMMITTEE
Claire A. Huang, Chairwoman
Thomas R. Kearney
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Prosper Marketplace, Inc.
The following table sets forth information regarding the beneficial ownership of PMI’s Common Stock as of March 1, 2022,2024, by:
•each of PMI’s directors;
•each of PMI’s named executive officers;
•each person, or group of affiliated persons, who is known by PMI to beneficially own more than 5% of PMI’s Common Stock; and
•all of PMI’s directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. Except as otherwise indicated in the footnotes to the table below, all of the shares reflected in the table are shares of Common Stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.
Percentage ownership calculations are based on 273,024,515277,790,279 shares of Common Stock outstanding as of March 1, 2022,2024, assuming the conversion of all of PMI’s convertible preferred stock, but excluding any outstanding stock options or warrants. Each share of PMI preferred stock is convertible at any time at the discretion of the holder. Shares of PMI’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock convert into shares of PMI Common Stock at a ratio of 1 to 1. Shares of PMI’s Series A-1 Preferred
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Stock convert into shares of PMI Common Stock at a ratio of 1,000,000 to 1. Shares of PMI’s Series G Preferred Stock convert into shares of PMI common stock at a ratio of 1 to 1.36.

In computing the number of shares of Common Stock beneficially owned by a person or entity and the percentage ownership of that person or entity, PMI deemed outstanding all shares of Common Stock subject to options and warrants held by that person or entity that are currently exercisable or vesting within 60 days of March 1, 2022.2024. PMI did not deem these
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shares outstanding for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1.0% is denoted with an asterisk (*). Except as otherwise indicated in the footnotes to the table below, addresses of named beneficial owners and officers are in care of Prosper Marketplace, Inc., 221 Main Street, 3rd Floor, San Francisco, CA 94105.
Number of
Shares Owned1
Number of Shares Underlying Options, and Warrants Exercisable Currently or Within 60 Days2
Total Number of Shares Beneficially Owned3
Beneficial
Ownership
Percentage
Number of
Shares Owned1
Number of
Shares Owned1
Number of Shares Underlying Options, and Warrants Exercisable Currently or Within 60 Days2
Total Number of Shares Beneficially Owned3
Beneficial
Ownership
Percentage
Directors and Executive OfficersDirectors and Executive Officers
Thomas R. Kearney
Thomas R. Kearney
Thomas R. KearneyThomas R. Kearney— 479,166 479,166 *20,000 959,166 959,166 979,166 979,166 **
Claire A. HuangClaire A. Huang— 1,000,000 1,000,000 *Claire A. Huang— 1,000,000 1,000,000 1,000,000 1,000,000 **
Peter J. deSilvaPeter J. deSilva270,833 270,833 *Peter J. deSilva— 750,000 750,000 750,000 750,000 **
David KimballDavid Kimball— 27,218,499 27,218,499 9.07 %David Kimball— 27,218,499 27,218,499 27,218,499 27,218,499 8.92 8.92 %
Usama AshrafUsama Ashraf— 5,488,230 5,488,230 1.97 %Usama Ashraf— 7,241,884 7,241,884 7,241,884 7,241,884 2.54 2.54 %
Pete WoodhousePete Woodhouse— — — — Pete Woodhouse— 3,839,545 3,839,545 3,839,545 3,839,545 1.36 1.36 %
Edward R. Buell IIIEdward R. Buell III— 990,217 990,217 *Edward R. Buell III— 1,502,041 1,502,041 1,502,041 1,502,041 **
Ashish Agarwal— — — — 
Nasos Topakas— — — — 
Melinda Marchesi
All directors and executive officers as a group4
All directors and executive officers as a group4
— 35,446,945 35,446,945 11.49 %
All directors and executive officers as a group4
20,000 42,511,135 42,511,135 42,531,135 42,531,135 13.28 13.28 %
5% Shareholders5% Shareholders
5% Shareholders
5% Shareholders
Francisco Partners5
Francisco Partners5
Francisco Partners5
Francisco Partners5
17,413,325 35,544,141 52,957,466 17.16 %17,413,325 35,544,141 35,544,141 52,957,466 52,957,466 16.90 16.90 %
Newport Trust Company6
Newport Trust Company6
51,247,915 — 51,247,915 18.77 %
Newport Trust Company6
51,247,915 — — 51,247,915 51,247,915 18.45 18.45 %
LPG Capital GP Limited7
LPG Capital GP Limited7
50,776,886 — 50,776,886 18.60 %
LPG Capital GP Limited7
50,776,886 — — 50,776,886 50,776,886 18.28 18.28 %
Soros Fund Management LLC8
Soros Fund Management LLC8
723,902 51,614,124 52,338,026 16.12 %
Soros Fund Management LLC8
723,902 51,614,124 51,614,124 52,338,026 52,338,026 15.89 15.89 %
Accel Partners9
Accel Partners9
24,320,667 — 24,320,667 8.91 %
Accel Partners9
24,320,667 — — 24,320,667 24,320,667 8.76 8.76 %
IDG Capital Partners10
IDG Capital Partners10
24,320,667 — 24,320,667 8.91 %
IDG Capital Partners10
24,320,667 — — 24,320,667 24,320,667 8.76 8.76 %
JPF LLC11
JPF LLC11
— 41,833,904 41,833,904 13.29 %
JPF LLC11
— 41,833,904 41,833,904 41,833,904 41,833,904 13.09 13.09 %
New Residential Investment Corp.12
1 41,833,904 41,833,905 13.29 %
Rithm Capital Corp.12
Rithm Capital Corp.12
1 41,833,904 41,833,905 13.09 %
Third Point Ventures LLC13
Third Point Ventures LLC13
— 41,833,904 41,833,904 13.29 %
Third Point Ventures LLC13
— 41,833,904 41,833,904 41,833,904 41,833,904 13.09 13.09 %
* Less than 1%* Less than 1%
1.Includes shares of Common Stock (including Common Stock issuable upon the conversion of preferred stock) owned directly or indirectly, but does not include shares subject to options and warrants.
2.Includes shares subject to options or warrants owned directly or indirectly that are currently exercisable or will become exercisable within 60 days of March 1, 2022.2024.
3.The amounts and percentages of Common Stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Commission, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities for which that person has a right to acquire beneficial ownership within 60 days.
4.Consists of 35,446,94542,511,135 shares of Common Stock issuable upon the exercise of stock options.
5.Represents 17,413,325 shares of Common Stock issuable upon the conversion of preferred stock held by Francisco Partners through certain of its affiliates and 35,544,141 shares of Common Stock issuable upon the exercise and conversion of the preferred stock warrant held by Francisco Partners through certain of its affiliates. Francisco Partners
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is deemed to have voting and investment power over these shares. The address for Francisco Partners is One Letterman Drive, Building C – Suite 410, San Francisco, CA 94129
6.Represents 51,247,915 shares of Common Stock issuable upon the conversion of preferred stock held by Prosper Grantor Trust. Prosper Grantor Trust is a wholly-owned subsidiary of Prosper Marketplace, Inc. and as such, Prosper Marketplace Inc. holds sole voting power over such shares. Newport Trust Company, as trustee for Prosper Grantor
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Trust, is deemed to be an indirect beneficial owner of such shares. The address for Newport Trust Company is 45 South 7th Street,570 Lexington Ave., Suite 2208, Minneapolis, MN 55402.1502, New York, NY 10022.
7.Represents 50,776,886 shares of Common Stock issuable upon the conversion of preferred stock held by LPG Capital through certain of its affiliates. LPG Capital l is deemed to have voting and investment power over the shares. The address for LPG Capital is 199-203 Hennessy Road, Flat 1002, Hong Kong, China.
8.Consists of (i) 2 shares of Common Stock issuable upon the conversion of preferred stock and 51,370,58651,614,124 shares of Common Stock issuable upon the exercise and conversion of the preferred stock warrants, in each case, held by QPL Holdings (PF) LP, a Delaware limited partnership (the “QPL Shares”); and (ii) 243,538 shares of Common Stock issuable upon the exercise and conversion of the preferred stock warrants held by QPB Holdings Ltd., a Cayman Islands exempted company (the “QPB Shares”); and (iii) 723,900723,902 shares of Common Stock issuable upon the conversion of preferred stock held by Quantum Strategic Partners Ltd., a Cayman Islands exempted company (the “Quantum Strategic Shares”). 
Soros Fund Management LLC (“SFM LLC”) serves as principal investment manager for QPL Holdings (PF) LP, QPB Holdings Ltd., and Quantum Strategic Partners Ltd. As such, SFM LLC has been granted investment discretion over the QPL Shares, the QPB Shares and the Quantum Strategic Shares. George Soros serves as Chairman of SFM LLC and has sole discretion to replace FPR Manager LLC, the Manager of SFM LLC. The business address of SFM LLC is 250 West 55th Street, 29th Floor, New York, NY 10019.
9.Represents 5,703,470 shares of Common Stock and 7,245,859 shares of Common Stock issuable upon the conversion of preferred stock held by Accel Partners through certain of its affiliates (collectively, the “Accel Shares”); 3,498,765 shares of Common Stock and 4,722,733 shares of Common Stock issuable upon the conversion of preferred stock held by IDG Capital Partners through certain of its affiliates (the “IDG Shares”); and 877,185 shares of Common Stock and 2,272,655 shares of Common Stock issuable upon the conversion of preferred stock held by Breyer Capital, LLC and James W. Breyer 2005 Trust dated 2/25/2005 (collectively, the “Breyer Shares”). Accel Partners is deemed to have voting and investment power over the Accel Shares. Accel Partners is an affiliate of IDG Capital Partners and may also therefore be deemed to share voting and investment power over the IDG Shares. Mr. Breyer is a partner of Accel Partners and thereforetherefore Accel Partners may also be deemed to share voting and investment power over the Breyer Shares. Accel Partners disclaims beneficial ownership of the IDG Shares and Breyer Shares except to the extent of its pecuniary interest therein. The address of Accel Partners is 428500 University Avenue, Palo Alto, California 94301.
10.Represents 3,498,765 shares of Common Stock and 4,722,733 shares of Common Stock issuable upon the conversion of preferred stock held by IDG Capital Partners through certain of its affiliates (“IDG Shares”); 5,703,470 shares of common stock and 7,245,859 shares of common stock issuable upon the conversion of preferred held by Accel Partners through certain of its affiliates (collectively, the “Accel Shares”); and 877,185 shares of Common Stock and 2,272,655 shares of Common Stock issuable upon the conversion of preferred stock held by Breyer Capital, LLC and James W. Breyer 2005 Trust dated 2/25/2005 (collectively, the “Breyer Shares”). IDG Capital Partners is deemed to have voting and investment power over the IDG Shares. IDG Capital Partners is an affiliate of Accel Partners and may also therefore be deemed to share voting and investment power over the Accel Shares. Mr. Breyer is a partner of Accel Partners, which is an affiliate of IDG Capital Partners, and therefore IDG Capital Partners may also be deemed to share voting and investment power over the Breyer Shares. IDG Capital Partners disclaims beneficial ownership of the Accel Shares and Breyer Shares except to the extent of its pecuniary interest therein. The address for IDG Capital Partners is 99 Queen’s Road Central, Unit 1509, The Center, Hong Kong, China.
11.Represents 41,833,904 shares of common stock issuable upon the exercise and conversion of the preferred stock warrant held by JPF LLC. JPF LLC has shared voting power and shared investment power with its parent, Jefferies Funding LLC, Jefferies Funding LLC’s parent, Jefferies Group LLC, and Jefferies Group LLC’s parent, Jefferies Financial Group Inc. The address for JPF LLC is 520 Madison Avenue, New York, NY 10022.
12.Consists of (i) 1 share of Common Stock issuable upon the conversion of preferred stock, held directly by Rithm Capital Corp. (formerly known as New Residential Investment Corp.); and (ii) 41,833,904 shares of common stock issuable upon the exercise and conversion of the preferred stock warrant held by NRZ PRO Warrant LLC (the “NRZ Shares”). NRZ Pro Warrant LLC is an indirect, wholly-owned subsidiary of New Residential InvestmentRithm Capital Corp. New Residential InvestmentRithm Capital Corp. is deemed to have voting and investment power over the NRZ Shares. The address for New Residential InvestmentRithm Capital Corp. is 1345 Avenue of the Americas, 45th799 Broadway, 8th Floor, New York, NY 10105.10003.
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13.Represents 41,833,904 shares of common stock issuable upon the exercise and conversion of the preferred stock warrant held by Third Point Ventures LLC. Third Point LLC, as investment manager of Third Point Ventures LLC, has voting power over such shares. The address for Third Point Ventures LLC is 55 Hudson Yards,390 Park Avenue, 19th Floor, New York, NY 10001.10022.

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Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information, as of December 31, 2021,2023, with respect to shares of PMI Common Stock that may be issued under PMI’s existing equity compensation plans.
Number of
shares of
common
stock to be
issued upon
exercise of
outstanding
options,
warrants, RSUs
and rights1
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
Number of
shares of
common
stock
remaining
available for
future
issuance
under equity
compensation
plans
Number of shares of
common stock to be issued upon exercise of outstanding
options, warrants, RSUs and rights1
Number of shares of
common stock to be issued upon exercise of outstanding
options, warrants, RSUs and rights1
Weighted average exercise price of outstanding options,
warrants and rights
Number of shares of common stock remaining available for future issuance under equity compensation plans
Equity compensation plans approved by stockholders:Equity compensation plans approved by stockholders:
Prosper Marketplace, Inc. 2005 Stock Plan, as amended and restated
Prosper Marketplace, Inc. 2005 Stock Plan, as amended and restated
Prosper Marketplace, Inc. 2005 Stock Plan, as amended and restatedProsper Marketplace, Inc. 2005 Stock Plan, as amended and restated1,337,790 $0.02 — 
Prosper Marketplace, Inc. 2015 Equity Incentive Plan, as amendedProsper Marketplace, Inc. 2015 Equity Incentive Plan, as amended73,484,704 0.07 22,033,419 
Equity compensation plans not approved by stockholders:Equity compensation plans not approved by stockholders:
Equity compensation plans not approved by stockholders:
Equity compensation plans not approved by stockholders:
Outstanding common stock warrants
Outstanding common stock warrants
Outstanding common stock warrantsOutstanding common stock warrants1,080,349 0.22 — 
Total potential sharesTotal potential shares75,902,843 $0.07 22,033,419 
1.Includes option and RSU issuances to employees, directors and certain consultants, advisors or vendors; however, it does not include warrants granted to outside individuals, consultants, advisors and vendors.
Prosper Funding LLC
PMI is the sole member of, and holds a 100% equity interest in, PFL. PFL does not have any equity compensation plans.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Prosper Marketplace, Inc.
Agreements with PFL
On January 22, 2013, PMI entered into an Administration Agreement with PFL (as amended to date, the “PMI Administration Agreement”), pursuant to which PMI agreed to provide certain administrative services relating to the marketplace. Under the PMI Administration Agreement, PFL is required to pay PMI (a) an amount equal to one-twelfth (1/12) of the specified annual Corporate Administration Fees equal to 50% of finance and legal personnel costs, (b) a fee for each Borrower Loan originated through the marketplace, (c) 90% of all Servicing Fees collected by or on behalf of Prosper Funding, and (d) all nonsufficient funds fees collected by or on behalf of PFL. As of the most recent amendment of the PMI Administration Agreement, PFL is required to pay PMI (a) an Corporate Administration Fees of $500 thousand per month, (b) a fee for each Borrower Loan originated through the marketplace, (c) 62.5% of all Servicing Fees collected by or on behalf of Prosper Funding, and (d) all nonsufficient funds fees collected by or on behalf of Prosper Funding.
Also on January 22, 2013, PFL and PMI entered into an Asset Transfer Agreement (the “Asset Transfer Agreement”) pursuant to which PMI, effective February 1, 2013 (i) transferred the marketplace and substantially all of PMI’s assets and rights related to the operation of the marketplace to PFL, and (ii) made a capital contribution to PFL in excess of $3 million. Under the Asset Transfer Agreement, PMI also transferred substantially all of its remaining assets to PFL, including (i) all outstanding Notes issued by PMI under the Indenture dated June 15, 2009 between PMI and Wells Fargo Bank, as trustee (the
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“Indenture” “Indenture”), (ii) all Borrower Loans corresponding to such Notes, (iii) all registration agreements related to such Notes and Borrower Loans, and (iv) all documents and information related to the foregoing. Certain hardware and agreements relevant to the development, maintenance and use of the marketplace, including in relation to the origination, funding and servicing of Borrower Loans, and the issuance, funding and payment of the Notes, were not transferred or assigned to PFL by PMI. In addition, PMI did not transfer to PFL (i) agreements with PMI’s directors, officers or employees and PMI’s financial, legal or other advisors or consultants, (ii) certain agreements with vendors to provide PMI with goods or services in the ordinary course of business (including software licensed pursuant to any “shrink wrap” or “click wrap” license), and (iii) certain cash and short-term investments.

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In the Asset Transfer Agreement, PMI agreed, among other things, to:
i.fund any repurchase obligation with respect to the transferred Notes, and indemnify PFL for any other losses that arise out of any registration agreement related to the transferred Notes or Borrower Loans, including as a result of a breach by PMI of any of its representations or warranties made therein;
ii.fund any arbitration filing or administrative fees or arbitrator fees payable under any registration agreement related to the transferred Notes or Borrower Loans; and
iii.fund any indemnification obligations that arise under any registration agreement entered into by PMI prior to the date of the asset transfer.
On August 17, 2021, PMI and PFL entered into an Asset Transfer and License Agreement (the “IP Asset Transfer and License Agreement”). The IP Asset Transfer and License Agreement, among other things, (i) transfers, assigns, and conveys certain intellectual property assets related to PMI’s white label service and PMI’s Credit Card product from PMI to PFL, and (ii) grants certain licenses and sublicenses related to the transferred intellectual property assets from PFL to PMI. PMI also agreed to make certain intellectual property filings to provide third parties with notice of the conveyance and to assist PFL with any additional intellectual property filings as may be required. PMI received a one-time fee of $10 from PFL in connection with the foregoing.

The foregoing description of the IP Asset Transfer and License Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the IP Asset Transfer and License Agreement, which is filed as an exhibit hereto and is incorporated herein by reference.
Holders of the transferred Notes are third party beneficiaries under the Asset Transfer Agreement and the Administration Agreement.
Under Section 4.1 of the Indenture, PMI could transfer substantially all of its assets to any person without the consent of the holders of the existing Notes, provided that the transferee expressly assumed all of PMI’s obligations under the Indenture and the existing Notes. In that case, the transferee would succeed to and be substituted for PMI, and PMI would be discharged from all of its obligations and covenants, under the Indenture and the existing Notes. Accordingly, on January 22, 2013, PMI, PFL and Wells Fargo Bank, as trustee entered an Amended and Restated Indenture (the “Amended and Restated Indenture”), effective February 1, 2013, which (i) effected such assumption, substitution and discharge (the “Note Assumption”), and (ii) amended and restated the Indenture to reflect the Note Assumption and to make certain other amendments to the Indenture as permitted therein. Following the Note Assumption, PFL became the obligor with respect to the transferred Notes and the Amended and Restated Indenture, and PMI no longer has any obligations with respect thereto.
Agreements with Significant Shareholders
On February 27, 2017, PFL entered into a Loan Purchase Agreement (the “Purchase Agreement”) with PF LoanCo Funding LLC, a Cayman limited liability company (the “Beneficiary”), and Wilmington Savings Fund Society, FSB, not in its individual capacity but solely in its capacity as trustee of PF LoanCo Trust, a New York common law trust (the “Trust”). The Purchase Agreement sets forth the terms and conditions pursuant to which PFL will sell eligible personal loans in an aggregate amount of up to $5.0 billion to the Purchaser for the benefit of the Beneficiary. As of December 31, 2019, anAn aggregate of $3.3 billion of loans were purchased under the Purchase Agreement, which does not include $0.3 billion of Whole Loan purchases by members of the Consortium prior to the signing of the Purchase Agreement. The Consortium Purchase Agreement ended in May 2019.
In connection with the Purchase Agreement, on February 27, 2017, PMI entered into a Warrant Agreement with PF WarrantCo Holdings, LP (“PF WarrantCo”), a Delaware limited partnership and an entity related to the Beneficiary, and, for certain limited purposes, New Residential Investment Corp. (the “Series F Warrant Agreement”). Pursuant to the Series F Warrant Agreement, PMI issued to PF WarrantCo three warrant certificates to purchase up to in aggregate 177,720,706 shares of PMI’s Series F Preferred Stock at an exercise price of $0.01 per share (the “Warrant Shares”).
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During the term of the Consortium Purchase Agreement, PF WarrantCo was a beneficial owner of more than 5% of PMI’s Common Stock as a result of the Warrant Shares vesting. The Beneficiary is an affiliate under common control with PF WarrantCo.
For more information regarding these transactions, please see Note 15, Consortium Purchase Agreement, of Prosper's Notes to Consolidated Financial Statements.
Certain Relationships Among Directors and Officers
None.
Participation in the Marketplace
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PMI’s executive officers, directors and certain affiliates, have opened investor accounts on the marketplace and have made deposits to and withdrawals from their accounts, and invested in portions of borrowers’ loan requests from time to time in the past via purchases of Notes, and may do so in the future. The Notes and Borrower Loans were obtained on terms and conditions that were not more favorable than those obtained by other investors.
Financing Arrangements with Significant Shareholders, Directors and Officers
For further information regarding stock ownership for executive officers, directors and security holders owning greater than 5% ownership of all PMI classes of voting securities please see Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Prosper Marketplace, Inc.”
Under the terms of the amended and restated voting agreement, dated April 7, 2015, certain investors in PMI’s Convertible Preferred Stock, have each agreed, subject to maintaining certain ownership levels, to exercise their voting rights so as to elect one designee of Francisco Partners III, L.P., one designee of SC Prosper Holdings LLC, one designee of QPL Holdings (PF) LP, one designee of the Series A-1 Convertible Preferred Stock holders, PMI’s Chief Executive Officer (“CEO”), one common director designated by the CEO, and two independent directors.
Under the terms of the amended and restated investor rights agreement, dated February 27, 2017, the holders of a majority of the registrable securities of PMI have the right to demand that PMI file a registration statement under the Securities Act, so long as the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $20 million. These registration rights are subject to specified conditions and limitations. In addition, PMI is promptly required to give written notice to all holders of registrable securities prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of PMI. The amended and restated investor rights agreement also provides that if PMI registers any of its shares for public sale, stockholders with registration rights will have the right to include their shares in the registration statement, subject to specified conditions and limitations. Further, in the amended and restated investor rights agreement, if PMI receives from any holders of registrable securities a written request that PMI effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement, PMI is required to use reasonable best efforts to file a Form S-3 registration statement and to effect such registration as would permit or facilitate the sale and distribution of all or such portion of such holder’s registrable securities as are specified in the request, so long as the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $2.5 million.
Indemnification Agreements
PMI’s amended and restated certificate of incorporation provides that it will indemnify its directors and officers to the fullest extent permitted by Delaware law. In addition, PMI has entered into separate indemnification agreements with each of its directors and executive officers. For more information regarding these agreements, see Item 10, “Directors, Executive Officers and Corporate Governance—Prosper Marketplace, Inc.—Limitations on Officers’ and Directors’ Liability and Indemnification Agreements” for more information.
Policies and Processes for Transactions Involving Related Parties
PMI’s board of directors has not adopted a formal policy or procedure that must be followed prior to any transaction, arrangement or relationship with a related person, as defined by SEC regulations.
PMI has adopted a corporate Code of Ethics and Corporate Governance (the “Code”) that is enforced throughout all levels of management and deals with conflicts of interest, among other things. The Code requires PMI’s directors, officers and employees to avoid any conduct or activities that conflict, or appear to conflict, with our interests, or that may make it difficult for the individual to perform his or hertheir duties objectively. The Code also requires directors and executive officers to disclose any actual or potential conflict of interest to PMI’s Chief Compliance Officer, who will report such conflicts to PMI’s Audit Committee for review.
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PMI’s directors and executive officers are required each year to respond to a questionnaire regarding their independence. The questionnaire also requires each director and executive officer to identify if they or an immediate family member have been indebted to, or have been a participant in any material transactions with, PMI or any of its subsidiaries. Additionally, PMI’s directors and executive officers are required to disclose on a quarterly basis whether they or an immediate family member had made any direct or indirect investments on our personal loan platform.
The standards applied pursuant to the above-described procedures are to provide comfort that potential conflicts of interest or related party transactions are identified and receive appropriate oversight and review.
Director Independence
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For information regarding director independence, see Item 10, “Directors, Executive Officers, and Corporate Governance—Prosper Marketplace, Inc.—Director Independence.”
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Prosper Marketplace, Inc. and Prosper Funding LLC
Deloitte & Touche LLP (“Deloitte”) served as PMI and PFL’s independent registered public accounting firm for the fiscal year ended December 31, 20212023 and is serving in such capacity for the current fiscal year. Deloitte was engaged in October 2014.
The aggregate fees billed by Deloitte for professional services to PMI and PFL were $1,836were $2,163 thousand and $2,132$2,075 thousand in December 31, 20212023 and 2020,2022, respectively.
Audit Fees
The aggregate fees billed by Deloitte for professional services rendered for PMI and PFL for the audit of annual financial statements, the review of the quarterly financial statements, and services that are normally provided in connection with statutory and regulatory filings or engagements were $1,584were $2,088 thousand and $1,785$1,818 thousand in 20212023 and 2020,2022, respectively. 
Audit Related Fees 
The aggregate fees billed by Deloitte for professional assurance and related services reasonably related to the performance of the audit of the PMI and PFL’s financial statements, but not included under Audit Fees were $250$73 thousand and $275$255 thousand in 20212023 and 2020,2022, respectively. These fees are for service organization control assessment.  
Tax Fees
The aggregate fees billed by Deloitte for 20212023 and 20202022 for professional services for tax compliance, tax advice and tax planning were zero in 20212023 and 2020.2022. 
All Other Fees
Deloitte billed $2 thousand and $72$2 thousand, in 20212023 and 2020,2022, respectively, related to fees not included in “Audit”, “Audit Related Fees” or “Tax Fees.”
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Reports of Independent Registered Public Accounting Firms (PCAOB ID No. 34)
(a1) Report of Independent Registered Public Accounting Firm for PMI
(a2) Report of Independent Registered Public Accounting Firm for Prosper Funding LLC
(b) Documents List
Financial Statements
Prosper Marketplace, Inc.
4
6
7
87
98
109
  
Prosper Funding LLC 
5054
5155
5256
5357
5458
8693



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Prosper Marketplace Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Prosper Marketplace Inc. and subsidiaries (the "Company") as of December 31, 20212023 and 2020,2022, the related consolidated statements of operations, other comprehensive loss, convertible preferred stock and stockholders’ deficit, and cash flows, for each of the three years in the period ended December 31, 2021,2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021,2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Level 3 Financial Instruments and Unobservable Inputs Therein

•Borrower Loans and Loans Held for Sale, at Fair Value — Refer to– See Note 4. Borrow Loans, Loans Held for Sale and Notes, 2, 4 and 7 to the financial statementsat Fair Value
•Servicing Assets – See Note 6. Servicing Assets
•Credit Card Servicing Obligation Liability – See Note 5. Credit Card
•Credit Card Derivative – See Note 5. Credit Card

Critical Audit Matter Description

The Company measures Borrower Loans and Loans Held for Salefinancial instruments at fair value which are classified as Level 3 instruments.including borrower loans and loans held for sale, servicing assets, credit card servicing obligation and credit card derivative. As of December 31, 2021, Borrower Loans2023, borrower loans were $267.6$545.0 million, loans held for sale were $161.5 million, personal loans servicing assets were $12.2 million, credit card derivative was $36.8 million and Loans Held for Sale were $243.2 million.credit card servicing obligation liability was $9.7 million, which is recorded within other liabilities. The Company estimates the fair valuevalues using discounted cash flow valuation methodologies incorporating significant unobservable inputs and valuation assumptions that are reflective of management’s own estimates of assumptions that market participants would use in pricing the
F-1



instruments and requires significant management judgmentjudgement or estimate. The main assumptionsSignificant unobservable inputs used to valuein the Borrower Loansvaluation methodology of the servicing assets and Loans Held for Salecredit card serving obligation include the market servicing rate. For all level 3 financial instruments, significant unobservable inputs used in the valuation methodology include discount rates, default rates and prepayment rates derived from historical performance and discount rates applied to each credit grade of the loans.rates.

Auditing the methodology and significant unobservable inputs specifically, the unobservable inputs related to the discount rate, default rate and prepayment rate, used by management to estimate the fair valuevalues of Borrower Loans and Loans Held for Salethese level 3 financial instruments required a high degree of auditor judgment and subjectivity and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of Borrower Loansthese Level 3 financial instruments and Loans Held for Sale at fair value including unobservable inputs used by management to estimate the fair value included the following key procedures:
F-1



•We performed inquiries with management andgained an understanding of the Company’s third-party valuation expert to understand the process for developing,significance of inputs and assumptions used in, the valuation models.using sensitivity analysis, identifying relevant inputs and assumptions for further testing.

•With the assistance of our fair value specialists, we developed independent estimates of fair value and compared our estimates to the Company’s estimates.

•We tested the source information derived from the Company’s data used in the valuation models.
Valuation of Servicing Assets — Refer to Notes 2, 5 and 7 to the financial statements
Critical Audit Matter Description
The Company measures Servicing Assets at fair value which are classified as Level 3 instruments. As of December 31, 2021, Servicing Assets were $8.8 million. The Company estimates the fair value using a discounted cash flow valuation methodology incorporating significant unobservable inputs and valuation assumptions that are reflective of management’s own estimates of assumptions that market participants would use in pricing the instruments and requires significant management judgment or estimation. Significant unobservable inputs used in the valuation methodology include the market servicing rate, discount rate, default rate and prepayment rate.
Auditing the significant unobservable inputs used by management to estimate the fair value of Servicing Assets required a high degree of auditor judgment and subjectivity and an increased extend of effort, including the need to involve our fair value specialist.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of Servicing Assets at fair value including unobservable inputs used by management to estimate the fair value included the following key procedures:
•We performed inquiries with management and the Company’s third-party valuation expert to understand the process for developing, and assumptions used in, the valuation model.
•With the assistance of our fair value specialists, we developed an independent estimate of fair value and compared our estimate to the Company’s estimate.
•We evaluated the reasonableness of the market servicing rate of servicing assumption used in developing the fair value estimate of the Servicing Assets.servicing assets.

•We testedevaluated the source information derived fromreasonableness of the Company’s datamarket servicing rate assumption used in developing the valuation model.fair value estimate of the credit card servicing obligation liability.

Valuation of Convertible Preferred Stock Warrant Liability – Refer to Notes 2 and 12 to the financial statementsFinancial Statements

Critical Audit Matter Description

Convertible Preferred Stock Warrantspreferred stock warrants are recorded at fair value and subject to remeasurement to fair value at each balance sheet date. As of December 31, 2021, Convertible Preferred Stock Warrant Liability2023, convertible preferred stock warrant liability was $250.9$215.0 million. To estimate the fair value of the Convertible Preferred Stock Warrants,convertible preferred stock warrants, the Company determines the business enterpriseequity value of the Company using a variety of valuation methods, including recent transactions in the Company's stock, discounted cash flow models and market based methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the business enterpriseequity value has been estimated, an option pricing model is used to allocate the value to the various classes of equity, including preferred stock. The concluded per share value for the Convertible Preferred Stock Warrantsconvertible preferred stock warrants is then determined using a Black-Scholes option pricing model.

Auditing the valuation methods used by management to estimate the fair value of the Convertible Preferred Stock Warrant Liabilityconvertible preferred stock warrant liability required a high degree of auditor judgment and subjectivity and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of the Convertible Preferred Stock Warrant Liabilityconvertible preferred stock warrant liability included the following key procedures:procedures, among others:

•We performed inquiries with management and the Company’s third-party valuation expert to understand the process for developing, and assumptions used in, the valuation model.

•With the assistance of our fair value specialists we evaluated the Convertible Preferred Stock Warrant valuation methodology, assumptions, and fair value results.
F-2



•We evaluated whether management’s assumptions were reasonable including comparing management’s historical forecasts of future cash flows to actual results.

