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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
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 unaudited condensed consolidated balance sheets as of the dates presented:
| June 30, 2022
|  |  | Fair Value
| Carrying Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents(1) | $ | 707,302 |  |  | $ | 707,302 |  |  | $ | — |  |  | $ | — |  |  | $ | 707,302 |
Restricted cash and restricted cash equivalents(1) | 291,631 |  |  | 291,631 |  |  | — |  |  | — |  |  | 291,631 |
Investments in AFS debt securities(2)(4) | 197,933 |  |  | 137,388 |  |  | 60,545 |  |  | — |  |  | 197,933 |
Loans at fair value(2) | 7,959,382 |  |  | — |  |  | — |  |  | 7,959,382 |  |  | 7,959,382 |
Loans at amortized cost(1) | 253,112 |  |  | — |  |  | — |  |  | 264,348 |  |  | 264,348 |
Servicing rights(2) | 176,964 |  |  | — |  |  | — |  |  | 176,964 |  |  | 176,964 |
Asset-backed bonds(2)(5) | 193,739 |  |  | — |  |  | 193,739 |  |  | — |  |  | 193,739 |
Residual investments(2)(5) | 94,978 |  |  | — |  |  | — |  |  | 94,978 |  |  | 94,978 |
Non-securitization investments – other(3) | 22,780 |  |  | — |  |  | — |  |  | 22,780 |  |  | 22,780 |
Third party warrants(2)(6) | 766 |  |  | — |  |  | — |  |  | 766 |  |  | 766 |
Derivative assets(2)(7)(8) | 2,243 |  |  | 2,243 |  |  | — |  |  | — |  |  | 2,243 |
Purchase price earn-out(2)(9) | 625 |  |  | — |  |  | — |  |  | 625 |  |  | 625 |
IRLCs(2)(10) | 1,120 |  |  | — |  |  | — |  |  | 1,120 |  |  | 1,120 |
Interest rate caps(2)(8) | 3,987 |  |  | — |  |  | 3,987 |  |  | — |  |  | 3,987 |
Digital assets safeguarding asset(2)(11) | 112,010 |  |  | — |  |  | 112,010 |  |  | — |  |  | 112,010 |
Total assets | $ | 10,018,572 |  |  | $ | 1,138,564 |  |  | $ | 370,281 |  |  | $ | 8,520,963 |  |  | $ | 10,029,808 |
Liabilities |  |  |  |  |  |  |  |  |
Time deposits(1) | $ | 18,474 |  |  | $ | — |  |  | $ | 18,455 |  |  | $ | — |  |  | $ | 18,455 |
Debt(1) | 3,723,561 |  |  | 783,600 |  |  | 2,556,006 |  |  | — |  |  | 3,339,606 |
Residual interests classified as debt(2) | 54,436 |  |  | — |  |  | — |  |  | 54,436 |  |  | 54,436 |
Derivative liabilities(2)(7)(8) | 25,716 |  |  | 259 |  |  | 25,457 |  |  | — |  |  | 25,716 |
Student loan commitments(2)(10) | 254 |  |  | — |  |  | — |  |  | 254 |  |  | 254 |
Digital assets safeguarding liability(2)(11) | 112,010 |  |  | — |  |  | 112,010 |  |  | — |  |  | 112,010 |
Total liabilities | $ | 3,934,451 |  |  | $ | 783,859 |  |  | $ | 2,711,928 |  |  | $ | 54,690 |  |  | $ | 3,550,477 |
| December 31, 2021
|  |  | Fair Value
| Carrying Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents(1) | $ | 494,711 |  |  | $ | 494,711 |  |  | $ | — |  |  | $ | — |  |  | $ | 494,711 |
Restricted cash and restricted cash equivalents(1) | 273,726 |  |  | 273,726 |  |  | — |  |  | — |  |  | 273,726 |
Investments in AFS debt securities(2)(4) | 194,907 |  |  | 129,835 |  |  | 65,072 |  |  | — |  |  | 194,907 |
Loans at fair value(2) | 5,952,972 |  |  | — |  |  | — |  |  | 5,952,972 |  |  | 5,952,972 |
Loans at amortized cost(1) | 115,912 |  |  | — |  |  | — |  |  | 118,412 |  |  | 118,412 |
Servicing rights(2) | 168,259 |  |  | — |  |  | — |  |  | 168,259 |  |  | 168,259 |
Asset-backed bonds(2)(5) | 253,669 |  |  | — |  |  | 253,669 |  |  | — |  |  | 253,669 |
Residual investments(2)(5) | 121,019 |  |  | — |  |  | — |  |  | 121,019 |  |  | 121,019 |
