| FAIR VALUE OF ASSETS AND LIABILITIES |
FAIR VALUE OF ASSETS AND LIABILITIES Financial Instruments Recorded at Fair Value For a description of the fair value hierarchy and an overview of Prosper’s fair value methodologies related to the Credit Card Derivative and Receivable from Credit Card Partner, see Note 2, Summary of Significant Accounting Policies. Refer to Note 4, Borrower Loans, Loans Held for Sale and Notes, at Fair Value, for further details on the methodologies utilized to value Borrow Loans and Notes issued through the Note Channel. The Convertible Preferred Stock Warrant Liability is valued using a Black-Scholes option pricing model. Refer to Note 13 for additional information. Prosper did not transfer any assets or liabilities in or out of level 3 during the years ended December 31, 2025 and 2024. When utilizing market data and bid-ask spreads, Prosper uses the price within the bid-ask spread that best represents fair value. When quoted prices do not exist, Prosper uses prices obtained from independent third-party pricing services to measure the fair value of financial instruments. Prosper's primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information, such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar securities. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts. The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2025 | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Total | | Assets: | | | | | | | | | | Borrower Loans, at Fair Value (Note 4) | | $ | — | | | $ | — | | | $ | 309,737 | | | $ | 309,737 | | | Receivable from Credit Card Partner, at Fair Value (Note 5 and 7) | | — | | | — | | | 99,865 | | | 99,865 | | | Servicing Assets (Note 6) | | — | | | — | | | 17,402 | | | 17,402 | | | Credit Card Derivative (Note 5) | | — | | | — | | | 48,290 | | | 48,290 | | | Total Assets | | $ | — | | | $ | — | | | $ | 475,294 | | | $ | 475,294 | | | Liabilities: | | | | | | | | | | Notes, at Fair Value (Note 4) | | $ | — | | | $ | — | | | $ | 243,900 | | | $ | 243,900 | | | Convertible Preferred Stock Warrant Liability (Note 13) | | — | | | — | | | 230,060 | | | 230,060 | | | Loan Trailing Fee Liability (Note 10) | | — | | | — | | | 3,328 | | | 3,328 | | | Credit Card servicing obligation liability (Note 5) | | — | | | — | | | 9,276 | | | 9,276 | | | Total Liabilities | | $ | — | | | $ | — | | | $ | 486,564 | | | $ | 486,564 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2024 | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Total | | Assets: | | | | | | | | | | Borrower Loans, at Fair Value | | $ | — | | | $ | — | | | $ | 461,785 | | | $ | 461,785 | | | Receivable from Credit Card Partner, at Fair Value (Note 5 and 7) | | — | | | — | | | 104,153 | | | 104,153 | | | Servicing Assets | | — | | | — | | | 13,718 | | | 13,718 | | | Credit Card Derivative (Note 5) | | — | | | — | | | 38,739 | | | 38,739 | | | Total Assets | | $ | — | | | $ | — | | | $ | 618,395 | | | $ | 618,395 | | | Liabilities: | | | | | | | | | | Notes, at Fair Value | | $ | — | | | $ | — | | | $ | 283,030 | | | $ | 283,030 | | | Convertible Preferred Stock Warrant Liability | | — | | | — | | | 261,249 | | | 261,249 | | | Loan Trailing Fee Liability (Note 10) | | — | | | — | | | 3,004 | | | 3,004 | | | Credit Card servicing obligation liability (Note 5) | | — | | | — | | | 8,947 | | | 8,947 | | | Total Liabilities | | $ | — | | | $ | — | | | $ | 556,230 | | | $ | 556,230 | |
As PMI’s Borrower Loans, Receivable from Credit Card Partner, Credit Card Derivative, Servicing Assets, Notes, Credit Card servicing obligation liability, loan trailing fee liability and Convertible Preferred Stock Warrant Liability 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. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs. Prosper did not transfer any assets or liabilities in or out of Level 3 for the year ended December 31, 2025 and 2024. Significant Unobservable Inputs The following tables present quantitative information about the ranges of significant unobservable inputs used for the Company’s Level 3 fair value measurements at December 31, 2025 and 2024: | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | 2025 | | 2024 | | Borrower Loans and Notes: | | | | | | | | | Discount rate | 5.0 | % | — | 15.5 | % | | 5.7 | % | — | 10.9 | % | | Default rate | 1.9 | % | — | 14.5 | % | | 2.6 | % | — | 22.6 | % |
