The geographic concentration of our loan originations may expose us to an increased risk of loss due to risks associated with certain regions. Certain regions of the United States from time to time will experience weaker economic conditions and higher unemployment and, consequently, will experience higher rates of delinquency and loss than on similar loans nationally. In addition, natural, man-made disasters or health epidemics or pandemics in specific geographic regions may result in higher rates of delinquency and loss in those areas. A significant portion of our outstanding receivables originated in certain states, and within the states where we operate, originations are generally more concentrated in and around metropolitan areas and other population centers. Therefore, economic conditions, natural, man-made disasters, health epidemics or pandemics, public policies that have the effect of drawing financial-services companies into contentious political or social issues, or other factors affecting these states or areas in particular could adversely impact the delinquency and default experience of the receivables and could adversely affect our business. Further, the concentration of our outstanding receivables in one or more states would have a disproportionate effect on us if governmental authorities in any of those states take action against us or take action affecting how we conduct our business.

As of December 31, 2022, 45%, 26%, 9%, 5% and 4% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, Illinois and New Jersey, respectively. If any of the events noted in these risk factors were to occur in or have a disproportionate impact in regions where we operate or plan to commence operations, it may negatively affect our business in many ways, including increased delinquencies and loan losses or a decrease in future originations.

Our proprietary credit risk models rely in part on the use of third-party data to assess and predict the creditworthiness of our ~~customers,~~members, and if we lose the ability to license or use such third-party data, or if such third-party data contain inaccuracies, it may harm our results of operations.

We rely on our proprietary credit risk models, which are statistical models built using third-party alternative data, credit bureau data, ~~customer~~ application data and our credit experience gained through monitoring the payment performance of our ~~customers~~members over time. If we are unable to access certain third-party data used in our credit risk models, or our access to such data is limited, our ability to accurately evaluate potential ~~customers~~members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations. Third-party data sources, ~~include~~including credit bureau data and other alternative data ~~sources. Such data is electronically obtained from third parties and is~~sources, are aggregated by our risk engine to be used in our credit risk models to score applicants, ~~and~~ make credit decisions, and in our verification processes to confirm ~~customer reported~~member-reported information. ~~Data from consumer reporting agencies and other~~If the information that we receive from third parties about a ~~customer may be~~member is inaccurate or ~~may~~does not accurately reflect the ~~customer’s~~member’s creditworthiness, ~~which~~this may cause us to provide loans to higher risk ~~customers~~members than we ~~intend~~intended through our underwriting process and/or inaccurately price the loans we make. In response to the economic impact of COVID-19, regulators may require banks and other lenders to not report negative performance data to the credit bureaus. As a result, credit bureau data may prove less reliable in predicting credit risk for borrowers. We use numerous third-party data sources and multiple credit factors within our proprietary credit risk models, which helps mitigate, but does not eliminate, the risk of an inaccurate individual report. In addition, there are risks that the costs of our access to third-party data may increase or our terms with such third-party data providers could worsen. In recent years, well-publicized allegations involving the misuse or inappropriate sharing of personal information have led to expanded governmental scrutiny of practices relating to the safeguarding of personal information and the use or sharing of personal data by companies in the U.S. and other countries. That scrutiny has in some cases resulted in, and could in the future lead to, the adoption of stricter laws and regulations relating to the use and sharing of personal information. These types of laws and regulations could prohibit or significantly restrict our third-party data sources from sharing information, or could restrict our use of personal data when developing our proprietary credit risk models, or for fraud prevention purposes. These restrictions could also inhibit our development or marketing of certain products or services, or increase the costs of offering them to ~~customers~~members or ~~make~~reduce the effectiveness of credit models ~~less effective~~ at predicting credit outcomes or preventing fraud.

We follow procedures to verify ~~each customer’s~~a member’s identity ~~income,~~ and address which are designed to minimize fraud. These procedures may include visual inspection of ~~customer~~applicant identification documents to ensure authenticity, review of paystubs or bank statements for proof of income and employment, and review of analysis of information from credit bureaus, fraud detection databases and other alternative data sources for verification of identity, employment, income and other debt obligations. If any of the information that is considered in the loan review process is inaccurate, whether intentional or not, and such inaccuracy is not detected prior to loan funding, the loan may have a greater risk of default than expected. If any of our procedures are not followed, or if these procedures fail, fraud may occur. Additionally, there is a risk that following the date of the loan application, a ~~customer~~member may have defaulted on, or become delinquent in the payment of, a pre-existing debt obligation, taken on additional debt, lost his or her job or other sources of income or experienced other adverse financial events. Fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negatively impact our results of operations, brand and reputation and require us to take additional steps to reduce fraud risk, which could increase our costs.

~~We are exposed to geographic concentration risk.~~

The geographic concentration of our loan originations may expose us to an increased risk of loss due to risks associated with certain regions. Certain regions of the United States from time to time will experience weaker economic conditions and higher unemployment and, consequently, will experience higher rates of delinquency and loss than on similar loans nationally. In addition, natural, man-made disasters or health epidemics or pandemics such as the COVID-19 pandemic in specific geographic regions may result in higher rates of delinquency and loss in those areas. A significant portion of our outstanding receivables is originated in certain states, and within the states where we operate, originations are generally more concentrated in and around metropolitan areas and other population centers. Therefore, economic conditions, natural, man-made disasters, health epidemics or pandemics or other factors affecting these states or areas in particular could adversely impact the delinquency and default experience of the receivables and could adversely affect our business. Further, the concentration of our outstanding receivables in one or more states would have a disproportionate effect on us if governmental authorities in any of those states take action against us or take action affecting how we conduct our business.

~~As of December 31, 2020, 55.9%, 26.2%, 5.2%. and 5.0%~~ ~~of our Owned Principal Balance at End of Period related to customers from California, Texas, Florida, and Illinois, respectively~~. If any of the events noted in these risk factors were to occur in or have a disproportionate impact in regions where we operate or plan to commence operations, it may negatively affect our business in many ways, including increased delinquencies and loan losses or a decrease in future originations.

2522

Changes in immigration patterns, policy or enforcement could affect some of our customers, including those who may be undocumented immigrants, and consequently impact the performance of our loans, our business and results of operations.

Some of our customers are immigrants and some may not be U.S. citizens or permanent resident aliens. We follow appropriate customer identification procedures as mandated by law, including accepting government issued picture identification that may be issued by non-U.S. governments, as permitted by the USA PATRIOT Act, but we do not verify the immigration status of our customers, which we believe is consistent with industry best practices and is not required by law. While our credit models look to approve customers who have stability of residency and employment, it is possible that a significant change in immigration patterns, policy or enforcement could cause some customers to emigrate from the United States, either voluntarily or involuntarily, or slow the flow of new immigrants to the United States. Changes to current laws or the adoption of new laws could make it more difficult or less desirable for immigrants to work in the United States, resulting in increased delinquencies and losses on our loans or a decrease in future originations due to more difficulty for potential customers to earn income. In addition, if we or our competitors receive negative publicity around making loans to undocumented immigrants, it may draw additional attention from regulatory bodies or consumer advocacy groups, all of which may harm our brand and business. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action.

~~Our current level of interest rate spread may decline in the future. Any material reduction in our interest rate spread could adversely affect our results of operations.~~

We earn over 90% of our revenue from interest payments on the loans we make to our customers. Financial institutions and other funding sources provide us with the capital to fund a substantial portion of the principal amount of our loans to customers and charge us interest on funds that we borrow. In the event that the spread between the interest rate at which we lend to our customers and the rate at which we borrow from our lenders decreases, our Net Revenue will decrease. The interest rates we charge to our customers and pay to our lenders could each be affected by a variety of factors, including our ability to access capital markets, the volume of loans we make to our customers, loan mix, competition and regulatory limitations. See “~~Part I~~I ,~~Item 7A.Quantitative and Qualitative Disclosures About Market Risk~~”.

Market interest rate changes may adversely affect our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as inflation, recession, the state of the credit markets, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies. Interest rate changes may require us to make adjustments to the fair value of our Fair Value Loans or Fair Value Notes, which may in turn adversely affect our results of operations. For instance, interest rates recently declined significantly. When interest rates fall, the fair value of our Fair Value Loans increases, which increases Net Revenue. In addition, decreasing interest rates also increase the fair value of our Fair Value Notes, which reduces Net Revenue. Because the duration and fair value of our loans and asset- backed notes are different, the respective changes in fair value did not fully offset each other resulting in a negative impact on Net Revenue. Any reduction in our interest rate spread could have an adverse effect on our business, results of operations and financial condition. In August 2020, we implemented a nationwide 36% APR cap for newly originated loans, which we expect will reduce our interest rate spread and may have an adverse effect on our business, results of operations and financial condition. ~~We do not currently hedge our interest rate exposure associated with our debt financing or fair market valuation of our loans.~~

~~Fraudulent activity could negatively impact our business, operating results, brand and reputation and require us to take steps to reduce fraud risk.~~

Fraud is prevalent in the financial services industry and is likely to increase as perpetrators become more sophisticated, as well as during the COVID-19 pandemic due to fraud with COVID-19 related themes. We are subject to the risk of fraudulent activity associated with customers and third parties handling customer information. Also, we continue to develop and expand our mobile origination channel, which involves the use of internet and telecommunications technologies (including mobile devices) to offer our products and services. These new mobile technologies may be more susceptible to the fraudulent activities of organized criminals, perpetrators of fraud, hackers, terrorists and others. Our resources, technologies and fraud prevention tools may be insufficient to accurately detect and prevent fraud. If the level of our fraud losses increases, our results of operations could be harmed, our brand and reputation may be negatively impacted, we may be subjected to higher regulatory scrutiny and our costs may increase as we attempt to reduce such fraud.

~~Security breaches of customers’ confidential information that we store may harm our reputation, adversely affect our results of operations, and expose us to liability.~~

We are increasingly dependent on information technology systems and infrastructure, including mobile and cloud-based technologies, to operate our business. In the ordinary course of our business, we collect, process, transmit and store large amounts of sensitive information, including the personal information, credit information and other sensitive data of our customers and potential customers. It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such sensitive information. We also have arrangements in place with certain of our third-party vendors that require us to share consumer information. We have also outsourced elements of our operations (including elements of our

information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may have access to our computer networks or our confidential information. In addition, many of those third parties may in turn subcontract or outsource some of their responsibilities to third parties. As a result, our information technology systems, including the functions of third parties that are involved or have access to those systems, is very large and complex. While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the size, complexity, accessibility and distributed nature of our information technology systems, and the large amounts of sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. In addition to the extraction of sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information and systems. In addition, the prevalent use of mobile devices increases the risk of data security incidents. Significant disruptions of our, our third-party vendors’ and/ or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and result in the loss, misappropriation, or unauthorized access, use or disclosure of, or the prevention of access to, sensitive information, which could result in financial, legal, regulatory, business and reputational harm to us. The automated nature of our business may make us attractive targets for hacking and potentially vulnerable to computer malware, physical or electronic break-ins and similar disruptions. Despite efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, in which case there would be an increased risk of fraud or identity theft, and we may experience losses on, or delays in the collection of amounts owed on, a fraudulently induced loan.

While we regularly monitor data flow inside and outside the company, techniques used to obtain unauthorized access or to sabotage systems change frequently and are difficult to detect. As a result, we and our third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. Any event that leads to unauthorized access, use or disclosure of personal information, including but not limited to personal information regarding our customers, loan applicants, and employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs for us, and result in significant legal and financial exposure and/or reputational harm. In particular, these mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. In addition, any failure or perceived failure by us or our vendors to comply with our privacy, confidentiality, or data security-related legal or other obligations to third parties, or any security incidents or other inappropriate access events that result in the unauthorized access, release or transfer of sensitive information, which could include personally identifiable information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others and could cause third parties, to lose trust or we could be subject to claims by third parties that have breached our privacy- and confidentiality-related obligations, which could harm our business and prospects. Moreover, cybersecurity experts are warning about a growing use of COVID-19-related themes by malicious cyber actors. At the same time, the surge of in teleworking has increased the use of potentially vulnerable services, such as virtual private networks, amplifying the threat to individuals and organizations. Cybercriminals are targeting individuals and organizations with COVID-19-related cyberattacks.

We also face indirect technology, cybersecurity and operational risks relating to the customers, clients and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including vendors, payment processors, and other parties who have access to confidential information due to our agreements with them. In addition, any security compromise in our industry, whether actual or perceived, or information technology system disruptions, natural disasters, terrorism, war and telecommunication and electrical failures, could interrupt our business or operations, harm our reputation, erode customer confidence, negatively affect our ability to attract new customers, or subject us to third-party lawsuits, regulatory fines or other action or liability.

Like other financial services firms, we have been and continue to be the subject of actual or attempted unauthorized access, mishandling or misuse of information, computer viruses or malware, and cyber-attacks that could obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, distributed denial of service attacks, data breaches and other infiltration, exfiltration or other similar events. In August 2019, we identified an incident involving unauthorized access to a small number of company email accounts. Forensic investigation indicated that a small amount of consumer and employee sensitive information was contained in these email accounts. As a result, we sent breach notices and provided credit monitoring services provided to approximately 700 consumers, and sent notices to employees in Mexico in accordance with Mexican law.

Our retail locations also process physical customer loan documentation that contain confidential information about our customers, including financial and personally identifiable information. We retain physical records in various storage locations outside of our retail locations. The loss or

theft of customer information and data from our retail locations or other storage locations could subject us to additional regulatory scrutiny, possible civil litigation and possible financial liability and losses.

We maintain errors, omissions, and cyber liability insurance policies covering certain security and privacy damages. However, we cannot be certain that our coverage will continue to be available on economically reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business, financial condition and results of operations.

~~Any significant disruption in our computer systems could prevent us from processing or posting payments on loans, reduce the effectiveness of our credit risk models and result in a loss of customers.~~

In the event of a system outage and physical data loss, our ability to service our loans, process applications or make loans available would be adversely affected. We also rely on facilities, components, and services supplied by third parties, including data center facilities and cloud storage services. Any interference or disruption of our technology and underlying infrastructure or our use of our third-party providers’ services could materially and adversely affect our business, relationships with our customers and our reputation. Also, as our business grows, we may be required to expand and improve the capacity, capability and reliability of our infrastructure. If we are not able to effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and infrastructure to reliably support our business, our results of operations may be harmed.

In addition, the software that we have developed to use in our daily operations is highly complex and may contain undetected technical errors that could cause our computer systems to fail. Because each loan that we make involves our proprietary automated underwriting process and depends on the efficient and uninterrupted operation of our computer systems, and all of our loans are underwritten using an automated underwriting process that does not require manual review, any failure of our computer systems involving our automated underwriting process and any technical or other errors contained in the software pertaining to our automated underwriting process could compromise our ability to accurately evaluate potential customers, which would negatively impact our results of operations. Our computer systems may encounter service interruptions at any time due to system or software failure, natural disasters, severe weather conditions, health epidemics or pandemics, terrorist attacks, cyber-attacks, computer viruses, physical or electronic break-ins, technical errors, power outages or other events, and any failure of our computer systems could cause an interruption in operations and result in disruptions in, or reductions in the amount of, collections from the loans we make to our customers. While we have taken steps to prevent such activity from affecting our systems, if we are unable to prevent such activity, we may be subject to significant liability, negative publicity and a loss of customers, all of which may negatively affect our business.

Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing or posting payments on the loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and cause customers to abandon our business, any of which could adversely affect our business, results of operations and financial condition.

We may not be able to make technological improvements as quickly as demanded by our customers, including to address their needs during the COVID-19 pandemic, which could harm our ability to attract customers and adversely affect our results of operations, financial condition and liquidity.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial and lending institutions to better serve customers and reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology, such as mobile and online services, to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. We may not be able to effectively implement new technology-driven products and services as quickly as competitors or be successful in marketing these products and services to our customers. Furthermore, our technology may become obsolete or uncompetitive, and there is no guarantee that we will be able to successfully develop, obtain or use new technologies to adapt our models and systems. Failure to successfully keep pace with technological change affecting the financial services industry could harm our ability to attract customers and adversely affect our results of operations, financial condition and liquidity. Additionally, the economic impact of the COVID–19 pandemic has required and continues to require us to make rapid changes to our systems in order to be able to offer our customers appropriate reduced payment plans and alternative payment options. If we are not able to implement these changes quickly enough, it could impact our credit performance.

~~Because we receive a significant amount of cash in our retail locations through customer loan repayments, we may be subject to theft and cash shortages due to employee errors.~~

Since our business requires us to receive a significant amount of cash in each of our retail locations, we are subject to the risk of theft (including by or facilitated by employees) and cash shortages due to employee errors. Although we have implemented various procedures and programs to reduce these risks, maintain insurance coverage for theft and provide security measures for our facilities, we cannot make assurances that theft and employee error will not occur. We have experienced theft and attempted theft in the past.

A deterioration in the financial condition of counterparties, including financial institutions, could expose us to credit losses, limit access to liquidity or disrupt our ~~business operations.~~business.

We have entered into, and may in the future enter into, financing and derivative transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, hedge funds, and other financial institutions. Furthermore, the operations of U.S. and global financial services institutions are interconnected, and a decline in the financial condition of one or more financial services institutions, or the perceived lack of creditworthiness of such financial institutions, may expose us to credit losses or defaults, limit access to liquidity or otherwise disrupt ~~the operations of~~ our business. As such, our financing and derivative transactions expose us to ~~credit~~the risk ~~in the event~~ of acounterparty default, ~~by the counterparty,~~ which can be exacerbated during periods of market ~~illiquidity, such as is currently being experienced due to the COVID-19 pandemic.~~illiquidity.

Our vendor relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business.

We have vendors that, among other things, provide us with key services, including financial, technology and other services to support our loan origination, servicing and other activities. ~~The CFPB issued guidance stating~~Our expansion into new channels, products or markets may introduce additional third-party service providers, strategic partners and other third parties on which we may become reliant. For example, in connection with the secured personal loan product, we work with third parties that ~~institutions under its supervision may be held responsible for~~provide information and/or services in connection with valuation, title management and title processing, repossessions, and remarketing. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our partner banks' federal bank regulators (the Federal Reserve Board, the ~~actions~~Office of Comptroller of the ~~companies with~~Currency and the Federal Deposit Insurance Corporation) and our consumer financial services regulators, including state regulators and the CFPB, which ~~they contract. Accordingly,~~could increase the scope of management involvement and decreasing the benefit that we receive from using third-party vendors. We could be adversely impacted to the extent our vendors and partners fail to comply with the legal requirements applicable to the particular products or services being offered. ~~Our use of third-party vendors is subject to increasing regulatory attention.~~

The CFPB and other regulators have issued regulatory guidance that has focused on the need for financial institutions to perform increased due diligence and ongoing monitoring of third-party vendor relationships, thus increasing the scope of management involvement and decreasing the benefit that we receive from using third-party vendors. Moreover, if our bank partners or their regulators conclude that we have not met the heightened standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions.

In some cases, third-party vendors are the sole source, or one of a limited number of sources, of the services they provide to us. Most of our vendor agreements are terminable on little or no notice, and if our current vendors were to stop or were unable to continue providing services to us on acceptable terms, we may be unable to procure alternatives from other vendors in a timely and efficient manner on acceptable terms or at all. If any third-party vendor fails to provide the services we require, due to factors outside our control, we could be subject to regulatory enforcement actions, suffer economic and reputational harm and incur significant costs to resolve any such disruptions in service.

~~If we lose~~Our mission to provide inclusive, affordable financial services that empower our members to build a better future may conflict with the ~~services of any~~short-term interests of our ~~key management personnel, our business could suffer.~~stockholders.

Our ~~future success significantly depends~~mission is to provide inclusive, affordable financial services that empower our members to build a better future. We have made and will continue to make decisions that we believe will benefit our members and therefore provide long-term benefits for our business, even if our decision negatively impacts our short-term results of operations. For example, we constrain the maximum rates we charge in order to further our goal of making our loans affordable for our target members. Our decisions may negatively impact our short-term financial results or not provide the long-term benefits that we expect and may adversely impact our business operations, results of operations, and financial condition.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus on the ~~continued service and performance of our key management personnel. Competition for these employees is intense and we may not be able~~mission that contribute to replace, attract and retain key personnel. We do not maintain key-man insurance for every member of our senior management team. The loss of the service of our senior management team or key team members, and the process to replace any of them, or the inability to attract additional qualified personnel as needed, all of which would involve significant time and expense, could harm our business.

~~Competition for~~We believe that a critical component of our ~~highly skilled~~success is our corporate culture and our deep commitment to our mission. We believe this mission-based culture fosters innovation, encourages teamwork and cultivates creativity. Our mission defines our business philosophy as well as the emphasis that we place on our members, our people and our culture and is consistently reinforced to and by our employees. As we continue to grow, including from the integration of employees ~~is intense,~~ and businesses acquired in connection with previous or future acquisitions, we may ~~not be able~~find it difficult to maintain these valuable aspects of our corporate culture and our long-term mission. Operating as a remote-first company may make it difficult for us to preserve our corporate culture and could negatively impact on workforce morale and productivity. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain ~~the~~ employees, ~~we need to support the growth of our business.~~

~~Competition for highly skilled personnel, including engineering~~encourage innovation and ~~data analytics personnel, is extremely intense, particularly in the San Francisco Bay Area where our headquarters is located. We have experienced~~teamwork, and ~~expect to continue to face difficulty identifying~~effectively focus on and ~~hiring qualified personnel in many areas, especially as we~~ pursue our ~~growth strategy. We may not be able to hire or retain such personnel at compensation levels consistent with our existing compensation~~mission and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, employee candidates, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment so significant volatility or a

decline in the price of our stock may adversely affect our recruitment strategies. Additionally, changes to U.S. immigration policies, as well as restrictions on global travel due to public health crises requiring quarantines or other precautions to limit exposure to infectious diseases, may limit our ability to hire and/or retain talent.

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 training their replacements and the quality of our services and our ability to serve our customers could be adversely affected.corporate objectives.

We are dependent on hiring an adequate number of hourly bilingual employees to run our business and are subject to government regulations concerning these and our other employees, including minimum wage laws.

Our workforce is comprised primarily of bilingual employees who work on an hourly basis. In certain areas where we operate, there is significant competition for hourly bilingual employees and the lack of availability of an adequate number of hourly bilingual employees could adversely affect our operations. In addition, we are subject to applicable rules and regulations relating to our relationship with our employees, including minimum wage and break requirements, health benefits, unemployment and sales taxes, overtime and working conditions and immigration status. We are from time to time subject to employment-related claims, including wage and hour claims. Further, legislated increases in minimum wage, as well as increases in additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates, and compliance costs and fines, would increase our labor ~~costs, which could have an adverse effect on our business.~~costs.