Non-securitization investments – ETFs(2) | 1,486 |  |  | 1,486 |  |  | — |  |  | — |  |  | 1,486 |
Non-securitization investments – other(3) | 6,054 |  |  | — |  |  | — |  |  | 6,054 |  |  | 6,054 |
Third party warrants(2)(6) | 1,369 |  |  | — |  |  | — |  |  | 1,369 |  |  | 1,369 |
Derivative assets(2)(7)(8) | 5,444 |  |  | — |  |  | 5,444 |  |  | — |  |  | 5,444 |
Purchase price earn-out(2)(9) | 4,272 |  |  | — |  |  | — |  |  | 4,272 |  |  | 4,272 |
IRLCs(2)(10) | 3,759 |  |  | — |  |  | — |  |  | 3,759 |  |  | 3,759 |
Student loan commitments(2)(10) | 2,220 |  |  | — |  |  | — |  |  | 2,220 |  |  | 2,220 |
Interest rate caps(2)(8) | 493 |  |  | — |  |  | 493 |  |  | — |  |  | 493 |
Total assets | $ | 7,600,272 |  |  | $ | 899,758 |  |  | $ | 324,678 |  |  | $ | 6,378,336 |  |  | $ | 7,602,772 |
Liabilities |  |  |  |  |  |  |  |  |
Debt(1) | $ | 3,947,983 |  |  | $ | 1,240,560 |  |  | $ | 2,807,253 |  |  | $ | — |  |  | $ | 4,047,813 |
Residual interests classified as debt(2) | 93,682 |  |  | — |  |  | — |  |  | 93,682 |  |  | 93,682 |
Derivative liabilities(2)(7)(8) | 864 |  |  | 196 |  |  | 668 |  |  | — |  |  | 864 |
Total liabilities | $ | 4,042,529 |  |  | $ | 1,240,756 |  |  | $ | 2,807,921 |  |  | $ | 93,682 |  |  | $ | 4,142,359 |
_____________________ (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 value of our convertible notes issued in October 2021 was classified as Level 1, as it was based on an observable market quote. The fair values of our warehouse facility debt, revolving credit facility debt and credit card loans were based on market factors and credit factors specific to these financial instruments. The fair value of our 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 fair value of our commercial and consumer banking loans was determined using a discounted cash flow model with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults. 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 time-based deposits is estimated by a discounted cash flow method using rates currently offered for deposits of similar remaining maturities. (2)Measured at fair value on a recurring basis. (3)Measured at fair value on a nonrecurring basis. (4)Investments in AFS debt securities 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 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)The key unobservable assumption used in the fair value measurement of the third party warrants is the price of the stock underlying the warrants. The fair value is measured as the difference between the stock price and the strike price of the warrants. As the strike price is insignificant, we concluded that the impact of time value on the fair value measure was immaterial. (7)For certain derivative instruments for which an enforceable master netting agreement exists, we elected to net derivative assets and derivative liabilities by counterparty. These instruments are presented on a gross basis herein. See Note 1 for additional information. (8)Derivative liabilities classified as Level 1 are based on broker quotes in active markets and represent economic hedges of either loans or securitization investment fair values. Interest rate swaps and interest rate caps 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. As of June 30, 2022, interest rate swaps and interest rate caps were valued using