At December 31, 2025 and 2024, the discounted cash flow methodology used to estimate the Note fair values used the same projected cash flows as the related Borrower Loans. | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | 2025 | | 2024 | | Servicing Assets: | | | | | | | | | Discount rate | 15.0 | % | — | | 25.0 | % | | 15.0 | % | — | 25.0 | % | | Default rate | 2.0 | % | — | | 15.0 | % | | 2.6 | % | — | 22.6 | % | | Prepayment rate | 13.3 | % | — | | 35.6 | % | | 8.3 | % | — | 29.8 | % | Market servicing rate (1) (2) | 0.593 | % | — | | 0.842 | % | | 0.633 | % | — | 0.842 | % | (1) Servicing assets associated with loans enrolled in a relief program offered by the Company as of December 31, 2025 and 2024, were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption. | (2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2025 and 2024, the market rate for collection fees and non-sufficient fund fees was assumed to be 10 basis points and 7 basis points, respectively, for a weighted-average total market servicing rate of 69.3 basis points to 94.2 basis points and 70.3 basis points to 91.2 basis points, respectively. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | December 31, |
| 2025 | | 2024 | Loan Trailing Fee Liability: | | | | | | | | | Discount rate | 15.0 | % | — | | 25.0 | % | | 15.0 | % | — | | 25.0 | % | | Default rate | 2.0 | % | — | | 15.0 | % | | 2.6 | % | — | | 22.6 | % | | Prepayment rate | 13.3 | % | — | | 35.6 | % | | 8.3 | % | — | | 29.8 | % |
Ranges of inputs are not applied to the Credit Card Derivative and Credit Card servicing obligation liability, as they are valued at the portfolio level. Refer below for a summary of the significant unobservable inputs associated with those Level 3 fair value measurements. Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis The following table presents additional information about Level 3 Borrower Loans, Loans Held for Sale and Notes measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | Liabilities | | | | | | Borrower
Loans | | Loans Held
for Sale | | | Notes | | | | Total | | Fair Value at January 1, 2024 | | $ | 545,038 | | | $ | 161,501 | | | | $ | (321,966) | | | | | $ | 384,573 | | | Purchase of Borrower Loans/Issuance of Notes | | 186,073 | | | 2,054,646 | | | | (184,200) | | | | | 2,056,519 | | | Principal repayments on Borrower Loans | | (349,740) | | | (22,554) | | | | 195,169 | | | | | (177,125) | | | Borrower Loans sold to third parties | | (4,454) | | | (2,055,338) | | | | — | | | | | (2,059,792) | | | Other changes | | (1,550) | | | (303) | | | | 424 | | | | | (1,429) | | | Change in fair value | | (49,271) | | | (2,263) | | | | 27,543 | | | | | (23,991) | | | Transfer of Loans Held for Sale to Borrower Loans upon PMIT 2024-1 Transaction, at Fair Value | | 135,689 | | | (135,689) | | | | — | | | | | — | | | Fair Value at December 31, 2024 | | $ | 461,785 | | | $ | — | | | | $ | (283,030) | | | | | $ | 178,755 | | | Purchase of Borrower Loans/Issuance of Notes | | 164,625 | | | 2,487,702 | | | | (163,892) | | | | | 2,488,435 | | | Principal repayments on Borrower Loans | | (283,762) | | | — | | | | 183,753 | | | | | (100,009) | | | Borrower Loans sold to third parties | | (2,632) | | | (2,487,702) | | | | — | | | | | (2,490,334) | | | Other changes | | (1,577) | | | — | | | | 474 | | | | | (1,103) | | | Change in fair value | | (28,702) | | | — | | | | 18,795 | | | | | (9,907) | | | Fair Value at December 31, 2025 | | $ | 309,737 | | | $ | — | | | | $ | (243,900) | | | | | $ | 65,837 | |
Effective March 28, 2024, the outstanding balance of Loans Held for Sale was reduced to zero following the contribution of loans held in consolidated warehouse trusts to the PMIT 2024-1 securitization transaction, which followed the PMIT 2023-1 securitization transaction in September 2023, as more fully described in Note 7, Securitizations. The Company has not designated any new personal loans as Loans Held for Sale since these transactions, other than loans that are purchased and immediately sold through the Whole Loan Channel. This movement of loans through the Whole Loan Channel is reflected in the accompanying consolidated statements of cash flows and the Level 3 tables above. Details on the fair value of the Servicing Asset associated with loans sold through the Whole Loan Channel are discussed below. The following table presents additional information about the Level 3 Receivable from Credit Card Partner, measured at fair value on a recurring basis for the year ended December 31, 2025 (in thousands): | | | | | | | | | | | Receivable from Credit Card Partner | | Fair Value at January 1, 2024 | | $ | — | | | Transfer of Credit Card principal and interest receivables upon securitization | | 96,907 | | | Purchases of Credit Card principal receivables | | 9,254 | | | Principal repayments on Credit Card receivables | | (11,885) | | | Other changes | | 415 | | | Change in fair value | | 9,462 | | | Fair Value at December 31, 2024 | | $ | 104,153 | | | Purchases of Credit Card principal receivables | | 75,181 | | | Principal repayments on Credit Card receivables | | (62,311) | | | Other changes | | 160 | | | Change in fair value | | (17,318) | | | Fair Value at December 31, 2025 | | $ | 99,865 | | | | | | | |