~~Our mission to provide inclusive, affordable financial services that empower our customers to build a better future may conflict with the short-term interests of our stockholders.~~

Our mission is to provide inclusive, affordable financial services that empower our customers to build a better future. Therefore, we have made in the past, and may make in the future, decisions that we believe will benefit our customers and therefore provide long-term benefits for our business, even if our decision negatively impacts our short-term results of operations. For example, we constrain the maximum interest rates we charge in order to further our goal of making our loans affordable for our target customers. Our decisions may negatively impact our short-term financial results or not provide the long-term benefits that we expect and may decrease the spread between the interest rate at which we lend to our customers and the rate at which we borrow from our lenders.

~~If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus on the mission that contribute to our business.~~

We believe that a critical component of our success is our corporate culture and our deep commitment to our mission. We believe this mission-based culture fosters innovation, encourages teamwork and cultivates creativity. Our mission defines our business philosophy as well as the emphasis that we place on our customers, our people and our culture and is consistently reinforced to and by our employees. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain these valuable aspects of our corporate culture and our long-term mission. In addition, the widespread stay-at-home orders resulting from the COVID-19 pandemic have required us to make substantial changes to the way that the vast majority of our employee population does their work. Any failure to preserve our culture, including a failure due to the growth from becoming a public company or resulting from remote work arrangements, could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork, and effectively focus on and pursue our mission and corporate objectives.

Misconduct by our employees could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.

Our reputation is critical to maintaining and developing relationships with our existing and potential ~~customers~~members and third parties with whom we do business. There is a risk that our employees ~~including our employees that are working from home due to COVID-19,~~ could be accused of or engage in misconduct that adversely affects our business, including fraud, ~~theft, the~~ redirection, misappropriation ~~or otherwise~~of member funds, improper execution of loan transactions, embezzlement and theft, disclosure of personal and business information and the failure to follow protocol when interacting with ~~customers~~members that could lead us to suffer direct losses from the activity as well as serious reputational harm. Employee misconduct could also lead to regulatory sanctions and prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could harm our reputation and our business.

Our international operations and offshore service providers involve inherent risks which could result in harm to our business.

As of December 31, ~~2020,~~2022, we had ~~1,591~~1,553 employees inrelated to three contact centers in Mexico. These employees provide certain English/Spanish bilingual support related to ~~customer-facing~~member-facing contact center activities, administrative and technology support of the contact centers and back-office support services. We have also engaged outsourcing partners in the United States that provide offshore ~~customer-facing~~member-facing contact center activities in ~~Mexico,~~ Colombia, Jamaica and ~~Jamaica,~~the Philippines, and may in the future include additional locations in other countries. In addition, ~~we opened a~~our technology development center in India ~~in 2019.~~is staffed through outsourcing partners and our own employees. We have engaged vendors that utilize employees or contractors based outside of the United States. As of December 31, ~~2020,~~2022, our outsourcing partners have provided us, on an exclusive basis, the equivalent of ~~579~~807 full-time equivalents in ~~Mexico,~~ Colombia, Jamaica, Philippines and India. These international activities are subject to inherent risks that are beyond our control, including:

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

•local licensing and reporting obligations;

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

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

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

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

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

•~~the impact of,~~terrorism, and ~~response of local governments to, the COVID-19 pandemic;~~other events outside our control;

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

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

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

•potentially adverse tax developments and consequences.

Violations of the complex foreign and U.S. laws, rules and regulations that apply to our international operations and offshore activities of our service providers may result in reputational harm, heightened regulatory scrutiny, fines, criminal actions or sanctions against us, our directors ~~our officers~~ or our employees, as well as restrictions on the conduct of our ~~business and reputational damage.~~business.

If we discover a material weakness in our internal control over financial reporting that we are unable to remedy or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to report our financial results on a timely and accurate basis and the market price of our common stock may be adversely affected.

~~The Sarbanes-Oxley Act requires, among other things, that, as a public company, we maintain effective~~We have developed our disclosure controls, internal control over financial reporting and other procedures to ensure information required to be disclosed by us in the reports that we will file with the Securities and Exchange Commission ("SEC") is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. To maintain and improve the effectiveness of our disclosure controls and procedures ~~including implementation of financial systems~~ and ~~tools. Any failure to maintain effective disclosure controls and procedures or~~ internal control over financial reporting, ~~could~~we have ~~an adverse effect on~~expended and anticipate we will continue to expend significant resources, including accounting-related costs and significant management oversight. Any failure to maintain the adequacy of our ~~ability~~internal controls, or consequent inability to ~~accurately report our~~produce accurate financial ~~information~~statements on a timely basis, could increase our operating costs and ~~result~~could materially impair our ability to operate our business. Our current controls and any new controls that we develop may become inadequate because of changes in ~~material misstatements~~conditions in our ~~consolidated~~business. If our internal controls are perceived as inadequate or we are unable to produce timely or accurate financial ~~statements.~~statements, investors may lose confidence in our operating results and our stock price could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.

~~To comply with~~ Section ~~404A~~404 of the Sarbanes-Oxley Act ~~we may incur substantial cost, expend significant~~requires our management ~~time on compliance-related issues and hire additional accounting,~~to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal ~~audit staff with appropriate public company experience and technical accounting knowledge. Moreover, if we~~control over financial reporting. We are ~~not able~~also required to ~~comply with the requirements of Section 404A in a timely manner or if we or~~have our independent registered public accounting firm ~~identify deficiencies in~~attest to, and issue an opinion on, the effectiveness of our internal control over financial reporting. If we are unable to assert that our internal control over financial reporting ~~that are deemed~~is effective, or if, when required, our independent registered public accounting firm is unable to ~~be material weaknesses,~~express an opinion on the effectiveness of our internal control over financial reporting, we could belose investor confidence in the accuracy and completeness of our financial reports, which could subject us to sanctions or investigations by the ~~Securities and Exchange Commission (the "SEC")~~SEC or other regulatory

authorities, adversely affect our ability to access the credit markets and sell additional equity and commit additional financial and management resources to remediate deficiencies.

Because we receive a significant amount of cash in our retail locations through member loan repayments, we may be subject to theft and cash shortages due to employee errors.

Since our business requires us to receive a significant amount of cash in each of our retail locations, we are subject to the risk of theft (including by or facilitated by employees) and cash shortages due to employee errors. We have experienced theft and attempted theft in the past. Although we have implemented various procedures and programs to reduce these risks, maintain insurance coverage for theft and provide security measures for our facilities, we cannot make assurances that theft and employee error will not occur.

Our business is subject to the risks of natural disasters, public health crises and other catastrophic events, and to interruption by man-made problems.

A significant natural disaster, such as an earthquake, fire, hurricanes, flood or other catastrophic event ~~(many~~(many of which are becoming more acute and frequent as a result of climate change), or interruptions by strikes, crime, terrorism, social unrest, cyber-attacks, pandemics or other public health crises, power outages, geopolitical unrest or other man-made problems, could have an adverse effect on our business, results of operations and financial condition. ~~Our headquarters is located~~For example, a significant natural disaster in ~~the San Francisco Bay Area,~~Northern California or any other location in which we have offices or facilities or employees working remotely, could adversely affect our business operations, financial condition and prospects, and our ~~systems are hosted in multiple data centers across Northern California, a region~~

known for seismic activity and wildfires and related power outages. Additionally, certain of our contact centers and retail locations are located in areas prone to natural disasters, including earthquakes, tornadoes, and hurricanes, and certain of our retail locations and our contact centersinsurance coverage may be ~~located in areas with high levels of criminal activities.~~insufficient to compensate us for losses that may occur.

Our IT systems are backed up regularly to highly available, alternate data centers in a different region, and we have conducted disaster recovery testing of our mission critical systems. Despite any precautions we may take, however, the occurrence of a natural disaster or other unanticipated problems at our data centers could result in lengthy interruptions in our services. In addition, acts of war, terrorism, and other geopolitical unrest could cause disruptions in our business and lead to interruptions, delays or loss of critical data.

In addition, a large number of ~~customers~~members make payments and apply for loans at our retail locations. If one or more of our retail locations becomes unavailable for any reason ~~including as a result of the COVID-19 pandemic~~ or other public health crisis, localized weather events, or natural or man-made disasters, our ability to conduct business and collect payments from ~~customers~~members on a timely basis may be adversely affected, which could result in lower loan originations, higher delinquencies and increased losses. For example, ~~from time to time~~during parts of the COVID-19 pandemic, we ~~have~~ temporarily closed a few of our retail locations due to public health orders or other concerns, ~~relating to the COVID-19 pandemic,~~ which we believe ~~partially contributed~~resulted in lower Aggregate Originations. While all of our retail locations are currently open, it is possible that we will have to ~~the decrease in Aggregate Originations in the three months and twelve months December 31, 2020 as compared to the three months and twelve months ended December 31, 2019. We may have to~~temporarily close retail locations as necessary due to public health orders or other concerns relating to ~~the COVID-19 pandemic.~~any public health crisis. The closure of ~~additional~~ retail locations ~~would~~could further adversely affect our loan originations, member experience, results of operations and financial condition.

~~All of the~~The aforementioned risks may be further increased if our business continuity plans prove to be inadequate and there can be no assurance that both personnel and non-mission critical applications can be fully operational after a declared disaster within a defined recovery time. If our personnel, systems, or primary data center facilities are impacted, we may suffer interruptions and delays in our business operations. In addition, ~~to the extent~~if these events impact our ~~customers~~members or their ability to timely repay their loans, our business could be negatively affected.

In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business. While we seek to mitigate our business risks associated with climate change, there are inherent climate-related risks wherever business is conducted. Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our Bay Area headquarters have experienced and may continue to experience, climate-related events and at an increasing frequency, including floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with the wildfires. Changing market dynamics, global policy developments and increasing frequency and impact of extreme weather events on critical infrastructure in the United States and elsewhere have the potential to disrupt our business, the business of our critical vendors, partners and members, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. In addition, current and emerging legal and regulatory requirements with respect to climate change (e.g., carbon pricing) and other aspects of ESG (e.g., disclosure requirements) may result in increased compliance requirements on our business, which may increase our operating costs and disrupt our business.

We may not maintain sufficient business interruption or property insurance to compensate us for potentially significant losses, including potential harm to our business that may result from interruptions in our ability to provide our financial products and services.

Unfavorable outcomes in legal proceedings may harm our business and results of operations.

We ~~are,~~have been, and may in the future become, subject to litigation, claims, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private ~~parties, which may affect our results of operations.~~ ~~See Item 3. "Legal Proceedings” for more information regarding this and other proceedings.~~

parties. If the results of any pending or future legal proceedings are unfavorable to us or if we are unable to successfully defend against third-party lawsuits, we may be required to pay monetary damages or fulfill our indemnification obligations or we may be subject to fines, penalties, injunctions or other censure. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues.

~~Risks Related to Our Intellectual Property~~

~~It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.~~

Our ability to lend to our customers depends, in part, upon our proprietary technology. We may be unable to protect our proprietary technology effectively which would allow competitors to duplicate our products and adversely affect our ability to compete with them. We rely on a combination of copyright, trade secret, trademark laws and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property and do not have patent protection. However, the steps we take to protect our intellectual property rights may be inadequate. For example, a third party may attempt to reverse engineer or otherwise obtain and use our proprietary technology without our consent. The pursuit of a claim against a third party for infringement of our intellectual property could be costly, and there can be no guarantee that any such efforts would be successful. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and adversely impact our business.

~~We have been, and may in the future be, sued by third parties for alleged infringement of their proprietary rights.~~

Our proprietary technology, including our credit risk models, may infringe upon claims of third-party intellectual property, and we may face intellectual property challenges from such other parties. The expansion of our product suite and our potential expansion into banking services may create additional trademark risk. We may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any

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intellectual property disputes. If we are unsuccessful, such claim or litigation could result in a requirement that we pay significant damages or licensing fees, which would negatively impact our financial performance. We may also be obligated to indemnify parties or pay substantial legal settlement costs, including royalty payments,Funding and to modify applications or refund fees. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business operations.Liquidity Risks

For example, in January 2018, we received a complaint by a third party alleging various claims for trademark infringement, unfair competition, trademark dilution and misappropriation against us. The complaint calls for monetary damages and injunctive relief requiring us to cease usingWe amended our ~~trademarks.~~ We believe this claim is without merit and intend to vigorously defend this matter. The final outcome with respect to the claims in the lawsuits, including our liability, if any, is uncertain. Furthermore, we cannot be certain that any of these claims would be resolved in our favor. For example, an adverse litigation ruling against us could result in a significant damages award against us, could result in injunctive relief, could result in a requirement that we make substantial royalty payments, and could result in the cancellation of certain Oportun trademarks which would require that we rebrand. Moreover, an adverse finding could cause us to incur substantial expense, could be a distraction to management, and any rebrandingCorporate Financing, as a result ~~may not be well received in the market. To the extent that we reach a negotiated settlement, the settlement could require that we pay substantial compensation~~of which certain tranches of additional loans are available on an uncommitted basis, and ~~could require that we make modifications to our name, branding, marketing materials, and advertising that may not be well received in the market.~~ ~~See Item 3. "Legal Proceedings~~ ~~for more information regarding these proceedings.~~

Moreover, it has become common in recent years for individuals and groups to purchase intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies such as ours. Even in instances where we believe that claims and allegations of intellectual property infringement against us are without merit, defending against such claims is time consuming and expensive and could result in the diversion of time and attention of our management and employees. In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may refuse or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.

~~Our credit risk models and internal systems rely on software that is highly technical, and if it contains undetected errors,~~ our business could be adversely ~~affected.~~affected if we were unable to access such additional capital.

~~Our credit risk models~~On March 10, 2023 (the “Second Amendment Closing Date”), Oportun Financial Corporation (the “Company”) entered into an Amendment No. 2 to Credit Agreement (the ”Second Amendment”), by and ~~internal systems rely~~among the Company, as borrower, the subsidiaries of the Company party thereto as guarantors, certain affiliates of Neuberger Berman Specialty Finance as lenders, and Wilmington Trust, National Association, as administrative agent and collateral agent (the “Agent”), which amended the Credit Agreement, dated as of September 14, 2022 (as amended, supplemented or otherwise modified, including by the Second Amendment, the “Amended Credit Agreement”), by and among the Company, the lenders from time to time party thereto and the Agent.

On the Second Amendment Closing Date, the Company borrowed $20.8 million of incremental term loans (the “Incremental Tranche A-1 Loans”) and intends to borrow an additional $4.2 million of incremental term loans (the “Incremental Tranche A-2 Loans”) on ~~internally developed software~~or about March 27, 2023, which amount has been committed by the applicable lenders. Under the Amended Credit Agreement, the Company may borrow up to an aggregate additional amount of $50.0 million on an uncommitted basis, in two $25.0 million tranches (the “Incremental Tranche B Loans” and the “Incremental Tranche C Loans”) expected to be available, if provided by the applicable lenders, on or about April 21, 2023 and June 23, 2023, respectively.

The loans (the “Loans”) and other obligations under the Amended Credit Agreement are secured by the assets of the Company and certain of its subsidiaries guaranteeing the Loans, including pledges of the equity interests of certain subsidiaries that ~~is highly technical and complex.~~are directly or indirectly owned by the Company, subject to customary exceptions.

On the Second Amendment Closing Date, pursuant to the Second Amendment, the Company issued warrants (the “Warrants”) to the lenders providing the Incremental Tranche A-1 Loans to purchase 1,980,242 shares of the Company’s common stock at an exercise price of $0.01 per share. In addition, ~~our models~~(a) in connection with the funding of the Incremental Tranche A-2 Loans, the Company will issue Warrants to the lenders providing the Incremental Tranche A-2 Loans to purchase 116,485 shares of the Company’s common stock, (b) in connection with the funding of the Incremental Tranche B Loans, the Company will issue Warrants to the lenders providing the Incremental Tranche B Loans to purchase 1,048,363 shares of the Company’s common stock, and ~~internal systems depend~~(c) in connection with the funding of the Incremental Tranche C Loans, the Company will issue Warrants to the lenders providing the Incremental Tranche C Loans to purchase 1,048,363 shares of the Company’s common stock, in each case, at an exercise price of $0.01 per share. The Company also entered into a Registration Rights Agreement with the applicable lenders on the ~~ability of such software~~Second Amendment Closing Date (the “Registration Rights Agreement”), which stipulates that the Company will file a registration statement with the Securities and Exchange Commission with respect to ~~store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in~~ the ~~future contain, undetected errors, bugs or other defects, which risk may be heightened in light~~shares underlying the Warrants.

Given the uncommitted nature of the ~~numerous changes~~Incremental Tranche B and Incremental Tranche C Loans, there can be no assurance that the Company will be able to access such additional capital. If we do not have ~~implemented~~sufficient capital, we may have to ~~our systems in a short amount~~take additional actions to decrease expenses, curtail the origination of time in reaction to the COVID-19 pandemic. Some errors may only be discovered after the code has been released for external or internal use. Errors, bugs or other defects within the software on which we rely may result in a negative experience for our customers, result in errors or compromiseloans, and our ability to ~~protect customer data or~~continue to support our ~~intellectual property. Specifically, any defect in our credit risk models could result in the approval of unacceptably risky loans. Such defects could also result in harm~~growth and to ~~our reputation, loss of customers, loss of revenue, adjustments~~respond to ~~the fair value of our Fair Value Loans or Fair Value Notes,~~ challenges ~~in raising debt or equity, or liability for damages, any of which could adversely affect our business and results of operations.~~

~~Some aspects of our business processes include open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.~~

We incorporate open source software into processes supporting our business. Such open source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be ~~construed in a manner that limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.~~

Some open source licenses contain requirements that we make source code available at no cost for modifications or derivative works we create based upon the type of open source software we use. We may face claims from third parties claiming ownership of, or demanding the release or license of, such modifications or derivative works (which could include our proprietary source code or credit risk models) or otherwise seeking to enforce the terms of the applicable open source license. If portions of our proprietary credit risk models are determined to be subject to an open source license, or if the license terms for the open source software that we incorporate change, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our model or change our business activities, any of which could negatively affect our business operations and our intellectual property rights.impaired.

In addition, ~~to risks related to license requirements, the use of open source software can lead to greater risks than the use of third-party commercial software, as open source licensors generally~~if we do not ~~provide warranties~~have sufficient capital, we may need to engage in equity, debt or ~~controls on~~convertible debt financings to secure additional funds. If we raise additional funds by issuing equity securities or securities convertible into equity securities, those securities may have rights, preferences or privileges senior to the ~~origin~~rights of ~~the software. Use~~our common stock and our stockholders may experience dilution. Debt financing, if available, may have a high cost of ~~open source~~

~~software~~funds and may ~~also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to breach~~involve covenants restricting our ~~website and systems that rely on open source software.~~

~~Risks Related to Our Industry and Regulation~~

~~The lending industry is highly regulated. Changes in regulations~~operations or ~~in the way regulations are applied to our business could adversely affect our business.~~

Our business is subject to numerous federal, state and local laws and regulations. Statutes, regulations and policies affecting lending institutions are continually under review by Congress, state legislatures and federal and state regulatory agencies. Changes in laws or regulations, or the regulatory application or interpretation of the laws and regulations applicable to us, could adversely affect our ability to ~~operate~~incur additional debt. Lenders may also require warrants to boost their return, the issuance of which would be dilutive to our stockholders. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders and could also negatively impact our stock price. A number of factors, including market volatility or depressed valuations, trading prices in the ~~manner~~equity markets, our financial condition and capital market conditions will impact our ability to obtain equity or debt financing. We may not be able to engage in ~~which we currently conduct business. Such changes~~any of these activities or engage in ~~and in the interpretation and enforcement of, laws and regulations may also make it more difficult or costly for us to originate additional loans, or for us to collect payments~~these activities on ~~our loans to customers or otherwise operate our business by subjecting us to additional licensing, registration and other regulatory requirements in the future.~~ For instance, bills have been introduced in Congress and in several states in recent years proposing various usury caps and other provisions that could otherwise greatly restrict the rates and fees that lenders can charge customers for late and returned payments. If such a bill were to be enacted, it would greatly restrict profitability for us.

Furthermore, judges or regulatory agencies could interpret current rules or laws differently than the way we do, leading to such adverse consequences as described above. A failure to comply with any applicable laws or regulations could result in regulatory actions, loss of licenses, lawsuits and damage to our reputation, any ofdesirable terms, which could have an adverse effect on our business, results of operation and financial condition and our ability to originate and service loans and perform our obligations to investors and other constituents. It could also result in a default or early amortization event under our debt facilities and reduce or terminate availability of debt financing to us to fund originations.

~~Our failure to comply with the regulations in the jurisdictions in which we conduct our business could harm our results of operations.~~

State attorneys general have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws. For example, Section 1042 of the Dodd-Frank Act grants state attorneys general the ability to enforce the Dodd-Frank Act and regulations promulgated under the Dodd-Frank Act’s authority and to secure remedies provided in the Dodd-Frank Act against entities within their jurisdiction. State attorneys general also have enforcement authority under state law with respect to unfair or deceptive practices. Also, the California Consumer Financial Protection Law expands the jurisdiction of and reorganizes the existing state regulator to have broad authority over providers of financial services and products and gives the regulator broad enforcement authority against covered persons with respect to unfair, deceptive or abusive act and discrimination violations. Generally, under these statutes, state attorneys general may conduct investigations, bring actions, and recover civil penalties or obtain injunctive relief against entities engaging in unfair, deceptive, or fraudulent acts. Attorneys general may also coordinate among themselves to enter into multi-state actions or settlements. Finally, several consumer financial laws like the Truth in Lending Act and Fair Credit Reporting Act grant enforcement or litigation authority to state attorneys general.

We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable federal, state and local regulations, but we may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have an adverse effect on our operations. There is also a chance that a regulator will believe that we or our service providers or strategic partners should obtain additional licenses above and beyond those currently held by us or our service providers, if any. Changes in laws or regulations applicable to us could subject us or our service providers to additional licensing, registration and other regulatory requirements in the future or could adversely affect our ability to operate or the manner in which we conduct business, including restrictions on our ability to open retail locations in certain counties, municipalities or other geographic locations.

A failure to comply with applicable laws and regulations could result in additional compliance requirements, limitations on our ability to collect all or part of the principal of or interest on loans, fines, an inability to continue operations, regulatory actions, loss of our license to transact business in a particular location or state, lawsuits, potential impairment, voiding, or voidability of loans, rescission of contracts, civil and criminal liability and damage to our reputation.

A proceeding relating to one or more allegations or findings of our violation of law could also result in modifications in our methods of doing business, including our servicing and collections procedures. It could result in the requirement that we pay damages and/or cancel the balance or other amounts owing under loans associated with such violation. It could also result in a default or early amortization event under certain of our debt facilities and reduce or terminate availability of debt financing to us to fund originations. To the extent it is determined that the loans we make to our customers were not originated in accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cash, or swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements. We may not have adequate liquidity and resources to make such cash repurchases or swap for qualifying assets.

