Marketplace Revenue

6 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Marketplace Revenue

Marketplace Revenue

Marketplace revenue consists of (i) origination fees, (ii) servicing fees, (iii) gain (loss) on sales of loans and (iv) net fair value adjustments, as described below.

Origination Fees: Origination fees are primarily fees earned related to originating and issuing unsecured personal loans that are held for sale. Origination fees are paid directly to the Company by borrowers upon the origination of the loan.

In addition, origination fees include transaction fees that are paid to the Company by issuing bank partners or education and patient service providers for the work performed in facilitating the origination of loans by the issuing banks. Prior to the acquisition of Radius, the Company relied on third-party issuing banks to originate and fund loans initiated by borrowers. Following the acquisition, the Company became the originator and lender for all unsecured personal and auto loans. However, the Company continues to utilize issuing bank partners to fund education and patient finance loans, which originate and service such loans and from whom the Company receives transaction fees.

Servicing Fees: The Company receives servicing fees to compensate it for the costs incurred in servicing a loan, including managing payments from borrowers, collections and payments to investors. The amount of servicing fee revenue earned is predominantly affected by the servicing rates paid by investors and the outstanding principal balance of loans. Servicing fee revenue related to whole loans sold also includes the change in fair value of servicing assets and liabilities associated with the loans. Servicing rights are recorded as either an asset or liability depending on the degree to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee.

Gain (Loss) on Sales of Loans: In connection with loan sales and in addition to servicing fees earned with respect to the corresponding loan, the Company recognizes a gain or loss on the sale of that loan based on the level to which the contractual loan servicing fee is above or below an estimated market rate loan servicing fee. Additionally, the Company recognizes transaction costs as a loss on sale of loans.

Net Fair Value Adjustments: The Company records fair value adjustments on loans that are recorded at fair value.

The following table presents components of marketplace revenue for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Origination fees	$	113,802	$	3,874	$	169,361	$	140,117
Servicing fees	22,714		19,315		45,880		61,074
Gain on sales of loans	19,317		1,724		27,640		15,985
Net fair value adjustments (1)	(4,098)		(6,032)		(9,419)		(95,818)
Total marketplace revenue	$	151,735	$	18,881	$	233,462	$	121,358

(1)    Certain prior period valuation adjustments on securities available for sale and Structured Program borrowings were reclassified from net fair value adjustments to provision for credit losses and interest expense, respectively, to conform to the current period presentation.

Revenue from Contracts with Customers

The Company’s revenue from contracts with customers includes i) transaction fees received from issuing bank partners and ii) referral fees from third-party companies. Transaction fees are presented as a component of

origination fees in “Marketplace revenue” and referral fees are presented as a component of “Other non-interest income” in the Condensed Consolidated Statements of Operations.

Upon the acquisition of Radius, the Company’s principal sources of revenue are marketplace revenue and interest income on loans, which are outside the scope of ASC 606, Revenue from Contracts with Customers. The remainder of the Company’s revenue is classified as non-interest income and is earned from a variety of sources, such as custodial and other fees, service charges, gains and losses and other non-interest income.

The following table presents the Company’s revenue from contracts with customers, disaggregated by revenue source for services transferred over time, for the second quarters and first halves of 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Transaction fees	$	3,374	$	3,874	$	25,776	$	140,117
Referral fees	2,762		625		5,356		2,239
Total revenue from contracts with customers	$	6,136	$	4,499	$	31,132	$	142,356

The Company recognizes transaction and referral fees at each distinct instance after the Company satisfies its performance obligations. The Company had no bad debt expense for the second quarters and first halves of 2021 and 2020. Because revenue is recognized at the same time that payments are received, the Company had no contract assets, contract liabilities, or deferred contract costs recorded as of both June 30, 2021 and December 31, 2020. Additionally, the Company did not recognize any revenue from performance obligations related to prior periods (for example, due to changes in transaction price) for the second quarters and first halves of 2021 and 2020. For additional detail on the Company’s accounting policy regarding revenue recognition, see “Note 1. Summary of Significant Accounting Policies.”