The following table presents additional information about the Level 3 Servicing Assets measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands): | | | | | | | | | | | Servicing Assets | | Fair Value at January 1, 2024 | | $ | 12,249 | | | Additions | | 10,997 | | | Less: Change in fair value | | (9,528) | | | Fair Value at December 31, 2024 | | $ | 13,718 | | | Additions | | 13,609 | | | Less: Change in fair value | | (9,925) | | | Fair Value at December 31, 2025 | | $ | 17,402 | |
The following table presents additional information about the Level 3 Credit Card Derivative measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands): | | | | | | | | | | | | | | | Credit Card Derivative | | Fair Value at January 1, 2024 | | | | $ | 36,848 | | | Change in fair value | | | | 13,335 | | | Reduction to fair value upon PMCC 2024-1 securitization (Notes 5 and 7) | | | | (11,444) | | | Fair Value at December 31, 2024 | | | | $ | 38,739 | | | Change in fair value | | | | 9,551 | | | Fair Value at December 31, 2025 | | | | $ | 48,290 | |
The following table presents additional information about the Level 3 Credit Card servicing obligation liability measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands). | | | | | | | | | | | | | | | Credit Card Servicing Obligation Liability | | Fair Value at January 1, 2024 | | | | $ | 9,732 | | | Reduction to fair value upon PMCC 2024-1 securitization (Note 5) | | | | (2,846) | | | Other changes in fair value | | | | 2,061 | | | Fair Value at December 31, 2024 | | | | $ | 8,947 | | | Change in fair value | | | | 329 | | | Fair Value at December 31, 2025 | | | | $ | 9,276 | |
The following table presents additional information about the Level 3 Convertible Preferred Stock Warrant Liability measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands): | | | | | | | | | | | | | | | Convertible Preferred Stock Warrant Liability | | Fair Value at January 1, 2024 | | | | $ | 215,041 | | | | | | | | | | | | | | | | | | Change in fair value | | | | 46,208 | | | Fair Value at December 31, 2024 | | | | $ | 261,249 | | | Reclassification to Convertible Preferred Stock upon exercise of Series F Warrants (Note 13) | | | | (73,292) | | | | | | | | | | | | | Change in fair value | | | | 42,103 | | | Fair Value at December 31, 2025 | | | | $ | 230,060 | |
Loan Trailing Fee The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and default rates using a discounted cash flow model. The assumptions used are the same as those used for the valuation of Servicing Assets, as described below. The following table presents additional information about Level 3 Loan Trailing Fee Liability measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands): | | | | | | | | | | | Loan Trailing Fee Liability | | Balance at January 1, 2024 | | $ | 2,942 | | | Issuances | | 1,959 | | | Cash payment of Loan Trailing Fee | | (2,597) | | | Change in fair value | | 700 | | | Balance at December 31, 2024 | | $ | 3,004 | | | Issuances | | 2,477 | | | Cash payment of Loan Trailing Fee | | (2,657) | | | Change in fair value | | 504 | | | Balance at December 31, 2025 | | $ | 3,328 | |
Significant Recurring Level 3 Fair Value Input Sensitivity Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2025 and 2024 for Borrower Loans are presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | | | Borrower Loans | | December 31, 2025 | | December 31, 2024 | | | | Fair value, using the following assumptions: | | $ | 309,737 | | | $ | 461,785 | | | | | Weighted-average discount rate | | 8.53 | % | | 7.72 | % | | | | Weighted-average default rate | | 11.79 | % | | 12.59 | % | | | | | | | | | | | Fair value resulting from: | | | | | | | 100 basis point increase in discount rate | | $ | 307,014 | | | $ | 457,584 | | | | 200 basis point increase in discount rate | | 304,354 | | | 453,483 | | | | | Fair value resulting from: | | | | | | | 100 basis point decrease in discount rate | | $ | 312,526 | | | $ | 466,090 | | | | 200 basis point decrease in discount rate | | 315,384 | | | 470,502 | | | | | | | | | | | | Fair value resulting from: | | | | | | | Applying a 1.1 multiplier to default rate | | $ | 307,253 | | | $ | 456,385 | | | | Applying a 1.2 multiplier to default rate | | 304,767 | | | 451,011 | | | | | Fair value resulting from: | | | | | | | Applying a 0.9 multiplier to default rate | | $ | 312,219 | | | $ | 467,211 | | | | Applying a 0.8 multiplier to default rate | | 314,699 | | | 472,663 | | | |
