v3.23.2

Fair Value of Assets and Liabilities | 6 Months Ended
--- | ---
Jun. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value of Assets and Liabilities | Fair Value of Assets and LiabilitiesFor a description of the fair value hierarchy and the Company’s fair value methodologies, see “Part II – Item 8. Financial Statements and Supplementary Data – Note 1. Summary of Significant Accounting Policies” in the Annual Report. The Company records certain assets and liabilities at fair value as listed in the following tables. Financial Instruments, Assets and Liabilities Recorded at Fair Value The following tables present the fair value hierarchy for assets and liabilities measured at fair value:
June 30, 2023 | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Balance at Fair Value
Assets: |  |  |  |  |  |  |
Loans held for sale at fair value | $ | — |  |  | $ | — |  |  | $ | 250,361 |  |  | $ | 250,361 |
Loans held for investment at fair value | — |  |  | — |  |  | 404,119 |  |  | 404,119 |
Retail and certificate loans held for investment at fair value | — |  |  | — |  |  | 26,837 |  |  | 26,837 |
Securities available for sale: |  |  |  |  |  |  |
U.S. agency residential mortgage-backed securities | — |  |  | 214,516 |  |  | — |  |  | 214,516 |
Senior asset-backed securities related to Structured Program transactions | — |  |  | 1,139 |  |  | 142,785 |  |  | 143,924 |
U.S. agency securities | — |  |  | 79,040 |  |  | — |  |  | 79,040 |
Mortgage-backed securities | — |  |  | 38,143 |  |  | — |  |  | 38,143 |
Other asset-backed securities | — |  |  | 28,466 |  |  | — |  |  | 28,466 |
Other asset-backed securities related to Structured Program transactions | — |  |  | — |  |  | 16,980 |  |  | 16,980 |
Municipal securities | — |  |  | 2,510 |  |  | — |  |  | 2,510 |
Total securities available for sale | — |  |  | 363,814 |  |  | 159,765 |  |  | 523,579 |
Servicing assets | — |  |  | — |  |  | 85,387 |  |  | 85,387 |
Other assets | — |  |  | 4,726 |  |  | — |  |  | 4,726 |
Total assets | $ | — |  |  | $ | 368,540 |  |  | $ | 926,469 |  |  | $ | 1,295,009 |
Liabilities: |  |  |  |  |  |  |
Borrowings | $ | — |  |  | $ | — |  |  | $ | 4,460 |  |  | $ | 4,460 |
Retail notes, certificates and secured borrowings | — |  |  | — |  |  | 26,837 |  |  | 26,837 |
Other liabilities | — |  |  | 4,726 |  |  | 2,570 |  |  | 7,296 |
Total liabilities | $ | — |  |  | $ | 4,726 |  |  | $ | 33,867 |  |  | $ | 38,593 |
December 31, 2022 | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Balance at Fair Value
Assets: |  |  |  |  |  |  |
Loans held for sale at fair value | $ | — |  |  | $ | — |  |  | $ | 110,400 |  |  | $ | 110,400 |
Loans held for investment at fair value | — |  |  | — |  |  | 925,938 |  |  | 925,938 |
Retail and certificate loans held for investment at fair value | — |  |  | — |  |  | 55,425 |  |  | 55,425 |
Securities available for sale: |  |  |  |  |  |  |
U.S. agency residential mortgage-backed securities | — |  |  | 214,427 |  |  | — |  |  | 214,427 |
U.S. agency securities | — |  |  | 74,394 |  |  | — |  |  | 74,394 |
Mortgaged-backed securities | — |  |  | 22,518 |  |  | — |  |  | 22,518 |
Other asset-backed securities | — |  |  | 14,203 |  |  | — |  |  | 14,203 |
Asset-backed securities related to Structured Program transactions | — |  |  | 5,248 |  |  | 12,469 |  |  | 17,717 |
Municipal securities | — |  |  | 2,443 |  |  | — |  |  | 2,443 |
Total securities available for sale | — |  |  | 333,233 |  |  | 12,469 |  |  | 345,702 |
Servicing assets | — |  |  | — |  |  | 84,308 |  |  | 84,308 |
Other assets | — |  |  | — |  |  | 5,099 |  |  | 5,099 |