~~For more information with respect to the regulatory framework affecting our businesses, see “Business -~~ ~~Regulations and Compliance~~.”

~~Financial regulatory reform relating to asset-backed securities has not been fully implemented and could have a significant impact on our ability to access the asset-backed securities market.~~

We rely upon asset-backed financing for a significant portion of our funds with which to carry on our business. Asset-backed securities and the securitization markets were heavily affected by the Dodd-Frank Act and have also been a focus of increased regulation by the SEC. For example, the Dodd-Frank Act mandates the implementation of rules requiring securitizers or originators to retain an economic interest in a portion of the credit risk for any asset that they securitize or originate. Furthermore, sponsors are prohibited from diluting the required risk retention by dividing the economic interest among multiple parties or hedging or transferring the credit risk the sponsor is required to maintain. Rules relating to securitizations rated by nationally-recognized statistical rating agencies require that the findings of any third-party due diligence service providers be made publicly available at least five business days prior to the first sale of securities, which has led and will continue to lead us to incur additional costs in connection with each securitization.

However, some of the regulations to be implemented under the Dodd-Frank Act relating to securitization have not yet been finalized. Additionally, there is general uncertainty regarding what changes, if any, may be implemented with regard to the Dodd-Frank Act. Any new rules or changes to the Dodd-Frank Act (or the current rules thereunder) could adversely affect our ability and our cost to access the asset-backed securities market.

~~Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses.~~

In the ordinary course of business, we have been named as a defendant in various legal actions, including class actions and other litigation. Generally, this litigation arises from the dissatisfaction of a consumer with our products or services; some of this litigation, however, has arisen from other matters, including claims of violation of do-not-call, credit reporting and collection laws, bankruptcy and practices. All such legal actions are inherently unpredictable and, regardless of the merits of the claims, litigation is often expensive, time-consuming, disruptive to our operations and resources, and distracting to management. In addition, certain of those actions include claims for indeterminate amounts of damages. Our involvement in any such matter also could cause significant harm to our reputation and divert management attention from the operation of our business, even if the matters are ultimately determined in our favor. If resolved against us, legal actions could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business. We have in the past chosen to settle (and may in the future choose to settle) certain matters in order to avoid the time and expense of litigating them. Although none of the settlements has been material to our business, there is no assurance that, in the future, such settlements will not have a material adverse effect on our business.

In addition, a number of participants in the consumer financial services industry have been the subject of putative class action lawsuits, state attorney general actions and other state regulatory actions, federal regulatory enforcement actions, including actions relating to alleged unfair, deceptive or abusive acts or practices, violations of state licensing and lending laws, including state usury laws, actions alleging discrimination on the basis of race, ethnicity, gender or other prohibited bases, and allegations of noncompliance with various state and federal laws and regulations relating to originating and servicing consumer finance loans and other consumer financial services and products. The current regulatory environment, increased regulatory compliance efforts, and enhanced regulatory enforcement have resulted in significant operational and compliance costs and may prevent us from providing certain products and services. There is no assurance that these regulatory matters or other factors will not, in the future, affect how we conduct our business or adversely affect our business. In particular, legal proceedings brought under state consumer protection statutes or under several of the various federal consumer financial services statutes subject to the jurisdiction of the CFPB may result in a separate fine for each violation of the statute, which, particularly in the case of class action lawsuits, could result in damages substantially in excess of the amounts we earned from the underlying activities.

Some of our consumer financing agreements include arbitration clauses. If our arbitration agreements were to become unenforceable for any reason, we could experience an increase to our consumer litigation costs and exposure to potentially damaging class action lawsuits.

In addition, from time to time, through our operational and compliance controls, we identify compliance issues that require us to make operational changes and, depending on the nature of the issue, result in financial remediation to impacted customers. These self-identified issues and voluntary remediation payments could be significant, depending on the issue and the number of customers impacted, and could generate litigation or regulatory investigations that subject us to additional risk.

~~Internet-based and electronic signature-based loan origination processes may give rise to greater risks than paper-based processes.~~

We use the internet and internet-enabled mobile phones to obtain application information, distribute certain legally required notices to applicants for, and borrowers of, the loans, and to obtain electronically signed loan documents in lieu of paper documents with tangible borrower signatures. ~~In addition, we have introduced the use of electronic signature-based loan origination processes with a tablet in our retail locations.~~ These processes may entail greater risks than would paper-based loan origination processes, including risks regarding the sufficiency of notice for compliance with consumer protection laws, risks that borrowers may challenge the authenticity of their signature or of the loan documents, risks that a court of law may not enforce electronically signed loan documents and risks that, despite controls, unauthorized changes are made to the electronic loan documents. If any of those factors were to cause any loans, or any of the terms of the loans, to be unenforceable against the borrowers, our ability to service these loans could be adversely affected.

The CFPB has sometimes taken expansive views of its authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new agency could impact our business.

Actions by the CFPB could result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them. The CFPB could also implement rules that restrict our effectiveness in servicing our financial products and services. Future actions by the CFPB (or other regulators) against us or our competitors that discourage the use of our or their services or restrict our business activities could result in reputational harm and adversely affect our business. If the CFPB changes regulations that were adopted in the past by other regulators and transferred to the CFPB by the Dodd-Frank Act, or modifies through supervision or enforcement past regulatory guidance or interprets existing regulations in a different or stricter manner than they have been interpreted in the past by us, the industry or other regulators, our compliance costs and litigation exposure could increase materially. If future regulatory or legislative restrictions or prohibitions are imposed that affect our ability to offer certain of our products or that require us to make significant changes to our business practices, and if we are unable to develop compliant alternatives with acceptable returns, our business could be adversely affected.

The collection, processing, storage, use and disclosure of personal data could give rise to liabilities as a result of existing or new governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

We receive, transmit and store a large volume of personally identifiable information and other sensitive data from customers and potential customers. There are federal, state and foreign laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and sensitive data. Specifically, cybersecurity and data privacy issues, particularly with respect to personally identifiable information are increasingly subject to legislation and regulations to protect the privacy and security of personal information that is collected, processed and transmitted. For example, in June 2018, California enacted the California Consumer Privacy Act (the "CCPA"), which broadly defines personal information and took effect on January 1, 2020. The CCPA gives California residents expanded privacy rights and protections and provides for civil penalties for CCPA violations, in addition to providing for a private right of action for data breaches. On November 3, 2020, California approved the California Privacy Rights Act (the "CPRA"), that amends the CCPA to create new and additional privacy rights and obligations in California and creates the California Privacy Protection Agency to enforce the laws. Whereas we have implemented the CCPA, compliance with other current and future customer privacy data protection and information security laws and regulations could result in higher compliance, technical or operating costs. Further, any violations of these laws and regulations may require us to change our business practices or operational structure, address legal claims and sustain monetary penalties and/or other harms to our business. We could also be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or require changes to our business practices or privacy policies.

~~We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act.~~

The Investment Company Act of 1940, as amended (the "Investment Company Act") contains substantive legal requirements that regulate the manner in which “investment companies” are permitted to conduct their business activities. We believe we have conducted, and we intend to continue to conduct, our business in a manner that does not result in our company being characterized as an investment company, including by relying on certain exemptions from registration as an investment company. We rely on guidance published by the Securities and Exchange Commission's (the "SEC") staff or on our analyses of such guidance to determine our qualification under these and other exemptions. To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our business operations accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could inhibit our ability to conduct our business operations. There can be no assurance that the laws and regulations governing our Investment Company Act status or SEC guidance regarding the Investment Company Act will not change in a manner that adversely affects our operations. If we are deemed to be an investment company, we may attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on our business. We may not receive such relief on a timely basis, if at all, and such relief may require us to modify or curtail our operations. If we are deemed to be an investment company, we may also be required to institute burdensome compliance requirements and our activities may be restricted.

~~Our bank sponsorship products may lead to regulatory risk and may increase our regulatory burden.~~

We currently have a bank sponsorship program with WebBank for our credit card product. On November 10, 2020, we announced that we had entered into a bank sponsorship program agreement with MetaBank, N.A. to offer unsecured installment loans, currently anticipated to launch in mid-2021. State and federal agencies have broad discretion in their interpretation of laws and their interpretation of requirements related to bank sponsorship programs and may elect to alter standards or the interpretation of the standards applicable to these programs. For instance, the Colorado Credit Commissioner recently settled its lawsuit challenging two bank sponsorship programs requiring certain restrictions on such programs in order for them to continue in Colorado. Additionally, the OCC and FDIC recently issued "Valid when made" rules for which both regulators were sued by various states. The OCC also recently finalized a "true lender" rule but that rule is also expected to be challenged in court. The uncertainty of the federal and state regulatory environments around bank sponsorship programs means that our efforts to launch an installment loan product through a bank sponsor may not ultimately be successful, or it may be challenged by one or more states in which we launch such a program. Furthermore, federal regulation of the banking industry, along with tax and accounting laws, regulations, rules and standards may limit the business activity of banks and affiliates under these structures and control the method by which we can conduct business. Regulation by a federal banking regulator may also subject us to increased compliance, legal and operational costs, and could subject our business model to scrutiny or limit our ability to expand the scope of our activities in a manner that could have a material adverse effect on us.

~~We are pursuing a national bank charter which could subject us to significant new regulation.~~

We recently applied to obtain a national bank charter through the establishment of a de novo bank to, among other things, allow us to offer additional products and services, provide us with new sources of lower cost funding and give our business regulatory clarity. If we were to obtain a national bank charter, we would be subject to supervision and regulation by the OCC under the National Bank Act, by the Federal Deposit Insurance Corporation (the “FDIC”) and by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the Bank Holding Company Act which could be subject to certain restrictions and requirements, including capital requirements and shareholder requirements.

Our efforts to comply with such additional regulation may require substantial time and monetary commitments. If any new regulations or interpretations of existing regulations to which we are subject impose requirements on us that are impractical or that we cannot satisfy, our financial performance may be adversely affected.

In addition, as a bank holding company, we would generally be prohibited from engaging, directly or indirectly, in any activities other than those permissible for bank holding companies. This restriction might limit our ability to pursue future business opportunities which we might otherwise consider but which might fall outside the scope of permissible activities.

If we are able to obtain a national bank charter, certain of our stockholders may need to comply with applicable federal banking statutes and regulations, including the Change in Bank Control Act and the Bank Holding Company Act. Specifically, stockholders holding 10.0% or more of our voting interests may be required to provide certain information and/or commitments on a confidential basis to, among other regulators, the Federal Reserve. This requirement may deter certain existing or potential stockholders from purchasing shares of our common stock, which may suppress demand for the stock and cause the price to decline.

If we are unable to obtain or decide not to pursue a national bank charter, our ability to grow, improve our capital efficiency, or funding resilience, may be adversely affected. Without a national bank charter, we would be required to continue to maintain several state licenses and our business, including our ability to offer a broader range of products and services, may be adversely affected.

~~Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.~~

We maintain a compliance program designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the USA PATRIOT Act and U.S. economic sanctions laws administered by the Office of Foreign Assets Control. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering and terrorist financing and engaging in transactions involving sanctioned countries persons and entities. These controls include procedures and processes to detect and report suspicious transactions, perform customer due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. No assurance is given that our programs and controls will be effective to ensure compliance with all applicable anti-money laundering and anti-terrorism financing laws and regulations, and our failure to comply with these laws and regulations could subject us to significant sanctions, fines, penalties and reputational harm.

~~We are subject to governmental export and import controls that could subject us to liability, impair our ability to compete in international markets and adversely affect our business.~~

Although our business does not involve the commercial sale or distribution of hardware, software or technology, in the normal course of our business activities we may from time to time ship general commercial equipment outside the United States to our subsidiaries or affiliates for their internal use. In addition, we may export, transfer or provide access to software and technology to non-U.S. persons such as employees and contractors, as well as third-party vendors and consultants engaged to support our business activities. In all cases, the sharing of software and/or technology is solely for the internal use of the company or for the use by business partners to provide services to us, including software development. However, such shipments and transfers may be subject to U.S. and foreign regulations governing the export and import of goods, software and technology. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to significant sanctions, fines, penalties and reputational harm. Further, any change in applicable export, import or economic sanctions regulations or related legislation, shift in approach to the enforcement or scope of existing regulations or change in the countries, persons or technologies targeted by these regulations could adversely affect our business.

~~Risks Related to Our Indebtedness~~condition.

We have incurred substantial debt and may issue debt securities or otherwise incur substantial debt in the future, which may adversely affect our financial condition and negatively impact our operations.

We have ~~in the past incurred, and expect~~a substantial amount of indebtedness, which requires significant interest payments. From time to ~~continue~~time, we may seek to ~~incur, substantial debt to fund our loan activities.~~obtain additional capital. We depend on securitization transactions, warehouse facilities ~~whole loan sales~~ and other forms of debt financing, as well as whole loan and structured loan sales, in order to finance the growth of our business and the origination of most of the loans we make to our ~~customers. The incurrence~~members. Our outstanding borrowings or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to adopt one or more alternatives to refinance our debt, dispose of ~~debt~~assets or obtain necessary funds, including obtaining additional equity capital which could be on terms that may be onerous or highly dilutive.

We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.

Our substantial level of indebtedness and the current constraints on our liquidity could have ~~a variety of negative effects, including:~~important consequences, including the following:

•we must use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which reduces or will reduce funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, execution of growth strategies, and potential acquisitions;

•our ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired;

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

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

•acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do notobtain a waiver for such breach or renegotiate ~~our~~such covenant;

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

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

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

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

•place us at a disadvantage compared to our competitors that have less debt;

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

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

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

•we may be more vulnerable to economic downturn and adverse developments in our business, including potential economic recession, inflation, and other factors outside our control.

~~In addition,~~Our ability to meet our ~~Secured Financing carries a floating rate~~expenses, to remain in compliance with our covenants under our debt instruments and to make future principal and interest payments in respect of ~~interest linked~~our debt depends on, among other factors, our operating performance, competitive developments and financial market conditions, all of which are significantly affected by financial, business, economic and other factors. We are not able to ~~LIBOR. In July 2017, the U.K. announced the discontinuation~~control many of ~~LIBOR which could result in~~these factors. Given current industry and economic conditions, our cash flow may not be sufficient to allow us to pay principal and interest ~~rate increases~~ on our ~~Secured Financing which could adversely affect~~debt and meet our ~~results of operations.~~other obligations.

To the extent our relationship with lenders is negatively affected by disputes that may arise from time to time, it may be more difficult to seek covenant relief, if needed, or to raise additional funds in the future.

A breach of early payment triggers or covenants or other terms of our agreements with lenders could result in an early amortization, default, and/or acceleration of the related funding facilities.

The primary funding sources available to support the maintenance and growth of our business include, among others, asset-backed ~~securitization,~~securitizations, revolving debt facilities (including the Secured Financing), Corporate Financing, ~~facility)~~and structured and whole loan ~~sale facilities. Our liquidity would be adversely affected by our inability~~sales. If we are unable to comply with various conditions precedent to availability under these facilities (including the eligibility of our loans), covenants and other specified requirements set forth in our agreements with our lenders, ~~which~~this could result in the early amortization, default and/or acceleration of our existing facilities. Such covenants and requirements include financial covenants, portfolio performance covenants and other events. ~~For example,~~The Corporate Financing contains financial covenants requiring a minimum liquidity maintenance covenant, minimum asset coverage ratio, together with other customary affirmative and negative covenants, and events of default. The obligations are secured by assets of the Company and its subsidiaries. Compliance with these covenants may limit our ability to take actions that might be to our advantage or to the advantage of our stockholders.

Our securitizations contain collateral performance threshold triggers related to the ~~three–month~~three-month average annualized gross ~~charge–off~~charge-off or net ~~charge–off~~charge-off rate which, if exceeded, would lead to early amortization. We expect the economic impact of the COVID–19 pandemic to continue to cause our charge-offs to increase; depending upon how high charge–offs increase, the thresholds on our securitizations could be exceeded leading to an early amortization event. In addition, in response to the COVID-19 pandemic, we implemented certain credit tightening measures. Those measures, combined with lower customer demand, have led to lower originations. As such, toTo support our collateral requirements under our financing agreements, we ~~have been~~ ~~using~~use a random selection process to take loans off our warehouse line to pledge to our securitizations. An inability to originate enough loans to meet the collateral requirements in our financing arrangements, could result in the early amortization, default and/or acceleration of our existing facilities.Moreover, we currently act as servicer with respect to the unsecured consumer loans held by our subsidiaries. If we default in our servicing obligations or fail to meet certain financial covenants, an early amortization event or event of default could occur, and/or we could be replaced by our ~~backup~~back-up servicer or another ~~replacement~~successor servicer. If ~~we are replaced as~~the back-up servicer ~~to these loans, there~~or successor servicer is ~~no guarantee that~~not adequate, the ~~backup services will~~collection and processing of repayments may be ~~adequate. Any disruptions in services may cause the inability to collect and process repayments. For more information on covenants, requirements and events, see~~ ~~Note 8 of the Notes to the Consolidated Financial Statements included elsewhere in this report.~~impaired.

During an early amortization period or if an event of default exists, principal and interest collections from the loans in our asset-backed facilities would be applied to repay principal under such facilities and principal collections would no longer be available on a revolving basis to fund purchases of newly originated loans. If an event of default exists under our revolving debt or loan sale facilities, the applicable ~~lenders’~~lenders or purchasers’ commitments to extend further credit or purchase additional loans under the related facility would terminate. If ~~loan~~ collections were insufficient to repay

the amounts due under our securitizations and our revolving debt ~~facility,~~facilities, the applicable lenders, trustees and noteholders could seek remedies, including against the collateral pledged under such facilities.

~~An early amortization event or event~~ Any of ~~default~~these events would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources. ~~This may increase our funding costs or alternative funding sources might not be available when needed.~~ If

we were unable to arrange new or alternative methods of financing on favorable terms, we might have to curtail the origination of loans, and we may be replaced by our ~~backup~~back-up servicer or another ~~replacement~~successor servicer.

Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial ratios. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing. For more information on covenants, requirements and events, see Note 9, Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.

Our securitizations and structured and whole loan sales may expose us to certain risks, and we can provide no assurance that we will be able to ~~access the securitization or whole loan sales market~~conduct such transactions in the future, which may require us to seek more costly financing.

We have securitized, and may in the future securitize, certain of our loans to generate cash to originate new loans or pay our outstanding indebtedness. In each such transaction and in connection with our warehouse facilities, we sell and convey a pool of loans to a special purpose entity ("SPE"). Concurrently, each SPE issues notes or certificates pursuant to the terms of an indenture. The securities issued by the SPE are secured by the pool of loans owned by the SPE. In exchange for the sale of a portion of the pool of loans to the SPE, we receive cash, which are the proceeds from the sale of the securities. We also contribute a portion of the pool of loans in consideration for the equity interests in the SPE. Subject to certain conditions in the indenture governing the notes issued by the SPE (or the agreement governing the SPE’s revolving loan), the SPE is permitted to purchase additional loans from us or distribute to us residual amounts received by it from the loan pool, which residual amounts are the cash amounts remaining after all amounts payable to service providers and the noteholders have been satisfied. We also have the ability to swap pools of loans with the SPE. Our equity interest in the SPE is a residual interest in that it entitles us as the equity owner of the SPE to residual cash flows, if any, from the loans and to any assets remaining in the SPE once the notes are satisfied and paid in full (or in the case of a revolving loan, paid in full and all commitments terminated). As a result of challenging credit and liquidity conditions, the value of the subordinated securities we retain in our securitizations might be reduced or, in some cases, eliminated.

~~During the financial crisis that began in 2008, the~~The securitization market ~~was constrained,~~is subject to changing market conditions, and we ~~can give no assurances that we will~~may not be able to ~~complete additional securitizations in the future. Similar to 2008, there is no assurance that sources of capital will continue to be available in the future on terms favorable to us or at all, particularly in light of capital markets volatility stemming from the~~ ~~COVID-19 pandemic~~. The availability of debt financing and other sources of capital depends on many factors, some of which are outside of our control. The risk of volatility surrounding the global economic system, including due to other disruptions and uncertainty surrounding the COVID-19 pandemic, continue to create uncertainty around access ~~to the capital markets.~~this market when we would otherwise deem appropriate. Further, other matters, such as (i) accounting standards applicable to securitization transactions and (ii) capital and leverage requirements applicable to banks and other regulated financial institutions holding asset-backed securities, could result in decreased investor demand for securities issued through our securitization transactions, or increased competition from other institutions that undertake securitization transactions. In addition, compliance with certain regulatory requirements may affect the type of securitizations that we are able to complete.

Asset-backed securities and the securitization markets were heavily affected by the Dodd-Frank Act and have also been a focus of increased regulation by the SEC. For example, the Dodd-Frank Act mandates the implementation of rules requiring securitizers or originators to retain an economic interest in a portion of the credit risk for any asset that they securitize or originate. Furthermore, sponsors are prohibited from diluting the required risk retention by dividing the economic interest among multiple parties or hedging or transferring the credit risk the sponsor is required to maintain. Rules relating to securitizations rated by nationally-recognized statistical rating agencies require that the findings of any third-party due diligence service providers be made publicly available at least five business days prior to the first sale of securities, which has led and will continue to lead us to incur additional costs in connection with each securitization. In addition, some of the regulations to be implemented under the Dodd-Frank Act relating to securitization have not yet been finalized. Any new rules or changes to the Dodd-Frank Act (or the current rules thereunder) could adversely affect our ability and our cost to access the asset-backed securities market.

If it is not possible or economical for us to securitize our loans in the future, we would need to seek alternative financing to support our operations and to meet our existing debt obligations, which may not be available on commercially reasonable terms, or at all. If the cost of such alternative financing were to be higher than our securitizations, we would likely reduce the fair value of our ~~Fair Value Loans,~~loans receivable held for investment, which would negatively impact our results of operations.

The gain on sale generated by any of our structured or whole loan sales and servicing fees earned on sold loans ~~also~~ represents a significant source of our earnings. Demand for our loans at the current premiums may be impacted by factors outside our control, including availability of loan pools, demand by investors for ~~whole~~ loan assets and attractiveness of returns offered by competing investment alternatives offered by other loan originators with more attractive characteristics than our loan pools and loan purchaser interest. In March 2022, we participated in a securitization through which we issued amortizing asset-backed notes secured by a pool of its unsecured and secured personal installment loans and may do additional structured loan sales in the future. See Note 5, Loans Held for Sale and Loans Sold of the Notes to the Consolidated Financial Statements included elsewhere in this report. If we are unable to sell additional loans or obtain other financing, our revenue and liquidity may be negatively impacted and we may not be able to grow our business as planned and we may have to further curtail our originations.