the overnight Secured Overnight Financing Rate (“SOFR”) curve and the implied volatilities suggested by the SOFR rate curve. As of December 31, 2021, interest rate swaps were valued using the three-month LIBOR swap yield curve. These were determined to be observable inputs from active markets. (9)The purchase price earn-out provision is classified as Level 3 because of our reliance on unobservable inputs, such as conditional prepayment rates, annual default rates and discount rates. (10)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. (11)The digital assets safeguarding liability and corresponding safeguarding asset are classified as Level 2, because they do not trade in active markets, and are valued using quoted prices on an active exchange that has been identified as the principal market for the underlying digital assets that are being held by our third-party custodians for the benefit of our members. Loans The following key unobservable assumptions were used in the fair value measurement of our loans as of the dates indicated:
| June 30, 2022 |  | December 31, 2021 |  |
| Range |  | Weighted Average |  | Range |  | Weighted Average |  |  |  |
Student loans |  |  |  |  |  |  |  |  |  |  |
Conditional prepayment rate | 16.9% – 25.3% |  | 20.2% |  | 16.5% – 26.3% |  | 19.2% |  |  |  |
Annual default rate | 0.2% – 4.4% |  | 0.4% |  | 0.2% – 4.2% |  | 0.4% |  |  |  |
Discount rate | 3.2% – 8.0% |  | 3.6% |  | 1.9% – 7.1% |  | 2.9% |  |  |  |
Home loans |  |  |  |  |  |  |  |  |  |  |
Conditional prepayment rate | 2.5% – 7.9% |  | 7.3% |  | 4.8% – 16.4% |  | 12.4% |  |  |  |
Annual default rate | 0.1% – 0.4% |  | 0.1% |  | 0.1% – 0.2% |  | 0.1% |  |  |  |
Discount rate | 4.5% – 13.0% |  | 4.8% |  | 2.5% – 13.0% |  | 2.6% |  |  |  |
Personal loans |  |  |  |  |  |  |  |  |  |  |
Conditional prepayment rate | 16.1% – 43.8% |  | 19.1% |  | 18.4% – 37.7% |  | 20.5% |  |  |  |
Annual default rate | 4.3% – 35.1% |  | 4.6% |  | 4.2% – 30.0% |  | 4.4% |  |  |  |
Discount rate | 5.1% – 9.4% |  | 5.4% |  | 3.9% – 7.0% |  | 4.0% |  |  |  |
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:
| June 30, 2022 |  | December 31, 2021 |  |
| 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% – 23.3% |  | 19.1% |  | 15.2% – 25.6% |  | 20.4% |  |  |  |
Annual default rate | 0.2% – 4.3% |  | 0.4% |  | 0.2% – 4.3% |  | 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 | 5.0% – 11.2% |  | 5.2% |  | 10.0% – 16.4% |  | 11.5% |  |  |  |
Annual default rate | 0.1% – 0.1% |  | 0.1% |  | 0.1% – 0.2% |  | 0.1% |  |  |  |
Discount rate | 8.0% – 8.0% |  | 8.0% |  | 7.5% – 7.5% |  | 7.5% |  |  |  |
Personal loans |  |  |  |  |  |  |  |  |  |  |
Market servicing costs | 0.2% – 1.3% |  | 0.3% |  | 0.2% – 1.1% |  | 0.2% |  |  |  |
Conditional prepayment rate | 17.0% – 44.0% |  | 25.1% |  | 22.5% – 41.4% |  | 26.0% |  |  |  |
Annual default rate | 3.3% – 7.0% |  | 4.5% |  | 3.2% – 7.0% |  | 4.4% |  |  |  |
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:
| June 30, 2022 |  |  |  | December 31, 2021 |  |
Market servicing costs |  |  |  |  |  |  |
2.5 basis points increase | $ | (11,074) |  |  |  |  | $ | (10,822) |  |  |
5.0 basis points increase | (22,191) |  |  |  |  | (21,644) |  |  |
Conditional prepayment rate |  |  |  |  |  |  |
10% increase | $ | (5,442) |  |  |  |  | $ | (6,260) |  |  |
20% increase | (10,780) |  |  |  |  | (12,031) |  |  |
