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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2023~~2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______


333-179941-01 333-204880 333-225797-01 333-257739	PROSPER MARKETPLACE, INC. a Delaware corporation 221 Main Street, 3rd Floor San Francisco, CA 94105 Telephone: (415) 593-5426	73-1733867
333-179941 333-204880-01 333-225797 333-257739-01	PROSPER FUNDING LLC a Delaware limited liability company 221 Main Street, 3rd Floor San Francisco, CA 94105 Telephone: (415) 593-5426	45-4526070
Commission File Number	Exact Name of Registrant as Specified in its Charter State or Other Jurisdiction of Incorporation or Organization Address of Principal Executive Offices, Zip Code Registrant's Telephone Number (Including Area Code)	I.R.S. Employer Identification Number

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Prosper Marketplace, Inc.

None

Prosper Funding LLC

None

Securities registered pursuant to Section 12(g) of the Act:

Prosper Marketplace, Inc.

None

Prosper Funding LLC

None

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Prosper Marketplace, Inc.			Yes ¨ No ý
Prosper Funding LLC			Yes ¨ No ý

Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.


Prosper Marketplace, Inc.			Yes ¨ No ý
Prosper Funding LLC			Yes ¨ No ý

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Prosper Marketplace, Inc.			Yes ý No ¨
Prosper Funding LLC			Yes ý No ¨

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Prosper Marketplace, Inc.			Yes ý No ¨
Prosper Funding LLC			Yes ý No ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large

Accelerated

Filer

Accelerated

Filer

Non-accelerated Filer

Smaller

Reporting

Company

Emerging Growth Company

Prosper Marketplace, Inc.

☐

Prosper Funding LLC

☐

If an emerging growth company, indicate by check mark if each registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


Prosper Marketplace, Inc.			¨
Prosper Funding LLC			¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.


Prosper Marketplace, Inc.			¨
Prosper Funding LLC			¨

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements.


Prosper Marketplace, Inc.			¨
Prosper Funding LLC			¨

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based

compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).


Prosper Marketplace, Inc.			¨
Prosper Funding LLC			¨

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act).


Prosper Marketplace, Inc.			Yes ☐ No ý
Prosper Funding LLC			Yes ☐ No ý

Prosper Funding LLC meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format specified in General Instruction I(2) of Form 10-K.

Aggregate Market Value of Voting and Non-Voting Common Equity Held by Non-Affiliates of the Registrant at

Number of Shares of Common Stock of the Registrant Outstanding at

June 30, 2023

March 19, 2024

June 30, 2024

March 21, 2025

Prosper Marketplace, Inc.

(a)

77,~~164~~560,~~623~~839

($0.01 par value)

Prosper Funding LLC

(a)(b)

None

(a) Not applicable

(b) All voting and non-voting common equity is owned by Prosper Marketplace, Inc.

THIS COMBINED FORM 10-K IS SEPARATELY FILED BY PROSPER MARKETPLACE, INC. AND PROSPER FUNDING LLC. INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EACH REGISTRANT MAKES NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER REGISTRANT.

TABLE OF CONTENTS

ITEM

Page

PART I

ITEM 1

Business

ITEM 1A

Risk Factors

ITEM 1B

Unresolved Staff Comments

4140

ITEM 1C

Cybersecurity

4241

ITEM 2

Properties

4443

ITEM 3

Legal Proceedings

4443

ITEM 4

Mine Safety Disclosures

4443

PART II

ITEM 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

4443

ITEM 6

[Reserved]

4443

ITEM 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4544

ITEM 7A

Quantitative and Qualitative Disclosures About Market Risk

6668

ITEM 8

Financial Statements and Supplementary Data

6869

ITEM 9

Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure

6869

ITEM 9A

Controls and Procedures

6869

ITEM 9B

Other Information

6970

ITEM 9C

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

6970

PART III

ITEM 10

Directors, Executive Officers and Corporate Governance

7071

ITEM 11

Executive Compensation

ITEM 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 13

Certain Relationships and Related Transactions, and Director Independence

ITEM 14

Principal Accounting Fees and Services

PART IV

ITEM 15

Exhibits, Financial Statement Schedules

SIGNATURES

EXHIBIT INDEX

XBRL Content

Except as the context requires otherwise, as used herein, “Registrants” refers to Prosper Marketplace, Inc. (“PMI”), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC (“PFL”), a Delaware limited liability company; “we,” “us,” “our,” “Prosper,” and the “Company” refers to (i) PMI, (ii) its wholly owned subsidiaries, PFL, BillGuard, Inc. (“BillGuard”), a Delaware corporation, and Prosper Healthcare Lending LLC (“PHL”), a Delaware limited liability company, and (iii) its variable interest entities, Prosper Warehouse I Trust (“PWIT,” terminated March 28, 2024), a Delaware statutory trust,; Prosper Warehouse II Trust (“PWIIT,” terminated September 25, 2023), a Delaware statutory trust,; Prosper Marketplace Issuance Trust, Series 2023-1 (“PMIT 2023-1”), a Delaware statutory trust; Prosper Marketplace Issuance Trust, Series 2024-1 (“PMIT 2024-1”), a Delaware statutory trust; Prosper Credit Card Issuer LLC (“PMCC 2024-1”), a Delaware limited liability company and Prosper Grantor Trust (“PGT”), a Delaware statutory trust, on a consolidated basis; and “Prosper Funding” refers to PFL and its wholly owned subsidiary, Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis. In addition, the unsecured personal loans originated through our marketplace are referred to as “Borrower Loans,” and the borrower payment dependent notes issued through our marketplace, whether issued by PMI or PFL, are referred to as “Notes.” Investors currently invest in Borrower Loans through two channels: (i) the “Note Channel,” which allows investors to purchase Notes from PFL, the payments of which are dependent on the payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows accredited and institutional investors to purchase Borrower Loans in their entirety directly from PFL. The Notes available to Note Channel investors are distinguishable from notes held by certain third party investors pursuant to Prosper’s securitization transactions, which are referred to herein as “Notes Issued by Securitization Trust.” Finally, although historically the Company has referred to investors as “lender members,” PFL calls them “investors” herein to avoid confusion since WebBank is the lender for Borrower Loans originated through our marketplace.

Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. These statements may appear throughout this Annual Report on Form 10-K, including the sections titled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, PFL or PMI expresses an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of their respective managements, expressed in good faith, and is believed to have a reasonable basis. Nevertheless, there can be no assurance that the expectation or belief will result or be achieved or accomplished.

The following include some, but not all, of the factors that could cause actual results or events to differ materially from those anticipated:

•the performance of the Notes, which, in addition to being speculative investments, are special, limited obligations that are not guaranteed or insured;

•PFL’s ability to make payments on the Notes, including in the event that borrowers fail to make payments on the corresponding Borrower Loans;

•our ability to attract potential borrowers and investors to our personal loan marketplace, ~~and~~ borrowers to our unsecured credit card (“Credit Card”) product, and secured digital home equity line of credit and home equity loan (together, the “Home Equity Products”);

•the reliability of the information about borrowers that is supplied by borrowers, including actions by some borrowers to defraud investors;

•our ability to service the Borrower Loans, and our ability or the ability of a third party debt collector to pursue collection against any borrower, including in the event of fraud or identity theft;

•credit risks posed by the credit worthiness of borrowers of our Personal Loan and Credit Card products and the effectiveness of our credit rating systems;

•potential efforts by state regulators or litigants to impose liability that could affect PFL’s (or any subsequent assignee’s) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their loans;

•the impact of future economic conditions on the performance ~~of the Notes~~ and the loss rates for the ~~Notes~~Borrower Loans and the Credit Card product;

•~~the~~our ~~growth~~ability ~~and~~to ~~performance~~reduce ofloss ~~the~~rates ~~recently-launched~~associated with our Credit Card product ~~and the Home Equity Products~~;

•our compliance with applicable local, state and federal law, including the Investment Advisers Act of 1940, the Investment Company Act of 1940 and other laws;

•our compliance with applicable regulations and regulatory developments or court decisions affecting our business;

•potential efforts by state regulators or litigants to characterize PFL or PMI, rather than WebBank, as the lender of the loans originated through our marketplace;

•the application of federal and state bankruptcy and insolvency laws to borrowers and to PFL and PMI;

•the impact of borrower delinquencies, defaults and prepayments on the returns on the Notes;

•the impact of rising interest rates and inflation on our business, results of operations, financial condition and future prospects;

•the lack of a public trading market for the Notes and the current lack of any trading platform on which investors can resell the Notes;

•the federal income tax treatment of an investment in the Notes and the PMI Management Rights;

•our ability to prevent security breaches, disruptions in service, and comparable events that could compromise the personal and confidential information held on our data systems, reduce the attractiveness of the platform or adversely impact our ability to service Borrower Loans; and

•the other risks discussed under the “Risk Factors” section of this Annual Report on Form 10-K.

There may be other factors that may cause actual results to differ materially from the forward-looking statements in this Annual Report on Form 10-K. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does occur, what impact they will have on our results of operations and financial condition. You should carefully read the factors described in the “Risk Factors” section of this Annual Report on Form 10-K for a description of certain risks that could, among other things, cause our actual results to differ from these forward-looking statements.

All forward-looking statements speak only as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this Annual Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

PART I

ITEM 1. BUSINESS

Overview

Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to three lending products, each of which supports our vision: (i) unsecured personal loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, (ii) a Credit Card product available to eligible borrowers, and (iii) ~~secured~~ Home Equity ~~Products~~products available to eligible homeowners.

Personal Loan

We are a pioneer of peer-to-peer lending in the U.S. and first launched our personal loan lending product in 2006. Our personal loan marketplace facilitated $2.2 billion in Borrower Loan originations during ~~2023~~2024 and $2527.69 billion in Borrower Loan originations since launch.

We believe our personal loan business model has key advantages relative to traditional banks, including (i) an innovative marketplace model that efficiently connects qualified supply and demand of capital, (ii) online operations that substantially reduce the need for physical infrastructure and improve convenience, and (iii) use of advanced technology and artificial intelligence to deliver simple, fast, personalized, and transparent solutions that can improve consumers’ financial health as they move across the credit spectrum. We do not operate physical branches or incur expenses related to infrastructure like traditional banks or consumer finance institutions. As part of operating our marketplace, we verify the identity of borrowers and assess borrowers’ credit risk profile using a combination of public and proprietary data. Our proprietary technology automates several loan origination and servicing functions, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection.

To consumer borrowers, we believe that we offer generally better pricing, on average, than the pricing those loan borrowers would pay on outstanding credit card balances or unsecured installment loans from a traditional lender. To individual and institutional investors, we offer an asset class (personal loans) that we believe has attractive risk adjusted returns, transparency, and lower duration risk.

Our personal loan marketplace offers fixed rate, fully amortizing, unsecured personal loans ranging from $2,000 to $50,000 with no prepayment penalty. Loan terms of 24, 36, 48 and 60 months are available, depending in large part upon the Prosper Rating assigned to the borrower at issuance and loan amount being sought. All Borrower Loans are originated and funded by WebBank, an FDIC-insured, state chartered industrial bank organized under the laws of Utah. After origination, WebBank sells the Borrower Loans to PFL, which either holds them or sells them to accredited institutional investors.

Investors invest in Borrower Loans through two channels – (i) the “Note Channel,” which allows investors to purchase Notes from PFL, the payments of which are dependent on PFL’s receipt of payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows accredited institutional investors to purchase a Borrower Loan in its entirety directly from PFL. PFL continues to own the Borrower Loans originated through the Note Channel. We service all of the Borrower Loans made through our marketplace.

Credit Card

In December 2021, we launched our Prosper Credit Card product in partnership with Coastal Community Bank (“Coastal”), through which eligible consumers are extended unsecured credit through Prosper-branded Credit Cards. In accordance with our program agreement with Coastal, the receivables associated with these Credit Cards are originated and maintained on the balance sheet of Coastal, until we exercise our right to purchase eligible receivables. Customer accounts are ~~then~~ randomly designated as either Prosper Allocations or Coastal Allocations on an approximate 9095% to 105% split~~, respectively~~. Each party receives 100% of the interest income and is responsible for the credit losses on its allocated customer accounts. Credit Card receivables that remain on Coastal’s balance sheet are not available for investment purposes.

On November 1 2024, we closed our first Credit Card securitization transaction, PMCC 2024-1, in which we purchased Credit Card receivables with an unpaid principal balance of $94.7 million from the Prosper Allocations, and contributed them to the securitization. PMCC 2024-1 then issued senior notes in four classes to third-party investors with a stated aggregate value of $82.9 million. This transaction is described more fully in Note 5 of the accompanying consolidated financial statements.

Home Equity

We launched the HELOC product and the HELoan product in March 2019 and October 2022, respectively. Currently, we partner with Spring EQ, LLC and Citizens Bank, N.A. (collectively, our “Home Lending Partners”) to provide a variety of Home Equity services, including accepting online applications, counseling and non-counseling services, and verification, technology and processing services. The Home Equity Products are available through our website in 29 states and the District of Columbia. Neither of the Home Equity Products are available for investment purposes.

Segment Reporting

We have three reportable segments: Personal Loan, Home Equity and Credit Card.

Company Background and History

PMI was incorporated in the state of Delaware on March 22, 2005. PFL was formed as a limited liability company in the state of Delaware on February 17, 2012, and is a wholly-owned subsidiary of PMI.

PMI developed our personal loan marketplace and, until February 1, 2013, owned the proprietary technology that makes operation of our personal loan marketplace possible. On February 1, 2013, PMI transferred the personal loan marketplace to PFL. PFL has been organized and is operated in a manner that is intended (i) to minimize the likelihood that it will become subject to a voluntary or involuntary bankruptcy or similar proceeding, and (ii) to minimize the likelihood that, in the event of PMI’s bankruptcy, PFL would be substantively consolidated with PMI and thus have its assets subjected to claims of PMI’s creditors. We believe we have achieved this by imposing through PFL’s organizational documents and covenants in the Amended and Restated Indenture (as defined below in Item 13, “Certain Relationships and Related Transactions, and Director Independence”) certain restrictions on PFL’s activities and certain formalities designed to reinforce PFL’s status as a distinct entity from PMI. In addition, under the Administration Agreement, dated February 1, 2013, between PMI and PFL (as amended to date, the “Administration Agreement”), PMI has agreed, in its dealings with PFL and with third parties, to observe certain “separateness covenants” related to its corporate formalities. PMI has also adopted resolutions limiting its own activities and interactions with PFL in order to further reduce the likelihood that PFL would be substantively consolidated with PMI in the event of PMI’s bankruptcy.

PFL has retained PMI, pursuant to the Administration Agreement, to provide certain administrative services relating to our personal loan marketplace. Specifically, the Administration Agreement contains a license granted by PFL to PMI that entitles PMI to use the marketplace for and in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and Note servicing, and marketing, and (ii) PMI’s performance of its duties and obligations to WebBank in relation to loan origination and funding. The license is terminable in whole or in part upon the failure by PMI to pay PFL the licensing fee, or upon PMI’s termination as the provider of some or all of the aforementioned services. See Item 13, “Certain Relationships and Related Transactions, and Director Independence—Prosper Marketplace, Inc.—Agreements with PFL” for more information.

How our Personal Loan Marketplace Works

Our ~~personal~~Personal ~~loan~~Loan marketplace is an online marketplace that matches individuals who wish to obtain unsecured ~~personal~~Borrower ~~loans~~Loans with individuals and institutions who are willing to commit funds to those loans. A borrower who wishes to obtain a loan through our marketplace must apply and, if accepted, post a loan listing to our marketplace. Each time we post a group of listings on our ~~personal~~Personal ~~loan~~Loan marketplace, we determine the relative proportions of such listings that will be allocated to the Note Channel and the Whole Loan Channel, respectively, based on our estimate of the relative overall demand in each channel. We then use a random allocation methodology to allocate individual listings between the two channels based on those proportions. If a listing receives enough investor commitments, WebBank will originate the Borrower Loan requested and then sell it to PFL.

Borrowers

Any natural person at least 18 years of age who is a U.S. resident in a state where loans through our marketplace are available with a U.S. bank account and a social security number may apply to become a borrower. All potential borrowers are subject to anti-fraud, anti-terrorism and identity verification processes and a potential borrower cannot obtain a loan without passing those processes.

When a borrower requests a loan, we first evaluate whether the borrower meets the underwriting criteria required by WebBank. WebBank originates loans to borrowers and then sells and assigns the loans to PFL. The underwriting criteria apply to all Borrower Loans originated through our marketplace and may not be changed without WebBank’s consent. For the Note Channel, all borrowers who request a loan are subject to the following minimum eligibility criteria: (1) have at least a 600 FICO 08 score, (2) have nine or fewer credit bureau inquiries (after excluding duplicate inquiries) within the last 6 months, (3) have an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50%, (5) have at least two open trades reported on their credit report, and (6) have not filed for bankruptcy within the last 12 months.

~~inquiries) within the last 6 months, (3) have~~ an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50% ~~(the debt-to-income ratio for joint loans is calculated using the combined debt-to-income ratio of the primary and secondary borrowers without duplication of combined debt)~~, (5) have at least ~~three~~two open trades reported on their credit report, and (6) have not filed for bankruptcy within the last 12 months.

We also allow two borrowers to apply together as joint applicants for a co-borrower loan. We currently offer loans with 36-month and 60-month terms to co-borrowers, although we may additionally choose to offer loans with 24-month and 48-month terms to co-borrowers in the future. Each borrower applicant is held jointly and severally liable for the obligations under the loan. In the case of co-borrower loans, the primary (or “specified”) borrower must satisfy the following minimum eligibility criteria: (1) have at least a 640 FICO 08 score, (2) have fewer than five credit bureau inquiries (after excluding duplicate inquiries) within the last 6 months, (3) have an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50% (the debt-to-income ratio for joint loans is calculated using the combined debt-to-income ratio of the primary and secondary borrowers without duplication of combined debt), (5) have at least three open trades reported on their credit report, and (6) have not filed for bankruptcy within the last 12 months.

In addition, a borrower may have up to two loans through Prosper outstanding at one time, provided that (1) the first loan is current, (2) the aggregate outstanding principal balance of both loans does not exceed the then-current maximum allowable loan amount for loans (currently $50,000), (3) the borrower has held their first Borrower Loan for at least 6 months, and (4) the borrower complies with the prior-borrower constraints below. For co-borrower loans, the foregoing additional requirements will apply if either the primary or secondary borrower has a currently outstanding loan.

If a borrower has previously obtained a Borrower Loan through our marketplace, then in addition to the foregoing requirements (as applicable), the borrower must also (1) have no prior charge-offs on Borrower Loans originated through our marketplace, and (2) have never been more than 15 days delinquent on any Borrower Loan obtained through our marketplace within 12 months of their application.

From time to time, we have, with WebBank’s consent, tested new products that include features which are outside the standard eligibility criteria discussed above. These products are available exclusively through our Whole Loan Channel.

Investors

Investors are individuals and institutions that have the opportunity to buy Notes or Borrower Loans after registering on our ~~personal~~Personal ~~loan~~Loan marketplace. However, investors do not have the ability to invest in Credit Card and Home Equity ~~Products~~products on our personal loan marketplace. An individual investor must be a natural person at least 18 years of age and a U.S. resident, must provide their social security number, and may be required to provide their state driver’s license or state identification card number. An institutional investor must provide its taxpayer identification number and entity formation documentation. All potential investors are subject to anti-fraud, anti-terrorism and identity verification processes and a potential investor cannot invest in Notes or Borrower Loans without passing those processes.

At the time an individual investor registers to participate in the Note Channel, such investor must satisfy any minimum financial suitability standards established for the Note Channel by the state in which the investor resides, if applicable. Investors who participate in the Note Channel must enter into an investor registration agreement, which governs all sales of Notes to such investors.

Only investors who are approved by us are eligible to participate in the Whole Loan Channel. At a minimum, to participate in the Whole Loan Channel, an investor must meet the definition of an “accredited investor” set forth in Regulation D under the Securities Act. Investors who participate in the Whole Loan Channel must enter into loan purchase and loan servicing agreements with us.

Individual investors can also create a Prosper IRA account to invest in our marketplace using tax-deferred funds from an individual retirement account (“IRA”). Prosper IRA accounts are not maintained on our personal loan marketplace. Rather, Prosper IRA accounts are managed by third-party custodians who direct Prosper to make deposits and withdrawals to the individual’s Prosper IRA account on behalf of the investor and/or their beneficiaries and who ensure IRA accounts remain compliant with applicable U.S. Internal Revenue Service (“IRS”) regulations. Investors have the ability to select their third-party custodian or utilize a Prosper preferred third-party custodian partner for account management purposes.

Relationship with WebBank

WebBank is an FDIC-insured, Utah-chartered industrial bank that originates all Borrower Loans made through our personal loan marketplace. WebBank and PMI are parties to an agreement under which PMI manages the operations of our marketplace that relate to the submission of loan applications by borrowers and the making of related Borrower Loans by WebBank in exchange for a fee. WebBank makes each Borrower Loan with its own funds. A joint WebBank-Prosper Credit Policy, which can be changed only with WebBank’s approval, constitutes the policy we must follow in reviewing, approving and administering Borrower Loans made by WebBank through the marketplace. WebBank, PMI and PFL are parties to a Loan Sale Agreement, under which WebBank sells and assigns the promissory notes evidencing the Borrower Loans to PFL. As consideration for WebBank's agreement to sell and assign the promissory notes, PFL pays WebBank the purchase price of the promissory notes, as well as a monthly fee, which is partially tied to the terms and performance of the loans. PMI receives payments from WebBank as compensation for the activities it undertakes on WebBank's behalf.

consideration for WebBank's agreement to sell and assign the promissory notes, PFL pays WebBank the purchase price of the promissory notes, as well as a monthly fee, which is partially tied to the terms and performance of the loans. PMI receives payments from WebBank as compensation for the activities it undertakes on WebBank's behalf.

Risk Management

Each loan listing is assigned a letter grade that indicates the expected level of risk associated with the listing, which we refer to as a Prosper Rating. Each Prosper Rating corresponds to an estimated average annualized loss rate range. The Prosper Rating associated with a loan listing reflects the loss expectations for that listing as of the time the rating is given. This means that otherwise similar borrowers may have different Prosper Ratings at different points in time as the Prosper Rating is updated to incorporate more recent information.

The estimated average annualized loss rate for each loan listing is based primarily on the historical performance of Borrower Loans with similar characteristics and is primarily determined by the following scores: (i) one or more custom Prosper scores (“Prosper Score”), as may be supplemented by additional proprietary scoring models, and (ii) a credit score obtained from a credit reporting agency. A Prosper Score is also updated periodically to include new information that is predictive of borrower risk as such information becomes available or as the evidence supporting a particular variable becomes strong enough to merit its inclusion in a Prosper Score.

To create a Prosper Score, we have developed and refined custom, artificial intelligence driven risk models using our historical data as well as a data archive from a consumer credit bureau. We built the Prosper Score models on our borrower population, and included information provided directly by the borrowers as well as information from their credit reports and other data sources, so that the models would incorporate behavior that is unique to that population. In addition to a Prosper Score, another major element used to determine the Prosper Rating for a loan listing is a credit score from a consumer reporting agency. We currently use either or both of TransUnion’s FICO08 score and VantageScore. We obtain a borrower’s credit score at the time the loan listing is created, unless we already have a credit score on file that is not more than thirty days old.

Sale of Notes and Borrower Loans

If an investor successfully bids on a loan listing, the principal amount of the loan will be set aside in the investor’s account and may not be used for other bids. In the event a listing does not result in a loan being originated, the funds are again made available for bidding by the investor.

For loan listings allocated to the Note Channel, a bid on a listing is an investor’s commitment to purchase a Note from PFL. PFL generally issues and sells a series of Notes for each Borrower Loan that is originated through the Note Channel. The Notes are sold to the investors who successfully bid on the corresponding loan listing in the principal amounts of their respective bids. Each series of Notes is dependent for payment on PFL’s receipt of payments on the corresponding Borrower Loan. PFL uses the proceeds of each series of Notes to purchase the corresponding Borrower Loan from WebBank on the second business day after WebBank has originated the Borrower Loan. Each Note comes attached with an inseparable PMI Management Right issued by PMI. Each PMI Management Right constitutes an "investment contract," a concept under federal securities law that refers to an arrangement where investors invest money in a common enterprise with the expectation of profits, primarily from the efforts of others.

Generally, for listings allocated to the Whole Loan Channel, a bid on a listing is an investor’s commitment to purchase the Borrower Loan from PFL after origination by WebBank and sale to PFL. On the second business day after WebBank has originated the Borrower Loan, PFL purchases the Borrower Loan from WebBank and re-sells the Borrower Loan that same day to the corresponding investor. In some cases, certain investors in the Whole Loan Channel purchase Borrower Loans that WebBank retains beyond the second business day. PFL records the investor as the owner of the Borrower Loan.

Loan Servicing and Collection

We are responsible for servicing the Borrower Loans made through our personal loan marketplace. We will pay each Note holder principal and interest on the Note in an amount equal to each such Note’s pro-rata portion of the principal and interest payments, if any, which we receive on the corresponding Borrower Loan, net of our servicing fee. We will also pay Note holders their pro-rata portion of any other amounts we receive on the corresponding Borrower Loans, including late fees and prepayments, subject to our servicing fee; provided, that we will not pay Note holders any non-sufficient funds fees we receive for failed borrower payments. In addition, the funds available for payment on the Notes will be reduced by the amount of any attorneys’ fees or collection fees we, a third-party servicer, or a collection agency imposes in connection with collection efforts related to the corresponding Borrower Loan. We will have no further obligation to make payments on any Note after its final maturity date.

We will pay each investor who has purchased a Borrower Loan through the Whole Loan Channel principal and interest on the Borrower Loan purchased in an amount equal to the principal and interest payments, if any, that we receive, net of our servicing fee. We will also pay these investors any other amounts we receive on the Borrower Loans, including late fees and prepayments, subject to our servicing fee, provided that we will not pay these investors any non-sufficient funds fees we receive for failed borrower payments or any payment processing fees we may collect. In addition, the funds available for payment on

servicing fee. We will also pay these investors any other amounts we receive on the Borrower Loans, including late fees and prepayments, subject to our servicing fee, provided that we will not pay these investors any non-sufficient funds fees we receive for failed borrower payments or any payment processing fees we may collect. In addition, the funds available for payment on the Borrower Loans will be reduced by the amount of any attorneys' fees or collection fees we, a third-party servicer or a collection agency imposes in connection with collection efforts related to the Borrower Loan.

If a Borrower Loan becomes past due, we may collect on it directly or refer it to a third-party collection agency. Our in-house collections department and third-party collection agencies are compensated by keeping a portion of the payments they collect based on a predetermined schedule.

Customers

Personal Loan: A relatively small number of investors provide the funding commitments for a large percentage of all listings that result in Borrower Loans originated through our ~~personal~~Personal ~~loan~~Loan marketplace. Of all Borrower Loans originated in the year ended December 31, ~~2023~~2024, the largest party purchased a total of 1523.17% of those loans. For a description of the investors and borrowers on our personal loan marketplace, please see the “How our Personal Loan Marketplace Works—Investors” and “How our Personal Loan Marketplace Works—Borrowers” sections above.

Credit Card: Our Credit Card customers are generally near-prime borrowers with credit scores that typically range from 600 to 660 and initial credit lines that range from $500 to $3,000.

Industry Background and Trends

According to the Board of Governors of the Federal Reserve System, as of December ~~2023~~2024, the balance of outstanding consumer credit (excluding loans secured by real estate) in the United States totaled $5.0 2 trillion. This amount included $1.34 trillion of revolving consumer credit, primarily credit card, and $3.7 8 trillion of non-revolving loans. A portion of the revolving balances are also refinanced by consumers at lower interest rates and fixed terms through personal loans.

The market for consumer lending is competitive and rapidly evolving, and there is an opportunity for our business model to transform the traditional lending process. We believe our marketplace offers a superior solution for both borrowers and investors.

For borrowers, we believe our Personal Loan marketplace offers the following principal competitive factors: better terms versus other alternatives; a simple, easy and intuitive customer experience; a fast and efficient process; and trust and transparency.

For investors, we believe our marketplace offers the following principal competitive factors: attractive risk-adjusted returns; low duration risk; diversification from other asset classes; a simple, easy and intuitive customer experience; and trust and transparency.

Competition

We compete for borrowers and investors against other financial products and companies. For borrowers, our competition includes banking institutions, credit unions, credit card issuers, mortgage and home equity lenders, and other online consumer lending companies, including publicly traded companies such as LendingClub Corporation, Social Finance Inc., and Upstart Holdings, Inc. For investors in our ~~personal~~Personal ~~loan~~Loan product, our competition includes other consumer lending platforms, alternative asset funds, and asset classes such as equities, bonds and commodities. We may also face potential competition from new market entrants, or business expansion from established companies. These companies may have significantly greater financial, technical, marketing and other resources and may be able to devote greater resources to the development, promotion, sale and support of their offerings.

Our Competitive Strengths

We believe the following strengths differentiate us from our competitors and provide us with sustainable competitive advantages:

•Leading Online Personal Loan Marketplace. Since inception, our personal loan marketplace has facilitated $2527.69 billion in loan originations, of which $2.2 billion was for the year-ended December 31, ~~2023~~2024. As our business grows, our brand, reputation and scale strengthens. This allows us to attract top talent, speed up product innovation, launch additional consumer finance products, attract marketplace participants and drive down our cost structure, all of which further benefit borrowers and investors. For the year ended December 31, ~~2023~~2024, 5447.58% of Borrower Loans originated from borrowers who previously borrowed on our personal loan marketplace, evidence of our strong ~~customer experience~~brand.

•Robust Network Effect. The attractiveness of our personal loan marketplace increases as the number of participants on our marketplace increases, yielding a classic network effect. Our personal loan marketplace offers consumer borrowers access to affordable credit, and allows individual and institutional investors to invest in an asset class with attractive risk-adjusted returns. The diversity of investors brings scale and breadth of funding to our marketplace and makes credit more affordable. As both sides of the equation grow, the advantages (reduced risk, lower cost) scale accordingly, attracting even more borrowers and investors. The increased participant pool reduces costs and generates more data which we use to improve the effectiveness of our credit decisioning and scoring models. This enhances our aggregate loan performance and builds increased trust in our marketplace, which in turn attracts more borrowers and investors.

•Technology Platform. Our technology platform automates key aspects of our operations, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection. This provides a significant time and cost advantage over traditional consumer lending business models and, we believe, enables us to provide a superior user experience to our customers. Using our accumulated performance data, we continually invest in incremental improvements in our algorithms thus extending our technological advantage.

•Proprietary Risk Management Capabilities. We have developed artificial intelligence driven proprietary risk models based on personal loan and credit card performance data, which we believe allows us to accurately assess the credit risk profile of borrowers and which we believe also allows investors to earn attractive risk-adjusted returns. We leverage the results from our growing data stream to continually refine these artificial intelligence driven risk models and more accurately predict credit performance.

•Unique Corporate Structure. Our corporate structure was designed to offer our investors extra protection. The organization and operation of PFL and PMI as separate and distinct entities should serve to protect our Note investors in the event of a bankruptcy filing by or against PMI. This organizational structure, along with the federal and state registration process, is expensive and time consuming to undertake, and is not easily duplicated by competitors.

•Efficient and Attractive Financial Model. We have multiple revenue streams and an efficient cost model. For personal loans, we generate revenue from transaction fees from our marketplace’s role in matching borrowers with investors to enable loan originations, servicing fees related to Borrower Loans for which we retain the servicing rights, net interest income from Borrower Loans and Loans Held for Sale, credit referral fees and other ancillary revenue sources. We also earn revenue from transaction fees generated by our Home Equity Products and interest income and a variety of fees provided under the Credit Card program, including interchange fees, annual fees and late fees, net of a program fee and a portion of the interchange fees that must be remitted to Coastal. Additionally, our technology platform significantly reduces the need for physical infrastructure and therefore allows our business to grow with a lower cost operating model, providing us with significant operating leverage.

Sources of Revenues

We earn revenue in a variety of ways from our ~~personal~~Personal ~~loan~~Loan, Credit Card, and Home Equity ~~Products~~products. We have three primary sources of ~~personal~~Personal ~~loan~~Loan revenues: transaction fees, servicing fees, and net interest income. We earn transaction fees from WebBank by facilitating the origination of Borrower Loans through the ~~personal~~Personal ~~loan~~Loan marketplace, ~~and we earn~~ servicing fees from investors for processing principal and interest payments made by borrowers and passing such payments on to investors and ~~also earn~~ net interest income from Borrower Loans and Loans Held for Sale. Our revenues are reduced by any incentives provided to investors at the time of sale. We also earn ~~revenue~~net ~~from~~ interest income and various fees generated by our Credit Card program, including interchange fees, annual fees and late fees, net of program fees and a portion of the interchange fees that must be remitted to Coastal. Finally, we earn revenue from our Home Equity ~~Products~~products through broker fees paid by our Home Lending ~~Partners~~partners. Changes in the fair values of our consolidated financial instruments are also included in our revenue.

Sales and Marketing

Our sales and marketing efforts are designed to attract individuals and institutions to our products, encourage their enrollment and participation as users, and facilitate and enhance their understanding and utilization of each product. We employ a wide range of marketing channels to reach potential customers and build our brand and value proposition. These channels include referrals, online marketing, direct mail, partner and affiliate introductions, and email. We are constantly seeking new methods to reach more potential members, while testing and optimizing the end-to-end customer experience.

Origination and Servicing

We have efficient and scalable systems for credit risk assessment, loan underwriting, and servicing of the Borrower Loans and Credit Card product. Our risk models take borrowers’ supplied information and combine that information with public and proprietary data to make real time decisions. Our verification agents use several tools to efficiently verify borrower information. Our personal loan servicing platform calculates a loan’s amortization and processes payments received from borrowers and passes such payments on to investors. In addition, we have a back-up servicing agreement for personal loans with Vervent, Inc. (“Vervent”), a loan servicing company that is willing and able to assume servicing responsibilities in the event that we are no longer able to service the Borrower Loans and Notes. Vervent is a financial services company that has entered into numerous successor loan servicing agreements.

public and proprietary data to make real time decisions. Our verification agents use several tools to efficiently verify borrower information. Our personal loan servicing platform calculates a loan’s amortization and processes payments received from borrowers and passes such payments on to investors. In addition, we have a back-up servicing agreement for personal loans with Vervent, Inc. (“Vervent”), a loan servicing company that is willing and able to assume servicing responsibilities in the event that we are no longer able to service the Borrower Loans and Notes. Vervent is a financial services company that has entered into numerous successor loan servicing agreements.

Technology

We have made, and continue to make, substantial investment in our customer acquisition capability, customer experience, and credit underwriting, loan servicing and payment systems. Our personal loan marketplace utilizes proprietary software to process electronic cash movements, record book entries and calculate cash balances in users’ funding accounts. Electronic deposits and payments are mostly done via Automated Clearing House (“ACH”) transactions. The technology platform allows us to economically acquire and service Borrower Loans and Notes and allows WebBank to efficiently originate and fund Borrower Loans.

The ~~system~~platform ~~hardware~~ for our personal loan marketplace is ~~located~~hosted in ~~hosting~~Google ~~facilities in Scottsdale, Arizona, Las Vegas, Nevada, The Dalles, Oregon and Council Bluffs, Iowa~~Cloud. We ~~own the hardware deployed in support of our personal loan marketplace. We~~ continuously monitor the performance and availability of our marketplace. The infrastructure isleverages ~~scalable~~Google ~~and~~Cloud’s ~~utilizes~~native ~~standard~~products, ~~techniques~~ such as ~~load-balancing~~Cloud Run instances and ~~redundancies~~segregated Project Virtual Private Clouds.

Key aspects of our technology include:

•Scalability. Our personal loan marketplace is designed and built as a real-time, highly scalable, multi-tier, redundant system. It incorporates technologies designed to prevent any single point of failure within ~~the~~our ~~data~~loan ~~center~~platform from taking the entire system offline. This is achieved by utilizing load-balancing technologies at the front end and business layer tiers and clustering technologies in the back-end tiers to allow scaling both horizontally and vertically depending on marketplace utilization. Google Cloud autoscaling is also utilized to dynamically scale platform availability in real-time.

•Data Integrity and Security. We are committed to protecting our users' information and we take the integrity and security of the data provided by them very seriously. To that end, we have established data protection policies which are implemented and enforced using the latest technologies. All sensitive information is transmitted on secure channels using SSL technology, with SSL certificates issued by Symantec or DigiCert. We employ principles of least privilege and layered security to protect stored sensitive information. Sensitive information at rest is encrypted using industry standard encryption technologies with appropriate controls to access the data. We protect the network perimeter using the latest technologies including but not limited to firewall and anti-virus threat management techniques. We use strong multi-factor authentication to protect and monitor remote access. We ~~back~~utilize upmultiple ~~all~~Google ~~data~~Cloud ~~securely~~regions and ~~would~~zones ~~expect~~ to ~~recover~~provide ~~operations~~backups inand afault-tolerance, ~~short~~adding ~~period~~resilience ofto ~~time~~recovery operations in the event of a disaster. Logging and monitoring of the systems and security controls are designed to ensure that the controls are functional and that alerts are triggered on security violations.

•Fraud Detection. We employ a combination of proprietary technologies and commercially available licensed technologies and solutions to prevent and detect fraud. These include knowledge-based authentication, behavioral analytics and digital fingerprinting to prevent identity fraud. We use services from third-party vendors for user identification, credit checks and for checking customer names against the list of Specially Designated Nationals and other lists maintained by the Office of Foreign Assets Control (“OFAC”). In addition, we use specialized third-party software to augment the identity fraud detection systems. We also have a dedicated team which conducts additional investigations of cases flagged for high fraud risk. Finally, we enable users to report suspicious activity, which we may then evaluate further.

•Targeted Risk Assessment. Our risk models, which utilize artificial intelligence via machine learning, include flags and characteristics which are unique to our platform. We believe these models result in a risk assessment that is more targeted and accurate than traditional models, leading to higher approval rates and highly automated identity and income verification. We are continuing to enhance the technology embedded within our models to facilitate and improve access to credit and the application experience for borrowers. We have been building and enhancing these machine learning models since 2015.

Intellectual Property

We rely on a combination of copyright, patent, trade secret, trademark, and other rights, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes and other intellectual property. We enter into confidentiality and other written agreements with our employees, consultants and service providers, and through these and other written agreements, attempt to control access to and distribution of the software, documentation and other proprietary technology and information. We also utilize a robust multi-layered monitoring program, including third party domain monitoring services, web search engine alerts and our outside counsel, which we leverage to actively enforce our intellectual property rights. Despite these efforts to protect our proprietary rights, third parties may, in an authorized or unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a product with the same functionality. Policing all unauthorized use of intellectual property rights is nearly impossible. Therefore, we cannot be certain that the steps we have taken or will take in the future will prevent misappropriations of our technology or intellectual property rights.

Wetechnology ~~have~~and ~~registered~~information. We ~~several~~also ~~trademarks~~utilize ina ~~the~~robust ~~United~~multi-layered ~~States~~monitoring program, including ~~“Prosper~~third party domain monitoring services,” ~~“FAAS~~web search engine alerts and our outside counsel,” ~~“Make~~which ~~Healthcare~~we ~~Affordable~~leverage to actively enforce our intellectual property rights. Despite these efforts to protect our proprietary rights,” ~~“Powered~~third byparties ~~Prosper”~~may, in an authorized or unauthorized manner, attempt to use, copy or otherwise obtain and ~~numerous~~market ~~stylized~~or ~~marks~~distribute our intellectual property rights or technology or otherwise develop a product with the same functionality. Policing all unauthorized use of intellectual property rights is nearly impossible. Therefore, ~~including~~we cannot be certain that the ~~Prosper~~steps ~~and~~we ~~Prosper~~have ~~Healthcare~~taken ~~Lending~~or ~~logos~~will take in the future will prevent misappropriations of our technology or intellectual property rights.

We have ~~invested~~registered inseveral atrademarks ~~research~~in ~~and~~the ~~development~~United ~~program and~~States, asincluding ~~of December 31~~“Prosper,” ~~2023,~~“Powered ~~we had eight issued patents~~ by ~~the~~Prosper” ~~United States Patent~~ and ~~Trademark~~numerous ~~Office.~~stylized Wemarks, ~~may~~including ~~file additional patent applications or pursue additional patent protection in~~ the ~~future~~Prosper toand ~~the~~Prosper ~~extent~~Healthcare weLending ~~believe it will be beneficial~~logos.

We have invested in a research and development program and, as of December 31, 2024, we had eight issued patents by the United States Patent and Trademark Office. We may file additional patent applications or pursue additional patent protection in the future to the extent we believe it will be beneficial.

Human Capital Resources

Employee Profile

At Prosper, our mission is to advance financial well-being and our employees are critical to achieving this mission. We are committed to hiring and developing employees who embody our core values: accountability, collaboration, excellence, curiosity, diversity, simplicity, and integrity. As of December 31, ~~2023~~2024, we had ~~404~~416 full-time employees, all of whom were based in the United States. Our employees are classified as either “local” to either our San Francisco, California and Phoenix, Arizona offices or “remote national” if they work remotely. As of December 31, ~~2023~~2024, we had ~~139~~148 local employees based in our San Francisco, California office, ~~134~~123 local employees based in our Phoenix, Arizona office, and ~~131~~145 remote national employees. None of our employees are represented by labor unions. We have not experienced any work stoppages, and we believe that our relations with our employees are good.

Employee Health & Wellness

Our employees have access to several programs and benefits related to employee wellness including: traditional life and health (medical, dental, vision) insurance, flexible paid time off, free membership to physical, mental and emotional health resources, and parental leave programs, among others. We believe our progressive human resources policies, learning and development, talent acquisition, and community engagement and support activities enable us to attract and retain key personnel.

Employee Recognition and Talent Development

We understand that to attract and retain great people, we must listen to and engage them regularly. We conduct an anonymous, company-wide employee engagement survey ~~twice a year~~ to gauge our progress and identify the areas where we excel and areas for improvement in the employee experience. Following ~~each~~the survey, we identify areas where we would like to focus to support engagement within the company and create action plans to support those initiatives. We have implemented two award programs to recognize and honor our employees who exemplify our values.

Because we operate in a highly regulated industry, we require ongoing regulatory and compliance training for our employees. Additionally, we provide a series of leadership training for all people managers. We also offer employees free access to on-demand training on an array of subjects from technical to business management to build their skills and advance their careers as well as opportunities for employees to pursue their passion projects and leadership development in alignment with our values.

Diversity, Equity, Inclusion and Belonging

Diversity and collaboration are among our Company’s core values and we believe our efforts in diversity, equity, inclusion and belonging (“DEIB”) fuel our innovation and drive our success. Our goal is to foster a diverse and inclusive workplace where our employees feel that their identities and experiences are represented, embraced and celebrated. We are also committed to our efforts to increase diversity through our hiring practices by using gender-neutral job postings and recruiting policies that promote diverse candidates. We recruit the best people for the job regardless of differences that include gender, ethnicity and other protected traits and it is our policy to comply fully with all federal, state and local laws relating to discrimination in the workplace. We have several employee resource groups that help us to identify opportunities and actions related to DEIB and to better engage underrepresented populations. Our DEIB principles are also reflected in our employee training, and in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace. We continue to enhance our DEIB policies, with guidance from our executive leadership team.

Government Regulation

Overview

The lending and securities industries are highly regulated. Each of the financial products offered by us are subject to extensive and complex rules and regulations. We also are subject to licensing and examination by various federal, state and local government authorities. These authorities impose obligations and restrictions on our activities, WebBank’s activities and the Borrower Loans acquired and Notes issued through our marketplace, Coastal’s activities and the Credit Card product, and our Home Lending Partners and the Home Equity Products. In particular, these rules may limit the fees that may be assessed, require extensive disclosure to, and consents from, borrowers, prohibit discrimination, and impose multiple qualification and licensing obligations on our activities. Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, voiding of loan contracts, indemnification liabilities to contract counterparties, class action lawsuits, administrative enforcement actions and civil and criminal liabilities. While compliance with such requirements is at times complicated by our novel business model, we believe we are in substantial compliance with these rules and regulations. These rules and regulations are subject to continuous change, however, and a material change could have an adverse effect on our compliance efforts and ability to operate.

From time to time, various types of federal and state legislation are proposed and new regulations are introduced that could result in additional regulation of, and restrictions on, the business of consumer lending. We cannot predict whether any such legislation or regulations will be adopted or how this would affect our business or our important relationships with third parties. In addition, the interpretation of existing legislation may change or may prove different than anticipated when applied to our novel business model. Compliance with such requirements could involve additional costs, which could have a material adverse effect on our business. As a consequence of the extensive regulation of consumer lending in the United States, our business is particularly susceptible to being affected by federal and state legislation and regulations that may increase the cost of doing business.

Personal Loan State and Federal Laws and Regulations

State Licensing Requirements. In most states we believe that WebBank, as originator of all Borrower Loans originated through our marketplace, satisfies any relevant licensing requirements with respect to the origination of such Borrower Loans. In addition, as needed, we seek licenses and/or authorizations of various types so that we may conduct activities such as servicing and marketing in all states and the District of Columbia, with the exceptions of Iowa and West Virginia. We are subject to supervision and examination by the state regulatory authorities that administer these state lending laws. The licensing statutes vary from state to state and prescribe or impose different requirements, including: restrictions on loan origination and servicing practices, limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review.

State Usury Laws. Section 521 of the Depository Institution Deregulation and Monetary Control Act of 1980 (12 U.S.C. § 1831d) (“DIDA”) and Section 85 of the National Bank Act (“NBA”) (12 U.S.C. § 85), federal case law interpreting the NBA such as Tiffany v. National Bank of Missouri and Marquette National Bank of Minneapolis v. First Omaha Service Corporation, and FDIC advisory opinion 92-47 permit FDIC-insured depository institutions, such as WebBank, to “export” the interest rate permitted under the laws of the state where the bank is located, regardless of the usury limitations imposed by the state law of the borrower’s state of residence unless the state has chosen to opt out of the exportation regime. WebBank is located in Utah, and Title 70C of the Utah Code does not limit the amount of fees or interest that may be charged by WebBank on loans of the type offered through our marketplace. Iowa and Puerto Rico have opted out of the exportation regime under Section 525 of DIDA and we do not operate in either jurisdiction. In June 2023, Colorado enacted a DIDA opt-out law which ~~will~~went beinto ~~effective~~effect on July 1, 2024. WeOn June 18, 2024, a federal court granted a preliminary injunction to halt enforcement of the Colorado DIDA law with respect to loans made by state-charted banks located out of Colorado to the extent those banks are members of one of the trade associations which brought the suit. Colorado appealed the decision to the U.S. Court of Appeals for the Tenth Circuit. On February 24, 2025, the FDIC withdrew an amicus brief it had filed previously in support of Colorado. While there can be no assurances as to the outcome of this litigation with Colorado, we believe that judicial interpretations support the view that ~~such~~DIDA opt outs only apply to loans “made” in ~~those~~the opted-out states.

