Fair Value of Assets and Liabilities

For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Note 2 – Summary of Significant Accounting Policies.” The Company did not transfer any assets or liabilities in or out of Level 3 during the first quarters of 2016 or 2015.

Financial Instruments Recorded at Fair Value

The following tables present the fair value hierarchy for assets and liabilities measured at fair value:



March 31, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Loans	$	—	$	—	$	4,716,156	$	4,716,156
Securities available for sale:
Corporate debt securities	—		209,171		—		209,171
Asset-backed securities	—		48,079		—		48,079
U.S. agency securities	—		16,583		—		16,583
U.S. Treasury securities	—		3,516		—		3,516
Other securities	—		6,951		—		6,951
Total securities available for sale	—		284,300		—		284,300
Servicing assets	—		—		16,964		16,964
Total assets	$	—	$	284,300	$	4,733,120	$	5,017,420

Liabilities:
Notes and certificates	$	—	$	—	$	4,713,449	$	4,713,449
Servicing liabilities	—		—		2,827		2,827
Total liabilities	$	—	$	—	$	4,716,276	$	4,716,276



December 31, 2015	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Loans	$	—	$	—	$	4,556,081	$	4,556,081
Securities available for sale:
Corporate debt securities	—		215,751		—		215,751
Asset-backed securities	—		54,409		—		54,409
U.S. agency securities	—		16,578		—		16,578
U.S. Treasury securities	—		3,485		—		3,485
Other securities	—		6,988		—		6,988
Total securities available for sale	—		297,211		—		297,211
Servicing assets	—		—		10,250		10,250
Total assets	$	—	$	297,211	$	4,566,331	$	4,863,542

Liabilities:
Notes and certificates	$	—	$	—	$	4,571,583	$	4,571,583
Servicing liabilities	—		—		3,973		3,973
Total liabilities	$	—	$	—	$	4,575,556	$	4,575,556

As the Company's loans and related notes and certificates, and loan servicing rights do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, the realized and unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs.

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs used for the Company's Level 3 fair value measurements at March 31, 2016 and December 31, 2015:



		March 31, 2016
		Range of Inputs
Financial Instrument	Unobservable Input	Minimum		Maximum		Weighted- Average
Loans, notes and certificates	Discount rates	3.0	%	22.7	%	8.1	%
	Net cumulative expected loss rates⁽¹⁾	0.3	%	27.5	%	11.6	%
	Cumulative prepayment rates⁽¹⁾	8.0	%	44.3	%	32.6	%

Servicing asset/liability	Discount rates	3.5	%	21.6	%	9.0	%
	Net cumulative expected loss rates⁽¹⁾	0.3	%	27.5	%	9.7	%
	Cumulative prepayment rates⁽¹⁾	8.0	%	44.3	%	36.6	%
	Total market servicing rates (% per annum on unpaid principal balance)⁽²⁾	0.57	%	0.90	%	0.57	%

		December 31, 2015
		Range of Inputs
Financial Instrument	Unobservable Input	Minimum		Maximum		Weighted- Average
Loans, notes and certificates	Discount rates	2.9	%	17.5	%	9.0	%
	Net cumulative expected loss rates⁽¹⁾	0.3	%	22.0	%	9.9	%
	Cumulative prepayment rates⁽¹⁾	23.4	%	36.4	%	30.8	%

Servicing asset/liability	Discount rates	3.5	%	16.3	%	9.4	%
	Net cumulative expected loss rates⁽¹⁾	0.3	%	22.0	%	8.8	%
	Cumulative prepayment rates⁽¹⁾	8.0	%	36.4	%	30.5	%
	Base market servicing rates (% per annum on unpaid principal balance)⁽³⁾	0.50	%	0.75	%	0.50	%


⁽¹⁾	Expressed as a percentage of the original principal balance of the loan, note or certificate.


⁽²⁾	Includes ancillary fees estimated to be paid to a hypothetical third-party servicer.


⁽³⁾	Excludes ancillary fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2015, the market rate for ancillary fees was assumed to be 7 basis points for a weighted-average total market servicing rate of 57 basis points.

At March 31, 2016 and December 31, 2015, the discounted cash flow methodology used to estimate the notes and certificates' fair values used the same projected net cash flows as their related loans. As demonstrated by the following table below, the fair value adjustments for loans were largely offset by the fair value adjustments of the notes and certificates due to the payment dependent design of the notes and certificates and because the principal balances of the loans were very close to the combined principal balances of the notes and certificates.

The following tables present additional information about Level 3 loans, notes and certificates measured at fair value on a recurring basis for the first quarters of 2016 and 2015:



	Loans									Notes and Certificates
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Beginning balance at December 31, 2015	$	4,681,671		$	(125,590	)	$	4,556,081		$	4,697,169		$	(125,586	)	$	4,571,583
Purchases of loans	2,230,288			—			2,230,288			—			—			—
Issuances of notes and certificates	—			—			—			901,258			—			901,258
Whole loan sales	(1,308,463		)	—			(1,308,463		)	—			—			—
Principal payments	(586,159		)	—			(586,159		)	(583,982		)	—			(583,982		)
Charge-offs	(84,991		)	84,991			—			(84,977		)	84,977			—
Recoveries	—			(10,191		)	(10,191		)	—			(10,177		)	(10,177		)
Change in fair value recorded in earnings	—			(165,400		)	(165,400		)	—			(165,233		)	(165,233		)
Ending balance at March 31, 2016	$	4,932,346		$	(216,190	)	$	4,716,156		$	4,929,468		$	(216,019	)	$	4,713,449