Annual default rate |  |  |  |  |  |  |
10% increase | $ | (215) |  |  |  |  | $ | (205) |  |  |
20% increase | (428) |  |  |  |  | (408) |  |  |
Discount rate |  |  |  |  |  |  |
100 basis points increase | $ | (4,810) |  |  |  |  | $ | (3,782) |  |  |
200 basis points increase | (9,408) |  |  |  |  | (7,349) |  |  |
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 June 30, 2022 |  |  |  |  |  |  |
Fair value as of March 31, 2022 | $ | 85,957 |  |  | $ | 59,585 |  |  | $ | 27,963 |  |  | $ | 173,505 |
Recognition of servicing from transfers of financial assets | 2,991 |  |  | 4,482 |  |  | 7,659 |  |  | 15,132 |
Servicing rights assumed from third parties | — |  |  | — |  |  | 1,317 |  |  | 1,317 |
Derecognition of servicing via loan purchases | (31) |  |  | — |  |  | (146) |  |  | (177) |
Change in valuation inputs or other assumptions | 5,707 |  |  | 1,202 |  |  | 2,189 |  |  | 9,098 |
Realization of expected cash flows and other changes | (9,705) |  |  | (3,103) |  |  | (9,103) |  |  | (21,911) |
Fair value as of June 30, 2022 | $ | 84,919 |  |  | $ | 62,166 |  |  | $ | 29,879 |  |  | $ | 176,964 |
Three Months Ended June 30, 2021 |  |  |  |  |  |  |
Fair value as of March 31, 2021 | $ | 106,338 |  |  | $ | 32,038 |  |  | $ | 22,864 |  |  | $ | 161,240 |
Recognition of servicing from transfers of financial assets | 6,110 |  |  | 9,367 |  |  | 6,316 |  |  | 21,793 |
Derecognition of servicing via loan purchases | (392) |  |  | — |  |  | (188) |  |  | (580) |
Change in valuation inputs or other assumptions | (387) |  |  | (1,783) |  |  | 1,946 |  |  | (224) |
Realization of expected cash flows and other changes | (12,068) |  |  | (2,065) |  |  | (8,329) |  |  | (22,462) |
Fair value as of June 30, 2021 | $ | 99,601 |  |  | $ | 37,557 |  |  | $ | 22,609 |  |  | $ | 159,767 |
Six Months Ended June 30, 2022 |  |  |  |  |  |  |
Fair value as of January 1, 2022 | $ | 90,003 |  |  | $ | 50,533 |  |  | $ | 27,723 |  |  | $ | 168,259 |
Recognition of servicing from transfers of financial assets | 8,815 |  |  | 8,720 |  |  | 14,083 |  |  | 31,618 |
Servicing rights assumed from third parties | — |  |  | — |  |  | 1,946 |  |  | 1,946 |
Derecognition of servicing via loan purchases | (1,072) |  |  | — |  |  | (515) |  |  | (1,587) |
Change in valuation inputs or other assumptions | 6,999 |  |  | 8,942 |  |  | 4,737 |  |  | 20,678 |
Realization of expected cash flows and other changes | (19,826) |  |  | (6,029) |  |  | (18,095) |  |  | (43,950) |
Fair value as of June 30, 2022 | $ | 84,919 |  |  | $ | 62,166 |  |  | $ | 29,879 |  |  | $ | 176,964 |
Six Months Ended June 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 | 39,699 |  |  | 15,906 |  |  | 12,319 |  |  | 67,924 |
Derecognition of servicing via loan purchases | (392) |  |  | — |  |  | (188) |  |  | (580) |
Change in valuation inputs or other assumptions | (16,115) |  |  | 1,546 |  |  | 2,236 |  |  | (12,333) |
Realization of expected cash flows and other changes | (24,228) |  |  | (3,809) |  |  | (16,804) |  |  | (44,841) |
Fair value as of June 30, 2021 | $ | 99,601 |  |  | $ | 37,557 |  |  | $ | 22,609 |  |  | $ | 159,767 |
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:
| June 30, 2022 |  |  |  | December 31, 2021 |  |
Discount rate (range) | 1.6% – 5.0% |  |  |  | 0.6% – 3.7% |  |
Conditional prepayment rate (range) | 19.4% – 33.0% |  |  |  | 19.5% – 32.2% |  |