Our results of operations are affected by our ability to sell our loans for a premium over their net book value. Potential loan purchasers might reduce the premiums they are willing to pay, or even require a discount to principal balance, for the loans that they purchase during periods of economic slowdown or recession to compensate for any increased risks. A reduction in the sale price of the loans we sell under ~~our~~any future whole loan sale program would likely result in a reduction in the fair value of our Loans Receivable at Fair Value, ~~Loans,~~ which would negatively impact our results of operations. Any sustained decline in demand for our loans or increase in delinquencies, defaults or foreclosures may reduce the price we receive on future loan sales below our loan origination cost.

In connection with our securitizations, Secured Financing facility, and whole loan sales, we make representations and warranties concerning these loans. If those representations and warranties are not correct, we could be required to repurchase the loans. Any significant required repurchases could have an adverse effect on our ability to operate and fund our business.

In our asset-backed securitizations, our Secured Financing facility, and our whole loan sales, we make numerous representations and warranties concerning the characteristics of the loans we transfer and sell, including representations and warranties that the loans meet the eligibility requirements of those facilities and investors. If those representations and warranties are incorrect, we may be required to repurchase the loans. Failure to repurchase so-called ineligible loans when required would constitute an event of default under our securitizations, our Secured Financing facility and our whole loan sales and a termination event under the applicable agreement. We can provide no assurance, however, that we would have adequate cash or other qualifying assets available to make such repurchases.

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~~Risks Related~~We may need to ~~Ownership~~raise additional funds in the future, including through equity, debt, or convertible debt financings, to support business growth and those funds may not be available on acceptable terms, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new financial products and services, enhance our risk management model, improve our operating infrastructure, or acquire complementary businesses and technologies. Additionally, increases in our cost of funds and charge-offs may reduce our margins and require us to raise more capital to support our existing business and execute our corporate strategies. Accordingly, we may need to engage in equity, debt or convertible debt financings to secure additional funds. If we raise additional funds by issuing equity securities or securities convertible into equity securities, those securities may have rights, preferences or privileges senior to the rights of our common stock and our stockholders may experience dilution. Any large equity or equity-linked offering could also negatively impact our stock price. A number of factors, including market volatility or depressed valuations, trading prices in the equity markets, our financial condition and capital market conditions will impact our ability to obtain equity or debt financing.

Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Lenders may also require warrants to boost their return, the issuance of which would be dilutive to our stockholders. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders.

If we do not have sufficient capital, we may be unable to pursue certain opportunities and our ability to continue to support our growth and to respond to challenges could be impaired.

Intellectual Property Risks

It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.

Our ~~Common Stock~~ability to offer our products and services to our members depends, in part, upon our proprietary technology. We may be unable to protect our proprietary technology effectively which would adversely affect our ability to compete with them. We rely on a combination of copyright, trade secret, trademark laws and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property and do not have patent protection. However, the steps we take to protect our intellectual property rights may be inadequate. For example, a third party may attempt to reverse engineer or otherwise obtain and use our proprietary technology without our consent. The pursuit of a claim against a third party for infringement of our intellectual property could be costly, and there can be no guarantee that any such efforts would be successful. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and business.

We have been, and may in the future be, sued by third parties for alleged infringement of their proprietary rights.

Our proprietary technology, including our credit risk models and A.I. algorithms, may infringe upon claims of third-party intellectual property, and we may face intellectual property challenges from such other parties. The expansion of our suite of financial products and services may create additional trademark risk. We may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any intellectual property disputes. If we are unsuccessful, such claim or litigation could result in a requirement that we pay significant damages or licensing fees, which would negatively impact our financial performance. We may also be obligated to indemnify parties or pay substantial legal settlement costs, including royalty payments, and to modify applications or refund fees. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time consuming, and may divert the attention of our management and key personnel from our business operations.

Our credit risk models, A.I. capabilities, and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our credit risk models, A.I. capabilities, and internal systems rely on internally developed software that is highly technical and complex. In addition, our models, A.I. capabilities, and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors, bugs or other defects. Some errors may only be discovered after the code has been released for external or internal use. Errors, bugs or other defects within the software on which we rely may result in a negative experience for our members, result in errors or compromise our ability to protect member data or our intellectual property. Specifically, any defect in our credit risk models could result in the approval of unacceptably risky loans. Such defects could also result in reputational harm, loss of members, loss of revenue, adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, challenges in raising capital, or liability for damages.

Some aspects of our business processes include open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

We incorporate open source software into processes supporting our business. Such open source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.

In addition to risks related to license requirements, the use of open source software can lead to greater risks than the use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open source software.

Industry and Regulatory Risks

The financial services industry is highly regulated.Changes in regulations or in the way regulations are interpreted and applied to our business could adversely affect our business.

We are subject to various federal, state and local regulatory regimes related to the financial services that we provide. The principal policy objectives of these regulatory regimes are to provide meaningful disclosures to consumers, to protect against unfair, deceptive and abusive acts or practices and to prevent discrimination. Laws and regulations, among other things, impose licensing and qualifications requirements; require various disclosures and consents; mandate or prohibit certain terms and conditions for various financial products; prohibit discrimination based on certain prohibited bases; prohibit unfair, deceptive or abusive acts or practices; require us to submit to examinations by federal and state regulatory regimes; and require us to maintain various policies, procedures and internal controls.

Federal and state agencies have broad enforcement powers over us, including powers to periodically examine and continuously monitor our operations and to investigate our business practices and broad discretion to deem particular practices unfair, deceptive, abusive or otherwise not in accordance with the law. State attorneys general have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws. For example, Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") grants state attorneys general the ability to enforce the Dodd-Frank Act and regulations promulgated under the Dodd-Frank Act’s authority and to secure remedies against entities within their jurisdiction. State attorneys general also have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws have enforcement authority under state law with respect to unfair or deceptive practices. Generally, under these statutes, state attorneys general may conduct investigations, bring actions, and recover civil penalties or obtain injunctive relief against entities engaging in unfair, deceptive, or fraudulent acts. Attorneys general may also coordinate among themselves or with other regulators to enter into coordinated actions or settlements. Finally, several consumer financial laws like the Truth in Lending Act and Fair Credit Reporting Act grant enforcement or litigation authority to state attorneys general.

Changes in laws or regulations, or the regulatory application or interpretation of the laws and regulations applicable to us, could adversely affect our ability to operate in the manner in which we currently conduct business, and may also make it more difficult or costly for us to originate additional loans, or for us to collect payments on our loans to members or otherwise operate our business by subjecting us, our service providers, or strategic partners, to additional licensing, registration and other regulatory requirements in the future.

Failure to comply with applicable laws and regulations could result in additional compliance requirements, limitations on our ability to collect or retain all or part of the principal of or interest on loans, fines or penalties, an inability to continue operations, modification in business practices, regulatory actions, loss of required licenses or registrations, potential impairment, voiding, or voidability of loans, rescission of contracts, civil and criminal liability and damage to our reputation. It could also result in a default or early amortization event under certain of our debt facilities and reduce or terminate availability of debt financing to us to fund originations. To the extent it is determined that any loan we make was not originatedin accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cashor swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements. We may not have adequate liquidity and resources to make such cash repurchases or swap for qualifying assets.

Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses and reputational harm.

In the ordinary course of business, we have been named as a defendant in various legal actions, including class actions and other litigation. Generally, this litigation arises from the claims of violation of do-not-call, credit reporting, collection, and bankruptcy laws. The complexity of the laws related to secured personal loans regarding vehicle titling, lien placement and repossession may enhance the risk of consumer litigation. Further, the origination of loans through bank partnerships may increase the risk of litigation or regulatory scrutiny including based on the "true lender" theory that seeks to recharacterize a lending transaction. State legislation requiring licensure and state restrictions including fee and rate limits on bank partner loans may also reduce profitability and/or increase regulatory and litigation risk. Additionally, platforms offering banking services and products through partners have also been challenged by federal and state regulators on a variety of claims.

Regulatory bodies may enact new laws or promulgate new regulations or view matters or interpret laws and regulations differently than they have in the past, or commence investigations or inquiries into our business practices. For example, in April 2022, the CFPB announced that it intends to examine nonbank financial companies that pose risks to consumers, and in November 2022, the Treasury Department issued a report encouraging the CFPB to increase its supervisory activity with respect to larger nonbank lenders. If the CFPB decides to subject us to its supervisory process, it could significantly increase the level of regulatory scrutiny of our business practices. In addition, the Biden Administration recently announced a government-wide effort to eliminate “junk fees” which could subject our business practices to even further scrutiny. The CFPB’s action on junk fees thus far has largely focused on fees associated with deposit products, such as “surprise” overdraft fees and not-sufficient-funds fees, that are not within scope of our products or services. However, what constitutes a “junk fee” remains undefined. The CFPB has called out other fees, such as pay-to-pay fees charged by debt collectors, and is actively soliciting consumer input on fee practices associated with other consumer financial products or services, signaling that the “junk fee” initiative is likely to continue to broaden in scope. In February 2023, the CFPB published a proposed rule, which is currently subject to public comment, amending Regulation Z to mandate significant decreases to credit card late fees and eliminate annual inflation adjustments for late fee safe harbor amounts. All such legal and regulatory actions are inherently unpredictable and, regardless of the merits of the claims, legal and regulatory actions are often expensive, time-consuming, disruptive to our operations and resources, and distracting to management. In addition, certain of those actions include claims for indeterminate amounts of damages. Our involvement in any such matter also could cause significant harm to our reputation and divert management attention from the operation of our business, even if the matters are ultimately determined in our favor. If resolved against us, legal actions could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business. We have in the past chosen to settle (and may in the future choose to settle) certain matters in order to avoid the time and expense of litigating them. Although none of the settlements has been material to our business, there is no assurance that, in the future, such settlements will not have a material adverse effect on our business.

In addition, a number of participants in the consumer financial services industry have been the subject of putative class action lawsuits, state attorney general actions and other state regulatory actions, federal regulatory enforcement actions, including actions relating to alleged unfair, deceptive or abusive acts or practices, violations of state licensing and lending laws, including state usury laws, actions alleging violations of the Americans with Disabilities Act, discrimination on the basis of race, ethnicity, gender or other prohibited bases, and allegations of noncompliance with various state and federal laws and regulations relating to originating and servicing consumer finance loans and other consumer financial services and products. The current regulatory environment, increased regulatory compliance efforts, and enhanced regulatory enforcement have resulted in significant operational and compliance costs and may prevent us from providing certain products and services. There is no assurance that these regulatory matters or other factors will not, in the future, affect how we conduct our business or adversely affect our business. In particular, legal proceedings brought under state consumer protection statutes or under several of the various federal consumer financial services statutes subject to the jurisdiction of the CFPB may result in a separate fine for each violation of the statute, which, particularly in the case of class action lawsuits, could result in damages substantially in excess of the amounts we earned from the underlying activities.

In addition, from time to time, through our operational and compliance controls, we identify compliance issues that require us to make operational changes and, depending on the nature of the issue, result in financial remediation to impacted members. These self-identified issues and voluntary remediation payments could be significant, depending on the issue and the number of members impacted, and could generate litigation or regulatory investigations that subject us to additional risk.

Internet-based and electronic signature-based loan origination processes may give rise to greater risks than paper-based processes.

We use internet-based loan processes to obtain application information, distribute certain legally required notices to applicants and borrowers, and to obtain electronically signed loan documents in lieu of paper documents with wet borrower signatures obtained in person. These processes may entail greater risks than would paper-based loan origination processes, including risks regarding the sufficiency of notice for compliance with consumer protection laws, risks that borrowers may challenge the authenticity of their signature or of the loan documents, risks that a court of law may not enforce electronically signed loan documents and risks that, despite controls, unauthorized changes are made to the electronic loan documents. If any of those factors were to cause any loans, or any of the terms of the loans, to be unenforceable against the borrowers, or impair our ability to service our loans, the value of our loan assets would decrease significantly to us and to our whole loan purchasers, securitization investors and warehouse lenders. In addition to increased default rates and losses on our loans, this could lead to the loss of whole loan purchasers and securitization investors and trigger terminations and amortizations under our debt warehouse facilities, each of which would materially adversely impact our business.

The CFPB has broad authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new agency could impact our business.

The CFPB has broad authority to create and modify regulations under federal consumer financial protection laws and regulations, such as the Truth in Lending Act and Regulation Z, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act and Regulation V, the Electronic Funds Transfer Act and Regulation E, and to enforce compliance with those laws. The CFPB is charged with the examination and supervision of certain participants in the consumer financial services market, including short-term, small dollar lenders, and larger participants in other areas of financial services. While historically, we have not been subject to CFPB supervisory authority, it is possible that we may become subject to additional regulatory scrutiny and compliance costs going forward through supervision by the CFPB. In recent publications, the CFPB has indicated that the agency is significantly increasing its oversight and scrutiny over consumer finance and on April 25, 2022, the CFPB announced that it was invoking a previously unused legal provision to examine nonbank financial companies that it believes pose risk to consumers. The CFPB may also request, through examination or investigation, reports concerning our organization, business conduct, markets and activities and if the CFPB were to determine that we were engaging in activities that pose risks to consumers, may conduct on-site examinations of our business on a periodic basis. On October 19, 2022, in Community Financial Services Association of America v. Consumer Financial Protection Bureau, the U.S. Court of Appeals for the Fifth Circuit found that the CFPB's independent funding through the Federal Reserve violated the U.S. Constitution’s appropriations clause and invalidated the remaining portions of the CFPB’s restrictions on the lenders offering payday, auto title and other short-term, high-interest loans. The CFPB has appealed the decision to the Supreme Court of the United States and we are unable to predict the timing, outcome, and impact of this litigation.

In addition, the CFPB maintains an online complaint system that allows consumers to log complaints with respect to various consumer finance products, including the credit products we offer. This system could inform future CFPB decisions with respect to its regulatory, enforcement or examination focus. The CFPB also may issue requests for public input in certain areas of concern that may lead to increased regulatory scrutiny on us, our products and consumer finance industry and impose restrictions on fees and charges, thereby impacting results of our business. For example, in March 2022, it requested public input on fees for financial products and has indicated that it plans to ramp up enforcement actions against lenders that illegally charge credit card late-payment fees and may rewrite its rules that set thresholds for such fees. Further, in February 2023, the CFPB proposed a rule that would amend regulations to limit credit card late-payment fees to $8 or 25% of the minimum payment due, whichever is greater.

On March 3, 2021, we received a Civil Investigative Demand (CID) from the CFPB. The stated purpose of the CID is to determine whether small-dollar lenders or associated persons, in connection with lending and debt-collection practices, have failed to comply with certain federal consumer protection laws over which the CFPB has jurisdiction. We have received additional information requests related to the CID. The information requests are focused on our legal collection practices from 2019 to 2021 and hardship treatments offered to members during the COVID-19 pandemic. On September 15, 2022, we received a Notice and Opportunity to Respond and Advise (“NORA”) letter from the staff of the CFPB in connection with the CID, stating that it is considering whether to recommend that the CFPB take legal action against us based on alleged violations focused on our failure to timely dismiss certain lawsuits and the hardship treatments offered during the COVID-19 pandemic, including credit reporting related thereto. On October 14, 2022, we provided the CFPB with a written response to the NORA letter disputing the allegations. The Company is cooperating fully with the CFPB with respect to this matter and we believe that our business practices have been in full compliance with applicable laws. Because the CFPB has broad authority to determine what it views as potentially unfair, deceptive or abusive acts or practices, at this time, the Company is unable to predict the ultimate outcome of this matter.

Digit received a CID from the CFPB in June 2020. The CID was disclosed and discussed during the acquisition process. The stated purpose of the CID is to determine whether Digit, in connection with offering its products or services, misrepresented the terms, conditions, or costs of the products or services in a manner that is unfair, deceptive, or abusive. While the Company believes that the business practices of the Company, including Digit, have been in full compliance with applicable laws, in the interest of resolving this matter, on August 11, 2022, Digit agreed to a consent order with the CFPB resolving such CID. In connection with such consent order, Digit agreed to implement a redress and compliance plan to pay at least $68,145 in consumer redress to consumers who may have been harmed and paid a $2.7 million civil penalty to the CFPB in the third quarter of 2022.

Other federal or state regulators could launch similar investigations or join the CFPB in its investigation. In addition, actions by the CFPB could result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them. The CFPB could also implement rules that restrict our effectiveness in servicing our financial products and services. Future actions by the CFPB (or other regulators) against us or our competitors that discourage the use of our or their services or restrict our business activities could result in reputational harm and adversely affect our business. If the CFPB changes regulations that were adopted in the past by other regulators and transferred to the CFPB by the Dodd-Frank Act, or modifies through supervision or enforcement past regulatory guidance or interprets existing regulations in a different or stricter manner than they have been interpreted in the past by us, the industry or other regulators, our compliance costs and litigation exposure could increase materially. The current presidential administration has appointed and is expected to continue to appoint consumer-oriented regulators at federal agencies such as the CFPB, FTC, OCC and FDIC, and the government’s focus on enforcement of federal consumer protection laws is expected to increase. It is possible that these regulators could promulgate rulemakings and bring enforcement actions that materially impact our business and the business of our lending partners.

The collection, storage, use, disclosure, and other processing of personal information is an area of increasing complexity and scrutiny.

We collect, store, use, disclose, and otherwise process a large volume of personal information about individuals (including members and employees). New laws and regulations concerning the processing of personal information continue to be vigorously debated and enacted at all levels of government across the United States and around the globe while existing laws, such as the Gramm-Leach-Bliley Act, are being amended or reinterpreted to account for the rapidly evolving data economy. The California Consumer Privacy Act (the "CCPA"), including the California Privacy Rights Act of 2020 ("CPRA") amendments imposes significant requirements on businesses processing consumer personal information – principally

around enabling and honoring consumer choices related to such processing. Violations of the CCPA can result in civil penalties assessed by the Attorney General or the California Privacy Protection Agency and individual plaintiffs may pursue statutory damages in a private right of action for certain data breaches. Several U.S. states have already followed California’s lead in enacting comprehensive privacy legislation and others are likely to do so in the future. At the federal level, regulators, including the CFPB and FTC, have adopted, or are considering adopting, laws and regulations concerning personal information and data privacy and security. The FTC, for example, released its updated Standards for Safeguarding Customer Information (Safeguards Rule), effective June 9, 2023, which raises the bar for covered financial institutions’ information security programs through proscriptive requirements for things like accountability and oversight, performing risk assessments, encryption, and enabling multi-factor authentication to protect all forms of customer information. This patchwork of legislation and regulation may give rise to conflicts or differing views of personal privacy rights.

The rapidly evolving privacy and data protection regulatory environment, along with increased scrutiny from consumers and their advocates and increased complexity in Oportun’s organizational structure, demands careful attention to our own processing of personal information and processing by third parties acting on our behalf.For example, we’ve seen an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships through our subsidiary Digit. Our failure, or a failure by third parties with whom we do business, to comply with applicable privacy laws or regulations and contractual obligations required by our business partners, and even a perceived failure, could damage our reputation, harm our ability to obtain market adoption, discourage existing and prospective members from using our products and services, require us to change our business practices, business partners or operational structure, or result in investigations, claims, or fines by governmental agencies and private plaintiffs.Even in the absence of a challenge to our practices, we may incur substantial costs to implement new systems to comply with regulatory requirements, such as consumer requests concerning the processing of their personal information and to honor any choices that may be available to them by law.

Our business is subject to the regulatory framework applicable to registered investment advisers, including regulation by the SEC.

We offer investment management services through Digit Advisors, LLC which provides automated investment advice regarding the selection of a portfolio of exchange traded funds through our mobile application. Digit Advisors is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is subject to regulation by the SEC.

Investment advisers are subject to the anti-fraud provisions of the Advisers Act and to fiduciary duties derived from these provisions, which apply to our relationships with our members who are advisory clients, as well as the funds we manage. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our members, including for example restrictions on transactions with our affiliates. Our investment adviser has in the past and will in the future be subject to periodic SEC examinations. Our investment adviser is also subject to other requirements under the Advisers Act and related regulations primarily intended to benefit advisory clients. These additional requirements relate to matters including maintaining effective and comprehensive compliance programs, record-keeping and reporting and disclosure requirements. The Advisers Act generally grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event such investment adviser fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individuals from associating with an investment adviser, the revocation of registrations and other censures and fines. Even if an investigation or proceeding did not result in a sanction or the sanction imposed against us or our employees were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and ability to gain or retain members.

Our bank partnership products may lead to regulatory risk and may increase our regulatory burden.

We provide our credit card products through a bank partnership program with WebBank and we have bank partnership programs with Pathward, N.A., to offer unsecured installment loans and provide deposit accounts, debit card services and other transaction services to our members. State and federal agencies have broad discretion in their interpretation of laws and their interpretation of requirements related to bank partnership programs and may elect to alter standards or the interpretation of the standards applicable to these programs. In addition, as a result of our bank partnerships, prudential bank regulators with supervisory authority over our partners have the ability to regulate aspects of our business. There has also been significant recent government enforcement action and litigation challenging the validity of such arrangements for lending products, including disputes seeking to recharacterize lending transactions on the basis that the non-bank party rather than the bank is the “true lender” or “de facto lender”, and in case law challenging the “valid when made” doctrine, which holds that based on federal preemption, state interest rate limitations are not applicable in the context of certain bank-non-bank partnership arrangements.

The uncertainty of the federal and state regulatory environments around bank partnership programs means that our efforts to launch products and services through bank partners may not ultimately be successful, or may be challenged by legislation or regulatory action. If the legal structure underlying our relationship with our bank partners were to be successfully challenged, we may be found to be in violation of state licensing requirements and state laws regulating interest rates and fees. In the event of such a challenge or if our arrangements with our bank partners were to change or end for any reason, we would need to rely on an alternative bank relationship, find an alternative bank relationship, rely on existing state licenses, obtain new state licenses, pursue a national bank charter, and/or be subject to the interest rate limitations of certain states. In addition, adverse orders or regulatory enforcement actions against our bank partners, even if unrelated to our business, could impose restrictions on their ability to continue to extend credit or on current terms. Regulation by federal and state regulators may also subject us to increased compliance, legal and operational costs, and could subject our business model to scrutiny and otherwise increase our regulatory burden, or may adversely affect our ability to expand our business.

Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.

We maintain a compliance program designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the USA PATRIOT Act and U.S. economic sanctions laws administered by the Office of Foreign Assets Control. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering and terrorist financing and engaging in transactions involving sanctioned countries persons and entities. These controls include procedures and processes to detect and report suspicious transactions, perform member due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. Our failure to comply with anti-money laundering, economic and trade sanctions regulations, and similar laws could subject us to substantial civil and criminal penalties, or result in the loss or restriction of our state licenses, or liability under our contracts with third parties, which may significantly affect our ability to conduct some aspects of our business. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements, may significantly affect or change the manner in which we currently conduct some aspects of our business.

We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act.