/s/ DELOITTE & TOUCHE LLP

San Francisco, CA
March 25, 202222, 2024
F-2




We have served as the Company’s auditor since 2014.
F-3





Prosper Marketplace, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31, December 31,
20212020
202320232022
Assets:Assets:
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash EquivalentsCash and Cash Equivalents$67,700 $50,145 
Restricted Cash (1)Restricted Cash (1)167,925 163,723 
Accounts Receivable (1)1,054 605 
Accounts Receivable
Accounts Receivable
Accounts Receivable
Loans Held for Sale, at Fair Value (1)Loans Held for Sale, at Fair Value (1)243,170 274,621 
Borrower Loans, at Fair Value (1)267,626 378,263 
Borrower Loans, at Fair Value
Property and Equipment, NetProperty and Equipment, Net29,714 28,446 
Prepaid and Other Assets (1)Prepaid and Other Assets (1)6,238 5,196 
Credit Card Derivative
Servicing AssetsServicing Assets8,761 9,242 
GoodwillGoodwill36,368 36,368 
Intangible Assets, NetIntangible Assets, Net328 500 
Total AssetsTotal Assets$828,884 $947,109 
Liabilities, Convertible Preferred Stock and Stockholders'
Deficit:		Liabilities, Convertible Preferred Stock and Stockholders'
Deficit:		 Liabilities, Convertible Preferred Stock and Stockholders' Deficit: 
Accounts Payable and Accrued LiabilitiesAccounts Payable and Accrued Liabilities$25,790 $17,876 
Payable to InvestorsPayable to Investors152,794 124,094 
Notes, at Fair ValueNotes, at Fair Value265,985 208,379 
Notes Issued by Securitization Trust (1)Notes Issued by Securitization Trust (1)— 156,782 
Certificates Issued by Securitization Trust, at Fair Value (1)— 22,917 
Warehouse Lines (1)Warehouse Lines (1)209,275 242,479 
Warehouse Lines (1)
Warehouse Lines (1)
Term Loan
Other LiabilitiesOther Liabilities23,900 25,057 
Convertible Preferred Stock Warrant LiabilityConvertible Preferred Stock Warrant Liability250,941 112,319 
Total LiabilitiesTotal Liabilities$928,685 $909,903 
Commitments and Contingencies (see Note 17)Commitments and Contingencies (see Note 17)00Commitments and Contingencies (see Note 17)
Convertible Preferred Stock – $0.01 par value; 444,760,848 shares authorized as of December 31, 2021 and December 31, 2020; 209,613,570 shares issued and outstanding as of December 31, 2021 and December 31, 2020. Aggregate liquidation preference of $370,456 as of December 31, 2021 and 2020.$322,748 $322,748 
Less: Convertible Preferred Stock Held by Consolidated VIE (Note 12), 51,247,915 shares issued and outstanding as of December 31, 2021 and December 31, 2020.(2,381)(2,381)
Convertible Preferred Stock – $0.01 par value; 444,760,848 shares authorized as of December 31, 2023 and December 31, 2022; 209,613,570 shares issued and outstanding as of December 31, 2023 and December 31, 2022. Aggregate liquidation preference of $370,456 as of December 31, 2023 and 2022.
Less: Convertible Preferred Stock Held by Consolidated VIE (Note 13), 51,247,915 shares issued and outstanding as of December 31, 2023 and December 31, 2022.
Stockholders' Deficit:Stockholders' Deficit:  Stockholders' Deficit: 
Common Stock – $0.01 par value; 625,000,000 shares authorized; 73,089,929 shares issued and 72,153,994 shares outstanding as of December 31, 2021; 70,075,307 shares issued and 69,139,372 shares outstanding as of December 31, 2020245 215 
Common Stock – $0.01 par value; 625,000,000 shares authorized; 77,861,329 shares issued and 76,925,394 shares outstanding as of December 31, 2023; 75,223,850 shares issued and 74,287,915 shares outstanding as of December 31, 2022.
Additional Paid-In CapitalAdditional Paid-In Capital157,256 155,952 
Less: Treasury StockLess: Treasury Stock(23,417)(23,417)
Accumulated DeficitAccumulated Deficit(554,252)(415,911)
Total Stockholders' DeficitTotal Stockholders' Deficit$(420,168)$(283,161)
Total Stockholders' Deficit
Total Stockholders' Deficit
Total Liabilities, Convertible Preferred Stock and Stockholders' DeficitTotal Liabilities, Convertible Preferred Stock and Stockholders' Deficit$828,884 $947,109 
(1) Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below.
(1) Includes amounts in consolidated variable interest entities presented separately in the table below.
(1) Includes amounts in consolidated variable interest entities presented separately in the table below.
(1) Includes amounts in consolidated variable interest entities presented separately in the table below.
The accompanying notes are an integral part of these consolidated financial statements.
F-4



The following table presents the assets and liabilities of consolidated variable interest entities (VIEs)(“VIEs”), which are included in the Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. On September 27, 2021, assets and liabilities held by the securitization trusts consolidated by PMI as VIEs were removed from the balance sheet as part of the deconsolidation of those entities. See Note 6 - Securitizations and Note 10 - Debt in the Notes to Consolidated Financial Statements for additional information.
December 31,
20212020
December 31,December 31,
202320232022
Assets of consolidated VIEs, included in total assets above:Assets of consolidated VIEs, included in total assets above:
Restricted Cash
Restricted Cash
Restricted CashRestricted Cash$5,128 $25,203 
Loans Held for Sale, at Fair ValueLoans Held for Sale, at Fair Value243,170 274,621 
Loans Held for Sale, at Fair Value
Loans Held for Sale, at Fair Value
Borrower Loans, Held at Fair ValueBorrower Loans, Held at Fair Value— 168,593 
Prepaid and Other AssetsPrepaid and Other Assets2,846 2,043 
Total assets of consolidated variable interest entities$251,144 $470,460 
Total assets of consolidated VIEs
Liabilities of consolidated VIEs, included in total liabilities above:Liabilities of consolidated VIEs, included in total liabilities above:
Notes Issued by Securitization TrustNotes Issued by Securitization Trust$— $156,782 
Certificates Issued by Securitization Trust, at Fair Value— 22,917 
Notes Issued by Securitization Trust
Notes Issued by Securitization Trust
Warehouse LinesWarehouse Lines209,275 242,479 
Total liabilities of consolidated variable interest entities$209,275 $422,178 
Warehouse Lines
Warehouse Lines
Other liabilities
Total liabilities of consolidated VIEs
The accompanying notes are an integral part of these consolidated financial statements.
F-5




Prosper Marketplace, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
Years Ended December 31, Years Ended December 31,
202120202019 202320222021
Revenues:Revenues:  
Operating Revenues:Operating Revenues:  
Operating Revenues:
Operating Revenues:
Transaction Fees, Net
Transaction Fees, Net
Transaction Fees, NetTransaction Fees, Net$89,364 $67,335 $119,282 
Servicing Fees, NetServicing Fees, Net15,024 18,517 23,406 
Gain on Sale of Borrower Loans7,196 4,816 10,946 
Fair Value of Warrants Vested on Sale of Borrower Loans— — (17,553)
(Loss) Gain on Sale of Borrower Loans
Other Revenues
Other Revenues
Other RevenuesOther Revenues3,992 2,711 5,953 
Total Operating RevenuesTotal Operating Revenues115,576 93,379 142,034 
Interest Income (Expense):Interest Income (Expense):   Interest Income (Expense): 
Interest Income on Borrower Loans and Loans Held for SaleInterest Income on Borrower Loans and Loans Held for Sale83,107 104,150 100,786 
Interest Expense on Financial InstrumentsInterest Expense on Financial Instruments(50,816)(60,127)(63,736)
Total Interest Income, NetTotal Interest Income, Net32,291 44,023 37,050 
Change in Fair Value of Financial Instruments, Net(3,241)(34,166)(25,514)
Total Interest Income, Net
Total Interest Income, Net
Change in Fair Value of Financial Instruments
Total Net Revenue
Total Net Revenue
Total Net RevenueTotal Net Revenue144,626 103,236 153,570 
Expenses:Expenses:   Expenses: 
Origination and ServicingOrigination and Servicing35,056 29,897 34,915 
Sales and MarketingSales and Marketing35,065 29,259 73,824 
General and AdministrativeGeneral and Administrative73,122 63,384 71,588 
Impairment Expenses— 445 — 
Restructuring Charges, Net— — 34 
Change in Fair Value of Convertible Preferred Stock WarrantsChange in Fair Value of Convertible Preferred Stock Warrants138,622 (37,677)(11,235)
Gain on Forgiveness of PPP Loan
Loss on Deconsolidation of VIEsLoss on Deconsolidation of VIEs1,494 — — 
Impairment Expense
Interest Expense on Term Loan
Other Income, NetOther Income, Net(463)(639)(1,945)
Total ExpensesTotal Expenses282,896 84,669 167,181 
Net (Loss) Income Before Income TaxesNet (Loss) Income Before Income Taxes(138,270)18,567 (13,611)
Income Tax ExpenseIncome Tax Expense(71)(16)(100)
Net (Loss) IncomeNet (Loss) Income$(138,341)$18,551 $(13,711)
Plus: Return on Share Purchase— 2,381 1,066 
Less: Net Income Allocated to Participating Securities
Less: Net Income Allocated to Participating Securities
Less: Net Income Allocated to Participating SecuritiesLess: Net Income Allocated to Participating Securities— (15,172)— 
Net (Loss) Income Attributable to Common StockholdersNet (Loss) Income Attributable to Common Stockholders$(138,341)$5,760 $(12,645)
Net (Loss) Income Per Share – BasicNet (Loss) Income Per Share – Basic$(1.95)$0.08 $(0.18)
Net (Loss) Income Per Share – DilutedNet (Loss) Income Per Share – Diluted$(1.95)$0.02 $(0.18)
Weighted-Average Shares – BasicWeighted-Average Shares – Basic70,767,27568,592,55770,511,605Weighted-Average Shares – Basic76,092,56973,291,71470,767,275
Weighted-Average Shares – DilutedWeighted-Average Shares – Diluted70,767,275306,673,58670,511,605Weighted-Average Shares – Diluted76,092,569348,593,59470,767,275
The accompanying notes are an integral part of these consolidated financial statements.
F-6



Prosper Marketplace, Inc.
Consolidated Statements of Other Comprehensive (Loss) IncomeConvertible Preferred Stock and Stockholders’ Deficit
(in thousands)thousands, except share amounts)
Years Ended December 31,
202120202019
Net (Loss) Income$(138,341)$18,551 $(13,711)
Other Comprehensive Income, Before Tax:  
Change in Net Unrealized (Loss) Gain on Available for Sale Investments, at Fair Value— — 13 
Other Comprehensive Income, Before Tax— — 13 
Income Tax Effect— — — 
Other Comprehensive Income (Loss), Net of Tax— — 13 
Comprehensive (Loss) Income, Net of Tax$(138,341)$18,551 $(13,698)
 Convertible Preferred StockConvertible Preferred Stock Held by Consolidated VIECommon StockTreasury Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Total
 SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 2020209,613,570 $322,748 (51,247,915)(2,381)74,316,607 $215 (5,177,235)$(23,417)$155,952 $(415,911)$(283,161)
Exercise of vested stock options— — — — 3,014,622 30 — — 31 — 61 
Stock-based compensation expense— — — — — — — — 1,273 — 1,273 
Net Loss— — — — — — — — — (138,341)(138,341)
Balance at December 31, 2021209,613,570 322,748 (51,247,915)(2,381)77,331,229 245 (5,177,235)(23,417)157,256 (554,252)(420,168)
Exercise of vested stock options— — — — 2,133,921 22 — — 32 — 54 
Stock-based compensation expense— — — — — — — — 1,526 — 1,526 
Net Income— — — — — — — — — 70,582 70,582 
Balance at December 31, 2022209,613,570 $322,748 (51,247,915)$(2,381)79,465,150 $267 (5,177,235)$(23,417)$158,814 $(483,670)$(348,006)
Exercise of vested stock options— — — — 2,637,479 26 — — 91 — 117 
Stock-based compensation expense— — — — — — — — 1,804 — 1,804 
Net Loss— — — — — — — — — (106,462)(106,462)
Balance at December 31, 2023209,613,570 $322,748 (51,247,915)$(2,381)82,102,629 $293 (5,177,235)$(23,417)$160,709 $(590,132)$(452,547)
The accompanying notes are an integral part of these consolidated financial statements.
F-7



Prosper Marketplace, Inc.
Consolidated Statements of Convertible Preferred Stock and Stockholders’ DeficitCash Flows
(in thousands, except share amounts)thousands)
 Convertible Preferred StockConvertible Preferred Stock Held by Consolidated VIECommon StockTreasury Stock
Additional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated
Deficit
Total
 SharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 1, 2019214,637,925 $323,793 — $— 75,652,445 $229 (5,177,235)$(23,417)$145,486 $(13)$(420,751)$(298,466)
Repurchase of Common Stock— — — — (2,196,665)(22)— — 22 — — — 
Repurchase of Convertible Preferred Stock(5,024,355)(1,045)— — — — — — 1,045 — — 1,045 
Exercise of vested stock options— — — — 173,356 1 — — 24 — — 25 
Stock-based compensation expense— — — — — — — — 4,839 — — 4,839 
Change in net unrealized loss on Available for Sale Investments, at Fair Value— — — — — — — — — 13 — 13 
Net Loss— — — — — — — — — — (13,711)(13,711)
Balance at December 31, 2019209,613,570 322,748 — — 73,629,136 208 (5,177,235)(23,417)151,416 — (434,462)(306,255)
Exercise of vested stock options— — — — 687,471 7 — — 8 — — 15 
Stock-based compensation expense— — — — — — — — 2,147 — — 2,147 
Purchase of Convertible Preferred Stock by consolidated VIE Prosper Grantor Trust (Note 12)— — (51,247,915)(2,381)— — — — 2,381 — — 2,381 
Net Income— — — — — — — — — — 18,551 18,551 
Balance at December 31, 2020209,613,570 $322,748 (51,247,915)$(2,381)74,316,607 $215 (5,177,235)$(23,417)$155,952 $— $(415,911)$(283,161)
Exercise of vested stock options— — — — 3,014,622 30 — — 31 — — 61 
Stock-based compensation expense— — — — — — — — 1,273 — — 1,273 
Net Loss— — — — — — — — — — (138,341)(138,341)
Balance at December 31, 2021209,613,570 $322,748 (51,247,915)$(2,381)77,331,229 $245 (5,177,235)$(23,417)$157,256 $— $(554,252)$(420,168)
Years Ended December 31,
 202320222021
Cash Flows from Operating Activities:  
Net (Loss) Income$(106,462)$70,582 $(138,341)
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by (Used in) Operating Activities: 
Change in Fair Value of Financial Instruments22,910 9,712 3,241 
Depreciation and Amortization10,989 10,924 9,839 
Amortization of Operating Lease Right-of-Use Asset2,408 3,545 3,774 
Gain on Termination of Operating Lease Right-of-Use Asset— (88)— 
Impairment of Operating Lease Right-of-Use Asset196 — — 
Recognition of Servicing Asset on Sale of Borrower Loans(9,239)(12,957)(7,973)
Change in Fair Value of Servicing Rights15,564 9,157 8,454 
Stock-Based Compensation Expense1,575 1,326 1,136 
Loss on Deconsolidation of VIEs— — 1,494 
Change in Fair Value of Convertible Preferred Stock Warrants48,695 (84,595)138,622 
Gain on Forgiveness of PPP Loan— (8,604)— 
Accrual of Payment-in-kind Interest on Term Loan1,527 — — 
Other, Net1,497 12 2,027 
Changes in Operating Assets and Liabilities:
Purchase of Loans Held for Sale at Fair Value(1,921,129)(3,063,729)(1,712,705)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value1,989,170 2,783,971 1,770,822 
Accounts Receivable(4,061)(2,408)(449)
Prepaid and Other Assets(12,350)(2,194)639 
Credit Card Derivative(561)3,304 — 
Accounts Payable and Accrued Liabilities4,159 11,530 7,776 
Payable to Investors1,420 (67,482)28,700 
Other Liabilities1,537 3,092 (3,493)
Net Cash Provided by (Used in) Operating Activities47,845 (334,902)113,563 
Cash Flows from Investing Activities:  
Purchase of Borrower Loans Held at Fair Value(232,306)(284,921)(231,998)
Proceeds from Sales and Principal Payments of Borrower Loans Held at Fair Value191,077 202,119 236,861 
Purchases of Property and Equipment(15,722)(13,063)(12,041)
Net Cash Used in Investing Activities(56,951)(95,865)(7,178)
Cash Flows from Financing Activities:  
Proceeds from Issuance of Notes Held at Fair Value231,520 285,115 231,933 
Payments of Notes Held at Fair Value(188,670)(202,308)(172,250)
Principal Payments on Notes Issued by Securitization Trust(34,701)— (87,700)
Principal Payments on Certificates Issued by Securitization Trust— — (14,935)
Net cash and restricted cash outflows from Deconsolidation of VIEs— — (6,821)
Proceeds from Issuance of Securitized Notes (Note 7)250,657 — — 
Proceeds from Warehouse Lines48,478 235,870 68,800 
Principal payments on Warehouse Lines(111,732)— (101,900)
Extinguishment of PWIIT Warehouse Line (Note 11)(223,968)— — 
Proceeds from Term Loan (Note 11)— 73,500 — 
Principal payments on financing lease— (78)(76)
Payment for Debt Issuance Costs(3,937)(402)(1,740)
Proceeds from Exercise of Stock Options118 54 61 
Net Cash (Used in) Provided by Financing Activities(32,235)391,751 (84,628)
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash(41,341)(39,016)21,757 
Cash, Cash Equivalents and Restricted Cash at Beginning of the Year196,609 235,625 213,868 
Cash, Cash Equivalents and Restricted Cash at End of the Year$155,268 $196,609 $235,625 
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest$97,431 $58,114 $49,923 
Cash paid for operating leases included in the measurement of lease liabilities3,051 5,770 5,381 
Non-Cash Investing Activity - Accrual for Property and Equipment, Net1,468 1,154 971 
Non-Cash Investing Activity - Deconsolidation of Borrower Loans, at Fair Value— — 78,361 
Non-Cash Financing Activity - Accrual for Debt Issuance Costs550 — — 
Non-Cash Financing Activity - Forgiveness of PPP Loan— 8,604 — 
Non-Cash Financing Activity - Deconsolidation of Notes Issued by Securitization Trust— — 69,709 
Non-Cash Financing Activity - Deconsolidation of Certificates Issued by Securitization Trust, at Fair Value— — 13,979 
Reconciliation to Amounts on Consolidated Balance Sheets
Cash and Cash Equivalents$34,970 $83,446 $67,700 
Restricted Cash120,298 113,163 167,925 
Total Cash, Cash Equivalents and Restricted Cash$155,268 $196,609 $235,625 
The accompanying notes are an integral part of these consolidated financial statements.
F-8



Prosper Marketplace, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31,
 202120202019
Cash Flows from Operating Activities:  
Net (Loss) Income$(138,341)$18,551 $(13,711)
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by (Used in) Operating Activities: 
Change in Fair Value of Financial Instruments, Net3,241 34,160 27,306 
Depreciation and Amortization9,839 8,349 7,676 
Amortization of Operating Lease Right-of-Use Asset3,774 3,487 3,494 
Impairment of Operating Lease Right-of-Use Asset— 445 — 
Gain on Sale of Borrower Loans(7,973)(5,830)(11,924)
Change in Fair Value of Servicing Rights8,454 9,189 12,476 
Stock-based Compensation Expense1,136 1,913 4,529 
Fair Value of Warrants Vested on Sale of Borrower Loans— — 17,552 
Loss on Deconsolidation of VIEs (Note 6)1,494 — — 
Change in Fair Value of Convertible Preferred Stock Warrants138,622 (37,677)(11,235)
Other, Net2,027 1,675 1,118 
Changes in Operating Assets and Liabilities:
Purchase of Loans Held for Sale at Fair Value(1,712,705)(1,338,082)(2,320,560)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value1,770,822 1,254,474 2,241,569 
Accounts Receivable(449)1,090 3,424 
Prepaid and Other Assets639 498 1,350 
Accounts Payable and Accrued Liabilities7,776 (2,187)(106)
Payable to Investors28,700 23,002 (26,446)
Other Liabilities(3,493)(5,391)(4,590)
Net Cash Provided by (Used in) Operating Activities113,563 (32,334)(68,078)
Cash Flows from Investing Activities:  
Purchase of Borrower Loans Held at Fair Value(231,998)(133,644)(170,328)
Proceeds from Sales and Principal Payments of Borrower Loans Held at Fair Value236,861 279,658 254,845 
Purchases of Property and Equipment(12,041)(8,359)(10,312)
Purchases of Available for Sale Investments, at Fair Value— — (1,488)
Maturities of Available for Sale Securities— — 23,763 
Net Cash (Used in) Provided by Investing Activities(7,178)137,655 96,480 
Cash Flows from Financing Activities:  
Proceeds from Issuance of Notes Held at Fair Value231,933 133,228 171,138 
Payments of Notes Held at Fair Value(172,250)(149,409)(167,419)
Principal Payments on Notes Issued by Securitization Trust(87,700)(192,771)(134,250)
Principal Payments on Certificates Issued by Securitization Trust(14,935)(22,136)(13,770)
Proceeds from Securitization Issuance— — 8,962 
Net cash and restricted cash outflows from Deconsolidation of VIEs (Note 6)(6,821)— — 
Proceeds from Warehouse Lines68,800 126,149 186,010 
Principal payments on Warehouse Lines(101,900)(15,300)(57,899)
Principal payments on financing lease(76)(84)— 
Proceeds from Paycheck Protection Program Loan— 8,447 — 
Payment for Debt Issuance Costs(1,740)— (7,850)
Proceeds from Exercise of Stock Options61 15 25 
Net Cash Used in Financing Activities(84,628)(111,861)(15,053)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash21,757 (6,540)13,349 
Cash, Cash Equivalents and Restricted Cash at Beginning of the Year213,868 220,408 207,059 
Cash, Cash Equivalents and Restricted Cash at End of the Year$235,625 $213,868 $220,408 
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest$49,923 $57,697 $60,642 
Non-Cash Investing Activity - Accrual for Property and Equipment, Net$971 $833 $707 
Non-Cash Investing Activity - Deconsolidation of Borrower Loans, at Fair Value$78,361 $— $— 
Non-Cash Financing Activity - Deconsolidation of Notes Issued by Securitization Trust$69,709 $— $— 
Non-Cash Financing Activity - Deconsolidation of Certificates Issued by Securitization Trust, at Fair Value$13,979 $— $— 
Right-of-use assets obtained in exchange for new financing lease obligation$— $239 $— 
Non-Cash Investing Activity - Consolidation of Borrower Loans, at Fair Value$— $— $(391,383)
Non-Cash Financing Activity- Issuance of Securitization Notes and Certificates$— $— $554,892 
Non-Cash Financing Activity- Derecognition of Warehouse Line Debt$— $— $(158,857)
Reconciliation to Amounts on Consolidated Balance Sheets
Cash and Cash Equivalents$67,700 $50,145 $64,635 
Restricted Cash167,925 163,723 155,773 
Total Cash, Cash Equivalents and Restricted Cash$235,625 $213,868 $220,408 
The accompanying notes are an integral part of these consolidated financial statements.
F-9


PROSPER MARKETPLACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BUSINESS
Prosper Marketplace, Inc. (“PMI” or the “Company”) was incorporated in the state of Delaware on March 22, 2005. Except as the context requires otherwise, as used in these notes to consolidated financial statements of Prosper Marketplace, Inc., “Prosper”, “PMI”,PMI, “Prosper,” “we,” “us,” and the "Company"“our” refer to Prosper Marketplace, Inc.PMI and its wholly-owned subsidiaries, on a consolidated basis.
PMI developed a peer-to-peer online credit marketplace (the “marketplace”), and in February 2013, transferred ownership of the marketplace to Prosper Funding LLC (“PFL”), its wholly-owned subsidiary. All of the borrower payment dependent notes (“Notes”) issued and sold through the marketplace today are issued and sold by PFL. PFL also operates the marketplace and facilitates the origination of unsecured, personal loans by WebBank (“Borrower Loans”), an FDIC-insured, Utah-chartered industrial bank, through the marketplace. Pursuant to a Loan Account Program Agreement between PMI and WebBank, PMI manages the operation of the marketplace as an agent of WebBank in connection with the submission of loan applications by potential borrowers. PMI also manages the origination of related loans by WebBank and the funding of such Borrower Loans by WebBank. On February 1, 2013, PFL entered into an Administration Agreement with PMI in its capacity as licensee, corporate administrator, loan marketplace administrator and loan and Note servicer, pursuant to which PMI provides certain back office support, loan platform administration and loan servicing to PFL.
A borrower who wishes to obtain a Borrower Loan through the marketplace must post a loan listing on the marketplace. Listings are allocated to one of two investor funding channels: (i) the “Note Channel,” which allows investors to commit to purchase Notes from PFL, the payments of which are dependent on PFL’s receipt of payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows investors to commit to purchase 100% of a Borrower Loan directly from Prosper.
As of December 31, 2021,2023, the marketplace is open to investors in 3031 states and the District of Columbia. Additionally, as of December 31, 2021,2023, the marketplace is open to borrowers in 48 states and the District of Columbia. Currently our marketplace does not operate internationally.
In December 2021, the Company launched its Prosper Credit Card product in partnership with Coastal Community Bank (“Coastal”), through which eligible consumers are extended unsecured credit through Prosper-branded Credit Cards. In accordance with our program agreement with Coastal, the receivables associated with these Credit Cards are maintained on the balance sheet of Coastal. Customer accounts are then randomly designated as either Prosper Allocations or Coastal Allocations on an approximate 90% to 10% split, respectively. Each party receives 100% of the interest income and is responsible for the credit losses on its allocated customer accounts. PMI is responsible for verified fraud losses across the entire portfolio and a portion of straight charge-off losses. Credit Card receivables are not available on the Company’s personal loan marketplace for investment purposes.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of PMI and its wholly owned subsidiaries including PFL, Prosper Healthcare Lending LLC (“PHL”), BillGuard, Inc. (“BillGuard”), and its consolidated VIEs including Prosper Warehouse I Trust (“PWIT”), Prosper Warehouse II Trust (“PWIIT”)PWIIT,” terminated September 25, 2023), Prosper Marketplace Issuance Trust, Series 2019-12023-1 (“PMIT 2019-1,” deconsolidated on September 27, 2021)2023-1”), Prosper Marketplace Issuance Trust, Series 2019-2 (“PMIT 2019-2,” deconsolidated on September 27, 2021), Prosper Marketplace Issuance Trust, Series 2019-4 (“PMIT 2019-4,” deconsolidated on September 27, 2021) and Prosper Grantor Trust (“PGT”). All intercompany balances and transactions between PMI and its subsidiaries have been eliminated in consolidation. PMI and PFL’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
PMI did not have any items of other comprehensive income (loss) during any of the periods presented in the consolidated financial statements as of and for the years ended December 31, 2023, 2022 and 2021.
Notes Issued by Securitization Trust are notes held by certain third-party investors pursuant to Prosper’s securitization transaction, and are distinguishable from the borrower payment dependent Notes available to investors through the Company’s Note Channel.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures, including contingent liabilities at the date of the financial statements and the reported amounts of revenues and
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expenses during the reporting periods. These estimates, judgments and assumptions include but are not limited to the following: valuation of Loans Held for Sale, Borrower Loans and associated Notes, Certificates Issued by Securitization Trust (Note 6), valuation of servicing rights, and loan trailing fee liability and Credit Card Derivative, valuation allowance on deferred tax assets, stock-based compensation expense, Intangible Assets, Goodwill, Convertible Preferred Stock Warrant Liability, Repurchase Obligations and contingent liabilities. These judgments, estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions.
Consolidation of Variable Interest Entities
A variable interest entity (VIE) is a legal entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. Prosper’s variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the fair value of the entity’s net assets. A VIE is consolidated by its primary beneficiary, which is
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the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Prosper consolidates a VIE when it is deemed to be the primary beneficiary. Prosper assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis.
Transfers of Financial Assets
Prosper accounts for transfers of financial assets as sales when it has surrendered control over the transferred assets. Control is generally considered to have been surrendered when the transferred assets have been legally isolated from Prosper, the transferee has the right to pledge or exchange the assets without any significant constraints, and Prosper has not entered into a repurchase agreement, does not hold unconditional call options and has not written put options on the transferred assets. In assessing whether control has been surrendered, Prosper considers whether the transferee would be a consolidated affiliate and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of the transfer, even if they were not entered into at the time of transfer. Prosper measures gain or loss on sale of financial assets as the net proceeds received on the sale less the carrying amount of the loans sold. The net proceeds of the sale include the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, and recourse obligations.
Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments measured at fair value consist principally of Borrower Loans, Loans Held for Sale (Note 4), Servicing Assets (Note 6), Credit Card Derivative (Note 5), Loan Trailing Fee Liabilities (Note 9)10), Notes, Certificates Issued by Securitization TrustDebt (Note 6)11) and Convertible Preferred Stock Warrant Liability.Liability (Note 13). The estimated fair values of other financial instruments, including Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities, and Payable to Investors approximate their carrying values because of their short-term nature. The estimated fair values of the Paycheck Protection Program loan (Note 9 and 10), Notes Issued by Securitization Trust (Note 6)Term Loan and Warehouse Lines (Note 11) do not approximate their carrying values due primarily to differences in the stated and market rates associated with these instruments.
The fair value hierarchy includes a three-level classification, which is based on whether the inputs to the valuation methodology used for measurement are observable:
Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
Level 3 — Unobservable inputs.
When developing fair value measurements, Prosper maximizes the use of observable inputs and minimizes the use of unobservable inputs. However, for certain instruments Prosper must utilize unobservable inputs in determining fair value due to the lack of observable inputs in the market, which requires greater judgment in measuring fair value. In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are determined using assumptions that management believes a market participant would use in pricing the asset or liability.
As observable market prices are not available for the Borrower Loans, Loans Held for Sale, Notes, Certificates Issued by Securitization TrustServicing Assets and Servicing Assets,Credit Card Derivative, or for similar assets and liabilities, Prosper believes the Borrower Loans, Loans Held for Sale, Notes, Certificates Issued by Securitization TrustServicing Assets and Servicing AssetsCredit Card Derivative are considered level 3 financial instruments. Prosper primarily uses a discounted cash flow model to estimate their fair value, and key assumptions used in valuation include default rates and
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prepayment rates derived from market data and historical performance and discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.
The obligation to pay principal and interest on any series of Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of our servicing fee which is 1.0% of the outstanding balance. The fair value election for Notes and Borrower Loans allows both the assets and the related liabilities to receive similar accounting treatment for expected losses which is consistent with the subsequent cash flows to investors that are dependent upon borrower payments. As such, the fair value of a series of Notes is approximately equal to the fair value of the corresponding Borrower Loan, adjusted for the 1.0% servicing fee and the timing of loan purchase, Note issuance and borrower payments. As a result, the valuation of the Notes uses the same methodology and assumptions as the Borrower Loans, except that the Notes incorporate
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the 1.0% servicing fee and any differences in timing in payments. The effective interest rate associated with a group of Notes is less than the interest rate earned on the corresponding Borrower Loan due to the 1.0% servicing fee.
Refer to Note 78, Fair Value of Assets and Liabilities, for additional fair value disclosures.
Cash and Cash Equivalents
Cash includes various unrestricted deposits with investment-grade rated financial institutions. Cash equivalents consist of highly liquid marketable securities with original maturities of three months or less at the time of purchase and consist primarily of money market funds, commercial paper, US treasury securities and US agency securities. Cash equivalents are recorded at cost, which approximates fair value.
At times, our cash balances may exceed federally insured amounts and potentially subject the Company to a concentration of credit risk. The Company believes that no significant concentration of credit risk exists with respect to these balances based on its assessment of the creditworthiness of these financial institutions.
Restricted Cash
Restricted cash consists primarily of cash deposits, money market funds and short term certificate of deposit accounts held as collateral as required for long term leases, loan funding and servicing activities, and cash that investors or Prosper have on the marketplace that has not yet been invested in Borrower Loans or disbursed to the investor.
Borrower Loans, Loans Held for Sale Notes and Certificates Issued by Securitization TrustNotes
Borrower Loans are funded either through the Note Channel or through the Whole Loan Channel. Through the Note Channel, Prosper purchases Borrower Loans from WebBank, then issues Notes to investors and holds the Borrower Loans until maturity. The obligation to repay a series of Notes issued through the Note Channel is dependent upon the repayment of the associated Borrower Loans.Loan. Borrower Loans funded and Notes issued through the Note Channel are carried on Prosper’s Consolidated Balance Sheetsconsolidated balance sheets as assets and liabilities, respectively.
In 2019, Prosper began refinancing the purchase of Borrower Loans through the Whole Loan Channel through securitization transactions, which issued senior notes, risk retention interests, and residual certificates. Associated securitization trusts were deemed consolidated VIEs until September 2021, when the Company sold its share of the residual certificates issued by these securitization trusts and deconsolidated the VIEs. Prior to their deconsolidation, the Borrower Loans held in the securitization trusts were included in “Borrower Loans, at Fair Value”, senior notes sold to third party investors were included in “Notes Issued by Securitization Trust”, and the risk retention interest and residual certificates held by third party investors were included in “Certificates Issued by Securitization Trust, at Fair Value” on the Consolidated Balance Sheets. Refer to Note 6 - Securitization for additional disclosures and details on the deconsolidation of these securitization trust VIEs.
Prosper uses Warehouse Lines to purchase Loans Held for Sale that may be subsequently contributed to securitization transactions or sold to investors. Loans Held for Sale are included in “Loans Held for Sale, at Fair Value” inon the Consolidated Balance Sheets. See Note 10 -11, Debt, for more details on Warehouse Lines.
In September 2023, Prosper closed a securitization transaction (the “PMIT 2023-1 Transaction”) with personal loans previously funded through its PWIIT Warehouse Line. The newly formed securitization entity, PMIT 2023-1, issued notes acquired by third parties and residual certificates acquired by PMI (a majority owned affiliate of PFL, the sole sponsor of the securitization). PMIT 2023-1 is deemed a consolidated VIE, and as a result the Borrower Loans it holds are presented in “Borrower Loans, at Fair Value,” and the notes sold to third-party investors are included in “Notes Issued by Securitization Trust” on the accompanying Consolidated Balance Sheet. See Note 7, Securitizations, for additional disclosures.
Borrower Loans and Loans Held for Sale are purchased from WebBank. Prosper places Borrower Loans and Loans Held for Sale on non-accrual status when they are 120 days past due. When a loan is placed on non-accrual status, Prosper stops accruing interest and reverses all accrued but unpaid interest as of such date. Additionally, Prosper charges-off Borrower Loans and Loans Held for Sale when they are 120 days past due. The fair value of loans 120 or more days past due generally consists of the expected recovery from debt sales in subsequent periods.
Prosper has elected the fair value option for Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization Trust.Notes. Changes in fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of Notes due to the borrower payment-dependent design of the Notes. Changes in the fair value of Borrower Loans held in consolidated securitization trusts were partially offset by changes in fair value of the Certificates Issued by Securitization Trust, prior to the deconsolidation of these securitization trusts in September 2021. Changes in fair value of Loans Held for Sale are recorded through Proper's earnings and Prosper collects interest on Loans Held for Sale. Changes in the fair valuevalues of Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization TrustNotes are included in “ChangeChange in Fair Value of Financial Instruments Net” on the accompanying Consolidated Statements of Operations.
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Prosper primarily uses a discounted cash flow model to estimate the fair value of Borrower Loans, Loans Held for Sale Notes, and Certificates Issued by Securitization Trust.Notes. The key assumptions used in the valuation include default rates and prepayment rates derived primarily from historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.
F-12Credit Card Derivative

The Company evaluated the terms of the Credit Card program agreement (the “Credit Card Program Agreement”) with Coastal Community Bank (“Coastal”) and determined that it contained features that met the definition of derivatives under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging. These features are freestanding financial instruments (as defined under ASC 480, Distinguishing Liabilities from Equity), and have been valued separately as derivatives. A right of offset exists between the derivatives, and they are presented net on the accompanying consolidated balance sheets. Changes in the fair value of the Credit Card Derivative, as well as settled transactions from the Credit Card portfolio, are recorded in Change in Fair Value of Financial Instruments on the accompanying Consolidated Statements of Operations.
In August 2023, the Company executed an amendment to the Credit Card Program Agreement that, among other things, (a) increased the maximum outstanding Credit Card principal balance for Prosper Allocations from $200 million to $300 million, (b) funded a cash reserve account in the name of Coastal in connection with charge-off losses on receivables allocated to Prosper, and (c) clarified various items from the original program agreement. As a result of (b), the Company reclassified approximately $9.3 million in Restricted Cash held in the reserve account to Prepaid and Other Assets on the accompanying Consolidated Balance Sheets.
Refer to Note 5, Credit Card, for additional details on revenues and expenses related to the Credit Card product.
Servicing Assets
Prosper records Servicing Assets at their estimated fair values for servicing rights retained when Prosper sells Borrower Loans to unrelated third-party buyers. The change in fair value of Servicing Assets is recognized in Servicing Fees, Net. The gain or loss on a loan sale is recorded in (Loss) Gain on Sale of Borrower Loans while the fair value of the servicing rights, which is based on the degree to which the contractual loan servicing fee is above or below an estimated market servicing rate is recorded in Servicing Assets on the Consolidated Balance Sheets.
Prosper uses a discounted cash flow model to estimate the fair value of the loan Servicing Assets which considers the contractual projected servicing fee revenue that Prosper earns on the Borrower Loans, the estimated market servicing rates to service such loans, the prepayment rates, the default rates and the current principal balances of the Borrower Loans.
Property and Equipment
Property and Equipment consists of computer equipment, office furniture and equipment, leasehold improvements, software purchased or developed for internal use and web site development costs. Property and Equipment is stated at cost, less accumulated depreciation and amortization, and is computed using the straight-line method based upon estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

Furniture and fixtures7 years
Office equipment5 years
Computers and equipment3 years
Leasehold improvements5-8 years
Software and website development costs1-5 years