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2025 and 2024 for Notes are presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Notes | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 243,900 | | | $ | 283,030 | | | Weighted-average discount rate | | 8.67 | % | | 7.70 | % | | Weighted-average default rate | | 11.48 | % | | 13.25 | % | | | | | | | Fair value resulting from: | | | | | 100 basis point increase in discount rate | | $ | 241,752 | | | $ | 280,451 | | 200 basis point increase in discount rate | | 239,655 | | | 277,934 | | | Fair value resulting from: | | | | | 100 basis point decrease in discount rate | | $ | 246,096 | | | $ | 285,669 | | 200 basis point decrease in discount rate | | 248,352 | | | 288,381 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 241,944 | | | $ | 279,718 | | Applying a 1.2 multiplier to default rate | | 239,987 | | | 276,422 | | | Fair value resulting from: | | | | | Applying a 0.9 multiplier to default rate | | $ | 245,853 | | | $ | 286,358 | | Applying a 0.8 multiplier to default rate | | 247,806 | | | 289,702 | |
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2025 and 2024 for Servicing Assets is presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Servicing Assets | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 17,402 | | | $ | 13,718 | | | Weighted-average market servicing rate | | 0.598 | % | | 0.640 | % | | Weighted-average prepayment rate | | 21.65 | % | | 18.70 | % | | Weighted-average default rate | | 11.84 | % | | 14.03 | % | | | | | | | Fair value resulting from: | | | | | Market servicing rate increase of 0.025% | | $ | 16,398 | | | $ | 12,843 | | Market servicing rate decrease of 0.025% | | 18,405 | | | 14,593 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to prepayment rate | | $ | 16,949 | | | $ | 13,415 | | Applying a 0.9 multiplier to prepayment rate | | 17,863 | | | 14,026 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 17,114 | | | $ | 13,448 | | Applying a 0.9 multiplier to default rate | | 17,689 | | | 13,989 | |
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2025 for Receivable from Credit Card Partner is presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | | | Receivable from Credit Card Partner | | December 31, 2025 | | December 31, 2024 | | | | Fair value, using the following assumptions: | | $ | 99,865 | | | $ | 104,153 | | | | | Discount rate on Credit Card receivable cash flows | | 23.15 | % | | 22.44 | % | | | | Prepayment rate on Credit Card receivables | | 8.22 | % | | 8.14 | % | | | | Default rate on Credit Card receivables | | 15.00 | % | | 14.80 | % | | | | | | | | | | | Fair value resulting from: | | | | | | | 100 basis point increase in discount rate | | $ | 99,689 | | | $ | 103,923 | | | | 200 basis point increase in discount rate | | 99,518 | | | 103,699 | | | | | Fair value resulting from: | | | | | | | 100 basis point decrease in discount rate | | $ | 100,045 | | | $ | 104,390 | | | | 200 basis point decrease in discount rate | | 100,231 | | | 104,633 | | | | | | | | | | | | Fair value resulting from: | | | | | | | Applying a 1.1 multiplier to prepayment rate | | $ | 99,676 | | | $ | 103,911 | | | | Applying a 0.9 multiplier to prepayment rate | | 100,055 | | | 104,398 | | | | | | | | | | | | Fair value resulting from: | | | | | | | Applying a 1.1 multiplier to default rate | | $ | 97,376 | | | $ | 101,503 | | | | Applying a 0.9 multiplier to default rate | | 102,459 | | | 106,916 | | | |
Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2025 and 2024 for the Credit Card Derivative is presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Credit Card Derivative | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 48,290 | | | $ | 38,739 | | | Outstanding Credit Card Principal Balance, Prosper and Coastal Allocations | | 330,409 | | | 303,245 | | | Discount rate on Prosper Allocations | | 23.15 | % | | 22.44 | % | | Discount rate on Coastal Program Fee | | 23.15 | % | | 22.44 | % | | Prepayment rate applied to Credit Card portfolio | | 8.22 | % | | 8.14 | % | | Default rate applied to Credit Card portfolio | | 15.33 | % | | 15.65 | % | | | | | | | Fair value resulting from: | | | | | 100 basis point increase in both discount rates | | $ | 47,654 | | | $ | 38,225 | | 200 basis point increase in both discount rates | | 47,036 | | | 37,725 | | | Fair value resulting from: | | | | | 100 basis point decrease in both discount rates | | $ | 48,945 | | | $ | 39,269 | | 200 basis point decrease in both discount rates | | 49,619 | | | 39,814 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to prepayment rate | | $ | 47,625 | | | $ | 38,210 | | Applying a 0.9 multiplier to prepayment rate | | 48,964 | | | 39,275 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 38,254 | | | $ | 29,252 | | Applying a 0.9 multiplier to default rate | | 58,663 | | | 48,556 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in Estimate - Credit Card Derivative Effective December 31, 2024, to calculate the relevant portfolio interest rate for the Credit Card Derivative valuation, the Company implemented a forward projection for the attrition of cardholders enrolled in hardship and settlement programs. These programs were launched in the second quarter of 2024 and management believes they should be segregated from the base population of cardholders for the purposes of analyzing the fair value of the Credit Card Derivative cash flows. The effect of this change in estimate increased the Credit Card Derivative by $4.5 million as of December 31, 2024. Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2025 and 2024 for Credit Card servicing obligation liability is presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Credit Card servicing obligation liability | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 9,276 | | | $ | 8,947 | | | Discount rate on Credit Card portfolio servicing obligation | | 23.15 | % | | 22.44 | % | | Prepayment rate applied to Credit Card portfolio | | 8.22 | % | | 8.14 | % | | Default rate applied to Credit Card portfolio | | 15.33 | % | | 15.65 | % | | Market servicing rate | | 2.00 | % | | 2.00 | % | | | | | | | Fair value resulting from: | | | | | Market servicing rate increase of 0.10% | | $ | 9,761 | | | $ | 9,415 | | Market servicing rate decrease of 0.10% | | 8,792 | | | 8,481 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to prepayment rate | | $ | 9,174 | | | $ | 8,849 | | Applying a 0.9 multiplier to prepayment rate | | 9,380 | | | 9,047 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 9,056 | | | $ | 8,730 | | Applying a 0.9 multiplier to default rate | | 9,501 | | | 9,170 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
These sensitivities are hypothetical and should be evaluated with care. 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 impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Assets and Liabilities Not Recorded at Fair Value The following tables present the fair value hierarchy for assets and liabilities not recorded at fair value (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2025 | | Carrying Amount | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Fair Value | | Assets: | | | | | | | | | | | | Cash and Cash Equivalents | | $ | 46,755 | | | $ | 46,755 | | | $ | — | | | $ | — | | | $ | 46,755 | | | Restricted Cash - Cash and Cash Equivalents | | 92,854 | | | 92,854 | | | — | | | — | | | 92,854 | | | Restricted Cash - Certificates of Deposit | | 1,509 | | | — | | | 1,509 | | | — | | | 1,509 | | | Accounts Receivable | | 11,947 | | | — | | | 11,947 | | | — | | | 11,947 | | | Total Assets | | $ | 153,065 | | | $ | 139,609 | | | $ | 13,456 | | | $ | — | | | $ | 153,065 | | | Liabilities: | | | | | | | | | | | | Accounts Payable and Accrued Liabilities | | $ | 56,501 | | | $ | — | | | $ | 56,501 | | | $ | — | | | $ | 56,501 | | | Transaction Fee Refund Liability (Note 17) | | 17,191 | | | — | | | — | | | 17,191 | | | 17,191 | | | Payable to Investors | | 77,604 | | | — | | | 77,604 | | | — | | | 77,604 | | | Notes Issued by Securitization Trust | | 149,902 | | | — | | | 151,325 | | | — | | | 151,325 | | | | | | | | | | | | | | Term Loan (Note 11) | | 75,000 | | | — | | | 76,089 | | | — | | | 76,089 | | | Total Liabilities | | $ | 376,198 | | | $ | — | | | $ | 361,519 | | | $ | 17,191 | | | $ | 378,710 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2024 | | Carrying Amount | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Fair Value | | Assets: | | | | | | | | | | | | Cash and Cash Equivalents | | $ | 30,334 | | | $ | 30,334 | | | $ | — | | | $ | — | | | $ | 30,334 | | | Restricted Cash - Cash and Cash Equivalents | | 111,724 | | | 111,724 | | | — | | | — | | | 111,724 | | | Restricted Cash - Certificates of Deposit | | 3,029 | | | — | | | 3,029 | | | — | | | 3,029 | | | Accounts Receivable | | 7,545 | | | — | | | 7,545 | | | — | | | 7,545 | | | Total Assets | | $ | 152,632 | | | $ | 142,058 | | | $ | 10,574 | | | $ | — | | | $ | 152,632 | | | Liabilities: | | | | | | | | | | | | Accounts Payable and Accrued Liabilities | | $ | 49,346 | | | $ | — | | | $ | 49,346 | | | $ | — | | | $ | 49,346 | | | Transaction Fee Refund Liability (Note 17) | | 9,212 | | | — | | | — | | | 9,212 | | | $ | 9,212 | | | Payable to Investors | | 91,945 | | | — | | | 91,945 | | | — | | | 91,945 | | | Notes Issued by Securitization Trust | | 258,960 | | | — | | | 260,985 | | | — | | | 260,985 | | | Term Loan (Note 11) | | 75,540 | | | — | | | 76,581 | | | — | | | 76,581 | | | Total Liabilities | | $ | 485,003 | | | $ | — | | | $ | 478,857 | | | $ | 9,212 | | | $ | 488,069 | |
The estimated fair values of Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities, Transaction Fee Refund Liability and Payable to Investors approximate their carrying values because of their short-term nature.