The Investment Company Act of 1940, as amended (the "Investment Company Act") contains substantive legal requirements that regulate the way “investment companies” are permitted to conduct their business activities. We believe we have conducted, and we intend to continue to conduct, our business in a manner that does not result in our company being characterized as an investment company, including by relying on certain exemptions from registration as an investment company. We rely on guidance published by the SEC staff or on our analyses of such guidance to determine our qualification under these and other exemptions. To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our business operations accordingly. If we are deemed to be an investment company, we may attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on our business. We may not receive such relief on a timely basis, if at all, and such relief may require us to modify or curtail our operations. If we are deemed to be an investment company, we may also be required to institute burdensome compliance requirements and our activities may be restricted.

We are subject to governmental export and import controls that could subject us to liability, impair our ability to compete in international markets and adversely affect our business.

General Risk Factors

You may be diluted by the future issuance of additional common stock in connection with our equity incentive plans, acquisitions or otherwise.

Our amended and restated certificate of incorporation authorizes us to issue shares of common stock authorized but unissued and rights relating to common stock for the consideration and on the terms and conditions established by our Board in its sole discretion, whether in connection with acquisitions or otherwise. We have authorized ~~8,152,800~~9,072,159 shares for issuance under our 2019 Equity Incentive Plan, ~~and 996,217~~1,593,052 shares for issuance under our 2019 Employee Stock Purchase Plan, and 563,955 shares for issuance under our 2021 Inducement Equity Incentive Plan, each subject to adjustment in certain events. Any common stock that we issue, including under our ~~2019 Equity Incentive Plan, our 2019 Employee Stock Purchase Plan~~existing equity incentive plans or other equity incentive plans that we may adopt in the future, could dilute your percentage ownership.

The issuance of shares of our Common Stock upon exercise of our outstanding Warrants issued in connection with the Amended Credit Agreement would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

As of March 10, 2023, the Warrants to purchase 1,980,242 shares of our Common Stock issued in connection with the Amended Credit Agreement were outstanding and exercisable. The exercise price of these Warrants is $0.01 per share. In addition, pursuant to the Amended Credit Agreement, in connection with the funding of the Incremental Tranche A-2 Loans, the Company will issue Warrants to the lenders providing the Incremental Tranche A-2 Loans to purchase 116,485 shares of the Company’s common stock, in connection with the funding of the Incremental Tranche B Loans, the Company will issue Warrants to the lenders providing the Incremental Tranche B Loans to purchase 1,048,363 shares of the Company’s common stock, and in connection with the funding of the Incremental Tranche C Loans, the Company will issue Warrants to the lenders providing the Incremental Tranche C Loans to purchase 1,048,363 shares of the Company’s common stock, in each case, at an exercise price of $0.01 per share. The Company also entered into the Registration Rights Agreement, which stipulates that the Company will file a registration statement with the Securities and Exchange Commission with respect to the shares underlying the Warrants. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to holders of our common stock and increase the number of shares

eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock.

The price of our common stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock has been and may continue to be volatile and will depend on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock, because you might be unable to sell your shares at or above the price you paid. Factors that could cause fluctuations in the trading price of our common stock include the following:

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

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

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

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

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

•~~public reaction to our~~speculation in the press ~~releases, other public announcements, and filings with the SEC;~~or investment community;

•any major change in our management;

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

•~~rumors and market speculation involving us~~actual or ~~other companies~~anticipated fluctuations in our ~~industry;~~results of operations;

•actual or ~~anticipated changes in~~perceived data security breaches or incidents impacting us or our ~~results of operations or fluctuations in our results of operations;~~third-party service providers;

•changes in prevailing interest rates;

•quarterly fluctuations in demand for our loans;

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

•~~litigation, government investigations and regulatory actions;~~

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

•~~new laws or regulations or new interpretations of existing laws or regulations applicable to our business;~~litigation, government investigations and regulatory actions;

•~~changes in accounting standards, policies, guidelines, interpretations,~~passage of legislation or ~~principles;~~other regulatory developments that adversely affect us or our industry;

•~~widespread public health crises~~general economic conditions, such as ~~the COVID-19 pandemic;~~rising interest and inflation rates; and

•other ~~general~~risks and uncertainties described in these risk factors.

Broad market ~~political~~ and ~~economic conditions, including any such conditions and local conditions~~industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the ~~markets~~overall market and the market prices of particular companies’ securities, securities class action litigation has often been instituted against these companies. Such litigation could result in substantial costs and a diversion of our management’s attention and resources, which could harm our ~~customers, employees, and contractors are located.~~business. We may be the target of additional litigation of this type in the future as well.

If financial or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. ~~Because we are a new public company, the analysts who publish information about our common stock have had relatively little experience with our company, which could affect their ability to~~

~~accurately forecast our results and make it more likely that we fail to meet their estimates.~~ If any of the analysts who cover us issue an adverse or misleading opinion regarding our stock price, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

The enactment of tax reform legislation could adversely impact our financial position and results of operations.

Legislation or other changes in U.S. and international tax laws could increase our liability and adversely affect our after-tax profitability. For example, the United States recently enacted the Inflation Reduction Act, which implemented, among others, a 15% alternative minimum tax on adjusted financial statement income for certain large companies and a 1% excise tax on certain stock buybacks. In addition, many countries and the Organisation for Economic Co-operation and Development have reached an agreement to implement a 15% global minimum tax. Such proposed changes, as well as regulations and legal decisions interpreting and applying these changes, may have significant impacts on our effective tax rate, cash tax expenses and net deferred taxes in the future.

Our directors, officers, and principal stockholders have substantial control over our company, which could limit your ability to influence the outcome of key transactions, including a change of control.

Our directors, executive officers, and each of our 5% stockholders and their affiliates, in the aggregate, beneficially own a significant number of the outstanding shares of our common stock. As a result, these stockholders, if acting together, will be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They

may also have interests that differ from yours, and they may vote in a way with which you disagree or which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

We may need to raise additional funds in the future, including through equity, debt, or convertible debt financings, to support business growth and those funds may not be available on acceptable terms, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new loan products, enhance our risk management model, improve our operating infrastructure, expand to new retail locations or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity, debt or convertible debt financings to secure additional funds. If we raise additional funds by issuing equity securities or securities convertible into equity securities, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders.

If we are unable to obtain adequate financing or on terms satisfactory to us when we require it, we may be unable to pursue certain opportunities and our ability to continue to support our growth and to respond to challenges could be impaired.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified Board members.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended ( the "Exchange Act"), the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing standards of the Nasdaq Stock Market, and other applicable securities rules and regulations, including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources. ~~We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs.~~

Being a public company also makes it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage, incur substantially higher costs to obtain coverage or only obtain coverage with a significant deductible. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our Board, particularly to serve on our audit and risk committee and compensation and leadership committee.

In addition, changing laws, regulations and standards or interpretations thereof relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us.

Certain of our market opportunity estimates, growth forecasts, and key metrics could prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.

Market opportunity estimates, ~~and~~ growth forecasts and key metrics, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts relating to the size and expected growth of our

~~target~~ market opportunity may prove to be inaccurate. It is impossible to offer every loan product, term or feature that every ~~customer~~member wants, and our competitors may develop and offer ~~loan~~ products, terms or features that we do not offer. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of the individuals covered by our market opportunity estimates will generate any particular level of ~~revenues for us.~~revenues. Even if the markets in which we compete meet our size estimates and growth forecasts, our business could fail to grow at ~~similar~~expected rates, if at all, for a variety of reasons outside of our ~~control, including competition in our industry.~~control. Furthermore, in order for us to successfully address this broader market opportunity, we will need to successfully expand into new geographic regions where we do not currently operate.

Our key metrics are calculated using internal company data, including Members and Products, and have not been validated by an independent third-party. We have in the past implemented, and may in the future implement, new methodologies for calculating these metrics which may result in the metrics from prior periods changing, decreasing or not being comparable to prior periods. As our business develops, we may revise or cease reporting metrics if we determine that such metrics are no longer appropriate measures of our performance. Our key metrics may also differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. If investors or analysts do not perceive our metrics to be sufficient or accurate representations of our business, or if we discover material inaccuracies in our metrics, our stock price, reputation ~~business, results of operations,~~ and ~~financial condition~~prospects would be adversely affected.

Certain provisions in our charter documents and under Delaware law could limit attempts by our stockholders to replace or remove our Board, delay or prevent an acquisition of our company, and ~~limit~~adversely affect the market price of our common stock.

Provisions in our amended and restated certificate of incorporation, and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our Board. These provisions include the following:

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

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

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

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

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

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

As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board has approved the transaction. Such provisions could allow our Board to prevent or delay an acquisition of our company.

Certain of our executive officers may be entitled, pursuant to the terms of their employment arrangements, to accelerated vesting of their stock options following a change of control of our company under certain conditions. In addition to the arrangements currently in place with some of our executive officers, we may enter into similar arrangements in the future with other officers. Such arrangements could delay or discourage a potential acquisition.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a potential acquisition could limit the opportunity for our stockholders to receive a premium for their shares of our common stock in connection with such acquisition, and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware or the U.S. federal district courts will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, (4) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws, or (5) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. This

provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or the rules and regulations thereunder.Furthermore, Section 22 of the Securities Act of 1933, as amended (“Securities Act”), creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters is located in San Carlos, California pursuant to a lease expiring in February 2026. We are currently subleasing a portion of our headquarters space to third parties. As of December 31, ~~2020,~~2022, we leased additional facilities and office space in California, Texas, Mexico, and India. We also operate retail locations and co-locations ~~across California, Illinois, Texas, Utah, Nevada, Arizona, New Mexico, New Jersey, and Florida.~~throughout the United States.

Item 3. Legal Proceedings

~~For a description of legal proceedings, see~~ The information set forth under Note ~~15,~~ 16, Leases, Commitments and Contingencies, in the accompanying Notes to the Consolidated Financial ~~Statements.~~Statements is incorporated herein by reference. From time to time, we may bring or be subject to other legal proceedings and claims in the ordinary course of business, including legal proceedings with third parties asserting infringement of their intellectual property rights, consumer litigation, and ~~consumer litigation.~~regulatory proceedings. Other than as described in this report, we are not presently a party to any legal proceedings that, if determined adversely to us, we believe would individually or taken together have a material adverse effect on our business, financial condition, cash flows or results of operations.

Item 4. Mine Safety Disclosures

None.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Stockholders

Oportun's common stock has been listed for trading on the Nasdaq Global Select Market since September 26, 2019 under the symbol "OPRT". As of ~~February 16, 2021,~~March 8, 2023, we had ~~148 record holders~~132 registered stockholders of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name or held in trust by other entities. Therefore, the actual number of stockholders is greater than this number of registered stockholders of record.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth ~~and development~~ of our business. Any future determination to pay dividends will be made at the discretion of our Board subject to applicable laws, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements. Our future ability to pay cash dividends on our capital stock may also be limited by the terms of any future debt or preferred securities or future credit facility.Board.

Stock Performance

As a “Smaller Reporting Company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Issuer Purchases of Equity Securities

None.

Unregistered Sales of Equity Securities

~~We had no unregistered sales of our securities in the reporting period not previously reported.~~None.

Use of Proceeds

On September 30, 2019, we completed our initial public offering, (the "IPO"). The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-232685), which was declared effective by the SEC on September 25, 2019. There has been no material change in the use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act and other periodic reports previously filed with the SEC.

None.

Item 6. ~~Selected Financial Data~~

~~As a “Smaller Reporting Company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.~~Reserved

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

For more information about terms and abbreviations used in this report see the “Glossary” at the end of Part II of this report.

An index to our management's discussion and analysis follows:

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read together with, our audited consolidated financial statements and the related notes thereto and other disclosures included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this MD&A, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the information contained in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this MD&A.

Overview

We ~~offer responsible consumer credit through~~are a digital banking platform that puts our ~~A.I.-driven digital platform at~~members’ financial goals within reach. With intelligent borrowing, savings, budgeting, and spending capabilities, we empower members with the confidence to build a ~~lower cost compared~~better financial future. By intentionally designing our products to ~~market alternatives available to individuals that are not well served by~~help solve the financial ~~mainstream.~~health challenges facing a majority of people in the U.S., we believe our business is well positioned for significant growth. We take a holistic approach to serving our members and view it as our purpose to responsibly meet their current capital needs, help grow our members’ financial profiles, increase their financial awareness and put them on a path to a financially healthy life. In our ~~15-year~~16-year lending history, we have ~~originated~~extended more than ~~4.1~~$15.5 billion in responsible credit through more than 6.3 million loans ~~representing over $9.8 billion of~~and credit extended, to more than 1.8 million customers. We have developed a deep data-driven understanding of our customers' needs through a combination of the rigorous application of machine learning, the use of alternative data sets and continuous customer engagement.cards. We have been certified as a Community Development Financial Institution ("CDFI") by the U.S. Department of the Treasury since 2009.

With our acquisition of Digit in 2021, we believe we now have a strong competitive advantage over other fintechs and neobanks. As a combined company, we can now offer access to a comprehensive suite of digital banking products, offered either directly or through partners, including lending, savings and investing powered by A.I. and tailored to each member's goals.

Our ~~core offering~~financial products allow us to meet our members where they are and assist them with their overall financial health, resulting in opportunities to present multiple relevant products to our members. Our credit products include personal loans, secured personal loans and credit cards. Our digital banking products include digital banking, automated savings, long-term investing and retirement savings. Consumers are able to become members and access our products through our digital banking app—the Oportun Mobile app—and the Oportun.com website, which are our primary channels for onboarding and serving members. Our personal loan products are also available over the phone or through over 700 retail locations, which includes 590 of our Lending as a Service partner locations.

Credit Products

Personal Loans - Our personal loan is a simple-to-understand, affordable, unsecured, fully amortizing ~~personal~~ installment loan with fixed payments ~~and fixed interest rates~~ throughout the life of the loan. We charge fixed interest rates on our loans, which vary based on the amount disbursed and applicable state law, with a cap of 36% annual percentage rate (“APR”) in all cases. As of December 31, 2022, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 38 months and 32.0%, respectively. The average loan size for loans we originated in 2022 was $4,189. Our ~~personal~~ loans do not have prepayment penalties or balloon payments, and range in size from $300 to ~~$10,000~~$12,000 with terms of 12 to 60 months. Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of their income. As part of our underwriting process, we verify income for all applicants and only approve loans that meet our ability-to-pay criteria. As of December 31, 2022, we originate unsecured personal loans in 12 states through state licenses and in 30 states through our partnership with Pathward, N.A. (formerly known as MetaBank, N.A.).

Secured Personal Loans - In April 2020, we launched a personal installment loan product secured by an automobile, which we refer to as secured personal loans. Our secured personal loans range in size from $2,525 to $18,000 with terms ranging from ~~six~~27 to 5163 months. The average loan size for secured personal loans we originated in 2022 was $8,304. As of December 31, 2022, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 49 months and 28.3%, respectively. As part of our ~~commitment to be a responsible lender,~~underwriting process, we

evaluate the collateral value of the vehicle, verify income for ~~100% of our personal loan customers~~all applicants and only ~~make~~approve loans ~~to customers~~ that meet our ability-to-pay ~~model indicates should be able to afford a loan after meeting their other debts~~criteria. Our secured personal loans are currently offered in California, Texas, Florida, Arizona and regular living expenses. We execute our sales and marketing strategy through a variety of acquisition channels including our digital platform, retail locations, direct mail and digital marketing, and partnerships. We also benefit from customers learning about Oportun from friends or family members and other word-of-mouth referrals. Our omni-channel network enables us to serve our customers in the way they prefer and when it is convenient for them, online, over-the-phone, and in person. We have seen our customers' usage and preference for our digital channels accelerate during 2020New Jersey and we are ~~continuing to invest~~ in our digital origination and servicing platform, as well as building out customer self-service capabilities. Our personal loan serves as an alternative to high-cost installment, auto title, payday and pawn lenders. According to the ~~Financial Health Network study that we commissioned, we estimate that, as~~process of ~~December 31, 2020, our customers have saved more than $1.8 billion in aggregate interest and fees compared to alternative products available to them.~~considering expansion into other states.

~~Through~~Credit Cards - We launched Oportun® Visa® Credit Card, issued by WebBank, Member FDIC, in December 2019, and offer credit cards in 45 states as of December 31, 2022. Credit lines on our ~~recently announced partnership~~credit cards range in size from $300 to $3,000 with ~~MetaBank, N.A,,~~an APR between 24.9% to 29.9%. The average APR of the outstanding credit card receivables was 29.8% as of December 31, 2022. The average credit line for credit cards activated in 2022 was $834.

Digital Banking Products

Savings – Our Savings product is designed to understand a ~~national~~member’s cash flows and save the right amount on a regular basis to effortlessly achieve savings goals. Our savings product utilizes machine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner. Members integrate their existing bank ~~we will be~~accounts into the platform or they can make Digit their primary banking relationship through a bank partner. After one year using the automated savings product, members have been able to ~~offer~~increase their liquid savings by approximately 50%. Since 2015 Digit has helped members save more than $8.9 billion.

Direct – Our Direct product offers a ~~uniform product~~full checking account, through a bank partner, that intelligently organizes and budgets a member’s money across ~~the nation, while minimizing operational complexity~~bills, savings, and ~~generating cost savings that can be passed on to our customers. We plan to offer loan products that are~~spending. The bank account with a brain™, Direct leverages the same asA.I. engine used for our ~~unsecured personal loans with APRs capped at 36%. We~~savings product to automatically identify and organize recurring bills and guides spending to ensure members' savings goals are ~~currently working~~met, and that members know exactly what they can safely spend. This is on ~~the technology that will enable the rollout~~top of what members can expect from a traditional checking account, including a physical and virtual debit card to use for purchases and ATM withdrawals and checks.

Investing and Retirement – Our investment and retirement products are a longer-term savings solution via an A.I.-driven portfolio allocation into low-cost investments based upon risk-tolerance. Our long-term investment solutions automatically allocates our members' savings into low-cost risk-adjusted portfolios held in brokerage accounts or tax-advantaged IRAs. Since 2020, our members have invested $66.6 million into long-term goals through low-cost ETF portfolios. The investment products include a general investing account and a retirement account for our members’ longer term goals, utilizing smart recommendations to invest savings in risk-adjusted portfolios.

The funds in these savings, checking, investing and retirement accounts are owned by members of our ~~MetaBank, N.A. partnership by mid-2021. In November 2020, we began~~digital banking products and are not the ~~application process to obtain~~assets of the Company. Therefore, these funds are not included in the Consolidated Balance Sheets.

Lending as a ~~national bank charter.~~Service

Beyond our core direct-to-consumer lending business, we believe that we can leverage our proprietary credit scoring and underwriting model ~~can be offered as a service~~ to partner with other ~~companies. This~~consumer brands and expand our member base. With our Lending as a Service model, ~~is currently being piloted with~~ our ~~strategic~~ partner ~~DolEx. In this partnership, DolEx will market~~markets loans and ~~enter customer~~enters borrower applications into ~~Oportun’s~~our system and Oportun ~~will underwrite, originate~~underwrites, originates and ~~service~~services the loans. ~~If successful,~~Our first lending as a service partner was DolEx Dollar Express, Inc. with an initial launch in December 2020. In October of 2021, we launched another Lending as a Service partnership with Barri Financial Group in select locations. In January of 2022, we announced our first all-digital Lending as a Service partnership with Sezzle, a leading provider of Buy Now Pay Later ("BNPL") financing options which launched in the first quarter of 2023. Oportun is now available as a checkout option, through Sezzle, for larger purchases which we believe will allow us to reach more new members. We believe we will be able to offer Lending as a Service to additional partners, and ~~thereby~~ expand our ~~reach into new consumer markets.~~membership base.

We have begun expanding beyond our core offering of unsecured installment loans into other financial services that a significant portion of our customers already use and have asked us to provide, such as auto loans and credit cards. We launched the Oportun Visa Credit Card, issued by WebBank, Member FDIC, in 2019 and offered credit cards in 33 states as of December 31, 2020. In April 2020, we launched a personal installment loan secured by an automobile, which we refer to as secured personal loans.Capital Markets Funding

~~The map below show the states in which we offer our products as of~~ ~~December 31, 2020~~.

To fund our growth at a low and efficient cost, we have built a diversified and well-established capital markets funding program, which allows us to partially hedge our exposure to rising interest rates or credit spreads by locking in our interest expense for up to three years. Over the past ~~seven~~eight years, we have executed 1420 bond offerings in the asset-backed securities market, the last 1117 of which include tranches that have been rated investment grade. We have issued two- and three-year fixed rate bonds which have provided us committed capital to fund future loan originations at a fixed Cost of Debt. ~~In November 2014,~~On July 22, 2022, we issued $400.0 million of amortizing asset-backed notes. On September 14, 2022, we entered into a credit agreement for a $150.0 million senior secured term loan, which was upsized and amended on March 10, 2023 to provide the ability to be able to borrow up to an additional $75.0 million. On March 10, 2023, we borrowed $20.8 million of Incremental Tranche A-1 Loans and intend to borrow an additional $4.2 million of Incremental Tranche A-2 Loans on or about March 27, 2023, which amount has been committed by the applicable lenders. We may borrow up to an aggregate additional amount of $50.0 million on an uncommitted basis, in two $25.0 million tranches, expected to be available, if provided by the applicable lenders, on or about April 21, 2023 and June 23, 2023, respectively. On November 3, 2022, we issued $300.0 million of amortizing asset-backed notes.