The costs to develop software for the website and other internal uses are capitalized when management has authorized and committed project funding, when preliminary development efforts are successfully completed, and when it is probable that the project will be completed, and the software will be used as intended. Capitalized software and website development costs primarily include software licenses acquired, fees paid to outside consultants and salaries and payroll-related costs for employees directly involved in the development efforts.
Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed. Costs incurred for upgrades and enhancements that are considered to be probable to result in additional functionality are capitalized. Capitalized costs are included in Property and Equipment and amortized to expense using the straight-line method over their expected lives. Software and website development assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. RecoverabilityThe recoverability of software and
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website development assets to be held and used is measured by a comparison of the carrying amount of the asset group to the future net undiscounted cash flows expected to be generated by the asset group. If such software and website development assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software and website development asset group.
Leases
Management determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are included on the Consolidated Balance Sheets in Property and Equipment, Net and in Other Liabilities, respectively. For certain leases with original terms of twelve months or less, PMI recognizes the lease expense as incurred and does not recognizerecord ROU assets and lease liabilities.
If a contract contains a lease, management evaluates whether it should be classified as an operating or finance lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of PMI's leases do not provide an implicit rate, management uses an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The operating lease ROU assets are evaluated for impairment utilizing the same impairment model used for Property and Equipment.
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Goodwill and Intangibles
Goodwill associated with business combinations is computed by recognizing the portion of the purchase price that is not tied to individually identifiable and separately recognizable assets. Goodwill is assigned to the Company’s reporting units at the acquisition date according to the expected economic benefits that the acquired business will provide to the reporting unit. A reporting unit is a business operating segment or a component of a business operating segment. The Company identifies its reporting units based on how the operating segments and reporting units are managed. Accordingly, the Company allocated the entire balance of goodwill to the Personal Loan reportable and operating segment. Refer to Note 21 for further information on the Company’s reportable and operating segments.
Goodwill is not amortized but is tested for impairment annually or whenever indications of impairment exist. Annual impairment testing occurs on October 1. Impairment exists whenever the carrying value of Goodwill exceeds its implied fair value. Adverse changes in impairment indicators such as loss of key personnel, increased regulatory oversight or unplanned changes in operations could result in impairment. PMI did not recognize any Goodwill impairments during the years ended December 31, 2021, 2020 and 2019.
Costs of internally developing any intangibles is expensed as incurred. Intangible Assets identified through the acquisitions of American Healthcare Lending and BillGuard include customer relationships, technology and a brand name. The user base and customer relationship Intangible Assets are being amortized on an accelerated basis over a three to ten year period. The technology and brand name Intangible Assets were amortized on a straight-line basis over three to five years and one year, respectively.
Payable to Investors
Payable to Investors primarily represents the obligation to investors related to cash held in an account for the benefit of investors and payments-in-process received from borrowers.
Term Loan
Prosper entered into a Credit Agreement, which provided for a Term Loan with a third-party financial institution in November 2022, which is more fully described in Note 11. This Term Loan is carried at amortized cost, net of discounts and issuance costs, which are subsequently amortized to Interest Expense on Term Loan over the life of the underlying agreement.
Interest Expense on Term Loan is presented as a component of Expenses on the accompanying Consolidated Statements of Operations, except for any portion associated with Term Loan proceeds used to purchase Loans Held for Sale
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through the Company’s Warehouse Lines, and Notes Issued by Securitization Trustwhich is presented in Interest Expense on Financial Instruments as a component of Net Interest Income on the accompanying Consolidated Statement of Operations.
Warehouse Lines and Notes Issued by Securitization Trust (prior to deconsolidation in September 2021)
Warehouse Lines are carried at amortized cost. Prosper defers specific incremental costs directly related to entering into the Warehouse Lines and issuing Notes Issued by Securitization Trust and subsequently amortizes them into interest expense over the life of the arrangements.
Convertible Preferred Stock Warrant Liability
Prosper has entered into varying arrangements with investors to issue preferred stock warrants in exchange for their participation as a purchaser of Borrower Loans. In all cases, these warrants are free standing financial instruments due to their status as legally detached and separately exercisable warrants without conditions requiring Prosper to repurchase those warrants or the underlying preferred shares. These freestanding warrants are accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification TopicASC 480, Distinguishing Liabilities from Equity (“ASC 480”). Under ASC 480, vested freestanding warrants to purchase the Company’s convertible redeemable preferred stock are classified as a liability on the Consolidated Balance Sheets and carried at fair value because the warrants may conditionally obligate the Company to transfer assets at some point in the future. The Company records the warrants at fair value on issuance. The warrants are subject to remeasurement to fair value at each balance sheet date, and any change in their fair value is recognized as “Change in Fair Value of Convertible Preferred Stock Warrants” in the Consolidated Statements of Operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants, the completion of a deemed liquidation event or the conversion of convertible redeemable preferred stock into Common Stock.
Loan Trailing Fee Liability
On July 1, 2016, Prosper signed a series of agreements with WebBank which, among other things, includes an additional program fee (the “Loan Trailing Fee”) paid to WebBank in connection with the performance of each loan sold to Prosper. These agreements became effective as of August 1, 2016. The Loan Trailing Fee is dependent on the amount and timing of principal and interest payments made by borrowers of the underlying loans, irrespective of whether the loans are sold by Prosper, and gives WebBank an ongoing financial interest in the performance of the loans it originates. This fee is paid by Prosper to WebBank over the term of the respective loans and is a function of the principal and interest payments made by borrowers of such loans. In the event that principal and interest payments are not made with respect to any loan, Prosper is not required to make the related Loan Trailing Fee payment. The obligation to pay the Loan Trailing Fee for any loan sold to Prosper is recorded at fair value at the time of the origination of such loan within Other Liabilities and recorded as a reduction of “Transaction Fees, net”. Any changes in the fair value of this liability are recorded in “Servicing Fees, Net” on the consolidated statementsConsolidated Statements of operations.Operations. The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and defaults rates.
Revenue Recognition
Revenue primarily results from transactionTransaction and Servicing Fees and net interest incomeNet Interest Income earned. Fees include Transaction Fees for our services performed on behalf of WebBank to originate a loan.loan, as well as program fees and broker fees generated from our Credit Card product and Home Equity Products, respectively. PMI also has other smaller sources of revenue reported as Other Revenues, including referral fees, and securitizationincentive fees.
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Transaction Fees
Prosper has a customer contract with WebBank to facilitate the origination of all Borrower Loans through Prosper’s marketplace. In exchange for these services, Prosper earns a transaction fee from WebBank that is recognized when performance is complete and upon the successful origination of a Borrower Loan. The transaction fee Prosper earns is determined by the term and credit grade of the Borrower Loan that is facilitated on Prosper’s marketplace, and ranges from 1.0%1.00% to 5.0%7.99% of the original principal amount of each Borrower Loan that WebBank originates. Prosper records the transaction fee net of any fees paid to WebBank because Prosper does not receive an identifiable benefit from WebBank other than the borrower loan that has been recognized at fair value. Additionally, the Company assumes WebBank’s obligation under Utah law to refund the pro-rated amount of the transaction fee in excess of 5% in the event of a borrower prepayment of the loan in full before maturity. Actual and expected refunds are recorded as a reduction of “Transaction Fees, Net” on the Company’s Consolidated Statements of Operations, and are included in “Accounts Payable and Accrued Liabilities” on the Company’s Consolidated Balance Sheets (Note 17).
 The Company also generates various Credit Card program fees through its partnership with Coastal. These include interchange fees, annual fees and late fees, which compensate Prosper for its role in marketing and growing the Credit Card
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product. Interchange and late fees are recognized as they are generated each month, while annual fees received are deferred and recognized over the annual period to which they relate.
Additionally, the Company generates broker fees on Home Equity Products through its partnerships with its Home Lending Partners.
Servicing Fees
Investors who purchase Borrower Loans from Prosper typically pay Prosper a servicing fee which is generally set at 1.075% per1.0% per annum of the outstanding principal balance of the borrower loan prior to applying the current payment.payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The servicing fee compensates Prosper for the costs incurred in servicing the borrower loan, including managing payments from borrowers, managing payments to investors and maintaining investors’ account portfolios. Prosper records Servicing Fees from investors as a component of operating revenue when received.
Under the Credit Card program agreement, Prosper is responsible for servicing the entire underlying Credit Card portfolio. Coastal pays the Company a 1% per annum servicing fee on the daily outstanding balance of receivables designated as Coastal Allocations. To the extent these servicing fees do not exceed the market servicing rate a market participant would require to service the entire Credit Card portfolio, the Company records a servicing obligation liability and measures it at fair value throughout the servicing period. Changes in the fair value of the servicing obligation liability are recorded in Servicing Fees.
(Loss) Gain on Sale of Borrower Loans
Prosper recognizes gains or losses on the sale of Borrower Loans when it sells Borrower Loans to third parties. Prosper measures gain or loss on sale of Borrower Loans as the net proceeds received on a sale less the fair value of the Borrower Loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, repurchase obligations and repurchase obligations.any incentives provided or received at the time of sale.
Interest Income on Borrower Loans and Loans Held for Sale and Interest Expense on Financial Instruments
Prosper recognizes interest income on Borrower Loans and Loans Held for Sale using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record interest expense on the corresponding Notes, at Fair Value, Notes Issued by Securitization Trust Certificates Issued by Securitization Trust, and Warehouse Lines based on the contractual interest rates.
Other Revenues
Other Revenues consist primarily of securitization fees and credit referral fees. Credit referralThese fees are whereearned from partner companies pay us an agreed upon amount for successful referralsthe referral of customers from our marketplace.on the Company’s platform. The transaction price is a fixed amount per referral and is recognized by the Company upon a successful referral. SecuritizationOther revenues also include incentive fees representearned from partner companies through established incentive programs and miscellaneous net fees Prosper earnsrelated to facilitate securitizations for purchasers of Borrower Loans and is recognized as “Other Revenues” when the securitization is completed.Company’s Credit Card program.
As of December 31, 2021,2023, Prosper had no contract assets, contract liabilities or deferred contract costs. As of December 31, 2021,2023, Prosper had no unsatisfied performance obligations related to Transaction Fees or Other Revenues.
Advertising Costs
Advertising costs are expensed when incurred and are included in “Sales and Marketing” expense in the accompanying Consolidated Statements of Operations. Prosper incurred advertising costs of $6.117.6 million, $6.8$15.0 million and $32.8$6.1 million for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, respectively.
Stock-Based Compensation
Management determines the fair value of the Company's stock options issued to employees on the date of grant using the Black-Scholes option pricing model, which is impacted by the fair value of Common Stock as well as by changes in assumptions that include, but are not limited to, the expected Common Stock price volatility over the term of the option awards, the expected term of the awards, risk-free interest rates and the expected dividend yield.
PMI recognizes compensation expense for stock-based awards on a straight-line basis over the period during which an employee is required to provide services in exchange for the award (the vesting period of the award). Stock-based compensation expense is recognized only for those awards expected to vest. PMI estimates future forfeitures at the date of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from estimates.
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Stock-based awards issued to non-employees are marked-to-market up until the point that the awards measurement period has been achieved. Compensation expense for stock options issued to non-employees is calculated using the Black-Scholes option pricing model and is recorded over the vesting period of the award.
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Income Taxes
The asset and liability method is used to account for income taxes. Under this method, deferred income tax assets and liabilities are based on the differences between the financial statement carrying values and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Prosper’s policy is to include interest and penalties related to gross unrecognized tax benefits within its provision for income taxes. U.S. Federal, California and other state income tax returns are filed. Prosper is not currently undergoing any income tax examinations. Due to the cumulative net operating loss, generally all tax years remain open.
Prosper recognizes benefits from uncertain tax positions only if management believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.
Other Income, Net
Other Income, Net includesconsists primarily of interest income from Available for Sale Investments,Cash and Cash Equivalents and sublease income, SEC settlement costs and contract termination costs that are expected to be non-recurring and not part of restructuring activities.
Restructuring Charges
Restructuring Charges consist of severance costs and contract termination-related costs and impairment charges associated with the severance actions. A liability for severance costs is typically recognized when the plan of termination has been communicated to the affected employees and is measured at its fair value at the communication date. Contract termination costs consist primarily of costs that will continue to be incurred under operating leases for their remaining terms without economic benefit to the Company. A liability for contract termination costs is recognized at the date the Company ceases using the rights conveyed by the lease contract and is recorded at fair value, which is determined based on the remaining contractual lease rentals reduced by estimated sublease rentals.
Comprehensive Income
Marketable debt securities are generally considered available-for-sale and are carried at fair value, based on quoted market prices or other readily available market information. Gains and losses are recognized when realized using the specific identification method and included in “Other Income, Net” in the Consolidated Statements of Operations. Unrealized gains and losses, net of taxes, are included in Accumulated Other Comprehensive Income, which is reflected as a separate component of Stockholders’ Deficit in Prosper's Consolidated Balance Sheets. If management has determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to an identified loss is recognized in earnings. Prosper monitors its investment portfolio for potential impairment on a quarterly basis.income.
Recent Accounting Pronouncements
Accounting Standards Adopted In The Current Year
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions related to the incremental approach for intraperiod tax allocation, the requirement to recognize or derecognize deferred tax liabilities related to equity method investments that are also foreign subsidiaries and the methodology for calculating income taxes in an interim period. The guidance also clarifies and simplifies other aspects of the accounting for income taxes, including a modification in the guidance for franchise taxes that are partially based on income and recognizing deferred taxes for a subsequent step-up in the tax basis of goodwill. The ASU was effective for the Company beginning in the first quarter of 2021. The Company has adopted ASU 2019-12 and concluded that the impact on its consolidated financial statements was immaterial.
Accounting Standards Issued, to be Adopted by the Company in Future Periods
In March 2020, the FASB issued ASUAccounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP on contract modifications and hedge accounting, in order to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”)LIBOR and other interbank offered rates to alternative referenced rates, such as the Secured Overnight Financing Rate. This ASU canThe optional guidance, which became effective on March 12, 2020, could be adopted after its issuance dateapplied through December 31, 2022. In December 2022, the FASB issued No 2022-06 extending the sunset date of the relief provided under ASU No. 2020-04 to December 31, 2024. The Company amended its agreements and transitioned to SOFR for contracts that previously referenced LIBOR. The Company continues to evaluate potential future impacts that may result from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows.

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission’s Disclosure Update and Simplification Initiative”. The amendments in this update modify the disclosure or presentation requirements of a variety of Topics in the ASC in response to the SEC’s Release No. 33-10532, “Disclosure Update and Simplification Initiative”, and align the ASC’s requirements with the SEC’s regulations. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact reference rate reform will have on its contracts that reference LIBOR in orderthis ASU to determine whetherits impact on the Company’s disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to adoptIncome Tax Disclosures”, which enhances effective tax rate reconciliation disclosure requirements and provides clarity to the disclosures of income taxes paid, income before taxes and provision for income taxes. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this guidance. See Note 10 - Debt for more details.update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

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Other recent accounting pronouncements issued by the FASB did not, or are not believed by management to, have a material impact on the Company’s present or future financial statements.
NOTE 3. PROPERTY AND EQUIPMENT, NET
Property and Equipment, Net consists of the following at the dates presented (in thousands):
December 31, December 31,
20212020 20232022
Internal-use software and website development costs
Operating lease right-of-use assetsOperating lease right-of-use assets$17,485 $15,767 
Computer equipmentComputer equipment15,090 13,841 
Internal-use software and website development costs41,816 33,176 
Office equipment and furnitureOffice equipment and furniture2,961 2,872 
Leasehold improvementsLeasehold improvements7,167 7,167 
Assets not yet placed in serviceAssets not yet placed in service5,224 5,035 
Property and equipmentProperty and equipment89,743 77,858 
Less: Accumulated depreciation and amortizationLess: Accumulated depreciation and amortization(60,029)(49,412)
Total Property and Equipment, NetTotal Property and Equipment, Net$29,714 $28,446 

Depreciation and amortization expense for Property and Equipment for the years ended December 31, 2023, 2022 and 2021 2020was $10.9 million, $10.8 million and 2019 was $9.7 million, respectively. , $8.1 million and $7.4 million, respectively. These expenses are included in "General and Administrative" expenses on the Consolidated Statements of Operations. Prosper capitalized internal-use software and website development costs in the amount of $9.8$14.9 million $8.3, $11.0 million and $9.3$9.8 million for the years ended December 31, 2023, 2022 and 2021, 2020 and 2019, respectively. We recognized impairment of $0.4 million on our operating lease right-of-use assets related to vacant sublease space and the expected timing of finding new subtenants for the year ended December 31, 2020. Impairment was 0t material for years ended December 31, 2021 and 2019. Additionally, disclosures around the operating lease right-of-use assets are included in Note 16.
NOTE 4. BORROWER LOANS, LOANS HELD FOR SALE AND NOTES, AT FAIR VALUE
The fair value of the Borrower Loans originated and Notes issued through the Note Channel is estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used to value such Borrower Loans and Notes include default rates, prepayment rates and recoveries derived from historical performance market conditions and discount rates applied to each credit grade based on the perceived credit risk of each credit grade. The obligation to pay principal and interest on any series of notes is equal to the payments, if any, received on the corresponding borrower loan, net of the servicing fee. As such, the fair value of the Notes is approximately equal to the fair value of the Borrower Loans originated through the Note Channel, adjusted for the servicing fee and the timing of borrower payments subsequently
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disbursed to the note holders. The effective interest rate associated with any series of notes will be less than the interest rate earned on the corresponding borrower loan due to the servicing fee.
In 2019, Prosper began refinancing the purchase of Borrower Loans through the Whole Loan Channel through securitization transactions. Associated securitization trusts were deemed consolidated VIEs until September 2021, when the Company sold its share of the residual certificates issued by these securitization trusts and deconsolidated the VIEs. Prior to their deconsolidation, the Borrower Loans held in the securitization trusts were included in “Borrower Loans, at Fair Value” in the Consolidated Balance Sheets. See Note 6 - Securitization for additional disclosure and details on the deconsolidation of these securitization trust VIEs.
The fair value of Borrower Loans is estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used to value such borrower loans include default and prepayment rates derived from historical performance and discount rates based on the rates of return that investors would require when investing in financial instruments with similar characteristics.
Prosper Warehouse I Trust (“PWIT”) and Prosper Warehouse II Trust (“PWIIT”), consolidated VIEs, purchasepurchased Loans Held for Sale (collectively “Warehouse Loans”) from the Company through warehouse arrangements with national banking associations and an asset manager. managers. The PWIIT Warehouse Line was terminated on September 25, 2023. See Note 1011 - Debt for more details. Prosper utilizes Warehouse Lines to finance Loans Held for Sale that may be subsequently contributed to securitization transactions or sold to investors. The fair value of the Loans Held for Sale is estimated using the same methodology as the one utilized forused to value Borrower Loans valuation.Loans.
As of December 31, 20212023 and 2020,2022, Borrower Loans, Loans Held for Sale and Notes were as follows (in thousands):
 Borrower LoansLoans Held for SaleNotes
 202120202021202020212020
Aggregate principal balance outstanding$265,232 $393,642 $242,278 $279,113 $267,415 $217,110 
Fair value adjustments2,394 (15,379)892 (4,492)(1,430)(8,731)
Fair value$267,626 $378,263 $243,170 $274,621 $265,985 $208,379 
PMI has offered assistance to qualified borrowers who are facing financial hardship as a result of the COVID-19 pandemic. These relief options include, among other things, the ability to delay up to four monthly loan payments, the ability to reduce minimum monthly payments for up to 12 months and extend the term of the loan by up to 11 months, and waived late and non-sufficient funds fees. Since COVID-19 relief was first offered in March 2020, and through December 31, 2021, approximately 9.1% of our current outstanding loan balances on a cumulative basis have enrolled in at least one of these COVID-19 relief programs. Approximately 1.2% of our outstanding loan balances are actively enrolled in at least one relief program as of December 31, 2021.
 Borrower LoansLoans Held for SaleNotes
 202320222023202220232022
Aggregate principal balance outstanding$577,029 $333,294 $170,925 $512,076 $345,341 $336,555 
Fair value adjustments(31,991)(12,652)(9,424)(12,311)(23,375)(17,851)
Fair value$545,038 $320,642 $161,501 $499,765 $321,966 $318,704 
Borrower Loans
On September 27, 2021, Borrower Loans held by the securitization trusts consolidated by PMI as VIEs were removed from the balance sheet as part of the deconsolidation of those entities. Refer to Note 6 for additional details on this deconsolidation.
As of December 31, 2021,2023, outstanding Borrower Loans had original maturitiesterms to maturity of either24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.46% to 33.00% and had various original maturity dates through December 2028. At December 31, 2022, outstanding Borrower Loans had original terms to maturity of 24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82%33.00% and had various original maturity dates through December 2026. At December 31, 2020, outstanding Borrower Loans had original terms between 36 months and 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82% and had various original maturity dates through December 2025.2027.
As of December 31, 2021,2023, the Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $0.9 $7.0 million and a fair value of $0.1$1.3 million. As of December 31, 2020,2022, the Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $2.8$2.7 million and a fair value of $0.3 million. We place loans on non-accrual status when they are over 120 days past due. As of December 31, 20212023 and 2020,2022, Borrower Loans in non-accrual status had a fair value of $0.1$1.0 million and $0.4$0.3 million, respectively.
Loans Held for Sale
As of December 31, 2021,2023, outstanding Loans Held for Sale had original maturities betweenterms to maturity of 24, 36, months and48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31%from 6.00% to 31.82% and33.00% and had various original maturity dates through December 2026.July 2028. At December 31, 2020,2022, outstanding Loans Held for Sale had original maturities betweenterms to maturity of 24, 36, months and48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82%33% and had various original maturity dates
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through December 2025. 2027. The Company earned iInterestnterest income earned on Loans Held for Sale byof $53.7 million and $41.0 million for the Company was $32.6 millionyears ending December 31, 2023 and $27.6 million during 2021 and 2020,2022, respectively.
As of December 31, 2021,2023, Loans Held for Sale that were 90 days or more delinquent, had an aggregate principal amountunt of $0.8$2.1 million and a fair value of $0.1$0.5 million. As of December 31, 2020,2022, Loans Held for Sale that were 90 days or more delinquent, had an aggregate principal amount of $0.8$2.1 million and a fair value of $0.1$0.2 million. PMI places loans on non-accrual status when they are over 120 days past due. As of December 31, 20212023 and December 31, 2020,2022, Loans Held for Sale in non-accrual status had a fair value of $0.1$0.2 million (for both periods). and $0.2 million, respectively.
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NOTE 5. CREDIT CARD
Prosper recognizes gains and losses on the Credit Card Derivative within Change in Fair Value of Financial Instruments on the accompanying Consolidated Statement of Operations. For the years ended December 31, 2023 and 2022 the Company recognized $26.1 millionand $9.8 million, respectively of unrealized gains from fair value changes on the Credit Card Derivative. Changes from settled transactions underlying the Credit Card Derivative, including income from debt sales on charged off balances, were a loss of $0.6 million and a gain of $4.3 million for the years ended December 31, 2023 and 2022, respectively. These unrealized and settled gains and losses are included in Changes in Fair Value of Financial Instruments on the accompanying Consolidated Statements of Operations.
The Company records revenue from various fees generated from the Credit Card program, including interchange fees, annual fees and late fees, net of a portion of the interchange fees that must be remitted to Coastal. These fees are included in Transaction Fees, Net on the accompanying Consolidated Statement of Operations. For the years ended December 31, 2023 and 2022 these fees totaled $18.1 million and $7.0 million, respectively.
Under the program agreement, Prosper is responsible for servicing the entire underlying Credit Card portfolio. Coastal pays the Company a 1% per annum servicing fee on the daily outstanding balance of receivables designated as Coastal Allocations. To the extent these servicing fees do not exceed the market servicing rate a market participant would require to service the entire Credit Card portfolio, the Company records a servicing obligation liability and measures it at fair value through the servicing period. The net balance of this servicing obligation liability is included in Other Liabilities on the accompanying consolidated financial statements. Changes in the fair value of the servicing obligation liability are recorded in Servicing Fees, Net on the accompanying Consolidated Statement of Operations, and totaled $6.0 million and $3.7 million for the years ended December 31, 2023 and 2022, respectively.

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NOTE 5.6. SERVICING ASSETS
Prosper accounts for Servicing Assets at their estimated fair values with changes in fair values recorded in Servicing Fees.Fees, Net on the accompanying Consolidated Statements of Operations. The initial asset or liability is recognized when Prosper sells Borrower Loans to unrelated third-party buyers through the Whole Loan Channel and the servicing rights are retained. The Servicing Assets are measured at fair value throughout the servicing period. The total gains and losses recognized on the sale of such Borrower Loans foron the year ended December 31, 2021 wasConsolidated Statement of Operations were a loss of $12.4 million, a loss of $1.0 million and a gain of $7.2 million recognizedfor the years ended December 31, 2023, 2022 and 2021, respectively, and recorded in (Loss) Gain on Sale of Borrower Loans on the Consolidated StatementStatements of Operations. The total gains and losses recognized on the sale of such Borrower Loans for the year ended December 31, 2020 was a gain of $4.8 million recognized in Gain on Sale of Borrower Loans on the Consolidated Statement of Operations. The total gains and losses recognized on the sale of such Borrower Loans for the year ended December 31, 2019 were a gain of $10.9 million recognized in Gain on Sale of Borrower Loans and a loss of $17.6 million recognized in Fair Value of Warrants Vested on Sale of Borrower Loans on the Consolidated Statement of Operations.
As of December 31, 2021,2023, Borrower Loans that were sold, but for which Prosper retained servicing rights, had a total outstanding principal balance of $3.1 billion, original terms to maturity of 24, 36, 48 or 60 months, monthly payments with fixed interest rates ranging from 5.46% to 33.00%, and various original maturity dates through December 2028. As of December 31, 2022, Borrower Loans that were sold, but for which Prosper retained servicing rights, had a total outstanding principal balance of $2.3$3.2 billion, original terms to maturity of either24, 36, months48 or 60, months, monthly payments with fixed interest rates ranging from 5.31% to 31.82%33.00%, and various original maturity dates through December 2026. As of December 31, 2020, Borrower Loans that were sold, but for which Prosper retained servicing rights, had a total outstanding principal balance of $2.4 billion, original terms of either 36 months or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 31.82%, and various original maturity dates through December 2025.2027.
Contractually-specified servicing fees and ancillary fees totaling $24.8$30.9 million, $28.9 million and $38.4$24.8 million are included on the Consolidated Statements of Operations in Servicing Fees, Net for the years ended December 31, 2023, 2022 and 2021, 2020 and 2019, respectively.  
Fair Value Valuation Method
Prosper uses a discounted cash flow valuation methodology generally consisting of developing an estimate of future cash flows that are expected to occur over the life of a financial instrument and then discounts those cash flows at a rate of return that results in the fair value amount.
Significant unobservable inputs presented in the table within Note 78 below are those that Prosper considers significant to the estimated fair values of the Level 3 Servicing Assets. The following is a description of the significant unobservable inputs provided in the table.   
Market Servicing Rate
ManagementProsper estimates adequate market servicing rates that would fairly compensate a substitute servicer should one be required, which includes the profit that would be demanded in the marketplace. This rate is stated as a fixed percentage of outstanding principal balance on a per annum basis. With the assistance of a valuation specialist, managementProsper estimates these market servicing rates based on observable market rates for other loan types in the industry and on observing bids from sub-servicingsubservicing providers, adjusted for the unique loan attributes that are present in the specific loans that Prosper sells and services and from information from backup service providers.
Discount Rate
The discount rate is a rate of return used to discount future expected cash flows to arrive at a present value, which represents the fair value of the loan servicing rights. Management usesWe use a range of discount rates for the Servicing Assets based on comparable observed valuations of similar assets and publicly available disclosures related to servicing valuations, with comparability adjustments made to account for differences with Prosper’s Servicing Assets.servicing assets.
Default Rate
The default rate presented in Note 78 is an annualized, average estimate considering all Borrower Loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional default rate curves for each credit grade or Borrower Loan
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category. Each point on a particular Borrower Loan category’s curve represents the percentage of principal expected to default per period based on the term and age of the underlying Borrower Loans. The assumption regarding defaults directly reduces servicing revenues because the amount of servicing revenues received is based on the amount collected each period.
Prepayment Rate
The prepayment rate presented in Note 78 is an annualized, average estimate considering all Borrower Loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional prepayment rate curves for each credit grade or Borrower Loan category. Each point on a particular Borrower Loan category’s curve represents the percentage of principal expected to prepay per period based on the term and age of the underlying Borrower Loans. Prepayments reduce servicing revenues as they shorten the period over which Prosper expectswe expect to collect fees on the Borrower Loans, which is used to project future servicing revenues.
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NOTE 6.7. SECURITIZATIONS
In September 2023, Prosper did not co-sponsor any securitizations in 2020 or 2021. During 2019, Prosper co-sponsored securitizationsclosed the PMIT 2023-1 Transaction, a securitization of unsecured personal whole loans facilitatedthat were previously originated through ourProsper’s marketplace platform. Based on the terms of the underlying agreements, the PWIIT Warehouse Line (see Note 11, Debt) agreed to contribute Borrower Loans with an aggregate outstanding principal balance of $573.0$275.9 million through three securitization trusts (PMIT 2019-1, PMIT 2019-2, and PMIT 2019-4) and retained a portionas of the residual certificates in each securitization. Each securitization trustestablished cutoff date of August 31, 2023, to the PMIT 2023-1 Transaction. On September 25, 2023, these Borrower Loans with an updated aggregate outstanding principal balance of approximately $266.1 million were contributed to the PMIT 2023-1 Transaction. PMIT 2023-1 issued senior notes a risk retention interest and residual certificates to finance the purchase of the Borrower Loans. The risk retention interest represents the right to receive 5.0% of all amounts collected on the Borrower Loans held by the securitization trusts. The resulting senior notes were sold to third party investors. Prosper retained 65.5%, 16.4%,third-party investors, and 19.6% of the residual certificates issuedwere acquired by PMI, as a majority-owned affiliate of the sole sponsor of the PMIT 2019-1, PMIT 2019-2, and PMIT 2019-4, respectively. The remaining residual certificates and all the risk retention interests were held by third-party investors.2023-1 Transaction, PFL. In addition to the retained residual certificates, Prosper'sProsper’s continued involvement includes loan servicing responsibilities over the life of the underlying loans.
PMIT 2019-1, 2019-22023-1 is deemed a VIE, and 2019-4 were deemed VIEs. Prosper consolidated the VIEsCompany consolidates it as the primary beneficiary because Prosper, through itsbeneficiary. Through Prosper’s role as the servicer, had bothit has the power to direct the activities that most significantly affect the VIEs'PMIT 2023-1 Transaction’s economic performance andperformance. Additionally, because the Company holds the residual certificates, it has a variable interest that could potentially be significant to the VIEs through holding the retained residual certificates.PMIT 2023-1. In evaluating whether Prosper wasis the primary beneficiary, management consideredconsiders both qualitative and quantitative factors regarding the nature, size and form of the Company’sour involvement with PMIT 2023-1. Management assesses whether Prosper is the VIEs.primary beneficiary of the VIE on an on-going basis. For these VIEs,PMIT 2023-1, the creditors have no recourse to the general credit of Prosper and the liabilities of the VIEssecuritization trust can only be settled by the respective VIEs'PMIT 2023-1’s assets. Additionally, the assets of the VIEsPMIT 2023-1 can be used only to settle obligations of the VIEs.PMIT 2023-1. Because Prosper consolidatedconsolidates the securitization trusts,trust, the loansBorrower Loans held in the securitization trusts weretrust are included in “Borrower Loans, at Fair Value”,Value,” and the notes sold to third partythird-party investors recordedare presented in “Notes Issued by Securitization Trust”, and on the risk retention interests and residual certificates held by third party investors in Certificates Issued by Securitization Trust, at Fair Value inconsolidated balance sheets. Because Prosper holds 100% of the Consolidated Balance Sheets.
Management assesses whether Prosper is the primary beneficiary of its VIEs on an ongoing basis. On September 27, 2021, PMI sold its retained residual certificates issued by PMIT 2019-1, 2019-22023-1, they eliminate through consolidation and 2019-4 to an unrelated third party for $4.1are thus not presented on the consolidated balance sheets.
The notes under PMIT 2023-1 were issued in five classes: Class A in the amount of $165.5 million, Class B in cash. As a resultthe amount of this sale, management determined that$25.4 million, Class C in the Company was no longeramount of $25.1 million, Class D in the primary beneficiaryamount of these entities as it no longer held a variable$22.3 million and Class E in the amount of $13.1 million (collectively, the “2023-1 Notes”). The Class A, Class B, Class C, Class D and Class E notes bear interest that could potentially be significant toat fixed rates of 7.06%, 7.48%, 8.29%, 11.24% and 15.49%, respectively. Principal and interest payments began in October 2023 and are payable monthly. These notes are recorded at amortized cost, net of original issue discounts totaling approximately $0.8 million. These discounts, along with debt issuance costs incurred of $2.7 million, are deferred and amortized into interest expense over the VIEs. Accordingly, the net assets of PMIT 2019-1, 2019-2 and 2019-4 were deconsolidated from Prosper’s balance sheet on September 27, 2021, resulting in a loss on deconsolidation of $1.5 million, consistingcontractual lives of the following (in thousands):
PMIT 2019-1PMIT 2019-2PMIT 2019-4Total
Consideration received for residual certificates:
Cash$2,259 $836 $981 $4,076 
Net assets deconsolidated:
Restricted Cash$2,485 $4,324 $4,088 $10,897 
Borrower Loans (1)
15,133 29,989 33,239 78,361 
Notes Issued by Securitization Trust(13,022)(26,712)(29,975)(69,709)
Certificates Issued by Securitization Trust, at Fair Value (1)
(2,057)(5,990)(5,932)(13,979)
Total net assets deconsolidated$2,539 $1,611 $1,420 $5,570 
Total loss on deconsolidation$(280)$(775)$(439)$(1,494)
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(1) Because Borrower Loansnotes using the effective interest method. The notes held by third-party investors, along with unamortized original issue discounts and Certificatesdebt issuance costs, are aggregated and presented as “Notes Issued by Securitization Trust were measured at fair valueTrust” on the Company’s consolidated balance sheets,sheet. As of December 31, 2023, the balances above reflect the fair valuesoutstanding principal and accrued interest of these financial instruments asnotes was $217.5 million, secured by an aggregate outstanding principal balance of September 27, 2021, the deconsolidation date.
This loss on deconsolidation is presented$232.0 million of borrower loans included in Borrower Loans, at Fair Value on the accompanying consolidated statement of operations as “Loss on Deconsolidation of VIEs.” Prosper will continue to service the underlying borrower loans, but otherwise will have no continuing involvement with PMIT 2019-1, 2019-2Consolidated Balance Sheets, and 2019-4. In conjunction with the deconsolidation of the VIEs, the Company recognized Servicing Assets totaling $0.2approximately $12.6 million the impact of which isin cash collections held in collateral and reserve accounts included in Servicing Fees, NetRestricted Cash on the accompanying consolidated statement of operations. Consideration received from the sale of the residual certificates, net of Restricted Cash of $10.9 million retained by PMIT 2019-1, 2019-2 and 2019-4, is presented as a financing activity on the Company’s consolidated statement of cash flows, while the loss on deconsolidation is presented as an operating activity.balance sheets.
NOTE 7.8. FAIR VALUE OF ASSETS AND LIABILITIES
For a description of the fair value hierarchy and Prosper’s fair value methodologies, see Note 2 - Summary of Significant Accounting Policies. Prosper did not transfer any assets or liabilities in or out of Level 3 during the year ended December 31, 20212023 or 2020.2022.
Financial Instruments Recorded at Fair Value
The fair value of the Borrower Loans, Loans Held for Sale, Notes, Certificates Issued by Securitization Trust, servicing rightsServicing Assets and Liabilities and loan trailing fee liability are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used in the discounted cash flow model include default and prepayment rates primarily derived from historical performance and discount rates applied to each credit grade based on the perceived credit risk of each credit grade.
The fair value of the Credit Card Derivative is also estimated using a discounted cash flow model using certain assumptions. The key assumptions used in the valuation include default and prepayment rates derived primarily from historical performance and relevant market data, adjusted as necessary based on the perceived credit risk of the underlying portfolio. In addition, discount rates based on estimates of the rates of return that investors would require when investing in similar credit card portfolios are applied to the individual freestanding derivatives.
When utilizing market data and bid-ask spreads, Prosper uses the price within the bid-ask spread that best represents fair value. When quoted prices do not exist, Prosper uses prices obtained from independent third-party pricing services to measure the fair value of investment assets.financial instruments. Prosper's primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information, such as yields for similar types of
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securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar securities. The Company compares the prices obtained from its primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts.
The Convertible Preferred Stock Warrant Liability is valued using a Black-Scholes option pricing model. Refer to Note 1213 for additional information.
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The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands):
Balance at December 31, 2021Level 1 InputsLevel 2 InputsLevel 3 InputsTotal
Balance at December 31, 2023Balance at December 31, 2023Level 1 InputsLevel 2 InputsLevel 3 InputsTotal
Assets:Assets:    Assets: 
Borrower Loans, at Fair ValueBorrower Loans, at Fair Value$— $— $267,626 $267,626 
Loans Held for Sale, at Fair ValueLoans Held for Sale, at Fair Value— — 243,170 243,170 
SOFR rate swaption (Note 11)
SOFR rate swaption (Note 11)
SOFR rate swaption (Note 11)
Servicing AssetsServicing Assets— — 8,761 8,761 
Credit Card Derivative (Note 5)
Total AssetsTotal Assets$— $— $519,557 $519,557 
Liabilities:Liabilities:
Notes, at Fair Value
Notes, at Fair Value
Notes, at Fair ValueNotes, at Fair Value$— $— $265,985 $265,985 
Convertible Preferred Stock Warrant LiabilityConvertible Preferred Stock Warrant Liability— — 250,941 250,941 
Loan Trailing Fee Liability (Note 9)— — 2,161 2,161 
Convertible Preferred Stock Warrant Liability
Convertible Preferred Stock Warrant Liability
Loan Trailing Fee Liability (Note 10)
Credit Card servicing obligation liability (Note 5)
Total LiabilitiesTotal Liabilities$— $— $519,087 $519,087 
Balance at December 31, 2020Level 1 InputsLevel 2 InputsLevel 3 InputsTotal
Balance at December 31, 2022Balance at December 31, 2022Level 1 InputsLevel 2 InputsLevel 3 InputsTotal
Assets:Assets:    Assets: 
Borrower Loans, at Fair ValueBorrower Loans, at Fair Value$— $— $378,263 $378,263 
Loans Held for Sale, at Fair ValueLoans Held for Sale, at Fair Value— — 274,621 274,621 
LIBOR rate swaption
LIBOR rate swaption
LIBOR rate swaption
Servicing AssetsServicing Assets— — 9,242 9,242 
Credit Card Derivative (Note 5)
Total AssetsTotal Assets$— $— $662,126 $662,126 
Liabilities:Liabilities:    Liabilities: 
Notes, at Fair ValueNotes, at Fair Value$— $— $208,379 $208,379 
Certificates Issued by Securitization Trust, at Fair Value— — 22,917 22,917 
Convertible Preferred Stock Warrant LiabilityConvertible Preferred Stock Warrant Liability— — 112,319 112,319 
Loan Trailing Fee Liability (Note 9)— — 2,233 2,233 
Convertible Preferred Stock Warrant Liability
Convertible Preferred Stock Warrant Liability
Loan Trailing Fee Liability (Note 10)
Credit Card servicing obligation liability (Note 5)
Total LiabilitiesTotal Liabilities$— $— $345,848 $345,848 

As PMI’s Borrower Loans, Loans Held for Sale, Notes, Certificates Issued by Securitization Trust, Convertible Preferred Stock Warrant Liability, servicing assetsServicing Assets and Liability, Credit Card Derivative and loan servicing rightstrailing fee liability do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs. Prosper did not transfer any assets or liabilities in or out of Level 3 for the year ended December 31, 20212023 and 2020.2022.