Total assets | $ | — |  |  | $ | 333,233 |  |  | $ | 1,193,639 |  |  | $ | 1,526,872 |
Liabilities: |  |  |  |  |  |  |
Borrowings | $ | — |  |  | $ | — |  |  | $ | 8,085 |  |  | 8,085
Retail notes, certificates and secured borrowings | — |  |  | — |  |  | 55,425 |  |  | 55,425 |
Other liabilities | — |  |  | — |  |  | 8,583 |  |  | 8,583
Total liabilities | $ | — |  |  | $ | — |  |  | $ | 72,093 |  |  | $ | 72,093 |
Financial instruments are categorized in the valuation hierarchy based on the significance of observable or unobservable factors in the overall fair value measurement. For the financial instruments listed in the tables above that do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, changes in fair value for assets and liabilities within the Level 2 or Level 3 categories may include changes in fair value that were attributable to observable and unobservable inputs, respectively. The Company primarily uses a discounted cash flow (DCF) model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value. The Company did not transfer any assets or liabilities in or out of Level 3 during the second quarters and first halves of 2023 or 2022. Loans Held for Sale at Fair Value As of both June 30, 2023 and December 31, 2022, the majority of loans HFS were sold shortly after origination and at committed prices. Therefore, the Company is generally not exposed to fluctuations in the fair value of these loans as a result of adverse changes in key assumptions. Fair Value Reconciliation The following tables present additional information about Level 3 loans HFS on a recurring basis:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Fair value at beginning of period | $ | 44,647 |  |  | $ | 156,730 |  |  | $ | 110,400 |  |  | $ | 142,370 |
Originations and purchases | 1,272,118 |  |  | 2,728,499 |  |  | 2,477,147 |  |  | 4,999,424 |
Sales | (1,238,252) |  |  | (2,811,843) |  |  | (2,485,498) |  |  | (5,069,544) |
Principal payments | (5,135) |  |  | (8,524) |  |  | (11,600) |  |  | (21,860) |
Transfers | 191,807 |  |  | (11,888) |  |  | 191,807 |  |  | (11,888) |
Fair value adjustments recorded in earnings | (14,824) |  |  | 9,837 |  |  | (31,895) |  |  | 24,309 |
Fair value at end of period | $ | 250,361 |  |  | $ | 62,811 |  |  | $ | 250,361 |  |  | $ | 62,811 |
Loans Held for Investment at Fair Value Significant Unobservable Inputs The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 loans HFI at fair value:
|  |  |  |  |  |  | June 30, 2023 |  | December 31, 2022
|  |  |  |  |  |  | Minimum |  | Maximum |  | Weighted- Average |  | Minimum |  | Maximum |  | Weighted- Average
Discount rates |  | 8.6 | % |  | 16.7 | % |  | 12.7 | % |  | 8.8 | % |  | 17.1 | % |  | 12.7 | %
Net cumulative expected loss rates (1) |  | 2.2 | % |  | 10.2 | % |  | 6.3 | % |  | 2.1 | % |  | 9.8 | % |  | 5.7 | %
Cumulative expected prepayment rates (1) |  | 22.0 | % |  | 30.7 | % |  | 27.3 | % |  | 26.2 | % |  | 35.3 | % |  | 30.8 | %
(1) Expressed as a percentage of the acquired principal balance of the loan. Significant Recurring Level 3 Fair Value Input Sensitivity The sensitivity of loans HFI at fair value to adverse changes in key assumptions are as follows:
| June 30, 2023 |  | December 31, 2022 |  |
Loans held for investment at fair value | $ | 404,119 |  |  | $ | 925,938 |  |  |
Expected weighted-average life (in years) | 1.0 |  | 0.9 |  |
Discount rates: |  |  |  |  |
100 basis point increase | $ | (3,057) |  |  | $ | (7,471) |  |  |
200 basis point increase | $ | (6,071) |  |  | $ | (14,830) |  |  |