Through March 4, 2022, we were also party to a whole loan sale agreement with an institutional investor, which agreement has been amended from time to time. The term of the current agreement was set to expire on November 10, 2020. The parties have agreed to extend the agreement on the same terms through February 26, 2021. Additional extensions may be considered onprogram whereby we sold a ~~month-to-month basis. Pursuant to this agreement, we have committed to sell at least 10%~~percentage of our ~~unsecured loan originations, with an option to sell an additional 5%, subject to certain eligibility criteria and minimum and maximum volumes. In addition, from July 2017 to August 2020, we were party~~loans to a ~~separate~~third-party financial institution. We allowed the whole loan sale ~~arrangement with an institutional investor providing for a commitment to sell 100% of our loans originated under our loan~~ program ~~for customers who do not meet the qualifications of our core loan origination program. We chose not to renew the arrangement and allowed the~~ agreement to expire on its ~~terms on August 5, 2020.~~own terms. In March 2022, we participated in a securitization and sold loans through the issuance of amortizing asset-backed notes secured by a pool of our unsecured and secured personal installment loans. We also sold our share of the residual interest in the pool. The sold loans had an aggregate unpaid principal balance of approximately $227.6 million ("2022-1 transaction"). During 2022, we sold certain populations of our personal loans and credit card receivables that had an aggregate unpaid principal balance, including unpaid interest and fees, of approximately $66.2 million. In addition to ~~our~~possible future whole loan, ~~sale program,~~structured or other loan sales, we also have a ~~$400.0~~$600.0 million ~~Secured Financing~~Personal Loan Warehouse facility ~~committed~~with a term through ~~October 2021,~~September 2024 and a $150.0 million Credit Card Warehouse facility with a term through December 2023 which also helps to fund our ~~loan portfolio~~receivables growth. ~~In October 2020 we raised $39.8 million, net of fees and expenses, by selling $41.3 million of retained bonds related to our 2019-A and 2018-B asset-backed notes.~~

We closely manage our operating expenses, which consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees and general, administrative and other expenses, withOn March 8, 2023, the ~~goal of increasing investments in our data analytics, technology and mobile-first experiences, and our digital marketing capabilities.~~

We previously elected the fair value option to account for all loans receivable held for investment that were originated on or after January 1, 2018 (the "Initial Fair Value Loans"), and for all asset-backed notes issued on or after January 1, 2018 (the "Fair Value Notes"). As compared to the loans held for investment that were originated prior to January 1, 2018 (the "Loans Receivable at Amortized Cost"), we believe the fair value option enables us to report GAAP net income that more closely approximates our net cash flow generation and provides increased transparency into our profitability and asset quality. Loans Receivable at Amortized Cost issued prior to January 1, 2018 are accounted for in our 2019 financial statements at amortized cost, net. Upon adoption of ASU 2019-05 effective January 1, 2020, we elected the fair value option on all remaining loans receivable previously measured at amortized cost (the "Subsequent Fair Value Loans," and together with the Initial Fair Value Loans, the "Fair Value Loans"). Upon adoption of ASU 2019-05 effective January 1, 2020, we (i) released the remaining allowance for loan losses on Loan Receivables at Amortized Cost as of December 31, 2019; (ii) recognized the unamortized net originations fee income as of December 31, 2019; and (iii) measured the remaining loans originated prior to January 1, 2018 at fair value. Loans that we designate for sale are accounted for as held for sale and recorded atCredit Card Warehouse facility

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was amended, extending its term through December 2024 and reducing its commitment from $150.0 million to $120.0 million.

Streamlining Operations

On February 9, 2023, we announced that we are taking a series of measures to streamline our operations, including reducing the lower of cost or fair value until the loans receivable are sold. Asset-backed notes issued prior to January 1, 2018 are accounted for in our financial statements at amortized cost, net. After the redemptionsize of our ~~Series 2017-B asset-back notes~~corporate staff by 10%, impacting approximately 155 employees, and reducing our expenditures on ~~July 8, 2020,~~external contractors. In relation to these and other personnel related activities, we ~~no longer~~expect to incur non-recurring, pre-tax charges of $6 to $7 million in the first quarter of 2023. These reductions are anticipated to result in annualized run-rate savings in compensation and benefits of approximately $38 million beginning in 2023. We have ~~any asset-backed notes at amortized cost as~~also identified certain non-personnel related operational efficiencies that are anticipated to result in annualized run-rate savings of ~~December 31, 2020. We estimate the fair value of the Fair Value Loans using a discounted cash flow model, which considers various factors such as the price that we could sell our loans~~$10 to ~~a third party~~$15 million beginning in a non-public market, credit risk, net charge-offs, customer payment rates and market conditions such as interest rates. We estimate the fair value of our Fair Value Notes based upon the prices at which our or similar asset-backed notes trade. We reevaluate the fair value of our Fair Value Loans and our Fair Value Notes at the close of each measurement period.2023.

Retail Network Optimization

During the ~~past few years,~~first quarter of 2022, we ~~have seen a growing customer preference for our online and mobile channels. After a careful analysis of our customer trends and the overlapping geographic footprint of certain existing~~closed an additional 27 retail locations ~~we are planning to close 136 retail locations~~in April 2022 and ~~implement~~reduce a ~~workforce reduction~~portion of ~~certain employees~~the workforce who manage and operate ~~the~~these retail locations. By optimizing our retail channel, we estimate we will generate projected operating expense savings of approximately $19 million per year, after one-time charges. As customers have increasingly shifted to mobile and we are broadening our partners channel, we are planning to invest in the technology to continue to enhance our mobile channel and digital platform. We expect that we can continue to serve our existing customer base and scale to serve new customers with a more efficient retail footprint. For additional information, see ~~Note 16, Subsequent Events, to the Notes to the Consolidated Financial Statements included elsewhere in this report.~~

~~COVID-19 Update~~

~~We continue to monitor and proactively~~ ~~navigate~~ the COVID-19 pandemic, taking actions to manage our business in a thoughtful and conservative manner throughout this fluid situation, while ensuring the health and safety of our employees and customers. The actions taken since the beginning of the pandemic have resulted in improving credit trends, steadily increasing originations, and a continued strong balance sheet. We believe we remain well-positioned strategically and financially in the current environment, however, factors such as economic conditions, the unemployment rate, and further stimulus measures mayincome statement impact our future performance. As of December 31, 2020, 99% of our retail locations were open to serve customers. While we recognize and still believe that our retail channel is a key differentiator in our customer experience, a shift from in-store to mobile was occurring gradually prior to 2020. The pandemic further accelerated the adoption of our digital channels, and we believe that for many of our customers, this shift will be permanent. Our investment in digital capabilities gives us a path for continued growth in a more capital efficient manner. In the fourth quarter of 2020, 65% of new applicants chose to apply online, up from 46% in the fourth quarter of 2019. Additionally, 73% of all payments were made outside of our stores whereas this figure was 60% as of December 31, 2019.

~~Improving Credit Trends~~

~~Deferrals~~We believe that our rapid implementation of emergency hardship programs and reduced payment plans have been effective in providing impacted customers sufficient time to return to repayment status. We may consider Emergency Hardship Deferrals, granted one month at a time, for borrowers who continue to be impacted by the COVID-19 pandemic. As of December 31, 2020, 1.4% of our Owned Principal Balance at End of Period was in active deferral status under the Emergency Hardship Deferral program, down from a peak of 14.6% at the end of April 2020. We believe that our customers are currently managing through the crisis and most have returned to repayment status.

~~Delinquencies~~ We ended the fourth quarter of 2020 with a 30+ Day Delinquency Rate of 3.7%, compared to 4.0% at the end of the fourth quarter of 2019. Borrowers who are less than 30 days delinquent when they received an Emergency Hardship Deferral are counted at zero days delinquent, and customers that were more than 30 days delinquent continue to be in the same delinquency status as they were prior to receiving an Emergency Hardship Deferral. As a standard practice, we offer a grace period ranging between 7 and 15 days before a late fee is assessed, allowing customers extra time to make a payment if needed. We monitor our early stage delinquencies very closely and attempt to contact delinquent customers before the grace period expires to provide them with payment options.

Delinquencies and Deferrals
(Percentage of Outstanding Principal Balance of Owned Receivables)
Days Delinquent As of 3/31/2020 As of 4/30/2020 As of 5/31/2020 As of 6/30/2020 As of 7/31/2020 As of 8/31/2020 As of 9/30/2020 As of 10/31/2020 As of 11/30/2020 As of 12/31/2020
0 88.9% 90.2% 87.8% 89.5% 90.8% 90.0% 90.3% 91.3% 90.0% 90.7%
1-7 3.3 2.6 3.5 3.2 2.6 3.2 2.9 2.4 3.3 2.6
8-14 2.2 1.6 1.9 1.8 1.5 1.5 1.6 1.2 1.6 1.5
15-29 1.8 1.6 2.8 1.9 1.8 1.8 1.7 1.5 1.6 1.6
30-59 1.7 1.8 1.7 1.7 1.6 1.8 1.7 1.7 1.5 1.6
60-89 1.2 1.3 1.3 1.0 1.0 1.0 1.1 1.1 1.1 1.1
90-119 0.9 1.0 1.0 1.0 0.8 0.7 0.7 0.8 0.9 0.9
120+ (1)
— — — — — — — — — —
30+ 3.8 4.0 4.0 3.7 3.4 3.5 3.5 3.6 3.5 3.7
Emergency Hardship Deferrals (2)
6.1 14.6 7.6 5.0 3.9 2.8 1.5 1.0 0.9 1.4
(1) The 120+ delinquent balances are excluded from the 30+ delinquency rate and percent current rate calculations because these balances are charged off on the last day of a given month.
(2) Emergency Hardship Deferrals excluded from delinquent balances.

~~Net Charge-Offs~~ Our Annualized Net Charge-Off Rate for the fourth quarter ended December 31, 2020 was 9.4%, down from 10.4% for the third quarter ended September 30, 2020. Consistent with our charge-off policy, we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past due. As a result of the pandemic and based upon our analysis of loan performance following natural disasters or other emergencies, more loans have been determined to be uncollectible prior to reaching 120 days contractually past due, resulting in ~~$6.3 million and $21.6 million of~~ ~~higher charge-offs~~ ~~for the three months and year ended December 31, 2020, respectively.~~

~~Steadily Increasing Originations~~

Loan originations in the fourth quarter ended December 31, 2020 increased 48.3% as compared to the third quarter ended September 30, 2020 due to increasing approval rates, the refinement of our marketing efforts, including increased digital initiatives and optimization of direct mail, and by maintaining the availability of our omni-channel network. We have seen a rebound in originations following the decline that began in the second-half of March 2020 as a result of the COVID-19 pandemic. Originations for the month of December 2020 were down 28% year over year; however, we have seen steady improvement in each month following the low in April 2020.

Start of
Pandemic (1)
Recovery Quarterly Comparison
P/P (2)
-23% -64% 12% 46% 24% 19% 14% 15% 13% 6% 92% 48%
Y/Y -16% -71% -71% -60% -54% -45% -33% -31% -25% -28% -44% -28%
CAC $215 $574 $461 $298 $240 $210 $180 $162 $160 $146 $207 $155
(1) On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This coincided with a decline in originations.
(2) 'P/P' refers to period-over-period and is month-over-month from March '20 through December '20 and quarter-over-quarter for the quarterly comparisons for 3Q20 and 4Q20.

~~Credit Trends of New Originations~~

Due to our credit tightening in mid-March, loans originated after that time had First Payment Defaults below pre-pandemic levels. Based upon this performance, we prudently increased our approval rates in mid-June and have focused on increasing approval rates for our returning customers. First Payment Defaults on newly-originated loans are normalizing to 2019 levels. We calculate First Payment Defaults, shown below, as the principal balance of any loan whose first payment becomes 30 days past due, divided by the aggregate principal balance of all loans originated during that same week. We regard First Payment Defaults to be an early indicator of credit performance as the outstanding principal balance of loans that have their first payment past due are regarded as more likely to default and result in a charge off. We continue to monitor the external environment and intend to continue to adjust approval rates, verification procedures and loan sizes accordingly.

Owned Principal Balance at December 31, 2020 was $1.64 billion, which was up from $1.57 billion at September 30, 2020. The increase is primarily driven by an increase in originations due to higher application and approval rates compared to last quarter. Average Daily Principal Balance for the three months ended December 31, 2020 and September 30, 2020 was $1.61 billion and $1.60 billion, respectively.

~~Impact on Net Change in Fair Value~~

Our net increase or decrease in fair value, {or "net change in fair value"), includes our current period principal net charge-offs and mark-to-market adjustments on our Fair Value Loans and our Fair Value Notes.

The fair value of our Loans Receivable at Fair Value increased $26.7 million in the fourth quarter of 2020 from the third quarter of 2020 driven by an increase in the fair value price of our loans from 101.9% as of September 30, 2020 to 103.5% as of December 31, 2020. The increase in the fair value price of our loans is due to (a) a decrease in the discount rate from 7.84% as of September 30, 2020 to 6.85% as of December 31, 2020 caused by declining interest rates and credit spreads, (b) a decrease in remaining cumulative charge-offs from 10.61% as of September 30, 2020 to 10.03% as of December 31, 2020 due to customers returning to repayment, and (c) an increase in average life from 0.77 years as of September 30, 2020 to 0.80 years as of December 31, 2020 due to ~~longer terms for our returning customers.~~

The fair value of our Asset-Backed Notes at Fair Value decreased $1.6 million in the fourth quarter of 2020 from the third quarter of 2020 driven by a slight increase in the weighted average price of our asset-backed notes from 101.10% at September 30, 2020 to 101.12% as of December 31, 2020.

~~Investment in New Products~~

We ended the fourth quarter of 2020 with $5.7 million of credit card receivables issued through a partner bank, with our credit card product available in 33 states. In addition, we ended the fourth quarter of 2020 with $6.0 million of auto loans. In November 2020, we decided to cease originating direct auto loans used to purchase a vehicle. We continue to invest in developing our secured personal loan product following the launch of the pilot of this new product in the second quarter of 2020. We believe that secured personal loans will complement our unsecured product and provide us with the opportunity to serve additional customers and offer larger loans. In the near term we expect to continue to make investments in both our credit card and secured personal loan products to expand the features and availability of these offerings.

~~COVID-19 Expenses~~

Our top priority throughout the crisis has been protecting the health, safety and welfare of our employees and customers. As a result, the three and twelve months ended December 31, 2020 includes approximately $0.6 million and $4.6 million, respectively, in COVID-19 expenses for items and services including sanitation kits, facilities equipment, contingency call center, payment option flyers, childcare relief, special medical enrollment, sick leave, emergency assistance fund and charitable contributions. The COVID-19 expenses were separable from our normal business operations and are not expected to recur once the pandemic subsides. These one-time COVID-19 related expenses are included in our adjustments to derive our Non-GAAP measures and our business practices have been updated to operate in the current environment. As such, we expect no further COVID-19 related adjustments in future periods.

~~Capital and Liquidity~~

Our balance sheet is characterized by relatively low leverage, and our term securitizations and warehouse line are non-recourse to Oportun Financial Corporation and our operating subsidiaries. Our term securitizations allow us to fund new loan originations for the remainder of each securitization’s revolving period. To provide sufficient collateral to maintain our outstanding low-cost securitization bonds, on July 8, 2020, the issuer redeemed all $200.0 million of outstanding Series 2017-B asset-backed notes. The revolving periods for the remaining securitizations have end

~~dates which range from February 2021 to July 2022.~~ In October 2020, due to the strong market demand for asset-backed notes, we raised $39.8 million, net of fees and expenses, by selling $41.3 million of retained bonds related to our 2019-A and 2018-B asset-backed securitizations.

As of December 31, 2020, we had $168.6 million of cash, cash equivalents and restricted cash with $438.2 million of Adjusted Tangible Book Value. Additionally, our business generated $152.9 million of cash from operations in the twelve months ended December 31, ~~2020. As~~2022 was $1.9 million, and was recorded through General, administrative and other on the Consolidated Statements of ~~December 31, 2020,~~Operations. This amount included expenses related to the retail location closures and all severance and benefits-related costs. While we ~~had $153.0 million undrawn capacity on~~do not expect any significant additional expenses to be incurred related to these closures, we are continually evaluating the performance of retail and partner locations. During the first quarter of 2021, pursuant to our ~~$400.0 million warehouse line that is committed through October 2021. Based upon our recent projections,~~retail network optimization plan we ~~have determined that we have more than 12 months of liquidity runway.~~

~~See Item 1A. Risk Factors included elsewhere in this report for further discussion~~closed 136 retail locations and reduced a portion of the ~~risks~~employee workforce who managed and ~~uncertainties relating to~~operated these retail locations. The income statement impact for the ~~COVID–19 pandemic. See~~ "~~Results of Operations~~" ~~included elsewhere in this report for further discussion of how certain trends and conditions impacted the three and~~ twelve months ended December 31, ~~2020.~~2021 was $12.8 million, and was recorded through General, administrative and other on the Consolidated Statements of Operations. This amount included expenses related to the retail location closures and all severance and benefits-related costs.

Key Financial and Operating Metrics

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

For a presentation of the actual impact of the election of the fair value option for the periods presented in the financial statements included elsewhere in this report, please see the next section, "Non-GAAP Financial Measures". The Fair Value Pro Forma information is presented in that section because it is non-GAAP presentation.

The following table and related discussion set forth key financial and operating metrics for our operations as of and for the years ended December 31, ~~2020~~2022 and ~~2019.~~2021. For similar financial and operating metrics and discussion of ~~the~~ our ~~2019~~2021 results compared to our ~~2018~~2020 results, refer to Part II. Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2021 as filed with the SEC on ~~February 28, 2020 (File No. 001-39050).~~

As of or for the Year Ended December 31,
(in thousands of dollars, except CAC) 2020 2019
Aggregate Originations $ 1,347,994 $ 2,051,836
Number of Loans Originated 449,362 726,964
Active Customers 651,600 793,254
Customer Acquisition Cost $ 199 $ 134
Owned Principal Balance at End of Period $ 1,639,626 $ 1,842,928
Managed Principal Balance at End of Period $ 1,895,410 $ 2,198,950
Average Daily Principal Balance $ 1,701,665 $ 1,624,347
30+ Day Delinquency Rate 3.7 % 4.0 %
Annualized Net Charge-Off Rate 9.8 % 8.3 %
Operating Efficiency 67.4 % 60.4 %
Adjusted Operating Efficiency 61.1 % 57.2 %
Return on Equity (9.4) % 14.7 %
Adjusted Return on Equity (3.0) % 14.9 %
March 1, 2022.


	As of or for the Year Ended December 31,
(in thousands of dollars)	2022			2021
Key Financial and Operating Metrics

Members (1)	1,877,260			1,479,660






Products (1)	2,006,245			1,545,463
Aggregate Originations	$	2,922,871		$	2,295,012
30+ Day Delinquency Rate	5.6		%	3.9		%
Annualized Net Charge-Off Rate	10.1		%	6.8		%


Return on Equity	(13.5)		%	8.9		%
Adjusted Return on Equity	12.1		%	14.7		%


Other Metrics


Managed Principal Balance at End of Period	$	3,406,981		$	2,583,462
Owned Principal Balance at End of Period	$	3,098,609		$	2,272,864
Average Daily Principal Balance	$	2,740,318		$	1,756,170

(1) The 1,479,660 Members and 1,545,463 Products reported as of December 31, 2021 reflect our previously defined and disclosed "Members" and "Products" metrics. Beginning January 1, 2022, we modified our definition of Members to reflect the long-term nature of our relationship with our members and modified our definition of Products to reflect multiproduct adoption by our members.

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

Members

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

Members as of December 31, 2022 grew to 1.9 million, as compared to 1.5 million as of December 31, 2021. This increase was due to the success in our marketing efforts during the year.

Products

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

Products as of December 31, 2022, grew to 2.0 million, compared to the 1.5 million Products we had as of December 31, 2021. This increase was due to growth in both our credit products and our digital banking products.

Aggregate Originations

Aggregate Originations ~~decreased~~increased to ~~$1.35~~$2.92 billion for the year ended December 31, ~~2020~~2022 from ~~$2.05~~$2.30 billion for the year ended December 31, ~~2019,~~2021, representing a ~~34.3% decrease.~~27.4% increase. The ~~decrease~~increase is primarily driven by a reduced number of applications attributable both to increased economic uncertainty surrounding the COVID-19 pandemic, as well as a redirection of our marketing efforts. Further, the decrease is due to the reduced number of loans originated attributable to the proactive measures we implemented to tighten our lending criteria and underwriting practices given the current COVID-19 pandemic. We originated 449,362 and 726,964 loans for the year ended December 31, 2020 and 2019, respectively, representing a decrease of 38.2%. The decrease in Aggregate Originations was partially offset by an increasegrowth in average loan size ~~as our updated underwriting criteria favors returning customers who generally receive larger loans.~~

~~Active Customers~~

~~As of December 31, 2020, Active Customers decreased by 17.9% from December 31, 2019~~ due to a focus on returning members with historically lower ~~originations as~~credit risk and a ~~result~~larger number of ~~a reduction in application volume attributable to economic uncertainty surrounding~~loans originated. We originated 764,516 and 753,474 loans for the ~~COVID-19 pandemic, tightened lending criteria and underwriting practices, as well as a redirection in marketing efforts.~~

~~Customer Acquisition Cost~~

~~For the year~~years ended December 31, ~~2020~~2022 and ~~2019, our Customer Acquisition Cost was $199 and $134 respectively, representing an increase of 48.6% for the year ended December 31, 2020.~~ 2021, respectively. The increase is primarily due to the decline in number of loans originated period over period due to the COVID-19 pandemic. The increase is partially offset by the lower sales and marketing expenses due to the temporary redeployment of retail employees to assist with customer service, which concluded August 31, 2020, and the reduction in direct mail volume due to the redirection of our marketing efforts.

~~Managed Principal Balance at End of Period~~

~~Managed Principal Balance at End of Period as of December 31, 2020 decreased by 13.8% from December 31, 2019~~ driven by fewer loans originated year-over-year. This decline is a result of a reduced number of applications attributable both to increased economic uncertainty surrounding the COVID-19 pandemic, the proactive measures we implemented to tighten our lending criteria and underwriting practices, as well as a redirection of our marketing efforts.

~~Average Daily Principal Balance~~

~~Average Daily Principal Balance increased by 4.8% from $1.62 billion for the year ended December 31, 2019 to $1.70 billion for the year ended December 31, 2020. This~~ increase is primarily driven by ~~increases in average loan size and growth in originations prior~~an increased number of applications due to ~~the issuance of shelter in place orders which began in March 2020 as a result of the onset of the COVID-19 pandemic. These increases are~~higher demand, partially offset by a ~~decrease~~reduction in ~~Aggregate Originations, which has declined due to the impact of the COVID-19 pandemic.~~our approval rate as we tightened credit.

30+ Day Delinquency Rate

Our 30+ Day Delinquency Rate ~~was 3.7% and 4.0%~~increased to 5.6% as of December 31, ~~2020~~2022 from 3.9% as of December 31, 2021. The increase reflects the higher mix of first-time borrowers and ~~2019, respectively. The decrease is due~~the return to ~~the effectiveness of our collections tools and payment options that have helped our customers manage through the pandemic as well as tighter~~pre-pandemic underwriting criteria later in 2021. In mid-2022, we took numerous actions to improve the credit performance on newly originated loans; including significantly tightening our underwriting standards for ~~loans originated since the pandemic began~~.all borrowers, particularly for higher risk digital marketing channels, and adjusting loan size based on member free cash flow. We also focused lending towards existing and returning members to address rising delinquencies.

Annualized Net Charge-Off Rate

Annualized Net Charge-Off Rate for the years ended December 31, ~~2020~~2022 and ~~2019~~2021 was ~~9.8%~~10.1% and ~~8.3%~~6.8%, respectively. ~~Net charge-offs increased~~The increase is primarily driven by a higher mix of first-time borrowers in 2022 compared to 2021. In mid-2022, we took numerous actions to improve the credit performance on newly originated loans; including significantly tightening our underwriting standards for all borrowers, particularly for higher risk digital marketing channels, and adjusting loan size based on member free cash flow. We also focused lending towards existing and returning members to improve credit outcomes as existing and returning members historically have had lower loss rates. Further, due to ~~both increased unemployment caused by the economic uncertainty surrounding~~credit tightening in response to the COVID-19 pandemic and ~~additional charge-offs for some loans impacted by~~government stimulus payments our Annualized Net Charge-Off Rate was lower in 2021. We anticipate that this rate may increase in 2023 due to the impact of inflation and other macroeconomic factors on members.