	Loans									Notes and Certificates
	Outstanding Principal Balance			Valuation Adjustment			Fair Value			Outstanding Principal Balance			Valuation Adjustment			Fair Value
Beginning balance at December 31, 2014	$	2,836,729		$	(38,224	)	$	2,798,505		$	2,851,837		$	(38,219	)	$	2,813,618
Purchases of loans	1,474,972			—			1,474,972			—			—			—
Issuances of notes and certificates	—			—			—			852,715			—			852,715
Whole loan sales	(622,145		)	—			(622,145		)	—			—			—
Principal payments	(369,379		)	—			(369,379		)	(365,711		)	—			(365,711		)
Charge-offs	(43,821		)	43,821			—			(43,807		)	43,807			—
Recoveries	—			(3,472		)	(3,472		)	—			(3,461		)	(3,461		)
Change in fair value recorded in earnings	—			(47,820		)	(47,820		)	—			(47,815		)	(47,815		)
Ending balance at March 31, 2015	$	3,276,356		$	(45,695	)	$	3,230,661		$	3,295,034		$	(45,688	)	$	3,249,346

The following table presents additional information about Level 3 servicing assets and liabilities measured at fair value on a recurring basis for the first quarters of 2016 and 2015:



	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
	Servicing Assets		Servicing Liabilities			Servicing Assets			Servicing Liabilities
Fair value at beginning of period	$	10,250	$	(3,973	)	$	2,181		$	(3,973	)
Issuances ⁽¹⁾	5,631		(932		)	1,508			(1,412		)
Changes in fair value, included in servicing fees	232		2,078			(491		)	988
Additions, included in deferred revenue	851		—			298			—
Fair value at end of period	$	16,964	$	(2,827	)	$	3,496		$	(4,397	)


⁽¹⁾	Represents the offsets to the gains or losses on sales of the related loans, recorded in other revenue.

A portion of the servicing fee revenue increase in the first quarter of 2016 compared to the same period in 2015 was due to an increase in the Company's servicing asset valuation. This resulted from an increase in the Company's expected cash flows from ancillary fees (collection and recovery fees) due to contractual servicing fee increases.

Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity

Certain fair valuation adjustments recorded through earnings related to Level 3 instruments for the first quarters of 2016 and 2015. Generally, changes in the net cumulative expected loss rates, cumulative prepayment rates, and discount rates will have an immaterial net impact on the fair value of loans, notes and certificates, and servicing assets and liabilities.

Certain of these unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques for loans, notes and certificates, or servicing assets and liabilities, a change in one input in a certain direction may be offset by an opposite change from another input.

A specific loan that is projected to have larger future default losses than previously estimated has lower expected future cash flows over its remaining life, which reduces its estimated fair value. Conversely, a specific loan that is projected to have smaller future default losses than previously estimated has increased expected future cash flows over its remaining life, which increases its estimated fair value. Separately, an increase in expected prepayments will reduce the estimated fair value of a loan, whereas a decrease in expected prepayments will increase the estimated fair value of a loan.

The Company's selection of the most representative market servicing rates for servicing assets and servicing liabilities is inherently judgmental. The Company reviewed estimated third-party servicing rates for its loans and loans in similar credit sectors, as well as a market servicing benchmarking analysis provided by a third-party valuation firm, and determined that estimated total market servicing rates on its loans ranging from 0.57% to 0.90% per annum of outstanding principal are reasonable estimates as of March 31, 2016 and base market servicing rates on its loans, ranging from 0.50% to 0.75% per annum of outstanding principal, are reasonable estimates as of December 31, 2015. The table below shows the impact on the estimated fair value of servicing assets and liabilities, calculated using different market servicing rate assumptions as of March 31, 2016 and December 31, 2015:



	March 31, 2016						December 31, 2015
	Servicing Assets			Servicing Liabilities			Servicing Assets			Servicing Liabilities
Weighted-average market servicing rate assumptions⁽¹⁾	0.57		%	0.57		%	0.50		%	0.50		%
Change in fair value from:
Servicing rate increase by 0.10%	$	(4,852	)	$	1,235		$	(3,504	)	$	1,589
Servicing rate decrease by 0.10%	$	4,960		$	(1,127	)	$	3,610		$	(1,483	)


⁽¹⁾	Represents total market servicing rates, which include ancillary fees, at March 31, 2016, and base market servicing rates, which exclude ancillary fees, at December 31, 2015. As of December 31, 2015, the market rate for ancillary fees was assumed to be 7 basis points for a weighted-average total market servicing rate of 57 basis points.

Financial Instruments Not Recorded at Fair Value

The following tables present the fair value hierarchy for financial instruments not recorded at fair value:



March 31, 2016	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Cash and cash equivalents	$	583,842	$	—	$	583,842	$	—	$	583,842
Restricted cash	104,485		—		104,485		—		104,485
Deposits	872		—		872		—		872
Total assets	$	689,199	$	—	$	689,199	$	—	$	689,199
Liabilities:
Accrued expenses and other liabilities	$	1,699	$	—	$	—	$	1,699	$	1,699
Accounts payable	$	5,860	$	—	$	5,860	$	—	$	5,860
Payables to investors	71,917		—		71,917		—		71,917
Total liabilities	$	79,476	$	—	$	77,777	$	1,699	$	79,476



December 31, 2015	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Balance at Fair Value
Assets:
Cash and cash equivalents	$	623,531	$	—	$	623,531	$	—	$	623,531
Restricted cash	80,733		—		80,733		—		80,733
Deposits	871		—		871		—		871
Total assets	$	705,135	$	—	$	705,135	$	—	$	705,135
Liabilities:
Accounts payable	$	5,542	$	—	$	5,542	$	—	$	5,542
Payables to investors	73,162		—		73,162		—		73,162
Total liabilities	$	78,704	$	—	$	78,704	$	—	$	78,704