Expected credit loss rates on underlying loans: |  |  |  |  |
10% increase | $ | (2,454) |  |  | $ | (5,574) |  |  |
20% increase | $ | (5,006) |  |  | $ | (11,307) |  |  |
Expected prepayment rates: |  |  |  |  |
10% increase | $ | (2,146) |  |  | $ | (4,311) |  |  |
20% increase | $ | (4,157) |  |  | $ | (7,480) |  |  |
Fair Value Reconciliation The following table presents additional information about Level 3 loans HFI at fair value on a recurring basis:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Fair value at beginning of period | $ | 748,618 |  |  | $ | 15,384 |  |  | $ | 925,938 |  |  | $ | 21,240 |
Purchases | — |  |  | — |  |  | 4,037 |  |  | 14 |
Principal payments | (156,287) |  |  | (5,724) |  |  | (342,738) |  |  | (11,747) |
Transfers | (191,634) |  |  | 11,966 |  |  | (191,634) |  |  | 11,966 |
Interest income accretion and fair value adjustments recorded in earnings | 3,422 |  |  | (1,043) |  |  | 8,516 |  |  | (890) |
Fair value at end of period | $ | 404,119 |  |  | $ | 20,583 |  |  | $ | 404,119 |  |  | $ | 20,583 |
Retail and Certificate Loans and Related Notes, Certificates and Secured Borrowings The Company does not assume principal or interest rate risk on loans that were funded by its member payment- dependent self-directed retail program (Retail Program) because loan balances, interest rates and maturities are matched and offset by an equal balance of notes with the exact same interest rates and maturities. At June 30, 2023 and December 31, 2022, the DCF methodology used to estimate the retail note, certificate and secured borrowings’ fair values used the same projected net cash flows as their related loans. Therefore, the fair value adjustments for retail loans held for investment were largely offset by the corresponding fair value adjustments due to the payment dependent design of the retail notes, certificates and secured borrowings. Asset-Backed Securities Related to Structured Program Transactions Prior year comparative disclosures related to significant unobservable inputs, fair value sensitivities and fair value rollforwards for asset-backed securities related to Structured Program transactions are not presented below as the comparability between periods would not be meaningful given that the current period consists primarily of a new type of Structured Program transaction that occurred in the second quarter of 2023. See “Note 6. Securitizations and Variable Interest Entities” for more information. Senior Asset-Backed Securities Related to Structured Program Transactions As of June 30, 2023, the fair value of the senior asset-backed securities related to Structured Program transactions was $142.8 million with an expected weighted-average life of 1.5 years. Discount rates were the significant unobservable input used to measure the fair value of this Level 3 asset. The minimum, maximum and weighted-average discount rates assumptions were 7.4% as of June 30, 2023. A hypothetical 100 and 200 basis point increase in discount rates would decrease the fair value by $2.0 million and $3.9 million, respectively. The following table presents additional information about Level 3 senior asset-backed securities related to Structured Program transactions measured at fair value on a recurring basis:
| Three and Six Months Ended |  |  |  |
| June 30, 2023 |  |  |  |
Fair value at beginning of period | $ | — |  |  |  |  |  |  |
Additions | 144,680 |  |  |  |  |  |  |
Cash received | (1,290) |  |  |  |  |  |  |
Change in unrealized loss | (605) |  |  |  |  |  |  |
Fair value at end of period | $ | 142,785 |  |  |  |  |  |  |