F-22

Significant Unobservable Inputs
The following tables present quantitative information about the ranges of significant unobservable inputs used for the Company’s Level 3 fair value measurements at December 31, 20212023 and 2020:2022:
 December 31,
20212020
Borrower Loans, Loans Held for Sale, and Notes:
Discount rate4.2 %—14.3 %4.5 %—17.7 %
Default rate2.0 %—14.1 %2.3 %—17.9 %
Certificates Issued by Securitization Trust:December 31, 2020
Discount rate3.3 %—16.0 %
Default rate3.2 %—15.3 %
Prepayment rate7.6 %—35.4 %

Borrower Loans held in consolidated securitization trusts and the associated Certificates Issued by Securitization Trust
F-22

were deconsolidated from the Company’s balance sheet as of September 27, 2021 (Note 6), and as a result the tables above exclude these financial instruments. Refer to the section below for information about the inputs used to measure the fair value of these Borrower Loans and Certificates Issued by Securitization Trust.
December 31,
20212020
Servicing Assets:
Discount rate15.0 %— 25.0 %15.0 %—25.0 %
Default rate1.5 %— 14.1 %1.9 %—17.7 %
Prepayment rate10.2 %— 32.3 %12.4 %—28.9 %
Market servicing rate (1) (2)
0.648 %— 0.842 %0.625 %—0.818 %
 (1) Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points.
(2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2021 and 2020, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 7 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 69.5 basis points to 88.8 basis points, respectively.
 December 31,

20212020
Loan Trailing Fee Liability:
Discount rate15.0 %— 25.0 %15.0 %— 25.0 %
Default rate1.5 %— 14.1 %1.9 %— 17.7 %
Prepayment rate10.2 %— 32.3 %12.4 %— 28.9 %

 December 31,
20232022
Borrower Loans, Loans Held for Sale, and Notes:
Discount rate5.4 %—8.1 %5.4 %—13.2 %
Default rate3.2 %—23.6 %1.8 %—18.7 %
At December 31, 20212023 and 2020,2022, the discounted cash flow methodology used to estimate the Note fair values used the same projected cash flows as the related Borrower Loans.
Deconsolidated Assets
December 31,
20232022
Servicing Assets:
Discount rate15.0 %— 25.0 %15.0 %—25.0 %
Default rate2.8 %— 23.6 %2.0 %—19.3 %
Prepayment rate6.1 %— 30.6 %14.2 %—28.0 %
Market servicing rate (1) (2)
0.633 %— 0.842 %0.648 %—0.842 %
 (1) Servicing assets associated with loans enrolled in a relief program offered by the Company as of December 31, 2023 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption.
(2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2023 and 2022, the market rate for collection fees and non-sufficient fund fees was assumed to be 5 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 68.3 basis points to 89.2 basis points and 70.8 basis points to 90.2 basis points, respectively.

 December 31,

20232022
Loan Trailing Fee Liability:
Discount rate15.0 %— 25.0 %15.0 %— 25.0 %
Default rate2.8 %— 23.6 %2.0 %— 19.3 %
Prepayment rate6.1 %— 30.6 %14.2 %— 28.0 %

Ranges of inputs are not applied to the Credit Card Derivative and Liabilities
As discussed in Note 6,Credit Card servicing obligation liability, as they are valued at the Company deconsolidated its Borrower Loans held in securitization trusts and Certificates Issued by Securitization Trust on September 27, 2021. The amounts deconsolidatedportfolio level. Refer below for these financial instruments represent their estimated fair value on that date. Borrower Loan fair value measurements were determined usinga summary of the significant unobservable inputs as described in the previous section. Key assumptions for the valuation of Borrower Loans are presented in the following table (in thousands, except percentages):
Borrower LoansSeptember 27, 2021
Fair value, using the following assumptions:$78,361 
Weighted-average discount rate9.26 %
Weighted-average default rate8.13 %
Because the residual certificates held by the Company were sold in a market transaction to an unrelated third party, it was determined that the sales price was aassociated with those Level 3 fair representation of their fair value. Market assumptions were derived from the salevalue measurements.
F-23

and utilized to estimate the fair value of the risk retention interests as well. Key assumptions for the valuation of Certificates Issued by Securitization Trust are presented in the following table (in thousands, except percentages):
Certificates Issued by Securitization TrustSeptember 27, 2021
Fair value, using the following assumptions:$13,979 
Weighted-average discount rate7.99 %
Weighted-average default rate7.68 %
Weighted-average prepayment rate17.94 %
Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis
The following table presents additional information about Level 3 Borrower Loans, Loans Held for Sale Borrower Loans,and Notes and Certificates Issued by Securitization Trust measured at fair value on a recurring basis for the year ended December 31, 20212023 and 20202022 (in thousands): 
Assets
Assets
Assets
AssetsLiabilities
Borrower
Loans		Loans Held
for Sale		NotesCertificates Issued by Securitization TrustTotalBorrower
Loans		Loans Held
for Sale		NotesTotal
Fair Value at January 1, 2020$634,019 $142,026 $(244,171)$(52,168)$479,706 
Fair Value at January 1, 2022
Purchase of Borrower Loans/Issuance of NotesPurchase of Borrower Loans/Issuance of Notes133,644 1,338,082 (133,228)— 1,338,498 
Principal repayments
Principal repayments
Principal repaymentsPrincipal repayments(332,629)(104,798)149,409 22,136 (265,882)
Borrower Loans sold to third partiesBorrower Loans sold to third parties(6,731)(1,089,974)— — (1,096,705)
Other changesOther changes(1,420)1,168 (53)436 131 
Change in fair valueChange in fair value(48,620)(11,883)19,664 6,679 (34,160)
Fair Value at December 31, 2020378,263 274,621 (208,379)(22,917)421,588 
Fair Value at December 31, 2022
Fair Value at December 31, 2022
Fair Value at December 31, 2022
Purchase of Borrower Loans/Issuance of NotesPurchase of Borrower Loans/Issuance of Notes232,000 1,712,705 (231,933)— 1,712,772 
Principal repayments
Principal repayments
Principal repaymentsPrincipal repayments(260,689)(164,165)172,250 14,934 (237,670)
Borrower Loans sold to third partiesBorrower Loans sold to third parties(2,664)(1,580,164)— — (1,582,828)
Other changesOther changes(1,518)(249)167 113 (1,487)
Change in fair valueChange in fair value595 422 1,910 (6,110)(3,183)
Deconsolidation of VIEs (Note 6)(78,361)— — 13,980 (64,381)
Fair Value at December 31, 2021$267,626 $243,170 $(265,985)$— $244,811 
Transfer of Loans Held for Sale to Borrower Loans upon PMIT 2023-1 Transaction, at Fair Value
Fair Value at December 31, 2023

The following table presents additional information about the Level 3 Servicing Assets measured at fair value on a recurring basis for the year ended December 31, 20212023 and 20202022 (in thousands):
Servicing Assets
Fair Value at January 1, 20202022$12,6028,761 
Additions5,82912,957 
Less: Changes in fair value(9,189)
Fair Value at December 31, 2020$9,242 
Additions7,973 
Recognition of Servicing Assets upon deconsolidation of VIEs (Note 6)215 
Less: Change in fair value(8,669)(9,156)
Fair Value at December 31, 20212022$8,76112,562 
Additions9,238 
Less: Change in fair value(9,551)
Fair Value at December 31, 2023$12,249 

The following table presents additional information about the Level 3 Credit Card Derivative measured at fair value on a recurring basis for the year ended December 31, 2023 and 2022 (in thousands):
Credit Card Derivative
Fair Value at January 1, 2022$7 
Change in fair value9,784 
Net gains from settled transactions4,295 
Less: Net payments made(3,304)
Fair Value at December 31, 2022$10,782 
Change in fair value26,066 
Net losses from settled transactions(561)
Less: Net payments made561 
Fair Value at December 31, 2023$36,848 
F-24

The following tables presenttable presents additional information about the Level 3 Credit Card servicing obligation liability measured at fair value on a recurring basis for the year ended December 31, 2023 and 2022 (in thousands).
Credit Card Servicing Obligation Liability
Fair Value at January 1, 2022$— 
Change in fair value3,720 
Fair Value at December 31, 2022$3,720 
Change in fair value6,012 
Fair Value at December 31, 2023$9,732 
The following table presents additional information about the Level 3 Convertible Preferred Stock Warrant Liability measured at fair value on a recurring basis for the year ended December 31, 20212023 and 20202022 (in thousands):
 
Convertible Preferred Stock Warrant Liability
Fair Value at January 1, 20202022$149,996250,941 
Change in fair value(37,677)(84,595)
Fair Value at December 31, 20202022$112,319166,346 
Change in fair value138,62248,695 
Fair Value at December 31, 20212023$250,941215,041 


Loan Trailing Fee
The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and default rates using a discounted cash flow model. The assumptions used are the same as those used for the valuation of Servicing Assets, as described below.
The following table presents additional information about Level 3 Loan Trailing Fee Liability measured at fair value on a recurring basis for the year ended December 31, 20212023 and 20202022 (in thousands):
Loan Trailing Fee Liability
Balance at January 1, 20202022$2,9972,161 
Issuances1,3493,070 
Cash payment of Loan Trailing Fee(2,421)(2,245)
Change in fair value308304 
Balance at December 31, 20202022$2,2333,290 
Issuances1,7752,011 
Cash payment of Loan Trailing Fee(2,100)(2,791)
Change in fair value253432 
Balance at December 31, 20212023$2,1612,942 











F-25

Significant Recurring Level 3 Fair Value Input Sensitivity
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 20212023 and 20202022 for Borrower Loans and Loans Held for Sale are presented in the following table (in thousands, except percentages).
Borrower Loans and Loans Held for Sale:December 31, 2021 December 31, 2020
Fair value, using the following assumptions:$510,796 $652,884 
     Weighted-average discount rate5.64 %8.26 %
     Weighted-average default rate10.08 %11.58 %
Fair value resulting from:  
100 basis point increase in discount rate$505,732  $647,093 
200 basis point increase in discount rate$500,763  $641,437 
Fair value resulting from:  
100 basis point decrease in discount rate$516,064  $658,817 
200 basis point decrease in discount rate$521,437  $664,895 
Fair value resulting from:  
100 basis point increase in default rate$506,362  $646,421 
200 basis point increase in default rate$501,921  $639,987 
Fair value resulting from:  
100 basis point decrease in default rate$515,326  $659,377 
200 basis point decrease in default rate$519,851  $665,904 
F-25

Borrower Loans and Loans Held for Sale:December 31, 2023 December 31, 2022
Fair value, using the following assumptions:$706,539 $820,407 
     Weighted-average discount rate6.88 %6.72 %
     Weighted-average default rate12.44 %9.31 %
Fair value resulting from:  
100 basis point increase in discount rate$699,770  $812,061 
200 basis point increase in discount rate$693,167  803,927 
Fair value resulting from:  
100 basis point decrease in discount rate$713,481  $828,975 
200 basis point decrease in discount rate$720,601  837,773 
Fair value resulting from:  
Applying a 1.1 multiplier to default rate$696,510  $810,657 
Applying a 1.2 multiplier to default rate$686,586  800,989 
Fair value resulting from:  
Applying a 0.9 multiplier to default rate$716,671  $830,238 
Applying a 0.8 multiplier to default rate$726,910  840,156 
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 20212023 and 20202022 for Notes are presented in the following table (in thousands, except percentages).
Notes:Notes:December 31, 2021 December 31, 2020Notes:December 31, 2023 December 31, 2022
Fair value, using the following assumptions:Fair value, using the following assumptions:$265,985 $208,379 
Weighted-average discount rate Weighted-average discount rate5.76 %8.93 % Weighted-average discount rate6.55 %6.87 %
Weighted-average default rate Weighted-average default rate10.70 %12.26 % Weighted-average default rate14.21 %11.36 %
Fair value resulting from:Fair value resulting from: 
Fair value resulting from:
Fair value resulting from:
100 basis point increase in discount rate
100 basis point increase in discount rate
100 basis point increase in discount rate100 basis point increase in discount rate$263,326  $206,528 
200 basis point increase in discount rate200 basis point increase in discount rate$260,735  $204,720 
Fair value resulting from:Fair value resulting from: 
100 basis point decrease in discount rate100 basis point decrease in discount rate$268,714  $210,274 
100 basis point decrease in discount rate
100 basis point decrease in discount rate
200 basis point decrease in discount rate200 basis point decrease in discount rate$271,516  $212,217 
Fair value resulting from:Fair value resulting from: 
100 basis point increase in default rate$263,644  $206,304 
200 basis point increase in default rate$261,318  $204,238 
Fair value resulting from:Fair value resulting from: 
100 basis point decrease in default rate$268,340  $210,463 
200 basis point decrease in default rate$270,711  $212,558 
Fair value resulting from:
Applying a 1.1 multiplier to default rate
Applying a 1.1 multiplier to default rate
Applying a 1.1 multiplier to default rate
Applying a 1.2 multiplier to default rate
Fair value resulting from:
Applying a 0.9 multiplier to default rate
Applying a 0.9 multiplier to default rate
Applying a 0.9 multiplier to default rate
Applying a 0.8 multiplier to default rate




F-26

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 20212023 and 20202022 for Servicing Assets is presented in the following table (in thousands, except percentages).

Servicing Assets:December 31, 2021December 31, 2020
Fair value, using the following assumptions:$8,761 $9,242 
     Weighted-average market servicing rate0.650 %0.631 %
     Weighted-average prepayment rate20.82 %19.84 %
     Weighted-average default rate12.54 %12.78 %
Fair value resulting from:
Market servicing rate increase of 0.025%$8,203 $8,689 
Market servicing rate decrease of 0.025%$9,320 $9,796 
Fair value resulting from:
Applying a 1.1 multiplier to prepayment rate$8,568 $9,064 
Applying a 0.9 multiplier to prepayment rate$8,957 $9,423 
Fair value resulting from:
Applying a 1.1 multiplier to default rate$8,646 $9,116 
Applying a 0.9 multiplier to default rate$8,878 $9,369 
Servicing Assets:December 31, 2023December 31, 2022
Fair value, using the following assumptions:$12,249 $12,562 
     Weighted-average market servicing rate0.65 %0.65 %
     Weighted-average prepayment rate19.55 %18.47 %
     Weighted-average default rate15.25 %13.38 %
Fair value resulting from:
Market servicing rate increase of 0.025%$11,475 $11,708 
Market servicing rate decrease of 0.025%$13,023 $13,415 
Fair value resulting from:
Applying a 1.1 multiplier to prepayment rate$11,969 $12,286 
Applying a 0.9 multiplier to prepayment rate$12,533 $12,842 
Fair value resulting from:
Applying a 1.1 multiplier to default rate$11,998 $12,305 
Applying a 0.9 multiplier to default rate$12,503 $12,820 
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2023 and 2022 for the Credit Card Derivative is presented in the following table (in thousands, except percentages).
Credit Card Derivative:December 31, 2023December 31, 2022
Fair value, using the following assumptions:$36,848 $10,782 
Prosper Credit Card portfolio$286,284 $113,917 
Discount rate on Prosper Credit Card portfolio23.19 %26.23 %
Discount rate on Coastal Program Fee7.41 %9.26 %
Prepayment rate applied to Credit Card portfolio8.14 %10.08 %
Default rate applied to Credit Card portfolio14.36 %13.34 %
Fair value resulting from:
100 basis point increase in both discount rates$36,452 $10,699 
200 basis point increase in both discount rates$36,065 $10,618 
Fair value resulting from:
100 basis point decrease in both discount rates$37,253 $10,866 
200 basis point decrease in both discount rates$37,668 $10,951 
Fair value resulting from:
Applying a 1.1 multiplier to prepayment rate$36,374 $10,625 
Applying a 0.9 multiplier to prepayment rate$37,328 $10,942 
Fair value resulting from:
Applying a 1.1 multiplier to default rate$29,659 $8,001 
Applying a 0.9 multiplier to default rate$44,256 $13,641 
F-27

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2023 and 2022 for Credit Card servicing obligation liability is presented in the following table (in thousands, except percentages).
Credit Card servicing obligation liability:December 31, 2023December 31, 2022
Fair value, using the following assumptions:9,732 3,720 
Discount rate on Credit Card portfolio servicing obligation7.41 %9.26 %
Prepayment rate applied to Credit Card portfolio8.14 %10.08 %
Default rate applied to Credit Card portfolio14.36 %13.34 %
Market servicing rate2.00 %2.00 %
Fair value resulting from:
Market servicing rate increase of 0.10%$10,253 $3,919 
Market servicing rate decrease of 0.10%$9,213 $3,521 
Fair value resulting from:
Applying a 1.1 multiplier to prepayment rate$9,609 $3,662 
Applying a 0.9 multiplier to prepayment rate$9,858 $3,779 
Fair value resulting from:
Applying a 1.1 multiplier to default rate$9,487 $3,636 
Applying a 0.9 multiplier to default rate$9,984 $3,806 

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other
F-27F-28

assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.
Assets and Liabilities Not Recorded at Fair Value
The following tables present the fair value hierarchy for assets and liabilities not recorded at fair value (in thousands):
Balance at December 31, 2021Carrying AmountLevel 1 InputsLevel 2 InputsLevel 3 InputsFair Value
Balance at December 31, 2023Balance at December 31, 2023Carrying AmountLevel 1 InputsLevel 2 InputsLevel 3 InputsFair Value
Assets:Assets:
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash EquivalentsCash and Cash Equivalents$67,700 $67,700 $— $— $67,700 
Restricted Cash - Cash and Cash EquivalentsRestricted Cash - Cash and Cash Equivalents163,047 163,047 — — 163,047 
Restricted Cash - Certificates of DepositRestricted Cash - Certificates of Deposit4,878 — 4,878 — 4,878 
Accounts ReceivableAccounts Receivable1,054 — 1,054 — 1,054 
Total AssetsTotal Assets$236,679 $230,747 $5,932 $— $236,679 
Liabilities:Liabilities:
Accounts Payable and Accrued LiabilitiesAccounts Payable and Accrued Liabilities$25,790 $— $25,790 $— $25,790 
Accounts Payable and Accrued Liabilities
Accounts Payable and Accrued Liabilities
Payable to InvestorsPayable to Investors152,794 — 152,794 — 152,794 
Notes Issued by Securitization Trust
Warehouse LinesWarehouse Lines209,275 — 211,177 — 211,177 
Paycheck Protection Program loan (Note 9)8,590 — 8,556 — 8,556 
Term Loan (Note 11)
Total LiabilitiesTotal Liabilities$396,449 $— $398,317 $— $398,317 
Balance at December 31, 2020Carrying AmountLevel 1 InputsLevel 2 InputsLevel 3 InputsFair Value
Assets:
Cash and Cash Equivalents$50,145 $50,145 $— $— $50,145 
Restricted Cash - Cash and Cash Equivalents158,846 158,846 — — 158,846 
Restricted Cash - Certificates of Deposit4,877 — 4,877 — 4,877 
Accounts Receivable605 — 605 — 605 
Total Assets$214,473 $208,991 $5,482 $— $214,473 
Liabilities:
Accounts Payable and Accrued Liabilities$17,876 $— $17,876 $— $17,876 
Payable to Investors124,094 — 124,094 — 124,094 
Notes Issued by Securitization Trust156,782 — 158,951 — 158,951 
Warehouse Lines242,479 — 242,261 — 242,261 
Paycheck Protection Program loan (Note 9)8,505 — 8,540 — 8,540 
Total Liabilities$549,736 $— $551,722 $— $551,722 

Balance at December 31, 2022Carrying AmountLevel 1 InputsLevel 2 InputsLevel 3 InputsFair Value
Assets:
Cash and Cash Equivalents$83,446 $83,446 $— $— $83,446 
Restricted Cash - Cash and Cash Equivalents108,284 108,284 — — 108,284 
Restricted Cash - Certificates of Deposit4,879 — 4,879 — 4,879 
Accounts Receivable3,462 — 3,462 — 3,462 
Total Assets$200,071 $191,730 $8,341 $— $200,071 
Liabilities:
Accounts Payable and Accrued Liabilities$37,254 $— $37,254 $— $37,254 
Payable to Investors85,312 — 85,312 — 85,312 
Warehouse Lines446,762 — 444,329 — 444,329 
Paycheck Protection Program loan (Note 11)73,407 — 76,191 — 76,191 
Total Liabilities$642,735 $— $643,086 $— $643,086 
The estimated fair values of Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities and Payable to Investors approximate their carrying values because of their short-term nature.
F-28F-29

NOTE 8.9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
Prosper’s Goodwillgoodwill balance of $36.4 million at December 31, 20212023 did not change during the year ended December 31, 2021.2023. The Company recorded no Goodwillgoodwill impairment for the years ended December 31, 2021, 20202023, 2022 and 2019.2021.
Other Intangible Assets, Net
The following table presents the detail of other Intangible Assets subject to amortization as of the following dates (dollars in thousands):
December 31, 2021
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
Remaining
Useful Life
(In Years)
December 31, 2023December 31, 2023
Gross
Carrying Value
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
Remaining
Useful Life
(In Years)
Developed technologyDeveloped technology$3,060 $(3,060)$— — 
User base and customer relationshipsUser base and customer relationships5,050 (4,722)328 3.3User base and customer relationships5,050 (4,965)(4,965)85 85 1.31.3
Brand nameBrand name60 (60)— — 
Total Intangible Assets subject to amortizationTotal Intangible Assets subject to amortization$8,170 $(7,842)$328 
December 31, 2020
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
Remaining
Useful Life
(In Years)
December 31, 2022December 31, 2022
Gross
Carrying Value
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
Remaining
Useful Life
(In Years)
Developed technologyDeveloped technology$3,060 $(3,060)$— — 
User base and customer relationshipsUser base and customer relationships5,050 (4,550)500 4.3User base and customer relationships5,050 (4,858)(4,858)192 192 2.32.3
Brand nameBrand name60 (60)— — 
Total Intangible Assets subject to amortizationTotal Intangible Assets subject to amortization$8,170 $(7,670)$500 

The Company recorded no additional intangibles for the yearyears ended December 31, 2021 or 2020.2023 and 2022. For the years ended December 31, 2021, 20202023, 2022 and 2019,2021, the Company recordedrecorded no intangible asset impairment. Prosper’sintangible asset balance was $0.1 million and $0.2 million at December 31, 2023 and 2022, respectively. The user base and customer relationships intangible assets are being amortized on an accelerated basis over a three-to-ten year period.
Amortization expense for the years ended December 31, 2021, 20202023, 2022 and 20192021 was $0.20.1 million $0.2, $0.1 million and $0.3$0.2 million, respectively. Estimated amortization of purchased Intangible Assets for future periods is as follows (in thousands):
AmountsAmounts
Years Ending December 31,
2024
2024
2024
Amounts
Years Ending December 31,
2022$136 
2023107 
202485 
Thereafter— 
Total Amortization ExpensesTotal Amortization Expenses$328 
Total Amortization Expenses
Total Amortization Expenses

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NOTE 9.10. OTHER LIABILITIES
Other Liabilities consists of the following (in thousands):
December 31, December 31,
20212020 20232022
Operating lease liabilities$11,026 $13,342 
Paycheck Protection Program loan (Note 10)8,590 8,505 
Operating lease liabilities (Note 16)
Deferred revenue
Credit Card servicing obligation liability (Note 5)
Loan trailing fee liabilityLoan trailing fee liability2,161 2,233 
Deferred revenue1,196 63 
Deferred income tax liabilityDeferred income tax liability560 489 
Financing lease liabilities78 — 
Other
Other
OtherOther289 425 
Total Other LiabilitiesTotal Other Liabilities$23,900 $25,057 

Additionally, disclosures around the operating lease liabilities are included in Note 16.
NOTE 10.11. DEBT
Term Loan
Credit Agreement
On November 14, 2022, the Company entered into a Credit Agreement with a third-party financial institution, which provides for a $75 million Term Loan maturing on November 14, 2026. Proceeds received from the Term Loan were net of an original issue discount and the Company also incurred approximately $0.4 million in debt issuance costs. Both the original issue discount and the debt issuance costs are being amortized over the life of the Term Loan to interest expense using the effective interest method.
Interest
Borrowings under the Term Loan accrue interest at the Secured Overnight Financing Rate (“SOFR”) plus 9.0% per annum. In addition, all borrowings under the Term Loan accrue payment-in-kind (“PIK”) interest at 2.0% per annum. Any accrued PIK interest that remains unpaid at the end of each month is added to the outstanding principal balance of the Term Loan.
Guarantees and Collateral
PMI’s obligations under the Term Loan are guaranteed by PHL and BillGuard. All obligations under the Credit Agreement are secured by a first priority, perfected lien on substantially all of the assets of PMI (subject to exclusions such as certain cash amounts and deposit accounts), PHL and BillGuard, as well as equity interests in all of PMI’s subsidiaries with the exception of PGT.
Covenants and Other Matters
The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions and thresholds, restrict PMI’s ability to incur certain new indebtedness; incur certain liens; sell or otherwise dispose of all or substantially all its assets; make loans, advances, and guarantees; and pay dividends or make other distributions on equity interests.
In addition, the Credit Agreement contains certain financial covenants with which the Company must remain in compliance as of the last business day of each month during the life of the Term Loan:
•a minimum tangible net worth
•a minimum net liquidity
•a maximum leverage ratio
•a minimum asset coverage ratio
The Company is in compliance with all covenants as of December 31, 2023, as well as applicable monthly periods for the year then ended.
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The Credit Agreement also contains certain customary representations and warranties and affirmative covenants, and certain reporting obligations. In addition, the Term Loan lender will be permitted to accelerate all outstanding borrowings and exercise other specified remedies upon the occurrence of certain events of default (subject to certain grace periods and exceptions), which include, among other things, payment defaults, breaches of representations and warranties, covenant defaults, certain cross-defaults to other indebtedness, certain events of bankruptcy and insolvency, certain judgments and changes of control.
Prosper Warehouse Trust Agreements
Prosper’s consolidated VIEs, PWIT and PWIIT (together, “Warehouse VIEs”), each entered into an agreement (together, “Warehouse Agreements”) with certain lenders for committed revolving lines of credit (“Warehouse Lines”) during 2018 and 2019, respectively. In connection with the Warehouse Agreements, the Warehouse VIEs each entered into a security agreement with a bank as administrative agent and a national banking association as collateral trustee and paying agent. Proceeds under the Warehouse Lines may only be used to purchase certain unsecured personalconsumer loans and related rights and documents from Prosper and to pay fees and expenses related to the Warehouse Lines. Both Warehouse VIEs are consolidated because Prosper is the primary beneficiary of the VIEs. The assets of the VIEs can be used only to settle obligations of the VIEs. Additionally, the creditors of the Warehouse Lines have no recourse to the general credit of Prosper. The loans held in the Warehouse VIEs are included in “LoansLoans Held for Sale, at Fair Value”Value and Warehouse Lines are in “Warehouse Lines”Warehouse Lines in the consolidated balance sheets.

Both Warehouse Agreements contain the same certain covenants including restrictions on each Warehouse VIE's ability to incur indebtedness, pledge assets, merge or consolidate and enter into certain affiliate transactions. Each Warehouse Agreement also requires Prosper to maintain a minimum tangible net worth of $25 million, minimum net liquidity of $15 million and a maximum leverage ratio of 5:1. Tangible net worth is defined as the sum of (i) (A) Convertible Preferred Stock, (B) total Stockholders’ Deficit and (C) Convertible Preferred Stock Warrant Liability, less the sum of (ii) (A) goodwill and (B) intangible assets. Net liquidity is defined as the sum of cash, cash equivalents and Available for Sale Investments. The leverage ratio is defined as the ratio of total consolidated indebtedness other than non-recourse securitization indebtedness, non-recourse or limited recourse warehouse indebtedness and borrower dependent notes, to tangible net worth. As of December 31, 2021,2023, Prosper was in compliance with the covenants under each Warehouse Agreement.
PWIT Warehouse Line
On January 19, 2018, through PWIT, Prosper entered into a Warehouse Agreement for a Warehouse Line.Line with a national banking association. Effective June 12, 2018, the Warehouse Agreement was amended. The amendments included increasing the committed line of credit from $100 million to $200 million, extending the term of the PWIT Warehouse Line (including the final maturity date), amending the monthly unused commitment fee and reducing the rate at which the PWIT Warehouse Line bears interest.
Subsequently the Warehouse Agreement was amended on June 20, 2019 to extend the facility, to reduce the interest rate and unused commitment fee and to expand the eligibility criteria for unsecured personalconsumer loans that can be financed through the PWIT Warehouse Line. The Warehouse AgreementIt was amended again on May 19, 2021 to extend the facility, to reduce the interest and advance rates and to include provisions for an alternative benchmark rate in light of the ongoing phaseout of LIBOR.
On May 5, 2023, PMI further amended its PWIT Warehouse Line (“PWIT 2023 Extension”). The PWIT 2023 Extension increased the maximum borrowing amount from $200 million to $244 million, consisting of a $200 million Class A loan with the existing PWIT Warehouse Line national banking association and a $44 million Class B loan with an asset manager. Under the amended agreement,PWIT 2023 Extension, the total advance rate is 91.5% and proceeds of loans made underpurchased through the PWIT Warehouse Line may be borrowed, repaid and reborrowed until the earlier of June 20, 20232024 or the occurrence of any accelerated amortization event or event of default. Repayment ofon any outstanding proceeds will be made over the 24 montha 12-month period ending June 20, 2025, excluding the occurrence of any accelerated amortization event or event of default.
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Under the amended agreement,PWIT 2023 Extension, the PWIT Warehouse LineClass A loan bears interest at a rate of an established benchmark rate (currently LIBOR)one-month SOFR, plus a spread of 2.75% and has an advanceper annum, while the Class B loan bears interest at a rate of 87%.one-month SOFR, plus a spread of 8.50% per annum. The spread under both loans increases by 0.15% per annum effective January 1, 2024 unless a securitization or refinancing is executed prior to that date. Additionally, the PWIT Warehouse Line bearsuntil June 20, 2024, both loans bear a monthlydaily unused commitment fee of 0.50% per annum on the undrawn portion available under the PWIT Warehouse Line.each respective loan.
As of December 31, 2021,2023, Prosper had $96.6 $160.2 million in debt and accrued interest outstanding under the PWIT Warehouse Line. This debt is secured by an aggregate outstanding principal balance of $113.6$169.5 million included in Loans Held for Sale, at Fair Value and $10.1 million of cash included in Restricted Cash on the Consolidated Balance Sheets. As of December 31, 20212023 the undrawn portion availableamount under the PWIT Warehouse Line was $103.4$86.0 million. ProsperProsper incurred $0.3$2.2 million of deferred debt issuance costs forassociated with the PWIT Warehouse Line, including $0.3 million from the amendment signed on
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May 19, 2021, which are included in Prepaids“Prepaids and Other Assets on the Consolidated Balance SheetsAssets” and will be amortized to interest expense over the term of the revolving arrangement.