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| FAIR VALUE OF ASSETS AND LIABILITIES |
FAIR VALUE OF ASSETS AND LIABILITIES PFL has elected to record certain financial instruments at fair value on the balance sheet. PFL classifies Borrower Loans and Notes as financial instruments and assesses their fair value each on a quarterly basis for financial statement presentation purposes. Gains and losses on these financial instruments are shown separately on the Consolidated Statements of Operations. As of December 31, 2025 and 2024, the discounted cash flow methodology used to estimate the Notes fair values used the same projected cash flows as the related Borrower Loans. As demonstrated in the table below, the fair value adjustments for Borrower Loans were largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and because the principal balances of the Borrower Loans approximated the principal balances of the Notes. For a description of the fair value hierarchy and PFL’s fair value methodologies, see Note 2 - Summary of Significant Accounting Policies. PFL did not transfer any assets or liabilities in or out of Level 3 during the years ended December 31, 2025 and 2024. Financial Instruments Recorded at Fair Value The fair value of the Borrower Loans and Notes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary cash flow assumptions used to value such Borrower Loans and Notes include default and prepayment rates derived primarily from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics. The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2025 | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Total | | Assets: | | | | | | | | | | Borrower Loans, at Fair Value | | $ | — | | | $ | — | | | $ | 245,337 | | | $ | 245,337 | | | Servicing Assets | | — | | | — | | | 17,601 | | | 17,601 | | | Total Assets | | $ | — | | | $ | — | | | $ | 262,938 | | | $ | 262,938 | | | Liabilities: | | | | | | | | | | Notes, at Fair Value | | $ | — | | | $ | — | | | $ | 243,900 | | | $ | 243,900 | | | | | | | | | | | | Loan Trailing Fee Liability (included in Other Liabilities) | | — | | | — | | | 3,328 | | | 3,328 | | | Total Liabilities | | $ | — | | | $ | — | | | $ | 247,228 | | | $ | 247,228 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2024 | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | | Total | | Assets: | | | | | | | | | | Borrower Loans, at Fair Value | | $ | — | | | $ | — | | | $ | 285,578 | | | $ | 285,578 | | | Servicing Assets | | — | | | — | | | 14,333 | | | 14,333 | | | | | | | | | | | | Total Assets | | $ | — | | | $ | — | | | $ | 299,911 | | | $ | 299,911 | | | Liabilities: | | | | | | | | | | Notes, at Fair Value | | $ | — | | | $ | — | | | $ | 283,030 | | | $ | 283,030 | | | | | | | | | | | | Loan Trailing Fee Liability (included in Other Liabilities) | | — | | | — | | | 3,004 | | | 3,004 | | | Total Liabilities | | $ | — | | | $ | — | | | $ | 286,034 | | | $ | 286,034 | |
*Included in Other Liabilities on the consolidated balance sheets. As PFL’s Borrower Loans, Notes, Servicing Assets and loan trailing fee liability do not trade in an active market with readily observable prices, PFL uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, the realized and unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs. PFL did not transfer any assets or liabilities in or out of Level 3 for the years ended December 31, 2025, 2024 and 2023. Significant Unobservable Inputs The following tables present quantitative information about the significant unobservable inputs used for PFL’s Level 3 fair value measurements at the dates presented: | | | | | | | | | | | | | | | | | | | | | | | | | | Range | | Borrower Loans and Notes: | December 31, 2025 | | December 31, 2024 | | Discount rate | 6.3 | % | — | | 15.5 | % | | 5.8 | % | — | | 8.7 | % | | Default rate | 2.3 | % | — | | 14.5 | % | | 2.9 | % | — | | 22.