Other Asset-Backed Securities Related to Structured Program Transactions Significant Unobservable Inputs The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for other asset-backed securities related to Structured Program transactions:
|  |  |  |  |  |  | June 30, 2023 |  |  |  |  |  |  |  |
|  |  |  |  |  |  | Minimum |  | Maximum |  | Weighted- Average |  |  |  |  |  |  |  |  |  |  |  |
Discount rates |  | 5.5 | % |  | 6.6 | % |  | 5.8 | % |  |  |  |  |  |  |  |  |  |  |  |
Net cumulative expected loss rates (1) |  | 7.2 | % |  | 9.1 | % |  | 8.3 | % |  |  |  |  |  |  |  |  |  |  |  |
Cumulative expected prepayment rates (1) |  | 33.0 | % |  | 34.0 | % |  | 33.4 | % |  |  |  |  |  |  |  |  |  |  |  |
(1) Expressed as a percentage of the outstanding collateral balance. Significant Recurring Fair Value Input Sensitivity The following tables present adverse changes to the fair value sensitivity of Level 3 other asset-backed securities related to Structured Program transactions to changes in key assumptions:
| June 30, 2023
Fair value of interests held | $ | 16,980 |  |  |
Expected weighted-average life (in years) | 1.6 |  |
Discount rates |  |  |
100 basis point increase | $ | (193) |  |  |
200 basis point increase | $ | (388) |  |  |
Expected loss rates |  |  |
10% increase | $ | (390) |  |  |
20% increase | $ | (798) |  |  |
Expected prepayment rates |  |  |
10% increase | $ | (216) |  |  |
20% increase | $ | (496) |  |  |
Fair Value Reconciliation The following table presents additional information about Level 3 other asset-backed securities related to Structured Program transactions measured at fair value on a recurring basis:
| Three Months Ended |  | Six Months Ended |  |
| June 30, 2023 |  |  |  |
Fair value at beginning of period | $ | 10,397 |  |  | $ | 12,469 |  |  |  |  |
Additions | 8,667 |  |  | 8,780 |  |  |  |  |
Cash received | (2,084) |  |  | (4,269) |  |  |  |  |
Fair value at end of period | $ | 16,980 |  |  | $ | 16,980 |  |  |  |  |
S ervicing Assets Significant Unobservable Inputs The following table presents quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for servicing assets relating to loans sold to investors:
|  |  |  |  |  |  | June 30, 2023 |  | December 31, 2022
|  |  |  |  |  |  | Minimum |  | Maximum |  | Weighted- Average |  | Minimum |  | Maximum |  | Weighted- Average
Discount rates |  | 7.5 | % |  | 16.4 | % |  | 9.9 | % |  | 7.5 | % |  | 16.4 | % |  | 10.1 | %
Net cumulative expected loss rates (1) |  | 2.0 | % |  | 36.4 | % |  | 15.4 | % |  | 2.1 | % |  | 36.7 | % |  | 15.6 | %
Cumulative expected prepayment rates (1) |  | 17.0 | % |  | 47.7 | % |  | 32.9 | % |  | 15.8 | % |  | 47.2 | % |  | 35.9 | %
Total market servicing rates (% per annum on outstanding principal balance) (2) |  | 0.62 | % |  | 0.62 | % |  | 0.62 | % |  | 0.62 | % |  | 0.62 | % |  | 0.62 | %
(1) Expressed as a percentage of the original principal balance of the loan. (2) Includes collection fees estimated to be paid to a hypothetical third-party servicer. Significant Recurring Level 3 Fair Value Input Sensitivity The Company’s selection of the most representative market servicing rates for servicing assets is inherently judgmental. The Company reviews third-party servicing rates for its loans, loans in similar credit sectors, and market servicing benchmarking analyses provided by third-party valuation firms, when available. The table below shows the impact on the estimated fair value of servicing assets, calculated using different market servicing rate assumptions:
| June 30, 2023 |  | December 31, 2022