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 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:
| June 30, 2022 |  | December 31, 2021 |  |
| Range |  | Weighted Average |  | Range |  | Weighted Average |  |  |  |
Residual investments |  |  |  |  |  |  |  |  |  |  |
Conditional prepayment rate | 19.2% – 35.6% |  | 21.6% |  | 19.5% – 33.6% |  | 23.0% |  |  |  |
Annual default rate | 0.3% – 5.3% |  | 0.9% |  | 0.3% – 5.7% |  | 0.9% |  |  |  |
Discount rate | 3.9% – 10.5% |  | 5.4% |  | 2.6% – 10.5% |  | 4.4% |  |  |  |
Residual interests classified as debt |  |  |  |  |  |  |  |  |  |  |
Conditional prepayment rate | 19.1% – 50.7% |  | 30.2% |  | 20.0% – 41.8% |  | 31.5% |  |  |  |
Annual default rate | 0.5% – 5.8% |  | 2.7% |  | 0.5% – 5.6% |  | 3.2% |  |  |  |
Discount rate | 6.0% – 9.5% |  | 6.4% |  | 5.0% – 9.5% |  | 5.7% |  |  |  |
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 unaudited condensed 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 June 30, 2022 |  |  |
Fair value as of March 31, 2022 | $ | 106,677 |  |  | $ | 70,532 |
Change in valuation inputs or other assumptions(1) | 290 |  |  | 2,662 |
Payments | (11,989) |  |  | (18,758) |
Fair value as of June 30, 2022 | $ | 94,978 |  |  | $ | 54,436 |
Three Months Ended June 30, 2021 |  |  |
Fair value as of March 31, 2021 | $ | 150,961 |  |  | $ | 114,882 |
Additions | 11,787 |  |  | 2,170 |
Change in valuation inputs or other assumptions(1) | 3,355 |  |  | 5,717 |
Payments | (23,003) |  |  | (10,224) |
Fair value as of June 30, 2021 | $ | 143,100 |  |  | $ | 112,545 |
Six Months Ended June 30, 2022 |  |  |
Fair value as of January 1, 2022 | $ | 121,019 |  |  | $ | 93,682 |
Change in valuation inputs or other assumptions(1) | 1,052 |  |  | 5,625 |
Payments(2) | (27,093) |  |  | (44,871) |
Fair value as of June 30, 2022 | $ | 94,978 |  |  | $ | 54,436 |
Six Months Ended June 30, 2021 |  |  |
Fair value as of January 1, 2021 | $ | 139,524 |  |  | $ | 118,298 |
Additions | 38,168 |  |  | 2,170 |
Change in valuation inputs or other assumptions(1) | 6,852 |  |  | 13,668 |
Payments(2) | (41,444) |  |  | (21,591) |
Fair value as of June 30, 2021 | $ | 143,100 |  |  | $ | 112,545 |
___________________ (1)For residual investments, the estimated amounts of gains and losses included in earnings attributable to changes in instrument-specific credit risk were immaterial during the periods presented. (2)Payments of residual investments included residual investment sales of $220 and $220 during the three and six months ended June 30, 2022, respectively, and $2,676 and $2,676 during the three and six months ended June 30, 2021, respectively. 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:
| June 30, 2022 |  | December 31, 2021 |  |
| Range |  | Weighted Average |  | Range |  | Weighted Average |  |  |  |
IRLCs |  |  |  |  |  |  |  |  |  |  |
Loan funding probability(1) | 26.0% – 56.0% |  | 53.9% |  | 75.0% – 75.0% |  | 75.0% |  |  |  |
Student loan commitments |  |  |  |  |  |  |  |  |  |  |
Loan funding probability(1) | 95.0% – 95.0% |  | 95.0% |  | 95.0% – 95.0% |  | 95.0% |  |  |  |
___________________ (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 $34,668 as of June 30, 2022. 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 unaudited condensed consolidated statements of operations and comprehensive income (loss).