In May 2015, the U.S. Court of Appeals for the Second Circuit issued a decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the NBA and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. On November 10, 2015, the defendant in the Madden case filed a petition for a writ of certiorari with the United States Supreme Court for further review of the Second Circuit’s decision. On June 27, 2016, the United States Supreme Court denied the petition and refused to review the case, leaving the decision of the Second Circuit intact and binding on federal courts in Connecticut, New York and Vermont. The Madden decision has created some uncertainty as to whether non-bank entities purchasing loans originated by a bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the NBA, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential

Madden decision has created some uncertainty as to whether non-bank entities purchasing loans originated by a bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the NBA, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential litigation, or the possible impact of the litigation on our marketplace, we believe the Madden case addressed facts that are not presented by our marketplace lending platform and thus would not apply to Borrower Loans.

In June 2020, the FDIC issued a final regulation entitled “Federal Interest Rate Authority” that, among other things, addressed the uncertainty resulting from the Madden decision, including uncertainty affecting marketplace lenders that partner with banks. Under the FDIC’s rule, which applies to FDIC-insured state-chartered industrial banks such as WebBank, interest on a loan originated by WebBank that was permissible under DIDA at origination is not affected by WebBank’s subsequent sale of the loan to PFL. Seven states and the District of Columbia sued the FDIC, however, seeking to have the regulation set aside on Administrative Procedure Act grounds. Three states brought a similar challenge in the same court to a similar regulation issued by the OCC under the NBA. Both suits were decided inon February 8, 2022, with the United States District Court for the Northern District of California ruling that the FDIC and OCC had not exceeded their statutory authority when promulgating their respective rules. The court deferred to each federal agency's interpretation, and thus concluded that each agency’s rule was not unreasonable or arbitrary or capricious. The states had until April 11, 2022 to appeal the rulings to the U.S. Court of Appeals for the Ninth Circuit and did not do so.

On August 18, 2020, WebBank, the originator and lender of the loans offered through the personal loan marketplace, was among the parties that reached a settlement with the Administrator of the Colorado Uniform Consumer Credit Code which provides a safe harbor for the platforms operated by Marlette Funding, LLC and Avant, Inc., such that if the programs meet certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure, the programs will be deemed to be in compliance with Colorado’s usury limits. On November 9, 2020, we amended our agreements with WebBank to meet the requirements of the safe harbor for extending credit to borrowers in Colorado.

We had separately been in discussions with the Colorado Administrator during the Marlette and Avant litigation regarding certain terms of Borrower Loans offered through the personal loan marketplace to Colorado residents. Effective as of July 30, 2019, we and the Administrator entered into a stipulation (the “Stipulation”) to allow loans to continue to be offered through the personal loan marketplace to Colorado residents, subject to certain financing charge and late fee restrictions during the period that the Stipulation is in effect with respect to acquired loans, but excluding loans retained by WebBank or sold to a state-chartered, FDIC-insured bank or a federally-chartered bank. Effective as of February 6, 2024, we entered into a Stipulation and Final Agency Order (“FAO”) pursuant to which Prosper agreed to continue to be subject to such financing charge and late fee restrictions set forth in the Stipulation. ~~through~~The FAO expired on July 1, 2024 pursuant to its terms.

If a Borrower Loan made through our marketplace was deemed to be subject to the usury laws of a state that has opted-out of the exportation regime or becomes bound by the Second Circuit’s or a similar judicial decision (including a judicial decision setting aside the FDIC’s regulation governing permissible interest on loans sold by banks to non-banks), we could become subject to fines, penalties, and possible forfeiture of amounts charged to borrowers, and we may decide not to originate Borrower Loans through our marketplace in that applicable jurisdiction, which may adversely impact our growth. For more information, see Item 1A, “Risk Factors—If our marketplace were found to violate a state’s usury laws, we may have to alter our business model and our business could be harmed.”

State Securities Laws. We are subject to the securities laws of each state in which the registration or qualification to offer and sell the Notes and PMI Management Rights has been approved. Certain of these state laws require us to renew the registration or qualification of Notes and PMI Management Rights on an annual basis.

The Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) created many new restrictions and an expanded framework of regulatory oversight for the financial services industry. Among other things, the Dodd-Frank Act centralized responsibility for consumer financial protections by creating the Consumer Financial Protection Bureau (the “CFPB”), which has broad authority to write regulations under federal consumer financial protection laws, such as the Truth-in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act, and to enforce those laws against and examine large financial institutions, such as our issuing banks, for compliance. The CFPB is authorized to prevent “unfair, deceptive or abusive acts or practices” through its regulatory, supervisory and enforcement authority. We are subject to the CFPB’s jurisdiction, including its enforcement authority and may become subject to their supervisory authority, as a servicer and acquirer of consumer credit. The CFPB may request reports concerning our organization, business conduct, markets and activities, and also conduct on-site examinations of our business on a periodic basis. In February 2025, the CFPB issued orders to suspend operations and cease activity including, among other things, supervision and examination activity and litigation proceedings. These orders have been challenged in several lawsuits. While there can be no assurances as to the possible impact

Truth-in-Lending Act. The federal Truth-in-Lending Act (“TILA”), and Regulation Z, which implements TILA, require creditors to provide consumers with uniform, understandable information concerning certain terms and conditions of their loan and credit transactions. These rules apply to WebBank as the creditor for Borrower Loans facilitated through our marketplace, but because the transactions are carried out on our hosted website, we facilitate compliance at WebBank’s direction. For closed-end credit transactions of the type provided through our marketplace, these disclosures include providing the annual percentage rate, the finance charge, the amount financed, the number of payments and the amount of the monthly payment. The creditor must provide the disclosures before the Borrower Loan is closed. TILA also regulates the advertising of

~~credit~~of ~~and~~the ~~gives~~CFPB ~~borrowers,~~orders ~~among~~or ~~other~~the ~~things,~~various ~~certain~~lawsuits ~~rights~~challenging ~~regarding~~those ~~updated~~orders, ~~disclosures~~we ~~and~~believe ~~the~~that ~~treatment~~we ofare ~~credit~~in ~~balances.~~substantial ~~Our~~compliance ~~marketplace provides borrowers~~ with ~~a TILA disclosure prior to~~ the ~~time~~rules aand ~~Borrower~~regulations ~~Loan~~issued isby ~~originated.~~the WeCFPB ~~also~~prior ~~seek~~ to ~~comply~~the ~~with~~issuance ~~TILA’s~~of ~~disclosure~~the ~~requirements related to credit advertising~~orders.

~~Equal~~Truth-in-Lending ~~Credit Opportunity~~ Act. The federal ~~Equal~~Truth-in-Lending ~~Credit Opportunity~~ Act (“~~ECOA~~TILA”), ~~prohibits~~and ~~creditors~~Regulation ~~from~~Z, ~~discriminating~~which ~~against~~implements ~~credit applicants on the basis of race~~TILA, ~~color,~~require ~~sex,~~creditors ~~age,~~to ~~religion,~~provide ~~national~~consumers ~~origin,~~with ~~marital status~~uniform, orunderstandable ~~the~~information ~~fact~~concerning ~~that~~certain ~~all~~terms orand ~~part~~conditions of ~~the~~their ~~applicant’s~~loan ~~income~~and ~~derives~~credit ~~from~~transactions. ~~any~~These ~~public~~rules ~~assistance~~apply ~~program~~to orWebBank ~~the~~as ~~fact that~~ the ~~applicant~~creditor ~~has~~for inBorrower ~~good~~Loans ~~faith~~facilitated ~~exercised~~through ~~any~~our ~~right~~marketplace, ~~under~~but because the ~~federal~~transactions ~~Consumer~~are ~~Credit~~carried ~~Protection~~out ~~Act~~on orour ~~any~~hosted ~~applicable state law. Regulation B~~website, ~~which~~we ~~implements~~facilitate ~~ECOA,~~compliance ~~restricts~~at ~~creditors~~WebBank’s ~~from~~direction. ~~requesting~~For ~~certain~~closed-end ~~types~~credit transactions of ~~information~~the ~~from~~type ~~applicants~~provided ~~and~~through ~~from~~our ~~making~~marketplace, ~~statements~~these ~~that~~disclosures ~~would~~include ~~discourage~~providing onthe aannual ~~prohibited~~percentage ~~basis~~rate, athe ~~reasonable~~finance ~~person~~charge, ~~from~~the ~~making~~amount orfinanced, ~~pursuing~~the annumber ~~application.~~of ~~These~~payments ~~requirements~~and ~~apply~~the ~~both~~amount toof ~~lenders~~the ~~such~~monthly aspayment. ~~WebBank~~The ~~and~~creditor ~~other~~must ~~parties~~provide ~~like~~the usdisclosures ~~that~~before ~~regularly~~the ~~implement~~Borrower ~~and~~Loan ~~communicate~~is ~~credit decisions~~closed. ~~Investors~~TILA ~~may~~ also beregulates ~~subject to~~ the ~~ECOA~~advertising inof ~~their~~credit ~~capacity~~and asgives ~~purchasers of Notes~~borrowers, ifamong ~~they~~other ~~are~~things, ~~deemed~~certain torights ~~regularly~~regarding ~~participate~~updated indisclosures ~~credit~~and ~~decisions. In~~ the ~~underwriting~~treatment of ~~Borrower~~credit ~~Loans~~balances. onOur ~~our~~ marketplace, ~~both~~provides ~~WebBank~~borrowers ~~and we seek to comply~~ with ~~ECOA’s~~a ~~provisions~~TILA ~~prohibiting~~disclosure ~~discouragement~~prior ~~and discrimination. ECOA also requires creditors~~ to ~~provide~~the ~~consumers~~time ~~with timely notices of adverse action taken on credit applications. WebBank and we provide prospective borrowers who apply for~~ a Borrower Loan ~~through~~is ~~our~~originated. ~~marketplace~~We ~~but~~also ~~are~~seek ~~denied~~to ~~credit~~comply with anTILA’s ~~adverse~~disclosure ~~action notice which is in compliance with applicable~~ requirements ~~(see~~related ~~also~~to ~~below~~credit ~~regarding “Fair Credit Reporting Act”)~~advertising.

Equal Credit Opportunity Act. The federal Equal Credit Opportunity Act (“ECOA”) prohibits creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act or any applicable state law. Regulation B, which implements ECOA, restricts creditors from requesting certain types of information from applicants and from making statements that would discourage on a prohibited basis a reasonable person from making or pursuing an application. These requirements apply both to lenders such as WebBank and other parties like us that regularly implement and communicate credit decisions. Investors may also be subject to the ECOA in their capacity as purchasers of Notes, if they are deemed to regularly participate in credit decisions. In the underwriting of Borrower Loans on our marketplace, both WebBank and we seek to comply with ECOA’s provisions prohibiting discouragement and discrimination. ECOA also requires creditors to provide consumers with timely notices of adverse action taken on credit applications. WebBank and we provide prospective borrowers who apply for a Borrower Loan through our marketplace but are denied credit with an adverse action notice which is in compliance with applicable requirements (see also below regarding “Fair Credit Reporting Act”).

Fair Credit Reporting Act. The federal Fair Credit Reporting Act (“FCRA”) and its implementing regulations, including Regulation V, promote the accuracy, fairness and privacy of information in the files of consumer reporting agencies. FCRA requires a permissible purpose to obtain a consumer credit report, and requires persons to report loan payment information to credit bureaus accurately. FCRA also imposes disclosure requirements on creditors who take adverse action on credit applications based on information contained in a credit report. WebBank and we have a permissible purpose for obtaining credit reports on potential borrowers and WebBank and we also obtain explicit consent from borrowers to obtain such reports. As the servicer for the Borrower Loan, we have systems in place to report Borrower Loan payment and delinquency information to appropriate reporting agencies. We provide an adverse action notice to a rejected borrower on WebBank’s behalf at the time the borrower is rejected that includes all the required disclosures. We have also implemented an identity theft prevention program as required by law.

Fair Debt Collection Practices Act. The federal Fair Debt Collection Practices Act (“FDCPA”) and its implementing regulation, Regulation F, provide guidelines and limitations on the conduct of third-party debt collectors in connection with the collection of consumer debts. The FDCPA limits certain communications with third parties, imposes notice and debt validation requirements, and prohibits threatening, harassing or abusive conduct in the course of debt collection. We are not a “debt collector” under the FDCPA, ~~which~~through an exception to the ~~statute~~definition ~~defines~~of a debt collector as a person who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another. The CFPB retained the statute’s “debt collector” definition in its November 2020 final rules implementing the FDCPA. As the servicer for Borrower Loans originated by WebBank and owned by investors, we are not a debt collector based on our facilitation of loans in the origination process and/or its servicing of the Borrower Loans after the time of origination and prior to any default. While the FDCPA applies to third-party debt collectors, debt collection laws of certain states impose similar requirements on creditors who collect their own debts. Our agreement with our investors prohibits investors from attempting to collect directly on the Borrower Loan. We use our internal collection team and professional external debt collection agents to collect delinquent accounts. They are required to comply with all other applicable laws in collecting delinquent accounts of our borrowers.

Servicemembers Civil Relief Act. The federal Servicemembers Civil Relief Act (“SCRA”) allows military members to suspend or postpone certain civil obligations so that the military member can devote their full attention to military duties. The SCRA, as well as certain state laws with similar protections for military members, require us to adjust the interest rate of borrowers who qualify for and request relief. If a borrower with an outstanding Borrower Loan qualifies for protection under the SCRA or similar state laws, we will reduce the interest rate on the Borrower Loan to 6% for the duration of the borrower’s active duty. During this period, the investors who have invested in such Borrower Loan will not receive the difference between 6% and the Borrower Loan’s original interest rate. For a borrower to obtain an interest rate reduction on a Borrower Loan due to military service, we require the borrower to send us a written request and written documentation of active duty. We do not ~~take military service into account in assigning Prosper Ratings to borrower loan requests and we do not disclose the military status of borrowers to investors.~~

Military Lending Act. The federal Military Lending Act (“MLA”) provides specific protections for active duty service members and their dependents (or covered borrowers) in consumer credit transactions. Although originally enacted in 2006, the MLA applies to persons engaged in the business of extending consumer credit subject to the disclosure requirements of the TILA and Regulation Z with respect to loans made on or after October 3, 2016. The MLA prohibits creditors from imposing a Military Annual Percentage Rate (“MAPR”) greater than 36% in any consumer credit transaction involving a covered borrower. It also requires certain oral and written disclosures to be provided to covered borrowers. Additionally, the MLA prohibits creditors from requiring covered borrowers to waive rights to legal recourse, submit to arbitration, or pay a prepayment penalty

ortake ~~fee.~~military ~~Both~~service weinto ~~and~~account ~~WebBank~~in ~~have~~assigning ~~ensured~~Prosper ~~that~~Ratings ~~the~~to borrower loan ~~program~~requests ~~complies~~and ~~with~~we ~~the~~do ~~MLA requirements for covered borrowers, including but~~ not ~~limited~~disclose to the ~~restriction~~military onstatus ~~MAPR, the delivery~~ of ~~required~~borrowers ~~disclosures~~to ~~and the prohibition of mandatory arbitration and waiver of legal recourse~~investors.

Other Lending Regulations. We are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending, including additional requirements relating to loan disclosure, credit discrimination, credit reporting, debt collection and unfair, deceptive or abusive business practices. These laws and regulations may be enforced by state consumer credit regulatory agencies, state attorneys general, the CFPB and private litigants, among others. Given our novel business model and the subjective nature of some of these laws and regulations, particularly laws regulating unfair, deceptive or abusive business practices, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements.

Electronic Funds Transfer Act. The federal Electronic Fund Transfer Act (“EFTA”), and Regulation E, which implements it, provide guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts. In addition, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (“NACHA”). Most transfers of funds in connection with the origination and repayment of the Borrower Loans are performed by ACH. We obtain necessary electronic authorization from borrowers and investors for such transfers in compliance with such rules. Transfers of funds through our marketplace are currently executed by Wells Fargo and conform to the EFTA, its regulations and NACHA guidelines.

Electronic Signatures in Global and National Commerce Act/Uniform Electronic Transactions Act. The federal Electronic Signatures in Global and National Commerce Act (“ESIGN”) and similar state laws, particularly the Uniform Electronic Transactions Act (“UETA”), authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures. ESIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to obtain the consumer’s consent to receive information electronically. When a borrower or individual investor registers with our marketplace, we obtain their consent to transact business electronically and maintain electronic records in compliance with ESIGN and UETA requirements.

Privacy and Data Security Laws. The federal Gramm-Leach-Bliley Act (“GLBA”) limits the disclosure of nonpublic personal information about a consumer to nonaffiliated third parties and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities as well as to safeguard personal customer information. AsMany ~~of December 31,~~states ~~2023,~~have apassed ~~total~~or ofare ~~thirteen~~in ~~states~~the ~~have~~process ~~passed~~of ~~comprehensive~~passing consumer privacy and data protection laws. inMost ~~the~~of ~~United~~these ~~States:~~state ~~California,~~privacy ~~Virginia,~~laws ~~Colorado,~~exempt ~~Connecticut,~~entities ~~Utah,~~subject ~~Iowa,~~to ~~Indiana,~~GLBA. ~~Tennessee~~However, ~~Texas,~~there ~~Florida,~~are ~~Montana,~~a ~~Oregon,~~few ~~and~~state ~~Delaware.~~privacy Aslaws ~~of December 31,~~that ~~2023,~~exempt ~~California,~~data ~~Colorado,~~subject ~~Connecticut,~~to ~~Utah~~GLBA, and ~~Virginia’s~~thus ~~laws~~any consumer data not subject to GLBA are ~~effective~~subject to these state privacy laws. InAs ~~particular~~of December 31, 2024, the California Consumer Privacy Act (“CCPA”), ~~which~~and ~~took~~Oregon ~~effect~~Consumer onPrivacy ~~January~~Act 1,(“OCPA”) ~~2020,~~apply ~~provides~~to consumer data not subject to the GLBA. The CCPA and OCPA provide consumers in ~~the~~these ~~state~~states with rights to know about the use, to request deletion and correction, and to opt out of the sale of their personal information by businesses that are a certain size or that generate at least half of their revenue by selling personal information. In turn, ~~the~~these ~~CCPA~~state ~~requires~~privacy laws require subject businesses to notify consumers of their data collection practices and to implement procedures for timely responding to consumer requests submitted in exercise of their rights under the statute~~, although the CCPA includes certain exceptions for personal information that is protected under GLBA or other federal and state privacy laws~~. ~~These provisions of the CCPA were further strengthened by provisions of the California Privacy Rights Act (the “CPRA”), which took effect on January 1, 2023.~~ We maintain a detailed privacy policy that is accessible from our website and is designed to comply with applicable privacy laws.

In addition, state and federal privacy and data security laws require safeguards to protect the privacy and security of consumers’ personally identifiable information, require notification to affected customers in the event of a breach, and restrict certain sharing of nonpublic personal information about a consumer with affiliated entities. We maintain security measures designed to protect participants’ personal information, and we do not sell, rent or share such information with nonaffiliated third parties for marketing purposes unless previously agreed to by the participant or otherwise permitted by applicable law. In addition, we take a number of measures to safeguard the personal information of our borrowers and investors and to protect it against unauthorized access.

Bank Secrecy Act. In cooperation with WebBank, we have implemented an anti-money laundering policy and various anti-money laundering procedures to comply with applicable federal law. With respect to new borrowers and investors, we apply the customer identification and verification program rules and screen names against the list of Specially Designated Nationals maintained by the U.S. Department of the Treasury Office of Foreign Asset Control’s (“OFAC”) pursuant to the USA PATRIOT Act amendments to the Bank Secrecy Act (“BSA”) and its implementing regulation.

Credit Card State and Federal Laws and Regulations

byapply the ~~state~~customer ~~law~~identification ofand ~~the~~verification ~~cardholder’s~~program ~~state~~rules ofand ~~residence~~screen ~~unless~~names against the ~~state~~list ~~has~~of ~~chosen~~Specially toDesignated ~~opt~~Nationals ~~out~~maintained ofby the ~~exportation regime~~U.S. ~~State~~Department ~~privacy~~of ~~and~~the ~~data~~Treasury ~~security~~Office ~~laws~~of ~~such~~Foreign asAsset Control’s (“OFAC”) pursuant to the ~~CCPA~~USA ~~also~~PATRIOT ~~apply~~Act amendments to the ~~Credit~~Bank ~~Card~~Secrecy ~~product~~Act (“BSA”) and its implementing regulation.

~~The~~ Credit Card product is subject to the same federal laws and regulations applicable to our personal loan marketplace and as summarized above, including the Dodd-Frank Act, TILA, ECOA, FCRA, FDCPA, SCRA, MLA, EFTA, ESIGN, UETA, GLBA, BSA and OFAC. TILA and Regulation Z contain specific disclosure requirements for credit cards and advertising rules for credit cards. Please refer to the “Government Regulations—Personal Loan State and Federal Laws and Regulations” section above for a summary of these federal laws and regulations. Certain amendments to TILA also govern the Credit Card product, including the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”), which amended TILA to prescribe, among other things, additional procedures, disclosures, fee limits, and other protections for consumers applying for or holding credit cards, and the Fair Credit Billing Act (“FCBA”), which governs creditor obligations with respect to billing complaints and errors. For the Credit Card product, we take a similar approach to compliance for our personal loan marketplace, with adjustments for application of the rules to open-ended, unsecured credit cards as opposed to closed-end personal loans. We work with Coastal to facilitate compliance.

The Credit Card product operates under a similar bank partnership model as our personal loan marketplace, whereby through the application of Section 521 of DIDA, Section 85 of the NBA, and federal case law, Coastal may “export” the interest rate permitted under the laws of the State of Washington, where Coastal is located, regardless of the usury limitations imposed by the state law of the cardholder’s state of residence unless the state has chosen to opt out of the exportation regime. State privacy and data security laws such as the CCPA also apply to the Credit Card product.

The Credit Card product is subject to the same federal laws and regulations applicable to our personal loan marketplace and as summarized above, including the Dodd-Frank Act, TILA, ECOA, FCRA, FDCPA, SCRA, MLA, EFTA, ESIGN, UETA, GLBA, BSA and OFAC. TILA and Regulation Z contain specific disclosure requirements for credit cards and advertising rules for credit cards. Please refer to the “Government Regulations—Personal Loan State and Federal Laws and Regulations” section above for a summary of these federal laws and regulations. Certain amendments to TILA also govern the Credit Card product, including the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”), which amended TILA to prescribe, among other things, additional procedures, disclosures, fee limits, and other protections for consumers applying for or holding credit cards, and the Fair Credit Billing Act (“FCBA”), which governs creditor obligations with respect to billing complaints and errors. For the Credit Card product, we take a similar approach to compliance for our personal loan marketplace, with adjustments for application of the rules to open-end, unsecured credit cards as opposed to closed-end unsecured personal loans. We work with Coastal to facilitate compliance.

Home Equity State and Federal Laws and Regulations

The Home Equity Products are subject to many of the same federal laws and regulations as the personal loan marketplace, including the Dodd-Frank Act, TILA, ECOA, FCRA, ESIGN, GLBA, BSA and OFAC. TILA, Regulation Z, and applicable state laws contain specific disclosure requirements for the Home Equity Products and mortgage advertising rules. State mortgage broker and mortgage lender licensing and registration requirements also apply to the Home Equity Products, which must satisfy the minimum standards set forth in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and Regulation H, as well as state usury laws. State privacy and data security laws such as the CCPA also apply to the Home Equity Products.

The Home Equity Products are also subject to the Real Estate Settlement Procedures Act (“RESPA”) and its implementing regulation, Regulation X, as well as related guidance issued by the CFPB and the Department of Housing and Urban Development (“HUD”). RESPA, among other things, prohibits the payment or acceptance of referral fees or kickbacks, or any splitting of fees except for actual services performed. The TILA-RESPA Integrated Disclosure does not apply to HELOCs, but does apply to HELoans. Prosper does not service any of the Home Equity Products.

Finally, the Home Equity ~~Products~~products are subject to the data collection and reporting requirements of the Home Mortgage Disclosure Act (the “HMDA”) and its implementing regulation, Regulation C. Prosper is not directly subject to the HMDA data collection and reporting requirements, but collects data to support the reporting requirements applicable to its lending partner.

Foreign Laws and Regulations

We do not permit non-U.S. based individuals to register as borrowers on our marketplace and the marketplace does not operate outside the United States. Therefore, we do not believe that our marketplace is subject to foreign laws or regulations.

Summary of Risk Factors

We are subject to various risks, the most significant of which are summarized below. For more information about these and other risks that may affect us, you should carefully read the factors described in the “Risk Factors” section below.

Risks related to PFL, PMI and our operation of the personal loan ~~borrower~~marketplace ~~default~~

•~~The~~We ~~Notes~~have ~~are~~incurred ~~risky~~operating ~~and~~losses ~~speculative~~in ~~investments~~prior ~~suitable~~years ~~only~~and ~~for~~may ~~investors~~continue ofto ~~adequate~~incur ~~financial~~net ~~means~~losses in the future.

•The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.

•Human error in the operation of our platform has resulted in the allocation of Borrower Loans to our Note Channel which did not conform to the eligibility criteria applicable to Borrower Loans at the time of allocation. If we are unable to prevent the reoccurrence of similar errors, our business and investors could be adversely impacted.

•We have experienced errors on our platform that have resulted in incorrect reporting of performance returns to Note investors. If we are unable to prevent the reoccurrence of similar errors, investors could be adversely impacted.

•Arrangements for back-up servicing are limited. If PMI fails to maintain operations or the Administration Agreement is rejected or terminated (in bankruptcy or otherwise), investors may experience a delay and increased cost in respect of their expected principal and interest payments on Notes, and PFL may be unable to collect and process repayments from borrowers.

•PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.

•PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.

•Any significant disruption in service in our marketplace or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement. If the security of PFL’s investors’ and borrowers’ confidential information stored in our systems is breached, users’ secure information may be stolen, our reputations may be harmed, and we may be exposed to liability.

•Increasing interest rates have adversely impacted and could materially and adversely impact our business.

Risks related to compliance and regulation

•Our marketplace represents a novel approach to borrowing and investing that may fail to comply with federal and state securities laws, borrower protection laws and the state counterparts to such consumer protection laws. Borrowers may dispute the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws. Investors may attempt to rescind their Note purchases under securities laws. Regulatory agencies and their state counterparts may investigate our compliance with these regulatory obligations, and may take enforcement action with respect to alleged law violations. There continues to be uncertainty as to how the actions of the Consumer Financial Protection Bureau or any other new agency could impact our business or that of our issuing bank. If our marketplace were found to violate a state’s usury laws, we may have to alter our business model and our business could be harmed. If one or both of PMI and PFL is required to register under the Investment Company Act or the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected. Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.

•We rely on agreements with WebBank, pursuant to which WebBank originates loans to qualified borrowers on a uniform basis throughout the United States and sells and assigns those loans to PFL. If our relationship with WebBank were to end, we may need to rely on individual state lending licenses to originate Borrower Loans.

•PMI's administration of Quick Invest under its previous offering and PFL’s administration of Quick Invest, Recurring Investment, and Auto Invest under its current offering, could create additional liability for PFL and such liability could be material.

Risks related to borrower loans on the personal loan marketplace

•Payments on the Notes depend entirely on payments PFL receives on corresponding Borrower Loans. If a borrower fails to make any payments on the corresponding Borrower Loan related to a Note, payments on such Note will be correspondingly reduced. If payments on the Borrower Loan corresponding to an investor’s Note become overdue, such investor may not receive the full principal and interest payments that were expected on the Note.

•Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.

•The credit information of an applicant may be inaccurate or may not accurately reflect the applicant’s creditworthiness, which may cause an investor to lose all or part of the price paid for a Note. The fact that we have the exclusive right and ability to investigate claims of identity theft in the origination of Borrower Loans creates a significant conflict of interest between us and our investors.

•The Borrower Loans are not secured by any collateral or guaranteed or insured by any third party, and investors must rely on us or a third-party collection agency to pursue collection against any borrower.

•The Prosper Rating may not accurately set forth the risks of investing in the Notes, no assurances can be provided that actual loss rates for the Notes will come within the estimated average annualized loss rates indicated by the Prosper Rating, and investors have limited rights to cause Prosper to repurchase the Notes.

•We may not set appropriate interest rates for Borrower Loans.

•Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.

•The Borrower Loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the Borrower Loan, which may reduce the likelihood that an investor will receive the full principal and interest payments that such investor expects to receive on a Note.

•In general, the Borrower Loans do not contain any cross-default or similar provisions. If a borrower defaults on any of their other debt obligations, our ability to collect on the Borrower Loan on which an investor’s Note is dependent for payment may be substantially impaired.

Risks ~~Inherent~~related into investing in notes on the ~~Notes~~personal loan marketplace

•The Notes are risky and speculative investments suitable only for investors of adequate financial means.

•The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.

•PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.

•Our marketplace allows a borrower to prepay a Borrower Loan at any time without penalty. Borrower Loan prepayments will extinguish or limit an investor’s ability to receive additional interest payments on a Note.

•The Notes will not be listed on any securities exchange and can be held only by registered Prosper investors. Further, no trading platform for the transfer of Notes exists. Therefore, investors should be prepared to hold the Notes they purchase until maturity.

•Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.

Risks related to PFL and PMI, our marketplace and our ability to service the notes

•PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.

•We have incurred operating losses in prior years and may continue to incur net losses in the future.

•The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.

•PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.

•Increasing interest rates have adversely impacted and could materially and adversely impact our business.

Risks related to compliance and regulation

business model and our business could be harmed. If one or both of PMI and PFL is required to register under the Investment Company Act or the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected. Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.

Available Information

The following filings are available for download free of charge at www.prosper.com as soon as reasonably practicable after such filings are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”): Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports. Our SEC filings are also available to the public on the SEC’s website, at www.sec.gov. The information contained on our website and our blog is not incorporated by reference into this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, when evaluating our business. Any of the following risks, either alone or taken together, could materially and adversely affect our business, financial condition, operating results and prospects. While we believe the risks and uncertainties described below include all material risks currently known by us, it is possible that these may not be the only ones we face.

RISKS RELATED TO PFL, PMI AND OUR OPERATION OF THE PERSONAL LOAN ~~BORROWER~~MARKETPLACE ~~DEFAULT~~

~~The~~We ~~Notes~~have ~~are~~incurred ~~risky~~operating ~~and~~losses ~~speculative~~in ~~investments~~prior ~~suitable~~years ~~only~~and ~~for~~may ~~investors~~continue ofto ~~adequate~~incur ~~financial~~net ~~means~~losses in the future.

~~Investors~~We ~~should~~have beincurred ~~aware~~operating ~~that~~losses ~~the~~in ~~Notes~~prior ~~offered~~years, ~~through~~including ~~our~~2024, ~~marketplace~~and ~~are~~may ~~risky~~continue ~~and~~to ~~speculative~~incur ~~investments.~~net ~~The~~losses ~~Notes~~in ~~are~~the ~~special,~~future. ~~limited~~We ~~obligations~~have offinanced ~~PFL~~our ~~and~~operations ~~depend~~to ~~entirely~~date ~~for~~primarily ~~payment~~with onproceeds ~~PFL’s~~from ~~receipt~~the sale of ~~payments~~equity securities. In addition, we borrowed $75.0 million under the ~~corresponding~~Term ~~Borrower~~Loan ~~Loans~~in November 2022. ~~Notes~~PMI ~~are~~is ~~suitable~~dependent ~~only~~upon ~~for~~raising ~~investors~~additional ofcapital ~~adequate~~or ~~financial~~debt ~~means.~~financing Ifto anfund ~~investor~~its ~~cannot~~current ~~afford~~operating toplan ~~lose~~if ~~the~~it ~~entire~~cannot ~~amount~~generate ofsufficient ~~such~~positive ~~investor~~cash flow from operations. PMI’s ~~investment~~failure into ~~the~~achieve ~~Notes~~positive cash flow from operations or obtain additional debt and equity financing, ~~the~~could ~~investor~~adversely ~~should~~affect ~~not~~PMI’s ~~invest~~ability into perform its obligations under the ~~Notes~~Administration Agreement.

~~Payments~~The onTerm ~~the~~Loan, ~~Notes~~and ~~depend~~any ~~entirely~~additional onindebtedness ~~payments~~we ~~PFL~~incur ~~receives~~in ~~on corresponding Borrower Loans. If a borrower fails to make any payments on~~ the ~~corresponding Borrower Loan related to a Note~~future, ~~payments~~could onadversely ~~such~~affect ~~Note~~our ~~will~~business beand ~~correspondingly~~financial ~~reduced~~results.

~~PFL~~In ~~will~~November ~~only~~2022, ~~make~~PMI ~~payments~~entered ~~pro-rata~~into on a ~~series~~Term ~~of Notes after it receives a borrower’s payment on the corresponding Borrower~~ Loan, ~~net~~which ofprovides ~~servicing~~for ~~fees~~$75.0 million PFL also will retain from the funds received from the relevant borrower and otherwise available for payment on the Notes any non-sufficient funds fees and the amounts of any attorneys’ fees or collection fees our in~~-house~~ ~~collections~~debt ~~department,~~financing athat ~~third-party~~matures ~~servicer or collection agency imposes~~ in ~~connection~~November ~~with collection efforts~~2026. ~~Under~~In ~~the~~November ~~terms of the Notes~~2024, ifwe ~~PFL~~entered ~~does~~into ~~not~~an ~~receive~~amendment ~~any~~to ~~or all payments on~~ the ~~corresponding~~Term ~~Borrower~~ Loan, ~~payments~~which onrequires ~~the~~us ~~Note~~to ~~will~~make bequarterly ~~correspondingly reduced in whole or in part~~$2.5 million Ifprincipal ~~the relevant borrower does not make a payment on a specific monthly loan payment date, no payment will be made on the Note on the corresponding succeeding Note payment date~~repayments.

~~The~~Our ~~Borrower~~ability ~~Loans~~to ~~are~~make ~~not~~payments ~~secured~~on bythe ~~any~~Term ~~collateral~~Loan, orto ~~guaranteed~~repay orthe ~~insured~~Term byLoan ~~any~~when ~~third~~due, ~~party~~and to fund our business, operations and ~~investors~~significant ~~must~~planned ~~rely~~capital expenditures will depend on our ability to pay with available cash or generate cash in the future. Repayment of the Term Loan, and any additional indebtedness we may incur in the future, could require us to divert funds identified for other purposes to service the Term Loan. If we cannot generate sufficient cash flow from our operations to service the Term Loan, we may need to further amend the Term Loan, refinance the Term Loan, dispose of assets, or aissue ~~third-party~~additional ~~collection~~equity ~~agency~~to obtain the necessary funds. If required to ~~pursue~~do ~~collection~~so, ~~against~~we may be unable to take any ~~borrower~~of these actions on a timely basis, on terms satisfactory to us or at all.

Borrower Loans are unsecured obligations of borrowers. They are not secured by any collateral, and they are not guaranteed or insured by PFL, PMI or any third party, or backed by any governmental authority in any way. We and our third-party collection agencies will, therefore, be limited in our ability to collect on Borrower Loans. Moreover, Borrower Loans are obligations of borrowers to PFL as successor to WebBank, not obligations to the holders of Notes. Holders of the Notes will have no recourse to the borrowers and no ability to pursue borrowers to collect payments under Borrower Loans. Holders of the Notes may look only to PFL for payment of the Notes. Furthermore, if a borrower fails to make any payments on the Borrower Loan, the holders of the Notes corresponding to that Borrower Loan will not receive any payments on their Notes. The holders of such Notes will not be able to pursue collection against the borrower and will not be able to obtain the identity of the borrower in order to contact the borrower about the defaulted Borrower Loan.

~~The~~In ~~credit~~addition, ~~information~~the ofTerm anLoan ~~applicant~~contains ~~may~~financial becovenants, ~~inaccurate~~including ora ~~may~~minimum ~~not~~tangible ~~accurately~~net ~~reflect~~worth ~~the~~covenant, ~~applicant’s~~minimum ~~creditworthiness~~net liquidity covenant, ~~which~~maximum ~~may~~leverage ~~cause~~ratio, anand ~~investor~~minimum toasset ~~lose~~coverage ~~all~~ratio, ortogether ~~part~~with other customary affirmative and negative covenants and events of default. The obligations under the ~~price~~Term ~~paid~~Loan are also secured by assets of PMI and certain of its subsidiaries. Maintaining compliance with these covenants may require us to further amend the Term Loan, divert funds intended for aother ~~Note~~uses and limit our flexibility to take certain actions.

WeSee ~~obtain~~Note ~~applicant~~11 ~~credit information from consumer reporting agencies, and assign Prosper Ratings to listings based in part on the applicant’s credit score. A credit score that forms a part~~ of the ~~Prosper~~accompanying ~~Rating~~consolidated ~~assigned~~financial tostatements afor ~~listing~~more may not reflect the applicant’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data. Similarly, the credit data taken from the applicant’s credit report and displayed in listings may also be based on outdated, incomplete or inaccurate consumer reporting data. We do not verify the information ~~obtained~~about ~~from~~ the ~~applicant’s~~Term ~~credit report~~Loan. ~~Moreover, investors do not, and will not, have access to financial statements of applicants or to other detailed financial information about applicants.~~

The Prosper Rating may not accurately set forth the risks of investing in the Notes, no assurances can be provided that actual loss rates for the Notes will come within the estimated average annualized loss rates indicated by the Prosper Rating, and investors have limited rights to cause Prosper to repurchase the Notes.

The Prosper Rating assigned to a loan listing may not accurately reflect the risks of investing in the Notes, and is not a recommendation by us to buy or hold a Note. For example, the Prosper Rating for a listing could be inaccurate because the applicant’s credit report contained incorrect information. Similarly, although some of the information provided by applicants that is relevant to the Prosper Rating is verified by us before calculating the Prosper Rating, we do not verify all such information. For example, we do not verify the income or employment information on all applications. Further, the Prosper Rating does not reflect PFL’s credit risk as a debtor (such credit risk exists even though, as the debtor on the Notes, PFL’s only obligation is to pay to the Note holders their pro-rata shares of collections received on the related Borrower Loans net of applicable fees). In addition, no assurances can be provided that actual loss rates for the Notes will fall within the expected loss rates indicated by the Prosper Rating. The interest rates on the Notes might not adequately compensate Note investors for these additional risks.

If we include in a listing a Prosper Rating that is different from the Prosper Rating calculated by us or calculate the Prosper Rating for a listing incorrectly, and such error materially and adversely affects a holder’s interest in the related Note, PFL will indemnify the holder or repurchase the Note. PFL will not, however, have any indemnity or repurchase obligation under the Amended and Restated Indenture, the Notes, the Investor Registration Agreement or any other agreement associated with the Note Channel as a result of any other inaccuracy with respect to a listing’s Prosper Score or Prosper Rating. PFL’s contractual repurchase obligations do not affect a Note holder’s rights under federal or state securities laws.

Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.

Since it was first implemented in July 2011 through December 31, 2023, the Recurring Investment (formerly known as Auto Quick Invest) tool has experienced programming errors that affected 8,630 Notes and PMI Notes out of the 13,491,750 Notes and PMI Notes purchased. The Auto Invest tool was first implemented on June 2, 2016. Since such time through December 31, 2023, the Auto Invest tool has experienced programming errors that affected 2 Notes out of the 18,528,380 Notes purchased.

In the event of any errors in Recurring Investment or Auto Invest that cause an investor to purchase a Note from PFL that such investor would not otherwise have purchased or that differs materially from the Note such investor would have purchased had there been no error, PFL will either repurchase the Note, indemnify the investor against losses suffered on that Note or cure such error. See “Risk Factors—Risks Related to PFL and PMI, Our Marketplace and Our Ability to Service the Notes” for more information.

Some borrowers may use our marketplace to defraud investors, which could adversely affect investors’ ability to recoup their investment.

We use identity and fraud checks with external databases to authenticate each borrower’s identity. There is a risk, however, that these checks could fail and fraud may occur. In addition, applicants may misrepresent their intentions regarding loan purpose or other information contained in listings, and we do not verify the majority of this information. While PFL will indemnify an investor or repurchase Notes in limited circumstances (including, e.g., a material payment default on the Borrower Loan resulting from verifiable identity theft), it is not obligated to indemnify an investor or repurchase a Note from an investor if the investment is not realized in whole or in part due to fraud (other than verifiable identity theft) in connection with a loan listing, or due to false or inaccurate statements or omissions of fact in a listing, whether in credit data, a borrower’s representations, similar indicators of borrower intent and ability to repay the Borrower Loan. If PFL repurchases a Note, the repurchase price will be equal to the Note's outstanding principal balance and will not include accrued interest. If PFL repurchases any Notes, PMI will concurrently repurchase the related PMI Management Rights for zero consideration.

The fact that we have the exclusive right and ability to investigate claims of identity theft in the origination of Borrower Loans creates a significant conflict of interest between us and our investors.

We have the exclusive right to investigate claims of identity theft and determine, in our sole discretion, whether verifiable identity theft has occurred. Such a determination of verifiable identity theft may trigger an obligation by PFL to either repurchase the related Notes or Borrower Loans or indemnify the applicable Note holders. The denial of a claim under PFL’s identity theft guarantee would save PFL from its indemnification or repurchase obligation. Because investors rely solely on us to investigate incidents that might require PFL to indemnify the applicable Note holders or repurchase the related Notes or Borrower Loans, a conflict of interest exists between us and such investors.

If payments on the Borrower Loan corresponding to an investor’s Note become overdue, such investor may not receive the full principal and interest payments that were expected on the Note, and such investor may not recover the original purchase price on the Note.

We may refer Borrower Loans that become past due to a third party collection agency for collection or we may collect on such Borrower Loans directly. If a borrower fails to make a required payment on a Borrower Loan, we will pursue reasonable collection efforts in respect of the Borrower Loan. Referral of a delinquent Borrower Loan to a collection agency within five business days after it becomes 30 days past due will be considered reasonable collection efforts. If payment amounts on a delinquent Borrower Loan are received from a borrower after the loan has been referred to our in-house collections department or an outside collection agency, we or that collection agency may retain a percentage of that payment as a fee before any principal or interest becomes payable to an investor. Collection fees may be up to 40% of recovered amounts, in addition to any legal fees and transaction fees associated with accepting payments incurred in the collection effort.

For some non-performing Borrower Loans, we may not be able to recover any of the unpaid loan balance and, as a result, an investor who has purchased a corresponding Note may receive little, if any, of the unpaid principal and interest payable under the Note. In all cases, investors must rely on our collection efforts or the applicable collection agency to which such Borrower Loans are referred, and are not permitted to collect or attempt collection of payments on the Borrower Loans in any manner.

Loss rates on the Borrower Loans may increase as a result of economic conditions beyond our control and beyond the control of the borrower.

Borrower Loan loss rates may be significantly affected by economic downturns or general economic conditions beyond our control and beyond the control of individual borrowers. In particular, loss rates on Borrower Loans may increase due to factors such as prevailing interest rates, the rate of unemployment, the level of consumer confidence, residential real estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets, natural disasters, pandemics, and other factors.

The Borrower Loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the Borrower Loan, which may reduce the likelihood that an investor will receive the full principal and interest payments that such investor expects to receive on a Note.

If a borrower incurs additional debt after the date a loan listing is posted, the additional debt may impair the ability of that borrower to make payments on their Borrower Loan and, as such, reduce the likelihood that an investor will receive the principal and interest payments that such investor expects to receive on a corresponding Note. Moreover, the additional debt may adversely affect the borrower’s creditworthiness generally, and could result in the financial distress, insolvency, or bankruptcy of the borrower. To the extent that the borrower has or incurs other indebtedness and cannot pay all of their indebtedness, the borrower may choose to make payments to other creditors, rather than to PFL.

To the extent borrowers incur other indebtedness that is secured, such as a mortgage, a home equity line or an auto loan, the ability of the secured creditors to exercise remedies against the assets of the borrower may impair the borrower’s ability to repay the Borrower Loan on which an investor’s Note is dependent for payment. Borrowers may also choose to repay obligations under secured indebtedness or other unsecured indebtedness before repaying Borrower Loans because there is no collateral securing the Borrower Loans. An investor will not be notified if a borrower incurs additional debt after the date a loan listing is posted.

Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.

The investment return on the Notes depends on borrowers fulfilling their payment obligations in a timely and complete manner under the corresponding Borrower Loan. Borrowers may not view marketplace lending obligations originated through our marketplace as having the same significance as other credit obligations arising under more traditional circumstances. If a borrower neglects their payment obligations on a Borrower Loan upon which payment of an investor’s Note is dependent or

chooses not to repay their Borrower Loan entirely, such investor may not be able to recover any portion of the investment in a Note.

Our marketplace may fail to comply with applicable laws, which could limit our ability to collect on Borrower Loans.

The Borrower Loans are subject to federal and state consumer protection, licensing, and privacy laws. Our marketplace may not always be, and may not always have been, in compliance with these laws. Failure to comply with the laws and regulatory requirements applicable to our marketplace may, among other things, limit our or a collection agency's ability to collect all or part of the principal of or interest on Borrower Loans.

We regularly review the requirements of these laws and take measures aimed at ensuring that the Borrower Loans originated through our marketplace meet the requirements of all applicable laws. However, determining compliance with all applicable laws is a complex matter and it is possible that our determination may be inaccurate or incorrect. Also, changes in law, either due to court decisions, regulatory interpretations or rulings, or new legislation, may adversely affect the collectability of a Borrower Loan.

In general, the Borrower Loans do not contain any cross-default or similar provisions. If a borrower defaults on any of their other debt obligations, our ability to collect on the Borrower Loan on which an investor’s Note is dependent for payment may be substantially impaired.

The Borrower Loans do not contain cross-default provisions. A cross-default provision makes a default under certain debt of a borrower an automatic default on other debt of that borrower. Because the Borrower Loans do not contain cross-default provisions, a Borrower Loan will not be placed automatically in default upon that borrower’s default on any of the borrower’s other debt obligations. If a borrower defaults on debt obligations owed to a third party and continues to satisfy the payment obligations under the Borrower Loan, the third party may seize the borrower’s assets or pursue other legal action against the borrower before the borrower defaults on the Borrower Loan, which may affect our ability to collect from the borrower when or if the Borrower Loan becomes delinquent.

Borrowers may seek the protection of debtor relief under federal bankruptcy or state insolvency laws, which may result in the nonpayment of an investor’s Notes.