Return on Equity and Adjusted Return on Equity

For the year ended December 31, 2022 and 2021, Return on Equity was (13.5)% and 8.9%, respectively. The decrease in Return on Equity is primarily due to lower net income, primarily as a result of the goodwill impairment.

For the year ended December 31, 2022 and 2021, Adjusted Return on Equity was 12.1% and 14.7%, respectively. The decrease in Adjusted Return on Equity is primarily due to lower Adjusted Net Income. Adjusted Net Income was lower due to higher credit losses, higher cost of funds and decreased fair value of our loan portfolio as a result of higher loss and discount rate assumptions. For a reconciliation of Return on Equity to Adjusted Return on Equity, see “Non–GAAP Financial Measures.”

Historical Credit Performance

Our Annualized Net Charge-off Rate ranged between 7% and 9% from 2011 to 2019 and was 9.8% in 2020, a modest variance above this range during the pandemic. Due to credit tightening in response to the COVID-19 pandemic ~~deemed unlikely~~and government stimulus payments our Annualized Net Charge-Off Rate decreased to ~~be collectible.~~6.8% in 2021. Our Annualized Net Charge-off Rate increased to 10.1% in 2022 primarily due to a higher mix of first-time borrowers in 2021 and the first half of 2022. In response to this increase, we tightened our credit underwriting standards and focused lending towards existing and returning members to improve credit outcomes. Consistent with our charge-off policy, we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past ~~due. As~~due and charge-off a ~~result of the pandemic and based upon our analysis of loan performance following natural disasters or other emergencies, more loans have been determined to be uncollectible prior to reaching 120~~credit

card account when it is 180 days contractually past ~~due, resulting in $21.6 million of higher charge-offs for the year ended December 31, 2020.~~

~~Operating Efficiency and Adjusted Operating Efficiency~~

For the year ended December 31, 2020 and 2019, Operating Efficiency was 67.4%, and 60.4%, respectively and Adjusted Operating Efficiency was 61.1% and 57.2%, respectively. The increase in Operating Efficiency is due to operating expenses growing faster than total revenue. Increased operating expenses were driven by $21.9 million in investments in new products, as well as accelerated investments in new products and channels, technology, data and digital capabilities. Adjusted Operating Efficiency excludes COVID-19 expenses, stock-based compensation expense and litigation reserve. For a reconciliation of Operating Efficiency to Adjusted Operating Efficiency, see “Non-GAAP Financial Measures—Fair Value Pro Forma.”

~~Return on Equity and Adjusted Return on Equity~~due.

~~For the year ended December 31, 2020 and 2019, Return on Equity was (9.4)% and 14.7%, respectively, and Adjusted Return on Equity was (3.0)% and 14.9%, respectively.~~ The decreases in Return on Equity and Adjusted Return on Equity are primarily due to lower net income. Net income was lower due to higher charge-offs and the decrease in fair value of our Far Value Loans and Fair Value Notes on an aggregate basis as a result of macro-economic changes associated with the COVID-19 pandemic. For a reconciliation of Return on Equity to Adjusted Return on Equity, see “Non–GAAP Financial Measures—Fair Value Pro Forma.”

~~Historical Credit Performance~~

In addition to monitoring our loss and delinquency performance on an owned portfolio basis, we also monitor the performance of our loans by the period in which the loan was disbursed, generally years or quarters, which we refer to as a vintage. We calculate net lifetime loan loss rate by vintage as a percentage of original principal balance. Net lifetime loan loss rates equal the net lifetime loan losses for a given year through December 31, ~~2020~~2022 divided by the total origination loan volume for that year. ~~Loans are charged off no later than after becoming 120 days contractually delinquent.~~

The below chart and table shows our net lifetime loan loss rate for each annual vintage of our personal loan product since we began lending in ~~2006.~~2006, excluding loans originated from July 2017 to August 2020 under a loan program for borrowers who did not meet the qualifications for our core loan origination program. 100% of those loans were sold pursuant to a whole loan sale agreement. We have managed to stabilize cumulative net ~~lifetime~~ loan losses since the financial crisis that started in 2008. We even achieved a net lifetime loan loss rate of 5.5% during the peak of the recession in 2009. The evolution of our credit models has allowed us to increase our average loan size and commensurately extend our average loan terms. Cumulative net lifetime loan losses for the 2015, 2016, 2017, and 2018 vintages increased partially due to the delay in tax

refunds in 2017 and 2019, the impact of natural disasters such as Hurricane Harvey, and the longer duration of the loans. The 2018 and 2019 vintages are increasing due to the COVID-19 pandemic. The ~~chart below includes all personal~~2021 vintage is running higher than prior vintages primarily due to a higher percentage of loan ~~originations by vintage, excluding loans originated under our previous access~~disbursements to new members. We have tightened credit and began reducing loan ~~program for customers who do not meet~~volumes to new and returning members in the ~~qualifications~~third quarter of ~~our core loan origination program.~~2021 and reduced further in the second half of 2022.

Year of Origination
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Net lifetime loan losses as of December 31, 2020 as a percentage of original principal balance 7.7 % 8.9 % 5.5 % 6.4 % 6.2 % 5.6 % 5.6 % 6.1 % 7.1 % 8.0 % 8.3 % 9.4 %* 5.7 %*
Outstanding principal balance as of December 31, 2020 as a percentage of original amount disbursed — % — % — % — % — % — % — % — % — % — % 0.6 % 11.5 % 50.5 %
Dollar weighted average original term for vintage in months 9.3 9.9 10.2 11.7 12.3 14.5 16.4 19.1 22.3 24.2 26.3 29.0 30.0


	Year of Origination
	2007		2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
Dollar weighted average original term for vintage in months	9.3		9.9		10.2		11.7		12.3		14.5		16.4		19.1		22.3		24.2		26.3		29.0		30.0		32.0		33.3
Net lifetime loan losses as of December 31, 2022 as a percentage of original principal balance	7.7	%	8.9	%	5.5	%	6.4	%	6.2	%	5.6	%	5.6	%	6.1	%	7.1	%	8.0	%	8.2	%	9.8	%	10.6	%*	7.5	%*	8.7	%*
Outstanding principal balance as of December 31, 2022 as a percentage of original amount disbursed	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%	2.2	%	14.5	%	50.6	%

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

Seasonality

Our quarterly results of operations may not necessarily be indicative of the results for the full year or the results for any future periods. Our business is highly seasonal, and the fourth quarter is typically our strongest quarter in terms of loan originations. For the three months ended December 31, 2022, our business exhibited lower than typical originations due to our credit tightening. Prior to the pandemic, we historically experienced a seasonal decline in credit performance in the fourth quarter primarily attributable to competing demand of our borrowers' available cash flow around the holidays. General increases in our borrowers’ available cash flow in the first quarter, including from cash received from tax refunds, temporarily reduces our borrowers’ borrowing needs. We experienced this seasonal trend in 2022, consistent with years prior to the COVID-19 pandemic.

Results of Operations

The following tables and related discussion set forth our Consolidated Statements of Operations for the years ended December 31, ~~2020~~2022 and ~~2019.~~2021. For a discussion regarding our operating and financial data for the year ended December 31, ~~2019,~~2021, as compared to the same period in ~~2018,~~2020, refer to Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2021, as filed with the SEC on ~~February 28, 2020 (File No. 001-39050).~~March 1, 2022.


		Years Ended December 31,				Years Ended December 31,
(in thousands of dollars)	(in thousands of dollars)	2020		2019			(in thousands of dollars)	2022		2021
Revenue	Revenue						Revenue
Interest income	Interest income	$	545,466	$	544,126		Interest income	$	876,114	$	575,839
Non-interest income	Non-interest income	38,268		56,022			Non-interest income	76,431		50,943
Total revenue	Total revenue	583,734		600,148			Total revenue	952,545		626,782
Less:	Less:						Less:
Interest expense	Interest expense	58,368		60,546			Interest expense	93,046		47,669
Provision (release) for loan losses		—		(4,483)
Total net increase (decrease) in fair value		(190,306)		(97,237)

Total net decrease in fair value							Total net decrease in fair value	(218,842)		(48,632)
Net revenue	Net revenue	335,060		446,848			Net revenue	640,657		530,481
Operating expenses:	Operating expenses:						Operating expenses:
Technology and facilities	Technology and facilities	129,795		101,981			Technology and facilities	216,120		139,564
Sales and marketing	Sales and marketing	89,375		97,153			Sales and marketing	110,033		116,882
Personnel	Personnel	106,446		90,647			Personnel	154,850		115,833
Outsourcing and professional fees	Outsourcing and professional fees	47,067		57,243			Outsourcing and professional fees	67,630		57,931
General, administrative and other	General, administrative and other	20,471		15,392			General, administrative and other	58,838		37,480
Goodwill impairment							Goodwill impairment	108,472		—
Total operating expenses	Total operating expenses	393,154		362,416			Total operating expenses	715,943		467,690
Income (loss) before taxes	Income (loss) before taxes	(58,094)		84,432			Income (loss) before taxes	(75,286)		62,791
Income tax expense (benefit)		(13,012)		22,834
Income tax expense							Income tax expense	2,458		15,377
Net income (loss)	Net income (loss)	$	(45,082)	$	61,598		Net income (loss)	$	(77,744)	$	47,414

Total revenue

Year Ended December 31, 2020 vs. 2019 Change
(in thousands of dollars) 2020 2019 $ %
Revenue
Interest income $ 545,466 $ 544,126 $ 1,340 0.2 %
Non-interest income 38,268 56,022 (17,754) (31.7) %
Total revenue $ 583,734 $ 600,148 $ (16,414) (2.7) %
Percentage of total revenue:
Interest income 93.4 % 90.7 %
Non-interest income 6.6 % 9.3 %
Total revenue 100.0 % 100.0 %

~~Total Revenue. Total revenue decreased by $16.4 million, or 2.7%, from $600.1 million for 2019 to $583.7 million for 2020.~~


	Year Ended December 31,						2022 vs. 2021 Change
(in thousands of dollars)	2022			2021				$		%
Revenue
Interest income	$	876,114		$	575,839			$	300,275	52.1	%
Non-interest income	76,431			50,943				25,488		50.0	%
Total revenue	$	952,545		$	626,782			$	325,763	52.0	%
Percentage of total revenue:
Interest income	92.0		%	91.9		%
Non-interest income	8.0		%	8.1		%
Total revenue	100.0		%	100.0		%

Interest income. Total interest income increased by ~~$1.3~~$300.3 million, or ~~0.2%~~52.1%, from ~~$544.1~~$575.8 million for ~~2019~~2021 to ~~$545.5~~$876.1 million for ~~2020.~~2022. The increase is primarily attributable to growth in our Average Daily Principal Balance, which grew from ~~$1.62~~$1.76 billion for ~~2019~~2021 to ~~$1.70~~$2.74 billion for ~~2020~~2022, an increase of ~~4.8%~~56.0%. The increase ~~is the result of the stabilization of the portfolio subsequent to the issuance of shelter in place orders which began in March 2020 as a result of the onset of the COVID-19 pandemic and a strong rebound in originations beginning in the second quarter of 2020 and continuing through year-end. This~~ was partially offset by a decrease in portfolio yield of ~~143~~82 basis points ~~as we originated more loans~~in the year ended December 31, 2022 compared to the year ended December 31, 2021 driven by our tightening of credit underwriting standards and focusing lending towards existing and returning ~~customers, who~~members in the second half of 2022. Existing and returning members generally receive lower APRs, but historically have lower loss rates ~~due~~compared to ~~having tightened our underwriting criteria in response to the COVID-19 pandemic and our decision to cap the APR at 36% on all~~ new ~~originations as of August 6, 2020, which reduced the interest rates and origination fees on new loans.~~members.

Non-interest income. Total non-interest income ~~decreased~~increased by ~~$17.8~~$25.5 million, or ~~31.7%~~50.0%, from ~~$56.0~~$50.9 million for ~~2019~~2021 to ~~$38.3~~$76.4 million for ~~2020. Under~~2022. This increase is primarily due to $37.5 million attributable to Digit subscription income and $6.7 million increase in servicing revenue. This was partially offset by decreased gain on loans sold of $21.5 million under our whole loan sale programs ~~gain on loans sold decreased by $16.2 million, or 44.4%~~ due to ~~a decline in loans sold resulting from lower originations as a result~~the expiration of ~~the impact of the COVID-19 pandemic and~~ our ~~decision to sell 10% versus 15% of originated loans.~~whole loan sale agreement on March 4, 2022.

See Note 2, Summary of Significant Accounting Policies, and Note ~~12,~~ 13, Revenue, of the Notes to the Consolidated Financial Statements included elsewhere in this report for further discussion on our interest income, non-interest income and revenue.

5545

Interest expense


		Year Ended December 31,						2020 vs. 2019 Change				Year Ended December 31,								2022 vs. 2021 Change
(in thousands of dollars)	(in thousands of dollars)	2020			2019			$		%			(in thousands of dollars)	2022			2021				$		%
Interest expense	Interest expense	$	58,368		$	60,546		$	(2,178)	(3.6)	%		Interest expense	$	93,046		$	47,669			$	45,377	95.2	%
Percentage of total revenue	Percentage of total revenue	10.0		%	10.1		%						Percentage of total revenue	9.8		%	7.6		%
Cost of Debt	Cost of Debt	4.1		%	4.4		%						Cost of Debt	3.7		%	3.1		%
Leverage as a percentage of Average Daily Principal Balance	Leverage as a percentage of Average Daily Principal Balance	83.8		%	85.5		%						Leverage as a percentage of Average Daily Principal Balance	91.2		%	88.5		%


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

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


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


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


TABLE OF CONTENTS
~~GLOSSARY~~
Forward-Looking Statements		53

PART I
Item 1.	Business	81
Item 1A.	Risk Factors	1613
Item 1B.	Unresolved Staff Comments	4437
Item 2.	Properties	4437
Item 3.	Legal Proceedings	4437
Item 4.	Mine Safety Disclosures	4437

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4538
Item 6.	~~Selected Financial Data~~Reserved	4538
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4639
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	7259
Item 8.	Financial Statements and Supplementary Data	7561
	Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)	7561
	Consolidated Balance Sheets	7763
	Consolidated Statements of ~~Operations and Comprehensive Income~~Operations	7864
	Consolidated Statements of Changes in Stockholders' Equity	7965
	Consolidated Statements of Cash Flow	8066
	Notes to the Consolidated Financial Statements	8167
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~101~~90
Item 9A.	Controls and Procedures	~~101~~90
Item 9B.	Other Information	~~102~~91
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	91

	GLOSSARY	92

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~103~~94
Item 11.	Executive Compensation	~~103~~94
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	~~103~~94
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~103~~94
Item 14.	Principal Accounting Fees and Services	~~103~~94

PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~104~~95
Item 16.	Form 10-K Summary	~~104~~95

Exhibit Index		~~105~~96
Signatures		~~108~~100


~~Term or Abbreviation~~						~~Definition~~
~~30+ Day Delinquency Rate~~						Unpaid principal balance for our owned loans and credit card receivables that are 30 or more calendar days contractually past due as of the end of the period divided by Owned Principal Balance as of such date
~~Active Customers~~						Number of customers with an outstanding loan or an active credit card serviced by us at the end of a period. Active Customers includes customers whose loans are owned by us and loans that have been sold that we continue to service. Customers with charged-off accounts are excluded from Active Customers
~~Adjusted EBITDA~~						Adjusted EBITDA is a non-GAAP financial measure calculated as net income (loss), adjusted for the impact of our election of the fair value option and further adjusted to eliminate the effect of the following items: income tax expense (benefit), COVID-19 expenses, stock-based compensation expense, depreciation and amortization, impairment charges, litigation reserve, origination fees for Fair Value Loans, net and fair value mark-to-market adjustment
~~Adjusted Earnings Per Share ("EPS")~~						Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income by adjusted weighted-average diluted common shares outstanding. Weighted-average diluted common shares outstanding have been adjusted to reflect the conversion of all preferred shares as of the beginning of each annual period
~~Adjusted Net Income~~						Adjusted Net Income is a non-GAAP financial measure calculated by adjusting our net income (loss), for the impact of our election of the fair value option, and further adjusted to exclude income tax expense (benefit), COVID-19 expenses, stock-based compensation expense, impairment charges and litigation reserve, net of tax
~~Adjusted Operating Efficiency~~						Adjusted Operating Efficiency is a non-GAAP financial measure calculated by dividing total operating expenses (excluding COVID-19 expenses, stock-based compensation expense, impairment charges and litigation reserve) by Fair Value Pro Forma Total Revenue
~~Adjusted Return on Equity ("ROE")~~						~~Adjusted Return on Equity is a non-GAAP financial measure calculated by dividing annualized Adjusted Net Income by Average Fair Value Pro Forma total stockholders’ equity~~
~~Adjusted Tangible Book Value~~						~~Fair Value Pro Forma total stockholders' equity, excluding intangible assets and system development costs~~
~~Adjusted Tangible Book Value Per Share~~						Adjusted Tangible Book Value divided by common shares outstanding at period end. Common shares outstanding at period end have been adjusted to reflect the conversion of all preferred shares as of the beginning of each annual period.
~~Aggregate Originations~~						Aggregate amount disbursed to borrowers and purchases and cash advances, net of returns, on credit cards during a specific period. Aggregate Originations excludes any fees in connection with the origination of a loan
~~Annualized Net Charge-Off Rate~~						~~Annualized loan and credit card principal losses (net of recoveries) divided by the Average Daily Principal Balance of owned loans and credit card receivables for the period~~
~~AOCI~~						~~Accumulated other comprehensive income (loss)~~
~~APR~~						~~Annual Percentage Rate~~
~~Average Daily Debt Balance~~						~~Average of outstanding debt principal balance at the end of each calendar day during the period~~
~~Asset-Backed Notes at Fair Value (or "Fair Value Notes")~~						~~All asset-backed notes issued by Oportun on or after January 1, 2018~~
~~Average Daily Principal Balance~~						~~Average of outstanding principal balance of owned loans and credit card receivables at the end of each calendar day during the period~~
~~Board~~						~~Oportun’s Board of Directors~~
~~Book Value~~						~~Total assets less total liabilities, or equal to total stockholders' equity~~
~~Book Value Per Share~~						~~Book Value divided by common shares outstanding at period end~~
~~Cost of Debt~~						~~Annualized interest expense divided by Average Daily Debt Balance~~
~~Customer Acquisition Cost (or "CAC")~~						Sales and marketing expenses, which include the costs associated with various paid marketing channels, including direct mail, digital marketing and brand marketing and the costs associated with our telesales and retail operations divided by number of loans originated and new credit cards activated to new and returning customers during a period
~~Emergency Hardship Deferral~~						Any receivable that currently has one or more payments deferred and added at the end of the loan payment schedule in connection with a local or wide-spread emergency declared by local, state or federal government such as a natural disaster, government shutdown or pandemic
~~Fair Value Loans (or "Loans Receivable at Fair Value")~~						All loans receivable held for investment that were originated on or after January 1, 2018. Upon the adoption of ASU 2019-05 as of January 1, 2020 all loans receivable held for investment are reported in this line item for all prospective reporting periods
~~Fair Value Pro Forma~~						In order to facilitate comparisons to periods prior to January 1, 2018, certain metrics included in this presentation have been shown on a pro forma basis, or the Fair Value Pro Forma, as if we had elected the fair value option since our inception for all loans originated and held for investment and all asset-backed notes issued
~~Fair Value Pro Forma Total Revenue~~						Fair Value Pro Forma Total Revenue is calculated as the sum of Fair Value Pro Forma interest income and non-interest income. Fair Value Pro Forma interest income includes interest on loans and fees; origination fees are recognized upon disbursement. Non-interest income includes gain on sales, servicing fees and other income. We adopted ASU 2019-05 as of January 1, 2020 and as a result Fair Value Pro Forma Total Revenue and GAAP Total Revenue are equal for all prospective reporting periods
~~Fair Value Notes (or "Asset-Backed Notes at Fair Value")~~						~~All asset-backed notes issued by Oportun on or after January 1, 2018~~
~~FICO® score or FICO®~~						~~A credit score created by Fair Isaac Corporation~~
~~First Payment Defaults~~						~~Calculated as the principal balance of any loan whose first payment becomes 30 days past due, divided by the aggregate principal balance of all loans originated during that same period~~
~~GAAP~~						~~Generally Accepted Accounting Principles~~


~~Term or Abbreviation~~						~~Definition~~
~~Initial Fair Value Loans~~						~~All loans receivable held for investment that were originated on or after January 1, 2018~~
~~Leverage~~						~~Average Daily Debt Balance divided by Average Daily Principal Balance~~
~~Loans Receivable at Amortized Cost~~						~~Loans held for investment that were originated prior to January 1, 2018. Upon the adoption of ASU 2019-05 as of January 1, 2020 this line item has been eliminated for all prospective reporting periods~~
~~Loans Receivable at Fair Value (or "Fair Value Loans")~~						~~All Initial Fair Value Loans, together with the Subsequent Fair Value Loans~~
~~Managed Principal Balance at End of Period~~						~~Total amount of outstanding principal balance for all loans and credit card receivables, including loans sold, which we continue to service, at the end of the period~~
~~Net Revenue~~						~~Net Revenue is calculated by subtracting interest expense and provision (release) for loan losses from total revenue and adding the net increase (decrease) in fair value.~~
~~Operating Efficiency~~						~~Total operating expenses divided by total revenue~~
~~Owned Principal Balance at End of Period~~						~~Total amount of outstanding principal balance for all loans and credit card receivables, excluding loans sold, at the end of the period~~
~~Portfolio Yield~~						~~Annualized interest income as a percentage of Average Daily Principal Balance~~
~~Principal Balance~~						Original principal balance reduced by principal payments received to date for our personal loans. Purchases and cash advances, reduced by returns and principal payments received to date for our credit cards
~~Return on Equity~~						~~Annualized net income divided by average stockholders' equity for a period~~
~~Subsequent Fair Value Loans~~						~~All loans receivable held for investment, previously measured at amortized cost for which we elected the fair value option upon adoption of ASU 2019-05, effective January 1, 2020~~

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


Topic
Overview						4639
Key Financial and Operating Metrics						5241

Seasonality						44
Historical Credit Performance						5342
Results of Operations						5545
Fair Value Estimate Methodology for Loans Receivable at Fair Value						6050
Non-GAAP Financial Measures						6351
Liquidity and Capital Resources						6854
~~Off-Balance Sheet Arrangements~~						70
Critical Accounting Policies and Significant Judgments and Estimates						7057
Recently Issued Accounting Pronouncements						7158


Delinquencies and Deferrals
(Percentage of Outstanding Principal Balance of Owned Receivables)

Days Delinquent	As of 3/31/2020	As of 4/30/2020	As of 5/31/2020	As of 6/30/2020	As of 7/31/2020	As of 8/31/2020	As of 9/30/2020	As of 10/31/2020	As of 11/30/2020	As of 12/31/2020
0	88.9%	90.2%	87.8%	89.5%	90.8%	90.0%	90.3%	91.3%	90.0%	90.7%
1-7	3.3	2.6	3.5	3.2	2.6	3.2	2.9	2.4	3.3	2.6
8-14	2.2	1.6	1.9	1.8	1.5	1.5	1.6	1.2	1.6	1.5
15-29	1.8	1.6	2.8	1.9	1.8	1.8	1.7	1.5	1.6	1.6
30-59	1.7	1.8	1.7	1.7	1.6	1.8	1.7	1.7	1.5	1.6
60-89	1.2	1.3	1.3	1.0	1.0	1.0	1.1	1.1	1.1	1.1
90-119	0.9	1.0	1.0	1.0	0.8	0.7	0.7	0.8	0.9	0.9
120+ (1)	—	—	—	—	—	—	—	—	—	—

30+	3.8	4.0	4.0	3.7	3.4	3.5	3.5	3.6	3.5	3.7

Emergency Hardship Deferrals (2)	6.1	14.6	7.6	5.0	3.9	2.8	1.5	1.0	0.9	1.4
(1) The 120+ delinquent balances are excluded from the 30+ delinquency rate and percent current rate calculations because these balances are charged off on the last day of a given month.
(2) Emergency Hardship Deferrals excluded from delinquent balances.


