Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value MeasurementsFair 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: The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 are as follows (in thousands):


	Carrying Value		Fair Value Measurements
	September 30, 2022		Level 1		Level 2		Level 3
Financial assets:
Finance receivables at fair value, excluding accrued interest and fees receivable (1)	$	442,779	$	—	$	—	$	442,779

Financial liabilities:
Warrant liability - Public Warrants (2)	2,853		2,853		—		—
Warrant liability - Private Placement Warrants (3)	1,363		—		—		1,363

	Carrying Value		Fair Value Measurements
	December 31, 2021		Level 1		Level 2		Level 3
Financial assets:
Finance receivables at fair value, excluding accrued interest and fees receivable (1)	$	373,253	$	—	$	—	$	373,253

Financial liabilities:
Warrant liability - Public Warrants (2)	8,083		8,083		—		—
Warrant liability - Private Placement Warrants (3)	3,157		—		—		3,157

During the three and nine months ended September 30, 2022 and 2021, there were no transfers of assets or liabilities in or out of 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, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
Interest rate on finance receivables	150.80	%	147.60	%
Discount rate	25.90	%	21.80	%
Servicing cost*	5.00	%	5.00	%
Remaining life	0.59 years		0.62 years
Default rate*	19.57	%	17.70	%
Accrued interest*	3.80	%	3.20	%
Prepayment rate*	21.20	%	21.00	%

*Stated as a percentage of finance receivables

(2) 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.

(3) The fair value of the Private Placement Warrants is measured using a Monte Carlo simulation; accordingly, the fair value measurement for the Private Placement Warrants is categorized as Level 3.


The following table presents the significant assumptions used in the simulation at September 30, 2022 and December 31, 2021, the Closing Date:

	September 30, 2022						December 31, 2021
Input	$11.50 Exercise Price Warrants			$15 Exercise Price Warrants			$11.50 Exercise Price Warrants			$15 Exercise Price Warrants
Risk-free interest rate	2.98		%	2.98		%	1.19		%	1.50		%
Expected term (years)	5.0			10.0			4.6			9.6
Expected volatility	60.60		%	60.60		%	48.40		%	48.40		%
Exercise price	$	11.50		$	15.00		$	11.50		$	15.00
Fair value of warrants	$	0.26		$	0.77		$	0.74		$	1.40


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 December 31, 2021	$	1,879	$	1,278	$	3,157
Change in fair value	(356)		(146)		(502)
Fair value as of March 31, 2022	1,523		1,132		2,655
Change in fair value	(609)		(311)		(920)
Fair value as of June 30, 2022	914		821		1,735
Change in fair value	(254)		(118)		(372)
Fair value as of September 30, 2022	$	660	$	703	$	1,363

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, 2022 and December 31, 2021 (in thousands):


	Carrying Value		Fair Value Measurements
	September 30, 2022		Level 1		Level 2		Level 3
Assets:
Cash	$	14,011	$	14,011	$	—	$	—
Restricted cash	36,458		36,458		—		—
Accrued interest and fees receivable	15,286		15,286		—		—
Finance receivables at amortized cost, net	3,858		—		—		3,858

Liabilities:
Secured borrowing payable	1,758		—		—		1,758
Senior debt, net	338,369		—		—		338,369


	Carrying Value		Fair Value Measurements
	December 31, 2021		Level 1		Level 2		Level 3
Assets:
Cash	$	25,064	$	25,064	$	—	$	—
Restricted cash	37,298		37,298		—		—
Accrued interest and fees receivable	10,637		10,637		—		—
Finance receivables at amortized cost, net	4,220		—		—		4,220

Liabilities:
Secured borrowing payable	22,443		—		—		22,443
Senior debt, net	251,578		—		—		251,578

- 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 + Details