Borrowers may seek protection under federal bankruptcy law or similar laws. If a borrower files for bankruptcy (or becomes the subject of an involuntary petition), a stay will go into effect that will automatically put any pending collection actions on the Borrower Loan on hold and prevent further collection action absent bankruptcy court approval. If we receive notice that a borrower has filed for protection under the federal bankruptcy laws, or has become the subject of an involuntary bankruptcy petition, we will put the borrower’s account into “bankruptcy status.” When this occurs, we terminate automatic monthly ACH debits on the Borrower Loan and we will not undertake collection activity without bankruptcy court approval. Whether any payment will ultimately be made or received on a Borrower Loan after a bankruptcy status is declared depends on the borrower’s particular financial situation. In most cases, however, unsecured creditors such as PFL receive nothing, or only a fraction of their outstanding debt and, as a result, an investor who has purchased a corresponding Note may receive none or very little of the unpaid principal and interest payable on the Note.

Federal law entitles borrowers who enter active military service to an interest rate cap and certain other rights that may inhibit the ability to collect on Borrower Loans and reduce the amount of interest paid on the corresponding Notes.

Federal law provides borrowers on active military service with rights that may delay or impair our ability to collect on a Borrower Loan corresponding to an investor’s Note. The Servicemembers Civil Relief Act (“SCRA”) and other similar state laws require that the interest rate on preexisting debts, such as Borrower Loans, be set at no more than 6% while the qualified service member or reservist is on active duty. A holder of a Note that is dependent on such a Borrower Loan for payment will not receive the difference between 6% and the original stated interest rate for the Borrower Loan during any such period. The SCRA also permits courts to stay proceedings and the execution of judgments against service members and reservists on active duty, which may delay recovery on any Borrower Loans in default, and, accordingly, payments on the corresponding Notes.

Beginning October 3, 2016, the Military Lending Act (“MLA”) prohibits requiring covered borrowers, which include active military servicemembers and their dependents, to waive the right to legal recourse or to submit to arbitration. This may delay recovery on any relevant Borrower Loans in default, and, accordingly, payments on the corresponding Notes.

If there are any amounts under such a Borrower Loan still due and owing to PFL after the final maturity of the corresponding Notes, PFL will have no further obligation to make payments on such Notes, even if it receives payments on the Borrower Loan after the final maturity of such Notes. We do not take military service into account in assigning a Prosper Rating to loan listings. In addition, as part of the borrower registration process, we do not request borrowers to confirm if they are qualified service members or reservists within the meaning of the SCRA or the MLA. See Item 1, “Business—Government Regulation” for more information.

As of December 31, 2023, 162 Borrower Loans, with a total outstanding balance of $1.3 million are subject to the SCRA.

The Federal Trade Commission's Holder in Due Course Rule may substantially impair an investor’s ability to recoup the full purchase price of a Note or to receive the interest payments that such investor expects to receive on the Note.

The Federal Trade Commission's Holder in Due Course Rule, which in certain circumstances permits borrowers to assert any claims and defenses that they would have had against a seller of goods or services obtained with the proceeds of a loan against an originator or subsequent purchaser of the loan, could allow certain borrowers to raise such defenses against PFL to the extent of the outstanding loan balance. If such defenses are successfully raised, PFL will be unable to collect on the loan and it is unlikely that any further payment will be made on the corresponding Notes.

The death of a borrower may substantially impair an investor’s ability to recoup the full purchase price of a Note or to receive the interest payments that such investor expects to receive on the Note.

If a borrower dies with an outstanding Borrower Loan, PFL is required, upon receiving notice of the death, to stop accepting automatic loan payments and to refund any payments that were automatically debited after the borrower's date of death. Though we may seek to work with the executor of the borrower’s estate to obtain repayment of the loan, the borrower’s estate may not contain sufficient assets to repay the loan, or its executor may prioritize repayment of other creditors. In addition, if a borrower dies near the end of the term of their Borrower Loan, the time required for the probate of the borrower’s estate will likely extend beyond the Notes’ final maturity date, after which date PFL will cease to have any obligation to make payments on the Notes.

RISKS INHERENT IN INVESTING IN THE NOTES

The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.

The Notes will not represent an obligation of borrowers, PMI or any other party except PFL, and are special, limited obligations of PFL. The Notes are not guaranteed or insured by PMI, any governmental agency or instrumentality, or any third party. Although PFL has granted the indenture trustee, for the benefit of the Note holders, a security interest in the Borrower Loans corresponding to the Notes, the payments and proceeds that PFL receives on such Borrower Loans, the bank account in which such Borrower Loan payments are deposited, and the accounts in which investors’ funding amounts are deposited, the Note holders do not themselves have a direct security interest in the Borrower Loans or the right to payment thereunder. If an event of default under the Amended and Restated Indenture were to occur, the Note holders would be dependent on the indenture trustee’s ability to realize on the collateral and make payments on the Notes in the manner contemplated by the Amended and Restated Indenture. In addition, although PFL will take all actions that it believes are required under applicable law to perfect the security interest of the indenture trustee in the collateral, if its analysis of the required actions is incorrect or if it fails to take any required action in a timely manner, the indenture trustee’s security interest may not be effective and holders of the Notes could be required to share the collateral (and any proceeds thereof) with PFL’s other creditors, or, if a bankruptcy court were to order the substantive consolidation of PMI and PFL (as described below), PMI’s creditors.

PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.

PFL is only obligated to repurchase Notes or indemnify holders of Notes in limited circumstances. These circumstances include if (i) a material payment default under the corresponding Borrower Loan occurs as a result of verifiable identify theft; (ii) we include a Prosper Rating in a listing that is different from the Prosper Rating we calculated, or we calculate the Prosper Rating incorrectly; or (iii) any errors in Quick Invest, Recurring Investment, or Auto Invest cause an investor to purchase a Note from PFL that such investor would not otherwise have purchased or that differs materially from the Note, in which cases PFL also has the option to cure such error. PFL is not required to repurchase Notes or indemnify holders of Notes, however, if the Note holder’s investment is not realized in whole or in part due to fraud other than verified identity theft, or due to other false or inaccurate statements or omissions of fact in a listing, whether in credit data, borrower representations or similar indicia of borrower intent and ability to repay the loan. Further, PFL is under no obligation to repurchase a Note or indemnify any holder of Notes if a correctly determined Prosper Rating fails to accurately predict the actual losses on a Borrower Loan.

PFL might incur indemnification and repurchase obligations that exceed its projections, in which case it may not have sufficient liquidity to meet its indemnification and repurchase obligations.

PFL believes its liquidity will be sufficient to meet its reasonably anticipated indemnification and repurchase obligations. In determining its expected liquidity needs with respect to indemnification and repurchase obligations, PFL considers the history of such obligations incurred by it and PMI. Nonetheless, there can be no assurance that if PFL is obligated to repurchase a Note or indemnify a Note holder, that it will be able to meet its repurchase or indemnification obligations. If PFL is unable to meet its indemnification and repurchase obligations with respect to a Note, the investor in such Note may lose

all of such investor’s investment in the Note. For more information about Prosper’s existing repurchase and indemnification obligations, please see “Repurchase Obligations” in Note 17 of the accompanying consolidated financial statements.

Our marketplace allows a borrower to prepay a Borrower Loan at any time without penalty. Borrower Loan prepayments will extinguish or limit an investor’s ability to receive additional interest payments on a Note.

Borrower Loan prepayment occurs when a borrower decides to pay some or all of the principal amount on a Borrower Loan earlier than originally scheduled. Borrowers may decide to prepay all or a portion of the remaining principal amount due under a Borrower Loan at any time without penalty. In the event of a prepayment of the entire remaining unpaid principal amount of a Borrower Loan, each of the holders of the Notes corresponding to the Borrower Loan will receive their share of such prepayment but further interest will not accrue on such Borrower Loan or on such Note after the date on which the payment is made. If the borrower prepays a portion of the remaining unpaid principal balance, the term of the Borrower Loan will not change, but interest will cease to accrue on the prepaid portion. If a borrower prepays a Borrower Loan in whole or in part, an investor will not receive all of the interest payments that such investor originally expected to receive on the Note corresponding to such Borrower Loan. In addition, such investor may not be able to find a similar rate of return on another investment at the time at which the Borrower Loan is prepaid. Prepayments are subject to PFL’s servicing fee, even if the prepayment occurs immediately after issuance of a Note.

Prevailing interest rates may change during the term of the Notes. If this occurs, investors may receive less value from the purchase of Notes in comparison to other ways they may invest their money. Additionally, borrowers may prepay their Borrower Loans due to changes in interest rates, and investors may not be able to redeploy the amounts received from prepayments in a way that offers the return expected from the Notes.

The Borrower Loans on which the Notes are dependent for payment bear fixed, not floating, rates of interest. If prevailing interest rates increase, the interest rates on Notes investors purchase might be less than the rate of return they could earn if they had invested the purchase price in a different investment.

We may not set appropriate interest rates for Borrower Loans.

We set interest rates for all Borrower Loans based on Prosper Ratings, as well as additional factors such as Borrower Loan terms, the economic environment and competitive conditions. If we set interest rates for Borrower Loans too low, investors may not be compensated appropriately for the level of risk that they are assuming in purchasing Notes, while setting the interest rate too high may increase the risk of non-payment. In either case, a failure by us to set rates appropriately may adversely impact the ability of investors to receive returns on their Notes that are commensurate with the risks they have assumed in acquiring such Notes.

The Notes will not be listed on any securities exchange and can be held only by registered Prosper investors. Further, no trading platform for the transfer of Notes exists and there can be no assurance a trading platform for the transfer of Notes will develop in the future. Therefore, investors should be prepared to hold the Notes they purchase until maturity.

The Notes and PMI Management Rights will not be listed on any securities exchange and all Notes and PMI Management Rights must be held by registered Prosper investors. Further, in connection with the termination of our relationship with FOLIO Investments, Inc. in October 2016, a trading platform for the transfer of Notes and PMI Management Rights no longer exists. While we may, in our sole discretion, permit the establishment of another platform on which a secondary market may be made with respect to the Notes, there can be no assurance a trading platform for the Notes and PMI Management Rights will develop in the future. Therefore, Note purchasers must be prepared to hold their Notes and PMI Management Rights to maturity.

The U.S. federal income tax consequences of an investment in the Notes are uncertain.

There are no statutory provisions, regulations, published rulings or judicial decisions that directly address the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes. However, although the matter is not free from doubt because payments on the Notes are dependent on payments on the corresponding Borrower Loan, PFL treats the Notes as debt instruments that have original issue discount (“OID”) for U.S. federal income tax purposes. Where required, PFL intends to file informational returns with the IRS in accordance with such treatment unless there is a change or clarification in the law, by regulation or otherwise, that would require a different characterization of the Notes. Investors should be aware, however, that the IRS is not bound by PFL’s characterization of the Notes and the IRS or a court may take a different position with respect to the Notes’ proper characterization. For example, the IRS could determine that, in substance, each investor owns a proportionate interest in the corresponding Borrower Loan for U.S. federal income tax purposes or, for example, the IRS could instead treat the Notes as a different financial instrument (including an equity interest or a derivative financial instrument). Any different characterization could significantly affect the amount, timing, and character of income, gain or loss recognized in respect of a Note. For example, if the Notes are treated as PFL’s equity, (i) PFL would be subject to U.S. federal income tax on income, including interest, accrued on the corresponding Borrower Loans but would not be entitled to deduct interest or OID on the Notes, and (ii) payments on the Notes would be treated by the Note holder for U.S. federal

income tax purposes as dividends (that may be ineligible for reduced rates of U.S. federal income taxation or the dividends-received deduction) to the extent of PFL’s earnings and profits as computed for U.S. federal income tax purposes. A different characterization may significantly reduce the amount available to pay interest on the Notes. Investors are strongly advised to consult their own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the Notes (including any possible differing treatments of the Notes).

PFL’s ability to pay principal and interest on a Note may be affected by its ability to match the timing of its income and deductions for U.S. federal income tax purposes.

Investors should be aware that PFL’s ability to pay principal and interest on a Note may be affected by its ability, for U.S. federal income tax purposes, to match the timing of income it receives from a corresponding Borrower Loan that it holds and the timing of deductions that it may be entitled to in respect of payments made on the Notes that it issues. For example, if the Notes are treated as contingent payment debt instruments for U.S. federal income tax purposes but the corresponding Borrower Loans are not, there could be a potential mismatch in the timing of PFL’s income and deductions for U.S. federal income tax purposes, and PFL’s resulting tax liabilities could affect its ability to make payments on the Notes.

Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.

As is the practice with other marketplace lending companies, from time to time, we may fund portions of qualified loan requests in our marketplace and hold any Notes purchased as a result of such funding for our own individual accounts. Even though we will participate in funding Borrower Loans listed in our marketplace under the same terms and conditions and through the use of the same information that is made available to other potential investors in our marketplace, such participation may be perceived as involving a conflict of interest. For example, our funding of a Borrower Loan may cause the loan to fund, and in some cases, fund faster, than it would fund in the absence of our participation, which could benefit us to the extent that it ensures that we generate the revenue associated with the loan.

During the year ended December 31, 2023, we purchased $0.3 million in Notes for investment.

RISKS RELATED TO PFL AND PMI, OUR MARKETPLACE AND OUR ABILITY TO SERVICE THE NOTES

Human error in the operation of our platform has resulted in the allocation of Borrower Loans to our Note Channel which did not conform to the eligibility criteria applicable to Borrower Loans at the time of allocation. If we are unable to prevent the reoccurrence of similar errors, our business and investors could be adversely impacted.

In August 2022, we became aware of an error which resulted in the allocation of certain Borrower Loans intended for our Whole Loan Channel to our Note Channel. These Borrower Loans corresponded to Borrower Loan listings with attributes which, at the time of allocation, did not conform to the eligibility criteria applicable to Borrower Loans offered for investment in our Note Channel. The error ~~impacted a total of approximately $14 million out of the approximately $182 million of Borrower Loans allocated to the Note Channel from January 2022 to August 2022. The error~~ did not affect any other parts of Note investors’ accounts or the platform, including the receipt and distribution of loan payments, the Note and loan level information provided to investors, or the enforceability of the Borrower Loans. Following discovery of the error, we repurchased the impacted Notes from investors for the full outstanding principal balance, allowing such investors to retain all interest, principal and other payments received on such Notes prior to their repurchase, and have implemented new measures designed to avoid similar issues in the future.

This error illustrates the risks of human error on our processes to allocate loan listings to the Note Channel. If similar errors were to occur in the future, it could result in repurchase or indemnification obligations, negative publicity and unfavorable media coverage, harm to our reputation, litigation, regulatory inquiries or proceedings, loss of or damage to our relationships with borrowers or investors, loss of income and/or liability for damages, any of which could adversely affect our business and financial results.

We have experienced errors on our platform that have resulted in incorrect reporting of performance returns to Note investors. If we are unable to prevent the reoccurrence of similar errors, investors could be adversely impacted.

In April 2017, we became aware of an error in the annualized net return and seasoned annualized net return numbers displayed to Note investors, which resulted from errors in the code forming part of our calculation framework. On average, the error resulted in Note investors being shown annualized net return information that was approximately 260 basis points higher than the actual performance of Notes in their accounts. The error did not affect any other part of Note investors’ accounts, nor did it affect any other aspects of the platform, including the receipt and distribution of loan payments, deposits, monthly statements or tax documentation, or the Note and loan level information provided to investors. Following an SEC investigation, we entered into a settlement with the SEC to resolve the matter on April 19, 2019. Under the settlement, the SEC alleged a negligence-based violation of Section 17(a)(2) of the Securities Act and ordered PFL to cease and desist from any future violations of that provision. PFL neither admitted nor denied any wrongdoing, and paid a civil monetary penalty of $3.0 million in full on April 24, 2019.

violations of that provision. PFL neither admitted nor denied any wrongdoing, and agreed to pay a civil monetary penalty of $3.0 million. PFL paid the penalty in full on April 24, 2019.

The error reveals a risk associated with the complex programs, algorithms and inputs that support our platform. We depend on these programs, algorithms and inputs to store, retrieve, process and manage data, as well as to provide marketplace features such as our credit assessments and underwriting, the Prosper Rating, historical returns, and individual Note, Note portfolio and platform-wide performance data. Errors or other design defects within these programs, algorithms and inputs may result in a negative experience for borrowers and investors, delay introductions of new features or enhancements, or impact the information displayed on our website. They could also result in negative publicity and unfavorable media coverage, harm to our reputation, litigation, regulatory inquiries or proceedings, loss of or damage to our relationships with borrowers or investors, or loss of revenue or liability for damages, any of which could adversely affect our business and financial results.

Arrangements for back-up servicing of the Borrower Loans are limited. If PMI fails to maintain operations or the Administration Agreement is rejected or terminated (in bankruptcy or otherwise), investors may experience a delay and increased cost in respect of their expected principal and interest payments on Notes, and PFL may be unable to collect and process repayments from borrowers.

If the Administration Agreement (or the loan servicing provisions thereof) are terminated for any reason (whether as a result of PMI’s bankruptcy, non-performance or otherwise), PFL would attempt to transfer the loan servicing obligations on the Borrower Loans and Notes to a third party pursuant to its contractual agreements with investors.

PFL has entered into a back-up servicing agreement with a loan servicing company that is willing and able to transition servicing responsibilities from PMI. There can be no assurance, however, that this back-up servicer will be able to adequately perform the servicing of the outstanding Borrower Loans and Notes. If this back-up servicer assumes the servicing of the Borrower Loans and Notes, the back-up servicer may impose additional servicing fees (up to the maximums we have negotiated), reducing the amounts available for payments on the Notes. Additionally, transferring these servicing obligations to the back-up servicer may result in delays in the processing of collections on Borrower Loans and information with respect to amounts owed on Borrower Loans. If the back-up servicer is not able to service the Borrower Loans and Notes effectively, investors’ ability to receive principal and interest payments on their Notes may be substantially impaired, even if their portfolio of Notes is well diversified and the corresponding Borrower Loans are paying on schedule.

negotiated), reducing the amounts available for payments on the Notes. Additionally, transferring these servicing obligations to the back-up servicer may result in delays in the processing of collections on Borrower Loans and information with respect to amounts owed on Borrower Loans. If the back-up servicer is not able to service the Borrower Loans and Notes effectively, investors’ ability to receive principal and interest payments on their Notes may be substantially impaired, even if their portfolio of Notes is well diversified and the corresponding Borrower Loans are paying on schedule.

In addition, it is unlikely that the back-up servicer would be able to perform functions other than servicing the outstanding Borrower Loans and Notes, such as facilitating the creation of new Borrower Loans through our marketplace, or managing PFL’s marketing efforts. PFL believes that it could find one or more other parties who could perform these and any other functions necessary to fully operate our marketplace in the absence of PMI. However, this process, and any related onboarding of such party or parties, will take time. Any such delay or impairment that does not affect existing Note holders, because PFL or its back-up servicer proves able to continue servicing outstanding Borrower Loans and Notes, could nonetheless delay PFL’s ability to facilitate the origination of new Borrower Loans and issue new Notes through our marketplace, which could adversely affect PFL’s finances and customer relationships.

A decline in economic conditions may adversely affect our customers, which may negatively impact our business and results of operations.

As a lending marketplace, we believe our customers are highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers’ ability or desire to participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations.

A relatively small number of investors provide the funding for a large percentage of all Borrower Loans originated through our marketplace.

A relatively small number of investors provide the funding for a large percentage of all Borrower Loans originated through our marketplace. In the year ended December 31, 2024, the largest party purchased a total of 23.7% of the Borrower Loans originated through our marketplace. If these investors cease or significantly decrease their investment in Borrower Loans through our personal loan marketplace and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, then our business and results of operations may be adversely affected.

Our business could be adversely affected by a weakening market for securities backed by consumer assets.

PFL is involved in the securitization market through: (i) its business of selling loans to investors who, in turn, sell asset backed securities based on accumulated loan portfolios and (ii) securitization of loans retained by affiliates of PFL. If the market for asset backed securities based on consumer assets weakens, investors may cease or significantly decrease their funding of Borrower Loans through our marketplace and if PFL has been unable to attract sufficient investor purchase commitments from new and existing investors, then our business and results of operations may be adversely affected.

Although PFL has been organized in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy proceeding, if this were to occur, the rights of holders of the Notes could be uncertain, and payments on the Notes may be limited, suspended or stopped. The recovery, if any, of a holder on a Note may therefore be substantially delayed and substantially less than the principal and interest due and to become due on the Note.

Although PFL has been organized and is operated in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy or similar proceeding, if this were to occur, the recovery, if any, of a holder of a Note may be substantially delayed in time (for example, due to the imposition of a stay on payments by the bankruptcy court) and may be substantially less in amount than the principal and interest due and to become due on the Note even if a Note holder’s portfolio of Notes is well diversified and the Borrower Loans are paying on schedule. Further, although PFL has granted the indenture trustee, for the benefit of the Note holders, a security interest in all of the Borrower Loans, in all payments and proceeds it receives on the corresponding Borrower Loans and in the bank account in which the Borrower Loan payments are deposited, the holders of the Notes would still be subject to risks associated with PFL’s insolvency, bankruptcy or a similar proceeding.

If PFL becomes subject to a bankruptcy or similar proceeding, borrowers may delay payments or cease making payments at all.

Borrowers may delay or suspend making payments to PFL because of the uncertainties associated with PFL becoming subject to a bankruptcy or similar proceeding, even if the borrowers have no legal right to do so, and such delay would reduce, at least for a time, the funds that might otherwise be available to pay the Notes corresponding to those Borrower Loans. In addition, the commencement of the bankruptcy or similar proceeding may, as a matter of law, prevent PFL from making regular payments on the Notes, even if the funds to make such payments are available. Because the Indenture trustee would be required to enforce its security interest in the Borrower Loans in a bankruptcy or similar proceeding, the Indenture trustee's ability to make payments under the Notes would be delayed, which may effectively reduce the value of any recovery that a holder of a Note may receive (and no such recovery can be assured) by the time any recovery is available.

If PFL becomes subject to a bankruptcy or similar proceeding, interest accruing on the Notes upon and following such bankruptcy or similar proceeding may not be paid.

In a bankruptcy or similar proceeding of PFL, interest accruing on the Notes during the proceeding may not be part of the allowed claim of a holder of a Note. If the Note holder receives a recovery on the Note (and no such recovery can be assured), any such recovery may be based on, and limited to, the Note holder’s claim for principal and for interest accrued up to the date of the bankruptcy or similar proceeding, but not thereafter. Because a bankruptcy or similar proceeding may take months or years to complete, a claim based on principal and on interest only up to the start of the bankruptcy or similar proceeding may be substantially less than a claim based on principal and on interest through the end of the bankruptcy or similar proceeding.

the date of the bankruptcy or similar proceeding, but not thereafter. Because a bankruptcy or similar proceeding may take months or years to complete, a claim based on principal and on interest only up to the start of the bankruptcy or similar proceeding may be substantially less than a claim based on principal and on interest through the end of the bankruptcy or similar proceeding.

If PFL becomes subject to a bankruptcy or similar proceeding, a Note holder may not have any priority right to payment from the corresponding Borrower Loan, may not have any right to payment from funds in the applicable servicing account, and may not have any ability to access funds in the applicable funding accounts (the “FBO Funding accounts”).

In a bankruptcy or similar proceeding, if PFL has failed to perfect the security interest in Borrower Loans, investors may be required to share the proceeds of the Borrower Loans upon which their Notes are dependent for payment with PFL’s other creditors, including holders of other Notes or Borrower Loans. To the extent that proceeds of the Borrower Loans would be shared with PFL’s other creditors, any secured or priority rights of such other creditors may cause the proceeds to be distributed to such other creditors before any distribution is made to investors on the corresponding Notes.

If a payment is made on a Borrower Loan corresponding to a Note before PFL’s bankruptcy or similar proceeding is commenced, and those funds are held in the servicing account PFL maintains with Wells Fargo to collect borrower payments and have not been used by PFL to make payments on the Note as of the date the bankruptcy or similar proceeding is commenced, there can be no assurance that PFL will or will be able to use such funds to make payments on such Note. Other creditors of PFL (including holders of other Notes or Borrower Loans) may be deemed to have rights to such funds or interests in the applicable servicing account and monies credited thereto that are equal to or greater than the rights of the holder of such Note.

Although PFL believes that amounts funded by both Whole Loan Channel and Note Channel investors into the applicable FBO Funding accounts should not be subject to claims of its creditors other than the investors for whose benefit the funds are held, the legal title to the FBO Funding accounts, and the attendant right to administer the FBO Funding accounts, would be property of PFL’s bankruptcy estate. As a result, if PFL were to file for bankruptcy protection, the legal right to administer the funds in the FBO Funding accounts would vest with the bankruptcy trustee or debtor in possession. In that case, while neither PFL nor its creditors should be able to reach those funds, the indenture trustee or the investors may have to seek a bankruptcy court order lifting the automatic stay and permitting them to withdraw their funds. Investors may suffer delays in accessing their funds in the FBO Funding accounts as a result. Moreover, United States bankruptcy courts have broad powers at law and in equity and, if PFL has failed to properly segregate or handle investors’ funds, a bankruptcy court could determine that some or all of such funds were beneficially owned by PFL and should therefore be made available to PFL’s creditors generally.

law and in equity and, if PFL has failed to properly segregate or handle investors’ funds, a bankruptcy court could determine that some or all of such funds were beneficially owned by PFL and should therefore be made available to PFL’s creditors generally.

In a bankruptcy or similar proceeding of PFL, a holder of a Note may be delayed or prevented from enforcing PFL’s repurchase obligations with respect to such Note.

In a bankruptcy or similar proceeding of PFL, any right of a Note holder to require PFL to repurchase the Note or indemnify such Note holder under the circumstances set forth in the Investor Registration Agreement or the Note might not be enforceable, and such holder’s claim for such repurchase may be treated less favorably than a general unsecured obligation of PFL.

Although PFL has been organized in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI’s bankruptcy, if PFL were substantively consolidated in this manner, the rights of the holders of the Notes could be uncertain, and payments on the Notes may be limited, suspended or stopped. The recovery, if any, of a holder on a Note may therefore be substantially delayed and substantially less than the principal and interest due and to become due on the Note.

Although PFL has been organized and is operated in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI’s bankruptcy, if PMI became subject to a bankruptcy or similar proceeding and PFL were substantively consolidated with PMI, the risks described in the immediately preceding risk factors regarding (i) payment delays, (ii) uncollectability of interest accrued during the bankruptcy proceeding, (iii) being subordinated to the interests of PFL’s other creditors, and (iv) the indenture trustee’s inability to access funds in the deposit account or the FBO Funding accounts, would all be present and, in addition, the same considerations would apply in relation to the claims of creditors of PMI, including that such creditors of PMI may be determined to have perfected security interests or unsecured claims that take precedence over or are at least equal in priority to those of creditors of PFL (including holders of Notes).

In addition, in the event of a bankruptcy or similar proceeding of PMI, (i) the implementation of back-up servicing arrangements may be delayed or prevented, and (ii) PMI’s ability to transfer its servicing obligations to a back-up servicer or its other corporate and marketplace administration services and marketing services to third parties may be limited and subject to the approval of the bankruptcy court or other presiding authority. The bankruptcy process may delay or prevent the implementation of back-up servicing, which may impair the collection on Borrower Loans to the detriment of Note holders.

PMI owns and did not transfer to PFL ownership of the computer hardware that it uses to host and maintain the website or agreements with third parties relating to the hosting and maintenance of the website. Although PMI’s retention of such hardware and agreements should not bear on a bankruptcy court’s analysis of the legal separateness of PMI and PFL (or their respective assets and liabilities), the cessation of or substantial reduction of the day-to-day operations of PMI (because of or during its bankruptcy or otherwise) would materially impair and delay the ability of PFL or a back-up service provider to retrieve data and information in the possession of PMI and to operate our marketplace or elements thereof relevant to Borrower Loan and Note servicing.

PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.

Pursuant to the Administration Agreement, PMI is obligated to use commercially reasonable efforts to service and collect on the Borrower Loans in accordance with industry standards. Subject to that obligation, the Administration Agreement grants PMI the authority to waive or modify any non-material term of a Borrower Loan, consent to the postponement of strict compliance with any such term, or in any manner grant a non-material indulgence to any borrower. In addition, if a Borrower Loan is in default, or PMI determines a default is reasonably foreseeable or that such action is consistent with its servicing obligation, the Administration Agreement grants PMI the authority to waive or modify a material term of a Borrower Loan, to accept payment of an amount less than the principal balance in final satisfaction of a Borrower Loan and to grant any indulgence to a borrower, provided that PMI has reasonably and prudently determined that such action will not be materially adverse to the interests of the relevant Note holders. If PMI approves a modification to the terms of any Borrower Loan it must promptly notify the corresponding Note holders in each Note holder's account.

There can be no assurance that PMI, in its capacity as servicer, will be able to collect the principal amount or interest rate agreed to and/or sell charged off Borrower Loans in the future as a result of business, regulatory or other considerations.

We have incurred operating losses in prior years and may continue to incur net losses in the future.

We have incurred operating losses in prior years, including 2023, and may continue to incur net losses in the future. We have financed our operations to date primarily with proceeds from the sale of equity securities. In addition, we borrowed $75.0 million under the Term Loan in November 2022. PMI is dependent upon raising additional capital or debt financing to fund its current operating plan if it cannot generate sufficient positive cash flow from operations. PMI’s failure to achieve

positive cash flow from operations or obtain sufficient debt and equity financing, could adversely affect its ability to perform its obligations under the Administration Agreement and, in such event, PFL’s ability to continue to make payments on the Notes could be materially impaired.

The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.

In November 2022, we entered into the Term Loan, which provides for $75.0 million in debt financing that matures in November 2026.

Our ability to make payments on the Term Loan, to repay the Term Loan when due, and to fund our business, operations and significant planned capital expenditures will depend on our ability to pay with available cash or generate cash in the future. The Term Loan, and any additional indebtedness we may incur in the future, could require us to divert funds identified for other purposes to service the Term Loan. If we cannot generate sufficient cash flow from our operations to service the Term Loan, we may need to refinance the Term Loan, dispose of assets, or issue additional equity to obtain the necessary funds. If required to do so, we may be unable to take any of these actions on a timely basis, on terms satisfactory to us or at all.

In addition, the Term Loan contains certain financial covenants, including a minimum tangible net worth covenant, minimum net liquidity covenant, maximum leverage ratio, and minimum asset coverage ratio, together with other customary affirmative and negative covenants and events of default. The obligations under the Term Loan are also secured by assets of PMI and certain of its subsidiaries. Compliance with these covenants may require us to divert funds intended for other uses and limit our flexibility to take certain actions.

See Note 11 of the accompanying consolidated financial statements for more information about the Term Loan.

Although our business has grown, we may be unable to manage our growth effectively and meet the demands that such growth places on our facilities, employees and infrastructure.

As the number of borrowers, investors and Borrower Loans originated through our marketplace increases, PMI will need to increase its facilities, personnel and infrastructure in order to continue performing effectively its obligations under the Administration Agreement and to accommodate the effects that such growth will have on our servicing and marketplace needs. PMI must constantly add new hardware and update its software and our personal loan marketplace, expand customer support services, and add new employees to maintain the operations of our personal loan marketplace as well as to satisfy its servicing obligations on the Borrower Loans and the Notes and its other obligations under the Administration Agreement. If PMI is unable to increase the capacity of our marketplace and maintain the necessary infrastructure to perform its duties under the Administration Agreement, PFL, or one or more other third-party service providers engaged by PFL, will have to perform the duties otherwise performed by PMI, and investors may experience delays in receipt of payments on their Notes and periodic downtime of our marketplace.

The Credit Card ~~and~~product ~~Home~~is ~~Equity Products are new products within a competitive market which are~~ complex and ~~require~~requires us to allocate significant resources to support the ~~development, launch and growth of these new products~~product. ~~If these new products are unable to attract borrowers and generate revenue, our business and results of operations could suffer.~~

The ~~HELOC product was launched in March 2019, the~~ Credit Card product was launched in December 2021~~, and the HELoan product was launched in October 2022~~. The ~~launch~~continued operation of ~~these~~the ~~new~~Credit ~~and~~Card ~~complex~~product ~~products~~ requires us to allocate significant resources ~~in hiring new employees to support each product~~, ~~ensuring~~including ~~each~~in ~~product~~servicing ~~complies with applicable laws~~ and ~~regulations,~~collections ~~and~~devoted ~~integrating~~to the ~~products into our online platform. See Item 1, “Business—Government Regulation” for more information about the laws and regulations which affect the~~ Credit Card ~~and Home Equity Products~~product. Our ~~Home Equity and~~ Credit Card ~~products~~product also ~~face~~faces intense competition from other new market entrants or business expansion from established companies which may have more experience and resources operating ~~these~~a ~~products~~comparable product. There is no guarantee that we will ~~attract the borrowers necessary to~~ generate sufficient revenue to recoup the continued investment of resources into the ~~development,~~operation ~~launch~~of the Credit Card product, and ~~growth~~the operation of ~~these~~the ~~new~~Credit ~~products.~~Card ~~The~~product ~~products~~ may also divert management’s time and effort from other initiatives.

~~The~~Our Credit Card ~~and~~product ~~Home~~has ~~Equity~~a ~~Products~~limited performance history and, as we are ~~not~~responsible ~~available~~for verified fraud losses and most straight chargeoffs across the portfolio and for credit losses on accounts allocated to us, any failure to accurately capture credit and market risks could have a negative impact on our ~~personal~~business, ~~loan~~operating ~~marketplace~~results ~~for~~and ~~investment~~financial ~~purposes~~condition.

Our Credit Card product was launched in December 2021 and has a limited performance history. The performance of the Credit Card product is also significantly dependent on the ability of the application process and credit risk models we use for the Credit Card product to prevent fraud, asevaluate an applicant’s credit profile and determine the likelihood of default. There is no assurance that our Credit Card application process and credit risk models can accurately verify Credit Card applicants and predict repayment and loss profiles. Pursuant to our program agreement with Coastal, we are responsible for verified fraud losses and most straight ~~charegeoffs~~charge-offs across the entire Credit Card portfolio and for credit losses onfor approximately 95% of the Credit Card accounts. ~~allocated~~If toour ~~us,~~application ~~any~~process ~~failure~~and torisk models do not accurately ~~capture~~prevent fraud or reflect credit ~~and~~risk ~~market~~on ~~risks~~the ~~could~~Credit ~~have~~Card aproduct, ~~negative~~greater ~~impact~~than onexpected losses may result and our business, operating results and financial condition could be materially and adversely affected. For more information about credit losses for the Credit Card portfolio during the year ended December 31, 2024, please see Note 5, Credit Card, of the consolidated financial statements.

predict repayment and loss profiles. Pursuant to our program agreement with Coastal, we are responsible for verified fraud losses and most straight charge-offs across the entire Credit Card portfolio and for credit losses for approximately 90% of the Credit Card accounts. If our application process and risk models do not accurately prevent fraud or reflect credit risk on the Credit Card product, greater than expected losses may result and our business, operating results and financial condition could be materially and adversely affected.

Our Credit Card product is also currently focused on higher risk borrowers, who may have higher exposure to economic downturns and general economic conditions beyond our control and beyond the control of these borrowers. The risk of exposure faced by these borrowers may be even higher amidst recent market conditions, including a rising rate of inflation and increase in interest rates. See “A rising rate of inflation and increase in interest rates could materially and adversely impact our personal loan marketplace, our Credit Card program, and our investments in Borrower Loans” for more information about these recent market conditions.

The Credit Card and Home Equity Products are not available on our personal loan marketplace for investment purposes.

We rely on our program agreement with Coastal to offer our Credit Card product. If our relationship with Coastal were to end, the ability to continue to offer our Credit Card product would be affected, which could affect our financial and business results.

We offer our Credit Card product to eligible consumers through a program agreement with Coastal, our bank partner for the Credit Card product. If our relationship with Coastal were to end or if Coastal were to cease operations, our ability to continue to offer our Credit Card product would be affected, which could adversely affect our financial and business results. In such an event, one or both of PMI and PFL would need to either partner with a different bank or rely on individual state lending licenses (to the extent necessary) to continue to offer the Credit Card product. Because neither of PMI or PFL currently possess all required licenses to offer the Credit Card product in every state, we might be forced to limit the rates of interest charged on the Credit Card product in some states and might not be able to offer the Credit Card in certain states altogether. If we partner with a new bank, issuance and servicing of the Credit Card product could be disrupted and delayed as we transition to a different bank partner. We also may face increased costs and compliance burdens if the program agreement with Coastal is terminated.

In addition, Prosper’s allocation of Credit Card receivables are maintained on the balance sheet of Coastal and Coastal holds a cash reserve account funded by Prosper which applies to Prosper’s allocation of Credit Card charge-off losses and all fraud losses. The Credit Card program agreement contains provisions that provide for the transition to a new bank partner and wind down of the agreement, but if our relationship with Coastal were to end due to unforeseen circumstances or if Coastal were to cease operations, the Credit Card receivables and the cash reserve account could be affected.

PFL’s reliance on PMI or other third-party service providers, lack of employees, ~~limited operating history,~~ and capitalization levels could make it difficult to operate at a sustainable level.

PFL was formed in 2012 as a limited purpose vehicle. Under the Administration Agreement, PFL receives a license fee from PMI for granting PMI a non-exclusive, worldwide license to access and use our marketplace. In addition, PFL earns servicing fees in relation to the servicing of the Borrower Loans and Notes that it retains from collections on the Borrower Loans. PFL believes this fee income is sufficient to cover its reasonably anticipated obligations. While PFL believes that it is adequately capitalized to meet its foreseeable obligations, and that its fee income is sufficient to meet its ongoing operating costs, its financial resources are limited and could prove to be insufficient. In addition, PFL has no employees and relies on PMI, as servicer, or other third-party service providers, to perform most of its day-to-day operations. The lack of PFL’s own employees, ~~its limited operating history,~~ and capitalization that is less than that of PMI could make it difficult for PFL to operate at a level that will be sustainable. Absent the services to be provided to PFL by PMI pursuant to the Administration Agreement, PFL's risk management process, ability to predict loss rates and the general operation of our marketplace would have a smaller margin for error than does PMI.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

The consumer lending market is competitive and rapidly changing. With the introduction of new technologies and the influx of new entrants, we expect competition to persist and intensify in the future, which could harm our ability to increase volume in our marketplace.

Our principal competitors include banking institutions, credit unions, credit card issuers, mortgage lenders, consumer finance companies, and online lending platforms. Competition could result in reduced volumes, reduced fees or the failure of our marketplace to achieve or maintain more widespread market acceptance, any of which could harm our business. In addition, in the future we may experience new competition including companies possessing large, existing customer bases, substantial financial resources and established distribution channels. If any of these companies or any major financial institution decides to enter our online lending sector, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed.

31Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their marketplaces

enter our online lending sector, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed.25

~~Most of our current or potential competitors have significantly more financial, technical, marketing~~ and ~~other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their marketplaces and~~ distribution channels. Our potential competitors may also have longer operating histories, more extensive customer bases, greater brand recognition and broader customer relationships than we have. These competitors may be better able to develop new products, to respond quickly to new technologies and to undertake more extensive marketing campaigns. Our industry is driven by constant innovation. If we are unable to compete with such companies and meet the need for innovation, the use of our marketplace could stagnate or substantially decline.

If we fail to promote and maintain our brand in a cost-effective manner, we may lose market share and our revenue may decrease.

To succeed, we must increase transaction volumes in our marketplace by attracting a large number of borrowers and investors in a cost-effective manner. If we are not able to attract qualified borrowers and sufficient investor purchase commitments, we will not be able to increase our transaction volumes. PFL believes that developing and maintaining awareness of its brand in a cost-effective manner is critical to achieving widespread acceptance of our marketplace and attracting new borrower and investors. Furthermore, we believe that the importance of brand recognition will increase as competition in our industry increases. Successful promotion of our brand will depend largely on the effectiveness of marketing efforts, the user experience on our marketplace and our ability to maintain and defend a differentiated brand identity. These brand promotion activities may not yield increased revenues. If we fail to successfully promote, defend, and maintain our brand, we may lose our existing users to competitors or be unable to attract new users, which would cause our revenue to decrease and may impair our ability to maintain our marketplace.

The proprietary technology that makes operation of our marketplace possible is not fully protected by patents. It may be difficult and costly for PFL to protect its intellectual property rights in relation thereto, or to continue to develop or obtain new technologies, which could adversely affect its ability to operate competitively.

On February 1, 2013, PMI transferred ownership of the marketplace, including the proprietary technology and all of the rights related to the operation of the marketplace, to PFL. PFL’s ability to maintain our marketplace depends, in part, upon this proprietary technology. We have taken steps to protect our proprietary interests in such technology, including through patent filings, and intend to continue to vigorously protect these interests. Despite our best efforts, however, we may not protect the proprietary technology effectively, which would allow competitors to duplicate our products and adversely affect our ability to compete. A third party may attempt to reverse engineer or otherwise obtain and use the proprietary technology without PFL’s consent. In addition, our marketplace may infringe upon claims of third-party patents and PFL or PMI may face intellectual property challenges from such other parties. PFL or PMI may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any intellectual property disputes. Furthermore, the technology may become obsolete, and there is no guarantee that PFL will be able to successfully develop, obtain or use new technologies to adapt our marketplace to compete with other companies. If PFL cannot protect the proprietary technology embodied in and used by our marketplace from intellectual property challenges, or if our marketplace becomes obsolete, PFL’s ability to maintain our marketplace and perform its servicing obligations could be adversely affected and, in such event, its ability to continue to make payments on the Notes could be materially impaired.

PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.

Because PFL is not a bank, it cannot belong to or directly access the Automated Clearing House (ACH) payment network. As a result, it currently relies on an FDIC-insured depository institution to process its transactions. If PFL cannot continue to obtain such services from this institution or elsewhere, or if it cannot transition to another processor quickly, its ability to process payments will suffer and investors’ ability to receive principal and interest payments on the Notes will be delayed or impaired.

If the security of PFL's investors' and borrowers' confidential information stored in our systems is breached or otherwise subjected to unauthorized access, users' secure information may be stolen, our reputations may be harmed, and we may be exposed to liability.

As with any entity with a significant Internet presence, we and certain third party vendors occasionally have experienced cyber-attacks, breaches of our and their systems and other similar incidents, which to-date have not had a material effect on our business, operations or reputation. Future attacks are likely to occur. Our marketplace stores PFL’s investors’ and borrowers’ bank information and other personally identifiable sensitive data. Any accidental or willful security breaches or other unauthorized access could cause users’ secure information to be stolen and used for criminal purposes. Security breaches or unauthorized access to secure information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee or contractor error, malfeasance, faulty password management or otherwise, or if design flaws in the relevant software are exposed and exploited, and, as a result, a third party or disaffected employee obtains unauthorized access to any investors’ or borrowers’ data, PFL’s relationships with its users could be severely damaged, and PFL (or PMI) could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and

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consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee or contractor error, malfeasance, faulty password management or otherwise, or if design flaws in the relevant software are exposed and exploited, and, as a result, a third party or disaffected employee obtains unauthorized access to any investors’ or borrowers’ data, PFL’s relationships with its users could be severely damaged, and PFL (or PMI) could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and PMI’s third-party ~~hosting~~service ~~facilities~~providers may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our users to lose confidence in the effectiveness of PFL’s and PMI’s data security measures. Further, the CCPA, which was enacted in California, affords individuals in the state affected by data breaches a private right of action against companies that have allegedly been the target of such breaches due to a failure to implement and maintain appropriate cybersecurity policies and procedures. Any security breach, whether actual or perceived, would harm our reputations, and we could lose users.

We use industry standard technologies to maintain secure remote work protocols and protect sensitive data within our control, and we require employees to undergo background checks prior to being hired and complete security awareness training at regular intervals. However, we are necessarily limited in our ability to control or ensure the security of networks that employees use to work remotely.

Any significant disruption in service in our marketplace or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement.

PMI's ability to perform its obligations under the Administration Agreement could be materially and adversely affected by events outside of its control. The satisfactory performance, reliability and availability of PMI's technology and its underlying network infrastructure are important to our respective operations, level of customer service, reputation and ability to attract new users and retain existing users. PMI's ~~system~~loan ~~hardware~~platform isand ~~hosted~~internal insystems ~~several~~are ~~hosting~~hosted ~~facilities located~~ in ~~Las~~Google ~~Vegas,~~Cloud ~~Nevada;~~Platform ~~Scottsdale, Arizona; The Dalles, Oregon; and Council Bluffs, Iowa~~(“GCP”). ~~Our~~GCP ~~hosting~~does ~~facilities service providers do~~ not guarantee that access to our marketplace or to PMI's ~~own~~internal systems will be uninterrupted, error-free or secure. The operation of our marketplace and PMI's operation of its own systems depends on our ~~service providers~~GCP's ability to protect ~~the relevant systems in~~ their ~~facilities~~infrastructure against damage or interruption from natural disasters, power or telecommunications failures, ~~air~~service ~~quality~~outages, ~~temperature,~~hardware/software ~~humidity or other environmental concerns~~failures, ~~computer~~network ~~viruses or other attempts to harm them~~disruptions, ~~criminal acts~~ cyber-attacks, and similar events. If ~~PMI's~~our ~~arrangement~~cloud ~~with~~service ~~any~~agreement ~~hosting~~with ~~facilities~~Google ~~service~~were ~~provider is~~ terminated, or if there iswere asignificant ~~lapse of~~ service ordisruptions ~~damage~~within tothe ~~such~~GCP ~~provider's facilities~~environment, PMI could experience interruptions in providing its services under the Administration Agreement, PFL could experience interruptions in the operations of our marketplace, and both could experience delays and additional expense in arranging ~~new~~alternative ~~facilities~~cloud infrastructure. Any interruptions or delays in PMI’s performance of its services or in the functioning of and accessibility of our marketplace, whether as a result of aGCP ~~hosting facility~~ service ~~provider or other third-party error~~issues, PMI's ~~error~~configuration errors, natural disasters or security breaches,, whether accidental or willful, could harm PFL’s relationships with users and its reputation. Additionally, in the event of damage or interruption, PMI's insurance policies may not be sufficient for PMI to adequately compensate PFL for any losses that it may incur. PMI's disaster recovery plan has not been tested under actual disaster conditions, and PMI may not have sufficient capacity to recover all data and services in the event of an outage at one or more hosting facilities. These factors could prevent PMI from processing or posting payments on the Borrower Loans or the Notes, damage PFL's brand and reputation, divert the attention of PMI's employees, reduce PFL's revenue, subject PMI or PFL to liability and cause users to abandon our marketplace, any of which could adversely affect our respective businesses, financial condition and results of operations.