Weighted-average market servicing rate assumptions | 0.62 | % |  | 0.62 | %
Change in fair value from: |  |  |
Servicing rate increase by 0.10% | $ | (9,923) |  |  | $ | (10,505) |
Servicing rate decrease by 0.10% | $ | 9,923 |  |  | $ | 10,505 |
The following table presents the fair value sensitivity of servicing assets to adverse changes in key assumptions:
| June 30, 2023 |  | December 31, 2022
Fair value of servicing assets | $ | 85,387 |  |  | $ | 84,308 |
Discount rates |  |  |
100 basis point increase | $ | (726) |  |  | $ | (726) |
200 basis point increase | $ | (1,453) |  |  | $ | (1,451) |
Expected loss rates |  |  |
10% increase | $ | (1,069) |  |  | $ | (1,037) |
20% increase | $ | (2,137) |  |  | $ | (2,074) |
Expected prepayment rates |  |  |
10% increase | $ | (1,790) |  |  | $ | (1,994) |
20% increase | $ | (3,581) |  |  | $ | (3,989) |
Fair Value Reconciliation The following table presents additional information about Level 3 servicing assets measured at fair value on a recurring basis:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Fair value at beginning of period | $ | 89,241 |  |  | $ | 72,112 |  |  | $ | 84,308 |  |  | $ | 67,726 |
Issuances (1) | 13,576 |  |  | 29,090 |  |  | 27,701 |  |  | 51,455 |
Change in fair value, included in Marketplace revenue | (17,074) |  |  | (21,034) |  |  | (29,650) |  |  | (38,013) |
Other net changes | (356) |  |  | (741) |  |  | 3,028 |  |  | (1,741) |
Fair value at end of period | $ | 85,387 |  |  | $ | 79,427 |  |  | $ | 85,387 |  |  | $ | 79,427 |
(1) Represents the gains or losses on sales of the related loans. Financial Instruments, Assets and Liabilities Not Recorded at Fair Value The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value:
June 30, 2023 | Carrying Amount |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Balance at Fair Value
Assets: |  |  |  |  |  |  |  |  |
Loans and leases held for investment, net | $ | 5,178,186 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,408,746 |  |  | $ | 5,408,746 |
Other assets | 37,375 |  |  | — |  |  | 36,393 |  |  | 1,359 |  |  | 37,752 |
Total assets | $ | 5,215,561 |  |  | $ | — |  |  | $ | 36,393 |  |  | $ | 5,410,105 |  |  | $ | 5,446,498 |
Liabilities: |  |  |  |  |  |  |  |  |
Deposits (1) | $ | 829,798 |  |  | $ | — |  |  | $ | — |  |  | $ | 826,478 |  |  | $ | 826,478 |
Borrowings | 11,215 |  |  | — |  |  | 561 |  |  | 10,654 |  |  | 11,215 |
Other liabilities | 59,342 |  |  | — |  |  | 28,260 |  |  | 31,082 |  |  | 59,342 |
Total liabilities | $ | 900,355 |  |  | $ | — |  |  | $ | 28,821 |  |  | $ | 868,214 |  |  | $ | 897,035 |
December 31, 2022 | Carrying Amount |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs |  | Balance at Fair Value
Assets: |  |  |  |  |  |  |  |  |
Loans and leases held for investment, net | $ | 4,705,302 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,941,825 |  |  | $ | 4,941,825 |
Other assets | 36,646 |  |  | — |  |  | 35,300 |  |  | 1,397 |  |  | 36,697 |
Total assets | $ | 4,741,948 |  |  | $ | — |  |  | $ | 35,300 |  |  | $ | 4,943,222 |  |  | $ | 4,978,522 |
Liabilities: |  |  |  |  |  |  |  |  |
Deposits (1) | $ | 860,808 |  |  | $ | — |  |  | $ | — |  |  | $ | 860,808 |  |  | $ | 860,808 |
Borrowings | 66,773 |  |  | — |  |  | 2,619 |  |  | 64,154 |  |  | 66,773 |
Other liabilities | 62,247 |  |  | — |  |  | 30,311 |  |  | 31,936 |  |  | 62,247 |
Total liabilities | $ | 989,828 |  |  | $ | — |  |  | $ | 32,930 |  |  | $ | 956,898 |  |  | $ | 989,828 |
(1) Excludes deposit liabilities with no defined or contractual maturities.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration