| Fair Value Measurements | Fair Value Measurements The following tables summarize, by level within the fair value hierarchy, the carrying amounts and estimated fair values of our assets and liabilities (i) measured at fair value on a recurring basis, (ii) measured at fair value on a nonrecurring basis, or (iii) disclosed but not carried at fair value in the consolidated balance sheets as of the dates presented. September 30, 2021 Fair Value Carrying Value Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 533,523 $ 533,523 $ — $ — $ 533,523 Restricted cash and restricted cash equivalents (1) 320,705 320,705 — — 320,705 Investments in AFS debt securities (2)(4) 197,203 128,537 68,666 — 197,203 Student loans (2) 2,554,441 — — 2,554,441 2,554,441 Home loans (2) 184,879 — — 184,879 184,879 Personal loans (2) 2,054,226 — — 2,054,226 2,054,226 Credit card loans (1) 72,012 — — 73,846 73,846 Servicing rights (2) 163,474 — — 163,474 163,474 Asset-backed bonds (2)(5) 260,557 — 260,557 — 260,557 Residual investments (2)(5) 131,501 — — 131,501 131,501 Non-securitization investments – ETFs and common stock (2)(6)(7) 2,159 2,159 — — 2,159 Non-securitization investments – other (3) 3,315 — — 3,315 3,315 Derivative assets (2)(12)(14) 3,291 3,291 — — 3,291 Purchase price earn-out (2)(8) 5,411 — — 5,411 5,411 Interest rate lock commitments (2)(9) 4,569 — — 4,569 4,569 Student loan commitments (2)(9) 4,190 — — 4,190 4,190 Interest rate swaps (2)(13)(14) 1,263 — 1,263 — 1,263 Total assets $ 6,496,719 $ 988,215 $ 330,486 $ 5,179,852 $ 6,498,553 Liabilities Debt (1) $ 2,770,226 $ — $ 2,810,067 $ — $ 2,810,067 Residual interests classified as debt (2) 103,898 — — 103,898 103,898 Warrant liabilities – SoFi Technologies warrants (2)(11) 174,938 174,938 — — 174,938 ETF short positions (2)(6) 90 90 — — 90 Total liabilities $ 3,049,152 $ 175,028 $ 2,810,067 $ 103,898 $ 3,088,993 December 31, 2020 Fair Value Carrying Value Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 872,582 $ 872,582 $ — $ — $ 872,582 Restricted cash and restricted cash equivalents (1) 450,846 450,846 — — 450,846 Student loans (2) 2,866,459 — — 2,866,459 2,866,459 Home loans (2) 179,689 — — 179,689 179,689 Personal loans (2) 1,812,920 — — 1,812,920 1,812,920 Credit card loans (1) 3,723 — — 3,723 3,723 Commercial loan (1) 16,512 — — 16,512 16,512 Servicing rights (2) 149,597 — — 149,597 149,597 Asset-backed bonds (2)(5) 357,411 — 357,411 — 357,411 Residual investments (2)(5) 139,524 — — 139,524 139,524 Non-securitization investments – ETFs and common stock (2)(6)(7) 6,850 6,850 — — 6,850 Non-securitization investments – other (3) 1,147 — — 1,147 1,147 Interest rate lock commitments (2)(9) 15,620 — — 15,620 15,620 Total assets $ 6,872,880 $ 1,330,278 $ 357,411 $ 5,185,191 $ 6,872,880 Liabilities Debt (1) $ 4,798,925 $ — $ 4,851,658 $ — $ 4,851,658 Residual interests classified as debt (2) 118,298 — — 118,298 118,298 Warrant liabilities – Series H warrants (2)(10) 39,959 — — 39,959 39,959 Derivative liabilities (2)(12)(14) 2,008 2,008 — — 2,008 Interest rate swaps (2)(13)(14) 947 — 947 — 947 ETF short positions (2)(6) 5,241 5,241 — — 5,241 Total liabilities $ 4,965,378 $ 7,249 $ 4,852,605 $ 158,257 $ 5,018,111 _____________________ (1) Disclosed but not carried at fair value. The carrying value of our debt is net of unamortized discounts and debt issuance costs. The fair values of our warehouse facility debt, revolving credit facility debt, financing arrangements assumed in the Galileo acquisition and credit card loans were based on market factors and credit factors specific to us. The securitization debt was valued using a discounted cash flow model, with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults and prepayments. The carrying amounts of our cash and cash equivalents and restricted cash and restricted cash equivalents approximate their fair values due to the short-term maturities and highly liquid nature of these accounts. The fair value of our single commercial loan as of December 31, 2020 was also determined to approximate its carrying value, as the loan was issued in the fourth quarter of 2020, was short-term in nature, and was repaid in full in January 2021. (2) Measured at fair value on a recurring