Our marketplace may be vulnerable to ~~computer viruses~~malware, ~~physical~~third-party orsoftware ~~electronic~~vulnerabilities, ~~break-ins~~ and similar disruptions.

Our marketplace may be vulnerable to ~~computer viruses~~malware, ~~physical~~third-party orsoftware ~~electronic~~vulnerabilities, ~~break-ins~~ and similar disruptions. If a hacker were able to infiltrate our marketplace, users would be subject to the increased risk of fraud or borrower identity theft and may experience losses on, or delays in the recoupment of amounts owed on, a fraudulently induced purchase of a Note. Additionally, if a hacker were able to access our secure files, they might be able to gain access to users’ personal information. While we have taken steps to prevent such activity from affecting our marketplace, if we are unable to prevent such activity, the value of investors’ investment in the Notes could be adversely affected.

The development and use of artificial intelligence technology presents risks and challenges that may adversely impact our business.

We or our third-party vendors may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges. AI tools, particularly generative AI tools, may produce outputs or take action that is incorrect and results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. The limited transparency of outputs generated by AI technology increases the challenges associated with assessing the proper operation of AI tools, understanding and monitoring the capabilities of AI technology, reducing erroneous outputs, and complying with applicable regulations. We may also rely on AI technology developed by third parties in areas such as software code, customer support, or in the generation of content, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. There is also a significant amount of proposed legislation at the state and federal levels addressing the use and development of AI. These laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance. While we have policies governing the use of generative AI by our employees and a process for approving vendors that use AI technology, there is no guarantee that such policies will protect us from potential liability relating to our adoption or use of AI technologies and vendors that use AI technology. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees we need to perform under the Administration Agreement.

Competition for highly skilled technical and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve borrower and investors could diminish, resulting in a material adverse effect on PMI's ability to perform its obligations under the Administration Agreement and, in such event, PFL’s ability to continue to make payments on the Notes could be materially impaired. See Item 1, “Business—Human Capital Resources” for more information about Prosper’s employees.

training their replacements and the quality of our services and our ability to serve borrower and investors could diminish, resulting in a material adverse effect on PMI's ability to perform its obligations under the Administration Agreement and, in such event, PFL’s ability to continue to make payments on the Notes could be materially impaired. See Item 1, “Business—Human Capital Resources” for more information about Prosper’s employees.

PMI may enter into acquisitions that may be difficult to integrate, fail to achieve our strategic objectives, disrupt our business or divert management attention.

PMI ~~has entered, and~~ may ~~continue to~~ enter, into acquisitions of businesses, technologies and products intended to complement its existing business, solutions, services and technologies. PMI cannot provide assurance that the acquisitions it has made or will make in the future will provide it with the benefits or achieve the results anticipated in entering into the transaction. Acquisitions are typically accompanied by a number of risks, including: difficulties assimilating and retaining the management and other personnel, culture and operations of the acquired businesses; potential disruption of ongoing business and distraction of management; difficulties in maintaining acceptable standards, controls, procedures and policies, including integrating financial reporting and operating systems, particularly with respect to foreign and/or public subsidiaries; potential loss of existing or acquired strategic operating partners, users and customers following an acquisition; difficulties in integrating acquired technologies and products into our solutions and services; and unexpected costs and expenses resulting from the acquisition, and potential unknown liabilities associated with acquired businesses.

In addition, acquisitions may result in the incurrence of debt, acquisition-related costs and expenses, restructuring charges and write-offs. Acquisitions may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.

PMI may enter into negotiations for acquisitions that are not ultimately consummated. Those negotiations could result in diversion of management time and significant out-of-pocket costs. If PMI fails to evaluate and execute acquisitions successfully, PMI may not be able to achieve its anticipated level of growth and its business and operating results could be adversely affected.

Events beyond our control may damage our ability to maintain adequate records, maintain our marketplace or perform the servicing obligations. If such events result in a system failure, investors’ ability to receive principal and interest payments on the Notes would be substantially harmed.

If a catastrophic event resulted in a marketplace outage and physical data loss and/or affected our electronic data storage and back-up storage systems, PFL’s ability (and PMI’s ability as servicer under the Administration Agreement) to perform its servicing obligations would be materially and adversely affected. Such events include, but are not limited to, fires, earthquakes, terrorist attacks, natural disasters, computer viruses and telecommunications failures. In the event of any marketplace outage or physical data loss described in this paragraph, PFL cannot guarantee that investors would be able to recoup their investment in the Notes.

Events beyond our control, such as an economic downturn, public health emergencies, international conflicts, natural disasters, or other catastrophic events, may damage our ability to continue operations without disruptions, including our ability to attract new borrowers and investors, retain existing investors, as well as the ability of existing borrowers to repay their loans. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.

Our business is subject to the risk that external events, such as public health emergencies, natural disasters, or other catastrophic events, could disrupt our day-to-day operations and impair the activities of borrowers and investors on our marketplace. Unforeseen events, or the prospect of such events, including acts of war (including the invasion of Ukraine by Russia), terrorism and other international conflicts, public health issues including health epidemics or pandemics, and natural disasters such as fires, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our vendors or result in political or economic instability. These events could reduce demand for our products or make it difficult or impossible to receive services from our vendors. Any such disruption could also damage our reputation, which would further lower investor or borrower demand for our products. We could also be subject to claims or litigation with respect to losses caused by such disruptions. Our property and business interruption insurance may not cover a particular event at all or be sufficient to fully cover our losses. 28

Our business is subject to the risk that external events, such as economic downturns, public health emergencies, natural disasters, or other catastrophic events, could disrupt our day-to-day operations and impair the activities of borrowers and investors on our marketplace. Unforeseen events, or the prospect of such events, including acts of war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, and natural disasters such as fires, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our vendors or result in political or economic instability. These events could reduce demand for our products or make it difficult or impossible to receive services from our vendors. Any such disruption could also damage our reputation, which would further lower investor or borrower demand for our products. We could also be subject to claims or litigation with respect to losses caused by such disruptions. Our property and business interruption insurance may not cover a particular event at all or be sufficient to fully cover our losses.

Additionally, a potential recession or volatility in capital markets as a result of public health emergencies may cause existing investors to cease or significantly decrease their investment in Borrower Loans through our marketplace. For existing borrowers, any resulting work slowdowns or stoppages may directly result in the inability to make loan payments, and may impair investors’ ability to receive principal and interest payments on the corresponding Notes. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.

34Increasing interest rates could materially and adversely impact our personal loan marketplace, our Credit Card program, and our investments in Borrower Loans.

~~Increasing~~Various economic factors resulted in a significant increase in interest rates in 2022 that have ~~adversely~~continued ~~impacted~~through 2024. Such an increase has had and could ~~materially~~have ~~and~~a ~~adversely~~negative impact on our personal loan marketplace by decreasing the ability of borrowers to repay their current loan obligations on Borrower Loans, decreasing the ability of borrowers under our Credit Card program to repay the obligations on their Credit Card, and ~~our~~reducing ~~investments~~Borrower Loan origination volume. Borrowers may also be more likely to incur additional unsecured or secured debt in an effort to mitigate the effects of the increase in interest rates, which may further reduce their likelihood of repaying Borrower Loans. The increase in interest rates has and could continue to reduce investor demand for Borrower Loans, as investors may have less capital to invest in Borrower Loans and may seek alternative investment options. Although we have adjusted our pricing to account for the increase in the cost of funds and increased credit risk and may continue to do so in the future, we may not be able to fully offset higher costs through rate increases, which may affect the ability of our investors to generate the risk adjusted returns expected for their investment.

Various economic factors have resulted in a significant increase in interest rates. Such an increase has had, and could continue to have, a negative impact on our personal loan marketplace by decreasing the ability of borrowers to repay their current loan obligations on Borrower Loans, decreasing the ability of borrowers under our Credit Card program to repay the obligations on their Credit Card, and reducing Borrower Loan origination volume. Borrowers may also be more likely to incur additional unsecured or secured debt in an effort to mitigate the effects of the increase in interest rates, which may further reduce their likelihood of repaying Borrower Loans. The increase in interest rates has, and could continue to, also reduce investor demand for Borrower Loans, as investors may have less capital to invest in Borrower Loans and may seek alternative investment options. Although we have adjusted our pricing to account for the increase in the cost of funds and increased credit risk and may continue to do so in the future, we may not be able to fully offset higher costs through rate increases, which may affect the ability of our investors to generate the risk adjusted returns expected for their investment.

In addition, we also invest in Borrower Loans as Loans Held for Sale through our PWIT Warehouse Line. We were also previously invested in Borrower Loans as Loans Held for Sale through our PWIIT Warehouse Line, which was terminated on September 25, 2023 in connection with a securitization transaction. Our investment in Borrower Loans is subject to the interest rate risk applicable to investors outlined above, and as a result our future investment income may fall short of expectations, or we may suffer a loss in principal if we are forced to sell Loans Held for Sale that have declined in market value due to changes in interest rates, loss assumptions or overall market conditions. To reduce the impact of large fluctuations in interest rates, we hedge a portion of our interest rate risk by entering into a derivative agreement with a financial institution. The derivative agreement that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes. Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the United States. Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, our results of operations and financial condition could be adversely affected. The fair value of Loans Held for Sale was $161.5 million and $499.8 million as of December 31, 2023 and 2022, respectively.

See “Quantitative and Qualitative Disclosures about Market Risk” for more information regarding the potential impact of the various market risks on our business.

RISKS RELATED TO COMPLIANCE AND REGULATION

~~Our~~We ~~marketplace~~ must comply with regulatory regimes applicable to consumer credit transactions as well as with regulatory regimes applicable to securities transactions. Certain state laws generally regulate interest rates and other charges and require certain disclosures, and also require licensing for certain activities. In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair, ~~and~~ deceptive, or abusive acts and practices, and debt collection practices may apply to the origination, servicing and collection of Borrower Loans in our marketplace and credit card receivables. We are also subject to other laws, such as:

•the federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to borrowers regarding the terms of their loans;

•the Credit Card Accountability Responsibility and Disclosure Act of 2009, which amended the federal Truth-in-Lending Act and requires additional procedures, disclosures, fee limits and other protections for consumers applying for or holding open end credit cards;

•the Fair Credit Billing Act, which amended the federal Truth-in-Lending Act and creates creditor obligations with respect to billing complaints and errors for credit card customers;

•the federal Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination in the extension of credit on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act;

•the federal Fair Credit Reporting Act and Regulation V, which ~~regulates~~regulate the use, reporting and disclosure of information related to each applicant’s credit history;

•the federal Fair Debt Collection Practices Act and Regulation F, which ~~regulates~~regulate debt collection practices by “debt collectors” and ~~prohibits~~prohibit debt collectors from engaging in certain practices in collecting, and attempting to collect, outstanding personal loans;

•state counterparts to the above consumer protection laws;

•state and federal securities laws, which require that any non-exempt offers and sales of the Notes be registered;

•Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair, deceptive or abusive acts or practices in connection with any consumer financial product or service;

•the federal Gramm-Leach-Bliley Act, which includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities as well as to safeguard personal customer information, and other privacy laws and regulations;

•state consumer privacy and data protection laws, including the California Consumer Privacy Act and Oregon Consumer Privacy Act, which provides consumers in ~~the~~these ~~state~~states with extensive rights to know about the use, to request deletion and correction, and to opt out of the sale of their personal information by certain businesses, and which obligates such businesses to notify consumers of their data collection practices and to implement procedures for addressing consumer requests regarding their personal data;

•the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy protection;

•the federal Servicemembers Civil Relief Act, which allows military members to suspend or postpone certain civil obligations so that the military member can devote their full attention to military duties;

•the federal Military Lending Act, which provides specific protections for active duty service members and their dependents (or covered borrowers) in consumer credit transactions;

•the federal Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide disclosure requirements, guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts;

•the federal Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures;

•the federal Bank Secrecy Act, which relates to compliance with anti-money laundering, customer due diligence and record-keeping policies and procedures;

•the federal Real Estate Settlement Procedures Act and Regulation X, which applies to the Home Equity Products;

•the federal Home Mortgage Disclosure Act and Regulation C, which applies to the Home Equity Products; and

•state mortgage broker and licensing and registration requirements that meet the minimum standards set forth in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and Regulation H.

We may not always be in compliance with these laws. Borrowers may make counterclaims regarding the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws. Investors may attempt to rescind their Note purchases under securities laws, and PFL or PMI’s failure to comply with such laws could also result in civil or criminal liability. Compliance with these requirements is also costly, time-consuming and limits operational flexibility. See Item 1, “Business—Government Regulation” for more information.

Recent U.S. Supreme Court rulings and changes in the U.S. legislative and executive branches may result in changes to regulatory policies that may impact our business and operations.

Several significant administrative law cases were decided by the U.S. Supreme Court in 2024, most notably Loper Bright Enterprises v. Raimondo. In Loper Bright, the U.S. Supreme Court held that the U.S. Administrative Procedure Act requires that courts exercise their independent judgment when deciding whether a federal agency has acted within its statutory authority and are not required to defer to an agency interpretation solely because a statute is ambiguous. These decisions may result in additional legal challenges to regulations and guidance issued by federal regulatory agencies on which we rely. In addition, the recent changes in U.S. legislative and executive branches could lead to potentially significant changes to the

existence, priorities, scope, practices and/or staffing levels of various regulatory agencies. For example, in February 2025, the Trump administration directed the CFPB to, among other things, suspend rule implementations and cease supervisory activities.

Changes to the federal and state legal and regulatory regimes, such as through amendments to laws and regulations, legal challenges to new and existing agency regulations and interpretations, imposition of supervisory action, or shifts in governmental or regulatory policies, practices or priorities may have a material adverse impact on the products and services we can offer, our operations, the cost to conduct business, and our results of operations. We may also become subject to different and potentially conflicting requirements and expectations in the jurisdictions in which we operate or that may attempt to exercise jurisdiction over us, which may have an adverse effect on our business and results of operations.

There continues to be uncertainty as to how the actions of the Consumer Financial Protection Bureau or any other new agency could impact our business or that of our issuing bank.

The Consumer Financial Protection Bureau (“CFPB”), which commenced operations in July 2011, has broad authority over the businesses in which we engage. This includes authority to write regulations under federal consumer financial protection laws, such as the Truth in Lending Act and the Equal Credit Opportunity Act, and to enforce those laws against and examine large financial institutions for compliance. The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices through its regulatory, supervisory, and enforcement authority. To assist in its enforcement, the CFPB maintains an online complaint system that allows consumers to log complaints with respect to various consumer finance products, including the loan products we facilitate. This system could inform future CFPB decisions with respect to its regulatory, enforcement or examination focus.

We are subject to the CFPB's jurisdiction, including its enforcement authority. The CFPB may therefore request reports concerning our organization, business conduct, markets and activities. In addition, the CFPB may conduct on-site examinations of our business on a periodic basis if the CFPB were to determine, based on, for example, consumer complaints, judicial opinions, or administrative decisions, that we are engaging in activities that pose risks to consumers. In addition, the CFPB finalized a rule for the direct supervision of nonbank installment lenders, which may permit the CFPB to conduct periodic examinations of our business.

36There continues to be uncertainty as to how the CFPB's strategies and priorities, including in both its examination and enforcement processes, will impact our businesses and our results of operations going forward. Actions by the CFPB could result in requirements to alter or cease offering affected loan products and services, making them less attractive and restricting our ability to offer them. In February 2025, the CFPB issued orders to suspend operations and cease activity including, among other things, supervision and examination activity and litigation proceedings. These orders have been challenged in several lawsuits. There is uncertainty as to the possible impact of the CFPB orders, the various lawsuits challenging those orders, and the new enforcement priorities of the CFPB.

CFPB finalized a rule for the direct supervision of nonbank installment lenders, which may permit the CFPB to conduct periodic examinations of our business.

There continues to be uncertainty as to how the CFPB's strategies and priorities, including in both its examination and enforcement processes, will impact our businesses and our results of operations going forward. Actions by the CFPB could result in requirements to alter or cease offering affected loan products and services, making them less attractive and restricting our ability to offer them.

Although we have committed resources to enhancing our compliance programs, actions by the CFPB or other regulators against us, our issuing banks or our competitors that discourage the use of the marketplace model or suggest to consumers the desirability of other loan products or services could result in reputational harm and a loss of borrowers or investors. Our compliance costs and litigation exposure could increase materially if the CFPB or other regulators enact new regulations, change regulations that were previously adopted, modify, through supervision or enforcement, past regulatory guidance, or interpret existing regulations in a manner different or stricter than have been previously interpreted.

Noncompliance with laws and regulations may impair our ability to facilitate the origination of or service Borrower Loans.

Generally, failure to comply with applicable laws and regulatory requirements may, among other things, limit our or a third party collection agency's ability to collect all or part of the principal amount of or interest on the Borrower Loans on which the Notes are dependent for payment. In addition, non-compliance could subject us to damages, revocation of required licenses, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm PFL's business and ability to maintain our marketplace and may result in borrowers rescinding their Borrower Loans.

Where applicable, we seek to comply with state lending, servicing and similar statutes, and we continually evaluate our licensing needs. In U.S. jurisdictions with licensing or other requirements that we believe may be applicable to our marketplace, we have obtained necessary licenses or comply with the relevant requirements. Nevertheless, if we are found to not comply with applicable laws or fail to meet financial or other state licensing requirements, we could lose one or more of our licenses or face other sanctions, which may have an adverse effect on our ability to continue to facilitate the origination of Borrower Loans through our marketplace, and on our ability to perform servicing obligations or make our marketplace available to borrowers in particular states, which may impair investors' ability to receive the payments of principal and interest on the Notes that they expect to receive.

If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed.

If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed. The interest rates that are charged to borrowers and that form the basis of payments to investors through our marketplace are based upon the ability under federal law of the issuing bank that originates the loan to export the interest rates of the state where it is located and on our ability to assist the bank in arranging such loans. WebBank, the bank that issues personal loans through our marketplace, exports the interest rates of Utah, which allows parties to generally agree by contract to any interest rate. As of December 31, ~~2023~~2024, the Borrower Loans carried interest rates that range from 56.4600% to 33.00%, which equate to an effective interest rate for Note investors that range from 45.4600% to 32.00%. Some states where borrowers are located, including Utah, have no statutory interest rate limitations on personal loans, while other jurisdictions have a maximum rate less than the current maximum rate offered by WebBank through our marketplace. If a borrower were to successfully bring claims against us for state usury or other state law violations, we could be subject to fines and penalties. Further, if the current structure under which WebBank makes personal loans through our marketplace were successfully challenged, we may have to substantially modify our business operations and may be required to maintain state-specific licenses and only provide a limited range of interest rates for Borrower Loans, all of which may substantially reduce our operating efficiency and attractiveness to investors and possibly result in a decline in our operating results. Recent litigation has successfully challenged lending arrangements in which banks or other exempt entities make loans and sell those loans to a third party charged with servicing the loans.

In addition, it is possible that state usury laws may impose liability that could affect an assignee's (i.e., PFL's and/or an investor who purchases Borrower Loans from PFL) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their Borrower Loans.

As discussed in Part I, Item 1, “Business—Government Regulation—State Usury Laws” above, in Madden v. Midland Funding, LLC, in May 2015, the U.S. Court of Appeals for the Second Circuit issued a decision in Madden v. Midland Funding, LLC that interpreted the scope of federal preemption under the National Bank Act and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. On ~~November~~The ~~10,~~Madden ~~2015,~~decision ~~the~~has ~~defendant~~created insome ~~the~~uncertainty ~~Madden~~as ~~case~~to ~~filed~~whether anon-bank ~~petition~~entities ~~for~~purchasing loans originated by a ~~writ~~bank ofmay ~~certiorari~~rely ~~with~~on ~~the~~federal ~~United~~preemption ~~States~~of ~~Supreme~~state ~~Court~~usury ~~for~~laws, ~~further~~and ~~review~~may ofcreate ~~the~~an ~~Second~~increased ~~Circuit’s~~risk ~~decision. On~~of ~~June~~litigation ~~27,~~by ~~2016,~~plaintiffs ~~the~~challenging ~~United~~our ~~States~~ability ~~Supreme~~to ~~Court~~collect ~~denied~~interest in accordance with the ~~petition~~terms ~~and~~of ~~refused~~Borrower toLoans. ~~review~~Although ~~the~~there ~~case,~~can ~~leaving~~be no assurances as to the ~~decision~~outcome of any potential litigation, or the ~~Second~~possible ~~Circuit~~impact ~~intact~~of ~~and~~the ~~binding~~litigation on ~~federal~~our ~~courts~~marketplace, inwe ~~Connecticut,~~believe ~~New~~the ~~York~~Madden ~~and~~case ~~Vermont.~~addressed ~~The~~facts ~~Madden~~that ~~decision~~are ~~has~~not ~~created~~presented ~~some~~by ~~uncertainty~~our asmarketplace tolending ~~whether~~platform ~~non-bank~~and ~~entities~~thus ~~purchasing~~would ~~loans~~not ~~originated~~apply byto aBorrower Loans.

bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the National Bank Act, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential litigation, or the possible impact of the litigation on our marketplace, we believe the Madden case addressed facts that are not presented by our marketplace lending platform and thus would not apply to Borrower Loans.

In June 2020, the FDIC issued a final regulation entitled “Federal Interest Rate Authority” that, among other things, addressed the uncertainty resulting from the Madden decision, including uncertainty affecting marketplace lenders that partner with banks. Under the FDIC’s rule, which applies to FDIC-insured state-chartered industrial banks such as WebBank, interest on a loan originated by WebBank that was permissible under DIDA at origination is not affected by WebBank’s subsequent sale of the loan to PFL. Seven states and the District of Columbia sued the FDIC, however, seeking to have the regulation set aside on Administrative Procedure Act grounds. Three states brought a similar challenge in the same court to a similar regulation issued by the OCC under the NBA. Both suits were decided in February 8, 2022, with the United States District Court for the Northern District of California ruling that the FDIC and OCC had not exceeded their statutory authority when promulgating their respective rules. The court deferred to each federal agency's interpretation, and thus concluded that each agency’s rule was not unreasonable or arbitrary or capricious. The states had until April 11, 2022 to appeal the rulings to the U.S. Court of Appeals for the Ninth Circuit and did not do so.

On August 18, 2020, WebBank, the originator and lender of loans offered through the personal loan marketplace, was among the parties that reached a settlement with the Administrator of the Colorado Uniform Consumer Credit Code which provides a safe harbor for the platforms operated by Marlette Funding, LLC and Avant, Inc., such that if the programs meet certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure, the programs will be deemed to be in compliance with Colorado’s usury limits. On November 9, 2020, we amended our agreements with WebBank to meet the requirements of the safe harbor for extending credit to borrowers in Colorado.

We and our counsel are monitoring these matters closely and, as developments warrant, we will consider any necessary changes to our marketplace required to avoid the impact of these cases on our business model. Because of investor demand, the maximum annual percentage rates offered through our marketplace may be lower in some states than others.

We rely on agreements with WebBank, pursuant to which WebBank originates personal loans on a uniform basis to qualified borrowers throughout the United States and sells and assigns those loans to PFL. If our relationships with WebBank were to end, we may need to rely on individual state lending licenses or partner with a different bank to offer Borrower Loans.

Borrower Loan requests take the form of an application to WebBank submitted through our marketplace. WebBank currently makes all personal loans to borrowers through our marketplace, which allows our marketplace to be available to borrowers on a uniform basis throughout the United States. If our relationships with WebBank were to end or if WebBank were to cease operations, one or both of PMI and PFL may need to rely on individual state lending licenses or we would need to partner with a different bank to originate Borrower Loans. Because neither of us currently possesses all required licenses to lend in every state, we might be forced to limit the rates of interest charged on Borrower Loans in some states and we might not be able to originate personal loans in some states altogether. If we partner with a new bank, service on our marketplace could be disrupted and delayed as we transition to a different bank partner. We also may face increased costs and compliance burdens if the agreements with WebBank are terminated.

Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.

Several lawsuits in the lending industry primarily involving high-interest “payday loan” marketers have brought under scrutiny the association between those firms and out-of-state banks. These lawsuits assert the loan marketers use out-of-state lenders in order to evade the consumer protection laws imposed by the states where they do business. Such litigation has sought to re-characterize the loan marketer as the lender for purposes of state consumer protection law and usury restrictions. Similar civil actions have been brought in the context of gift cards and retail purchase finance. Although we believe that our activities are generally distinguishable from the activities involved in these cases, a court or regulatory authority could disagree.

38Additional state consumer protection laws would be applicable to the Borrower Loans facilitated through our marketplace if one or both of us were re-characterized as a lender, and the Borrower Loans could be voidable or unenforceable.

to re-characterize the loan marketer as the lender for purposes of state consumer protection law and usury restrictions. Similar civil actions have been brought in the context of gift cards and retail purchase finance. Although we believe that our activities are generally distinguishable from the activities involved in these cases, a court or regulatory authority could disagree.32

Additional state consumer protection laws would be applicable to the Borrower Loans facilitated through our marketplace if one or both of us were re-characterized as a lender, and the Borrower Loans could be voidable or unenforceable. In addition, we could be subject to claims by borrowers, as well as enforcement actions by regulators. Even if we were not required to cease doing business with residents of certain states or to change our business practices to comply with applicable laws and regulations, we could be required to register or obtain licenses or regulatory approvals that could impose a substantial cost on us.

As online commerce develops, federal and state governments may draft and propose new laws to regulate commerce over the Internet, which may negatively affect our businesses.

As online commerce continues to evolve, increasing regulation by federal and state governments becomes more likely. Our businesses could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to marketplace lending. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our users in the form of increased fees. In addition, federal and state governmental or regulatory agencies may decide to impose taxes on services provided online. These taxes could discourage the use of the Internet as a means of consumer lending, which would adversely affect the viability of our marketplace.

If one or both of PMI and PFL is required to register under the Investment Company Act, either of our ability to conduct business could be materially adversely affected.

The Investment Company Act of 1940 (the “Investment Company Act”) contains substantive legal requirements that regulate the manner in which “investment companies” are permitted to conduct their business activities. PFL and PMI believe each has conducted its business in a manner that does not result in being characterized as an investment company. If, however, PFL is deemed to be an investment company under the Investment Company Act, it may be required to institute burdensome compliance requirements and its activities may be restricted, which would materially adversely affect its business, financial condition and results of operations. Any determination that PMI is an investment company under the Investment Company Act similarly could impair its ability to perform its obligations under the Administration Agreement and thereby impair PFL’s ability to make payments on the Notes. If PFL or PMI were deemed to be an investment company, PFL or PMI may also attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on their businesses.

If one or both of PMI and PFL is required to register under the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected.

The Investment Advisers Act of 1940, or the “Investment Advisers Act,” contains substantive legal requirements that regulate the manner in which “investment advisers” are permitted to conduct their business activities. PFL believes that its business consists of providing a platform for marketplace lending for which investment adviser registration and regulation do not apply under applicable federal or state law, and does not believe that it is required to register as an investment adviser with either the SEC or any of the various states. The SEC or a state securities regulator could reach a different conclusion, however. Registration as an investment adviser could adversely affect PFL’s method of operation and revenues. For example, the Investment Advisers Act requires that an investment adviser act in a fiduciary capacity for its clients. Among other things, this fiduciary obligation requires that an investment adviser manage a client’s portfolio in the best interests of the client, have a reasonable basis for its recommendations, fully disclose to its client any material conflicts of interest that may affect its conduct and seek best execution for transactions undertaken on behalf of its client. It could be difficult for PFL to comply with this obligation without meaningful changes to its business operations, and there is no guarantee that it could do so successfully. If PFL were ever deemed to be in non-compliance with applicable investment adviser regulations, it could be subject to various penalties, including administrative or judicial proceedings that might result in censure, fine, civil penalties (including treble damages in the case of insider trading violations), the issuance of cease-and-desist orders or other adverse consequences. Similarly, any determination by regulators that PMI must register as an investment adviser could materially adversely affect PMI and impair its ability to continue to administer our marketplace on PFL’s behalf.

PMI's administration of Quick Invest under its previous offering and PFL’s administration of Quick Invest, Recurring Investment, and Auto Invest under its current offering, could create additional liability for PFL and such liability could be material.

Quick Invest was a loan search tool that allowed investors to identify Notes that met their investment criteria. An investor using Quick Invest was asked to indicate (i) the Prosper Rating or Ratings they wished to use as search criteria, (ii) the total amount they wished to invest, and (iii) the amount they wished to invest per Note. Quick Invest then compiled a basket of Notes for their consideration that met their search criteria.

39Recurring Investment (formerly known as Auto Quick Invest) is an automated loan search tool that allows investors to easily invest in Notes that meet their specific investment criteria by automatically bidding any available funds in their account on Notes that match their selected parameters, in accordance with their specified instructions. An investor using Recurring Investment is asked to indicate (i) the Prosper Rating or Ratings and term of the Notes they wish to use as search criteria, and (ii) the amount they wish to invest per Note. If they wish, the investor can further customize their investment criteria by

Recurring Investment (formerly known as Auto Quick Invest) is an automated loan search tool that allows investors to easily invest in Notes that meet their specific investment criteria by automatically bidding any available funds in their account on Notes that match their selected parameters, in accordance with their specified instructions. An investor using Recurring Investment is asked to indicate (i) the Prosper Rating or Ratings and term of the Notes they wish to use as search criteria, and (ii) the amount they wish to invest per Note. If they wish, the investor can further customize their investment criteria by applying one or more of several dozen additional search criteria, such as loan amount, debt-to-income ratio and credit score. The investor can also set aside a specific amount of their funds as a cash reserve that will not be invested by the Recurring Investment tool. After the investor has entered and saved the parameters of their search, Recurring Investment automatically (i) runs searches on the designated criteria as new listings are posted on the marketplace, and (ii) places bids on any Notes identified by each such search. Currently, the Recurring Investment tool is available only through our website, and is not available through our mobile app, Prosper Invest.33

applying one or more of several dozen additional search criteria, such as loan amount, debt-to-income ratio and credit score. The investor can also set aside a specific amount of their funds as a cash reserve that will not be invested by the Recurring Investment tool. After the investor has entered and saved the parameters of their search, Recurring Investment automatically (i) runs searches on the designated criteria as new listings are posted on the marketplace, and (ii) places bids on any Notes identified by each such search. Currently, the Recurring Investment tool is available only through our website, and is not available through our mobile app, Prosper Invest.

Auto Invest is an automated loan search tool that makes it easier for investors to build their desired portfolio of Notes by automatically investing any available funds in an investor’s account in Notes that match the investor’s specified investment criteria and allocation targets. An investor using Auto Invest is asked to select (i) a loan allocation target, or a target mix of loans based on Prosper Ratings, and (ii) the amount they wish to invest per Note. The investor has the option of selecting a target from Prosper’s series of preset loan allocations based on the recent historical loan inventory on the marketplace, any of which may be customized by changing the individual allocation targets for each Prosper Rating, or they can create a custom loan allocation target across Prosper Ratings based on their specific risk tolerance. If they wish, the investor can further customize their investment criteria by applying additional filters, such as loan term and employment status. The investor can also set aside a percentage of their portfolio as a cash reserve that will not be invested by Auto Invest. Investors may update their target allocations, cash reserve and other investment criteria, and pause and restart Auto Invest, at any time. Once the investor turns on Auto Invest, the tool may immediately begin placing orders for Notes in accordance with the investor’s current and target allocations and other criteria. The mix of Notes in any particular order may not match the investor’s individual loan allocation targets, but over time Auto Invest will place orders so that the aggregate holdings in the investor’s portfolio will approximate, to the extent possible, the allocation specified in their investment criteria.

Since the Notes purchased through Recurring Investment, Auto Invest and Quick Invest are the same as Notes purchased manually, they present the same risks of non-payment as all Notes that may be purchased through our marketplace. For example, there is a risk that a Borrower Loan identified through Recurring Investment, Auto Invest or Quick Invest may become delinquent or default, and that the estimated return or historical return (as applicable) for that loan individually, or the estimated return or historical return (as applicable) for the allocation target or the basket of Notes selected by Recurring Investment, Auto Invest or Quick Invest as a whole, may not accurately reflect the actual return on such loan or Notes. If this were to occur, an investor who purchased a Note from PFL through Recurring Investment, Auto Invest or Quick Invest could pursue a claim against PFL in connection with its representations regarding the performance of the Borrower Loans bid upon through Recurring Investment, Auto Invest or Quick Invest, respectively. An investor could pursue such a claim under various anti-fraud theories under federal and state securities law.

We may face liability under state and federal securities law for statements in our prospectus and in other communications that could be deemed to be an offer to the extent that such statements are deemed to be false or misleading.

Loan listings and other borrower information available on PFL's website as well as in sales and listing reports are statements made in connection with the purchase and sale of securities that are subject to the antifraud provisions of the Exchange Act and the Securities Act. In general, these liability provisions provide a purchaser of the Notes with a right to bring a claim against one or both of us for damages arising from any untrue statement of material fact or failure to state a material fact necessary to make any statements made not misleading. Even though PFL and PMI have advised investors of what they believe to be the material risks associated with an investment in the Notes and PMI management rights, the SEC or a court could determine that they have not advised investors of all of the material facts regarding an investment in the Notes and PMI Management Rights, which could give investors the right to rescind their investment and obtain damages, and could subject PFL and PMI to civil fines or criminal penalties in addition to any such rescission rights or damages.

PMI and PFL’s activities in connection with the offer and sale of securities through our marketplace could result in potential violations of federal securities law and result in material liability to PFL and/or PMI.

PFL and PMI’s respective businesses are subject to federal and state securities laws that may limit the kinds of activities in which PFL and PMI may engage and the manner in which they engage in such activities. For example, changes to the manner in which PFL offers and sells Notes or other securities through our marketplace could be viewed by the SEC or a state securities regulator as involving the creation or sale of new, unregistered securities. In such circumstances, the failure to register such securities could subject PFL to liability and the amount of such liability could be meaningful. In addition, in 2008, PMI entered into a settlement with the SEC pursuant to which PMI agreed to cease and desist from committing or causing any violations or any future violations of Sections 5(a) and (c) of the Securities Act. Failure to comply with that order could result in material civil or criminal liability, which could materially adversely affect PMI’s business and PFL’s offering of Notes.

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RISKS RELATED TO BORROWER LOANS ON THE PERSONAL LOAN MARKETPLACE

Payments on the Notes depend entirely on payments PFL receives on corresponding Borrower Loans. If a borrower fails to make any payments on the corresponding Borrower Loan related to a Note, payments on such Note will be correspondingly reduced.

PFL will only make payments pro-rata on a series of Notes after it receives a borrower’s payment on the corresponding Borrower Loan, net of servicing fees. PFL also will retain from the funds received from the relevant borrower and otherwise available for payment on the Notes any non-sufficient funds fees and the amounts of any attorneys’ fees or collection fees our in-house collections department, a third-party servicer or collection agency imposes in connection with collection efforts. Under the terms of the Notes, if PFL does not receive any or all payments on the corresponding Borrower Loan, payments on the Note will be correspondingly reduced in whole or in part. If the relevant borrower does not make a payment on a specific monthly loan payment date, no payment will be made on the Note on the corresponding succeeding Note payment date.

The Borrower Loans are not secured by any collateral or guaranteed or insured by any third party, and investors must rely on us or a third-party collection agency to pursue collection against any borrower.

The credit information of an applicant may be inaccurate or may not accurately reflect the applicant’s creditworthiness, which may cause an investor to lose all or part of the price paid for a Note.

We obtain applicant credit information from consumer reporting agencies, and assign Prosper Ratings to listings based in part on the applicant’s credit score. A credit score that forms a part of the Prosper Rating assigned to a listing may not reflect the applicant’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data. Similarly, the credit data taken from the applicant’s credit report and displayed in listings may also be based on outdated, incomplete or inaccurate consumer reporting data. We do not verify the information obtained from the applicant’s credit report. Moreover, investors do not, and will not, have access to financial statements of applicants or to other detailed financial information about applicants.

Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.

Since it was first implemented in July 2011 through December 31, 2024, the Recurring Investment (formerly known as Auto Quick Invest) tool has experienced programming errors that affected 8,630 Notes and PMI Notes out of the 14,031,060 Notes and PMI Notes purchased. The Auto Invest tool was first implemented on June 2, 2016. Since such time through December 31, 2024, the Auto Invest tool has experienced programming errors that affected 2 Notes out of the 20,672,889 Notes purchased.

Some borrowers may use our marketplace to defraud investors, which could adversely affect investors’ ability to recoup their investment.

Loss rates on the Borrower Loans may increase as a result of economic conditions beyond our control and beyond the control of the borrower.

estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets, natural disasters, pandemics, and other factors.

Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.

Our marketplace may fail to comply with applicable laws, which could limit our ability to collect on Borrower Loans.

Borrowers may seek the protection of debtor relief under federal bankruptcy or state insolvency laws, which may result in the nonpayment of an investor’s Notes.

Whether any payment will ultimately be made or received on a Borrower Loan after a bankruptcy status is declared depends on the borrower’s particular financial situation. In most cases, however, unsecured creditors such as PFL receive nothing, or only a fraction of their outstanding debt and, as a result, an investor who has purchased a corresponding Note may receive none or very little of the unpaid principal and interest payable on the Note.

As of December 31, 2024, 188 Borrower Loans, with a total outstanding balance of $1.7 million are subject to the SCRA.

RISKS RELATED TO INVESTING IN NOTES ON THE PERSONAL LOAN MARKETPLACE

The Notes are risky and speculative investments suitable only for investors of adequate financial means.

Investors should be aware that the Notes offered through our marketplace are risky and speculative investments. The Notes are special, limited obligations of PFL and depend entirely for payment on PFL’s receipt of payments under the corresponding Borrower Loans. Notes are suitable only for investors of adequate financial means. If an investor cannot afford to lose the entire amount of such investor’s investment in the Notes, the investor should not invest in the Notes.

The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.

Loans corresponding to the Notes, the payments and proceeds that PFL receives on such Borrower Loans, the bank account in which such Borrower Loan payments are deposited, and the accounts in which investors’ funding amounts are deposited, the Note holders do not themselves have a direct security interest in the Borrower Loans or the right to payment thereunder. If an event of default under the Amended and Restated Indenture were to occur, the Note holders would be dependent on the indenture trustee’s ability to realize on the collateral and make payments on the Notes in the manner contemplated by the Amended and Restated Indenture. In addition, although PFL will take all actions that it believes are required under applicable law to perfect the security interest of the indenture trustee in the collateral, if its analysis of the required actions is incorrect or if it fails to take any required action in a timely manner, the indenture trustee’s security interest may not be effective and holders of the Notes could be required to share the collateral (and any proceeds thereof) with PFL’s other creditors, or, if a bankruptcy court were to order the substantive consolidation of PMI and PFL (as described below), PMI’s creditors.

PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.

PFL might incur indemnification and repurchase obligations that exceed its projections, in which case it may not have sufficient liquidity to meet its indemnification and repurchase obligations.

We may not set appropriate interest rates for Borrower Loans.

investors may not be compensated appropriately for the level of risk that they are assuming in purchasing Notes, while setting the interest rate too high may increase the risk of non-payment. In either case, a failure by us to set rates appropriately may adversely impact the ability of investors to receive returns on their Notes that are commensurate with the risks they have assumed in acquiring such Notes.

The U.S. federal income tax consequences of an investment in the Notes are uncertain.

PFL’s ability to pay principal and interest on a Note may be affected by its ability to match the timing of its income and deductions for U.S. federal income tax purposes.

Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.

During the year ended December 31, 2024, we purchased $0.2 million in Notes for investment.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 1C. CYBERSECURITY

Risk Management and Strategy

Prosper recognizes the critical importance of protecting the company’s assets and customer data against new and existing risks using appropriate organizational measures, policies, procedures, and technical solutions while maintaining robust cybersecurity measures to safeguard our information systems and protect the security, confidentiality, integrity, and availability of our data.

Managing Material Risks & Integrated Overall Risk Management

Prosper has strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our information security (“InfoSec”) team works closely with our information technology team to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.

Third-Party Risk Management Engagement

Prosper engages with a range of external experts, including external auditors, cybersecurity assessors and penetration testers as part of our InfoSec and cybersecurity programs. Our collaboration with these third-parties includes services such as external audits, threat assessments and guidance on key security initiatives. These partnerships allow us to leverage specialized knowledge and insights, consistent with our aim for industry-best practices.

Oversee Third-Party Risk

Prosper maintains stringent processes to oversee and manage the risks associated with third-party service providers, including a team focused on vendor, enterprise, and procurement risk management. We conduct diligence and security assessments of material third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. This monitoring includes an initial review of their information security program, annual re-assessments, and ongoing monitoring for security incidents. This approach is designed to mitigate risks related to data breaches or other security incidents originating from our material vendors and partners.

Risks from Cybersecurity Threats

For a description of the cybersecurity risks which could materially affect Prosper’s business strategy, results of operations, or financial condition, please refer to the following: (i) “Risk Factors—If the security of PFL's investors' and borrowers' confidential information stored in our systems is breached or otherwise subjected to unauthorized access, users' secure information may be stolen, our reputations may be harmed, and we may be exposed to liability,”; (ii) “Risk Factors—Any significant disruption in service in our marketplace or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement,”; and (iii) “Risk Factors—Our marketplace may be vulnerable to ~~computer viruses~~malware, ~~physical~~third-party orsoftware ~~electronic~~vulnerabilities, ~~break-ins~~ and similar disruptions.” We and certain third party vendors occasionally have experienced cyber-attacks, breaches of our and their systems and other similar incidents, which to-date have not had a material effect on Prosper’s business strategy, results of operations, or financial condition.

Governance

The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats.

Board of Directors Oversight of Risks

The Board is directly responsible for overseeing risks related to cybersecurity and is composed of board members with diverse expertise, including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.

The Board is informed of cybersecurity risks by our Chief Executive Officer (“CEO”) and General Counsel (“GC”), who are kept updated on an ongoing basis of cybersecurity risks through our Chief Technology Officer (“CTO”) and Head of Information Security (the “InfoSec Director”). Our InfoSec Director also prepares a quarterly update for each Board meeting that updates the Board of any information security and cybersecurity risks and threats to our systems. The InfoSec Director also

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~~will~~met ~~meet~~ with the Board directly for training focused exclusively on our cybersecurity and information security program and risks, ~~beginning~~starting in 2024 and expects to continue to provide such training in the future.

Risk Management Personnel

Primary responsibility for assessing, monitoring, and managing our cybersecurity risks rests with our InfoSec Director. Our InfoSec Director has experience building global Information Security programs and has advised organizations across several highly- regulated industries, including financial services, technology, healthcare, government, non-profit, and retail. Our InfoSec Director, with oversight from the CTO, manages Prosper’s information security risk management program and informs Prosper’s Enterprise Risk & Information Security Committee (“eRISC”), which consists of members of Prosper’s management team and includes our CEO, Chief Financial Officer (“CFO”), CTO, and GC, regarding the prevention, detection, mitigation, and remediation of cyber risks and incidents. The cybersecurity team has decades of experience in selecting, deploying, and operating cybersecurity technologies, initiatives, and processes. eRISC meets on at least a quarterly basis to discuss any cybersecurity incident reports, as applicable, ongoing cybersecurity initiatives and strategies, take any actions approved by the voting members of eRISC, and discuss escalation and reporting to the Board, as needed.

Process for Monitoring Cybersecurity Incidents

The InfoSec Director and eRISC, as applicable, are continually informed about the latest developments in cybersecurity including potential threats and innovative risk management techniques. The InfoSec Director is an active thought leader and speaker within the CISO community, regularly participating in cybersecurity conferences such as FS-ISAC, and CISO summits. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The InfoSec Director implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the InfoSec Director is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.

Reporting to Board of Directors

As discussed above in “Cybersecurity Board of Directors Oversight of Risks,” our InfoSec Director regularly updates our eRISC committee regarding all aspects related to cybersecurity risks and incidents and also maintains direct communication with the CEO, CFO, CTO, and GC for escalation of such incidents directly to the Board. This ensures that the highest levels of management and the Board are kept informed of the cybersecurity posture and potential risks facing Prosper.

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ITEM 2. PROPERTIES

Our corporate headquarters, including our principal administrative, marketing, technical support and engineering functions, is located in San Francisco, California, where we lease approximately 35,200 square feet of office space under ~~leases~~a lease that will expire May 31, 2028. We have also entered into leases for approximately 44,500 square feet of office space located in Arizona and Utah. We believe that our facilities are adequate to meet our current needs and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

Our disclosure set forth under Note 17, Commitments and Contingencies—West Virginia Matter, of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K is incorporated herein by reference.

Prosper Funding's disclosure set forth under Note 8, Commitments and Contingencies—West Virginia Matter, of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information; Holders of Record

There is no established public trading market for PMI's or PFL's common equity. As of December 31, ~~2023~~2024, there were approximately ~~470~~479 holders of record of PMI’s common stock. As of December 31, ~~2023~~2024, PMI owns 100% of PFL's membership interests.

Dividend Policy

PMI has not paid cash dividends since inception and does not anticipate paying cash dividends in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12 in Part III of this Annual Report for information about securities authorized for issuance under our equity compensation plans.

Recent Sales of Unregistered Securities

For the year ended December 31, ~~2023~~2024, PMI issued 2540,~~637,479~~055 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.0403. For the year ended December 31, ~~2022~~2023, PMI issued 2,~~133~~637,~~921~~479 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.0304. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder relative to sales by an issuer not involving a public offering.

Issuer Purchases of Equity Securities

~~During~~For the year ended December 31, ~~2023~~2024, we did not repurchase any common or preferred stock.

ITEM 6. [Reserved]

Not applicable.

4443

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Annual Report on Form 10-K. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those included in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses ~~2023~~2024 and ~~2022~~2023 items and year-to-year comparisons between ~~2023~~2024 and ~~2022, except for the material addition of the results of operations by segment, which was not presented in prior periods and now includes year-to-year comparisons between 2022 and 2021~~2023. For discussions related to ~~other~~2022 ~~2021~~ items and year-to-year comparisons between ~~2022~~2023 and ~~2021~~2022, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023.

PROSPER MARKETPLACE, INC.

Overview

Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to three lending products, each of which supports our vision: (i) unsecured personal loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, (ii) a Credit Card product available to eligible borrowers, and (iii) Home Equity ~~Products~~products available to eligible homeowners.

For the year ended December 31, ~~2023~~2024, our marketplace facilitated $2.2 billion in Borrower Loan originations, of which $12.91 billion were funded through our Whole Loan Channel, representing 8992% of the total Borrower Loans originated through our marketplace during this period. For the quarter ended December 31, ~~2023~~2024, our marketplace facilitated $~~442~~615.80 million in Borrower Loan originations, of which $~~391~~571.20 million were originated through our Whole Loan Channel, representing 8893% of the total Borrower Loans originated through our marketplace during this period. From inception through December 31, ~~2023~~2024 our marketplace has facilitated $2527.69 billion in Borrower Loan originations, of which $2325.01 billion were funded through our Whole Loan Channel, representing 90% of the total Borrower Loans originated through our marketplace during this period.

As a company that operates a credit marketplace, and offers Credit Card and Home Equity products, we believe our customers are highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers’ ability or desire to participate on our marketplace as borrowers or investors and, consequently, could negatively affect our business and results of operations.

4544

Key Operating and Financial Metrics (in thousands)

The following table displays our key operating and financial metrics for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022:

	Years Ended December 31,
	2023		2022		2021
	2024		2023		2022
Personal Loan Originations	$	2,~~164~~243,~~079~~346	$	32,~~340~~164,~~433~~079	$	13,~~946~~340,~~974~~433
Transaction Fees, Net	$	~~127~~193,~~838~~588	$	~~162~~127,~~742~~838	$	89162,~~364~~742
Whole Loans Outstanding (1)	$	3,491,788	$	3,680,855	$	2,529,814
Personal Loan Serviced Portfolio (1)	$	3,805,480	$	3,831,896	$	4,013,612
Prosper Credit Card Portfolio(1)	$	286,284	$	113,917	$	176
Whole Loans Outstanding (1)	$	3,508,181	$	3,491,788	$	3,680,855
Servicing Fees, Net	$	15,364	$	15,113	$	15,024
Prosper Credit Card Portfolio (1) (2)	$	394,416	$	286,284	$	113,917
Total Net Revenues	$	137,700	$	199,881	$	144,626
Servicing Fees, Net	$	23,026	$	15,364	$	15,113
Net (Loss) Income	$	(106,462)	$	70,582	$	(138,341)
Total Net Revenues	$	173,355	$	137,700	$	199,881
Adjusted Net Revenue (2)	$	142,209	$	207,129	$	147,710
Net (Loss) Income	$	(54,079)	$	(106,462)	$	70,582
Adjusted EBITDA (2)	$	(30,628)	$	(1,808)	$	15,898
Adjusted Net Revenue (3)	$	175,474	$	142,209	$	207,129
(1) Balance as of December 31
Adjusted EBITDA (3)	$	17,061	$	(30,628)	$	(1,808)
(2) Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial measures. For more information regarding these measures and the reconciliation to Total Net Revenue and Net (Loss) Income, respectively, the most comparable US GAAP measures, see “Non-GAAP Financial Measures.”
(1) Unpaid principal balance as of December 31
(2) Total of Prosper Allocations, Coastal Allocations and securitized PMCC 2024-1 Credit Card receivables
(3) Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial measures. For more information regarding these measures and the reconciliation to Total Net Revenue and Net (Loss) Income, respectively, the most comparable US GAAP measures, see “Non-GAAP Financial Measures.”

Personal Loan Originations

~~Total~~From ~~personal~~inception ~~loan~~of ~~originations on~~ the ~~platform~~Company ~~decreased~~through ~~35% for the year ended~~ December 31, ~~2023~~2024, ~~when~~a ~~compared~~total toof ~~the year ended December 31~~2, ~~2022~~205,677 ~~which~~Borrower ~~resulted~~Loans, intotaling ~~a decrease in Transaction Fees of~~ $3427.9 ~~million~~billion, orwere ~~21%.~~originated ~~The~~through ~~personal~~our loan originations decrease for the year ended December 31, 2023 versus the year ended December 31, 2022 was primarily due to reduced investor demand given the rapid increase in interest rates since the first quarter of 2022 and uncertain economic environmentmarketplace.

~~From inception of the Company through December 31, 2023, a total of 2,057,160 Borrower Loans, totaling $25.6 billion, were originated through our marketplace.~~ For the year ended December 31, ~~2023~~2024, ~~157~~148,~~840~~518 Borrower Loans totaling $2.2 billion were originated through our marketplace, as compared to ~~305~~157,~~123~~840 Borrower Loans totaling $32.32 billion originated in ~~2022~~2023, which represented a unit decrease of 486% and a dollar ~~decrease~~increase of 354%. ~~Personal~~This ~~loan~~dollar ~~origination~~increase ~~volume~~was byprimarily ~~Prosper~~due ~~Rating~~to ~~was~~increased third-party investor demand, as ~~follows~~well ~~for~~as an increase in the ~~periods~~average ~~presented~~loan ~~(in~~size ~~millions,~~during ~~except~~this ~~percentage):~~time.

	Year Ended December 31,
	2023				2022				2021
	Amount		%		Amount		%		Amount		%
AA	$	288.8	13	%	$	460.3	14	%	$	246.2	13	%
A	293.8		14	%	507.0		15	%	373.8		19	%
B	563.0		26	%	601.3		18	%	318.8		16	%
C	304.1		14	%	410.0		12	%	245.8		14	%
D	227.6		11	%	300.2		9	%	104.0		5	%
E	268.7		12	%	338.3		10	%	35.7		2	%
HR	21.7		1	%	29.4		1	%	0.9		—	%
Other (1)	196.4		9	%	693.9		21	%	621.8		32	%
Total	$	2,164.1	100	%	$	3,340.4	100	%	$	1,947.0	101	%
(1) Represents personal loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings.

Personal loan origination volume by Prosper Rating was as follows for the periods presented (in millions, except percentages):

For the year ended December 31, 2023, compared to 2022, the mix of personal loan originations on the Prosper platform reflects a significant decrease in investor appetite for whole loan purchases under the current economic environment, specifically for personal loans not assigned Prosper ratings. These personal loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors.


	Year Ended December 31,
	2024				2023				2022
	Amount		%		Amount		%		Amount		%

AA	$	298.3	13	%	$	288.8	13	%	$	460.3	14	%
A	374.2		17	%	293.8		14	%	507.0		15	%
B	479.7		22	%	563.0		26	%	601.3		18	%
C	223.3		10	%	304.1		14	%	410.0		12	%
D	212.3		9	%	227.6		11	%	300.2		9	%
E	318.6		14	%	268.7		12	%	338.3		10	%
HR	13.1		1	%	21.7		1	%	29.4		1	%
Other (1)	323.8		14	%	196.4		9	%	693.9		21	%
Total	$	2,243.3	100	%	$	2,164.1	100	%	$	3,340.4	100	%
(1) Represents personal loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings.

46For the year ended December 31, 2024, compared to 2023, the total and mix of personal loan originations on the Prosper platform reflects decreased originations for loans rated B, C, and D, offset by increased originations for loans rated AA, A, and E along with personal loans not assigned Prosper ratings. Beginning in the third quarter of 2024, the Prosper platform ceased originations for loans rated HR given limited investor demand for this rating. These loans not assigned Prosper ratings are sold only to institutional investors based on specific underwriting criteria and custom risk models developed by those investors.

~~Whole Loans Outstanding~~45

WePersonal ~~sell Borrower Loans through our Whole~~ Loan ~~Channel,~~Serviced Portfolio and ~~the outstanding balance of these personal loans serves as a primary driver of our Servicing Assets.~~ Whole ~~loans~~Loans outstanding decreased $0.2 billion, or 5%, from December 31, 2022 to December 31, 2023. This decrease is primarily due to decreased year-over-year personal loan originations, as discussed above, as well as the decrease in purchases of personal loans through our consolidated warehouse trusts.Outstanding

Our personal loan serviced portfolio consists of all Borrower Loans that we service both through the Note and Whole Loan Channels. Borrower Loans funded through the Whole Loan Channels include loans that we hold in consolidated trusts, as well as those sold to third parties. Our personal loan serviced portfolio decreased $26.4 million, or 1%, from December 31, 2023 to December 31, 2024. This decrease is primarily due to a reduction in personal loans purchased through our two consolidated warehouse trusts, which we terminated in the fourth quarter of 2023 and the first quarter of 2024, respectively, as well as a decrease in the balance of loans originated through our Note channel, partially offset by the year-over-year increase in originations discussed above.

The outstanding balance of Borrower Loans sold through our Whole Loan Channel serves as a primary driver of our Servicing Assets. Whole loans outstanding increased $16.4 million, or less than 1%, from December 31, 2023 to December 31, 2024 due primarily to the year-over-year increase in originations discussed above.

Prosper Credit Card Portfolio

The Credit Card portfolio consists of the outstanding principal of all Prosper-branded Credit Cards originated through our partnership with Coastal Community Bank (“Coastal”). From December 31, 2023 to December 31, 2024, the principal balance of the Credit Card portfolio increased $108.1 million, or 38%, due to increases in active Credit Cards and cardholder spend during this time.

In November 2024, the Company completed its first securitization of Credit Card receivables from the Prosper Credit Card portfolio, which is more fully described in Notes 5 and 7 of the accompanying consolidated financial statements.

Net (Loss) Income

See the section titled “Results of Operations” below, for the discussion on significant changes in Net (Loss) Income year-over-year.

Results of Operations

Overview

The following table summarizes our net (loss) income for the years ended December 31, 2024, 2023 and 2022 (in thousands, except percentage):

Years Ended December 31,

2023

2022

Change

% Change

2022

2021

Change

% Change

2024

2023

Change

% Change

2023

2022

Change

% Change

Total Net Revenues

~~137~~173,~~700~~355

~~199~~137,~~881~~700

~~(62~~35,~~181)~~655

~~(31)~~26

~~199~~137,~~881~~700

~~144~~199,~~626~~881

55(62,~~255~~181)

38(31)

Total Expenses

~~244~~227,~~084~~318

~~129~~244,~~004~~084

~~115~~(16,~~080~~766)

89(7)

~~129~~244,~~004~~084

~~282~~129,~~896~~004

~~(153~~115,~~892)~~080

~~(54)~~89

Net (Loss) Income Before Income Taxes

(~~106~~53,~~384~~963)

70(106,~~877~~384)

~~(177~~52,~~261)~~421

~~n/m~~49

70(106,~~877~~384)

~~(138~~70,~~270)~~877

~~209~~(177,~~147~~261)

n/m

Income Tax Expense

(78116)

(~~295~~78)

~~217~~(38)

~~(74)~~49

(~~295~~78)

(71295)

~~(224)~~217

~~315~~(74)

Net (Loss) Income

(~~106~~54,~~462~~079)

70(106,~~582~~462)

~~(177~~52,~~044)~~383

~~n/m~~49

70(106,~~582~~462)

~~(138~~70,~~341)~~582

~~208~~(177,~~923~~044)

n/m

n/m: not meaningful

Total Net Revenues for the year ended December 31, ~~2023~~2024, ~~decreased~~increased $6235.27 million, or 3126%, as compared to the year ended December 31, ~~2022~~2023. The ~~decrease~~increase was largely attributable to a $3465.9 8 million ~~decrease~~increase in Transaction Fees, Net, due to a revised WebBank transaction fee schedule starting in the ~~decrease~~fourth quarter of 2023 and further modified in June 2024, as well as the higher personal loan ~~originations~~origination volume (in dollars) during this time, as discussed above. ~~Additionally,~~There ~~Total~~was also a $7.7 million increase in Servicing Fees, Net ~~Revenues~~due ~~from~~primarily ~~Change~~to changes in ~~Fair~~the ~~Value~~fair value of ~~Financial~~the ~~Instruments~~Credit Card servicing obligation, ~~Net~~resulting ~~decreased~~largely ~~$13.2~~from ~~million~~(a) ~~when~~a ~~compared~~change toin ~~2022,~~estimate ~~due~~applied ~~primarily~~in to2024 ~~higher~~related ~~delinquencies~~to ~~and~~the ~~charge-offs~~discount ofrate ~~Loans~~applied ~~Held~~to ~~for~~the ~~Sale~~cash ~~and~~flows ~~securitized~~associated ~~Borrower~~with ~~Loans~~that obligation, as ~~the~~well ~~average~~as ~~outstanding~~(b) ~~balance~~the securitization of ~~these~~approximately ~~loans~~25% ~~has~~of ~~increased~~the ~~from~~unpaid ~~the~~principal ~~prior~~of ~~year.~~Credit ~~Higher~~Card ~~interest~~receivables ~~rates~~in ~~have~~November ~~also~~2024, ~~led~~as tono ~~negative~~servicing ~~fair~~obligation ~~value~~is ~~adjustments~~recognized on ~~these~~those ~~loans~~consolidated ~~held~~receivables. Additionally, Change in ~~consolidated~~Fair ~~warehouse~~Value ~~and~~of ~~securitization~~Financial ~~trusts.~~Instruments ~~These~~contributed ~~negative~~a ~~fair~~$1.2 million ~~value~~increase ~~adjustments~~to ~~were~~total ~~partially~~Net ~~offset~~Revenues, byprimarily due to an increase in the fair value ~~gains~~ of ~~$11.4~~our ~~million~~consolidated onwarehouse ~~the~~and ~~Credit~~securitization ~~Card~~loans ~~Derivative~~due asto ~~compared~~lower tointerest ~~the~~rates ~~prior~~and ~~year~~reduced ~~due~~delinquencies toand ~~the~~charge-offs, ~~overall~~partially ~~growth~~offset inby ~~the~~reduced ~~underlying~~fair value gains and increased charge-offs within our Credit Card portfolio. ~~There~~These ~~was~~increases ~~also~~were partially offset by a $1132.3 9 million decrease from (Loss) ~~Gain~~ on Sale of Borrower Loans, due primarily to additional incentives provided to whole loan investors ~~(“incentives”)~~during ~~driven~~this ~~by market volatility and incentives offered by competitors, as well as a decrease in whole loan originations from the prior year~~time. Finally, there was a $27.6 7 million decrease in Total Interest Income (Expense), Net, due inprimarily ~~part~~ to ~~accelerated~~a ~~debt~~decrease ~~issuance~~in ~~costs recognized upon~~ the ~~termination of the PWIIT Warehouse Line in September 2023 (see Note 11, Debt), as well as increased Warehouse Line interest expense due to higher interest rates and increased~~ average outstanding principal balance of ~~whole~~ loans ~~through~~held ~~our~~in consolidated warehouse ~~trusts~~and ~~for~~securitization ~~the past year~~trusts.

Total expenses for the year ended December 31, 2023 increased $115.1 million as compared to the year ended December 31, 2022, which is primarily due to the Change in Fair Value of Convertible Preferred Stock Warrants, which is in turn driven by changes in the fair value of the underlying Convertible Preferred Stock. Specifically, the loss for the year ended December 31, 2023 totals $48.7 million, which compares to a gain of $84.6 million for 2022, a change of $133.3 million. Total Expenses also increased due to the one-time $8.6 million Gain on Forgiveness of PPP Loan in 2022, as the U.S. Small Business Administration (“SBA”) formally forgave our Paycheck Protection Program (“PPP”) loan in March 2022 (Note 11). We also incurred $12.3 million in Interest Expense for the year ended December 31, 2023 on the Term Loan we closed in November 2022 (Note 11). Only $1.5 million in Interest Expense was incurred on that Term Loan in 2022. These increases were partially offset by a combined $36.2 million decrease in Origination and Servicing, Sales and Marketing and General and Administrative expenses, as costs decreased in response to lower personal loan originations. Accordingly, the net loss for the year ended December 31, 2023 increased $177.0 million when compared to the net income generated for the year ended December 31, 2022.46

47Total expenses for the year ended December 31, 2024, decreased $16.8 million, or 7%, as compared to the year ended December 31, 2023, which is primarily due to a combined $14.0 million decrease in Origination and Servicing expenses, Sales and Marketing expenses and General and Administrative expenses, primarily due to reduced compensation and marketing costs. The majority of the remaining decrease is attributable to the Change in Fair Value of Convertible Preferred Stock Warrants, which is in turn driven by changes in the fair value of the underlying Convertible Preferred Stock. Specifically, the loss for the year ended December 31, 2024 totals $46.2 million, which compares to a loss of $48.7 million for 2023, a change of $2.5 million. Accordingly, the net loss for the year ended December 31, 2024 decreased $52.4 million when compared to the net loss for the year ended December 31, 2023.

Revenues

The following table summarizes our revenues for the years ended December 31, 2024, 2023 and 2022 (in thousands, except percentages):

	Years Ended December 31,
	2023		2022		Change		% Change		2022		2021		Change		% Change
	2024		2023		Change		% Change		2023		2022		Change		% Change
Operating Revenues:
Transaction Fees, Net	$	~~127~~193,~~838~~588	$	~~162~~127,~~742~~838	$	~~(34~~65,~~904)~~750	~~(21)~~51	%	$	~~162~~127,~~742~~838	$	89162,~~364~~742	$	73(34,~~378~~904)	82(21)	%
Servicing Fees, Net	1523,~~364~~026		15,~~113~~364		~~251~~7,662		250	%	15,~~113~~364		15,~~024~~113		89251		12	%
(Loss) Gain on Sale of Borrower Loans	(12,380)		(1,039)		(11,341)		n/m		(1,039)		7,196		(8,235)		n/m
Loss on Sale of Borrower Loans	(45,316)		(12,380)		(32,936)		(266)	%	(12,380)		(1,039)		(11,341)		n/m
Other Revenues	67,~~108~~773		6,~~452~~108		~~(344)~~1,665		~~(5)~~27	%	6,~~452~~108		36,~~992~~452		~~2,460~~(344)		62(5)	%
Total Operating Revenues	~~136~~179,~~930~~071		~~183~~136,~~268~~930		~~(46~~42,~~338)~~141		~~(25)~~31	%	~~183~~136,~~268~~930		~~115~~183,~~576~~268		67(46,~~692~~338)		59(25)	%
Interest Income (Expense):
Interest Income on Borrower Loans and Loans Held for Sale	115,663		86,350		29,313		34	%	86,350		83,107		3,243		4	%
Interest Income on Financial Instruments	89,849		115,663		(25,814)		(22)	%	115,663		86,350		29,313		34	%
Interest Expense on Financial Instruments	(9173,~~983~~826)		(6091,~~025~~983)		~~(31~~18,~~958)~~157		53(20)	%	(6091,~~025~~983)		(5060,~~816~~025)		(931,~~209~~958)		1853	%
Total Interest Income, Net	2316,~~680~~023		2623,~~325~~680		(27,~~645~~657)		(1032)	%	2623,~~325~~680		3226,~~291~~325		(52,~~966~~645)		(1810)	%
Change in Fair Value of Financial Instruments	(2221,~~910~~739)		(922,~~712~~910)		~~(13~~1,~~198)~~171		~~(136)~~5	%	(922,~~712~~910)		(39,~~241~~712)		(613,~~471~~198)		(~~200~~136)	%
Total Net Revenues	$	~~137~~173,~~700~~355	$	~~199~~137,~~881~~700	$	~~(62~~35,~~181)~~655	~~(31)~~26	%	$	~~199~~137,~~881~~700	$	~~144~~199,~~626~~881	$	55(62,~~255~~181)	38(31)	%

n/m: not meaningful

Transaction Fees, Net

We earn a transaction fee upon the successful origination of all Borrower Loans facilitated through our marketplace. Specifically, we receive payments from WebBank as compensation for the activities we perform on behalf of WebBank. Our fee is determined by the term and credit grade of the Borrower Loans that we facilitate on our marketplace and WebBank originates. We record the transaction fee revenue net of any fees paid by us to WebBank.

We also earn various program fees from our Credit Card product, such as interchange fees, annual fees and late fees, and broker fees from our Home Equity ~~Products.~~products, ~~These~~all ~~program~~of ~~and~~which ~~broker fees~~ are recorded within Transaction Fees, Net.

Transaction Fees ~~decreased~~increased by $3465.98 million, or 2151%, for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023. This ~~decrease~~increase is ~~generally~~primarily ~~consistent~~due ~~with~~to the ~~lower~~revisions ~~personal~~to ~~loan origination volume discussed above, with some offsetting benefit from~~ the ~~revised~~ WebBank transaction fee schedule starting in ~~the~~October ~~fourth~~2023, ~~quarter~~which ofwere ~~2023~~then further modified in June 2024. Under the revised WebBank transaction fee schedule, transaction fees now range from 1.00% to 79.99%, depending on the term and credit grade of the Borrower Loan, as compared to 1.0% to 5.0% under the previous schedule prior to October 2023. Transaction fees above 5.0% are refundable on a pro-rated basis upon the full prepayment of the related ~~personal~~Borrower ~~loan~~Loan prior to maturity under Utah law, where WebBank is domiciled, and thus the impact of these increased transaction fees is reduced by the expected refunds. ~~The~~In ~~decrease~~addition to the impact from the change in the transaction fee schedule, the increased 2024 personal loan origination volume discussed above drove a portion of the increase in Transaction Fees, Net. There was also ~~partially~~a ~~offset~~positive byimpact from continued growth in our Credit Card product, as we recognized approximately $1824.1 million in program fees under our Credit Card product ~~for~~in ~~the year ended December 31~~2024, ~~2023,~~ as compared to $718.0 1 million ~~for~~in ~~2022, an increase of $11~~2023.~~1 million.~~

Servicing Fees, Net

Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is generally set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The Servicing Fee compensates us for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, payments to investors and maintaining investors’ account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, in Servicing Fees, Net.

48In addition, we are contractually obligated to service the entire portfolio under our Credit Card product. Our banking partner, Coastal, pays us a servicing fee of 1.0% per annum of the daily outstanding principal balance of all cards designated as Coastal allocations. These allocations represented approximately 10% of the portfolio through March 31, 2024, but were reduced to 5% starting April 1, 2024 as a result of an amendment to the Program Agreement executed in March 2024. To the extent these contractual fees are less than the market servicing rate that would be required by a market participant to service the portfolio, a servicing obligation is recorded. We do not recognize a servicing asset or obligation related to any Credit Card receivables that are effectively consolidated on our balance sheet through the PMCC 2024-1 securitization transaction discussed in Note 5 of the accompanying consolidated financial statements. Changes to the net Credit Card servicing obligation are included in Servicing Fees, Net.

InFor ~~addition~~the year ended December 31, we2024, ~~are~~Servicing ~~contractually~~Fees, ~~obligated~~Net increased $7.7 million, or 50%, as compared to ~~service~~2023, primarily as a result of a $6.8 million increase from changes in the ~~entire~~fair ~~portfolio~~value ~~under~~of ~~our~~the Credit Card ~~product~~servicing obligation. ~~Our~~Approximately ~~banking~~$2.8 million ~~partner,~~of ~~Coastal,~~this ~~pays~~increase usis aattributable ~~servicing~~to ~~fee~~the derecognition of 1%servicing ~~per~~obligations ~~annum~~for ofCredit Card receivables securitized through the ~~daily~~PMCC ~~outstanding~~2024-1 ~~principal~~transaction ~~balance~~in November 2024. Additionally, a change in estimate related to the application of ~~all~~a ~~cards~~revised ~~designated~~discount asrate ~~Coastal~~to ~~allocations~~this (Credit Card servicing obligation was applied in 2024, resulting in a decrease in the related liability of approximately ~~10%~~$1.8 million as of December 31, 2024, thus increasing Servicing Fees, Net by the ~~portfolio)~~same amount for 2024. ToThe ~~the~~remaining ~~extent~~increase ~~that~~from ~~these~~changes ~~contractual~~in ~~fees~~the ~~are~~fair ~~less~~value ~~than~~of the ~~market~~Credit Card servicing ~~rate~~obligation ~~that~~is ~~would~~primarily berelated ~~required~~to byan aoverall ~~market~~decrease ~~participant~~in tothe ~~service~~growth rate of the ~~entire~~Credit Card portfolio from 2023 to 2024, which resulted in a ~~servicing~~corresponding ~~obligation~~reduction isin ~~recorded~~the rate of fair value changes. ~~Changes~~Collections tofees, ~~this~~net ~~servicing~~of ~~obligation~~collection ~~are~~agency ~~included~~expenses, debt sale fees and loan trailing fees combined for a $0.9 million increase in Servicing Fees, Net, in 2024, primarily due to the increase in the balance of whole loans and Credit Card receivables outstanding during this time.

~~For~~Loss ~~the~~on ~~year~~Sale ~~ended December 31, 2023, Servicing Fees, Net remained relatively flat year-over-year with an increase~~ of ~~$0.3~~Borrower million, or 2%. This increase is primarily due to a combined increase of $5.8 million in whole loan servicing revenues and debt sale fees during this period, as well as a $0.4 million increase in net loan trailing fees, due to the increase in the balance of whole loans outstanding. These increases were partially offset by a $3.5 million net decrease in collection fees, generally due to an increase in charge-offs and additional spend on collection agencies compared to 2022. Additionally, there was a $2.3 million increase in the net Credit Card servicing obligation (reducing Servicing Fees) for the year ended December 31, 2023, as compared to 2022, due to the growth in the portfolio. Loans

(Loss) ~~Gain~~on Sale of Borrower Loans consists of incentives provided at the time Borrower Loans are sold through the Whole Loan Channel, net of any gains recognized on those sales, primarily related to the recognition of additional Servicing Assets. Since 2022, due to market volatility and incentives offered by competitors, we have provided additional incentives to our investors. For the year ended December 31, 2024, these incentives increased $35.3 million from the prior year. Excluding the impact of these incentives, the remaining change in Loss on Sale of Borrower Loans was an increased gain of $2.4 million for the year ended December 31, 2024, as compared to 2023, primarily due to the recognition of additional Servicing Assets upon the sale of whole loans, as well as a decrease in the adequate compensation assumption used to value the Servicing Assets from 64.8 bps to 63.3 bps, starting in the third quarter of 2023.

(Loss) Gain on Sale of Borrower Loans consists of net (losses) gains on Borrower Loans sold through the Whole Loan Channel, net of any incentives provided at the time of sale. Starting in the second half of 2022, due to market volatility and incentives offered by competitors, we provided additional incentives to our whole loan investors. For the year ended December 31, 2023, these incentives increased $7.2 million from the prior year. Excluding the impact of these incentives, the remaining decrease in (Loss) Gain on Sale of Borrower Loans of $4.1 million for the year ended December 31, 2023, as compared to 2022, was primarily due to decrease in the volume of whole loans sold due to lower personal loan originations, as discussed above.

Other Revenues

Other Revenues consists primarily of credit referral ~~and incentive~~ fees. Credit referral fees are earned from partner companies for the referral of customers on our platform, ~~while~~and ~~incentive~~accounted ~~fees~~for ~~are~~the ~~earned~~majority ~~from~~of ~~partner~~the ~~companies through our incentive programs. The~~ $01.37 million, orincrease ~~5%, decrease~~ in Other Revenues for the year ended December 31, ~~2023~~2024 as compared to ~~2022 was primarily related to incentive fees due to a specific program that terminated in June 2022~~2023.

Interest Income on ~~Borrower~~Financial ~~Loans~~Instruments and ~~Loans Held for Sale and~~ Interest Expense on Financial Instruments

We recognize Interest Income on Borrower Loans, ~~and~~ Loans Held for Sale and Receivable from Credit Card Partner (consisting of the underlying securitized Credit Card receivables) using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record interest expense on the corresponding fractional Notes, at Fair Value, Notes Issued by Securitization ~~Trust~~Trusts and Warehouse Lines based on the contractual interest rates. The interest rate on fractional Notes, at Fair Value is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans. Additionally, Interest Expense associated with Term Loan proceeds used to purchase Loans Held for Sale through our Warehouse Lines is allocated to Net Interest Income. For the year ended December 31, 2023, we allocated $0.2 million in Interest Expense on the Term Loan to Net Interest Income.

The decrease of $27.67 million, or 1032%, in Total Interest Income (Expense) for the year ended December 31, ~~2023~~2024 as compared to ~~2022~~2023 was primarily due to ~~the~~a combined $110.9 7 million ofdecrease ~~accelerated~~in ~~debt issuance costs recorded upon the termination of the PWIIT Warehouse Line, combined with a~~ net ~~$4.8~~interest ~~million~~income ~~decrease~~generated from (i) Loans Held for Sale ~~and Warehouse Lines~~, asless ~~market~~ interest ~~rates~~expense ~~drove~~incurred anon ~~increase~~the inWarehouse ~~the~~Lines, ~~cost~~and of(ii) ~~borrowing~~securitized onBorrower ~~the~~Loans, ~~variable~~less interest ~~Warehouse~~expense ~~Lines.~~incurred ~~These~~on ~~were~~Notes ~~partially~~Issued ~~offset~~ by ~~additional~~Securitization ~~net~~Trust, ~~interest~~during ~~income~~this ~~from~~period. ~~securitized~~This ~~Borrower~~decrease ~~Loans~~is ~~and~~reflective ~~Notes~~ of ~~$3.0~~the ~~million,~~reduced ~~collections~~average ~~accounts~~outstanding balance of ~~$0.9~~loans ~~million~~held ~~and~~in ~~Borrower~~these ~~Loans~~consolidated ~~funded~~trusts ~~through~~year-over-year, as well as the ~~Note~~related ~~Channel~~decrease ofin ~~$0.4~~the ~~million.~~associated

liabilities. There was also a combined $0.7 million decrease in net interest income generated from fractional Borrower Loans and Notes, as well as the Borrower Loans we have purchased directly, due to a decrease in the average outstanding balance of these loans during this time. These decreases were partially offset by a $3.7 million increase in net interest income generated from the Receivable from Credit Card Partner, less interest expense incurred on the related Notes Issued by Securitization Trust, following the PMCC 2024-1 securitization in November 2024.

Change in Fair Value of Financial Instruments

We record Borrower Loans, Loans Held for Sale, Notes, ~~and~~ the Credit Card Derivative ~~(see~~and ~~Note~~Receivable 5from ofCredit ~~the~~Card ~~accompanying~~Partner ~~consolidated financial statements)~~ at fair value., ~~Changes~~and changes in the fair ~~value~~values of ~~Borrower~~these ~~Loans~~financial ~~funded~~instruments ~~through~~within ~~the~~Change ~~Note Channel are largely offset by the changes~~ in ~~fair~~Fair ~~value~~Value of ~~the~~Financial ~~Notes~~Instruments ~~due to their borrower payment-dependent structure. Our obligation to pay principal and interest~~ on ~~Notes~~our isstatements ~~equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net~~ of ~~the servicing fee, which is generally 1~~operations.~~0% of the outstanding balance.~~

WePersonal use Warehouse Lines to finance the purchase of Loans Held for Sale for the purpose of earning Net Interest Income and contributing to securitization transactions. Loans Held for Sale consist primarily of loans held in warehouse trusts. Changes in the fair value of Loans Held for Sale are not offset by changes in the fair value of Warehouse Lines because Warehouse Lines are carried at amortized cost. See Note 11 of the accompanying consolidated financial statements for more details on Warehouse Lines.Loan

Changes in the fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the Notes due to their borrower payment-dependent structure. Our obligation to pay principal and interest on Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of the servicing fee, which is generally 1.0% of the outstanding balance.

We used Warehouse Lines to finance the purchase of Loans Held for Sale for the purpose of earning net interest income and contributing to securitization transactions. Loans Held for Sale consisted primarily of loans held in warehouse trusts. Changes in the fair value of Loans Held for Sale were not offset by changes in the fair value of Warehouse Lines because Warehouse Lines were carried at amortized cost. As discussed below and in Note 11 of the accompanying consolidated financial statements, we terminated our two existing Warehouse Lines in September 2023 and March 2024, respectively, and securitized the related Loans Held for Sale. Because of this, these loans are now classified as Borrower Loans on our consolidated balance sheets.

In September 2023 and March 2024, we sponsored and consolidated two Personal Loan securitization transactions, PMIT 2023-1 and PMIT 2024-1, respectively, with loans that were previously funded through our PWIIT and PWIT Warehouse Lines, respectively. Refer to Note 7, Securitization, of the accompanying consolidated financial statements for additional information on these securitization transactions. We expect that changes in the fair value of Borrower Loans held by PMIT 2023-1 and PMIT 2024-1 will be negative due to delinquencies and charge-offs, but they could ultimately be negative or positive due to changes in fair value assumptions, such as expected credit performance, prepayment rates and implied market discount rates. Additionally, the impact from fair value adjustments on these securitized Borrower Loans may lessen as they season and the outstanding principal balances decrease. Notes issued by PMIT 2023-1 and PMIT 2024-1 are carried at amortized cost on the accompanying consolidated balance sheets, and thus do not impact the Change in Fair Value of Financial Instruments.

We earn interest income on personal loans held in securitization trusts during the period we own or consolidate the loans, which partially offsets changes in the fair value of these loans. The following table illustrates the weighted-average composition of the loans held in consolidated securitization trusts by Prosper Rating for the periods presented, which is an indicator of their credit quality:


	Year Ended December 31,
	2024		2023
Borrower Loans - Securitization(1):
AA	26	%	24	%
A	28	%	26	%
B	23	%	23	%
C	12	%	13	%
D	5	%	7	%
E	5	%	6	%
HR	1	%	1	%
Total	100	%	100	%

(1) The percentages are calculated using the weighted-average of month-end principal balances of Borrower Loans by Prosper Rating.

Fair values of Borrower Loans, Loans Held for Sale and Notes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The key assumptions used include default and prepayment rates derived primarily from historical performance, and discount rates based on estimates of the rates of return that market investors would require when investing in other financial instruments with similar characteristics.

InCredit September 2023, we sponsored and consolidated a securitization transaction, the PMIT 2023-1 Transaction, with loans that were previously funded through our PWIIT Warehouse Line. Refer also to Note 7, Securitization, of the accompanying consolidated financial statements for additional information on this securitization transaction. We expect that changes in the fair value of Borrower Loans held by PMIT 2023-1 will be negative due to delinquencies and charge-offs, but they could ultimately be negative or positive due to changes in fair value assumptions, such as expected credit performance, prepayment rates and implied market discount rates. Notes issued by PMIT 2023-1 are carried at amortized cost on the accompanying condensed consolidated balance sheet, and thus do not impact the Change in Fair Value of Financial Instruments.Card

WeThe ~~earn~~Credit ~~interest~~Card ~~income~~Derivative onis ~~loans~~recorded ~~held~~at infair ~~warehouse~~value ~~trusts~~and ~~during~~is ~~the~~primarily ~~period~~reflective weof ~~own~~discounted orfuture ~~consolidate~~cash flows from certain features of our Credit Card program that were determined to meet the ~~loans~~definition of freestanding derivatives, ~~which~~including ~~partially~~interest ~~offsets~~income, ~~changes~~program infees ~~the~~paid ~~fair~~to ~~value~~our ofbanking ~~those~~partner ~~loans~~Coastal, credit losses and fraud losses. ~~The~~These ~~following~~cash ~~tables~~flows ~~illustrate~~are ~~the~~estimated ~~composition~~based upon a set of valuation assumptions, including default and prepayment rates derived primarily from comparable companies and our own historical performance, and discount rates based on estimates of the ~~loans~~rates ~~held~~of return that investors would require when investing in ~~warehouse~~other ~~and~~financial ~~securitization~~instruments ~~trusts~~with bysimilar ~~Prosper~~characteristics. ~~Rating,~~We ~~which~~also isrecord anthe ~~indicator~~net impact of ~~their~~realized ~~credit~~gains ~~quality:~~and losses under the Credit Card Derivative in Change in Fair Value of Financial Instruments.

	Years Ended December 31,
	2023		2022
Loans Held for Sale(1):
AA	28	%	28	%
A	27	%	27	%
B	22	%	22	%
C	12	%	13	%
D	6	%	6	%
E	4	%	4	%
HR	1	%	—	%
Grand Total	100	%	100	%
(1) The percentages are calculated as the weighted average of month-end principal balances of Loans Held for Sale by Prosper Rating.

In November 2024, we sponsored and consolidated a Credit Card securitization transaction, PMCC 2024-1, with existing Credit Card receivables that were previously accounted for through our Credit Card Derivative. See Notes 5 and 7 of the accompanying consolidated financial statements for further details on both the Credit Card Derivative and PMCC 2024-1. We fully consolidate PMCC 2024-1 as a VIE, as it has insufficient equity at risk and we determined that we were its primary beneficiary. Based on an analysis of the facts and circumstances surrounding the transaction, it was determined that the transfer of the Credit Card receivables from Coastal to PMCC 2024-1 did not meet the sales or participating interest criteria under Accounting Standards Codification (“ASC”) 860, Transfers and Servicing, and thus could not be recognized on our consolidated balance sheet. As a result, we record a secured Receivable from Credit Card Partner, which we have elected to present at fair value on our balance sheet. Receivable from Credit Card Partner is secured by and effectively mirrors the value of the underlying Credit Card receivables.

	Year Ended December 31, 2023
Borrower Loans - Securitization(2):
AA	24	%
A	26	%
B	23	%
C	13	%
D	7	%
E	6	%
HR	1	%
Total	100	%
(2) The percentages are calculated using the weighted-average of month-end principal balances of Borrower Loans by Prosper Rating.

As the sole sponsor of PMCC 2024-1, we are entitled to any residual cash flows it generates, and estimate the fair value of that residual interest using a discounted cash flow analysis based upon valuation assumptions generally similar to those used to value the Credit Card Derivative, adjusted to reflect the specific characteristics of the securitized Credit Card receivables underlying the Receivable from Credit Card Partner. That residual interest fair value is then added to the securitization advance rate applied to the outstanding balance of the Credit Card receivables to calculate the estimated fair value of Receivable from Credit Card Partner. Consistent with securitized Borrower Loans, Notes issued by PMCC 2024-1 are carried at amortized cost on the accompanying consolidated balance sheet, and thus do not impact the Change in Fair Value of Financial Instruments.

~~Fair~~For ~~values~~both ofthe ~~Borrower~~Credit ~~Loans,~~Card ~~Loans~~Derivative ~~Held for Sale~~ and ~~Notes~~Receivable ~~are~~from ~~estimated~~Credit ~~using~~Card ~~discounted~~Partner, ~~cash~~changes ~~flow~~in ~~methodologies~~the ~~based~~fair ~~upon~~value ashould ~~set~~generally offluctuate ~~valuation~~in ~~assumptions.~~line ~~The~~with ~~key~~changes ~~assumptions~~in ~~used~~the ~~include~~underlying ~~default~~portfolio and ~~prepayment~~charge-off ~~rates derived primarily from historical performance~~levels, ~~and~~but ~~discount~~could ~~rates~~also ~~based~~be onimpacted ~~estimates~~by ofchanges ~~the rates of return that investors would require when investing~~ in ~~other~~fair ~~financial~~value ~~instruments with similar characteristics. For the years ended December 31~~assumptions, ~~2023~~such ~~and~~as ~~2022,~~expected ~~the~~credit ~~Change in Fair Value of Financial Instruments~~performance, ~~Net~~prepayment ~~were~~rates ~~losses~~and ofimplied ~~$22.9~~market ~~million~~discount ~~and $9~~rates.~~7 million, respectively.~~

Fluctuation Analysis

For the years ended December 31, 2024 and 2023, the Change in Fair Value of Financial Instruments, Net was a loss of $21.7 million and a loss of $22.9 million, respectively. The decrease in the loss for the year ended December 31, 2024 as compared to the prior year is largely driven by the impact of securitized Borrower Loans and Loans Held for Sale, due to lower estimated loss rates and an overall decrease in the average balance of loans held in consolidation warehouse and securitization trusts year-over-year, as these loans continue to amortize. For securitized Borrower Loans and Loans Held for Sale, the combined loss from changes in fair value for the year ended December 31, 2024 was $22.1 million, due to $7.5 million in gains from fair value adjustments and $29.6 million in net charge-offs. For 2023, the loss from changes in fair value was a combined $47.4 million, due to $16.3 million in losses from fair value adjustments and $31.0 million in net charge-offs.

We also held a swaption to limit our exposure to fluctuations in SOFR due to our PWIT Warehouse Line, which consisted of two classes of loans that bore interest at SOFR plus a defined spread. This swaption was terminated on March 28, 2024, upon the repayment of our PWIT Warehouse Line in conjunction with the PMIT 2024-1 securitization. The change in fair value of the swaption was immaterial for the year ended December 31, 2024 and a loss of $1.2 million for 2023, resulting in a $1.2 million increase in revenues from Change in Fair Value of Financial Instruments during this time.

For fractional Borrower Loans and Notes (as well as the population of whole loans that are owned directly by PFL), the net impact to the Change in Fair Value of Financial Instruments was a $1.9 million loss for the year ended December 31, 2024 due to the borrower payment-dependent structure described above, offset by certain timing factors related to the receipt of borrower payments. For 2023, the net impact from these fractional Borrower Loans, Notes and whole loans owned by PFL was a $0.1 million gain.

~~The~~Fair ~~increase~~value changes related to future cash flows underlying the Credit Card Derivative resulted in a gain of $1.9 million and the net impact of realized transactions was a loss of $9.1 million for the year ended December 31, ~~2023~~2024. asThis ~~compared~~compares to the prior year, iswhen ~~largely~~fair ~~driven~~value bychanges ~~Loans~~related ~~Held~~to ~~for~~projected ~~Sale~~future cash flows were $26.1 million, ~~due~~while tothe ~~higher~~net ~~delinquencies~~impact ~~and~~of ~~charge-offs~~realized ~~combined~~transactions ~~with~~was ~~the~~a ~~impact~~loss ~~from~~of ~~higher~~$0.6 million. ~~interest~~This decrease in 2024 is primarily reflective of increased charge-offs and estimated loss rates, as well as the ~~outstanding~~reduced ~~balance~~growth rate of ~~Loans~~the ~~Held~~underlying ~~for~~Credit ~~Sale~~Card ~~continued~~portfolio. Additionally, the Company recognized an $11.4 million reduction to ~~increase~~the ~~until~~Credit Card Derivative upon the ~~PMIT~~close ~~2023~~of the PMCC 2024-1 ~~Transaction~~securitization ~~was~~on ~~completed~~November on1, ~~September~~2024, when approximately 25,% ~~2023.~~of ~~The~~the ~~loss~~outstanding ~~from~~portfolio ~~changes~~receivables inwere ~~fair~~transferred ~~value~~to ~~for~~the securitization. These decreases were partially offset by the ~~year~~impact ~~ended~~of ~~December~~two ~~31,~~changes ~~2023~~in ~~was~~estimate ~~$39~~implemented in 2024.3 ~~million~~Specifically, ~~due~~the first of the changes related to the application of a ~~$11.3~~single ~~million~~discount ~~loss~~rate onto all components of the Credit Card Derivative and resulted in a fair value ~~and~~increase of approximately $286.0 8 million infor ~~net~~the ~~charge-offs~~year ended December 31, 2024. ~~This~~The ~~compares~~second change related to ~~2022,~~the ~~when~~implementation ~~there~~of ~~was~~forward ainterest ~~loss~~rate ~~from~~and ~~changes~~attrition projections for cardholders enrolled in ~~fair~~hardship ~~value~~and ofsettlement ~~$25.0~~programs ~~million~~that were launched in the second quarter of 2024, ~~due~~separate tofrom athe ~~$13.2~~base ~~million~~cardholder ~~loss~~population, onand resulted in a fair value ~~and~~increase of approximately $114.8 5 million infor ~~net~~the ~~charge-offs~~year ended December 31, 2024.

For ~~fractional Borrower Loans and Notes,~~ the ~~net~~Receivable ~~impact~~from toCredit ~~the~~Card ~~Change~~Partner, inwe ~~Fair~~recognized ~~Value of Financial Instruments was~~ a $09.1 5 million gain ~~for~~from ~~the~~changes ~~year~~in ~~ended~~fair ~~December 31~~value, ~~2023,~~consisting ~~due~~of to$10.3 million ~~the~~in ~~borrower~~gains ~~payment-dependent~~from ~~structure~~projected ~~described~~future ~~above.~~cash ~~In 2022~~flows, ~~the~~less ~~net~~$0.9 million ~~impact~~in ~~from~~charge-offs. ~~these~~The ~~fractional~~projected ~~Borrower~~cash ~~Loans~~flow ~~and~~gains ~~Notes~~are ~~was~~inclusive of a gain of $07.4 5 million ~~gain.~~at ~~For~~the ~~Borrower~~closing ~~Loans~~of ~~held~~the inPMCC ~~PMIT 2023~~2024-1, ~~the~~securitization ~~loss~~transaction ~~from~~on ~~changes~~November in1, ~~fair~~2024, ~~value~~which ~~was~~partially ~~$8.1~~offset ~~million for~~ the ~~year~~reduction ~~ended~~to ~~December 31,~~the ~~2023~~Credit ~~and~~Card ~~related~~Derivative ~~primarily~~on tothe ~~delinquencies~~same ~~and~~day ~~charge-offs~~discussed above.

The following table details the change in fair value of our financial instruments for the years ended December 31, 2024, 2023 and 2022, respectively (in thousands):

The Credit Card Derivative is recorded at fair value and is primarily reflective of discounted future cash flows from certain features of our Credit Card program that were determined to meet the definition of freestanding derivatives, including interest income, program fees paid to our banking partner Coastal, credit losses and fraud losses. These cash flows are estimated based upon a set of valuation assumptions, including default and prepayment rates derived primarily from comparable companies and our own historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. See Note 5 of the accompanying consolidated financial statements for further details.


	Years Ended December 31,
	2024		2023		2022
Assets:
Borrower Loans	$	(49,271)	$	(48,387)	$	(30,436)
Loans Held for Sale	(2,263)		(39,269)		(24,967)
Credit Card Derivative (includes gains and losses from settled transactions)	(7,247)		25,506		14,079
Receivable from Credit Card Partner	9,462		—		—
SOFR rate swaption (included in Prepaid and Other Assets)	37		(1,163)		782

Liabilities:
Notes	27,543		40,403		30,830
Total	$	(21,739)	$	(22,910)	$	(9,712)

Fair value changes related to future cash flows underlying the Credit Card Derivative resulted in a gain of $26.1 million and the net impact of realized transactions was a loss of $0.6 million for the year ended December 31, 2023. This compares to the prior year, when fair value changes related to projected future cash flows were $9.8 million, while the net impact of realized transactions was a gain of $4.3 million. These fluctuations in gains and losses on the Credit Card Derivative for the year ended December 31, 2023, as compared to prior year, are largely reflective of the significant growth in the Credit Card portfolio, given that the Credit Card program was launched in December 2021, partially offset by increased charge-offs.

We also hold a swaption to limit our exposure to fluctuations in SOFR due to our PWIT Warehouse Line, which consists of two classes of loans that bear interest at SOFR plus a defined spread (see Note 11 for further information). The change in fair value of the swaption was a loss of $1.2 million and a gain of $0.8 million for the years ended December 31, 2023 and 2022, respectively. The decrease in the value of the swaption year-over-year is largely driven by an increase in the strike price of the swaption in 2023.

	Years Ended December 31,
	2023		2022		2021
Assets:
Borrower Loans	$	(48,387)	$	(30,436)	$	595
Loans Held for Sale	(39,269)		(24,967)		422
Credit Card Derivative (includes gains and losses from settled transactions)	25,506		14,079		—
SOFR rate swaption (included in Prepaid and Other Assets)	(1,163)		782		(58)
Liabilities:
Notes	40,403		30,830		1,910
Certificates Issued by Securitization Trust	—		—		(6,110)
Total	$	(22,910)	$	(9,712)	$	(3,241)

Expenses

The following table summarizes our expenses for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022 (dollar amounts in thousands):

	Years Ended December 31,
	2023		2022		$ Change		% Change		2022		2021		$ Change		% Change
	2024		2023		$ Change		% Change		2023		2022		$ Change		% Change
Expenses:
Origination and Servicing	$	4647,~~669~~628	$	5646,~~457~~669	$	~~(9,788)~~959	~~(17)~~2	%	$	5646,~~457~~669	$	3556,~~056~~457	$	21(9,~~401~~788)	61(17)	%
Sales and Marketing	5350,~~585~~638		8153,~~896~~585		(282,~~311~~947)		(355)	%	8153,~~896~~585		3581,~~065~~896		46(28,~~831~~311)		~~134~~(35)	%
General and Administrative - Research and Development	1914,~~069~~076		2019,~~670~~069		(14,~~601~~993)		(826)	%	2019,~~670~~069		1720,~~172~~670		3(1,~~498~~601)		20(8)	%
General and Administrative - Other	6659,~~464~~396		6266,~~988~~464		3(7,~~476~~068)		6(11)	%	6266,~~988~~464		5562,~~950~~988		73,~~038~~476		136	%
Change in Fair Value of Convertible Preferred Stock Warrants	4846,~~695~~208		~~(84~~48,~~595)~~695		~~133~~(2,~~290~~487)		~~n/m~~(5)	%	~~(84~~48,~~595)~~695		~~138~~(84,~~622~~595)		~~(223~~133,~~217)~~290		n/m
Gain on Forgiveness of PPP Loan	—		~~(8,604)~~—		~~8,604~~—		~~(100)~~n/a	%	~~(8,604)~~—		—(8,604)		(8,604)		~~n/a~~(100)	%
Loss on Deconsolidation of VIEs	—		—		—		n/a		—		1,494		(1,494)		(100)	%
Impairment of Right-of-Use Lease Assets	—		196		(196)		(100)	%	196		—		196		n/a
Impairment Expense	196		—		196		n/a		—		—		—		n/a
Interest Expense on Term Loan	13,124		12,265		859		7	%	12,265		1,527		10,738		703	%
Interest Expense on Term Loan	12,265		1,527		10,738		703	%	1,527		—		1,527		n/a
Other Income, Net	(3,752)		(2,859)		(893)		31	%	(2,859)		(1,335)		(1,524)		114	%
Other Income, Net	(2,859)		(1,335)		(1,524)		114	%	(1,335)		(463)		(872)		188	%
Total Expenses	$	227,318	$	244,084	$	(16,766)	(7)	%	$	244,084	$	129,004	$	115,080	89	%
Total Expenses	$	244,084	$	129,004	$	115,080	89	%	$	129,004	$	282,896	$	(153,892)	(54)	%

n/a: not applicable

n/m: not meaningful

The following table reflects full-time employees as of December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022 by functional area:

December 31,

2023

2022

2021

2024

2023

2022

Origination and Servicing

~~100~~97

~~166~~100

~~121~~166

Sales and Marketing

2832

3028

2030

General and Administrative - Research and Development

97102

~~104~~97

~~101~~104

General and Administrative - Other

~~179~~185

~~168~~179

~~142~~168

Total Headcount

~~404~~416

~~468~~404

~~384~~468

Origination and Servicing

Origination and Servicing costs consist primarily of salaries, benefits and stock-based compensation expense related to our capital markets, collections, customer support and payment processing employees and vendor costs associated with facilitating and servicing personal loans and our Credit Card product. The ~~decrease~~increase for the year ended December 31, ~~2023~~2024 of $91.80 million, or 172%, as compared to ~~2022~~2023 ~~was~~is primarily ~~due~~reflective toof a $95.0 7 million ~~decrease~~increase in ~~personal~~internal ~~loan servicing~~ and ~~origination~~third-party servicing costs, ~~consistent~~associated with ~~the~~our ~~decrease~~Credit inCard ~~personal~~product, ~~loan~~due ~~originations~~to ~~discussed~~the ~~above.~~continued ~~Additionally,~~growth ~~compensation~~of ~~costs~~the ~~decreased~~underlying portfolio, and a $4.0 .4 million, ~~driven~~increase ~~primarily~~in bydepreciation ~~decreased~~due ~~headcount,~~to ~~while~~the ~~software~~increase ~~and~~in ~~subscription~~the ~~costs~~balance ~~decreased~~of ~~$0.7~~internal-use ~~million~~software during this time. These ~~decreases~~ are partially offset by a $3.5 4 million ~~increase~~decrease in ~~third-party~~Personal Loan servicing and origination costs, ~~associated~~both internal and outsourced, as we have reduced these costs consistent with ~~our~~the ~~Credit~~overall ~~Card~~decrease ~~product~~in Person Loan originations since 2022, as reflected in the ~~underlying~~decrease in the Personal Loan serviced portfolio ~~continues~~discussed toabove. ~~grow~~Additionally, ~~and~~compensation acosts decreased $01.6 8 million, ~~increase~~driven inprimarily ~~depreciation~~by ~~due~~decreased toheadcount and the ~~increase~~elimination inof the ~~balance~~corporate ofbonus ~~internal-use~~accrual ~~software~~for ~~during~~the ~~this~~2023 ~~time~~fiscal year.

Sales and Marketing

Sales and Marketing costs consist primarily of affiliate marketing, search engine marketing, online and offline campaigns, email marketing, public relations and direct mail marketing, as well as compensation expenses such as wages, benefits and stock-based compensation for the employees who support these activities. For the year ended December 31, ~~2023~~2024, the decrease of $282.39 million, or 355%, from the prior year is due to an overall reduction in marketing and advertising costs,. ~~which~~This isincludes ~~generally~~a incombined ~~line with the~~ decrease in ~~personal~~digital, ~~loan~~direct ~~originations~~mail ~~during~~and ~~this~~email ~~time. This includes decreases in~~ marketing ~~partnership~~spend ~~costs~~ of $313.1 9 million, ~~digital~~partially ~~advertising~~offset ~~spend~~by ~~and email advertising costs of~~ a ~~combined~~ $21.3 7 million ~~and~~increase ~~direct-to-site~~in ~~advertising~~marketing ~~costs~~partnership ~~of $0~~costs.4 ~~million.~~ Additionally, outsourced marketing ~~consulting~~ costs decreased $0.3 2 million, ~~during~~in ~~this~~line ~~time.~~with ~~These~~the ~~decreases~~overall ~~were~~decrease ~~partially offset by a $5.4 million increase~~ in ~~direct~~marketing ~~mail~~and advertising costs. ~~Additionally~~Finally, compensation expense ~~increased~~decreased $0.6 5 million, ~~due~~driven primarily toby the ~~hiring~~elimination of ~~our~~the ~~new~~corporate ~~Chief~~bonus ~~Marketing~~accrual ~~Officer~~for inthe ~~May~~ 2023 fiscal year.

General and Administrative – Research and Development

General and Administrative – Research and Development costs consist primarily of salaries, benefits and stock-based compensation expense related to our engineering and product development employees, as well as related vendor costs. For the year ended December 31, ~~2023~~2024, the decrease of $15.60 million, or 826%, as compared to ~~2022~~2023, ~~was~~is primarily due to a $2.1 million decrease in compensation costs, driven by decreased average headcount and the elimination of the corporate bonus accrual for the 2023 fiscal year, and a $2.9 million decrease in costs related to outsourced services. These were partially offset by an increase in various software and subscription costs of $30.34 million. Finally there was an increase of $0.2 million ~~additional~~from capitalized internal-use software and web development costs (reducing the expense). Specifically, these capitalized costs were $14.3 5 million and $1114.0 3 million for the years ended December 31, ~~2023~~2024 and ~~2022~~2023, respectively. ~~This decrease was partially offset by a $1.0 million increase in compensation expense, $0.4 million increase in software and subscriptions and $0.3 million increase in outsourced services.~~

General and Administrative – Other

General and Administrative - Other expenses consist primarily of salaries, benefits and stock-based compensation expense related to our accounting, ~~and~~ finance, risk, legal, compliance, human resources and facilities employees, professional fees related to legal, tax, and accounting and facilities expenses. The ~~increase~~decrease in General and Administrative -– Other for the year ended December 31, ~~2023~~2024 of $37.51 million, or 611%, as compared to ~~2022~~2023 ~~was~~is due primarily to a $26.9 5 million ~~increase~~decrease in compensation expense, driven primarily by ~~increased~~the ~~headcount.~~elimination ~~There~~of ~~was~~the ~~also~~corporate abonus ~~$1.7~~accrual ~~million~~for ~~increase~~the in2023 ~~software~~fiscal ~~licenses~~year, and ~~subscriptions~~the ~~costs~~suspension toof ~~support~~401(k) ~~the~~matching ~~overall~~contributions ~~operations,~~starting ~~including~~in ~~the increased headcount~~2024. Additionally, ~~various~~ professional services costs, including accounting, tax and legal, contributed a $01.70 million decrease, and insurance, property taxes, and connectivity combined to contribute a $0.5 million ~~increase~~decrease in General and Administrative – Other expenses for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023. ~~Finally,~~These decreases inwere ~~various~~partially ~~facilities,~~offset ~~maintenance~~by ~~and~~a ~~depreciation~~$1.0 million ~~costs~~increase in ~~the~~facilities ~~amount~~and ofmaintenance ~~$1.6~~costs, ~~million~~primarily ~~partially~~due ~~offset~~to ~~the~~our ~~increase~~increased ~~for~~usage ~~the~~of ~~year~~cloud ~~ended~~storage ~~December~~to ~~31,~~meet ~~2023,~~the asdemands ~~compared~~of to the ~~prior~~growth ~~year~~in our operations.

Change in Fair Value of Convertible Preferred Stock Warrants

Change in Fair Value of Convertible Preferred Stock Warrants was a loss of $46.2 million and a loss of $48.7 million for the ~~year~~years ended December 31, 2024 and 2023, respectively, due to an increase in the fair value of the underlying Convertible Preferred Stock infor ~~2023.~~those periods.

~~Change~~Impairment ~~in Fair Value~~ of ~~Convertible Preferred Stock Warrants was a gain~~ Right-of-Use ~~$84.6~~Lease ~~million for the year ended December 31, 2022 due to a decrease in the fair value of the underlying Convertible Preferred Stock in 2022.~~Assets

~~Gain~~We onrecorded ~~Forgiveness~~a $0.2 million impairment charge for the year ended December 31, 2023 related to our operating lease right-of-use ~~PPP~~assets. ~~Loan~~This impairment was triggered by the vacancy of a portion of our leased office space and the time expected to find a new subtenant. No impairment charge was recorded for the year ended December 31, 2024.

As discussed in Note 11 of the accompanying consolidated financial statements, on March 21, 2022, we were notified by the SBA that all principal and interest under our PPP loan, totaling $8.6 million, was forgiven through a full forgiveness payment made on March 15, 2022 by the SBA to the lender of our PPP loan. As a result, we recognized the entire forgiven principal and interest as Gain on Forgiveness of PPP Loan for the year ended December 31, 2022.

Impairment Expense

We recorded a $0.2 million impairment charge for the year ended December 31, 2023 related to our operating lease right-of-use assets. This impairment was triggered by the vacancy of a portion of our leased office space and the time expected to find a new subtenant. No impairment charge was recorded for the year ended December 31, 2022.

Interest Expense on Term Loan

We incurred interest costs of $1213.3 1 million and $112.5 3 million ~~in interest costs~~ for the years ended December 31, ~~2023~~2024 and ~~2022~~2023, respectively, related to ~~the~~our Term Loan ~~we closed with a third-party financial institution in November 2022~~. Refer to Note 11 of the accompanying consolidated financial statements for further information on the Term Loan, including details ofon the interest rates. WeInterest ~~allocated~~costs ~~$0.2~~on ~~million~~the in Term Loan ~~interest~~increased ~~costs~~year-over-year primarily due to ~~Net~~the ~~Interest~~increase ~~Income~~in ~~for~~the amount of unpaid payment-in-kind (“PIK”) interest accrued into the ~~year~~outstanding ~~ended~~principal ~~December~~balance 31during this time. In November 2024, ~~2023~~we signed Amendment No. 2 to our Credit Agreement, aswhich revised the ~~related~~ Term Loan ~~proceeds~~repayment ~~were~~schedule. ~~used~~Effective December 2024, we are required to ~~purchase~~make ~~Loans~~quarterly ~~Held~~principal ~~for~~payments ~~Sale~~of ~~through~~$2.5 million ~~our~~and ~~Warehouse~~all ~~Lines~~interest will be paid in cash. These changes are expected to result in reduced Term Loan interest costs in future periods.

We allocated $0.2 million in Term Loan interest costs to Net Interest Income for the year ended December 31, 2023, as the related Term Loan proceeds were used to purchase Loans Held for Sale through our Warehouse Lines. No such amount was allocated in Term Loan interest costs to Net Interest Income for the year ended December 31, 2024.

Other Income, Net

Other Income, Net was $23.98 million for the year ended December 31, ~~2023~~2024 and primarily consists of ~~sublease income,~~ interest income on cash and cash equivalents, sublease income and other miscellaneous items. The increase of $10.59 million in Other Income, Net for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023 ~~was~~is primarily due to an increase in interest income driven by ~~higher~~rising average ~~cash balances (including proceeds from the Term Loan that closed in November 2022) and higher~~ interest rates, ~~partially~~throughout ~~offset~~most byof ~~decreased sublease income~~2024.

Non-GAAP Financial Measure

Adjusted Net Revenue

Adjusted Net Revenue is a non-GAAP financial measure that we define as our Total Net Revenue adjusted to exclude the impact of interest rates on the fair value of loans held in consolidated trusts and certain infrequent or unusual transactions such as the accelerated amortization of PWIT and PWIIT debt issuance costs. As a result of the termination of the PWIT Warehouse Line in March 2024 and the PWIIT Warehouse Line in September 2023 (see Note 11, Debt), we accelerated the remaining amortization of the related deferred debt issuance costs into interest expense. We exclude the impact of this accelerated amortization because it is non-cash and because of the infrequent nature of the transaction. Management does not believe that it is reflective of our ongoing operating results. We believe it is useful to investors to exclude the impact of interest rates on the fair value of loans held in consolidated trusts to gain insight into the performance of our consolidated loans, independent of market factors that are beyond management’s control.

Adjusted Net Revenue has limitations as a financial measure, should be considered as supplemental in nature and is not meant as a substitute for Total Net Revenue, which has been prepared in accordance with U.S. GAAP. These limitations include the following:

•Adjusted Net Revenue excludes the impact of interest rates, which may influence the price that a willing buyer would be willing to pay for our personal loans in a hypothetical arm’s length transaction; and

•Other companies, including companies in our industry, may calculate Adjusted Net Revenue differently or not at all, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted Net Revenue alongside other financial performance measures, including Total Net Revenue and our financial results presented in accordance with U.S. GAAP. The following table presents a reconciliation of Total Net Revenue to Adjusted Net Revenue for each of the periods indicated (in thousands):


	Years Ended December 31,
	2024		2023		2022
Total Net Revenue	$	173,355	$	137,700	$	199,881
Impact of Interest Rates on Fair Value of Loans Held in Consolidated Trusts (1)	1,386		2,629		7,248
Accelerated Amortization of PWIT Debt Issuance Costs (2)	733		—		—
Accelerated Amortization of PWIIT Debt Issuance Costs (2)	—		1,880		—
Adjusted Net Revenue	$	175,474	$	142,209	$	207,129
(1) Component of Change in Fair Value of Financial Instruments on the consolidated statements of operations
(2) Component of Interest Expense on Financial Instruments on the consolidated statements of operations

	Years Ended December 31,
	2023		2022		2021
Total Net Revenue	$	137,700	$	199,881	$	144,626
Impact of interest rates on fair value of loans held in consolidated trusts(1)	2,629		7,248		3,084
Accelerated amortization of PWIIT debt issuance costs(2)	1,880		—		—
Adjusted Net Revenue	$	142,209	$	207,129	$	147,710
(1) Component of Change in Fair Value of Financial Instruments on the consolidated statements of operations
(2) Component of Interest Expense on Financial Instruments on the consolidated statements of operations

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as Net Income (Loss) adjusted for interest income on Cash and Cash Equivalents, Interest Expense on Term Loan, Income Tax Benefit or Expense, depreciation and amortization, impairment of long-lived assets and Goodwill, stock-based compensation expense, Change in Fair Value of Convertible Preferred Stock Warrants ~~and certain infrequent or unusual transactions. Starting with the second quarter of 2023~~, ~~it is also adjusted for the~~ impact of interest rates on the fair value of loans held in consolidated trusts., ~~Prior~~and ~~periods~~certain ~~have~~infrequent ~~been~~or ~~updated~~unusual ~~to match current period presentation~~transactions. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

We consider Adjusted EBITDA to be a helpful indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Management uses Adjusted EBITDA, among other things, to understand and compare operating results across accounting periods, to evaluate our operations and financial performance and for internal planning and forecasting purposes. Inclusion of Adjusted EBITDA is intended to provide investors insight into the manner in which management views the performance of the Company, enhance investors’ evaluation of our operating results, and to facilitate meaningful comparisons of our results between periods. This non-GAAP financial measure should not be considered an alternative to, or more meaningful than, the GAAP financial information provided herein.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•Adjusted EBITDA does not consider the potentially dilutive impact of equity-based charges;

•Adjusted EBITDA does not reflect interest and tax payments that may represent a reduction in cash available to us; and

•Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

The major non-GAAP adjustments, and our basis for excluding them, are outlined below:

•Changes in the fair value of ~~convertible~~Convertible ~~preferred~~Preferred ~~stock~~Stock ~~warrants liability~~Warrants: We exclude these fair value changes primarily because they are non-cash items and the fair value varies based on the fair value of the underlying preferred stock, varying valuation methodologies and subjective assumptions. Their inclusion makes the comparison of our current financial results to previous and future periods difficult to evaluate.

•Stock-based compensation expense: This consists of expenses for equity awards under our equity incentive plans. Although stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to evaluate; therefore, we believe it is useful to exclude stock-based compensation. We also excluded these expenses because they are non-cash.

•Amortization or impairment of acquired ~~intangible~~Intangible ~~assets~~Assets and impairment of ~~goodwill~~Goodwill: We incur amortization or impairment of acquired Intangible Assets and Goodwill in connection with acquisitions and therefore exclude these amounts from our non-GAAP measures. We exclude these items because management does not believe they are reflective of our ongoing operating results.

exclude these amounts from our non-GAAP measures. We exclude these items because management does not believe they are reflective of our ongoing operating results.

•Gain on Forgiveness of PPP Loan: We recorded a gain on forgiveness when our PPP loan was forgiven by the SBA in the first quarter of 2022. We exclude the impact of this gain because of the infrequent nature of the transaction. Management does not believe that it is reflective of our ongoing operating results.

•Impairment of ~~Operating~~operating ~~Lease~~lease ~~Right~~right-of-~~Use~~use ~~Assets~~assets - We have recognized impairment on our operating lease right-of-use assets related to vacant sublease space and the expected timing of finding new subtenants. We exclude these charges because they are non-cash and because management does not believe they are reflective of our ongoing operating results.

•Impairment of long-lived assets: We incur losses on the impairment of long-lived assets that are disposed in connection with the exit of facilities. We exclude these items because management does not believe they are reflective of our ongoing operating results.

•Impact of interest rates on the fair value of loans held in consolidated trusts: See discussion on Adjusted Net Revenue, above.

•Accelerated amortization of PWIT and PWIIT debt issuance costs: See discussion on Adjusted Net Revenue, above.

•Interest Expense on Term Loan: We incur interest expense on ~~the~~our Term Loan ~~we closed in November 2022~~, which is more fully described in Note 11 of the accompanying consolidated financial statements. Proceeds from the Term Loan are used to fund the operations of the business at our discretion, within certain limitations. This may include, but is not limited to, making investments in our Credit Card product, ~~investing in loans held in our warehouse facilities~~ or meeting operational obligations. We exclude the Term Loan interest expense ~~not associated with proceeds used to invest in loans held in our warehouse facilities from Adjusted EBITDA,~~ as it is based on the overall financing structure of PMI. This differs from Interest Expense on Financial Instruments (part of Total Net Revenues), as the proceeds from those instruments are used exclusively for the purposes of purchasing loans on our marketplace and Credit Card receivables through the underlying warehouse and securitization transactions.

The following table presents a reconciliation of Net (Loss) Income to Adjusted EBITDA for each of the periods indicated (in thousands):

	Years Ended December 31,
	2023		2022		2021
	2024		2023		2022
Net (Loss) Income	$	(~~106~~54,~~462~~079)	$	70(106,~~582~~462)	$	~~(138~~70,~~341)~~582
Depreciation expense:
Origination and Servicing	89,~~774~~200		8,~~132~~774		78,~~167~~132
General and Administrative - Other	2,108		2,656		2,501
General and Administrative – Other	1,531		2,108		2,656
Amortization of Intangibles	107		136		172
Amortization of Intangible Assets	85		107		136
Stock-Based Compensation	1,~~575~~616		1,~~326~~575		1,~~136~~326
Change in Fair Value of Convertible Preferred Stock Warrants	4846,~~695~~208		~~(84~~48,~~595)~~695		~~138~~(84,~~622~~595)
Impact of Interest Rates on Fair Value of Loans Held in Consolidated Trusts	21,~~629~~386		72,~~248~~629		37,~~084~~248
Gain on Forgiveness of PPP Loan	—		~~(8,604)~~—		—(8,604)
Loss on Deconsolidation of VIEs	—		—		1,494
Impairment of Long-Lived Assets	463		—		—
Impairment Expense	196		—		—
Impairment of Right-of-Use Lease Assets	—		196		—
Interest Income on Cash and Cash Equivalents	(23,~~473~~322)		(~~511~~2,473)		(8511)
Interest Expense on Term Loan	1213,~~265~~124		112,~~527~~265		—1,527
Accelerated Amortization of PWIIT Debt Issuance Costs	1,880		—		—
Accelerated Amortization of PWIT Debt Issuance Costs	733		—		—
Income Tax Expense	78		295		71
Accelerated Amortization of PWIIT Debt Issuance Costs	—		1,880		—
Adjusted EBITDA	$	(30,628)	$	(1,808)	$	15,898
Income Tax Expense	116		78		295
Adjusted EBITDA	$	17,061	$	(30,628)	$	(1,808)

The increase in Adjusted EBITDA for the year ended December 31, 2024, as compared to 2023, is primarily reflective of increased transaction fees driven by higher Personal Loan originations and the revised WebBank transaction fee schedule (starting in the fourth quarter of 2023 and further modified in June 2024), as well as a decrease in personnel and outsourced services costs, as we eliminated the 2023 corporate bonus accrual and reduced our spend on outside vendors, particularly with regard to Origination and Servicing. Additionally, changes in estimates implemented in 2024 related to the valuation of the Credit Card Derivative and servicing obligation increased the value of our Credit Card Derivative by a combined $11.3 million and reduced the value of our Credit Card servicing obligation by $1.8 million as of December 31, 2024, both of which directly impact Adjusted EBITDA. These increases were partially offset by increased incentives provided to whole loan investors, as described above.

~~The~~Expenses ~~decrease~~on ~~in Adjusted EBITDA for~~ the ~~year~~consolidated ~~ended~~statement ~~December 31, 2023, as compared to 2022, is primarily reflective~~ of ~~decreased~~operations ~~personal~~include ~~loan originations, changes in~~ the ~~fair~~following ~~value~~amounts of ~~securitized~~stock-based ~~Borrower~~compensation ~~Loans~~expense ~~and Loans Held~~ for ~~Sale (other than~~ the ~~impact~~periods ofpresented ~~market interest rates) and incentives provided to whole loan investors as described above, partially offset by a significant increase~~ (in ~~Credit Card net revenues due to growth in the underlying portfolio since the Credit Card program launched at the end of 2021.~~thousands):

Expenses on the Consolidated Statement of Operations include the following amounts of stock-based compensation expense for the periods presented (in thousands):


	Years Ended December 31,
	2024		2023		2022
Servicing and Origination	$	86	$	83	$	134
Sales and Marketing	446		304		118
General and Administrative	1,084		1,188		1,074

Total Stock-Based Compensation Expense	$	1,616	$	1,575	$	1,326

	Years Ended December 31,
	2023		2022		2021
Servicing and Origination	$	83	$	134	$	123
Sales and Marketing	304		118		62
General and Administrative	1,188		1,074		951
Total Stock-Based Compensation Expense	$	1,575	$	1,326	$	1,136

Segment Net Revenues, Adjusted Net Revenue and Adjusted EBITDA

~~Segment~~Refer to Note 21 of the accompanying consolidated financial statements for information on our segment reporting, including reconciliations of segment net revenues to segment Adjusted Net ~~Revenues~~Revenue, and ~~Segment~~segment Adjusted EBITDA to Net Income (Loss) Before Income Taxes. The following table summarizes our segment net revenues, segment Adjusted Net Revenue and segment Adjusted EBITDA for the years ended December 31, 2024, 2023 and 2022 (dollar amounts in thousands).

Refer to Note 21 of the accompanying consolidated financial statements for information on our segment reporting. The following table summarizes our segment net revenues and segment Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands).


	Years Ended December 31,
	2024		2023		Change		% Change		2023		2022		Change		% Change
Segment Net Revenues
Personal Loan	$	144,319	$	100,921	$	43,398	43	%	$	100,921	$	180,717	$	(79,796)	(44)	%
Home Equity	1,697		1,875		(178)		(9)	%	1,875		2,821		(946)		(34)	%
Credit Card	27,339		34,904		(7,565)		(22)	%	34,904		16,343		18,561		114	%
Total Net Revenues	$	173,355	$	137,700	$	35,655	26	%	$	137,700	$	199,881	$	(62,181)	(31)	%

Segment Adjusted Net Revenues
Personal Loan	$	146,438	$	105,430	$	41,008	39	%	$	105,430	$	187,965	$	(82,535)	(44)	%
Home Equity	1,697		$	1,875	(178)		(9)	%	$	1,875	2,821		(946)		(34)	%
Credit Card	27,339		$	34,904	(7,565)		(22)	%	$	34,904	16,343		18,561		114	%
Total Adjusted Net Revenues	$	175,474	$	142,209	$	33,265	23	%	$	142,209	$	207,129	$	(64,920)	(31)	%

Segment Adjusted EBITDA
Personal Loan	$	19,964	$	(32,027)	$	51,991	n/m		$	(32,027)	$	9,301	$	(41,328)	n/m
Home Equity	245		(2,483)		2,728		n/m		(2,483)		(2,163)		(320)		(15)	%
Credit Card	(3,148)		3,882		(7,030)		n/m		3,882		(8,946)		12,828		n/m
Total Adjusted EBITDA	$	17,061	$	(30,628)	$	47,689	n/m		$	(30,628)	$	(1,808)	$	(28,820)	n/m

	Years Ended December 31,
	2023		2022		Change		% Change		2022		2021		Change		% Change
Segment Net Revenues
Personal Loan	$	100,921	$	180,717	$	(79,796)	(44)	%	$	180,717	$	143,670	$	37,047	26	%
Home Equity	1,875		2,821		(946)		(34)	%	2,821		946		1,875		198	%
Credit Card	34,904		16,343		18,561		114	%	16,343		10		16,333		n/m
Total Net Revenues	$	137,700	$	199,881	$	(62,181)	(31)	%	$	199,881	$	144,626	$	55,255	38	%
Segment Adjusted Net Revenues
Personal Loan	$	105,430	$	187,965	$	(82,535)	(44)	%	$	187,965	$	146,754	$	41,211	28	%
Home Equity	1,875		2,821		(946)		(34)	%	2,821		946		1,875		198	%
Credit Card	34,904		16,343		18,561		114	%	16,343		10		16,333		n/m
Total Adjusted Net Revenues	$	142,209	$	207,129	$	(64,920)	(31)	%	$	207,129	$	147,710	$	59,419	40	%
Segment Adjusted EBITDA
Personal Loan	$	(32,027)	$	9,301	$	(41,328)	n/m		$	9,301	$	22,303	$	(13,002)	(58)	%
Home Equity	(2,483)		(2,163)		(320)		(15)	%	(2,163)		(2,556)		393		15	%
Credit Card	3,882		(8,946)		12,828		n/m		(8,946)		(3,849)		(5,097)		(132)	%
Total Adjusted EBITDA	$	(30,628)	$	(1,808)	$	(28,820)	n/m		$	(1,808)	$	15,898	$	(17,706)	n/m

n/a: not applicable

n/m: not meaningful

Segment Adjusted EBITDA is our primary segment profitability metric, and is calculated as segment revenue less operating expenses that are directly attributable to the segments’ products. ~~Refer to Note 21 of the accompanying consolidated financial statements for a reconciliation of~~ Segment Adjusted ~~EBITDA to~~ Net ~~(Loss) Income Before Income Taxes. Segment Adjusted Net~~ Revenue is calculated as segment revenue less the impact of changes in interest rates on the fair value of loans held in consolidated trusts and certain unusual or infrequent transactions. For the periods presented above, these adjustments only impact the Personal Loan segment.

Comparison of ~~2023~~2024 and ~~2022~~2023

Personal Loan

Personal Loan segment net revenues ~~decreased~~increased ~~44% to~~ $~~100~~43.94 million, inor ~~2023~~43%, ~~from~~for ~~$180.7~~the ~~million~~year inended ~~2022~~December 31, 2024, as compared to 2023 primarily as a result of (a) a $4560.0 million ~~decrease~~increase in Transaction Fees, Net, due to the ~~decrease~~increase in ~~personal~~Personal ~~loan~~Loan originations during this time, as well as the revised WebBank transaction fee schedule starting in the fourth quarter of 2023 (further modified in June 2024); (b) a $24.6 5 million ~~decrease~~increase in net revenues from Change in Fair Value of Financial Instruments related to Borrower Loans and Loans Held for Sale, as described above, (c) a $111.3 6 million ~~decrease~~increase in ~~(Loss)~~Servicing ~~Gain~~Fees, ~~on Sale of Borrower Loans~~Net, due primarily to ~~additional~~increased ~~incentives~~collections, ~~provided~~debt tosale ~~whole~~and loan ~~investors~~trailing ~~driven~~fees; ~~by market volatility~~ and ~~incentives offered by competitors, combined with the impact from decreases in the volume of whole loans sold due to lower originations;~~ (d) a $01.6 4 million ~~decrease~~increase in Other Revenues, due primarily to the ~~termination~~increase ofin acredit ~~partner~~referral ~~incentive~~fees ~~agreement~~from inpartner ~~June~~companies ~~2022;~~on ~~and~~our ~~(e) a $2~~platform.6 ~~million~~These ~~decrease~~increases inwere ~~Total~~partially ~~Interest~~offset ~~Income~~by (~~Expense~~e), ~~Net,~~a ~~primarily due to the~~ $132.9 million ~~accelerated~~decrease ~~recognition~~from ofLoss ~~debt~~on ~~issuance~~Sale ~~costs upon the termination~~ of ~~the~~Borrower ~~PWIIT Warehouse Line in September 2023~~Loans, ~~combined~~due ~~with~~primarily ~~the~~to ~~impact~~additional ~~from~~incentives ~~higher~~provided ~~Warehouse Line interest expense due~~ to ~~increases~~whole inloan ~~market interest rates~~investors, ~~which~~partially ~~increased~~offset ~~the~~by ~~cost~~gains offrom ~~borrowing~~increased onPersonal ~~the~~Loan ~~variable~~sales ~~interest~~during ~~Warehouse~~this ~~Lines.~~time; ~~These~~and ~~decreases~~(f) ~~were~~an ~~partially offset by a~~ $411.4 2 million ~~increase~~decrease in ~~Servicing~~Total ~~Fees,~~Interest Income (Expense) Net, due primarily to the ~~increase~~decrease in ~~whole~~the ~~loans~~average outstanding ~~during~~principal ~~this~~balance ~~period,~~of asloans ~~discussed~~held ~~above.~~in consolidated warehouse and securitization trusts.

Segment Adjusted Net Revenue associated with the Personal Loan segment ~~decreased~~increased $8241.50 million, or 39%, in ~~2023~~2024 compared to ~~2022~~2023. This is reflective of the same factors that drove the ~~decrease~~increase in net revenues discussed above, excluding the impact of (a) interest rates on the fair value of loans held in consolidated trusts, and ~~the~~(b) accelerated recognition of debt issuance costs upon the termination of the PWIIT and PWIT Warehouse ~~Line~~Lines in September 2023 and March 2024, respectively. The volatile interest rate environment in 2023 resulted in a greater interest rate impact on the fair value of loans during that period.

Adjusted EBITDA associated with the Personal Loan segment ~~decreased~~increased $4152.30 million in ~~2023~~2024 as compared to ~~2022~~2023. This is primarily reflective of the ~~decrease~~same factors that drove the increases in net revenues and ~~segment~~ Adjusted Net Revenue discussed above, ~~which~~as ~~was~~well ~~not~~as ~~fully~~a ~~offset~~reduction byin ~~the~~expenses ~~corresponding~~year-over-year, including personnel, outsourced services and marketing costs. In general, Personal Loan segment operating expenses have been decreasing since 2022, due to an overall decrease in Personal Loan originations and management focus on generating operating ~~expenses~~efficiencies during this time.

Home Equity

For the year ended December 31, ~~2023~~2024, the decrease in Home Equity segment net revenues and segment Adjusted Net Revenue of $0.9 2 million is reflective of lower Transaction Fees, Net, due to the decreases in originations during this time. Home Equity segment net revenues consist of broker fees from our lending partners, and Adjusted EBITDA is reflective of these net revenues, offset by operating expenses. Home Equity segment operating expenses decreased $2.9 million for the year ended December 31, 2024, as compared to 2023, as we reduced resources and marketing dedicated to the Home Equity segment.

Credit Card

For the year ended December 31, ~~2023~~2024, Credit Card segment net revenues and segment Adjusted Net Revenue ~~increased~~decreased $187.6 million, or ~~114~~22%, as compared to ~~2022~~2023, primarily as a result of (a) a $1123.0 3 million ~~increase~~decrease in ~~Transaction~~Change ~~Fees,~~in ~~Net;~~Fair ~~(b)~~Value aof ~~$11.4~~Financial ~~million~~Instruments ~~increase~~from inour ~~fair~~Credit ~~value~~Card ~~gains~~Derivative onand ~~our~~Receivable from Credit Card ~~Derivative~~Partner (consisting of Credit Card receivables securitized in PMCC 2024-1). This includes a net $13.9 million decrease from fair value adjustments, generally due to ~~the~~a ~~overall~~lower portfolio growth rate and higher loss rate assumptions, and a $9.4 million decrease in ~~the~~revenue ~~Credit~~from ~~Card~~realized transactions, primarily due to increased charge-offs within the portfolio. ~~during~~This ~~this~~decrease ~~time;~~was ~~and~~partially ~~(c)~~offset by a $06.3 2 million increase in ~~other~~Servicing ~~revenue~~Fees, ~~mainly~~Net, ~~consisting~~driven primarily by a decrease in our servicing obligation (offsets revenue) due to (a) the impact of ~~credit~~the ~~referral~~lower ~~fees~~portfolio ~~earned~~growth ~~from~~rate, ~~partner~~(b) ~~companies~~a ~~for~~change in estimate related to the ~~referral~~applicable discount rate used to value the obligation, and (c) the derecognition of ~~customers~~servicing onobligations ~~our~~for ~~platform.~~Credit ~~These~~Card ~~increases~~receivables ~~were~~securitized ~~partially~~through ~~offset~~the byPMCC 2024-1 transaction in November 2024. Finally, there was also a $46.2 0 million ~~decrease~~increase in ~~Servicing~~Transaction Fees, Net, asdue ato ~~result~~the ofoverall angrowth in our Credit Card portfolio, and a $3.7 million increase in ~~the~~Total ~~net~~Interest ~~servicing~~Income ~~obligation~~(Expense) ~~related~~Net, todriven by the interest income generated by the securitized Credit Card ~~portfolio~~receivables in PMCC 2024-1, net of the interest expense on the securitized Notes.

Adjusted EBITDA associated with Credit Card ~~increased~~decreased $127.80 million in ~~2023~~2024, as compared to ~~2022~~2023, which is primarily reflective of the ~~increase~~decrease in net revenues and Adjusted Net Revenue discussed above, partially offset by ~~our~~decreased operating expenses of approximately $0.5 million. While Origination and Servicing costs have continued ~~investments~~to increase due to the overall growth in the ~~Credit~~portfolio, ~~Card~~we ~~product’s~~reduced Sales and Marketing costs in line with the lower portfolio growth rate.

Comparison of 2022 and 2021

Personal Loan

Personal Loan segment net revenues increased 26% to $180.7 million in 2022 from $143.7 million in 2021, primarily as a result of a $64.4 million increase in Transaction Fees, Net, due to the increase in originations during this time, as discussed above. This increase was partially offset by a $8.2 million decrease in Gain on Sale of Borrower Loans, due primarily to additional incentives provided to whole loan investors driven by market volatility and incentives offered by competitors. There was also a $20.6 million decrease in net revenues from Change in Fair Value of Financial Instruments, Net, due primarily to volatility in the capital markets and higher interest rates, which led to negative fair value adjustments on the loans we hold in consolidated warehouse trusts.

Adjusted EBITDA associated with the Personal Loan segment decreased 58% to $9.3 million in 2022 from $22.3 million in 2021, which is primarily reflective of the net revenues discussed above and higher operating expenses to support the higher originations.

Home Equity

Home Equity segment net revenues increased 198% to $2.8 million in 2022 from $0.9 million in 2021 due to increased broker fees from our Home Lending Partners.

Home Equity Adjusted EBITDA was a loss of $2.2 million in 2022, which is reflective of the net revenues discussed above, offset by our continued investments in the Home Equity product, particularly with regards to operations and marketing. In 2021, Home Equity Adjusted EBITDA was a loss of $2.6 million and consisted primarily of the net revenues reflected above, offset by research and development expenses, operations costs and professional fees incurred to ramp up the product after establishing our partnership with Spring EQ in October 2020.

Credit Card

Credit Card net revenues in 2022 of $16.3 million are primarily reflective of (a) $14.1 million in fair value gains on our Credit Card Derivative and (b) $7.0 million in transaction fees, partially offset by (c) a $3.7 million increase in the servicing obligation related to the Credit Card portfolio. Because we launched our Credit Card product in December 2021, Credit Card segment net revenues were not material in 2021.

Adjusted EBITDA associated with Credit Card was a loss of $8.9 million in 2022, which is reflective of the net revenues discussed above, offset by our continued investments in the Credit Card product’s success, particularly with regards to research and development expenses, operations and marketing. In 2021, Credit Card Adjusted EBITDA was a loss of $3.8 million and consisted primarily of research and development expenses and professional fees incurred to prepare the product for launch in December 2021.

LIQUIDITY AND CAPITAL RESOURCES

We have incurred operating losses in prior years and may continue to incur net losses in the future. For the years ended December 31, ~~2023~~2024 and ~~2022~~2023, we incurred a net ~~loss~~losses of $~~106~~54.51 million and ~~generated net income of~~ $70106.65 million, respectively. Additionally, from our inception through December 31, ~~2023~~2024, we have had an accumulated deficit of $~~590~~644.12 million.

We believe our liquidity needs for the next twelve months, and for the foreseeable future beyond that period, can be met through transaction fees, servicing fees, net interest income, other revenue, proceeds from sales of loans and securitizations, realized gains onfrom the Credit Card ~~Derivative~~portfolio and Cash and Cash Equivalents. For further details related to our Term Loan ~~and warehouse lines~~, see Note 11 of the accompanying consolidated financial statements. In the second quarter of 2024, we decided to eliminate the corporate bonus and long-term incentive plan accrual for the 2023 fiscal year, resulting in approximate cost savings of $6.0 million. The table in the section titled “Contractual Obligations” below summarizes our current and long-term material cash requirements as of December 31, ~~2023~~2024. Management monitors our financial results and operations. If the anticipated financial results ~~anticipated~~ are not achieved or we fail to maintain compliance with the debt covenants under our Term Loan, our sources of liquidity may not be sufficient to meet our operating and liquidity requirements without obtaining additional liquidity which may not be available on favorable terms or at all.

The following table summarizes our cash flow activities for the periods presented (in thousands):

	Year Ended December 31,
	2023		2022		2021
	2024		2023		2022
Net (Loss) Income	$	(~~106~~54,~~462~~079)	$	70(106,~~582~~462)	$	~~(138~~70,~~341)~~582
Net cash provided by (used in) operating activities	$	47219,~~845~~951	$	~~(334~~47,~~902)~~845	$	~~113~~(334,~~563~~902)
Net cash used in investing activities	(5699,~~951~~040)		(9556,~~865~~951)		(795,~~178~~865)
Net cash (used in) provided by financing activities	(32131,~~235~~092)		~~391~~(32,~~751~~235)		~~(84~~391,~~628)~~751
Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash	(41,341)		(39,016)		21,757
Net decrease in Cash, Cash Equivalents and Restricted Cash	(10,181)		(41,341)		(39,016)
Cash, Cash Equivalents and Restricted Cash at the beginning of the period	~~196~~155,~~609~~268		~~235~~196,~~625~~609		~~213~~235,~~868~~625
Cash, Cash Equivalents and Restricted Cash at the end of the period	$	~~155~~145,~~268~~087	$	~~196~~155,~~609~~268	$	~~235~~196,~~625~~609

Cash, Cash Equivalents and Restricted Cash decreased by $10.2 million for the year ended December 31, 2024, based on the following components:

Operating Activities: $220.0 million in cash was provided by operating activities, driven by (a) $180.8 million in net proceeds from Loans Held for Sale, (b) $33.2 million in net loss, net of non-cash items, and (c) $5.9 million in cash used for working capital, primarily due to the timing of payments to investors and third-party vendors.

Investing Activities: $99.0 million in cash was used in investing activities due to (a) $186.1 million in purchases of Borrower Loans, (b) $106.2 million in transfers of Credit Card Receivables from Credit Card Partner, and (c) $15.3 million in purchases of property and equipment, primarily consisting of internal-use software, partially offset by (d) $196.6 million from sales and principal payments of Borrower Loans, and (e) $11.9 million from principal payments on Credit Card Receivable from Credit Card Partner.

Financing Activities: $131.1 million in cash was used in financing activities, due primarily to (a) $129.4 million paid for the extinguishment of principal and interest on the PWIT Warehouse Line in March 2024, (b) $28.6 million in principal payments on Warehouse Lines, (c) $11.0 million in payments on Notes, at Fair Value, net of proceeds, (d) $4.3 million in debt issuance costs related to the PMIT 2024-1 and PMCC 2024-1 securitizations executed in March 2024 and November 2024, respectively, and (e) $2.5 million in principal repayments on the Term Loan, partially offset by (f) $44.7 million in proceeds, net of payments, from the issuance of PMIT 2024-1 and PMCC 2024-1 securitization notes.

Cash, Cash Equivalents and Restricted Cash decreased by $41.3 million for the year ended December 31, 2023, based on the following components:

Operating Activities: $47.8 million in cash was provided by operating activities, driven by (a) $68.0 million in net proceeds from Loans Held for Sale, partially offset by (b) $7.5 million in net loss, net of non-cash items and (c) $13.6 million in cash used for working capital, primarily due to the timing of payments to investors and third-party vendors, as well as a $9.3 million reclassification of Restricted Cash to Prepaid and Other Assets during the year (see Note 2 of the accompanying consolidated financial statements).

Operating Activities: $47.8 million in cash was provided by operating activities, driven by (a) $68.0 million in net proceeds from Loans Held for Sale, partially offset by (b) $10.3 million in net loss, net of non-cash items and (c) $9.9 million in cash used for working capital, primarily due to the timing of payments to investors and third-party vendors, as well as a $9.3 million reclassification of Restricted Cash to Prepaid and Other Assets during the year (see Note 2 of the accompanying consolidated financial statements).

Investing Activities: $57.0 million in cash was used in investing activities due to (a) $232.3 million in purchases of Borrower Loans, and (b) $15.7 million in purchases of property and equipment, primarily consisting of internal-use software, partially offset by (c) $191.1 million from sales and principal payments of Borrower Loans.

Financing Activities: $32.2 million in cash was used in financing activities, due primarily to (a) $224.0 million paid for the extinguishment of principal and interest on the PWIIT Warehouse Line, (b) $63.3 million in principal payments on Warehouse Lines, net of proceeds and (c) $3.9 million in debt issuance costs related to the extensions of our PWIIT warehouse facility in February 2023, PWIT warehouse facility in May 2023 and PMIT 2023-1 securitization in September 2023, partially offset by (d) $216.0 million in proceeds, net of payments, from the issuance of PMIT 2023-1 securitization notes and (e) $42.9 million in proceeds, net of payments, from the issuance of Notes, at Fair Value.

Income Taxes

We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax assets. Based on the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in prior years, we have provided a full valuation allowance against our net deferred tax assets.

We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. We are required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.

Off-Balance Sheet Arrangements

As a result of retaining servicing rights on the sale of Borrower Loans, we are an interest holder in certain special purpose entities that purchase these Borrower Loans. None of these special purpose entities are consolidated as we are not the primary beneficiary. Other than these special purpose entities, as of December 31, ~~2023~~2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Contractual Obligations

As of December 31, ~~2023~~2024, the following table summarizes our contractual obligations and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Payments Due by Period
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Term Loan	$	76,719	$	—	$	76,719	$	—	$	—
Term Loan principal	$	75,512	$	10,000	$	65,512	$	—	$	—
Operating lease obligations	1815,~~168~~215		4,~~497~~374		8,~~949~~482		42,~~722~~359		—
WebBank purchase obligations	1721,~~700~~145		1721,~~700~~145		—		—		—
WebBank minimum origination fees	12,~~300~~500		1,200		~~100~~1,300		—		—
Total contractual obligations	$	~~113~~114,~~887~~372	$	2336,~~397~~719	$	8575,~~768~~294	$	42,~~722~~359	$	—

Term Loan

As discussed in Note 11 of the accompanying consolidated financial statements, the full principal balance and any unpaid interest on the Term Loan is payable upon maturity in November 2026. We incur daily interest that is payable in cash at the end of each month, asand ~~well~~used asto ~~payment-in-kind~~incur PIK interest that iswas added to the outstanding principal balance if it ~~remains~~remained unpaid at the end of the month. In November 2024, we signed Amendment 2 to the Term Loan Credit Agreement, the terms of which require the repayment of $2.5 million in principal on each calendar quarter-end date through the maturity date. We made the first such payment on December 31, 2024. Additionally, all interest is now paid monthly in cash and thus no longer capitalized into the outstanding principal balance.