In the fourth quarter of 2023, a loan performance ratio under the Warehouse Agreement was exceeded which resulted in the PWIT Warehouse Line entering accelerated amortization. While in accelerated amortization, all loan collections are applied against the outstanding balance of the PWIT Warehouse Line, and the Company is unable to utilize the undrawn portion. In addition, there is a 1% per annum step-up fee on the outstanding balance. On January 22, 2024, the Company executed an amendment to the PWIT Warehouse Agreement, under which previous breaches of loan performance ratios were waived, the loan performance ratios were revised going forward, and the step-up fee was waived until June 30, 2024. Additionally, the advance rate under the PWIT Warehouse Line will gradually decrease by 1% on a monthly basis through June 2024, until it is reduced to 86.5%. The Company is in compliance with all covenants and revised loan performance ratios set by the amendment to the PWIT Warehouse Agreement as of the date of this report.
Prosper purchasedmaintains a swaption to limit the Company's exposure to increases in LIBOR.SOFR on up to $185.0 million of borrowings under the PWIT Warehouse Line. The swaptions areswaption is recorded on the consolidated balance sheet at fair value in Prepaids and Other Assets. Any changes in the fair value are recorded in the Change in Fair Value of Financial Instruments Net on the Consolidated Statement of Operations. The fair value of the swaption was not material$0.1 million and $1.3 million as of December 31, 2021.2023 and 2022, respectively. The change in fair value of the swaption was a loss of $1.2 million and a gain of $0.8 million for the years ended December 31, 2023 and 2022, respectively.
PWIIT Warehouse Line
On March 28, 2019, through PWIIT, Prosper entered into a second Warehouse Agreement for a $300 million Warehouse Line with a national banking association different than that of PWIT.
On Subsequently on March 4, 2021, PMI extended its $300 million PWIIT Warehouse Line (“PWIIT 2021 Extension”). The PWIIT 2021 Extension consistsconsisted of a $230 million Class A loan with the existing PWIIT Warehouse Line national banking association and a $70 million Class B loan with an asset manager. On February 10, 2023, PMI again extended its PWIIT Warehouse Line (“PWIIT 2023 Extension”). The advance rate onPWIIT 2023 Extension increased the maximum borrowing amount from $300 million to $450 million, consisting of a $400 million Class A loan with the existing PWIIT Extension is 90%. UnderWarehouse Line national banking association and a $50 million Class B loan with the PWIIT Extension, proceeds of loans made underexisting asset manager. In May 2023, the Company further amended the PWIIT Warehouse Line, may be borrowed, repaidwhich included replacing the existing Class B lender with another third-party asset manager and reborrowed untillowering the earlier of March 3,spread on Class B borrowings. In July 2023, or the occurrence of any accelerated amortization event or event of default. Repayment of any outstanding proceeds will be made over a 24-month period ending March 4, 2025, excluding the occurrence of any accelerated amortization event or event of default.
Under the PWIIT Extension,Warehouse Line was further amended, decreasing the maximum borrowing amount from $450 million to $300 million, consisting of a $265 million Class A loan bearsand a $35 million Class B loan. The Class A loan bore interest at a per annum rate of the national banking association's asset-backed commercial paper rate, plus a spread of 2.05%. The spread increases by 0.375% during2.85%, while the first 12 months immediately following the termination of the revolving period with an additional increase of 0.75% thereafter. Additionally, the Class A loan bears a monthly unused commitment fee of 0.50% per annum on the undrawn portion available under the Class A loan.
The Class B loan bearsbore interest at a per annum rate of adjusted one-month LIBOR,SOFR, plus a spread of 8.75%.
In conjunction with the PMIT 2023-1 Transaction (see Note 7, The spread increases by 0.375% duringSecuritizations), the first twelve months immediately followingentire portfolio of Borrower Loans held in the PWIIT Warehouse Line, with an unpaid principal balance of $273.8 million as of September 25, 2023, was transferred to either the PMIT 2023-1 Transaction or PFL, as follows: $266.1 million of those Borrower Loans were contributed into the securitization trust through a depositor, and the remaining $7.7 million consisted of loans ineligible for securitization and were transferred to PFL. Proceeds from the sale of these loans were used to pay down the outstanding principal and interest on the PWIIT Warehouse Line of $224.0 million, and the PWIIT Warehouse line was terminated at that time. Remaining proceeds after transaction expenses were transferred to PMI. As a result of the termination of the revolving period with an additional increase of 0.75% thereafter. Additionally, the Class B loan bears a monthly unused commitment fee of 0.50% or 1.00% per annum on the undrawn portion available under the Class B loan, depending on the Class B loan utilization percentage.
As of December 31, 2021, Prosper had $112.7 million in debt and accrued interest outstanding under the PWIIT Warehouse Line. This debt is secured by an aggregate outstanding principal balance of $126.8 million included in Loans Held for Sale, at Fair Value on the Consolidated Balance Sheets. At December 31, 2021 the undrawn portion available under the PWIIT Warehouse Line, was $187.3 million. Prosper incurred $1.3 million of deferred and unamortized debt issuance costs for the extension in March 2021, which are included in “Prepaids and Other Assets” and will beof $1.9 million were immediately amortized tointo interest expense over the term of the revolving arrangement.expense.
Phaseout of LIBOR
A portion of the interest rate charged on our Warehouse Lines is currently based on LIBOR. LIBOR has been the subject of reform and was expected to phase out by the end of fiscal 2021; however, on November 30, 2020, the ICE Benchmark Administration Limited (“ICE”) announced plans to delay the phase out of LIBOR to June 30, 2023. The consequences of the discontinuation of LIBOR cannot be entirely predicted but could impact the interest expense incurred on these debt instruments. We have negotiated alternatives to LIBOR on the PWIT and PWIIT Warehouse Lines, which we may renegotiate before LIBOR ceases to be a widely available reference rate.
Paycheck Protection Program Loan
The Paycheck Protection Program (“PPP”),In April 2020, the Company obtained an $8.4 million loan under the PPP, established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and sponsored by the U.S. Small Business Administration (“SBA”), provides small businesses – sole proprietors, independent contractors, and, with certain industry exceptions, businesses with fewer than 500 employees – the opportunity to apply for a loan of up to $10 million to cover up to 24 weeks (the “covered period”) of payroll costs, including benefits. Funds may also be used to cover interest on mortgage obligations, leases, and utilities incurred or in place before February 15, 2020. PPP loan payments are deferred, and based on SBA guidance, will be forgiven as long as (i) loan proceeds
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are used for covered expenses, (ii) full-time employee headcount is maintained during the eight-week period covered by the PPP loan and (iii) compensation for employees who earned less than $100,000 on an annualized basis in 2019 is not reduced by more than 25% during the covered period. For purposes of calculating maximum loan eligibility, payroll costs per employee are capped at $100,000 on an annualized basis.
In April 2020, the Company obtained an $8.4 million loan under the PPP.. The loan accrued interest at 1one percent per annum and had a two-year term through April 2022, with payments deferred until such time as an approval or denial of forgiveness iswas received from the SBA. The Company used the PPP Loan proceeds to cover payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. As of December 31, 2021, principal and interest outstanding under the PPP loan totaled $8.6 million and is included in Other Liabilities on the accompanying consolidated balance sheet. PMI formally applied for forgiveness with the lender and the SBA.
On March 21, 2022, the Company was notified by the SBA that all principal and interest under the loan, totaling $8.6 million, was forgiven in full through a forgiveness payment made on March 15, 2022 by the SBA to the lender of the PPP loan. As a result, the Company recognized a “Gain on Forgiveness of PPP Loan” for this amount on its accompanying Consolidated Statement of Operations for the year ended December 31, 2022.
NOTE 11.12. NET INCOME (LOSS) PER SHARE
PMI computes its net income (loss) per share in accordance with ASC Topic 260, Earnings Per Share (“ASC Topic 260”). Under ASC Topic 260, basic net income (loss) per share is computed by dividing net income (loss) available to common
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stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities.
PMI’s net income (loss) per share is calculated using the two-class method in accordance with ASC Topic 260. The two-class method allocates earnings that otherwise would have been available to common shareholders to holders of participating securities. Management considers all series of our Convertible Preferred Stock to be participating securities due to their rights to participate in dividends with Common Stock. As such, earnings allocated to these participating securities, which include participation rights in undistributed earnings, are subtracted from net income to determine total undistributed earnings to be allocated to common stockholders.
All participating securities are excluded from basic weighted-average common shares outstanding. Prior to any conversion to common shares, each series of Prosper’s Convertible Preferred Stock is entitled to participate on an if-converted basis in distributions of earnings, when and if declared by the board of directors, that are made to common stockholders and consequently, these shares were considered participating securities. During the year ended December 31, 2021, 20202023, 2022 and 2019,2021, certain shares issued as a result of the early exercise of stock options which are subject to a repurchase right by PMI were entitled to receive non-forfeitable dividends during the vesting period and consequently, are considered participating securities.
The weighted average shares used in calculating basic and diluted net income (loss) per share excludes certain shares that are disclosed as outstanding shares in the Consolidated Balance Sheets because such shares are restricted as they were associated with options that were early exercised and continue to remain unvested.

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Basic and diluted net income (loss) per share were calculated as follows for the periods presented (in thousands, except share and per share amounts):
December 31,
December 31,December 31,
202120202019 202320222021
Numerator:Numerator:  
Net (Loss) IncomeNet (Loss) Income$(138,341)$18,551 $(13,711)
Plus: Return on Share Purchase— 2,381 1,066 
Net (Loss) Income
Net (Loss) Income
Less: Net Income Allocated to Participating Securities
Less: Net Income Allocated to Participating Securities
Less: Net Income Allocated to Participating SecuritiesLess: Net Income Allocated to Participating Securities— (15,172)— 
Net (Loss) Income Attributable to Common StockholdersNet (Loss) Income Attributable to Common Stockholders$(138,341)$5,760 $(12,645)
Denominator:Denominator:
Weighted average shares used in computing basic and diluted Net Income (Loss) Per Share70,767,275 68,592,557 70,511,605 
Weighted average shares used in computing basic and diluted Net (Loss) Income Per Share
Weighted average shares used in computing basic and diluted Net (Loss) Income Per Share
Weighted average shares used in computing basic and diluted Net (Loss) Income Per Share
Effect of dilutive securities:Effect of dilutive securities:
Stock options Stock options— 24,816,184 — 
Stock options
Stock options
Warrants
Convertible preferred stock warrants Convertible preferred stock warrants— 213,264,845 — 
Weighted average shares used in computing diluted net income (loss) per share - diluted70,767,275 306,673,586 70,511,605 
Weighted average shares used in computing diluted Net (Loss) Income Per Share
Net (Loss) Income Per Share – BasicNet (Loss) Income Per Share – Basic$(1.95)$0.08 $(0.18)
Net (Loss) Income Per Share – DilutedNet (Loss) Income Per Share – Diluted$(1.95)$0.02 $(0.18)

The following common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been anti-dilutive (number of shares):
December 31, December 31,
202120202019 202320222021
Excluded Securities:Excluded Securities:  
Convertible Preferred Stock issued and outstandingConvertible Preferred Stock issued and outstanding158,365,655 158,365,655 209,613,570 
Convertible Preferred Stock issued and outstanding
Convertible Preferred Stock issued and outstanding
Stock options issued and outstandingStock options issued and outstanding72,756,708 48,265,056 73,851,862 
Warrants issued and outstanding
Warrants issued and outstanding
Warrants issued and outstandingWarrants issued and outstanding1,080,349 1,080,349 1,080,349 
Series E-1 Convertible Preferred Stock warrantsSeries E-1 Convertible Preferred Stock warrants35,544,141 — 35,544,141 
Series F Convertible Preferred Stock warrantsSeries F Convertible Preferred Stock warrants177,720,704 — 177,720,704 
Total Excluded SecuritiesTotal Excluded Securities445,467,557 207,711,060 497,810,626 

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NOTE 12.13. CONVERTIBLE PREFERRED STOCK, CONVERTIBLE PREFERRED STOCK WARRANT LIABILITY AND COMMON STOCK
Convertible Preferred Stock
Under PMI’s amended and restated certificate of incorporation, preferred stock is issuable in series and the Board of Directors is authorized to determine the rights, preferences, and terms of each series.
In January 2013, PMI issued and sold 69,340,760 shares of Series A Convertible Preferred Stock in a private placement at a purchase price of $0.29 per share for $19.8 million, net of issuance costs. In connection with that sale, PMI issued 25,585,910 shares at par value $0.01 per share of Series A-1 Convertible Preferred Stock to the holders of shares of PMI’s Convertible Preferred Stock that was outstanding immediately prior to the sale (“Old Preferred Shares”) in consideration for such stockholders participating in the sale. In connection with the Series A sale, Old Preferred Shares were converted into shares of Common Stock at a ratio of 1:1 if the holder of the Old Preferred Shares participated in the Series A sale or at a 10:1 ratio if the holder of the Old Preferred Shares did not so participate. In addition, each such participating holder received a share of Series A-1 Convertible Preferred Stock for every dollar of liquidation preference associated with an Old Preferred Share held by such holder. Each share of Series A-1 preferred stock has a liquidation preference of $2.00 and converts into Common Stock at a ratio of 1,000,000:1. The Series A and Series A-1 Convertible Preferred Stock were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering.
In September 2013, PMI issued and sold 41,443,670 shares of Series B Convertible Preferred Stock in a private placement at a purchase price of $0.60 per share for approximately $24.9 million, net of issuance costs. The Series B Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering.
In May 2014, PMI issued and sold 24,404,770 shares of Series C Convertible Preferred Stock in a private placement at a purchase price of $2.87 per share for approximately $69.9 million, net of issuance costs. The Series C Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering. The purpose of the Series C private placement was to raise funds for general corporate needs and for the tender offer discussed below.
On June 18, 2014, PMI issued a Tender Offer Statement to purchase up to 6,963,785 shares, in the aggregate, of its Series A Convertible Preferred Stock and Series B Convertible Preferred Stock at a price equal to $2.87 per share. Upon closure of the tender offer on July 16, 2014, 782,540 shares of Series A Convertible Preferred Stock and 5,667,790 shares of Series B Convertible Preferred Stock were purchased for an aggregate price of $18.5 million.
In April 2015, PMI issued and sold 23,888,640 shares of Series D Convertible Preferred Stock in a private placement at a purchase price of $6.91 per share for proceeds of approximately $164.8 million, net of issuance costs. The Series D Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering. The purpose of the Series D private placement was to raise funds for general corporate needs and for the share repurchase discussed below.  
In December 2016, PMI authorized 40,000,000 shares of Series E Convertible Preferred Stock. These shares are reserved for the Convertible Preferred Stock warrants that were also issued in December 2016
On December 16, 2016, PMI issued a warrant to purchase 20,267,135 shares of Series E-1 Convertible Preferred Stock of PMI at an exercise price of $0.01 per share (the “First Series E-1 Warrant”) to Pinecone Investments LLC (“Pinecone”), an affiliate of Colchis Capital Management, L.P. (“Colchis”).
On February 27, 2017, PMI issued to Pinecone Investments LLC a second warrant (the “Second Series E-1 Warrant,” and together with the First Series E-1 Warrant, the “Series E-1 Warrants”) to purchase 15,277,006 shares of Series E-1 Convertible Preferred Stock at an exercise price of $0.01 per share. The Series E-1 Warrants are immediately exercisable, in whole or in part, by paying in cash the full purchase price payable in respect of the number of shares purchased. The Series E-1 Warrants were issued pursuant to the Warrant Agreement dated December 16, 2016 between PMI and Colchis, as previously described in PMI’s Current Report on Form 8-K as filed with the SEC on December 22, 2016.
In connection with the Consortium Purchase Agreement (as defined in Note 15) entered into with affiliates of the Consortium (as defin(ed in Note 15, such affiliates, “Warrant“Warrant Holders”) a warrant agreement was signed (the “Series F Warrant Agreement”). Pursuant to the Series F Warrant Agreement, PMI issued to the Consortium 3three warrants (together, the “Series
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F Warrant”) to purchase up to an
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aggregate 177,720,706 shares of PMI’s Series F Convertible Preferred Stock at an exercise price of $0.01 per share (the “Series F Warrant Shares”).
The Warrant Holders' right to exercise the Series F Warrant was subject to monthly vesting during the term of the Consortium Purchase Agreement based upon the volume of loans the Consortium elected to purchase (if any) in each month, subject to certain cure rights such as offering additional loans for sale in subsequent periods. Under the terms of the Series F Warrant Agreement, the Series F Warrant Shares may also vest in full upon a change of control of PMI, insolvency of PMI or PFL, certain breaches of contract by PMI or PFL that are not cured within a defined cure period and upon the occurrence of certain events set forth in the Warrant Agreement.
The Series F Warrant will be exercisable with respect to vested Series F Warrant Shares, in whole or in part, at any time prior to the tenth anniversary of its date of issuance. The number of shares underlying the Series F Warrant may be adjusted following certain events such as stock splits, dividends, reclassifications and certain other issuances by PMI.
On September 20, 2017, Prosper issued and sold 37,249,497 shares of Series G Convertible Preferred Stock in a private placement at a purchase price of $1.34 per share for proceeds of approximately $47.9 million, net of issuance costs. The Series G Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(a)(2) of the Securities Act regarding sales by an issuer not involving a public offering. The purpose of the Series G private placement was to raise funds for general corporate purposes.
On December 23, 2019, Prosper entered into a Stock Repurchase Agreement with an investor to repurchase 7,221,020 shares, in the aggregate, of Series A, Series A-1, and Series B Convertible Preferred Stock and Common Stock for nominal consideration. Upon execution of the Agreement, 2,130,035 shares of Series A Convertible Preferred Stock, 2,245,600 shares of Series A-1 Convertible Preferred Stock, 648,720 shares of Series B Convertible Preferred Stock and 2,196,665 shares of Common Stock were repurchased. Upon repurchase of Convertible Preferred Stock, the difference between repurchase price and the carrying amount of the Convertible Preferred Stock was recognized in Additional Paid-In Capital. Additionally, the difference between the repurchase price and par value of the Common Stock was recorded through Additional Paid-In Capital.
Prosper Grantor Trust
On July 13, 2020, the Company established Prosper Grantor Trust (“PGT”), a revocable grantor trust administered by an independent trustee, with the intention of contributing assets to PGT for the benefit of PMI employees in the event of a change in control through an Eligible Employee Retention Plan. PGT was determined to be a VIE and PMI was determined to be its primary beneficiary due to the fact that the Company, through its role as the grantor, has both (a) the power to direct the activities that most significantly affect the VIE’s economic performance, including its funding decisions and investment strategy, and (b) the obligation to absorb losses that could be potentially significant to the economic performance of the VIE by virtue of the Company’s requirement to fund PGT in the event that it is unable to meet its obligations to PMI’s employees. PMI also maintains a contingent call liability on PGT’s assets in the event of a bankruptcy. As a result, PGT is fully consolidated into PMI’s consolidated financial statements.
On July 21, 2020, PGT entered into a Stock Transfer Agreement with a PMI investor to purchase 34,670,420 shares of Series A Convertible Preferred Stock and 16,577,495 shares of Series B Convertible Preferred Stock for nominal consideration. Upon execution of the Stock Transfer Agreement, these shares were purchased by a consolidated VIE of the Company, and thus the difference between the fair value of the repurchased stock and the purchase price is included in Convertible Preferred Stock Held by Consolidated VIE on PMI’s accompanying consolidated balance sheet as of December 31, 2021.2023. These shares remain outstanding for legal purposes and retain their voting rights, but are excluded from the earnings per share calculation.
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The number of authorized, issued and outstanding shares, their par value and liquidation preference for each series of Convertible Preferred Stock as of December 31, 20212023 are disclosed in the table below (amounts in thousands, except share and perpar value amounts):
Par Value
Authorized
Shares
Outstanding and Issued
Shares
Liquidation
Preference, Outstanding Shares
Series A$0.01 68,558,220 66,428,185 *$19,160 
Series A-1$0.01 24,760,915 22,515,315 45,031 
Series B$0.01 35,775,880 35,127,160 *21,190 
Series C$0.01 24,404,770 24,404,770 70,075 
Series D$0.01 23,888,640 23,888,640 165,000 
Series E-1$0.01 35,544,141 — — 
Series E-2$0.01 16,858,078 — — 
Series F$0.01 177,720,707 3 — 
Series G$0.01 37,249,497 37,249,497 50,000 
 Total 444,760,848 209,613,570 $370,456 
* Series A and Series B Convertible Preferred Stock totals are inclusive of 34,670,420 and 16,577,495 shares, respectively, held by PGT, a consolidated VIE.
Dividends
Dividends on shares of the Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, and Series G Convertible Preferred Stock are payable only when, as, and if declared by the Board of Directors. No dividends will be paid with respect to the Common Stock until any declared dividends on the Convertible Preferred Stock have been paid or set aside for payment to the preferred stockholders. After payment of any such dividends, any additional dividends or distributions will be distributed among all holders of Common Stock and preferred stock in proportion to the number of shares of Common Stock that would be held by each such holder if all shares of preferred stock were converted to Common Stock at the then effective conversion rate. The Series A-1 convertible preferred shares have no dividend rights. To date, no dividends have been declared on any of the PMI’s preferred stock or Common Stock.
Conversion
Under the terms of PMI’s amended and restated certificate of incorporation, the holders of preferred stock have the right to convert such preferred stock into Common Stock at any time. In addition, all preferred stock automatically converts into Common Stock (x) immediately prior to the closing of an Initial Public Offering (“IPO”)initial public offering that values Prosper at least at $2 billion and that results in aggregate proceeds to Prosper of at least $100 million or (y) upon a written request from the holders of at least 60% of the voting power of the outstanding preferred stock (on an as-converted basis, provided that: (i) the Series A-1 Convertible Preferred Stock shall not be converted without at least 14% of the voting power of the outstanding Series A-1 Convertible Preferred Stock; (ii) the Series D shall not be converted without at least 60% of the voting power of the outstanding Series D; (iii) the Series E-1 and Series E-2 shall not be converted without at least 60% of the voting power of the outstanding Series E-1 and Series E-2, voting together as a single class; (iv) the Series F shall not be converted without at least 60% of the voting power of the outstanding Series F, and (v) the shares of Series G Preferred Stock will not be automatically converted unless the holders of at least 60% of the outstanding shares of Series G Preferred Stock approve such conversion). In addition, if a holder of the Series A Convertible Preferred Stock has converted any of the Series A Convertible Preferred Stock, then all of such holder’s shares of Series A-1 Convertible Preferred Stock also will be converted upon a liquidation event.event (as defined under the certificate of incorporation). In lieu of any fractional shares of Common Stock to which a holder would otherwise be entitled, PMI shall pay such holder cash in an amount equal to the fair market value of such fractional shares, as determined by its Board of Directors. At present, each of the Series A, Series B, Series C, Series D, Series E-1, Series E-2, and Series F Convertible Preferred Stock converts into PMI Common Stock at a 1:1 ratio. Meanwhile, theThe Series A-1 Convertible Preferred Stock converts into Common Stock at a 1,000,000:1 ratio and the Series G Convertible Preferred Stock converts into Common Stock at a 1:1.36 ratio. The Series G Convertible Preferred Stock conversion ratio reflects the Series G true-up that occurred at end of the vesting period for the Series E-2 and Series F Preferred Stock warrants.
For the Series G true-up, the conversion price of the Series G Convertible Preferred Stock was reduced to a number equal to the Series G Preferred Stock original issuance price, divided by the quotient obtained by dividing the Series G true-up amount by the total number of Series G Preferred Stock issued as of the Series G closing date. The Series G true-up amount means the aggregate number of shares of Series G Preferred Stock that would have been issued to the purchasers of the Series G Preferred Stock on the Series G closing date, if warrants to purchase shares of Series E-2 Preferred Stock or Series F Preferred
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Stock that were exercisable or exercised as of the true-up time (end of vesting period) had been exercisable or exercised as of such Series G closing date.
Liquidation Rights
PMI’s Convertible Preferred Stock has been classified as temporary equity on the consolidated balance sheet. The preferred stock is not redeemable at the option of holders of the Convertible Preferred Stock;redeemable; however, in the event of a voluntary or involuntary liquidation, dissolution, change in control or winding up of PMI, holders of the Convertible Preferred Stock may have the right to receive its liquidation preference under the terms of PMI’s certificate of incorporation.
Each holder of Series E-1, Series E-2 and Series F Convertible Preferred Stock is entitled to receive prior and in preference to any distribution of proceeds from a liquidation event (as defined under the certificate of incorporation) to the holders of Series A, Series B, Series C, Series D, Series G and Series A-1 Convertible Preferred Stock or Common Stock, an amount per share for (i) each share of Series E-1 Convertible Preferred Stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, (ii) each share of Series E-2 Convertible Preferred Stock equal to the sum of two-thirds the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (iii) each share of Series F Convertible Preferred Stock equal to the sum of two-thirds of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.
After the payment or setting aside for payment to the holders of Series E-1, Series E-2, and Series F Convertible Preferred Stock each holder of Series A, Series B, Series C and Series D, Series E-2, Series F and Series G Convertible Preferred Stock is entitled to receive, on a pari passu basis, prior to and in preference to any distribution of proceeds from a liquidation event (as defined under the certificate of incorporation) to the holders of Series A-1 Convertible Preferred Stock or Common Stock, (i) an amount per share for each share of Series E-2 and Series F Convertible Preferred Stock equal to the sum of one-third of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (ii) an amount per share for each share of Series A, Series B, Series C, Series D and Series G Convertible Preferred Stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.
After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F and Series G Convertible Preferred Stock, the holders of Series A-1 Convertible Preferred Stock are entitled to receive, prior and in preference to any distribution of proceeds to the holders of Common Stock, an amount per share for each such share of Series A-1 Convertible Preferred Stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.
After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, Series G and Series A-1 Convertible Preferred Stock, the entire remaining proceeds legally available for distribution will be distributed pro-rata to the holders of Series A Convertible Preferred Stock and Common Stock in proportion to the number of shares of Common Stock held by them assuming the Series A Convertible Preferred Stock has been converted into shares of Common Stock at the then effective conversion rate, provided that the maximum aggregate amount per share of Series A Convertible Preferred Stock which the holders of Series A Convertible Preferred Stock shall be entitled to receive is three times the original issue price for the Series A Convertible Preferred Stock.
At present, the liquidation preferences are equal to $0.29 per share for the Series A Convertible Preferred Stock, $2.00 per share for the Series A-1 Convertible Preferred Stock, $0.60 per share for the Series B Convertible Preferred Stock, $2.87 per share for the Series C Convertible Preferred Stock, $6.91 per share for the Series D Convertible Preferred Stock, $0.84 per share for the Series E-1 Convertible Preferred Stock, $0.84 per share for the Series E-2 Convertible Preferred Stock, $0.84 per share for the Series F Convertible Preferred Stock and $1.34 per share for the Series G Convertible Preferred Stock.
Voting
Each holder of shares of Convertible Preferred Stock is entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Convertible Preferred Stock could be converted and each has voting rights and powers equal to the voting rights and powers of the Common Stock. The holders of Convertible Preferred Stock and the holders of Common Stock vote together as a single class (except with respect to certain matters that require separate votes or as required by law), and are entitled to notice of any stockholders’ meeting in accordance with the bylawsBylaws of PMI. 
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Convertible Preferred Stock Warrant Liability
Series E-1 Warrants
In connection with the Settlement and Release Agreement dated November 17, 2016 among PMI, its wholly owned subsidiary Prosper Funding LLC (“PFL”)PFL and Colchis, on December 16, 2016, PMI issued the First Series E-1 Warrant. A
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The Second Series E-1 Warrant for an additional 15,277,006 shares of Series E-1 Convertible Preferred Stock was granted on the signing of the Consortium Purchase Agreement (as defined in Note 15) on February 27, 2017. The warrants expire ten years from the date of issuance. Prosper recognized $21.3recognized $7.8 million of expense and $5.7$13.5 million of income from the change inre-measurement of the fair value of the warrants for the years ended December 31, 20212023 and 2020,2022, respectively. The income or expense resulted from changes in theremeasurement of the fair value of the warrantwarrants is recorded in Change in Fair Value of Convertible Preferred Stock Warrants on the Consolidated Statements of Operations.
To determine the fair value of the Series E-1 Warrants, the Company first determined the value of a share of a Series E-1 Convertible Preferred Stock. To determine the fair value of the Convertible Preferred Stock, the Company first derived the business enterprise value (“BEV”) of the Company using a variety of valuation methods, including recent transactions in the Company's stock, discounted cash flow models and market based methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the option pricing method (“OPM”) was used to allocate the BEV to the various classes of our equity, including our preferred stock. The concluded per share value for the Series E-1 Convertible Preferred Stock was utilized as an input to the Black-Scholes option pricing model.
The Company determined the fair value of the outstanding convertible Series E-1 preferred stock warrants utilizing the following assumptions as of December 31, 20212023 and 2020:2022:
December 31,
20212020
December 31,December 31,
202320232022
VolatilityVolatility63.0 %60.0 %Volatility66.0 %72.0 %
Risk-free interest rateRisk-free interest rate0.90 %0.20 %Risk-free interest rate4.10 %4.30 %
Expected term (in years)Expected term (in years)2.752.75Expected term (in years)2.75
Dividend yieldDividend yield— %— %Dividend yield— %— %
The above assumptions were determined as follows:
Volatility: The volatility is derived from historical volatilities of several unrelated publicly listed peer companies over a period approximately equal to the term of the warrant as the Company has limited information on the volatility of its preferred stock since there is currently no trading history. When making the selections of industry peer companies to be used in the volatility calculation, the Company considered the size, operational, and economic similarities to the Company’s principal business operations.
Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury yield in effect as of December 31, 2021,2023, and for zero coupon U.S. Treasury notes with maturities approximately equal to the term of the warrant. 
Expected Term: The expected term is the period of time for which the warrants are expected to be outstanding.
Dividend Yield: The expected dividend assumption is based on the Company’s current expectations about the Company’s anticipated dividend policy.
Series F Warrants
In connection with the Consortium Purchase Agreement (as described in Note 15) on February 27, 2017, PMI issued warrants to purchase up to 177,720,706 shares of PMI's Series F Convertible Preferred Stock at $0.01 per share. The warrants expire ten years from the date of issuance. Prosper recognized $117.3recognized $40.9 million of expense and $32.0 and $71.1 million of income from the re-measurement of the fair value of the warrants for the years ended December 31, 20212023 and 2020,2022, respectively. The income or expense resulting from changes in the fair value of the warrant is recorded inthrough Change in Fair Value of Convertible Preferred Stock Warrants on the Consolidated Statements of Operations.
To determine the fair value of the Series F Warrants, the Company first determined the value of a share of a Series F Convertible Preferred Stock. To determine the fair value of the Convertible Preferred Stock, the Company first derived the BEV using valuation methods, including a combination of methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the OPM was used to allocate the BEV to the various classes of Prosper's equity, including our preferred stock. The concluded per share value for the Series F Convertible Preferred Stock warrants utilized the Black-Scholes option pricing model.
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The Company determined the fair value of the outstanding Series F Warrants utilizing the following assumptions as of December 31, 20212023 and 2020:2022:
December 31,
20212020
December 31,December 31,
202320232022
VolatilityVolatility63.00 %60.0 %Volatility66.00 %72.0 %
Risk-free interest rateRisk-free interest rate0.90 %0.20 %Risk-free interest rate4.10 %4.30 %
Expected term (in years)Expected term (in years)2.752.75Expected term (in years)2.75
Dividend yieldDividend yield— %— %Dividend yield— %— %
The above assumptions were determined using the same criteria described above for the Series E-1 Warrants.
The combined activity of the Convertible Preferred Stock Warrant Liability for the years ended December 31, 20212023 and 2020 is2022 are presented in Note 8, Fair Value of Assets and Liabilities. Starting with the Series E and F Warrant valuations prepared as follows (in thousands):
Balance at January 1, 2020of September 30, 2023, due to a change in methodology, the Company removed the discount for lack of marketability that was previously applied to the Black-Scholes option pricing valuation. This change in accounting estimate resulted in an increase to the Convertible Preferred Stock Warrant Liability and the Change in Fair Value of Convertible Preferred Stock Warrants of approximately $39.7 million as of December 31, 2023 and for the year then ended.149,996 
Change in fair value(37,677)
Balance at December 31, 2020$112,319 
Change in fair value138,622 
Balance at December 31, 2021$250,941 
Common Stock
PMI, through its Amended and Restated Certificate of Incorporation, is the sole issuer of Common Stock and related options, RSUs and warrants. On February 16, 2016, PMI amended and restated its Certificate of Incorporation to, among other things, effect a 5-for-1 forward stock split. On September 20, 2017, PMI further amended its Amended and Restated Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance. The total number of shares of stock which PMI has the authority to issue is 1,069,760,848, consisting of 625,000,000 shares of Common Stock, $0.01 par value per share, and 444,760,848 shares of preferred stock, $0.01 par value per share. As described above, the Company repurchased 2,196,665 shares of Common Stock on December 23, 2019. As of December 31, 2021, 73,089,9292023, 77,861,329 shares of Common Stock were issued and 72,153,994 76,925,394 shares of Common Stock were outstanding. As of December 31, 2020, 70,075,3072022, 75,223,850 shares of Common Stock were issued and 69,139,37274,287,915 shares of Common Stock were outstanding. Each holder of common stock is entitled to one vote for each share of common stock held.  
Common Stock Issued upon Exercise of Stock Options
During the year ended December 31, 20212023 and 2020,2022, PMI issued 3,014,6222,637,479 and 687,4712,133,921 shares of Common Stock,, respectively, upon the exercise of vested options for cash proceeds of $61$117 thousand and $15$54 thousand, respectively. 
Common Stock Issued upon Exercise of Warrants
For the year ended December 31, 2021 and 2020, PMI issued zero shares of Common Stock upon the exercise of warrants.
NOTE 13.14. STOCK-BASED COMPENSATION
PMI grants equity awards primarily through its Amended and Restated 2005 Stock Option Plan (the “2005 Plan”), which was approved as amended and restated by its stockholders on December 1, 2010; and its 2015 Equity Incentive Plan, which was approved by its stockholders on April 7, 2015 and subsequently amended by an Amendment No. 1, Amendment No. 2 and Amendment No. 3, which were approved by PMI's stockholders effective as of February 15, 2016, May 31, 2016, and September 5, 2018 respectively (as amended, the “2015 Plan”). In March 2015, the 2005 Plan expired, except that any awards granted under the 2005 Plan prior to its expiration remain in effect pursuant to their terms. As of December 31, 2021,2023, under the 2005 Plan and 2015 Plan, options to purchase up to 96,855,91392,084,513 shares of PMI's Common Stock are reserved and may be granted to employees, directors, and consultants by PMI’s Board of Directors and stockholders to promote the success of Prosper’s business. Options generally vest 25% one year from the vesting commencement date and 1/48th per month thereafter or vest 50% two years from
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or vest 50% two years from the vesting commencement date and 1/48 per month thereafter or vest 1/36th per month from the vesting commencement date. In no event are options exercisable more than ten years after the date of grant.
Stock Option Reprice
On May 3, 2016 and March 17, 2017, the Compensation Committee of the Board of Directors of PMI approved two separate stock option repricing programs authorizing PMI’s officers to reprice certain outstanding stock options held by employees and directors that had exercise prices above the current fair market value of PMI’s Common Stock on those respective dates.
On August 11, 2020, the Compensation Committee of the Board of Directors of PMI approved a stock option repricing program (the “2020 Repricing” and together with the 2016 Repricing and the 2017 Repricing, the “Repricings”) authorizing PMI’s officers to reprice certain outstanding stock options held by employees and directors that have exercise prices above the current fair market value of PMI’s common stock. The repricing was effected on August 11, 2020 for eligible directors and employees.
PMI believes that the Repricings encourage the continued service of valued employees and directors and motivate them to perform at high levels, both of which are critical to the Company’s continued success. PMI has incurred and expects to incur additional share based compensation charges as a result of the Repricings.
The financial statement impact of the above Repricings was 0t material for the year ended December 31, 2021, and$0.4 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2021, the unamortized Repricings expense (net of forfeitures) will be immaterial and recognized over the remaining weighted average vesting period of 1.6 years.
Stock Option Activity
Stock option activity under the Stock Plans2005 Plan and 2015 Plan is summarized for the year ended December 31, 2021 as follows:2023 below:
Options
Issued and
Outstanding
Weighted-
Average
Exercise
Price
Weighted-Average
Contractual Term
(in years)
Aggregate intrinsic value1
(in thousands)
Options
Issued and
Outstanding
Weighted-
Average
Exercise
Price
Weighted-Average
Contractual Term
(in years)
Aggregate intrinsic value1
(in thousands)
Balance as of January 1, 202172,915,449 $0.02 7.02$2,915 
Balance as of January 1, 2023
Options granted Options granted17,554,859 $0.22  
Options exercised Options exercised(3,014,622)$0.02  
Options exercised
Options exercised
Options forfeited
Options forfeited
Options forfeited Options forfeited(15,239,345)$0.03  
Option expirations Option expirations(30,190)$0.02 
Balance as of December 31, 202172,186,151 $0.07 6.72$46,458 
Options vested and expected to vest as of December 31, 202165,003,920 $0.07 6.72$42,518 
Options vested and exercisable at December 31, 202148,561,623 $0.02 5.62$33,499 
Option expirations
Option expirations
Balance as of December 31, 2023
Balance as of December 31, 2023
Balance as of December 31, 2023
Options vested and expected to vest as of December 31, 2023
Options vested and exercisable at December 31, 2023
1. Aggregate intrinsic value represents the excess of the fair value of our Common Stock as of December 31, 20212023 over the exercise price of the outstanding in-the-money options.

Additional information pertaining to PMI's Common Stock option activities is as follows:
Year ended December 31,
202120202019
Weighted-average grant date fair value of options granted (per share)$0.13 $0.04 $0.11 
Year ended December 31,
202320222021
Weighted-average grant date fair value of options granted (per share)$0.21 $0.37 $0.13 
Other Information Regarding Stock Options
The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for share basedstock-based compensation expense requires PMI to make assumptions and judgments about the variables used in the calculation, including the fair value of PMI’s Common Stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of PMI’s Common Stock, a risk-free interest rate, and expected dividends. Given the absence of a publicly traded market, the Company considered numerous objective and subjective factors to determine the fair value of PMI’s Common Stock at each grant date. These factors included, but were not limited to:
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(i) contemporaneous valuations of Common Stock performed by unrelated third-party specialists, (ii) the prices for PMI’s preferred stock sold to outside investors, (iii) the rights, preferences and privileges of PMI’s preferred stock relative to PMI’s Common Stock; (iv) the lack of marketability of PMI’s Common Stock, (v) developments in the business, (vi) secondary transactions of PMI’s common and preferred shares, and (vii) the likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of Prosper, given prevailing market conditions. As PMI’s stock is not publicly traded, volatility for stock options is based on an average of the historical volatilities of the Common Stock of several entities with characteristics similar to those of PMI. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options using the simplified method. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. PMI uses an expected dividend yield of zero as it does not anticipate paying any dividends in the foreseeable future.
PMI also estimates forfeitures of unvested stock options. Expected forfeitures are based on the Company’s historical experience. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest.
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The fair value of PMI’s stock option awards granted during the years ended December 31, 2021, 20202023, 2022 and 20192021 was estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:
December 31,
December 31,December 31,
202120202019 202320222021
Volatility of common stockVolatility of common stock64.22 %52.62 %46.70 %Volatility of common stock66.63 %67.19 %64.22 %
Risk-free interest rateRisk-free interest rate1.02 %0.51 %1.95 %Risk-free interest rate3.55 %2.95 %1.02 %
Expected lifeExpected life6.0 years6.0 years6.0 yearsExpected life6.0 years
Dividend yieldDividend yield— %— %— %Dividend yield— %— %— %

PMI did not grant any performance-based options in 2021, 2020,2023, 2022, or 2019.2021.
Restricted Stock UnitsUnit Activity
For the years ended December 31, 2021, 20202023, 2022 and 2019,2021, PMI did not grant any restricted stock units (“RSUs”).RSUs.
The following table summarizes the number of PMI’s RSU activity for the year ended December 31, 2021:2023:
 Number of SharesWeighted-Average Grant Date Fair Value
Unvested at January 1, 20214,661,141 $0.91 
Forfeited(1,786,793)$0.54 
Unvested at December 31, 20212,874,348 $1.14 
 Number of SharesWeighted-Average Grant Date Fair Value
Unvested at January 1, 20232,602,383 $1.04 
Forfeited(27,750)$2.18 
Expired— $— 
Unvested at December 31, 20232,574,633 $1.03 
Stock BasedStock-Based Compensation
The following table presents the amount of stock-based compensation related to stock-based awards granted to employees recognized in the Company’s Consolidated Statements of Operations for the periods presented (in thousands):
 Years Ended December 31,
 202120202019
Origination and Servicing$123 $35 $417 
Sales and Marketing62 69 243 
General and Administrative951 1,809 3,868 
Total Stock-Based Compensation$1,136 $1,913 $4,528 

 Years Ended December 31,
 202320222021
Origination and Servicing$83 $134 $123 
Sales and Marketing304 118 62 
General and Administrative1,188 1,074 951 
Total Stock-Based Compensation$1,575 $1,326 $1,136 
For the years ended December 31, 2021, 20202023, 2022 and 2019,2021, Prosper capitalized $137$230 thousand,, $234 $200 thousand and $310$137 thousand, respectively, of stock-based compensation as internal use software and website development costs. As of December 31, 2021,2023, the unamortized share-based compensationstock-based compensation expense adjusted for forfeiture estimates related to Prosper's employees’ unvested share-basedstock-based awards was approximately $1.6$2.7 million, which will be recognized over a remaining weighted-average vesting period of approximately 2.82.5 years.
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NOTE 14.15. INCOME TAXES
The components of the Company’s Income Tax Expense are as follows for the periods presented (in thousands):
Years Ended December 31, Years Ended December 31,
202120202019 202320222021
Current:Current:  
FederalFederal$— $— $— 
Federal
Federal
StateState— — — 
ForeignForeign— — — 
Total Current Income Tax Expense (Benefit)— — — 
Total Current Income Tax Expense
Deferred:Deferred:  
Federal
Federal
FederalFederal47 47 47 
StateState24 38 52 
ForeignForeign— (69)1 
Total Deferred Income Tax ExpenseTotal Deferred Income Tax Expense71 16 100 
Total Income Tax ExpenseTotal Income Tax Expense$71 $16 $100 

Income Tax Expense differed from the amount computed by applying the U.S. federal income tax rate of 21% to pretax lossincome (loss) as a result of the following for the periods presented:
Years Ended December 31, Years Ended December 31,
202120202019 202320222021
Federal tax at statutory rateFederal tax at statutory rate21 %21 %21 %Federal tax at statutory rate21 %21 %21 %
State tax at statutory rate (net of federal benefit)State tax at statutory rate (net of federal benefit)8 %8 %9 %State tax at statutory rate (net of federal benefit)8 %6 %8 %
Incentive Stock Options(5)%2 %(4)%
Incentive stock options
Incentive stock options
Incentive stock options(1)%1 %(5)%
Preferred Stock WarrantsPreferred Stock Warrants(29)%(64)%8 %Preferred Stock Warrants(12)%(36)%(29)%
Change in valuation allowanceChange in valuation allowance6 %37 %(33)%Change in valuation allowance(18)%15 %6 %
Return-to-provisionReturn-to-provision(1)%(2)%— %
State tax rate changesState tax rate changes2 %(5)%— %
OtherOther(1)%(4)%(1)%Other1 %— %(1)%
Income Tax ExpenseIncome Tax Expense— %— %— %Income Tax Expense— %— %— %

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Temporary items that give rise to significant portions of deferred tax assets and liabilities are as follows for the periods presented (in thousands):
December 31, December 31,
20212020 20232022
Net operating loss carry forwardsNet operating loss carry forwards$91,793 $92,814 
Research and other creditsResearch and other credits307 532 
Stock compensationStock compensation4,272 10,510 
Stock compensation
Stock compensation
Accrued liabilitiesAccrued liabilities4,357 2,986 
Net servicing rights
Net servicing rights
Net servicing rights
Lease liabilitiesLease liabilities3,266 3,934 
Property and equipment
Section 174 R&D capitalization
Total deferred tax assetsTotal deferred tax assets103,995 110,776 
Net servicing rightsNet servicing rights(1,898)(2,067)
Property and equipment(1,873)(287)
Net servicing rights
Net servicing rights
Intangible assets
Intangible assets
Intangible assetsIntangible assets(1,770)(1,415)
Right-of-use assets
Right-of-use assets
Right-of-use assetsRight-of-use assets(2,264)(2,676)
Total deferred tax liabilitiesTotal deferred tax liabilities(7,805)(6,445)
Total net deferred tax assetTotal net deferred tax asset96,190 104,331 
Less: Valuation allowanceLess: Valuation allowance(96,750)(104,820)
Net deferred tax liabilityNet deferred tax liability$(560)$(489)

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Under ASC 740, Accounting for Income Taxes, a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The amount of valuation allowance is based upon management’s best estimate of Prosper’s ability to realize the net deferred tax assets. A valuation allowance can subsequently be reduced when management believes that the assets are realizable on a more-likely-than-not basis. As of December 31, 2021,2023, the Company continues to record a valuation allowance against its net deferred tax asset. The valuation allowance as of December 31, 2021, decreased2023, increased by $8.1$18.8 million to $96.8$126.3 million from the prior year.
The Internal Revenue Code imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an “ownership change” of a corporation. Accordingly, Prosper’s ability to utilize net operating losses and credit carryforwards may be limited in the future as the result of such an “ownership change.”
Prosper files federal and various state income tax returns, and has net operating loss carryforwards available to reduce future taxable income, if any, for both federal and state income tax purposes of approximately $345.3$362.6 million and $366.2$449.9 million, respectively, as of December 31, 2021.2023, before any potential limitations for “ownership changes.” The state net operating loss carryforwards are primarily related to California. The federal and state net operating loss carryforwards will begin to expire in 20252027 and 2022,2024, respectively. All net operating loss carryforwards are subject to a full valuation allowance. Prosper has federal and California research and development tax credits of approximately $428 thousand$2.8 million and $501 thousand,$2.8 million, respectively. The federal research credits will begin to expire in 2034 and the California research credits have no expiration date. Prosper also has California enterprise zone credits of approximately $0.2 million that will begin to expire in 2022.
The following table summarizes Prosper’s activity related to its unrecognized tax benefits (in thousands):
Balance at January 1, 2020$112 
Change related to 2020 tax year position— 
Balance at December 31, 2020$112 
Change related to 2021 tax year position— 
Balance at December 31, 2021$112 
Increase related to 2022 tax year position1,179 
Balance at December 31, 2022$1,291 
Change related to prior year tax position— 
Balance at December 31, 2023$1,291 
None of the unrecognized tax benefits would affect Prosper’s effective tax rate if these amounts are recognized due to the full valuation allowance. 

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Prosper’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of Income Tax Expense. As of December 31, 2021,2023, Prosper has not incurred any significant interest or penalties.
All tax returns will remain open for examination by federal and most state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards or research and development credits.
NOTE 15. CONSORTIUM PURCHASE AGREEMENT
On February 27,Beginning in 2022, the Tax Cuts and Jobs Act of 2017 Prosper entered into a series of agreements (the “Consortium Purchase Agreement”) with a consortium of investors (the “Consortium”),eliminates the option to deduct research and development expenditures and requires U.S. taxpayers to amortize them over five years pursuant to which the Consortium agreed to purchase Borrower Loans in an aggregate principal amountInternal Revenue Code Section 174, effective for tax year 2022. The enactment of up to $5.0 billion (including certain loans purchased by one of the investors prior to the date of the Consortium Purchase Agreement). PFL was obligated to offer for purchase minimum monthly volumes of eligible loans to the Consortium, for the Consortium to elect to purchase. The Consortium Purchase Agreement ended in May 2019.
In connection with the Consortium Purchase Agreement, PMI issued to the Consortium 3 warrant certificates to purchase an aggregate 177,720,706 shares of PMI’s Series F Preferred Stock at an exercise price of $0.01 per share (the “Warrant Shares”).
The Consortium’s right to exercise the Series F Warrant was subject to monthly vesting during the term of the Consortium Purchase Agreement based upon the volume of loans the Consortium elected to purchase (if any) in each month, subject to certain cure rights such as offering additional loans for sale in subsequent periods. Pursuant to these cure rights, if the Consortium failed to respond to offers for allocation, purchase or funding, the Consortium could take advantage ofIRC 174 did not have a designated period of time to cure such failure. There were no such failures by the Consortium during the term of the Consortium Purchase Agreement. Under the terms of the Series F Warrant Agreement, the Warrant Shares may also vest in full upon a change of control of PMI, insolvency of PMI or PFL, certain breaches of contract by PMI or PFL that are not cured within a defined cure period and upon the occurrence of certain other events set forth in the Series F Warrant Agreement.
On vesting of the Series F Warrants, Prosper recorded a liability as Convertible Preferred Stock Warrant Liabilitymaterial impact on the Consolidated Balance Sheets at fair value and a corresponding amount as Fair Value of Warrants Vested on Sale of Borrower Loans on the Consolidated Statements of Operations. Subsequent changes in the fair value of the vested warrants are recorded in Change in Fair Value of Convertible Preferred Stock Warrants on the Consolidated Statements of Operations. Additionally, in connection with the execution of the Consortium Purchase Agreement, certain previously issued rebates were
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settled by an issuance of vested Series F Convertible Preferred Stock Warrants. The difference in fair value of these warrants over the cash settlement price was recorded in Change in Fair Value of Convertible Preferred Stock Warrants on the Consolidated Statements of Operations.
Through its expiration in May 2019, $3.3 billion in loans were acquired and 177.7 million warrants vested under the Consortium Purchase Agreement. In addition to the $3.3 billion of loans acquired above, warrants vested on signing of the Consortium Purchase Agreement were issued to settle certain rebates on $0.3 billion of whole loan purchases by members of the Consortium prior to the signing of the Consortium Purchase Agreement. This $0.3 billion also reduced the up to $5.0 billion aggregate amount under the Consortium Purchase Agreement.Company's income tax liabilities.
NOTE 16. LEASES
Prosper has operating leases for corporate offices and datacenters. These leases have remaining lease terms of 1 yearless than three years to 6approximately five years. Some of the lease agreements include options to extend the lease term for up to an additional 5 years.five years. Rental expense under operating lease arrangements was $4.5$4.3 million,, $4.5 $4.7 million and $4.5 million for the yearyears ended December 31, 2021,2023, 20202022 and 2019,2021, respectively. Additionally, Prosper subleases certain leased office space to third parties when it determines there is excess leased capacity. Sublease revenue from operating lease arrangements was $0.3$0.4 million,, $0.4 $0.7 million and $0.8$0.3 million for the yearyears ended December 31, 2021, 20202023, 2022 and 2019,2021, respectively.
Operating Lease Right-of-Use (“ROU”) Assets
The following table summarizes the operating lease right-of-use (“ROU”)ROU assets as of December 31, 20212023, which are included in Property and Equipment, Net on the Consolidated Balance Sheets.
December 31, 2021
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
ROU assets - office buildings$16,709 $9,444 $7,265 
ROU assets - other776 344 432 
Total operating lease ROU assets$17,485 $9,788 $7,697 

December 31, 2023
Gross
Carrying Value
Accumulated
Amortization
Net
Carrying Value
ROU assets - office buildings$22,655 $11,825 $10,830 
The Company identified certain impairment triggers related to its ROU assets in 2020,2023, primarily due to the non-renewalvacancy of certain sublease agreementsa portion of the Company’s leased office space and the time expected to find a new subtenants.subtenant. As a result of impairment testing performed on these ROU assets, the Company recorded an impairment charge of $0.4 million $196 thousand for the year ended December 31, 2020.2023. No impairment charge was identified for the years ended December 31,2022 and 2021 or December 31, 2019..
In May 2022, the Company entered into an amendment to its San Francisco office lease, the most prominent impact of which was to extend the lease term for the Company’s primary space in that office for an additional period through May 2028. As a result of this lease modification, the Company recorded additional ROU operating lease assets and liabilities of $9.9 million.
Lease Liabilities
Prosper has entered into various non-cancelable operating leases for certain offices with contractual lease periods expiring between 2021 and 2026.
Future maturities of operating lease liabilities as of December 31, 20212023 were as follows (in thousands). The present value of the future minimum lease payments represents ourthe Company’s operating lease liabilities as of December 31, 20212023 and are included in "“Other LiabilitiesLiabilities”" on the consolidated balance sheets.
December 31, 2021
2022$5,833 
20232,124 
20241,360 
20251,395 
20261,218 
Thereafter— 
Total future minimum lease payments11,930 
Less: Imputed interest(904)
Present value of future minimum lease payments$11,026 

December 31, 2023
2024$4,497 
20254,517 
20264,432 
20273,311 
20281,411 
Thereafter— 
Total future minimum lease payments18,168 
Less: Imputed interest(3,737)
Present value of future minimum lease payments$14,431 
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Because the rate implicit in each lease is not readily determinable, we use our incremental borrowing rate to determine the present value of the lease payments. Values usedSupplemental cash flow information related to determine present value ofthe Company’s operating leases is as follows (dollars in thousands):
 Years Ended December 31,
 202320222021
Non-cash operating activity:  
ROU assets obtained or adjusted in exchange for new, amended and modified operating lease liabilities$(697)$9,980 $1,773 
The weighted-average remaining lease term and discount rate used in the calculation of the Company’s operating lease assets and liabilities are as follows (dollars in thousands):
December 31, 20212023
Cash paid for operating leases year-to-date$
5,381 
ROU assets obtained in exchange for new operating lease obligations year-to-date$1,773 
Weighted averageWeighted-average remaining lease term (in years)3.124.01 years
Weighted averageWeighted-average discount rate5.1911.27 %

NOTE 17. COMMITMENTS AND CONTINGENCIES
In the normal course of its operations, Prosper becomes involved in various legal actions. Prosper maintains provisions it considers to be adequate for such actions. Prosper does not believe it is probable that the ultimate liability, if any, arising out of any such matters will have a material effect on Prosper's financial condition, results of operations or cash flows.
Operating Commitments
Prosper has entered into an agreement with WebBank, under which all Borrower Loans originated through the marketplace are made by WebBank under its bank charter. On June 25, 2021, PMI, along with its wholly-owned subsidiary Prosper Funding LLC,PFL, and WebBank has entered into: (i) a Fifth Amendment (the “Sale Agreement Amendment”) to thean Asset Sale Agreement, dated July 1, 2016, between Prosper Funding LLCPFL and WebBank, (theas most recently amended by a Seventh Amendment dated February 28, 2024 (as amended, the “Sale Agreement”); (ii) a Sixth Amendment (the “Marketing Agreement Amendment”) to the Marketing Agreement, dated July 1, 2016, between PMI and WebBank, (theas most recently amended by a Seventh Amendment dated February 28, 2024 (as amended, the “Marketing Agreement”); and (iii) a Third Amendment (the “Purchase Agreement Amendment”) to the Stand By Purchase Agreement, dated July 1, 2016, between PMI and WebBank, (theas most recently amended by a Fourth Amendment dated February 28, 2024 (as amended, the “Purchase Agreement” and, collectively with the Sale Agreement and the Marketing Agreement, the “Origination and Sale Agreements”). Under the Origination and Sale Agreements, all Borrower Loans originated through the marketplace are made by WebBank under its bank charter.
The Origination and Sale Agreement Amendment, among other things, extends the term of the Sale Agreement toAgreements contain terms through February 1, 20252027. Prosper is required, under the Origination and amendsSale Agreements, to maintain certain collateral requirements under the Sale Agreement. The Marketing Agreement Amendment, among other things, extends the term of the Marketing Agreement to February 1, 2025 and sets forth the amended terms and conditions of certain fees owed by the Registrants to WebBank under the Marketing Agreement. The Purchase Agreement Amendment amends certain collateral requirements of PMI under the Purchase Agreement.
Pursuantrequirements. In addition, pursuant to the Marketing Agreement, Amendment, the marketing fee that Prosper receives in connection with the origination of each loan is partially reduced by an amount (the “Designated Amount”) calculated as a percentage of the principal amount of such loan based on the aggregate principal amount of loans originated for the applicable month. To the extent the aggregate Designated Amount for all loans originated during any month is less than $143,500 through February 1, 2022, and $100,000 thereafter through February 1, 2025, Prosper is required to pay WebBank an amount equal to such deficiency. Accordingly, the minimum fee is $1.2 million for each year from 2022 through 2024, and $0.1 million in 2025. On February 28, 2024, the Origination and Sale Agreements were amended to, among other things, extend the terms through February 1, 2027.
Additionally, under the agreement with WebBank,Origination and Sale Agreements, Prosper is required to maintain minimum net liquidity of $15$15.0 million at all times during the term of the agreement. Net liquidity is defined as the sum of Cash, and Cash Equivalents and Available for Sale Investments. Violation of this covenant can result in termination of the contract with WebBank. At December 31, 2021,2023, Prosper was in compliance with the covenant.
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Transaction Fee Refunds
Prosper assumes WebBank’s liability under Utah law to refund the pro-rated amount of any transaction fees collected in excess of 5%, in the event the underlying borrower prepays the loan before full maturity. As of December 31, 2023, the Company has accrued $1.6 million related to anticipated future refunds under this obligation.
Loan Purchase Commitments
Prosper entered into an agreement with WebBank to purchase $13.8$17.7 million of Borrower Loans that WebBank originated during the last two business days of the year ended December 31, 2021.2023. Prosper will purchase these Borrower Loans within the first two business days of the year ending December 31, 2022.2023.
Repurchase Obligation
Under the terms of the loan purchase agreements between Prosper and investors that participate in the Whole Loan Channel, Prosper may, in certain circumstances, become obligated to repurchase a Borrower Loan from an investor. Generally, these circumstances include the occurrence of verifiable identity theft, the failure to properly follow personal loan listing or bidding protocols or a violation of the applicable federal, state or local lending laws. Prosper recognizes a liability at fair value for the repurchase obligation when the Borrower Loans are sold. The fair value of the repurchase obligation is estimated based on historical experience. Repurchased Borrower Loans associated with violations of federal, state or local lending laws or verifiable identity theft are written off at the time of repurchase. The maximum potential amount of future payments associated under the repurchasewith this obligation is the outstanding balances of the Borrower Loans soldissued to third parties through the Whole Loan channels,
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Channel, which at December 31, 20212023 is $2.5 billion.$3.1 billion. Prosper has accrued $0.3$0.5 million and $0.2$0.3 million as of December 31, 20212023 and 2020,2022, respectively, relatedin regard to this obligation.
Under the terms of the indenture and investor registration agreement, Prosper may, in certain circumstances, become obligated to either repurchase a Note or indemnify the investor for any losses resulting from nonpayment of a Note purchased in the Retail Channel. The decision to repurchase or indemnify is in Prosper’s sole discretion. These circumstances include, but are not limited to, the occurrence of verifiable identity theft, a technical error in the automated bidding tools which results in the purchase of a Note that does not match the investor’s investment criteria, or situations in which a personal loan listing includes a Prosper Rating that is different from the Prosper Rating that should have appeared in the listing for the corresponding Borrower Loan because either PFL inaccurately input data into, or inaccurately applied, the formula for determining the Prosper Rating and, as a result, the interest of the investor is materially and adversely affected. During the year ended December 31, 2023 the Company repurchased $0.3 million of Notes under these circumstances, and has agreed to indemnify additional Notes with an unpaid principal balance of $0.8 million as of December 31, 2023.
Regulatory Contingencies
Prosper accrues for contingencies when a loss from such contingencies is probable and the amount of loss can be reasonably estimated. In determining whether a loss is probable and if it is possible to quantify the amount of the estimated loss, Prosper reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If Prosper determines that an unfavorable outcome is not probable or that the amount of a loss cannot be reasonably estimated, Prosper does not accrue for a potential litigation loss. If an unfavorable outcome is probable and Prosper can estimate a range of outcomes, an amount is recorded which management considers to be the best estimate within the range of potential losses that are both probable and estimable; however, if management cannot quantify the amount of the estimated loss, then the low end of the range of the potential losses is recorded.
SEC Inquiry
In April 2017, we became aware of an error in the annualized net return and seasoned annualized net return numbers displayed to Note investors. Prosper was advised by the SEC that it was investigating whether violations of federal securities laws had occurred in connection with the error. On April 19, 2019, the SEC accepted an offer of settlement from PFL to resolve the matter. Under the settlement, the SEC alleged a violation of Section 17(a)(2) of the Securities Act and ordered PFL to cease and desist from any future violations of that provision. PFL neither admitted nor denied any wrongdoing, and agreed to pay a civil monetary penalty of $3.0 million. The penalty of $3.0 million was paid in full in April 2019.
West Virginia Matter
In January 2018, the Attorney General of the State of West Virginia (the “Attorney General”) initiated discussions regarding certain acts and practices of PMI and PFL that the Attorney General asserts may have violated the West Virginia Consumer Credit and Protection Act (the “Consumer Act”), to which Prosper responded with such information as was requested by the Attorney General. Following a period of more than a year with limited to no communication, in February 2020, Prosper received a proposed Assurance of Discontinuance (an “AOD”) from the Attorney General of the State of West Virginia (the “WV Attorney General”) requesting that, without in any way admitting that any of its prior practices were in violation of the West Virginia Consumer Credit and Protection Act (the “Consumer Act”), Prosper agree to certain terms and conditions regarding its past and potential future conduct of its business with respect to customers in West Virginia, including a release by the WV Attorney General of any claims it may have related to the matters identified in the AOD. Prosper is evaluating and intends to discuss the proposed terms in the AOD with the Attorney General.
We cannot predict the outcome of the matter and any potential fines or penalties, if any, that may arise from the matter. Further, we are unable to estimate a range of outcomes and as a result no accrual has been made.
No loans have been originated through the Prosper platform to West Virginians since June 2016.2016 and the final loan originated through the Prosper platform to a borrower in West Virginia was repaid in October 2021.
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NOTE 18. RELATED PARTIES
Since Prosper’s inception, it has engaged in various transactions with its directors, executive officers and holders of more than 10% of its voting securities, and with immediate family members and other affiliates of its directors, executive officers, and 10% stockholders. Prosper believes that all of the transactions described below were made on terms no less favorable to Prosper than could have been obtained from unaffiliated third parties.
Prosper’s executive officers, directors who are not executive officers, and certain affiliates participate in its marketplace by placing bids and purchasing Notes. The aggregate amount of the Notes purchased and the income earned by
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parties deemed to be affiliates and related parties of Prosper for the year ended December 31, 20212023 and 2020,2022, as well as the Notes outstanding as of December 31, 20212023 and 20202022 are summarized below (in thousands):
Aggregate Amount of Notes Purchased for the Year Ended December 31,Interest Earned on Notes for the Year Ended December 31,
Aggregate Amount of Notes Purchased for the Year Ended December 31,Aggregate Amount of Notes Purchased for the Year Ended December 31,Interest Earned on Notes for the Year Ended December 31,
2021202020212020 2023202220232022
Executive officers and managementExecutive officers and management$35 $28 $7 $6 
Directors (excluding executive officers and management)Directors (excluding executive officers and management)24 272 1 43 
TotalTotal$59 $300 $8 $49 
Notes Balance as of
Notes Balance as ofNotes Balance as of
December 31, 2021December 31, 2020 December 31, 2023December 31, 2022
Executive officers and managementExecutive officers and management$41 $41 
Directors (excluding executive officers and management)Directors (excluding executive officers and management)15 — 
TotalTotal$56 $41 

NOTE 19. POSTRETIREMENT BENEFIT PLANS
Prosper has a 401(k) plan that covers all employees meeting certain eligibility requirements. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees may defer up to 90% of eligible compensation up to the annual maximum as determined by the Internal Revenue Service. Prosper’s contributions to the plan are discretionary. During the years ended December 31, 2021, 20202023, 2022 and 2019,2021, Prosper contributed $2.0$3.0 million $1.2, $2.7 million and $2.3$2.0 million, respectively, to the 401(k) plan. On January 1, 2024, PMI temporarily suspended its discretionary matching contributions, which may be reinstated in the future upon the Company meeting certain business objectives.
NOTE 20. SIGNIFICANT CONCENTRATIONS
Prosper is dependent on third party funding sources such as banks, asset managers, and investment funds and Warehouse Lines to provide the funds to allow WebBank to originate Borrower Loans that the third party funding sources will later purchase. Of all Borrower Loans originated in the year ended December 31, 2021, one2023, four individual partythird parties purchased 26.7%15.1%, 12.5%, 11.9% and 10.7% of such loans,all Borrower Loans originated, and the Company’s Warehouse VIEs purchased 12.6%8.4% of such loans. For the year ended December 31, 2020,2022, two individual parties purchased 21.4%23.4% and 14.3%10.4% of such loans, respectively, all Borrower Loans originated, and the Company’s Warehouse VIEs purchased 18.2%13.9% of such loans. These purchases reflectindicate that a significant portion of Prosper’s business is dependent on funding through the Whole Loan Channel, through which 88% and 91% 89% and 92% of Borrower Loans were originated in the years ended December 31, 20212023 and 2020,2022, respectively.
Prosper receives all of its transaction fee revenue related to personal loans from WebBank. Prosper earns a transaction fee from WebBank for our services in facilitating originations of Borrower Loans issued by WebBank. The rate of the transaction fee for each individual Borrower Loan is based on the term and credit grade of the Borrower Loan. No individual borrower or investor accounted for 10% or more of consolidated net revenue for any of the periods presented.    
NOTE 22.21. SEGMENTS
OurStarting with the fourth quarter of 2022, the Company realigned its reportable and operating segments to better reflect the nature and materiality of its product offerings. As a result of these changes, the Company now has three reportable and operating segments: Personal Loan, Home Equity and Credit Card.
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The Company’s Chief Executive Officer, who serves as the chief operating decision maker reviews(“CODM”) evaluates the financial performance of the Company’s segments based upon segment revenues, as well as segment Adjusted Net Revenue and segment Adjusted EBITDA, both non-GAAP profitability measures. Items outside of Adjusted EBITDA are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the CODM. The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and, therefore, total segment assets have not been disclosed.
The tables below present segment information presented on areconciled to consolidated basisTotal Net Revenue and Net Income (Loss) Before Income Taxes, as well as interest income and expense included in segment Adjusted Net Revenue and Adjusted EBITDA, for purposes of allocating resources and evaluating financial performance. As such, the Company has a single reporting and operating segment.periods indicated (in thousands).
Year Ended December 31, 2023
Personal LoanHome EquityCredit CardTotal
Total Net Revenue$100,921 $1,875 $34,904 $137,700 
Impact of interest rates on fair value of loans held in consolidated trusts2,629 — — 2,629 
Accelerated amortization of PWIIT debt issuance costs1,880 — — 1,880 
Segment Adjusted Net Revenue$105,430 $1,875 $34,904 $142,209 
Segment Adjusted EBITDA$(32,027)$(2,483)$3,882 $(30,628)
Depreciation expense:
Origination and Servicing(8,774)
General and Administrative(2,108)
Amortization of intangibles(107)
Stock-based compensation(1,575)
Impairment of operating lease right-of-use assets(196)
Change in Fair Value of Convertible Preferred Stock Warrants(48,695)
Impact of interest rates on fair value of loans held in consolidated trusts(2,629)
Interest income on cash and cash equivalents2,473 
Interest Expense on Term Loan(12,265)
Accelerated amortization of PWIIT debt issuance costs(1,880)
Net Loss Before Income Taxes$(106,384)
Interest Income (Expense) Included in Segment Adjusted EBITDA
Interest Income on Borrower Loans and Loans Held for Sale$115,663 $— $— $115,663 
Interest Expense on Financial Instruments(91,983)— — (91,983)
Total Interest Income, Net$23,680 $— $— $23,680 

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Year Ended December 31, 2022
Personal LoanHome EquityCredit CardTotal
Total Net Revenue$180,717 $2,821 $16,343 $199,881 
Impact of interest rates on fair value of loans held in consolidated trusts7,248 — — 7,248 
Segment Adjusted Net Revenue$187,965 $2,821 $16,343 $207,129 
Segment Adjusted EBITDA$9,301 $(2,163)$(8,946)$(1,808)
Depreciation expense:
Origination and Servicing(8,132)
General and Administrative(2,656)
Amortization of intangibles(136)
Stock-based compensation(1,326)
Change in Fair Value of Convertible Preferred Stock Warrants84,595 
Gain on Forgiveness of PPP Loan8,604 
Impact of interest rates on fair value of loans held in consolidated trusts(7,248)
Interest income on cash and cash equivalents511 
Interest Expense on Term Loan(1,527)
Net Income Before Income Taxes$70,877 
Interest Income (Expense) Included in Segment Adjusted EBITDA
Interest Income on Borrower Loans and Loans Held for Sale$86,350 $— $— $86,350 
Interest Expense on Financial Instruments(60,025)— — (60,025)
Total Interest Income, Net$26,325 $— $— $26,325 

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Year Ended December 31, 2021
Personal LoanHome EquityCredit CardTotal
Total Net Revenue$143,670 $946 $10 $144,626 
Impact of interest rates on fair value of loans held in consolidated trusts3,084 — — 3,084 
Segment Adjusted Net Revenue$146,754 $946 $10 $147,710 
Segment Adjusted EBITDA$22,303 $(2,556)$(3,849)$15,898 
Depreciation expense:
Organization and Servicing(7,167)
General and Administrative(2,501)
Amortization of intangibles(172)
Stock-based compensation(1,136)
Change in Fair Value of Convertible Preferred Stock Warrants(138,622)
Loss on Deconsolidation of VIEs(1,494)
Impact of interest rates on fair value of loans held in consolidated trusts(3,084)
Interest income on cash and cash equivalents8 
Net Loss Before Income Taxes$(138,270)
Interest Income (Expense) Included in Segment Adjusted EBITDA
Interest Income on Borrower Loans and Loans Held for Sale$83,107 $— $— $83,107 
Interest Expense on Financial Instruments(50,816)— — (50,816)
Total Interest Income, Net$32,291 $— $— $32,291 
NOTE 23.22. SUBSEQUENT EVENTS
Management has evaluated subsequent events or transactions occurring through the date the consolidated financial statements were issued and determined that no events or transactions, other than any items disclosed within the consolidated financial statements and related notes, are required to be disclosed herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Prosper Funding LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Prosper Funding LLC and subsidiaries (the "Company") as of December 31, 20212023 and 2020,2022, the related consolidated statements of operations, member’s equity, and cash flows, for each of the three years ended December 31, 2021,2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021,2023, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of a Matter

As discussed in Note 1 to the consolidated financial statements, the Company earns significant amounts of revenues and incurs significant expenses with a related party, its direct parent company, Prosper Marketplace, Inc.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current-period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.it relates.

Valuation of Level 3 Financial Instruments and Unobservable Inputs Therein

•Borrower Loans, — Refer toat Fair Value – See Note 4. Borrow Loans and Notes, 2, 4 and 7 to the financial statementsat Fair Value
•Servicing Assets – See Note 5. Servicing Assets

Critical Audit Matter Description

The Company measures Borrower Loansfinancial instruments at fair value which are classified as Level 3 instruments.including borrower loans and servicing assets. As of December 31, 2021, Borrower Loans2023, borrower loans were $267.6$324.3 million and servicing assets were $13.8 million. The Company estimates the fair valuevalues using discounted cash flow valuation methodologies incorporating significant unobservable inputs and valuation assumptions that are reflective of management’s own estimates of assumptions that market participants would use in pricing the instruments and requires significant management judgmentjudgement or estimate. The main assumptionsSignificant unobservable inputs used to valuein the Borrower Loansvaluation methodology for the servicing
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assets include the market servicing rate. For all level 3 financial instruments, significant unobservable inputs used in valuation methodology include discount rates, default rates and prepayment rates derived from historical performance and discount rates applied to each credit grade of the loans.rates.

Auditing the methodology and significant unobservable inputs specifically, the unobservable inputs related to the discount rate, default rate and prepayment rate, used by management to estimate the fair valuevalues of Borrower Loanslevel 3 financial instruments required a high degree of auditor judgment and subjectivity and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit
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Our audit procedures related to the valuation of Borrower Loans, at fair value includingthese Level 3 financial instruments and unobservable inputs used by management to estimate the fair value included the following key procedures:

•We performed inquiries with management andgained an understanding of the Company’s third-party valuation expert to understand the process for developing,significance of inputs and assumptions used in, the valuation model.using sensitivity analysis, identifying relevant inputs and assumptions for further testing.

•With the assistance of our fair value specialists, we developed independent estimates of fair value and compared our estimates to the Company’s estimates.

•We tested the source information derived from the Company’s data used in the valuation models.
Valuation of Servicing Assets — Refer to Notes 2, 5 and 7 to the financial statements
Critical Audit Matter Description
The Company measures Servicing Assets at fair value which are classified as Level 3 instruments. As of December 31, 2021, Servicing Assets were $9.8 million. The Company estimates the fair value using a discounted cash flow valuation methodology incorporating significant unobservable inputs and valuation assumptions that are reflective of management’s own estimates of assumptions that market participants would use in pricing the instruments and requires significant management judgment or estimation. Significant unobservable inputs used in the valuation methodology include the market servicing rate, discount rate, default rate and prepayment rate.
Auditing the significant unobservable inputs used by management to estimate the fair value of Servicing Assets required a high degree of auditor judgment and subjectivity and an increased extend of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of Servicing Assets at fair value including unobservable inputs used by management to estimate the fair value included the following key procedures:
•We performed inquiries with management and the Company’s third-party valuation expert to understand the process for developing, and assumptions used in, the valuation model.
•With the assistance of our fair value specialists, we developed an independent estimate of fair value and compared our estimate to the Company’s estimate.
•We evaluated the reasonableness of the market servicing rate of servicing assumption used in developing the fair value estimate of the Servicing Assets.
•We tested the source information derived from the Company’s data used in the valuation model.servicing assets.

