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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Fair value on a nonrecurring basis: The Company has no assets or liabilities measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Fair value measurement on a recurring basis: Effective January 1, 2021, the Company elected the fair value option to account for its installment finance receivables. Prior to that, OppFi-LLC only had warrant units that were measured at fair market value on a recurring basis. Subsequent to the Business Combination, the Company measures the Public Warrants and Private Placement Warrants at fair value on a recurring basis. The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
|  | Carrying Value |  | Fair Value Measurements
|  | September 30, 2021 |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |
Finance receivables at fair value (1) |  | $ | 334,114 |  |  | $ | — |  |  | $ | — |  |  | $ | 334,114 |
Financial liabilities: |  |  |  |  |  |  |  |
Warrant liability - Public Warrants (3) |  | 18,307 |  |  | 18,307 |  |  | — |  |  | — |
Warrant liability - Private Placement Warrants (4) |  | 6,199 |  |  | — |  |  | — |  |  | 6,199 |
|  | Carrying Value |  | Fair Value Measurements
|  | December 31, 2020 |  | Level 1 |  | Level 2 |  | Level 3
Financial liabilities: |  |  |  |  |  |  |  |
Warrant units (2) |  | $ | 1,309 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,309 |
During the three and nine months ended September 30, 2021, there were no transfers of assets or liabilities in or out of Level 1, Level 2 or Level 3 fair value measurements.
(1) The Company primarily estimates the fair value of its installment finance receivables portfolio using discounted cash flow models that have been internally developed. The models use inputs that are unobservable but reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value.
The following table presents quantitative information about the significant unobservable inputs used for the Company’s installment finance receivables fair value measurements as of September 30, 2021:
|  | September 30, 2021
Interest rate on finance receivables |  | 151.10 | %
Discount rate |  | 21.70 | %
Servicing fee* |  | 5.02 | %
Remaining life |  | 0.58 years
Default rate* |  | 19.09 | %
Accrued interest* |  | 3.20 | %
Prepayment rate* |  | 21.40 | %
*Stated as a percentage of finance receivables
(2) The estimated fair value of the warrant units is calculated using an option pricing model. The resulting fair value measurement is categorized as a Level 3 measurement. Upon closing of the Business Combination, the lender exercised the warrant units and the liability was reclassified to additional paid in capital. As such, there is no warrant unit liability at September 30, 2021. For the three and nine months ended September 30, 2021, warrant expense was $888 thousand and $4,208 thousand, respectively. For the three and nine months ended September 30, 2020, there was no warrant expense. Warrant expense is included in general, administrative, and other in the consolidated statements of operations.
The following table presents the change in the fair value of the warrant units (in thousands):
Fair value as of December 31, 2020 |  | $ | 1,309 |
Change in fair value |  | 4,208 |
Warrant units exercised |  | (5,517) |
Fair value as of September 30, 2021 |  | $ | — |
(3) The fair value measurement for the Public Warrants is categorized as Level 1 due to the use of an observable market quote in an active market under the ticker OPFI WS. (4) The fair value of the Private Placement Warrants is measured using as Monte Carlo simulation. As such, the Private Placement Warrants are categorized as Level 3.
The following table presents the significant assumptions used in the simulation at September 30, 2021 and July 20, 2021, the Closing Date:
|  | September 30, 2021 |  | July 20, 2021
Input |  | $11.50 Exercise Price Warrants |  | $15 Exercise Price Warrants |  | $11.50 Exercise Price Warrants |  | $15 Exercise Price Warrants
Risk-free interest rate |  | 0.93 | % |  | 1.51 | % |  | 0.69 | % |  | 1.23 | %
Expected term (years) |  | 4.8 |  | 9.8 |  | 5.0 |  | 10.0
Expected volatility |  | 37.00 | % |  | 35.50 | % |  | 36.50 | % |  | 36.00 | %
Exercise price |  | $ | 11.50 |  |  | $ | 15.00 |  |  | $ | 11.50 |  |  | $ | 15.00 |
Fair value of warrants |  | $ | 1.64 |  |  | $ | 2.23 |  |  | $ | 2.80 |  |  | $ | 3.50 |
The following table presents the changes in the fair value of the warrant liability - Private Placement Warrants (in thousands):
|  | $11.50 Exercise Price Warrants |  | $15 Exercise Price Warrants |  | Total
Fair value as of Closing Date, July 20, 2021 |  | $ | 7,110 |  |  | $ | 3,194 |  |  | $ | 10,304 |
Change in fair value |  | (2,946) |  |  | (1,159) |  |  | (4,105) |
Fair value as of September 30, 2021 |  | $ | 4,164 |  |  | $ | 2,035 |  |  | $ | 6,199 |
Financial assets and liabilities not measured at fair value: The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy as of September 30, 2021 (in thousands):
|  | Carrying Value |  | Fair Value Measurements
|  | September 30, 2021 |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 27,627 |  |  | $ | 27,627 |  |  | $ | — |  |  | $ | — |
Restricted cash |  | 29,175 |  |  | 29,175 |  |  | — |  |  | — |
Finance receivables at amortized cost, net |  | 1,269 |  |  | — |  |  | — |  |  | 1,269 |
Liabilities: |  |  |  |  |  |  |  |
Secured borrowing payable |  | 19,791 |  |  | — |  |  | — |  |  | 19,791 |
Senior debt, net |  | 205,968 |  |  | — |  |  | — |  |  | 205,968 |
The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy as of December 31, 2020 (in thousands):
|  | Carrying Value |  | Fair Value Measurements
|  | December 31, 2020 |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 25,601 |  |  | $ | 25,601 |  |  | $ | — |  |  | $ | — |
Restricted cash |  | 20,056 |  |  | 20,056 |  |  | — |  |  | — |
Finance receivables at amortized cost, net |  | 222,243 |  |  | — |  |  | — |  |  | 287,437 |
Liabilities: |  |  |  |  |  |  |  |
Reserve for repurchase liability |  | 4,241 |  |  | — |  |  | — |  |  | 4,241 |
Secured borrowing payable |  | 16,025 |  |  | — |  |  | — |  |  | 16,025 |
Senior debt, net |  | 131,726 |  |  | — |  |  | — |  |  | 131,726 |
Subordinated debt - related party |  | 4,000 |  |  | — |  |  | — |  |  | 4,000 |
Other debt |  | 6,354 |  |  | — |  |  | — |  |  | 6,354 |

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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 http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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