WebBank Purchase Obligations

Under our loan account program with WebBank, a Utah-charted industrial bank that serves as our primary issuing bank, WebBank retains ownership of loans facilitated through our marketplace for two business days after origination. As part of this arrangement, we have committed to purchase the loans at the conclusion of the two business days.

WebBank Minimum Origination Fees

We are required to pay WebBank a minimum fee to the extent monthly loan originations due to not meeting certain contractual thresholds. This obligation is more fully discussed in Note 17 of the accompanying consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

The accounting policies discussed below reflect our most significant judgments, assumptions and estimates which we believe are critical in understanding and evaluating our reported financial results, including fair value measurements of (i) Borrower Loans, ~~Loans Held for Sale~~ and Notes; (ii) Loan Servicing Asset; (iii) Credit Card Derivative and Credit Card Servicing Obligation; (~~iii~~iv) Receivable from Credit Card ~~Derivative~~Partner (as well as the related accounting treatment); and (ivv) Convertible Preferred Stock Warrants, as well as the estimate of our transaction fee refund liability. These judgments, estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. For a full description of all accounting policies adopted by us, please see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements.

Valuation of Borrower Loans, ~~Loans Held for Sale~~ and Notes

We have elected the fair value option for Borrower Loans, ~~Loans Held for Sale~~ and Notes. We primarily use a discounted cash flow model to estimate the fair value of ~~Borrower~~these ~~Loans,~~financial ~~Loans Held for Sale and Notes~~instruments. The key assumptions used in the valuation include default rates and prepayment rates derived 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. All these assumptions require significant management judgment. For further information on fair value measurement of Borrower Loans, ~~Loans Held for Sale~~ and Notes, refer to Note 8, - Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.

Valuation of Loan Servicing Asset ~~and Credit Card Servicing Obligation~~

We have elected to adopt the fair value method to measure the loan Servicing Asset for all classes of Servicing Assets subsequent to initial recognition. We use a discounted cash flow model to estimate the fair value of the loan Servicing Assets, which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Borrower Loans and the current principal balances of the loans, as well as significant unobservable inputs such as the estimated market servicing rate to service such loans, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the loan Servicing Assets, refer to Note 6, - Servicing Assets, and Note 8, - Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.

~~Similarly,~~Valuation we are responsible for servicing the entire portfolio related to our Credit Card product and recognize a servicing obligation liability to the extent servicing fees we expect to earn do not exceed the estimated market servicing rate a market participant would require to service the portfolio. We again use a discounted cash flow model to estimate the fair value of ~~the~~ Credit Card ~~Servicing~~Derivative ~~Obligation which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Credit Card portfolio~~ and the current outstanding principal balances of the credit card receivables, as well as significant unobservable inputs such as the estimated market servicing rate to service the portfolio, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the Credit Card Servicing ~~Obligations, refer to Note 5 - Credit Card and Note 8 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.~~Obligation

~~Valuation~~We evaluated the terms of the Credit Card program agreement and determined that it contained features that met the definition of derivatives under U.S. GAAP. These features are freestanding financial instruments and have been valued separately as derivatives. A right of offset exists between the derivatives, and they are presented net on the accompanying consolidated balance sheets. We use a discounted cash flow model to estimate the fair value of the various components of the Credit Card Derivative. The key assumptions used in the valuation include average portfolio interest rates, as well as default and prepayment rates derived primarily from relevant market data and historical performance, adjusted as necessary based on the perceived credit risk of the underlying cardholders. In addition, a single discount rate (see Changes in Estimates in 2024 discussion, below) based on the estimate of the rate of return that investors would require when investing in similar credit card portfolios, is applied to the individual freestanding derivatives. For further information on fair value measurement of the Credit Card Derivative, refer to Note 5, Credit Card, and Note 8, Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.

We ~~evaluated~~are ~~the~~also ~~terms~~responsible offor ~~the~~servicing our entire Credit Card ~~program~~portfolio ~~agreement~~ and ~~determined~~recognize ~~that~~a itservicing ~~contained~~obligation ~~features~~liability ~~that~~for ~~met~~ the ~~definition~~portion of ~~derivatives~~Credit ~~under~~Card ~~U.S.~~receivables ~~GAAP.~~that ~~These~~we ~~features~~do ~~are~~not ~~freestanding~~effectively ~~financial~~consolidate ~~instruments~~through ~~and~~the ~~have~~Receivable ~~been~~from ~~valued~~Credit ~~separately~~Card asPartner ~~derivatives~~(see below). AThis ~~right~~Credit ofCard ~~offset~~servicing ~~exists~~obligation ~~between~~is ~~the~~measured ~~derivatives,~~ and ~~they~~recorded ~~are~~to ~~presented net on~~ the ~~accompanying~~extent ~~consolidated~~servicing ~~balance~~fees ~~sheets.~~we Weexpect ~~use a discounted cash flow model~~ to ~~estimate~~earn ~~the~~do ~~fair~~not ~~value~~exceed of the ~~various~~estimated ~~components~~market ofservicing ~~the~~rate ~~Credit~~a ~~Card~~market ~~Derivative.~~participant ~~The~~would ~~key~~require ~~assumptions~~to ~~used~~service in the ~~valuation~~portfolio. ~~include~~We ~~default~~use ~~and~~a ~~prepayment~~discounted ~~rates~~cash ~~derived~~flow ~~primarily~~model ~~from~~to ~~relevant~~estimate ~~market data and historical performance, adjusted as necessary based on~~ the ~~perceived~~fair ~~credit~~value ~~risk~~ of the ~~underlying~~Credit ~~cardholder.~~Card Inservicing ~~addition,~~obligation ~~discount~~which ~~rates~~incorporates ~~based~~observable oninputs ~~estimates~~such ofas the ~~rates~~contractual ofservicing ~~return~~fee revenue that ~~investors~~we ~~would~~earn ~~require~~on ~~when~~the ~~investing~~Credit inCard ~~similar~~portfolio ~~credit~~and ~~card portfolios are applied to~~ the ~~individual~~current ~~freestanding~~outstanding ~~derivatives.~~principal ~~For~~balances ~~further~~of ~~information on fair value~~

the related Credit Card receivables, as well as significant unobservable inputs such as the estimated market servicing rate to service the portfolio, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the Credit Card ~~Derivative~~servicing obligation, refer to Note 5, - Credit Card, and Note 8, - Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.

Changes in Estimates in 2024

Effective March 31, 2024, we applied a single discount rate to all of the projected cash flows that comprise the Credit Card Derivative and Credit Card servicing obligation, in order to better align with how we believe a market participant would estimate the fair value of those cash flows. This single discount rate reflects the expected market rate of return from an investment in residual cash flows derived from a credit card portfolio. Previously, separate discount rates were applied to different cash flows reflecting assumptions around counterparty credit risk. As of December 31, 2024, the value of our Credit Card Derivative is higher by $6.8 million and the value of our Credit Card servicing obligation is $1.8 million lower than if they were calculated using the old methodology.

Additionally, effective December 31, 2024, to calculate the relevant portfolio interest rate for the Credit Card Derivative valuation, we 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 are short-term in nature (one year or less) and thus we believe 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.

Valuation of Receivable from Credit Card Partner

On November 1, 2024, we completed a securitization of Credit Card receivables from our Credit Card portfolio, which is maintained on the balance sheet of our banking partner, Coastal. On that date, Credit Card receivables with an outstanding principal balance of $94.7 million were purchased and contributed to the securitization entity, PMCC 2024-1, which we fully consolidate as a VIE. Based on an analysis of the facts and circumstances of the transaction, including the revolving nature of the underlying financial instruments, it was determined that the transfer of these Credit Card receivables did not meet the criteria for sales or participating interest accounting under ASC 860, Transfers and Servicing. As a result, we have recorded a secured Receivable from Credit Card Partner that effectively consists of the unpaid principal balance of the securitized Credit Card receivables.

We have elected to account for the Receivable from Credit Card Partner at fair value, and use a discounted cash flow model to estimate the fair value of the residual interest, given that we are the sole sponsor of the securitization and entitled to all residual cash flows it generates. We use certain assumptions similar to those used to value the Credit Card Derivative, including the discount rate that reflects the expected market rate of return from an investment in residual cash flows derived from a credit card portfolio, and the prepayment rate. Additional assumptions are adjusted to reflect the specific characteristics of the securitized Credit Card receivables, including the average portfolio interest rate and the default rate. This residual interest fair value is then added to the applicable securitization advance rate applied to the outstanding balance of Credit Card receivables to calculate the estimated fair value of Receivable from Credit Card Partner.

Valuation of Convertible Preferred Stock Warrants

Convertible Preferred Stock Warrants primarily consist of warrants to purchase Series E and Series F Convertible Preferred Stock. Series F Warrants were issued to ~~the~~an investor Consortium and vested when the Consortium purchased whole loans under the Consortium Purchase Agreement, which ended in May 2019.

We estimate the fair value of the Series E and Series F Warrants using valuation methods appropriate at each balance sheet date. Generally, this includes determining the ~~business~~equity ~~enterprise~~ value of the Company using methods that may include a discounted cash flow model, comparable public company analysis, and comparable acquisition analysis, which require significant management judgment. Additionally, we review and consider any recent transactions involving the Company's equity in determining whether such transactions should be considered in the valuation. Once the ~~business~~equity ~~enterprise~~ value has been estimated, an option pricing model is used to allocate the value to the various classes of our equity. The concluded per share value for the Series E and Series F Convertible Preferred Stock Warrant is then determined using a Black-Scholes option pricing model that requires us to make key assumptions such as volatility and expected warrant term. For further information on fair value measurement of the Convertible Preferred Stock Warrants, refer to Note 8, - Fair Value of Assets and Liabilities, and Note 13, - Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock, of the accompanying notes to our consolidated financial statements.

PROSPER FUNDING LLC

Overview

Prosper Funding LLC was formed in the state of Delaware in February 2012 as a limited liability company with PMI as its sole equity member. Prosper Funding was formed by PMI to hold Borrower Loans originated through the Note Channel and issue related Notes. Although Prosper Funding is consolidated with PMI for accounting and tax purposes, Prosper Funding has been organized and is operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding. Prosper Funding’s intention is to minimize the likelihood that its assets would be subject to claims by PMI’s creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that Prosper Funding will become subject to bankruptcy proceedings directly. Prosper Funding seeks to achieve this by placing certain restrictions on its activities and by implementing certain formal procedures designed to expressly reinforce its status as a distinct corporate entity from PMI.

As a credit marketplace, we believe our customers are more highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers’ ability or desire to participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations.

Results of Operations

Overview

The following table summarizes Prosper Funding’s net (loss) income for the years ended December 31, 2024, 2023 and 2022 (in thousands):

	Year Ended December 31,
	2023		2022		Change		% Change		2022		2021		Change		% Change
	2024		2023		Change		% Change		2023		2022		Change		% Change
Total Net Revenues	$	6361,~~224~~915	$	8663,~~987~~224	$	(231,~~763~~309)	(272)	%	$	8663,~~987~~224	$	6286,~~757~~987	$	24(23,~~230~~763)	39(27)	%
Total Expenses	6572,~~290~~859		8365,~~464~~290		~~(18~~7,~~174)~~569		~~(22)~~12	%	8365,~~464~~290		5983,~~547~~464		23(18,~~917~~174)		40(22)	%
Net (Loss) Income	$	(210,~~066~~944)	$	3(2,~~523~~066)	$	(58,~~589~~878)	n/m		$	3(2,~~523~~066)	$	3,~~210~~523	$	~~313~~(5,589)	10n/m	%

Total revenues for the year ended December 31, ~~2023~~2024 decreased $231.83 million, or 272%, from ~~the~~2023, ~~year~~primarily ~~ended~~due ~~December~~to a $2.0 31million decrease in net revenues as a result of the Change in Fair Value of Financial Instruments, ~~2022~~Net, primarily ~~due~~as a result of certain timing matters related to ~~decreased~~the ~~administration~~receipt ~~fee~~of ~~revenue~~borrower ~~driven~~payments bynear quarter-end. Additionally, there was a $0.7 million decrease in ~~the~~Total ~~number~~Interest ofIncome ~~personal~~(Expense), ~~loan~~Net, ~~listings~~due onprimarily ~~our~~to ~~marketplace~~a ~~during~~decrease in the ~~period,~~average outstanding balance of Borrower Loans and Notes year-over-year. These decreases were partially offset by ana $0.7 million increase in ~~incentives~~Servicing ~~provided~~Fees, toNet, ~~whole~~generally ~~loan~~due ~~investors~~to ~~(for~~increased ~~which~~collection ~~PFL~~and ~~bills~~debt ~~PMI).~~sale ~~Because~~fees, net of the ~~growth~~impact inof ~~our~~a reduced average servicing book, ~~there~~in ~~was~~2024, and a ~~resulting~~$0.5 million increase in ~~Servicing~~Other ~~Fees,~~Revenue ~~Net~~related to miscellaneous securitization fees and reduction of loan repurchase reserves. ~~There~~Administration Fee Revenue – Related Party increased by $34.2 million for the year ended December 31, 2024, as compared to 2023, but the increase was ~~also~~effectively offset by a ~~decrease~~$34.0 million reduction in ~~(Loss)~~revenue ~~Gain~~from Loss on Sale of Borrower Loans,. This is generally due to the ~~increase~~fact inthat PMI reimburses PFL for incentives provided to whole loan investors, as ~~well~~these asincentives ~~decreased~~are ~~whole~~recorded ~~loan~~in ~~originations.~~(Loss) ~~Because~~Gain ~~these~~on ~~incentives~~Sale ~~are~~of Borrower Loans, and then reimbursed through ~~the~~Administration ~~administration~~Fee ~~fee~~Revenue – Related Party.

62Total expenses for the year ended December 31, 2024 increased $7.6 million, or 12%, from 2023, largely due to an increase in Administration Fee – Related Party resulting from an increase in estimated transaction fee refunds following revisions to our pricing schedule with WebBank in October 2023 and June 2024, partially offset by a decrease in loans funded and Servicing Fees, Net collected for the period.

revenue, there is no net impact on total net revenues. Other Revenues decreased by $0.5 million primarily due to a partner incentive program that terminated in June 2022. Total expenses for the year ended December 31, 2023 decreased $18.2 million, or 22%, from 2022, largely due to a decrease in administrative fee expense during the year resulting from a decrease in personal loans funded for the period.63

Revenues

The following table summarizes Prosper Funding’s revenue for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands):

	Year Ended December 31,
	2023		2022		Change		% Change		2022		2021		Change		% Change
	2024		2023		Change		% Change		2023		2022		Change		% Change
REVENUES:
Revenues:
Operating Revenues:
Administration Fee Revenue – Related Party	$	4478,~~211~~376	$	6044,~~256~~211	$	~~(16~~34,~~045)~~165	~~(27)~~77	%	$	6044,~~256~~211	$	3460,~~017~~256	$	26(16,~~239~~045)	77(27)	%
Servicing Fees, Net	26,~~208~~921		2026,~~641~~208		~~5,567~~713		273	%	2026,~~641~~208		1520,~~770~~641		45,~~871~~567		3127	%
Loss (Gain) on Sale of Borrower Loans	(11,285)		1,678		(12,963)		n/m		1,678		8,450		(6,772)		(80)	%
(Loss) Gain on Sale of Borrower Loans	(45,316)		(11,285)		(34,031)		(302)	%	(11,285)		1,678		(12,963)		n/m
Other Revenue	~~356~~890		~~894~~356		~~(538)~~534		~~(60)~~150	%	~~894~~356		~~1,312~~894		(~~418~~538)		(3260)	%
Total Operating Revenues	5960,~~490~~871		8359,~~469~~490		~~(23~~1,~~979)~~381		~~(29)~~2	%	8359,~~469~~490		5983,~~549~~469		(23,~~920~~979)		40(29)	%
Interest Income on Borrower Loans	52,188		45,289		6,899		15	%	45,289		36,952		8,337		23	%
Interest Income (Expense):
Interest Expense on Notes	(48,572)		(42,165)		(6,407)		15		(42,165)		(34,514)		(7,651)		22	%
Interest Income on Borrower Loans	49,986		52,188		(2,202)		(4)	%	52,188		45,289		6,899		15	%
Total Interest Income (Expense), Net	3,616		3,124		492		16	%	3,124		2,438		686		28	%
Interest Expense on Notes	(47,033)		(48,572)		1,539		(3)		(48,572)		(42,165)		(6,407)		15	%
Change in Fair Value of Financial Instruments, Net	118		394		(276)		(70)	%	394		770		(376)		(49)	%
Total Interest Income (Expense), Net	2,953		3,616		(663)		(18)	%	3,616		3,124		492		16	%
Total Net Revenues	$	63,224	$	86,987	$	(23,763)	(27)	%	$	86,987	$	62,757	$	24,230	39	%
Change in Fair Value of Financial Instruments, Net	(1,909)		118		(2,027)		n/m		118		394		(276)		(70)	%
Total Net Revenues	$	61,915	$	63,224	$	(1,309)	(2)	%	$	63,224	$	86,987	$	(23,763)	(27)	%

n/m: not meaningful

Administration Fee Revenue -– Related Party

We primarily generate revenues through license fees we earn under our Administration Agreement with PMI. The Administration Agreement contains a license we grant to PMI that entitles PMI to use the marketplace for, and in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement, and (ii) PMI’s performance of its duties and obligations to WebBank under the Loan Account Program Agreement. The Administration Agreement requires PMI to pay us a monthly license fee that is partially based on the number of personal loan listings posted on the marketplace in that month, as well as a fee based on incentives provided to investors to incentivize the purchase of Borrower Loans from PFL. The ~~decrease~~increase in Administrative Fee Revenue – Related Party of $1634.02 million for the year ended December 31, ~~2023~~2024 as compared to in2023 ~~2022~~ was primarily due to aincreased ~~decrease~~reimbursements inreceived ~~personal~~from ~~loan~~PMI ~~listings~~for ~~generated~~incentives onprovided ~~the~~to ~~marketplace~~whole loan investors, which resulted in aan ~~decrease~~increase ~~in Administrative Fee Revenue~~ of $2235.5 3 million ~~for~~in ~~the~~Administration ~~year~~Fee ~~ended~~Revenue ~~December~~– ~~31,~~Related ~~2023~~Party during this time. This ~~decrease~~increase was partially offset by a $61.5 2 million ~~increase~~decrease ~~related to reimbursements received~~ from ~~PMI~~fewer ~~for~~loan ~~incentives~~listings ~~provided~~generated toon ~~whole~~our ~~loan~~marketplace ~~investors,~~during asthis ~~discussed above~~time.

6364

Servicing Fees, Net

Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is currently set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The Servicing Fee compensates us for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, managing payments to investors and maintaining investors’ account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, and debt sale fees in Servicing Fees, Net.

The increase in Servicing Fees, Net of $50.67 million infor the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023, ~~was~~is largely due to ~~the~~a ~~growth~~combined in$2.3 million ~~the~~increase ~~servicing~~in ~~book~~net ascollections ~~compared~~and todebt ~~the~~sale ~~prior year~~fees, ~~which~~as ~~resulted~~we incontinue ~~approximately~~to ~~$6.0~~enhance ~~million~~our inBorrower ~~additional~~Loan ~~Servicing~~collection ~~Fees~~and ~~for~~recovery ~~the~~efforts, ~~year~~partially ~~ended~~offset ~~December~~by ~~31,~~a ~~2023.~~reduction ~~This~~in ~~increase~~our inaverage ~~2023~~servicing ~~was~~book ~~partially~~during ~~offset~~these byperiods, ~~increases~~which resulted in ~~collection~~decreased ~~agency~~Servicing ~~costs~~Fees, ~~net~~Net of ~~collections~~$1.9 million. ~~and~~This ~~debt~~is ~~sale~~generally ~~fees,~~in asline wewith ~~increased~~the ~~our~~overall ~~spend~~decrease ~~on these agencies~~ in ~~response~~Personal toLoan ~~higher~~originations ~~delinquencies~~since 2022.

(Loss) Gain on Sale of Borrower Loans

(Loss) Gain on Sale of Borrower Loans consists of ~~(losses)~~incentives ~~gains~~provided onto investors at the time Borrower Loans are sold through the Whole Loan Channel, net of any ~~incentives~~gains ~~provided~~recognized toon ~~investors~~those atsales, ~~the~~primarily ~~time~~due ofto ~~sale. For~~ the ~~year~~recognition ~~ended~~of ~~December 31,~~additional ~~2023,~~Servicing ~~PFL recognized a loss of $11~~Assets.3 ~~million~~Since 2022, adue ~~decrease~~to ofmarket ~~$13.0~~volatility ~~million~~and ~~from~~incentives ~~2022.~~offered ~~This~~by ~~decrease~~competitors, ~~was~~we ~~primarily~~started ~~due~~providing to additional incentives ~~provided~~ to our whole loan investors,. ~~due~~For tothe ~~market~~year ~~volatility~~ended ~~and~~December 31, ~~incentives~~2024, ~~offered~~the byLoss ~~competitors.~~on ~~These~~Sale ~~incentives~~of ~~resulted~~Borrower inLoans aincreased $734.20 million ~~decrease~~from inthe ~~(Loss)~~loss ~~Gain~~recognized onin ~~Sale~~2023. ofThis ~~Borrower~~increased ~~Loans~~loss aswas ~~compared~~primarily due to ~~2022.~~additional ~~Excluding~~incentives ~~the~~provided ~~impact~~to ofwhole ~~these~~loan ~~incentives~~investors, ~~the~~which ~~remaining~~increased ~~decrease~~$35.3 million infrom ~~(Loss)~~2023. ~~Gain~~As ondiscussed ~~Sale~~above, ofPFL ~~Borrower~~is ~~Loans~~reimbursed offor ~~$5.8~~these ~~million~~incentives ~~for~~by PMI through the ~~year~~Administration ~~ended~~Fee ~~December 31,~~Revenue ~~2023,~~– asRelated ~~compared~~Party account. This increase to ~~2022,~~the loss was ~~primarily~~partially ~~due~~offset toby ~~decrease~~gains infrom the volume of whole loans sold ~~due~~during tothis ~~lower~~time, ~~personal~~resulting ~~loan~~from ~~originations,~~higher asPersonal ~~discussed~~Loan ~~above~~originations.

Other Revenues

Other Revenues ~~consists~~has historically consisted primarily of ~~incentive~~miscellaneous fees, ~~which~~including ~~are~~incentive fees earned from partner companies through our incentive programs, or securitization fees earned from sponsoring securitization transactions with loans from our marketplace. We also record changes to the reserve for the repurchase of Borrower Loans in Other Revenues. The $0.5 million ~~decrease~~increase in Other Revenues for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023, is primarily due to a$0.3 million ~~decrease~~ in ~~these~~securitization ~~incentive~~ fees asreceived weand ~~terminated~~$0.3 million anin ~~incentive~~decreases ~~program~~to inour ~~June~~repurchase ~~2022~~reserve.

Interest Income on Borrower Loans and Interest Expense on Notes

We recognize Interest Income on Borrower Loans using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record Interest Expense on the corresponding Notes based on the contractual interest rates. The interest rate on Notes is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans.

Overall, the $0.57 million ~~increase~~decrease in ~~net~~Net ~~interest~~Interest ~~income~~Income for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023, ~~was~~is due to ana ~~increase~~decrease in the average outstanding principal balance of Borrower Loans and Notes during this period.

Change in Fair Value of Financial Instruments, Net

Change in Fair Value of Financial Instruments, Net captures gains (losses) in fair value estimates using discounted cash flow methodologies that are based upon a set of valuation assumptions. The key assumptions used in valuations include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. Changes in fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the corresponding Notes due to the borrower payment-dependent structure, though differences will arise due to the actual and projected impact of cash flows related to charge-offs, debt sales and miscellaneous fees, as well as certain timing differences.

The following table summarizes the fair value adjustments for the years ended December 31, 2024, 2023 and 2022 respectively (in thousands):

The following table summarizes the fair value adjustments for the years ended December 31, 2023, 2022 and 2021 respectively (in thousands):


	Year Ended December 31,
	2024		2023		2022
Borrower Loans	$	(29,452)	$	(40,285)	$	(30,436)

Notes	27,543		40,403		30,830
Total	$	(1,909)	$	118	$	394

	Year Ended December 31,
	2023		2022		2021
Borrower Loans	$	(40,285)	$	(30,436)	$	(1,141)
Notes	40,403		30,830		1,911
Total	$	118	$	394	$	770

64The decrease in net revenues from Change in Fair Value of Financial Instruments for the year ended December 31, 2024, as compared to 2023, is primarily due to the timing of borrower payments close to quarter-end, which were not yet applied to the related Notes. Other fair value changes are generally not material, which is consistent with the borrower payment-dependent structure described above.

The increase in net revenues from Change in Fair Value of Financial Instruments for the year ended December 31, 2023, as compared to 2022, is primarily reflective of increased debt sale fees on charged-off Borrower Loans in 2023. This includes the impact of Borrower Loans transferred to PFL in conjunction with the PMIT 2023-1 Transaction, as discussed in Note 4, Borrower Loans and Notes, at Fair Value, of the accompanying consolidated financial statements. Other fair value changes are generally not material, which is consistent with the borrower payment structure described above.

Expenses

The following table summarizes Prosper Funding’s expenses for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022 (in thousands):

	Year Ended December 31,
	2023		2022		Change		% Change		2022		2021		Change		% Change
	2024		2023		Change		% Change		2023		2022		Change		% Change
Expenses:
Administration Fee – Related Party	$	5765,~~683~~869	$	7457,~~382~~683	$	~~(16~~8,~~699)~~186	~~(22)~~14	%	$	7457,~~382~~683	$	5274,~~641~~382	$	21(16,~~741~~699)	41(22)	%
Servicing and Other, Net	76,~~607~~990		97,~~082~~607		(~~1,475~~617)		(168)	%	97,~~082~~607		69,~~906~~082		2(1,~~176~~475)		32(16)	%
Total Expenses	$	6572,~~290~~859	$	8365,~~464~~290	$	~~(18~~7,~~174)~~569	~~(22)~~12	%	$	8365,~~464~~290	$	5983,~~547~~464	$	23(18,~~917~~174)	40(22)	%

Administration Fee Expense - Related Party

Pursuant to our Administration Agreement with PMI, PMI manages the marketplace on our behalf. Accordingly, each month we are required to pay PMI (a) a corporate administration fee of $500,000 per month, (b) a fee for each Borrower Loan originated through the marketplace, (c) 62.5% of all Servicing Fees collected by us or on our behalf and (d) all nonsufficient funds fees collected by us or on our behalf. In general, the Administrative Fee Expense – Related Party will not fluctuate directly in line with the Administrative Fee Revenue – Related Party due to both the flat corporate administrative fee, as well as the fact that we pay fees for three different services, but receive a fee based only on the number of personal loans listed on the platform. We also include loan trailing fees and refund liabilities for transaction fees above 5%, based on our revised pricing schedule with WebBank starting in October 2023 and revised in June 2024, in Administration Fee Expense – Related Party.

The ~~decrease~~increase in Administration Fee ~~expense~~Expense – Related Party of $168.72 million, or 14%, for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023, ~~was~~is due primarily to a ~~drop~~$10.7 million increase in the ~~number~~refund ofliability ~~Borrower~~for ~~Loans~~transaction ~~originated~~fees ~~through~~above ~~the~~5%, ~~marketplace~~as ~~during~~we ~~these~~raised ~~periods~~our transaction fees above 5% starting in October 2023. Additionally, ~~which~~there ~~contributed~~was a $210.3 5 million decrease in loan trailing fees, ~~partially~~a ~~offset~~contra byexpense, due to the ~~increase~~decrease in ~~Servicing~~the ~~Fees,~~Personal ~~Net,~~Loan ~~discussed~~serviced ~~above,~~portfolio ~~which~~during ~~resulted~~this intime. These are partially offset by a decrease in administration fees of $43.4 0 million, ~~increase~~due to decreases in ~~Administration~~the ~~Fee~~number -of ~~Related~~loans ~~Party~~funded ~~for~~and ~~the~~Servicing ~~year~~Fees, ~~ended~~Net ~~December~~and ~~31,~~nonsufficient ~~2023~~funds fees collected during this period.

Servicing and Other, Net

Servicing costs consist primarily of vendor and borrower costs, as well as depreciation of internal-use software associated with servicing Borrower Loans. Other items consist primarily of interest income on cash invested on our platform, as well as bank service charges and professional fees. The decrease in Servicing ~~costs~~and Other, Net for the year ended December 31, ~~2023~~2024, as compared to ~~2022~~2023, ~~was~~is primarily ~~driven~~due byto ~~the~~a decrease in ~~personal~~investor ~~loan~~indemnification ~~originations~~costs, partially offset by an increase in internal-use software depreciation due to the timing of certain projects. Servicing and Other costs are offset by interest income of $1.2 million and $0.6 million generated from cash invested on our platform for the years ended December 31, 2024 and 2023, respectively. The increase from the prior year is primarily related to changes in interest rates.

Other costs consist primarily of bank service charges and professional fees. The change in Other costs for the year ended December 31, 2023, as compared to 2022 was not significant.

Servicing and Other costs are offset by the interest income of $0.6 million and $0.1 million generated from cash invested on our platform during the years ended December 31, 2023 and 2022, respectively. The increase from the prior year is primarily related to the change in interest rates.

LIQUIDITY AND CAPITAL RESOURCES

We anticipate that our available funds and cash flow from operations will be sufficient to meet our operational cash needs for at least the next 12 months.

The following table summarizes our cash flow activities for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022 (in thousands):

6566

	Years Ended December 31,
	2023		2022		2021
	2024		2023		2022
Net (Loss) Income	$	(210,~~066~~944)	$	3(2,~~523~~066)	$	3,~~210~~523
Net cash provided by (used in) operating activities	$	37,~~664~~555	$	~~(57~~3,~~439)~~664	$	32(57,~~685~~439)
Net cash used in investing activities	(47,324)		(90,345)		(65,416)
Net cash provided by (used in) investing activities	3,115		(47,324)		(90,345)
Net cash provided by financing activities	42,850		77,757		59,683
Net cash (used in) provided by financing activities	(10,969)		42,850		77,757
Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash	(810)		(70,027)		26,952
Net decrease in Cash, Cash Equivalents and Restricted Cash	(299)		(810)		(70,027)
Cash, Cash Equivalents and Restricted Cash at the beginning of the period	97,~~849~~039		~~167~~97,~~876~~849		~~140~~167,~~924~~876
Cash, Cash Equivalents and Restricted Cash at the end of the period	$	9796,~~039~~740	$	97,~~849~~039	$	~~167~~97,~~876~~849

Cash, Cash Equivalents and Restricted Cash decreased by $0.3 million for the year ended December 31, 2024, based on the following components:

Operating Activities: $7.6 million in cash was provided by operating activities, driven by cash provided in working capital of $10.3 million, primarily due to the timing of payments to PMI and investors, partially offset by net loss, net of non-cash adjustments of $2.8 million.

Investing Activities: $3.1 million net cash provided by investing activities, due to $196.6 million of principal payments under Borrower Loans, partially offset by $186.1 million in purchases of Borrower Loans and $7.4 million in purchases of property and equipment, consisting primarily of internal-use software.

Financing Activities: $11.0 million net cash was used in financing activities, due to $195.2 million in payments for Notes, at Fair Value, partially offset by $184.2 million in proceeds from the issuance of Notes, at Fair Value.

Cash, Cash Equivalents and Restricted Cash decreased by $0.8 million for the year ended December 31, 2023, based on the following components:

Operating Activities: $3.7 million in cash was provided by operating activities, driven by net income, net of non-cash adjustments of $5.2 million, partially offset by cash used in working capital of $1.6 million, primarily due to the timing of payments to PMI and investors.

Investing Activities: $47.3 million net cash used in investing activities, due to $232.3 million in purchases of Borrower Loans and $6.1 million in purchases of property and equipment, consisting primarily of internal-use software, partially offset by $191.1 million of principal payments under Borrower Loans.

Financing Activities: $42.9 million net cash was provided by financing activities, due to $231.5 million in proceeds from the issuance of Notes, at Fair Value, partially offset by $188.7 million in payments for Notes, at Fair Value.

Income Taxes

We incurred no income tax provision for the years ended December 31, ~~2023~~2024 and ~~2022~~2023. We are a USU.S. disregarded entity for income tax purposes and our income and loss is included in the return of our parent, PMI. Given PMI’s history of taxable losses, it is difficult to accurately forecast how ~~Prosper~~PMI’s and our results will be affected by the realization and use of net operating loss carry forwards.

Off-Balance Sheet Arrangements

As a result of retaining servicing rights on the sale of Borrower Loans, we are a variable interest holder in certain special purposes entities that purchase these Borrower Loans. None of these special interest entities are consolidated as we are not the primary beneficiary. Otherwise as of December 31, ~~2023~~2024, we have not engaged in any off-balance sheet financing activities.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PROSPER MARKETPLACE, INC.

Market Risk

Market risk is the risk of loss to future earnings, values, or future cash flows that may result from changes in financial market prices and interest rates.

Through ~~the~~our ~~Warehouse Lines we invest in Loans Held for Sale and through the~~ securitization ~~trust~~trusts (formed in September 2023 and March 2024) we hold Borrower Loans. Changes in U.S. interest rates affect the market value of these ~~Loans Held for Sale and~~ Borrower Loans on our balance sheet. Our future investment income may fall short of expectations, or we may suffer a loss in principal if we are forced to sell Borrower Loans ~~Held for Sale~~ that have declined in market value due to changes in interest rates, loss assumptions or overall market conditions. ~~Recent~~Interest ~~interest~~ rate increases, ~~due in part to ongoing inflation,~~ may increase the risks of our investments in Borrower Loans ~~Held~~through ~~for~~our ~~Sale~~securitization ~~and Borrower Loans~~trusts, and additional fluctuations in interest rates may exacerbate such risks. Changes in the market value of Borrower Loans ~~Held for Sale~~ are recorded on the ~~Consolidated~~consolidated ~~Statement~~statement of ~~Operations~~operations. The fair value of Borrower Loans ~~Held~~held ~~for~~in ~~Sale~~consolidated securitization trusts was $~~161~~176.52 million and $~~499~~220.87 million as of December 31, ~~2023~~2024 and ~~2022~~2023, respectively~~, while the fair value of Borrower Loans held in the consolidated securitization trust was $220~~.~~7 million as of December 31, 2023.~~

66The fair values of Borrower Loans and Notes are determined using discounted cash flow methodologies based upon a set of valuation assumptions such as default rate, prepayment rate and discount rate. Default rate, prepayment rate and discount rate may change due to expected loan performance or changes in the expected returns of similar financial instruments available in the market. We are exposed to the risk of a decrease in the fair value of loans held in the warehouse and securitization trusts. For Borrower Loans and Notes presented on our Balance Sheet on behalf of our Note Channel investors, the fair value adjustments for Borrower Loans are largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and due to the total principal balances of the Borrower Loans being very close to the total principal balances of the Notes.

~~The~~We ~~fair~~had ~~values~~cash ~~of Borrower Loans, Loans Held for Sale,~~ and ~~Notes are determined using discounted~~ cash ~~flow~~equivalents ~~methodologies~~of ~~based~~$30.3 ~~upon~~million aand ~~set~~$35.0 ofmillion ~~valuation assumptions such~~ as ~~default~~of ~~rate~~December 31, ~~prepayment~~2024 ~~rate~~ and ~~discount~~2023, ~~rate~~respectively. ~~Default~~These ~~rate,~~amounts ~~prepayment~~were ~~rate~~held ~~and~~in ~~discount~~various ~~rate~~unrestricted ~~may~~deposits ~~change~~with ~~due~~highly torated ~~expected~~financial ~~loan~~institutions ~~performance~~and orshort-term, ~~changes~~highly inliquid ~~the~~marketable ~~expected~~securities ~~returns~~which ofmay ~~similar~~include ~~financial~~money ~~instruments~~market ~~available~~funds, ~~in the market~~U.S. WeTreasury ~~are~~securities, ~~exposed~~and toU.S. ~~the~~agency ~~risk~~securities. ofCash aand ~~decrease~~Cash inEquivalents ~~the~~are ~~fair value of loans~~ held infor ~~the~~working ~~warehouse~~capital ~~and securitization trusts~~purposes. ~~For~~Due ~~Borrower~~to ~~Loans~~their ~~and~~short-term ~~Notes~~nature, ~~presented~~we onbelieve ~~our~~that ~~Balance~~we ~~Sheet~~do onnot ~~behalf~~have ofany ~~our~~material ~~Note~~exposure ~~Channel~~to ~~investors,~~changes in the fair value ~~adjustments~~of ~~for~~these ~~Borrower~~liquid ~~Loans~~investments ~~are~~as ~~largely~~a ~~offset~~result byof ~~the~~changes ~~fair~~in ~~value~~interest ~~adjustments~~rates. ofDecreases ~~the~~in ~~Notes~~short-term ~~due~~interest torates ~~the~~will ~~borrower~~moderately ~~payment~~reduce ~~dependent~~interest ~~design~~income ofon ~~the~~these ~~Notes~~Cash and ~~due~~Cash toEquivalents. ~~the~~Increases ~~total~~in ~~principal~~short-term ~~balances~~interest ofrates ~~the~~will ~~Borrower~~moderately ~~Loans~~increase ~~being~~the ~~very~~interest ~~close~~income toearned on the ~~total~~Cash ~~principal~~and ~~balances~~Cash ~~of the Notes~~Equivalents.

We are also exposed to variable interest rate risk under the debt from the Warehouse Lines, which had an outstanding balance of $160.2 million and $446.8 million as of December 31, 2023 and 2022, respectively. To reduce the impact of large fluctuations in interest rates, we hedged a portion of our interest rate risk by entering into a derivative agreement with a financial institution. The derivative agreement that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes. Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the United States. Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, we could experience a material adverse effect on our results of operations and financial condition.

We had cash and cash equivalents of $35.0 million and $83.4 million as of December 31, 2023 and 2022, respectively. These amounts were held in various unrestricted deposits with highly rated financial institutions and short-term, highly liquid marketable securities which may include money market funds, U.S. Treasury securities, and U.S. agency securities. Cash and Cash Equivalents are held for working capital purposes. Due to their short-term nature, we believe that we do not have any material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will moderately reduce interest income on these Cash and Cash Equivalents. Increases in short-term interest rates will moderately increase the interest income earned on the Cash and Cash Equivalents.

Interest Rate Sensitivity

As more fully described in Note 8, Fair Value of Assets and Liabilities, of our financial statements attached to this Annual Report on Form 10-K, the ~~combined~~ fair value of Borrower Loans ~~and Loans Held for Sale~~ is $~~706~~461.58 million as of December 31, ~~2023~~2024, determined using a weighted-average discount rate of 67.8872%. The combined fair value of Borrower Loans and Loans Held for Sale was $~~820~~706.45 million as of December 31, ~~2022~~2023, determined using a weighted-average discount rate of 6.7288%. A hypothetical 100 basis point increase in interest rates would result in a decrease of ~~approximately~~ $64.82 million and $86.38 million in the fair value of PMI’s investment in Borrower Loans and Loans Held for Sale as of December 31, ~~2023~~2024 and ~~2022~~2023, respectively. A hypothetical 100 basis point decrease in interest rates would result in an increase of approximately $64.93 million and $8.6.9 million in the fair value of our investment in Borrower Loans and Loans Held for Sale as of December 31, ~~2023~~2024 and ~~2022~~2023, respectively. Any realized or unrealized gains or losses resulting from such interest rate change would be recorded in our statement of operations so long as we hold these Borrower Loans and Loans Held for Sale on our balance sheet.

PROSPER FUNDING LLC

Market Risk

Market risk is the risk of loss to future earnings, values, or future cash flows that may result from changes in financial market prices and interest rates.

Because balances, interest rates, and maturities of Borrower Loans are matched and offset by an equal balance of Notes with the exact same interest rates (net of our servicing fee) and initial maturities, we believe that we do not have any material exposure to changes in the net fair value of the combined Borrower Loan and Note portfolios as a result of changes in interest rates. We do not hold or issue financial instruments for trading purposes.

The fair values of Borrower Loans and the related Notes are determined using discounted cash flow methodologies based upon a set of valuation assumptions. The fair value adjustments for Borrower Loans are largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and due to the total principal balances of the Borrower Loans being very close to the total principal balances of the Notes.

Prosper Funding had Cash and Cash Equivalents of $32.48 million and $6.3.4 million as of December 31, ~~2023~~2024 and ~~2022~~2023, respectively. These amounts were held in various unrestricted deposits with highly rated financial institutions and short term, highly liquid marketable securities which may include money market funds, U.S. treasury securities and U.S. agency securities. Cash and cash equivalents are held for working capital purposes. Due to their short-term nature, Prosper Funding believes that it does not have any material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will moderately reduce interest income on these cash and cash equivalents, while increases in short-term interest rates will moderately increase the interest income earned on these cash and cash equivalent balances.

rates. Decreases in short-term interest rates will moderately reduce interest income on these cash and cash equivalents, while increases in short-term interest rates will moderately increase the interest income earned on these cash and cash equivalent balances.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Prosper Marketplace, Inc.

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Prosper Funding LLC

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Members' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

In connection with the preparation of this Annual Report on Form 10-K, each Registrant’s management, under the supervision and with the participation of such Registrant’s Principal Executive Officer (PEO) and Principal Financial Officer (PFO), evaluated the effectiveness of the design and operation of such Registrant’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, ~~2023~~2024. Based upon this evaluation, the PEO and the PFO of each Registrant have concluded that these disclosure controls and procedures are effective to provide reasonable assurance that material information relating to each Registrant and its subsidiaries that is required to be disclosed in reports filed with, or submitted to, the SEC under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and (ii) is accumulated and communicated to management, including its PEO and PFO, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), each Registrant’s management is required to assess the effectiveness of such Registrant’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether such Registrant’s internal control over financial reporting is effective.

Management of each Registrant is responsible for establishing and maintaining adequate internal control over financial reporting. Each Registrant’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of such Registrant’s financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Registrants’ management has assessed the effectiveness of the Registrants’ internal control over financial reporting as of December 31, ~~2023~~2024. In making this assessment the Registrants used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework (2013).” These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. Each Registrant’s assessment included documenting and evaluating the effectiveness of its internal control over financial reporting. Based on this evaluation, the person serving as each Registrant’s PEO and PFO has concluded that such Registrant’s internal controls were effective as of December 31, 2024.

Registrant’s assessment included documenting and evaluating the effectiveness of its internal control over financial reporting. Based on this evaluation, the person serving as each Registrant’s PEO and PFO has concluded that such Registrant’s internal controls were effective as of December 31, 2023.

Changes in Internal Control over Financial Reporting

During the fourth quarter of ~~2023~~2024, there were no changes in the internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Attestation Report of Registered Public Accounting Firm

The Dodd-Frank Wall Street Reform and Consumer Protection Act exempts any company that is not a “large accelerated filer” or an “accelerated filer” (as defined by SEC rules) from the requirement that such company obtain an external audit of the effectiveness of its internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. As a result, the Registrants are exempt from the requirement that they include in their Annual Report on Form 10-K an attestation report on internal control over financial reporting by an independent registered public accounting firm; however, management’s annual report on internal control over financial reporting, pursuant to Section 404(a) of the Sarbanes-Oxley Act, is still required with respect to the Registrants.

ITEM 9B. OTHER INFORMATION

~~Effective~~Not ~~March 21, 2024, PMI amended the Long-Term Cash Incentive Plan (the “LTCIP”) to amend certain eligibility criteria for participation in the LTCIP (the “Third Amendment to the LTCIP”)~~applicable. The Third Amendment to the LTCIP provides that participants must be employed by the Company for at least 36 months as of March 15th of the calendar year following the end of a performance period in order to be eligible to participate in the LTCIP.

The foregoing description of the Third Amendment to the LTCIP does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Amendment to the LTCIP, which is filed as an exhibit hereto and is incorporated herein by reference.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

6970

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Prosper Marketplace, Inc.

Executive Officers, Directors and Key Employees

The following table sets forth information about PMI’s current and imminent executive officers and directors as of the date of this Annual Report on Form 10-K:

Name

Age

Position(s)

David Kimball

5354

Chief Executive Officer and Chairman of the Board

Usama Ashraf

4748

President and Chief Financial Officer

Edward R. Buell III

4445

General Counsel, Secretary and Chief Compliance Officer

Pete Woodhouse

5859

Chief Technology Officer

Jeff Killian

Executive Vice President of Operations

Claire A. Huang

Director

Melinda Marchesi

Chief Marketing Officer

Thomas R. Kearney

Director

Claire A. Huang

Director

Peter J. deSilva

Director

Thomas R. Kearney

Director

Peter J. deSilva

Director

David Kimball has served as Chief Executive Officer and a director of PMI since December 2016. From March 2016 to February 2017, Mr. Kimball served as PMI's Chief Financial Officer. In May 2019, Mr. Kimball was appointed Chairman of the Board. He also currently serves as Chief Executive Officer and a director of PFL. Prior to joining PMI, Mr. Kimball was Senior Financial Officer of United Services Automobile Association's (USAA) Chief Operating Office, with financial responsibility for the real estate unit, the bank, the P&C and life insurance companies, the investment management company, and the call centers/distribution functions. Before his position as Senior Financial Officer of USAA's Chief Operating Office, Mr. Kimball spent eight years in various finance roles at USAA, including Senior Vice President of Corporate Finance; Corporate Treasurer; Chief Financial Officer of USAA Federal Savings Bank; and Assistant Vice President of Capital Markets. Prior to his time at USAA, Mr. Kimball spent ten years at Ford Motor Company and Ford Motor Credit Company in both the U.S. and U.K., working on their securitization programs, debt issuance, and a variety of financial planning and analysis positions. Mr. Kimball holds an M.B.A. and a B.A. in English from Brigham Young University. PMI believes that Mr. Kimball's financial and business expertise give him the qualifications and skills to serve as a director.