/s/ DELOITTE & TOUCHE LLP

San Francisco, CA
March 25, 202222, 2024

We have served as the Company's auditor since 2014.

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Prosper Funding LLC
Consolidated Balance Sheets
(amounts in thousands)
December 31,
20212020
December 31,December 31,
202320232022
Assets:Assets:  Assets:  
Cash and Cash EquivalentsCash and Cash Equivalents$10,765 $8,592 
Restricted CashRestricted Cash157,111 132,332 
Borrower Loans, at Fair ValueBorrower Loans, at Fair Value267,626 209,670 
Property and Equipment, NetProperty and Equipment, Net7,907 6,928 
Servicing AssetsServicing Assets9,796 11,088 
Receivable from Related Party
Other AssetsOther Assets317 217 
Total AssetsTotal Assets$453,522 $368,827 
Liabilities and Member's Equity:Liabilities and Member's Equity:  Liabilities and Member's Equity: 
Accounts Payable and Accrued LiabilitiesAccounts Payable and Accrued Liabilities$1,818 $2,361 
Payable to Related PartyPayable to Related Party1,306 4,120 
Payable to InvestorsPayable to Investors153,681 126,266 
Notes, at Fair ValueNotes, at Fair Value265,985 208,379 
Other LiabilitiesOther Liabilities2,434 2,613 
Total LiabilitiesTotal Liabilities425,224 343,739 
Member's Equity:Member's Equity:  Member's Equity: 
Member's EquityMember's Equity11,404 11,404 
Retained EarningsRetained Earnings16,894 13,684 
Total Member's EquityTotal Member's Equity28,298 25,088 
Total Liabilities and Member's EquityTotal Liabilities and Member's Equity$453,522 $368,827 
The accompanying notes are an integral part of these consolidated financial statements.
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Prosper Funding LLC
Consolidated Statements of Operations
(amounts in thousands)
Years Ended December 31, Years Ended December 31,
202120202019 202320222021
Revenues:Revenues:  
Operating Revenues:Operating Revenues:  
Operating Revenues:
Operating Revenues:
Administration Fee Revenue – Related Party
Administration Fee Revenue – Related Party
Administration Fee Revenue – Related PartyAdministration Fee Revenue – Related Party$34,017 $21,618 $49,818 
Servicing Fees, NetServicing Fees, Net15,770 20,791 26,368 
Gain (Loss) on Sale of Borrower Loans8,450 6,430 (5,058)
Loss (Gain) on Sale of Borrower Loans
Other RevenueOther Revenue1,312 552 155 
Total Operating RevenuesTotal Operating Revenues59,549 49,391 71,283 
Interest Income (Expense):Interest Income (Expense):
Interest Income on Borrower Loans
Interest Income on Borrower Loans
Interest Income on Borrower LoansInterest Income on Borrower Loans36,952 36,765 41,146 
Interest Expense on NotesInterest Expense on Notes(34,514)(34,457)(38,492)
Total Interest Income, Net Total Interest Income, Net2,438 2,308 2,654 
Change in Fair Value of Financial Instruments, NetChange in Fair Value of Financial Instruments, Net770 454 (375)
Total Net RevenuesTotal Net Revenues62,757 52,153 73,562 
Expenses:Expenses:   Expenses: 
Administration Fee – Related PartyAdministration Fee – Related Party52,641 45,472 62,575 
Servicing6,409 4,900 5,012 
General and Administrative497 380 33 
Servicing and Other, Net
Total ExpensesTotal Expenses59,547 50,752 67,620 
Net Income$3,210 $1,401 $5,942 
Total Expenses
Total Expenses
Net (Loss) Income
The accompanying notes are an integral part of these consolidated financial statements.
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Prosper Funding LLC
Consolidated Statements of Member’s Equity
(amounts in thousands)
Member’s
Equity
Retained EarningsTotal
Balance at January 1, 2019$24,904 $6,341 $31,245 
Member’s
Equity
Member’s
Equity
Retained EarningsTotal
Balance at December 31, 2020
Distributions to ParentDistributions to Parent(9,000)— (9,000)
Net IncomeNet Income— 5,942 5,942 
Balance at December 31, 201915,904 12,283 28,187 
Net Income
Net Income
Balance at December 31, 2021
Contribution from Parent
Distributions to ParentDistributions to Parent(4,500)— (4,500)
Net IncomeNet Income— 1,401 1,401 
Balance at December 31, 202011,404 13,684 25,088 
Distributions to Parent— — — 
Net Income— 3,210 3,210 
Balance at December 31, 2021$11,404 $16,894 $28,298 
Balance at December 31, 2022
Contribution of Borrower Loans from Parent (Note 4)
Contribution of Borrower Loans from Parent (Note 4)
Contribution of Borrower Loans from Parent (Note 4)
Net Loss
Balance at December 31, 2023
The accompanying notes are an integral part of these consolidated financial statements.
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Prosper Funding LLC
Consolidated Statements of Cash Flows
(amounts in thousands)
Years Ended December 31,
Years Ended December 31,Years Ended December 31,
202120202019 202320222021
Cash Flows from Operating Activities:Cash Flows from Operating Activities:   Cash Flows from Operating Activities:  
Net Income$3,210 $1,401 $5,942 
Net (Loss) Income
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:  Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: 
Change in Fair Value of Financial Instruments, NetChange in Fair Value of Financial Instruments, Net(770)(454)374 
Other Non-Cash Changes in Borrower Loans, Loans Held for Sale and NotesOther Non-Cash Changes in Borrower Loans, Loans Held for Sale and Notes26 46 (694)
Gain on Sale of Borrower LoansGain on Sale of Borrower Loans(9,020)(7,203)(13,033)
Change in Fair Value of Servicing RightsChange in Fair Value of Servicing Rights10,312 11,003 13,682 
Depreciation and AmortizationDepreciation and Amortization4,878 4,149 4,397 
Changes in Operating Assets and Liabilities:
Changes in Operating Assets and Liabilities:
Changes in Operating Assets and Liabilities:Changes in Operating Assets and Liabilities:    
Purchase of Loans Held for Sale, at Fair ValuePurchase of Loans Held for Sale, at Fair Value(1,712,705)(1,338,082)(2,320,560)
Proceeds from Sales and Principal Payments of Loans Held for Sale, at Fair ValueProceeds from Sales and Principal Payments of Loans Held for Sale, at Fair Value1,712,705 1,338,082 2,320,560 
Other AssetsOther Assets(100)532 (426)
Accounts Payable and Accrued LiabilitiesAccounts Payable and Accrued Liabilities(543)228 (2,557)
Payable to InvestorsPayable to Investors27,415 20,979 (21,966)
Net Related Party Receivable/PayableNet Related Party Receivable/Payable(2,544)1,183 2,251 
Other LiabilitiesOther Liabilities(179)(1,114)(789)
Net Cash Provided by (Used in) Operating ActivitiesNet Cash Provided by (Used in) Operating Activities32,685 30,750 (12,819)
Cash Flows From Investing Activities:   
Cash Flows from Investing Activities:Cash Flows from Investing Activities: 
Purchase of Borrower Loans, at Fair ValuePurchase of Borrower Loans, at Fair Value(231,998)(133,644)(170,326)
Proceeds from Sales and Principal Payments of Borrower Loans, at Fair ValueProceeds from Sales and Principal Payments of Borrower Loans, at Fair Value172,709 149,908 165,481 
Purchases of Property and EquipmentPurchases of Property and Equipment(6,127)(3,270)(6,374)
Net Cash (Used in) Provided by Investing Activities(65,416)12,994 (11,219)
Purchases of Property and Equipment
Purchases of Property and Equipment
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:Cash Flows from Financing Activities:   Cash Flows from Financing Activities: 
Proceeds from Issuance of Notes, at Fair ValueProceeds from Issuance of Notes, at Fair Value231,933 133,228 171,138 
Payments of Notes, at Fair ValuePayments of Notes, at Fair Value(172,250)(149,409)(167,420)
Cash Contribution from Parent
Cash Distributions to ParentCash Distributions to Parent— (4,500)(9,000)
Net Cash Provided by (Used in) Financing Activities59,683 (20,681)(5,282)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash26,952 23,063 (29,320)
Net Cash Provided by Financing Activities
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash
Cash, Cash Equivalents and Restricted Cash at Beginning of the PeriodCash, Cash Equivalents and Restricted Cash at Beginning of the Period140,924 117,861 147,181 
Cash, Cash Equivalents and Restricted Cash at End of the PeriodCash, Cash Equivalents and Restricted Cash at End of the Period$167,876 $140,924 $117,861 
Supplemental Disclosure of Cash Flow Information:Supplemental Disclosure of Cash Flow Information:   
Supplemental Disclosure of Cash Flow Information:
Supplemental Disclosure of Cash Flow Information: 
Cash Paid for InterestCash Paid for Interest$34,682 $34,410 $39,229 
Non-Cash Investing Activity- Accrual for Property and Equipment, NetNon-Cash Investing Activity- Accrual for Property and Equipment, Net$234 $504 $246 
Non-Cash Financing Activity - Contribution of Borrower Loans by Parent (Note 4)
Reconciliation to Amounts on Consolidated Balance Sheets:Reconciliation to Amounts on Consolidated Balance Sheets:
Reconciliation to Amounts on Consolidated Balance Sheets:
Reconciliation to Amounts on Consolidated Balance Sheets:
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash EquivalentsCash and Cash Equivalents$10,765 $8,592 $7,462 
Restricted CashRestricted Cash157,111 132,332 110,399 
Total Cash, Cash Equivalents and Restricted CashTotal Cash, Cash Equivalents and Restricted Cash$167,876 $140,924 $117,861 
The accompanying notes are an integral part of these consolidated financial statements.
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PROSPER FUNDING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BUSINESS
Prosper Funding LLC (“PFL”) was formed in the state of Delaware in February 2012 as a limited liability company with Prosper Marketplace, Inc. (“PMI”) as its sole equity member. Except as the context otherwise requires, as used in these Notes to consolidated financial statements of Prosper Funding LLC, “PFL”PFL and the “Company” refer to Prosper Funding LLC and its wholly owned subsidiary, Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis.
PFL did not have any items of other comprehensive income (loss) during any of the periods presented in the consolidated financial statements as of and for the years ended December 31, 2021, 2020 and 2019.
PFL was formed by PMI to hold Borrower Loans and issue Notes through the marketplace. Although PFL is consolidated with PMI for accounting and tax purposes, PFL has been organized and is operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding. PFL’s intention is to minimize the likelihood that its assets would be subject to claims by PMI’s creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that PFL will become subject to bankruptcy proceedings directly. PFL seeks to achieve this by placing certain restrictions on its activities and implementing certain formal procedures designed to expressly reinforce its status as a distinct entity from PMI.
Since February 1, 2013, all Notes issued and sold through the marketplace are issued, sold and serviced by PFL. Pursuant to a Loan Account Program Agreement between PMI and WebBank, PMI manages the operation of the marketplace, as agent of WebBank, in connection with the submission of Borrower Loan applications by potential borrowers, the origination of related Borrower Loans by WebBank and the funding of such Borrower Loans by WebBank. Pursuant to an Administration Agreement between PFL and PMI, PMI manages all other aspects of the marketplace on behalf of PFL. As a result PFL earns significant revenues and incurs significant expenses with a related party, its direct parent company, PMI.
A borrower who wishes to obtain a loan through the marketplace must post a loan listing on the marketplace. PFL allocates listings to one of two investor funding channels: (i) the “Note Channel,” which allows investors to commit to purchase Notes from PFL, the payments of which are dependent on PFL’s receipt of payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows investors to commit to purchase 100% of a Borrower Loan directly from PFL.
All loans requested and obtained through the marketplace are unsecured obligations of individual borrowers with a fixed interest rate and loanoriginal terms set at threeto maturity of 24, 36, 48 or five years60 months as of December 31, 2021.2023. All loans made through the marketplace are funded by WebBank, an FDIC-insured, Utah chartered industrial bank. After funding a loan, WebBank sells the loan to PFL, without recourse to WebBank, in exchange for the principal amount of the loan. WebBank does not have any obligation to purchasers of the Notes.
As of December 31, 2021,2023, PFL’s marketplace was open to investors in 3031 states and the District of Columbia. Additionally, as of December 31, 2021,2023, PFL’s marketplace was open to borrowers in 48 states and the District of Columbia. Currently, the marketplace does not operate internationally.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Basis of Presentation
PFL’s consolidated financial statements include the accounts of PFL and its wholly-owned subsidiary, Prosper Depositor LLC. All intercompany balances and transactions between PFL and Prosper Depositor LLC have been eliminated in consolidation. PFL’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
PFL did not have any items of other comprehensive income (loss) during any of the periods presented in the consolidated financial statements as of and for the years ended December 31, 2023, 2022 and 2021.

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Use of Estimates
The preparation of PFL’s consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates, judgments and assumptions include, but are not limited to, the following: valuation of Loans Held for Sale, Borrower Loans and associated Notes, valuation of servicing rights, valuation of loan trailing fee liability, repurchase obligations, and contingent liabilities. PFL bases its estimates on historical experience from all Borrower Loans and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ materially from estimates.
Consolidation of Variable Interest Entities
A variable interest entity (VIE) is a legal entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. PFL’s variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the fair value of the entity’s net assets. A VIE is consolidated by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. PFL consolidates a VIE when it is deemed to be the primary beneficiary. PFL assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis.
Transfers of Financial Assets
PFL accounts for transfers of financial assets as sales when it has surrendered control over the transferred assets. Control is generally considered to have been surrendered when the transferred assets have been legally isolated from PFL, the transferee has the right to pledge or exchange the assets without any significant constraints, and PFL has not entered into a repurchase agreement, does not hold unconditional call options and has not written put options on the transferred assets. In assessing whether control has been surrendered, PFL considers whether the transferee would be a consolidated affiliate and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of the transfer, even if they were not entered into at the time of transfer. PFL measures gain or loss on sale of financial assets as the net proceeds received on the sale less the carrying amount of the loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, and recourse obligations.
Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments consist principally of Cash and Cash Equivalents, Restricted Cash, Borrower Loans, Loans Held for Sale, Servicing Assets, Loan Trailing Fee Liability, Accounts Receivable, Accounts Payable and Accrued Liabilities, Payable to Investors and Notes. The estimated fair values of Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities, and Payable to Investors approximate their carrying values because of their short term nature.
The fair value hierarchy includes a three-level classification, which is based on whether the inputs to the valuation methodology used for measurement are observable:
Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
Level 3 — Unobservable inputs.
When developing fair value measurements, PFL maximizes the use of observable inputs and minimizes the use of unobservable inputs. However, for certain instruments PFL must utilize unobservable inputs in determining fair value due to the lack of observable inputs in the market, which requires greater judgment in measuring fair value. In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are determined using assumptions that management believes a market participant would use in pricing the asset or liability.
As observable market prices are not available for the Borrower Loans, Loans Held for Sale, Notes, and Servicing Assets, or for similar assets and liabilities, PFL believes the Borrower Loans, Loans Held for Sale, Notes, and Servicing Assets should be considered levelLevel 3 financial instruments. PFL primarily uses a discounted cash flow model to estimate their fair value and key assumptions used in valuation include default rates and prepayment rates derived from historical performance and
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and discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.
The obligation to pay principal and interest on any series of Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of our servicing fee which is generally 1.0% of the outstanding balance. The fair value election for Notes and Borrower Loans allows both the assets and the related liabilities to receive similar accounting treatment for expected losses which is consistent with the subsequent cash flows to investors that are dependent upon borrower payments. As such, the fair value of a series of Notes is approximately equal to the fair value of the corresponding Borrower Loan, adjusted for the 1.0% servicing fee and the timing of loan purchase, Note issuance and borrower payments. As a result, the valuation of the Notes uses the same methodology and assumptions as the Borrower Loans, except that the Notes incorporate the 1.0% servicing fee and any differences in timing in payments. Any unrealized gains or losses on the Borrower Loans and Notes for which the fair value option has been elected is recorded as a separate line item in the statement of operations. The effective interest rate associated with a group of Notes is less than the interest rate earned on the corresponding Borrower Loan due to the 1.0% servicing fee.
Refer to Note 78 for additional fair value disclosures.
Cash and Cash Equivalents
Cash includes various unrestricted deposits with highly rated financial institutions. Cash equivalents consist of highly liquid marketable securities with original maturities of three months or less at the time of purchase and consist primarily of money market funds, commercial paper, U.S. treasury securities and U.S. agency securities. Cash equivalents are recorded at cost, which approximates fair value.
Restricted Cash
Restricted Cash consists primarily of cash deposits, money market funds and short term certificatesshort-term certificate of deposit accounts held as collateral as required for long term leases, loan funding and servicing activities, and cash that investors or PFL have on theour marketplace that has not yet been invested in Borrower Loans or disbursed to the investor.
Borrower Loans, Loans Held for Sale and Notes
With respect to the Note Channel, PFL purchases Borrower Loans from WebBank, then issues notes,Notes and holds the Borrower Loans as a receivable until maturity. The obligation to repay a series of notes issuedNotes funded through the Note Channel is dependent upon the repayment of the associated Borrower Loans.Loan. Borrower loansLoans and Notes funded and notes issued through the Note Channel are carried on PFL’s Consolidated Balance Sheetsconsolidated balance sheets as assets and liabilities, respectively.
PFL places Borrower Loans and Loans Held for Sale on non-accrual status when they are 120 days past due. When a loan is placed on non-accrual status, PFL stops accruing interest and reverses all accrued but unpaid interest as of such date. Additionally, PFL charges-off Borrower Loans and Loans Held for Sale when they are 120 days past due. The fair value of loans 120 days past due generally consists of the expected recovery from debt sales in subsequent periods.
Management has elected the fair value option for Borrower Loans, Loans Held for Sale, and Notes. Changes in fair value of Borrower Loans are largely offset by the changes in fair value of Notes due to the borrower payment-dependent design of the Notes. Changes in fair value of Borrower Loans, Loans Held for Sale and Notes are included in “Change in Fair Value of Financial Instruments, Net” on the Consolidated Statements of Operations.
PFL primarily uses a discounted cash flow model to estimate the fair value of Borrower Loans, Loans Held for Sale and Notes. The key assumptions used in the valuation include default rates and prepayment rates derived primarily from historical performance and discount rates that reflectbased on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.
Servicing Assets
PFL records Servicing Assets at their estimated fair values for servicing rights retained when PFL sells Borrower Loans to unrelated third-party buyers. The change in fair value of Servicing Assets is recognized in revenue as Servicing Fees, Net. The gain or loss on a loan sale is recorded in Gain (Loss)Loss (Gain) on Sale of Borrower Loans while the fair value of the servicing rights, which is based on the degree to which the contractual loan servicing fee is above or below an estimated market loan servicing rate, is recorded in Servicing Assets on the Consolidated Balance Sheets.
PFL uses a discounted cash flow model to estimate the fair value of Servicing Assets which considers the contractual projected servicing fee revenue that PFL earns on the Borrower Loans, estimated market servicing fees to service such loans, prepayment rates, default rates and the current principal balances of the Borrower Loans.  
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Software and Website Development
Software and website development represents the software and website development costs that PMI transferred to PFL. PFL does not develop any of its own software or its website. Software and website development are included in Property and Equipment, Net and amortized to expense using the straight-line method over their expected lives which is generally one to five years. PFL evaluates its software assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software and website development assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software and website development assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software and website development assets.
Payable to Investors
Payable to Investors primarily represents the Company's obligation to investors related to cash held in an account for the benefit of investors and payments-in-process received from borrowers.
Loan Trailing Fee Liability
On July 1, 2016, PMI signed a series of agreements with WebBank which, among other things, includes an additional program fee (the “Loan Trailing Fee”) paid to WebBank in connection with the performance of each loan sold to PMI. These agreements were effective as of August 1, 2016. The Loan Trailing Fee is dependent on the amount and timing of principal and interest payments made by borrowers of the underlying loans, irrespective of whether the loans are sold by PMI, and gives WebBank an ongoing financial interest in the performance of the loans it originates. This fee is paid by PMI to WebBank over the term of the respective loans and is a function of the principal and interest payments made by borrowers of such loans. In the event that principal and interest payments are not made with respect to any loan, PMI is not required to make the related Loan Trailing Fee payment. The obligation to pay the Loan Trailing Fee for any loan sold to PMI is recorded at fair value at the time of the origination of such loan within Other Liabilities and recorded as a reduction of “Transaction Fees, net”. Any changes in the fair value of this liability are recorded in “Servicing Fees, Net” on the consolidated statementsConsolidated Statements of operations.Operations. The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and defaults rates.
Revenue Recognition
Revenue primarily results from fees, net interest earned and gains on the sale of Borrower Loans. Fees consist of related party administrative fees and Servicing Fees paid by investors. The Company also has other smaller sources of revenue reported as Other Revenues including fees charged in relation to securitizations by outside investors.
Administration Agreement License Fees
PFL primarily generates revenues through license fees it earns through an Administration Agreement with PMI. The Administration Agreement contains a license granted by PFL to PMI that entitles PMI to use the platform for and in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and Note servicing and marketing, and (ii) PMI’s performance of its duties and obligations to WebBank in relation to loan origination and funding. The license fees are based on the number of listings that are posted to the platform.
ServiceServicing Fees
Investors who purchase Borrower Loans from PFL through the Whole Loan Channel typically pay PFL a servicing fee which is currently set at 1.075%1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment.payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The servicing fee compensatescompensates PFL for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, managing payments to investors and maintaining investors’ account portfolios. PFL records Servicing Fees from investors as a component of operating revenue when received.
Gain (Loss)Loss (Gain) on Sale of Borrower Loans
PFL recognizes gains or losses on the sale of Borrower Loans when it sells Borrower Loans to third parties. PFL measures gain or loss on sale of Borrower Loans as the net proceeds received on the sale less the fair value of the Borrower Loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, and repurchase obligations.
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Interest Income on Borrower Loans and Interest Expense on Notes
PFL recognizes interest income on Borrower Loans originated through the Note Channel and interest expense on the corresponding Notes using the accrual method based on the stated interest rate to the extent PFL believes it to be collectable.
Administration Fee Expense - Related Party
Pursuant to the Administration Agreement between PFL and PMI, PMI manages the marketplace on behalf of PFL. Accordingly each month, PFL is required to pay PMI an administration fee that is based on PMI’s (a) finance and legal personnel costs, (b) number of Borrower Loans originated through the Marketplace, (c) Servicing Fees collected by or on behalf of PFL, and (d) nonsufficient funds fees collected by or on behalf of PFL.
Recent Accounting Pronouncements
Accounting Standards Adopted in the Current Period
No accounting standards were adopted in the current period for PFL.
Accounting Standards Issued, to be Adopted in Future Periods
No issued and pending accounting standards were identified that are expected to have an impact on PFL.
NOTE 3. PROPERTY AND EQUIPMENT, NET
Property and Equipment consist of the following as of the dates presented (in thousands):
December 31, December 31,
20212020 20232022
Internal-use software and web site development costsInternal-use software and web site development costs$31,979 $26,953 
Less: Accumulated depreciation and amortizationLess: Accumulated depreciation and amortization(24,072)(20,025)
Less: Accumulated depreciation and amortization
Less: Accumulated depreciation and amortization
Total Property and Equipment, NetTotal Property and Equipment, Net$7,907 $6,928 

Depreciation and amortization expense for the years ended December 31, 2023, 2022, and 2021 2020, and 2019 was $4.9 $6.3 million, $4.1 $5.5 million and $4.4$4.9 million, respectively. Internal-use software and web site development additions of $5.9$7.9 million, $3.5 $7.6 million and $5.5$5.9 million were purchased from PMI in the years ended December 31, 2023, 2022, and 2021, 2020, and 2019, respectively.  
NOTE 4. BORROWER LOANS AND NOTES, AT FAIR VALUE
The fair value of Borrower Loans and Notes issued through the Note Channel is estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used to value such Borrower Loans and Notes include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics. The obligation to pay principal and interest on any series of Notes is equal to the payments, if any, received on the corresponding borrower loan, net of the servicing fee. As such, the fair value of Notes is approximately equal to the fair value of Borrower Loans originated through the Note Channel, adjusted for the servicing fee and the timing of borrower payments subsequently disbursed to the note holders. The effective interest rate associated with a series of notes will be less than the interest rate earned on the corresponding borrower loan due to the servicing fee.
The aggregate principal balances outstanding and fair values of Borrower Loans and Notes as of December 31, 20212023 and 2020,2022, are presented in the following table (in thousands):
Borrower Loans
Borrower Loans
Borrower Loans
Borrower LoansNotes
December 31, 2021December 31, 2020December 31, 2021December 31, 2020
Aggregate principal balance outstandingAggregate principal balance outstanding$265,232 $215,373 $267,415 $217,110 
Aggregate principal balance outstanding
Aggregate principal balance outstanding
Fair value adjustments
Fair value adjustments
Fair value adjustmentsFair value adjustments2,394 (5,703)(1,430)(8,731)
Fair valueFair value$267,626 $209,670 $265,985 $208,379 
Fair value
Fair value

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As of December 31, 2023, outstanding Borrower Loans had original terms to maturity of 24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.46% to 33.00% and had various original maturity dates through December 2028. At December 31, 2021,2022, Borrower LoansLoans had original maturities of either 24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82%33.00% and had various original maturity dates through December 2026. At December 31, 2020, Borrower Loans had original maturities of either 36 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82% and had various original maturity dates through December 2025. Since COVID-19 relief was first offered in March 2020 and through December 31, 2021, approximately 9.1% of our current outstanding loan balances on a cumulative basis have enrolled in at least one of these COVID-19 relief programs. Approximately 1.2% of our outstanding loan balances are actively enrolled in at least one relief program as of December 31, 2021.2027.
As of December 31, 2021,2023, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $4.5 million and a fair value of $0.9 million. As of December 31, 2022, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $0.9$2.7 million and a fair value of $0.1 million. As of December 31, 2020, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $1.4 million and a fair value of $0.1$0.3 million. PFL places loans on non-accrual status when they are over 120 days past due. As of December 31, 20212023 and 2020,2022, Borrower Loans inin non-accrual status had a fair value of $0.1$0.8 million and $0.2$0.3 million, respectively.
On September 25, 2023, Prosper completed the PMIT 2023-1 Transaction, a securitization of Borrower Loans originated through Prosper’s marketplace platform. PFL served as the sole sponsor for this securitization. Loans eligible for securitization that were funded through the PWIIT Warehouse Line were contributed to the PMIT 2023-1 Transaction. Loans that were not eligible for securitization, with an aggregate outstanding principal balance of $7.7 million and a fair value of $2.0 million, were contributed to PFL, and are included in “Borrower Loans, at Fair Value” on the accompanying consolidated balance sheet. The fair value of these Borrower Loans was recorded as a deemed Contribution of Borrower Loans from Parent on the consolidated Statements of Member’s Equity and as a non-cash financing activity on the consolidated Statement of Cash Flows.
NOTE 5. SERVICING ASSETS
PFL accounts for Servicing Assets at their estimated fair values with changes in fair values recorded in Servicing Fees, Net on the Consolidated Statements of Operations. The initial asset is recognized when PFL sells Borrower Loans to unrelated third-party buyers through the Whole Loan Channel and the servicing rights are retained. The total recognized gains and losses on the sale of such Borrower Loans were a $8.5$11.3 million gain, loss, a $6.4$1.7 million gain and a $5.1$8.5 million lossgain for the years ended December 31, 2023, 2022, and 2021, 2020, and 2019, respectively.
At December 31, 2021,2023, Borrower Loans that were sold, but for which PFL retained servicing rights, had a total outstanding principal balance of $2.5$3.5 billion, original terms of 24, 36, 48 or 60 months, monthly payments with fixed interest rates ranging from 5.46% to 33.00% and various original maturity dates through December 2028. At December 31, 2022, Borrower Loans that were sold, but for which PFL retained servicing rights, had a total outstanding principal balance of $3.7 billion, original terms of either24, 36, 48 or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 31.82%33.00% and various original maturity dates through December 2026. At December 31, 2020, Borrower Loans that were sold, but for which PFL retained servicing rights, had a total outstanding principal balance of $2.4 billion, original terms of either 36 or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 31.82% and various original maturity dates through December 2025.2027.
Contractually-specified servicing fees and ancillary fees totaled $39.7 million, $33.8 million$29.2 million, $34.8 million and $43.4$29.2 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, and are included in Servicing Fees, Net on the Statement of Operations.
Fair Value Valuation Method
PFL uses a discounted cash flow valuation methodology generally consisting of developing an estimate of future cash flows that are expected to occur over the life of a financial instrument and then discounting those cash flows at a rate of return that results in the fair value amount.
Significant unobservable inputs presented in the table within Note 7 are those that PFL considers significant to the estimated fair values of the Level 3 Servicing Assets. The following is a description of the significant unobservable inputs provided in the table.  
Market Servicing Rate
PFL estimates adequate market servicing rates that would fairly compensate a substitute servicer should one be required, which includes the profit that would be demanded in the marketplace. This rate is stated as a fixed percentage of outstanding principal balance on a per annum basis. With the assistance of a valuation specialist, PFL estimates these market servicing rates based on observable market rates for other loan types in the industry and bids from sub-servicing providers, adjusted for the unique loan attributes that are present in the specific loans that PFL sells and services and information from backup service providers.
Discount Rate
The discount rate is a rate of return used to discount future expected cash flows to arrive at a present value, which represents the fair value of the loan servicing rights. Management used a range of discount rates for the Servicing Assets based
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on comparable observed valuations of similar assets and publicly available disclosures related to servicing valuations, with comparability adjustments made to account for differences with PFL’s Servicing Assets.
Default Rate
The default rate presented in Note 7 is an annualized, average estimate considering all Borrower Loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional default rate curves for each credit grade or borrower loan
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category. Each point on a particular borrower loan category’s curve represents the percentage of principal expected to default per period based on the term and age of the underlying Borrower Loans. The assumption regarding defaults directly reduces servicing revenues because the amount of servicing revenues received is based on the amount collected each period.
Prepayment Rate
The prepayment rate presented in Note 7 is an annualized, average estimate considering all borrower loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional prepayment rate curves for each credit grade or borrower loan category. Each point on a particular borrower loan category’s curve represents the percentage of principal expected to prepay per period based on the term and age of the underlying Borrower Loans. Prepayments reduce servicing revenues as they shorten the period over which PFL expects to collect fees on the Borrower Loans, which is used to project future servicing revenues.
NOTE 6. INCOME TAXES
PFL incurred no income tax provision for the year ended December 31, 20212023 and 2020.2022. PFL is a U.S. disregarded entity and its income and loss are included in the income tax reporting of its parent, PMI. Since PMI is in a taxable loss position, is not currently subject to income taxes, and has fully reserved against its deferred tax asset, the net effective tax rate for PFL is 0%.
NOTE 7. FAIR VALUE OF ASSETS AND LIABILITIES
PFL has elected to record certain financial instruments at fair value on the balance sheet. PFL classifies Borrower Loans, Loans Held for Sale and Notes as financial instruments and assesses their fair value on a quarterly basis for financial statement presentation purposes. Gains and losses on these financial instruments are shown separately on the Consolidated Statements of Operations.
As of December 31, 20212023 and 2020,2022, the discounted cash flow methodology used to estimate the NoteNotes fair values used the same projected cash flows as the related Borrower Loans. As demonstrated in the following table below, the fair value adjustments for Borrower Loans were largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and because the principal balances of the Borrower Loans approximated the principal balances of the Notes.
For a description of the fair value hierarchy and PFL’s fair value methodologies, see Note 2 - Summary of Significant Accounting Policies. PFL did not transfer any assets or liabilities in or out of Level 3 during the yearyears ended December 31, 20212023 and 2020.2022.
Financial Instruments Recorded at Fair Value
The fair value of the Borrower Loans and Notes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary cash flow assumptions used to value such Borrower Loans and Notes include default and prepayment rates derived primarily from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.
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The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands):
December 31, 2021
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Total
December 31, 2023December 31, 2023
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Total
Assets:Assets:
Borrower Loans, at Fair Value
Borrower Loans, at Fair Value
Borrower Loans, at Fair ValueBorrower Loans, at Fair Value$— $— $267,626 $267,626 
Servicing AssetsServicing Assets— — 9,796 9,796 
Total AssetsTotal Assets$— $— $277,422 $277,422 
Liabilities:Liabilities:    Liabilities: 
Notes, at Fair ValueNotes, at Fair Value$— $— $265,985 $265,985 
Loan Trailing Fee Liability*Loan Trailing Fee Liability*— — 2,161 2,161 
Loan Trailing Fee Liability*
Loan Trailing Fee Liability*
Total LiabilitiesTotal Liabilities$— $— $268,146 $268,146 
December 31, 2020
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Total
December 31, 2022December 31, 2022
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Total
Assets:Assets:
Borrower Loans, at Fair Value
Borrower Loans, at Fair Value
Borrower Loans, at Fair ValueBorrower Loans, at Fair Value$— $— $209,670 $209,670 
Servicing AssetsServicing Assets— — 11,088 11,088 
Total Assets
Total Assets
Total AssetsTotal Assets$— $— $220,758 $220,758 
Liabilities:Liabilities:    Liabilities: 
Notes, at Fair ValueNotes, at Fair Value$— $— $208,379 $208,379 
Loan Trailing Fee Liability*Loan Trailing Fee Liability*— — 2,233 2,233 
Loan Trailing Fee Liability*
Loan Trailing Fee Liability*
Total LiabilitiesTotal Liabilities$— $— $210,612 $210,612 
*Included in Other Liabilities on the Consolidated Balance Sheets.
As PFL’s Borrower Loans, Notes, Servicing Assets and loan trailing fee liability do not trade in an active market with readily observable prices, PFL uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, the realized and unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs.
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Significant Unobservable Inputs
The following tables present quantitative information about the significant unobservable inputs used for PFL’s Level 3 fair value measurements at the dates presented:
Range Range
Borrower Loans and Notes:Borrower Loans and Notes:December 31, 2021December 31, 2020Borrower Loans and Notes:December 31, 2023December 31, 2022
Discount rateDiscount rate4.3 %— 13.9 %5.3 %— 16.1 %Discount rate5.5 %— 8.0 8.0 %5.6 %— 12.9 12.9 %
Default rateDefault rate2.0 %— 13.5 %2.6 %— 16.2 %Default rate3.2 %— 23.6 23.6 %1.8 %— 18.2 18.2 %
Range Range
Servicing Assets:Servicing Assets:December 31, 2021December 31, 2020Servicing Assets:December 31, 2023December 31, 2022
Discount rateDiscount rate15.0 %— 25.0 %15.0 %—25.0 %Discount rate15.0 %— 25.0 25.0 %15.0 %—25.0 %
Default rateDefault rate1.5 %— 14.1 %1.9 %—17.7 %Default rate2.8 %— 23.6 23.6 %2.0 %—19.3 %
Prepayment ratePrepayment rate10.2 %— 32.3 %12.4 %—28.9 %Prepayment rate6.1 %— 30.6 30.6 %14.2 %—28.0 %
Market servicing rate (1) (2)
Market servicing rate (1) (2)
0.648 %— 0.842 %0.625 %—0.818 %
Market servicing rate (1) (2)
0.633 %— 0.842 0.842 %0.648 %—0.842 %
(1) Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points.
(2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2021 and 2020, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 7 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 69.5 basis points to 88.8 basis points, respectively.
(1) Servicing assets associated with loans enrolled in a relief program offered by the Company as of December 31, 2023 and 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption.
(1) Servicing assets associated with loans enrolled in a relief program offered by the Company as of December 31, 2023 and 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption.
(2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2023 and 2022, the market rate for collection fees and non-sufficient fund fees was assumed to be 5 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 68.3 basis points to 89.2 basis points and 70.8 basis points to 90.2 basis points, respectively.
(2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2023 and 2022, the market rate for collection fees and non-sufficient fund fees was assumed to be 5 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 68.3 basis points to 89.2 basis points and 70.8 basis points to 90.2 basis points, respectively.
Range
RangeRange
Loan Trailing Fee Liability:Loan Trailing Fee Liability:December 31, 2021December 31, 2020Loan Trailing Fee Liability:December 31, 2023December 31, 2022
Discount rateDiscount rate15.0 %— 25.0 %15.0 %— 25.0 %Discount rate15.0 %— 25.0 25.0 %15.0 %— 25.0 25.0 %
Default rateDefault rate1.5 %— 14.1 %1.9 %— 17.7 %Default rate2.8 %— 23.6 23.6 %2.0 %— 19.3 19.3 %
Prepayment ratePrepayment rate10.2 %— 32.3 %12.4 %— 28.9 %Prepayment rate6.1 %— 30.6 30.6 %14.2 %— 28.0 28.0 %
Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis
The following table presents additional information about Level 3 Loans Held for Sale, Borrower Loans, and Notes measured at fair value on a recurring basis for the year ended December 31, 20212023 and 20202022 (in thousands): 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
AssetsLiabilities
Borrower
Loans		Loans Held
for Sale		NotesTotal
Fair value at January 1, 2020$245,137 $— $(244,171)$966 
Assets
Borrower
Loans
Borrower
Loans
Borrower
Loans		Loans Held
for Sale		NotesTotal
Fair value at January 1, 2022
OriginationsOriginations133,644 1,338,082 (133,228)1,338,498 
Principal repaymentsPrincipal repayments(147,361)— 149,409 2,048 
Borrower Loans sold to third partiesBorrower Loans sold to third parties(2,547)(1,338,082)— (1,340,629)
Other changesOther changes7 — (53)(46)
Change in fair valueChange in fair value(19,210)— 19,664 454 
Fair value at December 31, 2020$209,670 $— $(208,379)$1,291 
Fair value at December 31, 2022
OriginationsOriginations232,000 1,712,705 (231,933)1,712,772 
Borrower Loans contributed by Parent, at Fair Value
Principal repaymentsPrincipal repayments(171,286)— 172,250 964 
Borrower Loans sold to third partiesBorrower Loans sold to third parties(1,422)(1,712,705)— (1,714,127)
Other changesOther changes(195)— 166 (29)
Change in fair valueChange in fair value(1,141)— 1,911 770 
Fair value at December 31, 2021$267,626 $— $(265,985)$1,641 
Fair value at December 31, 2023