basis. (3) Measured at fair value on a nonrecurring basis. (4) Investments in AFS debt securities as of September 30, 2021 were classified as Level 1 or Level 2. The Level 1 investments utilize quoted prices in actively traded markets. The Level 2 investments rely upon observable inputs other than quoted prices, dealer quotes in markets that are not active and implied pricing derived from new issuances of similar securities. See Note 1 and Note 3 for additional information. (5) These assets represent the carrying value of our holdings in VIEs wherein we were not deemed the primary beneficiary. As we do not provide financial support beyond our initial equity investment, our maximum exposure to loss as a result of our involvement with nonconsolidated VIEs is limited to the investment amount. See Note 5 for additional information. (6) ETFs and ETF short positions are classified as Level 1 based on utilizing quoted prices in actively traded markets. The short positions serve as an economic hedge to our non-securitization investments in ETFs. (7) Common stock held on our consolidated balance sheets is composed of fractional shares to facilitate member trading in fractional shares in various companies through a SoFi Invest account, as well as common stock held at 8 Limited, which functions as a clearing broker in Hong Kong. These assets are classified as Level 1 based on the use of quoted prices in actively traded markets. (8) The purchase price earn-out provision is classified as Level 3 because of our reliance on an unobservable inputs, such as conditional prepayment rates, annual default rates and discount rates. (9) IRLCs and student loan commitments are classified as Level 3 because of our reliance on assumed loan funding probabilities. The assumed probabilities are based on our internal historical experience with home loans and student loans similar to those in the funding pipelines on the measurement date. (10) In conjunction with the Closing of the Business Combination, we measured the final fair value of the Series H warrants and subsequently reclassified them into permanent equity. Therefore, we did not measure the Series H warrants at fair value on an ongoing basis, subsequent to May 28, 2021. See Note 10 for additional information on our historical Series H warrant liabilities, including inputs to the valuation. (11) SoFi Technologies warrants include an aggregate 28,125,000 public warrants and private placement warrants assumed in the Business Combination, which are classified as Level 1 due to the reliance upon an observable market quote in an active market. See “—Warrant Liabilities — SoFi Technologies Warrants” in this Note 8 for additional information. (12) Derivative assets and liabilities classified as Level 1 are based on broker quotes in active markets and represent economic hedges of loan fair values. (13) Interest rate swaps are classified as Level 2, because these financial instruments do not trade in active markets with observable prices, but rely on observable inputs other than quoted prices. Interest rate swaps are valued using the three-month LIBOR swap yield curve, which is an observable input from an active market. (14) For certain derivative instruments for which an enforceable master netting agreement exists, we elected to net derivative assets and derivative liabilities by counterparty. See Note 1 for additional information. Loans The following key unobservable assumptions were used in the fair value measurement of our loans as of the dates indicated: September 30, 2021 December 31, 2020 Range Weighted Average Range Weighted Average Student loans Conditional prepayment rate 16.1% – 26.8% 19.2% 15.8% – 33.3% 18.4% Annual default rate 0.2% – 3.4% 0.4% 0.2% – 4.9% 0.4% Discount rate 1.7% – 7.1% 2.9% 1.1% – 7.1% 3.3% Home loans Conditional prepayment rate 3.5% – 17.1% 11.6% 4.4% – 17.6% 14.9% Annual default rate 0.1% – 3.4% 0.1% 0.1% – 4.9% 0.1% Discount rate 1.8% – 12.5% 2.2% 1.3% – 10.0% 1.6% Personal loans Conditional prepayment rate 15.8% – 35.5% 20.5% 14.5% – 23.2% 18.1% Annual default rate 4.0% – 30.5% 4.3% 3.3% – 33.8% 4.2% Discount rate 3.9% – 6.9% 4.1% 5.0% – 10.7% 6.0% The key assumptions included in the above table are defined as follows: • Conditional prepayment rate — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of borrowers who do not make loan payments on time. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the loans. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. See Note 4 for additional loan fair value disclosures. Servicing Rights Servicing rights for student loans and personal loans do not trade in an active market with readily observable prices. Similarly, home loan servicing rights infrequently trade in an active market. At the time of the underlying loan sale or the assumption of servicing rights, the fair value of servicing rights is determined using a discounted cash flow methodology based on observable and unobservable inputs. Management classifies servicing rights as Level 3 due to the use of significant unobservable inputs in the fair value measurement. The following key unobservable inputs were used in the fair value measurement of our classes of servicing rights as of the dates presented: September 30, 2021 December 31, 2020 Range Weighted Average Range Weighted Average Student loans Market servicing costs 0.1% – 0.2% 0.1% 0.1% – 0.2% 0.1% Conditional prepayment rate 15.1% – 26.2% 20.9% 13.8% – 24.7% 18.7% Annual default rate 0.2% – 4.3% 0.4% 0.2% – 4.8% 0.4% Discount rate 7.3% – 7.3% 7.3% 7.3% – 7.3% 7.3% Home loans Market servicing costs 0.1% – 0.1% 0.1% 0.1% – 0.1% 0.1% Conditional prepayment rate 10.9% – 17.3% 12.4% 13.9% – 20.3% 16.5% Annual default rate 0.1% – 0.3% 0.1% 0.1% – 0.1% 0.1% Discount rate 8.0% – 8.0% 8.0% 10.0% – 10.0% 10.0% Personal loans Market servicing costs 0.2% – 1.1% 0.3% 0.2% – 0.7% 0.3% Conditional prepayment rate 22.1% – 40.5% 26.2% 16.2% – 26.1% 19.1% Annual default rate 3.0% – 7.1% 4.7% 3.1% – 7.5% 5.5% Discount rate 7.3% – 7.3% 7.3% 7.3% – 7.3% 7.3% The key assumptions included in the above table are defined as follows: • Market servicing costs — The fee a willing market participant, which we validate through actual third-party bids for our servicing, would require for the servicing of student loans, home loans and personal loans with similar characteristics as those in our serviced portfolio. An increase in the market servicing cost, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Conditional prepayment rate — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of default within the total serviced loan balance. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the servicing rights. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. The following table presents the estimated decrease to the fair value of our servicing rights as of the dates indicated if the key assumptions had each of the below adverse changes: September 30, 2021 December 31, 2020 Market servicing costs 2.5 basis points increase $ (10,654) $ (10,472) 5.0 basis points increase (21,309) (20,944) Conditional prepayment rate 10% increase $ (6,384) $ (5,430) 20% increase (12,256) (10,230) Annual default rate 10% increase $ (189) $ (336) 20% increase (375) (681) Discount rate 100 basis points increase $ (3,586) $ (2,986) 200 basis points increase (6,973) (5,820) The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. The effect on fair value of a variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the effect of an adverse variation in a particular assumption on the fair value of our servicing rights is calculated while holding the other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. The following table presents the changes in the Company’s servicing rights, which are measured at fair value on a recurring basis. Student Loans Home Loans Personal Loans Total Three Months Ended September 30, 2021 Fair value as of June 30, 2021 $ 99,601 $ 37,557 $ 22,609 $ 159,767 Recognition of servicing from transfers of financial assets 9,421 8,386 7,529 25,336 Servicing rights assumed from third parties — — 49 49 Derecognition of servicing via loan purchases — — (168) (168) Change in valuation inputs or other assumptions (1,698) 600 1,507 409 Realization of expected cash flows and other changes (11,305) (2,398) (8,216) (21,919) Fair value as of September 30, 2021 $ 96,019 $ 44,145 $ 23,310 $ 163,474 Three Months Ended September 30, 2020 Fair