| IRLCs |  | Student Loan Commitments
Three Months Ended June 30, 2022 |  |  |
Fair value as of March 31, 2022 | $ | (3,039) |  |  | $ | 23 |
Revaluation adjustments | 1,120 |  |  | (254) |
Funded loans(1) | 1,636 |  |  | (19) |
Unfunded loans(1) | 1,403 |  |  | (4) |
Fair value as of June 30, 2022 | $ | 1,120 |  |  | $ | (254) |
Three Months Ended June 30, 2021 |  |  |
Fair value as of March 31, 2021 | $ | 7,118 |  |  | $ | — |
Revaluation adjustments | 7,760 |  |  | — |
Funded loans(1) | (5,275) |  |  | — |
Unfunded loans(1) | (1,843) |  |  | — |
Fair value as of June 30, 2021 | $ | 7,760 |  |  | $ | — |
Six Months Ended June 30, 2022 |  |  |
Fair value as of January 1, 2022 | $ | 3,759 |  |  | $ | 2,220 |
Revaluation adjustments | (1,919) |  |  | (231) |
Funded loans(1) | (565) |  |  | (2,140) |
Unfunded loans(1) | (155) |  |  | (103) |
Fair value as of June 30, 2022 | $ | 1,120 |  |  | $ | (254) |
Six Months Ended June 30, 2021 |  |  |
Fair value as of January 1, 2021 | $ | 15,620 |  |  | $ | — |
Revaluation adjustments | 14,878 |  |  | — |
Funded loans(1) | (15,485) |  |  | — |
Unfunded loans(1) | (7,253) |  |  | — |
Fair value as of June 30, 2021 | $ | 7,760 |  |  | $ | — |
___________________ (1)For each quarter presented, funded and unfunded loan fair value adjustments represent the unpaid principal balance of funded and unfunded loans, respectively, during the quarter 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 — Other of $22,780 and $6,054 as of June 30, 2022 and December 31, 2021, respectively, include investments for which fair values are not readily determinable, which we elect to measure using the measurement alternative method of accounting. The fair value measurements are classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs in the fair value measurements. Adjustments to the carrying value, such as impairments and unrealized gains, are recognized within noninterest income—other in the unaudited condensed consolidated statements of operations and comprehensive income (loss). In the first quarter of 2022, we measured a former equity method investment under the measurement alternative method, which primarily drove the increase in the balance from year end. The fair value of this investment was $19,739 as of June 30, 2022. In the second quarter of 2022, we wrote off an investment with a carrying value of $2,168 for a loss, which reflected the impact of observable market changes. We had previously recognized a gain of $3,967 on this investment during the second quarter of 2021, which reflected a value based on the investee’s latest round of financing in an orderly transaction in an issuance similar to our investment holding. In that same quarter in 2021, we sold a portion of our investment for $2,000 at the same valuation. We also had another investment with a fair value of $2,000 as of both June 30, 2022 and December 31, 2021. We did not make any adjustments to the investment value through June 30, 2022. Purchase Price Earn-Out We recognize a derivative asset for a purchase price earn-out in conjunction with a loan sale agreement we entered in 2018. 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. 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 dates indicated:
Purchase Price Earn-Out |  | June 30, 2022 |  | December 31, 2021
Conditional prepayment rate |  | 22.7% |  | 22.9%
Annual default rate |  | 35.6% |  | 30.0%
Discount rate |  | 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. •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. •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 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 unaudited condensed consolidated statements of operations and comprehensive income (loss). Changes during the three and six months ended June 30, 2021 were immaterial.
| Purchase Price Earn-Out
Three Months Ended June 30, 2022 |
Fair value as of March 31, 2022 | $ | 2,285 |
Payments | (1,872) |
Changes in valuation inputs or assumptions(1) | 212 |
Fair value as of June 30, 2022 | $ | 625 |
Six Months Ended June 30, 2022 |
Fair value as of January 1, 2022 | $ | 4,272 |
Payments | (4,689) |
Changes in valuation inputs or assumptions(1) | 1,042 |
Fair value as of June 30, 2022 | $ | 625 |
___________________ (1)The estimated amount of losses included in earnings attributable to changes in instrument-specific credit risk were immaterial during the three and six months ended June 30, 2022. The losses attributable to instrument-specific credit risk were estimated by incorporating our current default and loss severity assumptions for the purchase price earn-out. These assumptions are based on historical performance and performance expectations over the term of the underlying instrument. Safeguarding Assets and Liabilities The following table presents the significant digital assets held by our third-party custodians on behalf of our members as of the date indicated:
| June 30, 2022 |  |
Bitcoin (BTC) | $ | 48,143 |  |  |
Ethereum (ETH) | 34,135 |  |  |
Cardano (ADA) | 8,383 |  |  |
Dogecoin (DOGE) | 4,182 |  |  |
Solana (SOL) | 3,778 |  |  |
Ethereum Classic (ETC) | 2,289 |  |  |
All other(1) | 11,100 |  |  |
Digital assets safeguarding liability and corresponding safeguarding asset | $ | 112,010 |  |  |
___________________ (1)Includes 25 digital assets, none of which was determined to be individually significant.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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