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | Range | | Servicing Assets: | December 31, 2025 | | December 31, 2024 | | Discount rate | 15.0 | % | — | | 25.0 | % | | 15.0 | % | — | 25.0 | % | | Default rate | 1.9 | % | — | | 15.0 | % | | 2.9 | % | — | 22.6 | % | | Prepayment rate | 3.4 | % | — | | 41.4 | % | | 13.6 | % | — | 28.1 | % | Market servicing rate (1) (2) | 0.593 | % | — | | 0.842 | % | | 0.633 | % | — | 0.842 | % | (1) Servicing assets associated with loans enrolled in a relief program offered by the Company as of December 31, 2025 and 2024 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption. | (2) Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2025 and 2024, the market rate for collection fees and non-sufficient fund fees was assumed to be 10 basis points and 7 basis points, respectively, for a weighted-average total market servicing rate of 69.3 basis points to 94.2 basis points and 70.3 basis points to 91.2 basis points, respectively. |
| | | | | | | | | | | | | | | | | | | | | | | | | Range | Loan Trailing Fee Liability: | December 31, 2025 | | December 31, 2024 | | Discount rate | 15.0 | % | — | | 25.0 | % | | 15.0 | % | — | | 25.0 | % | | Default rate | 1.9 | % | — | | 15.0 | % | | 2.9 | % | — | | 22.6 | % | | Prepayment rate | 3.4 | % | — | | 41.4 | % | | 13.6 | % | — | | 28.1 | % |
Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis The following table presents additional information about Level 3 Borrower Loans, Loans Held for Sale and Notes measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | | | Assets | | Liabilities | | | | | Borrower
Loans | | Loans Held
for Sale | | Notes | | Total | | Fair value at January 1, 2024 | | $ | 324,311 | | | $ | — | | | $ | (321,966) | | | $ | 2,345 | | | Originations | | 186,073 | | | 2,054,646 | | | (184,200) | | | 2,056,519 | | | Borrower Loans contributed by Parent, at Fair Value | | 1,634 | | | — | | | — | | | 1,634 | | | Principal repayments | | (192,113) | | | — | | | 195,169 | | | 3,056 | | | Borrower Loans sold to third parties | | (4,454) | | | (2,054,646) | | | — | | | (2,059,100) | | | Other changes | | (421) | | | — | | | 424 | | | 3 | | | Change in fair value | | (29,452) | | | — | | | 27,543 | | | (1,909) | | | Fair value at December 31, 2024 | | $ | 285,578 | | | $ | — | | | $ | (283,030) | | | $ | 2,548 | | | Originations | | 164,625 | | | 2,487,702 | | | (163,892) | | | 2,488,435 | | | Principal repayments | | (182,231) | | | — | | | 183,753 | | | 1,522 | | | Borrower Loans sold to third parties | | (2,632) | | | (2,487,702) | | | — | | | (2,490,334) | | | Other changes | | (467) | | | — | | | 474 | | | 7 | | | Change in fair value | | (19,536) | | | — | | | 18,795 | | | (741) | | | Fair value at December 31, 2025 | | $ | 245,337 | | | $ | — | | | $ | (243,900) | | | $ | 1,437 | |
PFL did not designate any new personal loans as Loans Held for Sale for the periods presented, other than loans that are purchased and immediately sold through the Whole Loan Channel. This movement of loans through the Whole Loan Channel is reflected in the accompanying consolidated statements of cash flows and the Level 3 tables above. Details on the fair value of the Servicing Asset associated with loans sold through the Whole Loan Channel are discussed below. The following table presents additional information about Level 3 Servicing Assets recorded at fair value (in thousands): | | | | | | | | | | | Servicing Assets | | Fair value at January 1, 2024 | | $ | 13,818 | | | Additions | | 10,997 | | | Change in fair value | | (10,482) | | | Fair value at December 31, 2024 | | $ | 14,333 | | | Additions | | 13,609 | | | Change in fair value | | (10,341) | | | Fair value at December 31, 2025 | | $ | 17,601 | |
Loan Trailing Fee Liability The fair value of the Loan Trailing Fee Liability (included in Other Liabilities on the accompanying Consolidated Balance Sheets) represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and default rates using a discounted cash flow model. The assumptions used are the same as those used for the valuation of Servicing Assets, as described below. The following tables present additional information about Level 3 Loan Trailing Fee Liability measured at fair value on a recurring basis (in thousands): | | | | | | | | | | | Loan Trailing Fee Liability | | Fair Value at January 1, 2024 | | $ | 2,942 | | | Issuances | | 1,959 | | | Cash payment of Loan Trailing Fee | | (2,597) | | | Change in fair value | | 700 | | | Fair Value at December 31, 2024 | | $ | 3,004 | | | Issuances | | 2,477 | | | Cash payment of Loan Trailing Fee | | (2,657) | | | Change in fair value | | 504 | | | Fair Value at December 31, 2025 | | $ | 3,328 | |
Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity Key economic assumptions are used to compute the fair value of Borrower Loans. The sensitivity of the current fair value to immediate changes in assumptions at December 31, 2025 and 2024 for Borrower Loans are presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Borrower Loans: | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 245,337 | | | $ | 285,578 | | | Weighted-average discount rate | | 8.67 | % | | 7.70 | % | | Weighted-average default rate | | 11.48 | % | | 13.35 | % | | | | | | | Fair value resulting from: | | | | | 100 basis point increase in discount rate | | $ | 243,180 | | | $ | 282,980 | | 200 basis point increase in discount rate | | 241,073 | | | 280,443 | | | Fair value resulting from: | | | | | 100 basis point decrease in discount rate | | $ | 247,547 | | | $ | 288,240 | | 200 basis point decrease in discount rate | | 249,810 | | | 290,969 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 243,371 | | | $ | 282,239 | | Applying a 1.2 multiplier to default rate | | 241,402 | | | 278,916 | | | Fair value resulting from: | | | | | Applying a 0.9 multiplier to default rate | | $ | 247,304 | | | $ | 288,934 | | Applying a 0.8 multiplier to default rate | | 249,269 | | | 292,306 | |
Key economic assumptions are used to compute the fair value of Notes. The sensitivity of the fair value to immediate changes in assumptions at December 31, 2025 and 2024 for Notes funded through the Note Channel are presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Notes: | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 243,900 | | | $ | 283,030 | | | Weighted-average discount rate | | 8.67 | % | | 7.70 | % | | Weighted-average default rate | | 11.48 | % | | 13.25 | % | | | | | | | Fair value resulting from: | | | | | 100 basis point increase in discount rate | | $ | 241,752 | | | $ | 280,451 | | 200 basis point increase in discount rate | | 239,655 | | | 277,934 | | | Fair value resulting from: | | | | | 100 basis point decrease in discount rate | | $ | 246,096 | | | $ | 285,669 | | 200 basis point decrease in discount rate | | 248,352 | | | 288,381 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 241,944 | | | $ | 279,718 | | Applying a 1.2 multiplier to default rate | | 239,987 | | | 276,422 | | | Fair value resulting from: | | | | | Applying a 0.9 multiplier to default rate | | $ | 245,853 | | | $ | 286,358 | | Applying a 0.8 multiplier to default rate | | 247,806 | | | 289,702 | |
Key economic assumptions are used to compute the fair value of Servicing Assets. The sensitivity of the current fair value to immediate changes in assumptions at December 31, 2025 and 2024 for Servicing Assets are presented in the following table (in thousands, except percentages). | | | | | | | | | | | | | | | | Servicing Assets: | | December 31, 2025 | | December 31, 2024 | | Fair value, using the following assumptions: | | $ | 17,601 | | | $ | 14,333 | | | Weighted-average market servicing rate | | 0.598 | % | | 0.635 | % | | Weighted-average prepayment rate | | 21.72 | % | | 18.83 | % | | Weighted-average default rate | | 11.86 | % | | 13.89 | % | | | | | | | Fair value resulting from: | | | | | Market servicing rate increase of 0.025% | | $ | 16,586 | | | $ | 13,419 | | Market servicing rate decrease of 0.025% | | 18,615 | | | 15,247 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to prepayment rate | | $ | 17,143 | | | $ | 14,016 | | Applying a 0.9 multiplier to prepayment rate | | 18,068 | | | 14,655 | | | | | | | | Fair value resulting from: | | | | | Applying a 1.1 multiplier to default rate | | $ | 17,310 | | | $ | 14,052 | | Applying a 0.9 multiplier to default rate | | 17,892 | | | 14,616 | |
These sensitivities are hypothetical and should be evaluated with care. 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 impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.
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