value as of June 30, 2020 $ 129,514 $ 17,987 $ 36,523 $ 184,024 Recognition of servicing from transfers of financial assets 8,513 5,321 1,422 15,256 Derecognition of servicing via loan purchases (12,369) — (934) (13,303) Change in valuation inputs or other assumptions (5,556) (1,927) 2,812 (4,671) Realization of expected cash flows and other changes (12,206) (1,242) (10,210) (23,658) Fair value as of September 30, 2020 $ 107,896 $ 20,139 $ 29,613 $ 157,648 Nine Months Ended September 30, 2021 Fair value as of January 1, 2021 $ 100,637 $ 23,914 $ 25,046 $ 149,597 Recognition of servicing from transfers of financial assets 49,120 24,292 19,848 93,260 Servicing rights assumed from third parties — — 49 49 Derecognition of servicing via loan purchases (392) — (356) (748) Change in valuation inputs or other assumptions (17,813) 2,146 3,743 (11,924) Realization of expected cash flows and other changes (35,533) (6,207) (25,020) (66,760) Fair value as of September 30, 2021 $ 96,019 $ 44,145 $ 23,310 $ 163,474 Nine Months Ended September 30, 2020 Fair value as of January 1, 2020 $ 138,582 $ 13,181 $ 49,855 $ 201,618 Recognition of servicing from transfers of financial assets 38,554 13,604 8,399 60,557 Derecognition of servicing via loan purchases (12,590) — (934) (13,524) Change in valuation inputs or other assumptions (18,164) (3,504) 5,336 (16,332) Realization of expected cash flows and other changes (38,486) (3,142) (33,043) (74,671) Fair value as of September 30, 2020 $ 107,896 $ 20,139 $ 29,613 $ 157,648 Asset-Backed Bonds The fair value of asset-backed bonds is determined using a discounted cash flow methodology. Management classifies asset-backed bonds as Level 2 due to the use of quoted prices for similar assets in markets that are not active, as well as certain factors specific to us. The following key inputs were used in the fair value measurement of our asset-backed bonds as of the dates indicated: September 30, 2021 December 31, 2020 Discount rate (range) 0.6% – 3.3% 0.8% – 4.0% Conditional prepayment rate (range) 18.0% – 31.2% 18.8% – 21.9% As of the dates indicated, the fair value of our asset-backed bonds was not materially impacted by default assumptions on the underlying securitization loans, as the subordinate residual interests, by design, are expected to absorb all estimated losses based on our default assumptions for the respective periods. Residual Investments and Residual Interests Classified as Debt Residual investments and residual interests classified as debt do not trade in active markets with readily observable prices, and there is limited observable market data for reference. The fair values of residual investments and residual interests classified as debt are determined using a discounted cash flow methodology. Management classifies residual investments and residual interests classified as debt as Level 3 due to the use of significant unobservable inputs in the fair value measurements. The following key unobservable inputs were used in the fair value measurements of our residual investments and residual interests classified as debt as of the dates indicated: September 30, 2021 December 31, 2020 Range Weighted Average Range Weighted Average Residual investments Conditional prepayment rate 18.0% – 31.7% 23.5% 18.8% – 22.3% 20.2% Annual default rate 0.3% – 6.1% 0.8% 0.3% – 6.2% 0.7% Discount rate 2.5% – 10.5% 4.1% 3.0% – 18.5% 6.2% Residual interests classified as debt Conditional prepayment rate 19.7% – 38.7% 29.6% 19.5% – 24.8% 21.4% Annual default rate 0.5% – 6.0% 3.3% 0.4% – 6.4% 3.1% Discount rate 5.5% – 9.5% 6.1% 8.5% – 18.0% 10.8% The key assumptions included in the above table are defined as follows: • Conditional prepayment rate — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period for the pool of loans in the securitization. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of borrowers who fail to remain current on their loans for the pool of loans in the securitization. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the residual investments and residual interests classified as debt. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. The following table presents the changes in the residual investments and residual interests classified as debt, which are both measured at fair value on a recurring basis. We record changes in fair value within noninterest income — securitizations in the consolidated statements of operations and comprehensive income (loss), a portion of which is subsequently reclassified to interest expense — securitizations and warehouses for residual interests classified as debt and to interest income — securitizations for residual investments, but does not impact the liability or asset balance, respectively. Residual Investments Residual Interests Classified as Debt Three Months Ended September 30, 2021 Fair value as of June 30, 2021 $ 143,100 $ 112,545 Additions 6,360 — Change in valuation inputs or other assumptions (1) 2,230 5,593 Payments (2) (20,189) (14,240) Fair value as of September 30, 2021 $ 131,501 $ 103,898 Three Months Ended September 30, 2020 Fair value as of June 30, 2020 $ 228,630 $ 165,666 Change in valuation inputs or other assumptions (1) 3,291 11,301 Payments (2) (28,442) (17,824) Transfers (3) (47,261) — Derecognition upon achieving true sale accounting treatment — (29,692) Fair value as of September 30, 2020 $ 156,218 $ 129,451 Nine Months Ended September 30, 2021 Fair value as of January 1, 2021 $ 139,524 $ 118,298 Additions 44,528 2,170 Change in valuation inputs or other assumptions (1) 9,082 19,261 Payments (2) (61,633) (35,831) Fair value as of September 30, 2021 $ 131,501 $ 103,898 Nine Months Ended September 30, 2020 Fair value as of January 1, 2020 $ 262,880 $ 271,778 Additions 10,708 — Change in valuation inputs or other assumptions (1) 6,441 28,815 Payments (2) (76,550) (69,424) Transfers (3) (47,261) — Derecognition upon achieving true sale accounting treatment — (101,718) Fair value as of September 30, 2020 $ 156,218 $ 129,451 ___________________ (1) For residual investments, the estimated amount of losses included in earnings attributable to changes in instrument-specific credit risk were $(6) and $(214) during the three and nine months ended September 30, 2021, respectively, and $(283) and $(1,314) during the three and nine months ended September 30, 2020, respectively. The losses attributable to instrument-specific credit risk were estimated by incorporating our current default and loss severity assumptions for the residual investments. These assumptions are based on historical performance, market trends and performance expectations over the term of the underlying instrument. (2) Payments of residual investments included residual investment sales of $1,615 and $4,291 during the three and nine months ended September 30, 2021, respectively, and $7,163 and $7,163 during the three and nine months ended September 30, 2020, respectively. (3) The three and nine months ended September 30, 2020 includes a transfer from residual investments (Level 3) to asset-backed bonds (Level 2) associated with a repackaged securitization transaction in which we formed a new VIE and, in the process, exchanged our residual interest for an asset-backed bond interest. Loan Commitments We classify student loan commitments as Level 3 because the assets do not trade in an active market with readily observable prices and, as such, our valuations utilize significant unobservable inputs. Additionally, we classify IRLCs as Level 3, as our IRLCs are inherently uncertain and unobservable given that a home loan origination is contingent on a plethora of factors. The following key unobservable inputs were used in the fair value measurements of our IRLCs and student loan commitments as of the dates indicated: September 30, 2021 December 31, 2020 Range Weighted Average Range Weighted Average IRLCs Loan funding probability (1) 64.1% – 64.1% 64.1% 54.5% – 54.5% 54.5% Student loan commitments Loan funding probability (1) 80.0% – 95.0% 87.5% n/a n/a ___________________ (1) The probability of honoring IRLCs and student loan commitments, which reflects the percentage likelihood that an approved loan application will close based on historical experience. A significant difference between the actual funded rate and the assumed funded rate at the measurement date could result in a significantly higher or lower fair value measurement of our IRLCs and student loan commitments. The