Usama Ashraf has served as PMI’s President since March 2021 and as its Chief Financial Officer since February 2017. He is currently responsible for Prosper's finance, accounting, capital markets, risk, collections, and business intelligence functions. He also currently serves as President, Chief Financial Officer, Treasurer and a director of PFL. Prior to joining PMI, from February 2016 to February 2017, Mr. Ashraf served as Deputy Chief Financial Officer and Treasurer at Annaly Capital Management, Inc. (“Annaly”). Prior to his time at Annaly, Mr. Ashraf worked at United Services Automobile Association (“USAA”), where he served as Corporate Treasurer from November 2014 to February 2016 and Assistant Corporate Treasurer from January 2014 to October 2014. Before joining USAA, Mr. Ashraf spent 13 years at CIT Group, where he held various positions in the Treasury and Corporate M&A departments, most recently serving as Deputy Treasurer with responsibility for the firm’s Treasury activities in the United States. He started his career in the investment banking division of Citigroup focused on M&A. Mr. Ashraf received a B.S. in Economics, with concentrations in Finance and Accounting, from The Wharton School of the University of Pennsylvania.

Edward “Ted” R. Buell III has served as PMI’s General Counsel and Secretary since March 2021, and its Chief Compliance Officer since June 2018. Mr. Buell also currently serves as PFL’s Secretary, a position he has held since March 2021. Prior to that, Mr. Buell served as PMI’s Deputy General Counsel from June 2018 to March 2021, its Assistant General Counsel and Deputy Chief Compliance Officer from January 2017 to June 2018 and its Senior Corporate Counsel from September 2015 to January 2017. Before joining PMI in September 2015, Mr. Buell served as an attorney at Severson & Werson P.C., advising and representing financial services clients in regulatory matters and litigation, from April 2010 to September 2015. Prior to that, Mr. Buell served as Assistant General Counsel at GreenPoint Mortgage Funding, Inc., a national mortgage bank that originated, sold and serviced mortgage loans, from September 2005 to April 2010. Mr. Buell holds a J.D. from the University of Miami School of Law and a B.A. degree in Criminology, Law and Society from the University of California, Irvine.

7071

Pete Woodhouse has served as PMI’s Chief Technology Officer since July 2021. Before joining PMI, Mr. Woodhouse was the Chief Technology Officer and Head of Product at Sibly, an employee mental health coaching text-based platform. Prior to his time at Sibly, Mr. Woodhouse spent 7 years in a variety of technology roles at PayPal, including as the Chief Technology Officer at PayPal Credit and as the Senior Director at PayPal Global Solutions Engineering. In Mr. Woodhouse’s role as Chief Technology Officer at PayPal Credit, he was responsible for building and integrating multiple credit products into the PayPal platform structure. Prior to his time at PayPal, Mr. Woodhouse held various product development and technology roles at PRTM, a management consulting subsidiary of PwC, Agilent Technologies, an analytical instrumentation development and manufacturing company, and spent 10 years at Hewlett-Packard Company. Mr. Woodhouse also currently serves as an Engineering Leadership Mentor at Plato, a mentorship program that aims to build soft skills in engineering and product managers. Mr. Woodhouse holds an MBA from Santa Clara University and a Bachelor of Science in Electrical Engineering from the University of Plymouth (England).

Jeff Killian has served as PMI’s Executive Vice President of Operations, since August 2022. Before joining PMI, Mr. Killian was the Vice President of Customer Success at Spot Insurance, an insurtech that provides on-demand injury insurance policies. Prior to his time at Spot Insurance, Mr. Killian led Customer Operations for North America and Australia for eBay Inc. At eBay, Mr. Killian led customer experience improvements, and customer channel strategy, while also supporting the company's changes to its payments processing platform. Prior to his time at eBay, Mr. Killian spent five years at New York Life Insurance Company as the Head of Service and Operations, a role in which he oversaw the company’s shift to digital strategies and advancing the company’s customer experience capabilities. Prior to his time at New York Life Insurance Company, Mr. Killian worked in a variety of service, sales, risk management, analytics, and strategy roles at Capital One. Mr. Killian also founded a digital consulting firm, Axeom Consulting, which he operated from 2019 to 2022. Mr. Killian holds an MBA from Southern Methodist University and a Bachelor of Business Administration (Finance) degree from Baylor University.

Melinda Marchesi has served as PMI’s Chief Marketing Officer since May 2023. Before joining PMI, Ms. Marchesi served as the Chief Operating Officer and Chief Commercial Officer at Momentum Financial Services Group, an alternative financial services company with multiple lending products. In her role at Momentum, Ms. Marchesi was responsible for all revenue-generating activities and operations. Prior to her time at Momentum, Ms. Marchesi spent ten years at JPMorgan Chase & Co. in a variety of Managing Director positions, including Chief Marketing Officer for the Chase Auto and Home Lending businesses, and Head of Digital Marketing for Credit Cards. In her roles at JPMorgan Chase, Ms. Marchesi managed digital and traditional marketing activities across multiple product lines and managed both the direct lending activities and marketing activities for the Chase Auto business. Prior to her time at JPMorgan Chase & Co., Ms. Marchesi spent thirteen years at Willis Towers Watson (formerly Towers Watson), a global B-to-B consultancy, including four years as the Global Digital Marketing Director. In her role as Global Digital Marketing Director, she oversaw all online communication and marketing strategies. Ms. Marchesi also currently serves as strategic advisor for Wealthmore, an alternative investment platform start-up, and as a limited partner for How Women Invest, an investment fund that focuses on female and minority entrepreneurs. Ms. Marchesi holds an M.A. in Professional Communication from La Salle University and a B.A. in English and Journalism from the University of Richmond.

Claire A. Huang has served as a director of PMI since December 2017. Ms. Huang is currently a member of the board of directors of SigFig, a robo-investing and customer engagement software provider, Zions Bancorporation N.A., a regional bank, and PODS, a leading storage and moving company. She is a member of the audit committee and compensation committee of Zions Bancorporation N.A. She also previously served as a director of Mirador Financial, Inc., a small business lending platform, from 2017 to 2018. Ms. Huang has extensive experience in marketing and brand management. She served as the first global Chief Marketing Officer of JP Morgan Chase from 2012 to 2014, where she worked with the marketing teams across all Chase retail and JP Morgan wholesale businesses to build brands and businesses with a customer focus. Before joining JP Morgan Chase, from 2008 to 2012, Ms. Huang held global head of marketing positions at Bank of America Merrill Lynch, where she was responsible for a number of high profile marketing initiatives, including the integration of Merrill Lynch and Bank of America and the launch of Merrill Edge, the company’s brokerage platform. Prior to her time at Bank of America Merrill Lynch, Ms. Huang held marketing leadership positions at Fidelity Investments, American Express Company, Wise Foods, and The Häagen-Dazs Company. Ms. Huang received a B.A. in Economics from De La Salle University in Manila, Philippines. PMI believes that Ms. Huang’s marketing and brand management expertise, as well as her experience at several leading financial institutions, give her the qualifications and skills to serve as a director.

Thomas R. Kearney was appointed as a director of PMI in May 2020. Mr. Kearney is currently a member of the Board of Directors and Finance Committee of the Plattsburgh College Foundation, a non-profit organization affiliated with the State University of New York at Plattsburgh. Mr. Kearney is also a member of the Board of Directors of the YMCA of San Francisco, a non-profit organization (“YSF”). Additionally, he is YSF Finance Committee Chair and a member of the YSF Board Executive Committee. Mr. Kearney is a CPA with extensive technical accounting and auditing experience. He previously worked at PricewaterhouseCoopers LLP for nearly 35 years and served as Assurance Partner for 20 years. In this role, Mr. Kearney helped financial services clients navigate a wide range of complex financial instruments, credit arrangements and operational processes and controls. Prior to PwC, Mr. Kearney conducted periodic reserve reporting for the Federal Reserve Bank of San Francisco and assisted with the implementation of Regulation D and Contemporaneous Reserve Reporting. Mr. Kearney holds a B.S. in Accounting from State University of New York at Plattsburgh. PMI believes that Mr. Kearney’s financial, business, and regulatory expertise gives him the qualification and skills to serve as a director. Mr. Kearney qualifies as an “audit committee financial expert” under SEC guidelines.

Peter J. deSilva was appointed as a director of PMI in April 2021. Mr. deSilva is also currently the Chief Executive Officer and serves as a director on the Board of Directors at IRALOGIX, Inc., an IRA financial technology company,. atMr. ~~Edelman~~deSilva ~~Financial~~also ~~Engines,~~currently aserves ~~financial~~as ~~planning~~a ~~and~~director ~~investment advisory company,~~ at Infosel Financiero SA de CV, a financial technological platform and business news agency that operates in Mexico and Latin America, at Fidelity Security Life Insurance Company, an insurance services provider, and at Fidelity Security Assurance Company, a subsidiary of Fidelity Security Life Insurance Company. In addition, Mr. deSilva serves as a director on the Board of Directors and as a member of the Compensation Committee of Onepak, Inc., a logistics technology company focused on return shipment tracking. Mr. deSilva previously served as the President of TD Ameritrade’s retail business and as President of TD Ameritrade, Inc. the firms broker dealer from September 2017 to December 2020. In his role, Mr. deSilva directed all facets of the division’s business strategy and operations, and integration with Scottrade Financial Services, another leading online brokerage firm. Prior to joining TD Ameritrade, from February 2015 to August 2017, Mr. deSilva served as the President of the Retail and Institutional divisions of Scottrade Financial Services, where he was responsible for the corporate strategy and distribution, sales, digital transformation, investment management, and institutional custody functions. Before joining Scottrade Financial Services, from 2004 to 2015, Mr. deSilva served as the President and Chief Operating Officer of UMB Financial Corporation, a financial services provider. Mr. deSilva also served on UMB Financial Corporation’s Board of Directors from February 2004 to December 2015. Prior to his time at UMB Financial Corporation, Mr. deSilva worked at Fidelity Investments, a leading online brokerage firm, where he held several leadership positions, including Senior Vice President and General Manager of Fidelity Investments’ Retail division and Senior Vice President of Fidelity Brokerage Company. Mr. deSilva holds a B.S. in Business Administration and Management from the University of Massachusetts, Dartmouth. Mr. deSilva also holds Series 7, 24, 63 and 66 licenses from the Financial Industry Regulatory Authority. PMI believes that Mr. deSilva’s financial, business and regulatory expertise give him the qualifications and skills to serve as a director.

Election of Directors

PMI’s board of directors currently consists of eight seats, with one vacancy to be filled by a designee of the Series A Holders, one vacancy to be filled by a designee of the Series A-1 Holders, one vacancy to be filled by a designee of Francisco Partners III, L.P., and one vacancy to be filled by a designee of the Series F Holders. All of the current members of PMI's board of directors were elected as directors pursuant to the terms of a voting rights agreement entered into among certain of PMI’s stockholders. In selecting the composition of its board of directors, PMI seeks to ensure that its board of directors collectively has a balance of expertise in the following areas: internet-based business, consumer financial products, business operations, and experience directing public and start-up companies. Based on these criteria, PMI believes that its board of directors has been effective in identifying diverse directors. The board of directors’ composition provisions of PMI’s voting rights agreement are still in effect. For more information regarding the terms of the voting rights agreement, see Item 13, “Certain Relationships and Related Transactions, and Director Independence.” Holders of the Notes offered through our marketplace, and the accompanying PMI Management Rights, will have no ability to elect or influence PMI’s directors or approve significant corporate transactions, such as a merger or other sale of PMI or its assets.

Board Leadership

Because PMI’s common stock is not listed on a national exchange, PMI is not required to maintain a board of directors consisting of a majority of independent directors, or to maintain an audit, nominating or compensation committee. PMI does not have a lead independent director.

Code of Ethics

Our Board of Directors is committed to a high standard of corporate governance practices and, through its oversight role, believes that it has encouraged and promoted a requisite culture of ethical business conduct among PMI’s officers and employees. To memorialize its commitment to these standards, the Board of Directors of PMI adopted a “Code of Ethics and Business Conduct” that applies to all of PMI's employees, directors and officers, including the Chief Executive Officer, Chief Financial Officer and other executive officers. A copy of the Code of Ethics and Business Conduct is available on our website at www.prosper.com/plp/legal. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, certain provisions of the Code of Ethics and Business Conduct by posting such information on our website or in public filings.

Director Independence

Because PMI’s common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities, PMI is not required to maintain a board of directors consisting of a majority of independent directors or to maintain an audit committee, nominating committee or compensation committee consisting solely of independent directors. Nevertheless, PMI’s board of directors has determined the independence of each director based on the independence criteria set forth in the listing standards of the New York Stock Exchange (“NYSE”). In making its determinations, the Board considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances the board of directors deemed relevant in determining their independence, including any transactions between each director or any member of their family, and us, our senior management or our independent registered public accounting firm. Based upon information requested from and provided by each director concerning their background, employment and affiliations, including family relationships, the board of directors determined that Ms. Huang and each of Messrs. Kearney and deSilva do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the listing requirements and rules of the NYSE.

Board Committees

Nominating Committee

PMI is not a “listed issuer” as defined under Section 10A-3 of the Exchange Act. Therefore, PMI is not required to have a nominating committee comprised of independent directors. PMI currently does not have a standing nominating committee and accordingly, there are no charters for such committee. PMI believes that a nominating committee is not necessary for a company of its size with its type of business. PMI also believes that its directors collectively have the requisite background, experience, and knowledge to fulfill the limited duties and obligations that a nominating committee may have.

Compensation Committee

PMI’s board of directors approved the formation of a Compensation Committee in August 2011. The current members of the Compensation Committee are Claire A. Huang (Chairwoman) and Thomas R. Kearney. The Compensation Committee oversees PMI’s executive officer compensation arrangements, plans, policies and programs maintained by PMI and administers PMI’s equity-based compensation plan for employees generally (including issuance of stock options, RSUs and other equity-based awards granted other than pursuant to a plan). The Compensation Committee meets at such times as determined appropriate by the Chair of the Compensation Committee.

oversees PMI’s executive officer compensation arrangements, plans, policies and programs maintained by PMI and administers PMI’s equity-based compensation plan for employees generally (including issuance of stock options, RSUs and other equity-based awards granted other than pursuant to a plan). The Compensation Committee meets at such times as determined appropriate by the Chair of the Compensation Committee.

The Compensation Committee is exempt from independence listing standards because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities. Nevertheless, the board of directors of PMI has determined that each of the current members of PMI’s Compensation Committee is independent under the applicable rules and regulations of the SEC and NYSE.

Audit Committee

PMI’s board of directors approved the formation of an Audit Committee in January 2010. The current members of the Audit Committee are Thomas R. Kearney (Chairman) and Peter J. deSilva. The Audit Committee oversees financial risk exposures, including monitoring the integrity of PMI’s consolidated financial statements, internal controls over financial reporting and the independence of PMI’s Independent Registered Public Accounting Firm. The Audit Committee receives internal control related assessments and reviews and discusses PMI’s annual and quarterly consolidated financial statements with management. In fulfilling its oversight responsibilities with respect to compliance matters, the Audit Committee meets at least quarterly with management, PMI’s Independent Registered Public Accounting firm and PMI’s internal legal counsel to discuss risks related to PMI’s financial reporting function.

internal control related assessments and reviews and discusses PMI’s annual and quarterly consolidated financial statements with management. In fulfilling its oversight responsibilities with respect to compliance matters, the Audit Committee meets at least quarterly with management, PMI’s Independent Registered Public Accounting firm and PMI’s internal legal counsel to discuss risks related to PMI’s financial reporting function.

The Audit Committee is exempt from independence listing standards because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities. Nevertheless, the board of directors of PMI has determined that each of the current members of PMI's Audit Committee is independent under the listing requirements and rules of the NYSE, and also satisfies the independence requirements of Section 10(m)(3) of the Exchange Act. Additionally, PMI's board of directors has determined that each of the current members of the Audit Committee is an audit committee financial expert as defined under SEC regulations and the listing requirements and rules of the NYSE.

Limitations on Officers’ and Directors’ Liability and Indemnification Agreements

As permitted by Delaware law, PMI’s amended and restated certificate of incorporation and bylaws contain provisions that limit or eliminate the personal liability of its directors for breaches of duty to the corporation. PMI’s amended and restated certificate of incorporation and bylaws limit the liability of directors to the fullest extent permitted under Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of their fiduciary duties as directors, except liability for:

•any breach of the director’s duty of loyalty to PMI or PMI’s stockholders;

•any act or omission not in good faith, believed to be contrary to the interests of PMI or its shareholders, involving reckless disregard for the director’s duty, for acts that involve an unexcused pattern of inattention that amounts to an abdication of duty, or that involves intentional misconduct or knowing or culpable violation of law;

•any unlawful payments related to dividends, unlawful stock repurchases, redemptions, loans, guarantees or other distributions; or

•any transaction from which the director derived an improper personal benefit.

These limitations do not affect the availability of equitable remedies, including injunctive relief or rescission. As permitted by Delaware law, PMI’s amended and restated certificate of incorporation and bylaws also provide that:

•PMI will indemnify its directors and officers to the fullest extent permitted by law;

•PMI may indemnify its other employees and other agents to the same extent that PMI indemnifies its officers and directors; and

•PMI will advance expenses to its directors and officers in connection with a legal proceeding, and may advance expenses to any employee or agent; provided, however, that such advancement of expenses shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person was not entitled to be indemnified.

The indemnification provisions contained in PMI’s amended and restated certificate of incorporation and bylaws are not exclusive.

In addition to the indemnification provided for in PMI’s amended and restated certificate of incorporation and bylaws, PMI has entered into indemnification agreements with each of its directors and officers. The indemnification agreements require PMI, among other things, to indemnify such persons for all expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement (if such settlement is approved in advance by PMI) (collectively, “Expenses”), actually and reasonably incurred by such person in connection with the investigation, defense or appeal of any proceeding to which such person may be made a party, a potential party, a non-party witness, or otherwise by reason of: (i) such person’s service as a director or officer of PMI; (ii) any action or inaction taken by such person or on such person’s part while acting as director, officer, employee or agent of PMI; or (iii) such person’s actions while serving at the request of PMI as a director, officer, employee, trustee, general partner, managing member, agent or fiduciary of PMI or any other entity, in each case, whether or not serving in any such capacity at the time any liability or expense is or was incurred. In addition, PMI is required to indemnify against any Expenses actually and reasonably incurred in connection with any action establishing or enforcing a right to indemnification or advancement of expenses under the indemnification agreement or under any directors’ and officers’ liability insurance policies maintained by PMI to the extent that such person is successful in such action. The indemnification agreements also provide that PMI agrees to indemnify such persons to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of the agreement or PMI’s amended and restated certificate of incorporation or bylaws. Moreover, the indemnification agreements provide that any future changes under

require PMI, among other things, to indemnify such persons for all expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement (if such settlement is approved in advance by PMI) (collectively, “Expenses”), actually and reasonably incurred by such person in connection with the investigation, defense or appeal of any proceeding to which such person may be made a party, a potential party, a non-party witness, or otherwise by reason of: (i) such person’s service as a director or officer of PMI; (ii) any action or inaction taken by such person or on such person’s part while acting as director, officer, employee or agent of PMI; or (iii) such person’s actions while serving at the request of PMI as a director, officer, employee, trustee, general partner, managing member, agent or fiduciary of PMI or any other entity, in each case, whether or not serving in any such capacity at the time any liability or expense is or was incurred. In addition, PMI is required to indemnify against any Expenses actually and reasonably incurred in connection with any action establishing or enforcing a right to indemnification or advancement of expenses under the indemnification agreement or under any directors’ and officers’ liability insurance policies maintained by PMI to the extent that such person is successful in such action. The indemnification agreements also provide that PMI agrees to indemnify such persons to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of the agreement or PMI’s amended and restated certificate of incorporation or bylaws. Moreover, the indemnification agreements provide that any future changes under Delaware law that expand the ability of a Delaware corporation to indemnify its officers and directors are automatically incorporated into the agreements.

Under the indemnification agreements, PMI is not obligated to provide indemnification on account of any proceeding unless such person acted in good faith and in a manner reasonably believed to be in the best interests of PMI, and with respect to criminal proceedings, such person had no reasonable cause to believe their conduct was unlawful. The termination of a proceeding by judgment, settlement, or conviction or upon a plea of nolo contendere or its equivalent does not, by itself, create the presumption that such person did not satisfy the above standards. In addition, under the indemnification agreements, PMI is not obligated to provide indemnification for: (i) any proceedings or claims initiated or brought voluntarily by such person and not by way of defense, unless such indemnification is authorized by PMI, other than a proceeding to establish such person’s right to indemnification; (ii) any expenses incurred by such person with respect to any proceeding instituted by such person to enforce and interpret the terms of their indemnification agreement, unless such person is successful in such action; (iii) which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid; (iv) an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); and (v) any reimbursement of PMI by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of PMI, as required in each case under the Exchange Act, as amended (including any such reimbursements that arise from an accounting restatement of PMI pursuant to Section 304 of the Sarbanes-Oxley Act, or the payment to PMI of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements).

PMI also maintains an insurance policy that covers certain liabilities of its directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.

PMI believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers. To the extent these provisions permit PMI to indemnify its officers and directors for liabilities arising under the Securities Act, however, PMI has been informed by the SEC that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Insider Trading Policy.

We are a Section 15(d) reporting company with publicly registered debt securities. Our company is privately held and there is no established public trading market for our equity. In addition, there is no secondary market for our debt securities. As a result, the Company has not adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our equity securities by directors, officers, employees and the Company itself. Our Board and management will continue to evaluate the need for an insider trading policy, and we may adopt a formal policy in the future if appropriate.

ITEM 11. EXECUTIVE COMPENSATION

Prosper Marketplace, Inc. - Compensation Discussion and Analysis

Overview

This section describes PMI's executive compensation objectives, compensation-setting process, executive compensation components and significant ~~2023~~2024 compensation decisions for PMI's named executive officers (“NEOs”). The compensation provided to PMI's NEOs for ~~2023~~2024 is set forth in detail in the Summary Compensation Table and other tables and the accompanying footnotes and narrative that follow this section.

PMI's named executive officers for ~~2023~~2024 are as follows:

•David Kimball, our Chief Executive Officer;

•Usama Ashraf, our President and Chief Financial Officer;

•Pete Woodhouse, our Chief Technology Officer;

•Edward R. Buell III, our General Counsel, Secretary and Chief Compliance Officer; and

•Melinda Marchesi, our Chief Marketing Officer asuntil ofher ~~May~~departure ~~2023~~from the Company in January 2025.

Executive Compensation Objectives

The objectives of PMI's executive compensation are to:

•attract, retain and motivate senior leaders who are capable of advancing PMI's mission and strategy and ultimately, creating and maintaining its long-term equity value;

•align the interests of PMI's executive officers with its stockholders’ long-term interests; and

•reward executive officers for their contributions to PMI's overall performance as well as for their individual performance.

Compensation-Setting Process

Role of Our Compensation Committee. The Compensation Committee has primary responsibility for overseeing all aspects of our executive compensation program, including evaluating and approving executive salaries, annual bonus awards and the size and structure of equity awards for PMI's executive officers, including the NEOs.

Role of Management. In setting ~~2023~~2024 compensation, PMI's Chief Executive Officer worked closely with the Compensation Committee in making recommendations and attending Committee meetings. Because of his daily involvement with PMI's executive team, the Chief Executive Officer was involved in the determination of compensation for all of PMI's executive officers other than himself. The Compensation Committee also delegated to the Chief Executive Officer the authority to make compensation decisions for senior management and executive officers (other than the Chief Executive Officer, Chief Financial Officer and President), subject to certain compensation limits set by the Compensation Committee.

Executive Compensation Components

PMI's executive compensation package includes: (1) base salary; (2) cash bonuses; and (3) long term incentives, generally in the form of cash and equity-based compensation, such as stock options and restricted stock units. PMI believes that this compensation mix supports its objective of attracting, motivating and retaining a talented and entrepreneurial executive team who will provide leadership for PMI’s success in dynamic and competitive markets. PMI's compensation program is balanced among all three components in order to attract top talent and maximize retention, while ensuring that an appropriate portion of the executives’ compensation is tied to the Company's and its stockholders’ long-term interests.

Base Salary

Base salary is a fixed amount and is not tied to any metric relating to the performance of PMI's business as a whole. The base salary of each executive officer is initially established in the executive officer's offer letter and reviewed annually by the Compensation Committee. In determining base salaries for ~~2023~~2024, PMI's Compensation Committee, together with the Chief Executive Officer, considered the individual executive officer's scope of responsibilities, contributions, prior salary level and position (in case of a promotion), and financial and market conditions.

	2023 Base Salaries
David Kimball 1	$	600,000
Usama Ashraf 2	$	488,000
Pete Woodhouse 3	$	415,000
Edward R. Buell III 4	$	365,000
Melinda Marchesi 5	$	365,000

1.In March 2023, PMI’s Compensation Committee reviewed executive base salaries and decided to increase Mr. Kimball’s annual base salary from $577,500 to $600,000.

2.In March 2023, PMI’s Compensation Committee reviewed executive base salaries and decided to increase Mr. Ashraf’s annual base salary from $469,350 to $488,000.

3.In March 2023, Mr. Woodhouse’s base salary was increased from $384,375 to $415,000.

4.In March 2023, Mr. Buell’s base salary was increased from $351,750 to $365,000.

5.In May 2023, Ms. Marchesi joined PMI as its Chief Marketing Officer, with an annual base salary of $365,000.

Cash Bonuses

PMI uses cash bonuses primarily to motivate and retain senior management leaders that are critical to advancing the Company's short-term and long-term strategic goals. In 2023, we based annual NEO bonuses on both the achievement of certain Board-approved financial, operational and strategic performance objectives as well as other factors.

In January 2024, the Compensation Committee reviewed the Company’s performance and progress towards the established 2023 objectives, and approved a bonus award of up to 40% of the annual target bonus amount for each NEO.

The amounts and terms of the bonuses awarded to each of our NEOs for 2023 are disclosed below, in the sections titled “Summary Compensation Table” and “Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table.”

The following table summarizes information regarding the base salaries for PMI's named executive officers for 2024:


	2024 Base Salaries
David Kimball 1	$	620,000
Usama Ashraf 2	$	505,500
Pete Woodhouse 3	$	429,000
Edward R. Buell III 4	$	378,000
Melinda Marchesi 5	$	402,000

1.In March 2024, PMI’s Compensation Committee reviewed executive base salaries and decided to increase Mr. Kimball’s annual base salary from $600,000 to $620,000.

2.In March 2024, PMI’s Compensation Committee reviewed executive base salaries and decided to increase Mr. Ashraf’s annual base salary from $488,000 to $505,500.

3.In March 2024, Mr. Woodhouse’s base salary was increased from $415,000 to $429,000.

4.In March 2024, Mr. Buell’s base salary was increased from $365,000 to $378,000.

5.In March 2024, Ms. Marchesi’s base salary was increased from $365,000 to $378,000. In August 2024, Ms. Marchesi’s base salary was increased from $378,000 to $402,000.

Cash Bonuses

PMI uses cash bonuses primarily to motivate and retain senior management leaders that are critical to advancing the Company's short-term and long-term strategic goals. We base annual NEO bonuses on both the achievement of certain Board-approved financial, operational and strategic performance objectives as well as other factors.

In January 2025, the Compensation Committee reviewed the Company’s performance and progress towards the established 2024 objectives, and approved a bonus award of up to 60% of the annual target bonus amount for each NEO.

The amounts and terms of the bonuses approved for each of our NEOs for 2024 are disclosed below, in the sections titled “Summary Compensation Table” and “Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table.”

Long-Term Incentives

Equity Compensation. PMI has used stock options and restricted stock units (“RSUs”) as the principal components of its executive long-term incentive equity compensation. Consistent with its compensation objectives, PMI believes this approach aligns the interests of its grantees with the long-term interests of PMI’s stockholders. PMI believes that stock options and RSUs also serve as effective retention tools due to vesting requirements that are based on continued service with the company. In granting equity awards, PMI has customarily considered, among other things, the executive officers' cash compensation, the need to retain and motivate executive officers and to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value, PMI's financial results, and each executive officer's individual contributions and responsibilities. The amounts and terms of the awards granted to each such NEO in ~~2023~~2024 are disclosed in the ~~2023~~2024 Grants of Plan-Based Awards table and accompanying footnotes to the table of Outstanding Equity Awards at ~~2023~~2024 Fiscal Year End.

Long-Term Cash Incentive Compensation. PMI’s Long-Term Cash Incentive Plan (“LTCIP”) is designed to reward our executives, including our named executive officers, for the achievement of strategic and operational objectives and the creation of long-term value. Under the LTCIP, eligible executive officers and vice presidents receive long-term cash incentive awards based on their performance during pre-established rolling two-year periods, the most recent of which ran from January 1, ~~2022~~2023 to December 31, ~~2023~~2024 (the “~~2022-~~2023-2024 Performance Period”). Payments will be made by March 15, following the end of a performance period, unless otherwise determined by the Compensation Committee. The incentive targets range from 75% to 150% of the participant’s base salary, unless otherwise determined by the Compensation Committee. PMI’s executive officers and vice presidents are eligible to participate in the LTCIP if, as of March 15th of calendar year following the end of a performance period, they have been employed with PMI for at least three years, are currently full or part time employees of PMI, and are in good standing. PMI believes that the LTCIP will complement its annual equity awards by focusing its senior executives on specific long-term financial performance goals, while providing an opportunity for more immediate liquidity. In January ~~2024~~2025, the Compensation Committee considered the Company’s performance and progress towards its established objectives during the ~~2022-~~2023-2024 Performance Period, and approved a payout of up to 7050% of the LTCIP incentive target amount for each NEO. The amounts of the LTCIP awards ~~payable~~earned toby eligible NEOs in connection with the ~~2022-~~2023-2024 Performance Period are set forth in the “Summary Compensation Table” below.

Employment Agreements

PMI has entered into employment arrangements with each of its NEOs, which are comprised of an offer letter and an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement. Each of these arrangements was approved or authorized on PMI’s behalf by the Compensation Committee or, in certain instances, its Board of Directors.

Each of the offer letters provides for “at-will” employment and sets forth the initial compensation arrangements for the NEO, generally including an initial base salary, an annual cash bonus opportunity, and an equity award. Certain of the offer letters provide for payments or an acceleration of the executive’s equity award grant upon termination of their employment in specified situations, including following a change in control. These arrangements (including potential payments and terms) are discussed in more detail in the “Narrative Discussion of the Summary Compensation Table” and “Grants of Plan-Based Awards Table” and the “Potential Payments Upon Termination or a Change In Control of PMI” sections and related tables below.

Other Compensation Information

Benefits Programs

PMI’s employee benefit programs, including its 401(k) plan, health and welfare programs, and incentive programs, including the Amended and Restated 2005 Stock Option Plan, the 2015 Equity Incentive Plan and the Long-Term Cash Incentive Plan, are designed to provide a competitive level of benefits to PMI’s employees generally, including its named executive officers and their families.

PMI’s 401(k) plan covers all employees meeting certain eligibility requirements. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees are allowed to contribute a percentage of their eligible compensation to the 401(k) plan, up to the annual maximum as determined by the Internal Revenue Service, and PMI may make discretionary matching contributions of a portion of the employees’ eligible wage deferrals, subject to certain limitations and conditions. ~~During~~On ~~the~~January ~~year ended December 31~~1, ~~2023~~2024, PMI ~~contributed~~temporarily ~~$3.0~~suspended ~~million~~its todiscretionary ~~the~~matching ~~401(k) plan~~contributions. ~~The~~As ~~amount~~a ofresult, ~~PMI’s~~during ~~matching~~the ~~contributions~~year ~~for~~ended ~~each~~December 31, of2024, ~~our~~PMI ~~NEOs~~did isnot ~~set~~contribute ~~forth~~any infunds ~~footnotes~~ to the ~~“Summary~~401(k) ~~Compensation Table” below~~plan. ~~On January 1, 2024,~~ PMI ~~temporarily~~may ~~suspended~~choose ~~its~~to ~~discretionary~~reinstate matching contributions, ~~which PMI may reinstate~~ in the future upon the Company meeting certain business objectives.

All full-time employees, including PMI’s named executive officers, may participate in its health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance.

Perquisites and Other Personal Benefits

Currently, PMI does not view perquisites or other personal benefits as a significant component of its compensation. Accordingly, PMI does not generally provide perquisites, such as company cars and paid parking spaces, to its executive officers. PMI does reimburse its executive officers for certain relocation expenses, subject to the terms and conditions prescribed by the Compensation Committee.

In the future, PMI may provide additional perquisites or other personal benefits in limited circumstances, such as where PMI believes it is appropriate to assist an individual executive in the performance of their duties and for recruitment, motivation or retention purposes.

Post-Employment Compensation

The Compensation Committee recognizes that a possible, threatened, or pending change of control transaction could result in the departure or distraction of PMI’s senior executives. To establish a meaningful financial incentive for PMI’s senior executive officers to work diligently through and beyond a proposed transaction that may involve a change in control of the company, certain of the stock options and restricted stock units granted to PMI’s NEOs will fully vest upon a change in control of PMI, while others will fully vest in the event that, within 12 months after a change in control of PMI, such officer is subject to a termination of employment without cause or resigns for good reason (each as defined in the applicable option agreement).

In addition, PMI entered into severance and change in control agreements (the “severance agreements”) with each of Messrs. Kimball and Ashraf in November 2020 and with Mr. Woodhouse in February 2022, the terms and conditions of which restate and replace any severance arrangements set forth in their respective offer letters. Under the severance agreements, each of Messrs. Kimball, Ashraf, and Woodhouse, would be entitled to the following in the event that such officer’s employment is terminated by PMI without “cause” or by the applicable officer for “good reason” (each as defined in the severance agreement) and the officer meets certain tenure requirements as of the date of such termination: (i) a lump sum severance payment equal to one year base salary; (ii) any unpaid annual bonus and long-term cash incentive award for the year(s) preceding the year of termination; (iii) continued coverage for the participants and eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for 12 months, unless such coverage is earlier terminated in accordance with the terms of the severance agreement; (iv) a pro-rated annual bonus payment for the year of termination; and (v) with respect to any long-term performance period under the LTCIP that commenced more than one year prior to the executive’s termination date, a pro-rated long-term cash incentive payment for the performance period in which the termination occurs. In the event that Messrs. Kimball, Ashraf, or Woodhouse, is terminated by PMI or its successor without cause or by the applicable officer for good reason and such termination occurs within 24 months following a change in control of PMI, then, subject to certain tenure requirements, such officer would be entitled to receive the severance set forth in items (i) through (iii) above, as well as such officer’s (x) target annual bonus for the year of termination; and (y) their target long-term cash incentive payment for the year of termination. Receipt of these severance benefits is conditioned on the officer’s signing a release of claims in favor of PMI.

PMI also entered into a severance agreement with Ms. Marchesi in March 2023 which contained the same terms and conditions as the severance agreements signed by Messrs. Kimball, Ashraf, and Woodhouse, provided that under the terms of Ms. Marchesi’s severance agreement, until certain tenure requirements were met, Ms. Marchesi would only be entitled to a lump sum severance payment equal to six months base salary in the event that her employment was terminated by PMI without “cause” or by her for “good reason” prior to the one year anniversary of her employment start date.78

with the terms of the severance agreement; (iv) a pro-rated annual bonus payment for the year of termination; and (v) with respect to any long-term performance period under the LTCIP that commenced more than one year prior to the executive’s termination date, a pro-rated long-term cash incentive payment for the performance period in which the termination occurs. In the event that Messrs. Kimball, Ashraf, or Woodhouse, is terminated by PMI or its successor without cause or by the applicable officer for good reason and such termination occurs within 24 months following a change in control of PMI, then, subject to certain tenure requirements, such officer would be entitled to receive the severance set forth in items (i) through (iii) above, as well as such officer’s (x) target annual bonus for the year of termination; and (y) their target long-term cash incentive payment for the year of termination. Receipt of these severance benefits is conditioned on the officer’s signing a release of claims in favor of PMI.

For additional information regarding these severance and change in control arrangements, see “Potential Payments Upon Termination or a Change in Control of PMI” below.

Compensation Risk Assessment

PMI's management evaluates and mitigates any risk that may exist relating to its compensation plans, practices and policies for all employees, including PMI's NEOs. PMI's management has concluded that PMI's compensation policies and practices do not create or promote inappropriate or excessive risk taking.

Summary Compensation Table

The following table provides information regarding the compensation earned during the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022 by each of PMI’s named executive officers (in thousands):

	Year	Salary ($)		Bonus ($)	Option Awards ($) 1	Non-Equity Incentive Plan Compensation ($) 2	All OtherCompensation ($) 3	Totals ($)
Name and Principal Position
David Kimball	~~2023~~2024	$	~~596~~617	~~239~~370	—	~~602~~447	17—	~~1,453~~$	1,434
Chief Executive Officer	~~2022~~2023	~~573~~596		~~574~~—	—	~~825~~—	1517	~~1,987~~613
	2021	550		550	—	731	13	1,844
	2022	573		574	—	825	15	1,987
Usama Ashraf	~~2023~~2024	~~485~~503		~~165~~302	—	~~489~~364	17—	1,~~155~~168
President and	~~2022~~2023	~~466~~485		~~396~~—	~~438~~—	~~670~~—	1517	~~1,985~~501
Chief Financial Officer	~~2021~~2022	~~447~~466		~~373~~396	69438	~~600~~670	1315	1,~~502~~985
Pete Woodhouse 4	2023	410		123	—	—	17	550
Pete Woodhouse	2024	427		192	—	307	—	926
Chief Technology Officer	~~2022~~2023	~~383~~410		~~287~~—	—	—	1517	~~685~~427
Edward R. Buell III 5	2023	363		94	—	244	17	718
	2022	383		287	—	—	15	685
General Counsel, Secretary and	2022	349		227	—	315	15	906
Edward R. Buell III	2024	376		147	—	181	—	704
Chief Compliance Officer	2021	323		191	26	185	13	738
General Counsel, Secretary and	2023	363		—	—	—	17	380
Melinda Marchesi 6	2023	243		73	1,124	—	—	1,440
Chief Compliance Officer	2022	349		227	—	315	15	906
Chief Marketing Officer
Melinda Marchesi 4	2024	386		—	—	—	—	386
Chief Marketing Officer	2023	243		—	1,124	—	—	1,367

1.The amounts reported represent the grant date fair value of the restricted stock units and stock options granted to the named executive officers as calculated in accordance with the Financial Accounting Board’s Topic ASC 718, Compensation–Stock Compensation (“ASC 718”) using a Black-Scholes model to purchase shares of PMI’s common stock. The key assumptions used in PMI’s ASC 718 calculation are discussed in Note 2 of PMI’s consolidated financial statements, which are incorporated by reference into this Annual Report.

2.The amount reported reflects non-equity incentive compensation earned under the Long Term Cash Incentive Plan.

3.“All Other Compensation” consists of compensation received from employer matching contributions to PMI’s 401(k) plan.

4.Mr. Woodhouse joined PMI in July 2021 as its Chief Technology Officer.

5.Mr. Buell was promoted to General Counsel and Secretary of PMI in March 2021.

6.Ms. Marchesi joined PMI in May 2023 as its Chief Marketing Officer.

2023 Grants of Plan-Based Awards 1 , 2

The following table sets forth certain information regarding grants of plan-based awards to the listed PMI named executive officers during 2023 (dollar amounts in thousands, except per share information):

						Grant Date						All Other Option Awards: Number of Securities Underlying Options(#)						Exercise or Base Price of Option Awards($/Sh)						Grant Date Fair Value ofStock and Option Awards ($) 3
Melinda Marchesi						5/11/2023						5,584,793						$	0.32					$	1,124

1.The following columns are intentionally omitted from this table: Estimated Future Payouts under Non-Equity Incentive Plan Awards, and Estimated Future Payouts under Equity Incentive Plan Awards.

2.The equity awards granted to NEOs in 2023 were granted under, and governed by the terms of, PMI's 2015 Equity Incentive Plan and the applicable award agreements. See the footnotes to the Outstanding Equity Awards at 2023 Fiscal Year-End table below for a description of the vesting schedule of the equity awards granted in 2023 and reported in the table above.

32.The ~~amounts~~amount reported ~~represent~~reflects ~~the~~non-equity ~~grant~~incentive ~~date~~compensation ~~fair~~payable ~~value~~under of the ~~stock~~Long ~~options~~Term ~~granted~~Cash toIncentive the named executive officers as calculated in accordance with the Financial Accounting Board’s Topic ASC 718, Compensation–Stock Compensation (“ASC 718”) using a Black-Scholes model to purchase shares of PMI’s common stockPlan. ~~The key assumptions used in PMI’s ASC 718 calculation are discussed in Note 2 of PMI’s consolidated financial statements, which are incorporated by reference into this Annual Report.~~

3.“All Other Compensation” consists of compensation received from employer matching contributions to PMI’s 401(k) plan. On January 1, 2024, PMI temporarily suspended its discretionary matching contributions. As a result, during the year ended December 31, 2024, PMI did not contribute any funds to the 401(k) plan.

4.Ms. Marchesi departed from her role as the Chief Marketing Officer of PMI in January 2025.

2024 Grants of Plan-Based Awards

During the year ended December 31, 2024, there were no grants of plan-based awards to any PMI named executive officers.

CEO Pay Ratio

In accordance with Item 402(u) of Regulation S-K, PMI is providing the following information for the year ended December 31, ~~2023~~2024:

•The median of total compensation of all employees, excluding our CEO: $~~140~~158,~~712~~846;

•The annual total compensation of our CEO: $1,~~452~~433,~~813~~855; and

•The ratio of CEO total compensation to median employee total compensation: 109.3203 to 1.

Our CEO pay ratio information is a reasonable good faith estimate calculated in a manner consistent with the SEC pay ratio rules and methods for disclosure. In order to determine the median employee from a compensation perspective, PMI examined cash compensation (salary, wages and cash bonuses) paid for the ~~2023~~2024 calendar year for all employees, excluding our CEO, employed as of December 31, ~~2023~~2024 (the “Determination Date”). On the Determination Date, Prosper’s employee population consisted of ~~404~~416 individuals, all of whom were located in the United States. This population consisted of our full-time, part-time, and temporary employees. We did not include any contractors or workers employed through a third-party provider in our employee population.

To identify the “median employee,” we utilized the amount of annualized earnings, wages and cash bonus our employees received, as reflected in our payroll records through the Determination Date and annualized such amounts for any individual hired during ~~2023~~2024. Once we identified our median employee, we combined all of the elements of such employee’s compensation for ~~2023~~2024 to determine the median employee total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K and compared such total compensation to the total compensation of PMI’s CEO, as reported in the Summary Compensation Table.

Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table

Offer Letters and Arrangements

David Kimball. In November 2016, PMI entered into an offer letter with Mr. Kimball in connection with his appointment as its Chief Executive Officer. In addition to his initial base salary, Mr. Kimball's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 100% of his base salary, payable on a quarterly basis; (ii) reimbursement of certain relocation expenses; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI. PMI also committed to grant Mr. Kimball an equity award of options exercisable into shares of PMI common stock representing up to 5% of PMI’s capitalization on a fully diluted basis, subject to the terms and conditions of the offer letter.

Mr. Kimball's November 2016 offer letter replaced the offer letter PMI entered into with Mr. Kimball in March 2016 in connection with his appointment as its Chief Financial Officer. In addition to the severance, reimbursement and benefits arrangements included in the November 2016 offer letter, Mr. Kimball's March 2016 offer letter included his initial base salary and equity grant as CFO and provided for a one-time sign-on bonus of $125,000, subject to certain repayment requirements in the event of Mr. Kimball’s termination from PMI within 12 months of his employment.

In November 2020, PMI and Mr. Kimball executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Kimball’s offer letter. The terms of Mr. Kimball’s severance and change in control agreement are described under “Post-Employment Compensation” above.

Usama Ashraf. In February 2017, PMI entered into an offer letter with Mr. Ashraf in connection with his appointment as its Chief Financial Officer. In addition to his initial base salary and equity grant, Mr. Ashraf's offer letter provided for (i) a one-time sign-on bonus of $20,000, subject to certain repayment requirements in the event of Mr. Ashraf's termination from PMI within 12 months of his employment; (ii) eligibility to receive an annual performance bonus in a target amount of 50% of his base salary; (iii) reimbursement of certain relocation expenses; (iv) reimbursement of certain short-term housing expenses and (v) eligibility to participate in the benefit programs generally available to employees of PMI.

~~performance bonus target from 50% to 60% of~~ his base salary.; In(iii) ~~March~~reimbursement ~~2019, the Compensation Committee increased Mr. Ashraf's annual performance bonus target to 75%~~ of ~~his~~certain ~~annual~~relocation ~~base~~expenses; salary. In March 2020, the Compensation Committee confirmed Mr. Ashraf's annual performance bonus target for 2020 would remain at 75% of his annual base salary. On February 24, 2021, Mr. Ashraf was appointed as President of PMI effective March 1, 2021. In connection with his appointment, Mr. Ashraf: (iiv) ~~will~~reimbursement ~~be eligible to receive an annual performance bonus in a target amount~~ of ~~85%~~certain ofshort-term ~~his~~housing ~~base~~expenses ~~salary;~~ and (iiv) ~~was~~eligibility ~~granted an option~~ to ~~purchase~~participate ~~2,000,000~~in ~~shares of PMI's common stock at an exercise price equal to~~ the ~~fair~~benefit ~~market~~programs ~~value~~generally ofavailable ~~the common stock on the grant date. The option will vest over a four year period, subject~~ to ~~and~~employees ~~in accordance with the terms~~ of ~~the stock option agreement~~PMI.

In addition to the terms of Mr. Ashraf's offer letter, in January 2018, the Compensation Committee approved a one-time retention bonus payment in an amount equal to 25% of his base salary. In August 2018, in connection with Mr. Ashraf's expanded scope of responsibilities in the role of Chief Financial Officer, the Compensation Committee increased his annual performance bonus target from 50% to 60% of his base salary. In March 2019, the Compensation Committee increased Mr. Ashraf's annual performance bonus target to 75% of his annual base salary. In March 2020, the Compensation Committee confirmed Mr. Ashraf's annual performance bonus target for 2020 would remain at 75% of his annual base salary. On February 24, 2021, Mr. Ashraf was appointed as President of PMI effective March 1, 2021. In connection with his appointment, Mr. Ashraf: (i) will be eligible to receive an annual performance bonus in a target amount of 85% of his base salary; and (ii) was granted an option to purchase 2,000,000 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date. The option will vest over a four year period, subject to and in accordance with the terms of the stock option agreement. Effective January 1, 2024, the Compensation Committee increased Mr. Ashraf’s annual performance bonus to a target amount of 100% of his base salary.

In November 2020, PMI and Mr. Ashraf executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Ashraf’s offer letter. The terms of Mr. Ashraf’s severance and change in control agreement are described under “Post-Employment Compensation” above.

Pete Woodhouse. In May 2021, PMI entered into an offer letter with Mr. Woodhouse in connection with his appointment as its Chief Technology Officer. In addition to his initial base salary and equity grant, Mr. Woodhouse’s offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 75% of his base salary;

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