	Start of Pandemic (1)	Recovery									Quarterly Comparison
P/P (2)	-23%	-64%	12%	46%	24%	19%	14%	15%	13%	6%	92%	48%
Y/Y	-16%	-71%	-71%	-60%	-54%	-45%	-33%	-31%	-25%	-28%	-44%	-28%
CAC	$215	$574	$461	$298	$240	$210	$180	$162	$160	$146	$207	$155
(1) On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This coincided with a decline in originations.
(2) 'P/P' refers to period-over-period and is month-over-month from March '20 through December '20 and quarter-over-quarter for the quarterly comparisons for 3Q20 and 4Q20.


	As of or for the Year Ended December 31,
(in thousands of dollars, except CAC)	2020			2019
Aggregate Originations	$	1,347,994		$	2,051,836
Number of Loans Originated	449,362			726,964
Active Customers	651,600			793,254
Customer Acquisition Cost	$	199		$	134
Owned Principal Balance at End of Period	$	1,639,626		$	1,842,928
Managed Principal Balance at End of Period	$	1,895,410		$	2,198,950
Average Daily Principal Balance	$	1,701,665		$	1,624,347


30+ Day Delinquency Rate	3.7		%	4.0		%
Annualized Net Charge-Off Rate	9.8		%	8.3		%
Operating Efficiency	67.4		%	60.4		%
Adjusted Operating Efficiency	61.1		%	57.2		%
Return on Equity	(9.4)		%	14.7		%
Adjusted Return on Equity	(3.0)		%	14.9		%


	Year Ended December 31,						2022 vs. 2021 Change
(in thousands, except percentages)	2022			2021				$		%
Goodwill impairment	$	108,472		$	—			$	108,472	*
Percentage of total revenue	11.4		%	—		%


	Three Months Ended
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Mar 31, 2019
Weighted average portfolio yield over the remaining life of the loans	30.17	%	30.50	%	30.78	%	30.74	%	31.45	%	32.08	%	32.43	%	32.59	%
Less: Servicing fee	(5.00)	%	(5.00)	%	(5.00)	%	(5.00)	%	(5.00)	%	(5.00)	%	(5.00)	%	(5.00)	%
Net portfolio yield	25.17	%	25.50	%	25.78	%	25.74	%	26.45	%	27.08	%	27.43	%	27.59	%
Multiplied by: Weighted average life in years	0.796		0.775		0.797		0.903		0.814		0.781		0.792		0.804
Pre-loss cash flow	20.03	%	19.75	%	20.54	%	23.25	%	21.53	%	21.13	%	21.67	%	22.07	%
Less: Remaining cumulative charge-offs	(10.03)	%	(10.61)	%	(12.73)	%	(14.56)	%	(9.61)	%	(9.87)	%	(10.05)	%	(10.00)	%
Net cash flow	10.00	%	9.14	%	7.81	%	8.69	%	11.92	%	11.26	%	11.62	%	12.07	%
Less: Discount rate multiplied by average life	(5.45)	%	(6.07)	%	(7.04)	%	(11.54)	%	(6.33)	%	(6.19)	%	(6.62)	%	(7.09)	%
Gross fair value premium (discount) as a percentage of loan principal balance	4.55	%	3.07	%	0.77	%	(2.85)	%	5.59	%	5.07	%	5.00	%	4.98	%
Less: Accrued interest and fees as a percentage of loan principal balance	(1.06)	%	(1.15)	%	(1.35)	%	(1.11)	%	(1.05)	%	(0.97)	%	(0.93)	%	(0.97)	%
Fair value premium (discount) as a percentage of loan principal balance	3.49	%	1.92	%	(0.58)	%	(3.96)	%	4.54	%	4.10	%	4.07	%	4.01	%
Discount Rate	6.85	%	7.84	%	8.84	%	12.78	%	7.77	%	7.93	%	8.38	%	8.86	%


Remaining Cumulative Charge-offs	Projected percentage change in the fair value of our Fair Value Loans		Projected change in net fair value recorded in earnings ($ in thousands)
120% of expected	(1.6)	%	$	(29,838)
110% of expected	(0.8)	%	(15,099)
100% of expected	—	%	—
90% of expected	0.8	%	15,288
80% of expected	1.6	%	30,971


Change in Interest Rates	Projected percentage change in the fair value of our Fair Value Loans		Projected percentage change in the fair value of our Fair Value Notes		Projected change in net fair value recorded in earnings ($ in thousands)
-100 Basis Points	0.7	%	1.5	%	$	(8,661)
-50 Basis Points	0.4	%	0.8	%	(4,465)
-25 Basis Points	0.2	%	0.4	%	(2,390)
Basis Interest Rate	—	%	—	%	—
+25 Basis Points	(0.2)	%	(0.3)	%	1,719
+50 Basis Points	(0.4)	%	(0.7)	%	3,752
+100 Basis Points	(0.7)	%	(1.4)	%	7,776


Remaining Cumulative Prepayments	Projected percentage change in the fair value of our Fair Value Loans		Projected change in net fair value recorded in earnings ($ in thousands)
120% of expected	(0.2)	%	$	(3,268)
110% of expected	(0.1)	%	(1,709)
100% of expected	—	%	—
90% of expected	0.1	%	1,679
80% of expected	0.2	%	3,523


	December 31, 2020						December 31, 2019						Period-to-period Change in FVPF
(in thousands)	As Reported		FV Adjustments		FV Pro Forma		As Reported		FV Adjustments		FV Pro Forma		$		%
Cash and cash equivalents	$	136,187	$	—	$	136,187	$	72,179	$	—	$	72,179	$	64,008	89	%
Restricted cash	32,403		—		32,403		63,962		—		63,962		(31,559)		(49)	%
Loans receivable (1)	1,696,526		—		1,696,526		1,920,559		5,011		1,925,570		(229,044)		(12)	%
Other assets	143,935		—		143,935		145,174		(6,579)		138,595		5,340		4	%
Total assets	2,009,051		—		2,009,051		2,201,874		(1,568)		2,200,306		(191,255)		(9)	%
Total debt (2)	1,413,694		—		1,413,694		1,549,223		1,557		1,550,780		(137,086)		(9)	%
Other liabilities	128,990		682		129,672		163,885		(1,621)		162,264		(32,592)		(20)	%
Total liabilities	1,542,684		682		1,543,366		1,713,108		(64)		1,713,044		(169,678)		(10)	%
Total stockholder's equity	466,367		(682)		465,685		488,766		(1,504)		487,262		(21,577)		(4)	%
Total liabilities and stockholders' equity	$	2,009,051	$	—	$	2,009,051	$	2,201,874	$	(1,568)	$	2,200,306	$	(191,255)	(9)	%


	Year Ended December 31, 2020						Year Ended December 31, 2019						Period-to-period Change in FVPF
(in thousands)	As Reported		FV Adjustments		FV Pro Forma		As Reported		FV Adjustments		FV Pro Forma			$		%
Revenue:
Interest income	$	545,466	$	—	$	545,466	$	544,126	$	(1,755)	$	542,371		$	3,095	1	%
Non-interest income	38,268		—		38,268		56,022		—		56,022			(17,754)		(32)	%
Total revenue	583,734		—		583,734		600,148		(1,755)		598,393			(14,659)		(2)	%
Less:
Interest expense	58,368		(889)		57,479		60,546		(1,412)		59,134			(1,655)		(3)	%
Provision (release) for loan losses	—		—		—		(4,483)		4,483		—			—		—	%
Net decrease in fair value	(190,306)		667		(189,639)		(97,237)		(13,361)		(110,598)			(79,041)		71	%
Net revenue	335,060		1,556		336,616		446,848		(18,187)		428,661			(92,045)		(21)	%
Operating expenses:
Technology and facilities	129,795		—		129,795		101,981		—		101,981			27,814		27	%
Sales and marketing	89,375		—		89,375		97,153		—		97,153			(7,778)		(8)	%
Personnel	106,446		—		106,446		90,647		—		90,647			15,799		17	%
Outsourcing and professional fees	47,067		—		47,067		57,243		—		57,243			(10,176)		(18)	%
General, administrative and other	20,471		—		20,471		15,392		—		15,392			5,079		33	%
Total operating expenses	393,154		—		393,154		362,416		—		362,416			30,738		8	%
Income (loss) before taxes	(58,094)		1,556		(56,538)		84,432		(18,187)		66,245			(122,783)		(185)	%
Income tax expense (benefit)	(13,012)		682		(12,330)		22,834		(5,018)		17,816			(30,146)		(169)	%
Net income (loss)	$	(45,082)	$	874	$	(44,208)	$	61,598	$	(13,169)	$	48,429		$	(92,637)	(191)	%


Components of Fair Value Mark-to-Market Adjustment - Fair Value Pro Forma (in thousands)	Year Ended December 31,
	2020		2019
Fair value mark-to-market adjustment on Fair Value Loans	$	(25,548)	$	39,460
Fair value mark-to-market adjustment on asset-backed notes	2,804		(15,253)
Total fair value mark-to-market adjustment - Fair Value Pro Forma	$	(22,744)	$	24,207


	Year Ended December 31,
Adjusted EBITDA (in thousands)	2020		2019
Net income (loss)	$	(45,082)	$	61,598
Adjustments:
Fair Value Pro Forma net income adjustment	874		(13,169)
Income tax expense (benefit)	(12,330)		17,816
COVID-19 expenses	4,632		—
Depreciation and amortization	20,220		14,101
Impairment	3,702		—
Stock-based compensation expense	19,488		19,183
Litigation reserve	8,750		905
Origination fees for Fair Value Loans, net	(900)		(1,908)
Fair value mark-to-market adjustment	22,744		(24,207)
Adjusted EBITDA (1)	$	22,098	$	74,319


	Year Ended December 31,
Adjusted Net Income (Loss) (in thousands)	2020			2019
Net income (loss)	$	(45,082)		$	61,598
Adjustments:
Fair Value Pro Forma net income adjustment	874			(13,169)
Income tax expense (benefit)	(12,330)			17,816
COVID-19 expenses	4,632			—
Impairment	3,702			—
Stock-based compensation expense	19,488			19,183
Litigation reserve	8,750			905
Adjusted income (loss) before taxes	(19,966)			86,333
Normalized income tax expense (benefit)	(5,738)			23,548
Adjusted Net Income (Loss) (1)	$	(14,228)		$	62,785
Income tax rate (2)	28.7		%	27.0		%


	Year Ended December 31,
Adjusted Net Income (in thousands)	2022			2021
Net income (loss)	$	(77,744)		$	47,414
Adjustments:

Income tax expense	2,458			15,377

Impairment	108,472			3,324
Stock-based compensation expense	27,620			18,857
Litigation reserve	2,750			—
Retail network optimization expenses	1,882			12,828
Acquisition and integration related expenses	29,682			10,648
Adjusted income before taxes	95,120			108,448
Normalized income tax expense	25,682			29,715
Adjusted Net Income	$	69,438		$	78,733
Income tax rate (1)	27.0		%	27.4		%


	Year Ended December 31,
(in thousands, except share and per share data)	2020		2019
Diluted earnings (loss) per share	$	(1.65)	$	0.40
Adjusted EPS
Adjusted Net Income (Loss)	$	(14,228)	$	62,785

Basic weighted-average common shares outstanding	27,333,271		9,347,103
Weighted-average common shares outstanding based on assumed convertible preferred conversion	—		14,005,753
Weighted average effect of dilutive securities:
Stock options	—		1,300,758
Restricted stock units (1)	—		101,671
Warrants	—		12,320
Diluted adjusted weighted-average common shares outstanding	27,333,271		24,767,605
Adjusted Earnings (Loss) Per Share	$	(0.52)	$	2.53


	December 31,		December 31,
Adjusted TBVPS (in thousands, except share and per share data)	2020		2019
Stockholders' equity	$	466,367	$	488,766
Adjustments:
Fair Value Pro Forma stockholders' equity adjustment	(682)		(1,504)
Intangible assets, net (1)	(27,483)		(18,455)
Adjusted Tangible Book Value	$	438,202	$	468,807

Total common shares outstanding	27,679,263		27,003,157

Book Value Per Share	$	16.85	$	18.10
Adjusted Tangible Book Value Per Share	$	15.83	$	17.36


	As of or for the Year Ended December 30,
(in thousands)	2020			2019
Operating Efficiency	67.4		%	60.4		%
Adjusted Operating Efficiency
Total revenue	$	583,734		$	600,148
Fair Value Pro Forma Total Revenue adjustments	—			(1,755)
Fair Value Pro Forma Total Revenue	583,734			598,393
Total operating expense	393,154			362,416
COVID-19 expenses	(4,632)			—
Impairment	(3,702)			—
Stock-based compensation expense	(19,488)			(19,183)
Litigation reserve	(8,750)			(905)

Total Fair Value Pro Forma adjusted operating expenses	$	356,582		$	342,328
Adjusted Operating Efficiency	61.1		%	57.2		%


Debt Facility	Scheduled Amortization Period Commencement Date	Interest Rate	Principal (in thousands)
Secured Financing	10/1/2021	LIBOR (minimum of 0.00%) + 2.45%	$	246,994
Asset-Backed Securitization-Series 2019-A Notes	8/1/2022	3.46%	279,412
Asset-Backed Securitization-Series 2018-D Notes	12/1/2021	4.50%	175,002
Asset-Backed Securitization-Series 2018-C Notes	10/1/2021	4.39%	275,000
Asset-Backed Securitization-Series 2018-B Notes	7/1/2021	4.18%	225,001
Asset-Backed Securitization-Series 2018-A Notes	3/1/2021	3.83%	200,004


			$	1,401,413


For the Years Ended December 31, 2020 and 2019
	Convertible Preferred Stock					Convertible Preferred and Common Stock Warrants			Common Stock
	Shares	Par Value		Additional Paid-in Capital		Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Deficit)		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2020	0	$	0	$	0	23,512	$	63	27,003,157	$	6	$	418,299	$	(162)	$	76,679	$	(6,119)	$	488,766
Issuance of common stock upon exercise of stock options	—	—		—		—	—		58,722	—		216		—		—		—		216



Stock-based compensation expense	—	—		—		—	—		—	—		19,488		—		—		—		19,488


Issuance of common stock upon exercise of warrants	—	—		—		(23,512)	(63)		10,972	—		253		—		—		(190)		—
Vesting of restricted stock units, net	—	—		—		—	—		606,412	—		(1,757)		—		—		—		(1,757)

Cumulative effect of adoption of ASU 2019-05	—	—		—		—	—		—	—		—		—		4,835		—		4,835
Change in post-termination benefit obligation	—	—		—		—	—		—	—		—		(99)		—		—		(99)


Net loss	—	—		—		—	—		—	—		—		—		(45,082)		—		(45,082)
Balance – December 31, 2020	0	$	0	$	0	0	$	0	27,679,263	$	6	$	436,499	$	(261)	$	36,432	$	(6,309)	$	466,367

Balance – January 1, 2019	14,043,977	$	16	$	257,887	24,959	$	130	2,935,249	$	3	$	44,411	$	(132)	$	52,662	$	(8,428)	$	346,549
Issuance of common stock upon exercise of stock options	—	—		—		—	—		105,909	—		791		—		—		—		791
Repurchase of stock options	—	—		—		—	—		—	—		(86)		—		—		—		(86)

Issuance of common stock upon initial public offering, net of offering costs	—	—		—		—	—		4,873,356	—		60,479		—		—		—		60,479
Stock-based compensation expense	—	—		—		—	—		—	—		19,183		—		—		—		19,183
Conversion of convertible preferred stock to common stock in connection with initial public offering	(14,043,977)	(16)		(257,887)		7,643	—		19,075,167	3		295,356		—		(37,456)		—		—

Issuance of convertible preferred stock and conversion to common stock upon exercise of warrants, net	—	—		—		(9,090)	(67)		3,969	—		67		—		—		—		—
Vesting of restricted stock units, net	—	—		—		—	—		9,507	—		(92)		—		—		—		(92)

Cumulative effect of adoption of ASC 842	—	—		—		—	—		—	—		—		—		(125)		—		(125)
Change in post-termination benefit obligation	—	—		—		—	—		—	—		—		(30)		—		—		(30)

Secured non-recourse affiliate note	—	—		—		—	—		—	—		(1,810)		—		—		2,309		499
Net income	—	—		—		—	—		—	—		—		—		61,598		—		61,598
Balance – December 31, 2019	0	$	0	$	0	23,512	$	63	27,003,157	$	6	$	418,299	$	(162)	$	76,679	$	(6,119)	$	488,766


For the Years Ended December 31, 2022 and 2021
	Common Stock
		Shares	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2022		32,004,396	$	6	$	526,338	$	83,846	$	(6,309)	$	603,881
Issuance of common stock upon exercise of stock options, net of shares withheld		546,312	1		(4,636)		—		—		(4,635)
Repurchase of stock options		(2,706)	—		(28)		—		—		(28)


Stock-based compensation expense		—	—		30,125		—		—		30,125



Vesting of restricted stock units, net of shares withheld		806,605	—		(4,000)		—		—		(4,000)





Net loss		—	—		—		(77,744)		—		(77,744)
Balance – December 31, 2022		33,354,607	$	7	$	547,799	$	6,102	$	(6,309)	$	547,599

Balance – January 1, 2021		27,679,263	$	6	$	436,499	$	36,432	$	(6,309)	$	466,628
Issuance of common stock upon exercise of stock options		240,047	—		3,272		—		—		3,272



Stock-based compensation expense		—	—		19,888		—		—		19,888



Vesting of restricted stock units, net of shares withheld		562,904	—		(6,502)		—		—		(6,502)



Issuance of equity on business acquisition		3,522,182	—		73,181		—		—		73,181

Net income		—	—		—		47,414		—		47,414
Balance – December 31, 2021		32,004,396	$	6	$	526,338	$	83,846	$	(6,309)	$	603,881


5.			Loans ~~Receivable at Amortized Cost, Net~~Held for Sale and Loans Sold


	December 22,
(in thousands)	2021
Goodwill	$	104,014
Acquired intangible assets	35,300
Developed technology	48,500
Cash and cash equivalents	20,499
Other assets acquired and liabilities assumed, net	(2,981)
Total purchase consideration	$	205,332


	Estimated fair values (in thousands)		Estimated useful life (years)
Member relationships	$	34,500	7.0
Trade name	800		3.0
Developed technology	48,500		7.0
Total acquired intangibles and developed technology	$	83,800


(in thousands)	Fiscal Years
2023	$	7,948
2024	7,798
2025	4,929
2026	4,929
2027	4,929
Thereafter	4,780
Total	$	35,313


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


	December 31, 2020
Variable Interest Entity	Initial note amount issued (a)		Initial collateral balance (b)		Current balance (a)		Current collateral balance (b)		Weighted average interest rate		Original revolving period
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Funding XIII, LLC (Series 2019-A)	$	279,412	$	294,118	$	283,299	$	299,237	3.46	%	3 years
Oportun Funding XII, LLC (Series 2018-D)	175,002		184,213		178,182		187,570		4.50	%	3 years
Oportun Funding X, LLC (Series 2018-C)	275,000		289,474		279,171		294,710		4.39	%	3 years
Oportun Funding IX, LLC (Series 2018-B)	225,001		236,854		226,653		241,237		4.18	%	3 years
Oportun Funding VIII, LLC (Series 2018-A)	200,004		222,229		200,004		226,242		3.83	%	3 years
Total asset-backed notes recorded at fair value	$	1,154,419	$	1,226,888	$	1,167,309	$	1,248,996


	December 31, 2022
Variable Interest Entity	Initial note amount issued (1)		Initial collateral balance (2)		Current balance (1)		Current collateral balance (2)		Weighted average interest rate (3)		Original revolving period (4)
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2022-3)	$	300,000	$	310,993	$	285,218	$	301,967	8.43	%	N/A
Oportun Issuance Trust (Series 2022-2)	400,000		410,212		313,689		344,218		7.03	%	N/A
Oportun Issuance Trust (Series 2022-A)	400,000		410,211		380,313		414,293		5.44	%	2 years
Oportun Issuance Trust (Series 2021-C)	500,000		512,762		435,951		518,929		2.48	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		432,123		519,182		2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		348,046		389,740		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		192,334		218,571		3.46	%	3 years




Total asset-backed notes recorded at fair value	$	2,754,412	$	2,834,687	$	2,387,674	$	2,706,900


	December 31, 2021
Variable Interest Entity	Initial note amount issued (1)		Initial collateral balance (2)		Current balance (1)		Current collateral balance (2)		Weighted average interest rate(3)		Original revolving period (4)
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2021-C)	$	500,000	$	512,762	$	497,774	$	525,436	2.48	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		498,487		521,174		2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		374,363		391,325		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		281,082		299,310		3.46	%	3 years




Total asset-backed notes recorded at fair value:	$	1,654,412	$	1,703,271	$	1,651,706	$	1,737,245


					December 31, 2022		December 31, 2021
Entity	Original Balance (1)		Maturity Date (2)	Interest Rate (3)	Balance		Balance
(in thousands)
Oportun Financial Corporation	$	150,000	September 14, 2026	SOFR (minimum of 0.00% + 9.00%	$	141,957	$	—
Oportun RF, LLC	116,000		May 1, 2024	SOFR (minimum of 0.00%) + 8.00%	80,922		114,092
Total acquisition and corporate financing	$	266,000			$	222,879	$	114,092