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The following table presents additional information about Level 3 Servicing Assets recorded at fair value (in thousands): 
Servicing Assets
Fair value at January 1, 20202022$14,8889,796 
Additions7,20315,277 
Change in fair value(11,003)(10,213)
Fair value at December 31, 20202022$11,08814,860 
Additions9,02010,151 
Change in fair value(10,312)(11,193)
Fair value at December 31, 20212023$9,79613,818 
Loan Trailing Fee Liability
The fair value of the Loan Trailing Fee Liability represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and default rates using a discounted cash flow model. The assumptions used are the same as those used for the valuation of Servicing Assets, as described below.
The following tables present additional information about Level 3 Loan Trailing Fee Liability measured at fair value on a recurring basis (in thousands):
Loan Trailing Fee Liability
Fair Value at January 1, 20202022$2,9972,161 
Issuances1,3493,070 
Cash payment of Loan Trailing Fee(2,421)(2,245)
Change in fair value308304 
Fair Value at December 31, 20202022$2,2333,290 
Issuances1,7752,011 
Cash payment of Loan Trailing Fee(2,100)(2,791)
Change in fair value253432 
Fair Value at December 31, 20212023$2,1612,942 












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Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity
Key economic assumptions are used to compute the fair value of Borrower Loans and Notes. The sensitivity of the current fair value to immediate changes in assumptions at December 31, 20212023 and 20202022 for Borrower Loans are presented in the following table (in thousands, except percentages):
Borrower Loans:December 31, 2021 December 31, 2020
Fair value, using the following assumptions:$267,626 $209,670 
     Weighted-average discount rate5.76 %8.93 %
     Weighted-average default rate10.70 %12.26 %
Fair value resulting from:  
100 basis point increase in discount rate$265,104  $207,810 
200 basis point increase in discount rate$262,499  $205,994 
Fair value resulting from:  
100 basis point decrease in discount rate$270,520  $211,575 
200 basis point decrease in discount rate$273,337  $213,527 
Fair value resulting from:  
100 basis point increase in default rate$265,435  $207,594 
200 basis point increase in default rate$263,107  $205,528 
Fair value resulting from:  
100 basis point decrease in default rate$270,133  $211,755 
200 basis point decrease in default rate$272,505  $213,851 
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Borrower Loans:December 31, 2023 December 31, 2022
Fair value, using the following assumptions:$324,311 $320,642 
     Weighted-average discount rate6.55 %6.87 %
     Weighted-average default rate14.36 %11.36 %
Fair value resulting from:  
100 basis point increase in discount rate$321,204  $317,380 
200 basis point increase in discount rate$318,174  $314,201 
Fair value resulting from:  
100 basis point decrease in discount rate$327,498  $323,991 
200 basis point decrease in discount rate$330,766  $327,429 
Fair value resulting from:  
Applying a 1.1 multiplier to default rate$319,708  $316,832 
Applying a 1.2 multiplier to default rate$315,153  $313,053 
Fair value resulting from:  
Applying a 0.9 multiplier to default rate$328,962  $324,484 
Applying a 0.8 multiplier to default rate$333,662  $328,361 

Key economic assumptions are used to compute the fair value of Notes. The sensitivity of the fair value to immediate changes in assumptions at December 31, 20212023 and 20202022 for Notes funded through the Note Channel are presented in the following table (in thousands, except percentages):
Notes:Notes:December 31, 2021 December 31, 2020Notes:December 31, 2023 December 31, 2022
Fair value, using the following assumptions:Fair value, using the following assumptions:$265,985 $208,379 
Weighted-average discount rate Weighted-average discount rate5.76 %8.93 % Weighted-average discount rate6.55 %6.87 %
Weighted-average default rate Weighted-average default rate10.70 %12.26 % Weighted-average default rate14.21 %11.36 %
Fair value resulting from:Fair value resulting from: 
Fair value resulting from:
Fair value resulting from:
100 basis point increase in discount rate
100 basis point increase in discount rate
100 basis point increase in discount rate100 basis point increase in discount rate$263,326  $206,528 
200 basis point increase in discount rate200 basis point increase in discount rate$260,735  $204,720 
Fair value resulting from:Fair value resulting from: 
100 basis point decrease in discount rate100 basis point decrease in discount rate$268,714  $210,274 
100 basis point decrease in discount rate
100 basis point decrease in discount rate
200 basis point decrease in discount rate200 basis point decrease in discount rate$271,516  $212,217 
Fair value resulting from:Fair value resulting from: 
100 basis point increase in default rate$263,644  $206,304 
200 basis point increase in default rate$261,318  $204,238 
Fair value resulting from:Fair value resulting from: 
100 basis point decrease in default rate$268,340  $210,463 
200 basis point decrease in default rate$270,711  $212,558 
Fair value resulting from:
Applying a 1.1 multiplier to default rate
Applying a 1.1 multiplier to default rate
Applying a 1.1 multiplier to default rate
Applying a 1.2 multiplier to default rate
Fair value resulting from:
Applying a 0.9 multiplier to default rate
Applying a 0.9 multiplier to default rate
Applying a 0.9 multiplier to default rate
Applying a 0.8 multiplier to default rate




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Key economic assumptions are used to compute the fair value of Servicing Assets. The sensitivity of the current fair value to immediate changes in assumptions at December 31, 20212023 and 20202022 for Servicing Assets are presented in the following table (in thousands, except percentages):
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Servicing Assets:Servicing Assets:December 31, 2021December 31, 2020Servicing Assets:December 31, 2023December 31, 2022
Fair value, using the following assumptions:Fair value, using the following assumptions:$9,796 $11,088 
Weighted-average market servicing rate Weighted-average market servicing rate0.650 %0.631 % Weighted-average market servicing rate0.650 %0.649 %
Weighted-average prepayment rate Weighted-average prepayment rate20.82 %19.84 % Weighted-average prepayment rate19.96 %18.77 %
Weighted-average default rate Weighted-average default rate12.24 %12.78 % Weighted-average default rate14.74 %12.63 %
Fair value resulting from:Fair value resulting from: 
Fair value resulting from:
Fair value resulting from:
Market servicing rate increase of 0.025%
Market servicing rate increase of 0.025%
Market servicing rate increase of 0.025%Market servicing rate increase of 0.025%$9,171 $10,424 
Market servicing rate decrease of 0.025%Market servicing rate decrease of 0.025%$10,421 $11,752 
Fair value resulting from:Fair value resulting from: 
Fair value resulting from:
Fair value resulting from:
Applying a 1.1 multiplier to prepayment rate
Applying a 1.1 multiplier to prepayment rate
Applying a 1.1 multiplier to prepayment rateApplying a 1.1 multiplier to prepayment rate$9,580 $10,874 
Applying a 0.9 multiplier to prepayment rateApplying a 0.9 multiplier to prepayment rate$10,015 $11,304 
Fair value resulting from:Fair value resulting from: 
Fair value resulting from:
Fair value resulting from:
Applying a 1.1 multiplier to default rate
Applying a 1.1 multiplier to default rate
Applying a 1.1 multiplier to default rateApplying a 1.1 multiplier to default rate$9,667 $10,936 
Applying a 0.9 multiplier to default rateApplying a 0.9 multiplier to default rate$9,926 $11,239 
These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.
NOTE 8. COMMITMENTS AND CONTINGENCIES
In the normal course of its operations, PFL becomes involved in various legal actions. PFL maintains provisions it considers to be adequate for such actions. The Company does not believe it is probable that the ultimate liability, if any, arising out of any such matters will have a material effect on financial condition, results of operations or cash flows.
Operating Commitments
PFL has entered into an agreement with WebBank, under which all Borrower Loans originated through the marketplace are made under WebBank's bank charter. On June 25, 2021, PMI, along with PFL, and WebBank has entered into: (i) a Fifth Amendment (the “Sale Agreement Amendment”) to thean Asset Sale Agreement, dated July 1, 2016, between PFL and WebBank, (theas most recently amended by a Seventh Amendment dated February 28, 2024 (as amended, the “Sale Agreement”); (ii) a Sixth Amendment (the “Marketing Agreement Amendment”) to the Marketing Agreement, dated July 1, 2016, between PMI and WebBank, (theas most recently amended by a Seventh Amendment dated February 28, 2024 (as amended, the “Marketing Agreement”); and (iii) a Third Amendment (the “Purchase Agreement Amendment”) to the Stand By Purchase Agreement, dated July 1, 2016, between PMI and WebBank, (theas most recently amended by a Fourth Amendment dated February 28, 2024 (as amended, the “Purchase Agreement” and, collectively with the Sale Agreement and the Marketing Agreement, the “Origination and Sale Agreements”). Under the Origination and Sale Agreements, all Borrower Loans originated through the marketplace are made by WebBank under its bank charter.
The Origination and Sale Agreement Amendment, among other things, extends the term of the Sale Agreement toAgreements contain terms through February 1, 20252027. Prosper is required, under the Origination and amendsSale Agreements, to maintain certain collateral requirements under the Sale Agreement. The Marketing Agreement Amendment, among other things, extends the term of the Marketing Agreement to February 1, 2025 and sets forth the amended terms and conditions of certain fees owed by the Registrants to WebBank under the Marketing Agreement. The Purchase Agreement Amendment amends certain collateral requirements of Prosper under the Purchase Agreement.
Pursuantrequirements. In addition, pursuant to the Marketing Agreement, Amendment, the marketing fee that PFLProsper receives in connection with the origination of each loan is partially reduced by an amount (the “Designated Amount”) calculated as a percentage of the principal amount of such loan based on the aggregate principal amount of loans originated for the applicable month. To the extent the aggregate Designated Amount for all loans originated during any month is less than $143.5 thousand through February 1, 2022, and $100,000 thereafter through February 1, 2025, PFLProsper is required to pay WebBank an amount equal to such deficiency. Accordingly, the minimum fee is $1.2 million for each year from 2022 through 2024, and $0.1 million in 2025.
F-65

On February 28, 2024, the Origination and Sale Agreements were amended to, among other things, extend the terms through February 1, 2027.
Additionally, under the agreement with WebBank, PFLOrigination and Sale Agreements, Prosper is required to maintain minimum net liquidity of $15 million at all times during the term of the agreement. Net liquidity is defined as the sum of Cash, Cash Equivalents and
F-69

Available for Sale Investments. Violation of this covenant can result in termination of the contract with WebBank. As of December 31, 20212023 the Company was in compliance with the covenant.
Transaction Fee Refunds
Prosper assumes WebBank’s liability under Utah law to refund the pro-rated amount of any transaction fees collected in excess of 5%, in the event the underlying borrower prepays the loan before full maturity. As of December 31, 2023, the PFL has accrued $1.6 million related to anticipated future refunds under this obligation.
Loan Purchase Commitments
Under the terms of PFL's agreement with WebBank, PFL is committed to purchase $13.8purchase $17.7 million of BorrowerBorrower Loans that WebBank originated during the last two business days of the year ended December 31, 2021.2023. PFL will purchase these Borrower Loans within the first two business days of the year ending December 31, 2022.2023.
Repurchase Obligation
Under the terms of the loan purchase agreements between PFL and investors that participate in the Whole Loan Channel, PFL may, in certain circumstances, become obligated to repurchase a Borrower Loan from an investor. Generally, these circumstances include the occurrence of verifiable identity theft, the failure to properly follow personal loan listing or bidding protocols or a violation of the applicable federal, state or local lending laws. PFL recognizes a liability at fair value for the repurchase obligation when the Borrower Loans are sold. The fair value of the indemnification and repurchase obligation is estimated based on historical experience. RepurchasedPFL recognizes a liability for the repurchase and indemnification obligation when the Borrower Loans are issued. Indemnified or repurchased Borrower Loans associated with violations of federal, state or local lending laws or verifiable identity theft are written off at the time of repurchase.repurchase or at the time an indemnification payment is made. The maximum potential amount of future payments associated under thethis repurchase obligation is the outstanding balances of the Borrower Loans soldissued through the Whole Loan channel,Channel, which at December 31, 20212023 was $2.5 $3.5 billion. PFL hadhas accrued $0.3$0.5 million and $0.2 $0.3 million as of December 31, 20212023 and 20202022 respectively in regard to this obligation.
Under the terms of the indenture and investor registration agreement, Prosper may, in certain circumstances, become obligated to either repurchase a Note or indemnify the investor for any losses resulting from nonpayment of a Note purchased in the Retail Channel. The decision to repurchase or indemnify is in Prosper’s sole discretion. These circumstances include, but are not limited to, the occurrence of verifiable identity theft, a technical error in the automated bidding tools which results in the purchase of a Note that does not match the investor’s investment criteria, or situations in which a personal loan listing includes a Prosper Rating that is different from the Prosper Rating that should have appeared in the listing for the corresponding Borrower Loan because either PFL inaccurately input data into, or inaccurately applied, the formula for determining the Prosper Rating and, as a result, the interest of the investor is materially and adversely affected. During the year ended December 31, 2023 the Company repurchased $0.3 million of Notes under these circumstances, and has agreed to indemnify additional Notes with an unpaid principal balance of $0.8 million as of December 31, 2023.
Regulatory Contingencies
PFL accrues for contingencies when a loss from such contingencies is probable and the amount of loss can be reasonably estimated. In determining whether a loss is probable and if it is possible to quantify the amount of the estimated loss, PFL reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If PFL determines that an unfavorable outcome is not probable or that the amount of a loss cannot be reasonably estimated, PFL does not accrue for a potential litigation loss. If an unfavorable outcome is probable and PFL can estimate a range of outcomes, PFL records the amount management considers to be the best estimate within the range of potential losses that are both probable and estimable; however, if management cannot quantify the amount of the estimated loss, then PFL records the low end of the range of those potential losses.
SEC Inquiry
In April 2017, we became aware of an error in the annualized net return and seasoned annualized net return numbers displayed to Note investors. PMI was advised by the SEC that it was investigating whether violations of federal securities laws had occurred in connection with the error. On April 19, 2019, the SEC accepted an offer of settlement from PFL to resolve the matter. Under the settlement, the SEC alleged a violation of Section 17(a)(2) of the Securities Act and ordered PFL to cease and desist from any future violations of that provision. PFL neither admitted nor denied any wrongdoing, and agreed to pay a civil monetary penalty of $3.0 million. The penalty of $3.0 million was paid in full in April 2019.
West Virginia Matter
In January 2018, the Attorney General of the State of West Virginia (the “Attorney General”) initiated discussions regarding certain acts and practices of PMI and PFL that the Attorney General asserts may have violated the West Virginia Consumer Credit and Protection Act (the “Consumer Act”), to which PMI responded with such information as was requested by the Attorney General. Following a period of more than a year with limited to no communication, in February 2020, PMIProsper received a proposed Assurance of Discontinuance (an “AOD”) from the Attorney General of the State of West Virginia (the “WV Attorney General”) requesting that, without in any way admitting that any of its prior practices were in violation of the West Virginia Consumer Credit and Protection Act PMI(the “Consumer Act”), Prosper agree to certain terms and conditions regarding its past and potential future conduct of its business with respect to customers in West Virginia, including a release by the WV Attorney General of any claims it may have related to the matters identified in the AOD. PMI is evaluating and intends to discuss the proposed terms in the AOD with the Attorney General.
We cannot predict the outcome of the matter and any potential fines or penalties, if any, that may arise from the matter. Further, we are unable to estimate a range of outcomes and as a result no accrual has been made.
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No loans have been originated through the PFLProsper platform to West Virginians since June 2016.2016 and the final loan originated through the Prosper platform to a borrower in West Virginia was repaid in October 2021.
F-66

NOTE 9. RELATED PARTIES
Since inception, PFL has engaged in various transactions with its directors, executive officers, PMI, and immediate family members and other affiliates of its directors, executive officers and PMI. PFL believes that all of the transactions described below were made on terms no less favorable to PFL than could have been obtained from unaffiliated third parties.
PFL’s executive officers and directors who are not executive officers participate in its marketplace by placing bids and purchasing Notes. The aggregate amount of the Notes purchased and the income earned by parties deemed to be related parties of PFL for the years ended December 31, 20212023 and 20202022 are summarized below (in thousands):
Aggregate Amount of Notes Purchased for the Year Ended December 31,Interest Earned on Notes for the Year Ended December 31,
Aggregate Amount of Notes Purchased for the Year Ended December 31,Aggregate Amount of Notes Purchased for the Year Ended December 31,Interest Earned on Notes for the Year Ended December 31,
2021202020212020 2023202220232022
Executive officers and managementExecutive officers and management$35 $28 $7 $6 
Directors (excluding executive officers and management)Directors (excluding executive officers and management)— — — — 
TotalTotal$35 $28 $7 $6 

The balance of Notes held by officers and directors who are not executive officers are as follows (in thousands):
Notes Balance as of
Notes Balance as ofNotes Balance as of
December 31, 2021December 31, 2020 December 31, 2023December 31, 2022
Executive officers and managementExecutive officers and management$41 $41 
Directors (excluding executive officers and management)Directors (excluding executive officers and management)— — 
TotalTotal$41 $41 

NOTE 10. SEGMENTS
PFL’s Chief Executive Officer, who serves as the chief operating decision maker, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company has a single reportable and operating segment.
NOTE 10.11. SIGNIFICANT CONCENTRATIONS
PFL is dependent on third party funding sources such as banks, asset managers, and investment funds to provide the funds to allow WebBank to originate Borrower Loans that the third party funding sources will later purchase. Of all Borrower Loans originated in the year ended December 31, 2021, one2023, four individual partythird parties purchased 26.7%15.1%, 12.5%, 11.9% and 10.7% of such loans, and PMI’s Warehouse VIEs purchased 12.6%8.4% of such loans. For the year ended December 31, 2020,2022, two individual parties purchased 21.4%23.4% and 14.3%10.4% of such loans, respectively, and PMI’s Warehouse VIEs purchased 18.2%13.9% of such loans. These purchases reflectindicate that a significant portion of PFL’s business is dependent on funding through the Whole Loan Channel, through which 88%89% and 91%92% of Borrower Loans were originated in the years ended December 31, 20212023 and 2020,2022, respectively. 
NOTE 12. SUBSEQUENT EVENTS
Management has evaluated subsequent events or transactions occurring through the date the consolidated financial statements were issued and determined that no events or transactions, other than any items disclosed within the consolidated financial statements and related notes, are required to be disclosed herein.
F-67F-71

EXHIBIT INDEX
Exhibit
Number
Description
2.1
Asset Transfer Agreement, dated January 22, 2013, between Prosper Marketplace, Inc. and Prosper Funding LLC (incorporated by reference to Exhibit 2.1 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013)
2.2
Agreement and Plan of Merger dated as of January 23, 2015 by and among Prosper Marketplace, Inc., American HealthCare Lending, LLC (“AHL”), Prosper Healthcare Lending, LLC and Shaun Sorensen, solely in his capacity as agent for AHL’s members and option holders (incorporated by reference to Exhibit 2.1 of PMI’s Current Report on Form 8-K, filed on January 27, 2015)
2.3
Agreement and Plan of Merger, dated as of September 23, 2015, by and among Prosper Marketplace, Inc., BillGuard, Inc., Beach Merger Sub, Inc. and Shareholder Representative Services LLC, solely in its capacity as the Stockholders’ Representative (incorporated by reference to Exhibit 2.1 of PMI’s Current Report on Form 8-K, filed on October 15, 2015)
2.42.4
Asset Transfer Agreement, dated August 17, 2021, between Prosper Marketplace, Inc. and Prosper Funding LLC (1)(2)
3.1
Fifth Amended and Restated Limited Liability Company Agreement of Prosper Funding LLC, dated October 21, 2013 (incorporated by reference to Exhibit 3.1 of Post-Effective Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-179941), filed on October 23, 2013 by PFL and PMI)
3.2
Amended and Restated Certificate of Incorporation of PMI, as further amended on October 15, 2018 (incorporated by reference to Exhibit 3.2 of PMI and PFL’s Quarterly Report on Form 10-Q, filed on November 14, 2018)
3.3
Certificate of Formation of Prosper Funding LLC (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form S-1/A, filed April 23, 2012 by PFL)
3.4
Bylaws of Prosper Marketplace, Inc., dated March 22, 2005, as amended by Amendment No. 1 dated February 15, 2016 and Amendment No. 2 dated May 19, 2020 (incorporated by reference to Exhibit 3.4 of PMI’s and PFL’s Quarterly Report on Form 10-Q (File No. 333-225797), filed August 14, 2020)
4.1
Form of PFL Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.5)
4.2
Form of PMI Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.4)
4.3
Supplemental Indenture, dated January 22, 2013, between Prosper Marketplace, Inc., Prosper Funding LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013)
4.4
Indenture, dated June 15, 2009, between Prosper Marketplace, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of Pre-Effective Amendment No. 5 to PMI’s Registration Statement on Form S-1 (File No. 333-147019), filed on June 26, 2009)
4.5
Amended and Restated Indenture, dated January 22, 2013, between Prosper Funding LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013)
4.6
First Supplemental Indenture, dated May 10, 2013, between Prosper Funding LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 of PMI and PFL's Quarterly Report on Form 10-Q, filed on August 14, 2013)
4.7
Credit Agreement, dated November 14, 2022, by and among Prosper Marketplace, Inc., as Borrower, the lenders from time to time party thereto, and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 4.1 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 11, 2023) (1)
10.1
Form of PFL Borrower Registration Agreement (2)
10.2
Form of PFL Investor Registration Agreement (incorporated by reference to Exhibit 10.210.1 of PMI and PFL’s Annual Report on Form 10-K filed on March 20, 2020)28, 2022)
10.310.2
Form of PFL Investor Registration Agreement (2)
10.3
Asset Sale Agreement, dated July 1, 2016, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL’s Current Report on Form 8-K/A, filed on March 7, 2017) (1)
10.410.4
First Amendment to Asset Sale Agreement, dated October 7, 2016, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1)
93

Exhibit
Number
Description
10.510.5
Second Amendment to Asset Sale Agreement, dated March 27, 2017, between PFL and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1)
93

Exhibit
Number
Description
10.610.6
Third Amendment to Asset Sale Agreement, dated February 1, 2019, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on April 24, 2019)
10.710.7
Fourth Amendment to Asset Sale Agreement, dated November 9, 2020, between PFL and WebBank (incorporated by reference to Exhibit 10.7 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020)
10.810.8
Fifth Amendment to Asset Sale Agreement, dated June 25, 2021, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on July 1, 2021) (1)
10.0910.9
Sixth Amendment to Asset Sale Agreement, dated October 5, 2022, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K, filed on October 11, 2022) (1)
10.10
Seventh Amendment to Asset Sale Agreement, dated February 28, 2024, between PFL and WebBank (1)(2)
10.11
Marketing Agreement, dated July 1, 2016, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL’s Current Report on Form 8-K/A, filed on March 7, 2017) (1)
10.102
First Amendment to Marketing Agreement, dated October 7, 2016, between PMI and WebBank (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1)
10.113
Second Amendment to Marketing Agreement, dated November 17, 2017, between PMI and WebBank (incorporated by reference to Exhibit 10.4 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1)
10.124
Third Amendment to Marketing Agreement, dated February 1, 2019, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on April 24, 2019) (1)
10.135
Fourth Amendment to Marketing Agreement, dated September 21, 2020, between PMI and WebBank (incorporated by reference to Exhibit 10.5 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (1)
10.146
Fifth Amendment to Marketing Agreement, dated November 9, 2020, between PMI and WebBank (incorporated by reference to Exhibit 10.6 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (1)
10.157
Sixth Amendment to Marketing Agreement, dated June 25, 2021, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on July 1, 2021) (1)
10.18
Seventh Amendment to Marketing Agreement, dated February 28, 2024, between PMI and WebBank (1)(2)
10.169
Administration Agreement, effective as of February 1, 2013, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.1 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013)
10.110.720
Amendment No. 1 to Administration Agreement, dated as of January 1, 2014, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.1 of PMI and PFL’s Current Report on Form 10-Q filed on May 14, 2014)
10.110.821
Amendment No. 2 to Administration Agreement, dated as of January 1, 2015, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.7 of PMI and PFL’s Annual Report on Form 10-K filed on April 6, 2015)
94

Exhibit
Number
Description
10.10.2192
Amendment No. 3 to Administration Agreement, dated as of November 8, 2016 and made effective as of July 1, 2016, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.8 of PMI and PFL's Annual Report on Form 10-K, filed on March 20, 2017)

10.10.2203
Amendment No. 4 to Administration Agreement, dated as of January 25, 2018, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.32 of PMI and PFL's Annual Report on Form 10-K, filed on March 26, 2018)
10.214
Amendment No. 5 to Administration Agreement, dated as of November 12, 2018 and made effective as of October 1, 2018, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.16 of PMI and PFL's Annual Report on Form 10-K, filed on March 29, 2019)
10.225
Amendment No. 6 to Administration Agreement, dated as of May 12, 2021, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 13, 2021)
94

Exhibit
Number
Description
10.236
Services and Indemnity Agreement, dated March 1, 2012, among Global Securitization Services, LLC, Kevin Burns, Bernard Angelo, Prosper Marketplace, Inc. and Prosper Funding LLC (incorporated by reference to Exhibit 10.8 of Pre-Effective Amendment No. 3 to PFL and PMI’s Registration Statement on Form S-1 (File Nos. 333-179941 and 333-179941-01), filed on November 21, 2012) (3)
10.24
Second Amended and Restated Loan Sale Agreement, dated January 25, 2013, among WebBank, Prosper Marketplace, Inc. and Prosper Funding LLC (incorporated by reference to Exhibit 10.5 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013) (1)
10.25
Second Amendment to Second Amended and Restated Loan Sale Agreement, dated October 27, 2015, between PMI, PFL and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL’s Quarterly Report on Form 10-Q, filed on November 9, 2015)
10.26
Second Amended and Restated Loan Account Program Agreement, dated January 25, 2013, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.6 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013) (1)
10.27
Stand By Loan Purchase Agreement, dated January 25, 2013, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.7 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013) (1)
10.28
Stand By Purchase Agreement, dated July 1, 2016, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL’s Current Report on Form 8-K, filed on July 8, 2016) (1)
10.10.2298
First Amendment to Stand By Purchase Agreement, dated February 1, 2019, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K/A, filed on April 24, 2019) (1)
10.3029
Second Amendment to Stand By Purchase Agreement, dated November 9, 2020, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.8 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (1)
10.310.130
Third Amendment to Stand By Purchase Agreement, dated June 25, 2021, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K/A, filed on July 1, 2021) (1)
10.31
Fourth Amendment to Stand By Purchase Agreement, dated February 28, 2024, between WebBank and Prosper Marketplace, Inc. (1)(2)
10.32
Director Indemnification Agreement, dated January 15, 2013, between Prosper Marketplace, Inc. and Patrick (Pat) Grady (incorporated by reference to Exhibit 10.20 of PMI and PFL’s Annual Report on Form 10-K, filed on March 31, 2014) (3)
10.33
Form of Indemnification Agreement for PMI’s directors (other than Patrick Grady), officers and key employees (incorporated by reference to Exhibit 10.21 of PMI and PFL's Annual Report on Form 10-K, filed on March 18, 2016) (3)
10.34
Back-Up Servicing Agreement (Note Channel), dated as of February 24, 2017, among Prosper Funding LLC, Prosper Marketplace, Inc., and Vervent, Inc. (f/k/a First Associates Loan Servicing, LLC) (incorporated by reference to Exhibit 10.10 of PMI and PFL’s Quarterly Report on Form 10-Q, filed on May 15, 2017) (1)
10.35
Amended and Restated Services and Indemnity Agreement, dated May 30, 2013, between Prosper Funding LLC, Prosper Marketplace, Inc., Global Securitization Services, LLC, Bernard J. Angelo and David V. DeAngelis (incorporated by reference to Exhibit 10.1 of PMI and PFL’s Current Report on Form 8-K, filed on June 5, 2013) (3)
10.36
Amended and Restated Prosper Marketplace, Inc. 2005 Stock Plan (incorporated by reference to Exhibit 4.2 of PMI’s Registration Statement on Form S-8 filed on May 29, 2014) (3)
10.37
Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI’s Registration Statement on Form S-8 filed on May 12, 2015) (3)
10.38
Amendment No. 1 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI’s Registration Statement on Form S-8 filed on April 13, 2016) (3)
95

Exhibit
Number
Description
10.10.3399
Amendment No. 2 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI’s Registration Statement on Form S-8 filed on August 15, 2016) (3)
10.4040
Amendment No. 3 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI’s Registration Statement on Form S-8 filed on March 26, 2018) (3)
95

Exhibit
Number
Description
10.4141
Form of Stock Option Agreement under the Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.29 of PMI and PFL’s Annual Report on Form 10-K, filed on March 18, 2016) (3)
10.4242
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.30 of PMI and PFL’s Annual Report on Form 10-K, filed on March 18, 2016) (3)
10.43
Prosper Marketplace, Inc. Eligible Employee Retention Plan, adopted as of November 6, 2020 (incorporated by reference to Exhibit 10.2 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (3)
10.44
Prosper Marketplace, Inc. Long-Term Cash Incentive Plan, effective November 5, 2020 (incorporated by reference to Exhibit 10.3 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (3)
10.45
First Amendment to Prosper Marketplace, Inc. Long-Term Cash Incentive Plan, effective May 11, 2021 (incorporated by reference to Exhibit 10.2 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 13, 2021) (3)
10.46
Second Amendment to Prosper Marketplace, Inc. Long-Term Cash Incentive Plan, effective March 25, 2022 (2)(3)
10.467
Third Amendment to Prosper Marketplace, Inc. Long-Term Cash Incentive Plan, effective March 21, 2024 (2)(3)
10.48
Form of Prosper Marketplace, Inc. Severance and Change in Control Agreement (incorporated by reference to Exhibit 10.4 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (3)
10.479
Warrant Agreement, dated as of February 27, 2017, among PMI, PF WarrantCo Holdings, LP, and, for certain limited purposes, New Residential Investment Corp (incorporated by reference to Exhibit 10.9 of PMI and PFL’s Quarterly Report on Form 10-Q, filed on May 15, 2017) (1)
10.50
First Amended and Restated Program Agreement, dated August 16, 2023, between Prosper Marketplace, Inc. and Coastal Community Bank (incorporated by reference to Exhibit 10.1 of PMI’s Current Report on Form 8-K, filed on August 22, 2023) (1)
21.1
Subsidiaries of Prosper Marketplace, Inc. (2)
21.2
Subsidiaries of Prosper Funding LLC (2)
23.1
Consent of Independent Registered Accounting Firm (2)
31.1
Certification of Principal Executive Officer of PMI pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
31.2
Certification of Principal Financial Officer of PMI pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
31.3
Certification of Principal Executive Officer of PFL pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
31.4
Certification of Principal Financial Officer of PFL pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2)
32.1
Certification of Principal Executive Officer and Principal Financial Officer of PMI pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to PMI's Annual Report on Form 10-K for the year ended December 31, 2020 (2)
96

Exhibit
Number
Description
32.2
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to PFL’s Annual Report on Form 10-K for the year ended December 31, 2020 (2)
(1) Certain portions of this exhibit have been, as applicable, (i) omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act or (ii) marked by brackets and omitted because the information is (a) not material and (b) would be competitively harmful if disclosed.
(2) Filed herewith.
(3) Management contract or compensatory plan or arrangement.  
96

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 28th22nd day of March 2022.2024.
PROSPER MARKETPLACE, INC.
By:/s/ David Kimball
David Kimball
Chief Executive Officer (Principal Executive Officer);
Chairman of the Board
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Usama Ashraf and Edward R. Buell III, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NameTitleDate
/s/ David KimballChief Executive Officer (Principal Executive Officer);
Chairman of the Board		March 28, 202222, 2024
David Kimball  
/s/ Usama AshrafPresident and Chief Financial Officer (Principal Financial Officer)March 28, 202222, 2024
Usama Ashraf  
*/s/ Claire A. HuangDirectorMarch 28, 202222, 2024
Claire A. Huang  
*/s/ Thomas R. KearneyDirectorMarch 28, 202222, 2024
Thomas R. Kearney  
*/s/ Peter J. deSilvaDirectorMarch 28, 202222, 2024
Peter J. deSilva
*By: /s/ Edward R. Buell IIIMarch 28, 2022
Edward R. Buell III
Attorney-in-Fact
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 28th22nd day of March 2022.2024.
PROSPER FUNDING LLC
By:/s/ David Kimball
David Kimball
Chief Executive Officer (Principal Executive Officer); Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Usama Ashraf and Edward R. Buell III, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NameTitle
/s/ David KimballChief Executive Officer (Principal Executive Officer); DirectorMarch 28, 202222, 2024
David Kimball 
/s/ Usama AshrafPresident, Chief Financial Officer and Treasurer (Principal Financial Officer); DirectorMarch 28, 202222, 2024
Usama Ashraf 
/s/ Bernard J. AngeloDirectorMarch 28, 202222, 2024
Bernard J. Angelo 
/s/ David V. DeAngelisDirectorMarch 28, 202222, 2024
David V. DeAngelis

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