aggregate amount of student loans we committed to fund was $151,919 as of September 30, 2021. See Note 1 under “— Derivative Financial Instruments” for the aggregate notional amount associated with IRLCs. The key assumption included in the above table is defined as follows: • Loan funding probability — Our expectation of the percentage of IRLCs or student loan commitments which will become funded loans. An increase in the loan funding probabilities, in isolation, would result in an increase in a fair value measurement. The weighted average assumptions were weighted based on relative fair values. The following table presents the changes in our IRLCs and student loan commitments, which are measured at fair value on a recurring basis. Changes in the fair values of IRLCs and student loan commitments are recorded within noninterest income — loan origination and sales in the consolidated statements of operations and comprehensive income (loss). IRLCs Student Loan Commitments Three Months Ended September 30, 2021 Fair value as of June 30, 2021 $ 7,760 $ — Revaluation adjustments 4,569 4,190 Funded loans (1) (5,458) — Unfunded loans (1) (2,302) — Fair value as of September 30, 2021 $ 4,569 $ 4,190 Three Months Ended September 30, 2020 Fair value as of June 30, 2020 $ 18,221 $ — Revaluation adjustments 16,856 — Funded loans (1) (9,433) — Unfunded loans (1) (8,788) — Fair value as of September 30, 2020 $ 16,856 $ — Nine Months Ended September 30, 2021 Fair value as of January 1, 2021 $ 15,620 $ — Revaluation adjustments 19,447 4,190 Funded loans (1) (20,943) — Unfunded loans (1) (9,555) — Fair value as of September 30, 2021 $ 4,569 $ 4,190 Nine Months Ended September 30, 2020 Fair value as of January 1, 2020 $ 1,090 $ — Revaluation adjustments 46,908 — Funded loans (1) (16,644) — Unfunded loans (1) (14,498) — Fair value as of September 30, 2020 $ 16,856 $ — ___________________ (1) Funded and unfunded loan fair value adjustments for the three-month periods presented represent the unpaid principal balance of funded and unfunded loans, respectively, during the periods presented multiplied by the IRLC or student loan commitment price in effect at the beginning of the quarter. For the year-to-date periods presented, amounts represent the summation of the per-quarter effects. Non-Securitization Investments Non-securitization investments — ETFs of $1,607 as of September 30, 2021 and $6,850 as of December 31, 2020 include investments in exchange-traded funds, each of which has a targeted investment strategy, such as securities with regular dividends (applicable to the 2021 period only), investment grade and high-yield fixed income securities (applicable to the 2021 period only), equity securities seeking long-term capital appreciation (sold during the 2021 period), and widely held U.S. stocks by SoFi members (sold during the 2021 period). Non-securitization investments — ETFs are measured at fair value on a recurring basis using the net asset value expedient in accordance with ASC 820 and are presented within other assets in the consolidated balance sheets. Non-securitization investments — Common stock of $552 as of September 30, 2021 includes stock inventory to facilitate member trading in fractional shares in various companies through a SoFi Invest account, as well as common stock at 8 Limited, which functions as a clearing broker in Hong Kong. Fractional share assets are measured at fair value on a recurring basis and presented within other assets in the consolidated balance sheets. Common stock assets were immaterial as of December 31, 2020. As of September 30, 2021 and December 31, 2020, non-securitization investments — other includes investments for which fair values are not readily determinable, which we elect to measure using the measurement alternative method of accounting. Under the measurement alternative method, we measure the investments at cost, less any impairment and adjusted for changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuers. The carrying values of the investments are presented within other assets in the consolidated balance sheets. Adjustments to the carrying values, such as impairments and unrealized gains, are recognized within noninterest income — other in the consolidated statements of operations and comprehensive income (loss). The fair value measurements are classified within Level 3 of the fair value hierarchy due to the uses of unobservable inputs in the fair value measurements. For one such investment with a fair value of $1,147 as of September 30, 2021 and December 31, 2020, we recorded an impairment charge of $803 in the second quarter of 2020 and adjusted the carrying value of the investment accordingly, which was based on a discounted cash flow analysis, wherein we weighted different valuation scenarios with different assumed internal rates of return and time to liquidity events. In performing a qualitative impairment assessment, we determined that the carrying amount of the investment exceeded its fair value due to a significant decline in investee operating results relative to expectations, primarily as a result of the COVID-19 pandemic. For an additional investment with a fair value of $2,168 as of September 30, 2021, we recognized a gain of $3,967 during the second quarter of 2021, which also represents our cumulative adjustment on this security and which we valued based on the investee’s latest round of financing during the second quarter of 2021. We considered this recent equity transaction to be an orderly transaction in an issuance similar to our investment holding. Additionally, we sold a portion of our investment during the second quarter of 2021 for $2,000 at the same valuation, contemporaneous with the investee’s latest round of financing, for which the cash was received in the third quarter of 2021. Purchase Price Earn-Out As of September 30, 2021, we had a derivative for a purchase price earn-out in conjunction with a loan sale agreement we entered into during 2018, as further discussed in Note 1. We receive a capped contractual payout based on the respective loan pool internal rate of return over a certain hurdle rate, which is adjusted for the loan purchaser’s expenses, which are generally immaterial. Historically, the purchase price earn-out value was immaterial. The fair value of the purchase price earn-out is determined using a discounted cash flow methodology. Management classifies the purchase price earn-out as Level 3 due to the use of significant unobservable inputs in the fair value measurement. A significant difference between the expected performance of the loans included in the loan sale agreement and the actual results as of the measurement date could result in a higher or lower fair value measurement. Our key valuation inputs were as follows as of the date indicated: September 30, 2021 Purchase Price Earn-Out Range Weighted Average Conditional prepayment rate 18.7% – 18.7% 18.7% Annual default rate 32.1% – 32.1% 32.1% Discount rate 25.0% – 25.0% 25.0% The key assumptions included in the above table are defined as follows: • Conditional prepayment rate — The monthly annualized proportion of the principal of the pool of loans included in the loan sale agreement that is assumed to be paid off prematurely. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of borrowers who fail to remain current on their loans for the pool of loans included in the loan sale agreement. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the purchase price earn-out derivative. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. The following table presents the changes in our purchase price earn-out, which is measured at fair value on a recurring basis. Changes in the fair value are recorded within noninterest income — other in the consolidated statements of operations and comprehensive income (loss). Purchase Price Earn-Out Three Months Ended September 30, 2021 Fair value as of June 30, 2021 $ — Initial recognition (1) 7,165 Payments (1,754) Fair value as of September 30, 2021 $ 5,411 Nine Months Ended September 30, 2021 Fair value as of January 1, 2021 $ — Initial recognition (1) 7,165 Payments (1,754) Fair value as of September 30, 2021 $ 5,411 ___________________ (1) The estimated amount of losses included in earnings attributable to changes in instrument-specific credit risk were $(652) during the three and nine months ended September 30, 2021. The losses attributabl |
