FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2022

The Company measures its cash equivalents, customer funds, short-term and long-term marketable debt securities, and marketable equity investment at fair value. The Company classifies these investments within Level 1 or Level 2 of the fair value hierarchy because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis are classified as follows (in thousands):


	March 31, 2022						December 31, 2021
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	1,259,739	$	—	$	—	$	2,344,768	$	—	$	—

U.S. agency securities	—		—		—		—		22,999		—
Certificates of deposit	—		—		—		—		4,983		—
Commercial paper	—		16,991		—		—		—		—
Corporate bonds	—		4,944		—		—		790		—

U.S. government securities	56,999		—		—		—		—		—
Municipal securities	—		3,914		—		—		—		—

Customer funds:
Money market funds	187,782		—		—		2,126,579		—		—
Reverse repurchase agreement	670,187		—		—		72,119		—		—
U.S. agency securities	—		—		—		—		29,994		—
U.S. government securities	—		—		—		360,060		—		—
Short-term debt securities:
U.S. agency securities	—		27,657		—		—		74,128		—
Certificates of deposit	—		8,495		—		—		9,200		—
Corporate bonds	—		299,670		—		—		293,319		—
Commercial paper	—		13,763		—		—		36,088		—
Municipal securities	—		4,035		—		—		5,548		—
U.S. government securities	423,093		—		—		430,843				—
Foreign government securities	—		20,036		—		—		20,157		—
Long-term debt securities:
U.S. agency securities	—		144,098		—		—		153,320		—
Corporate bonds	—		566,899		—		—		663,207		—
Municipal securities	—		18,518		—		—		22,417		—
U.S. government securities	590,871		—		—		674,476		—		—
Foreign government securities	—		12,753		—		—		13,010		—
Other:
Investment in marketable equity security	22,186		—		—		—		—		—
Total	$	3,210,857	$	1,141,773	$	—	$	6,008,845	$	1,349,160	$	—

The carrying amounts of certain financial instruments, including settlements receivable, consumer receivables, loans held for investment, accounts payable, customers payable, accrued expenses, and settlements payable, approximate their fair values due to their short-term nature. The carrying amounts of the Company's warehouse funding facilities approximate their fair values.

The Company estimates the fair value of its convertible and senior notes based on their last actively traded prices or significant other market observable inputs (Level 2). The estimated fair value and carrying value of the convertible and senior notes were as follows (in thousands):


	March 31, 2022				December 31, 2021
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
2031 Senior Notes	$	987,116	$	908,966	$	986,774	$	1,018,113
2026 Senior Notes	988,312		932,917		987,626		994,579
2027 Convertible Notes	567,535		518,840		567,208		614,286
2026 Convertible Notes	568,039		525,134		567,621		595,548
2025 Convertible Notes	991,109		1,297,846		990,361		1,477,302
2023 Convertible Notes	459,800		839,083		459,618		958,927
2022 Convertible Notes	—		—		455		3,192
Total	$	4,561,911	$	5,022,786	$	4,559,663	$	5,661,947

The estimated fair value and carrying value of loans held for sale and loans held for investment were as follows (in thousands):


	March 31, 2022				December 31, 2021
	Carrying Value		Fair Value (Level 3)		Carrying Value		Fair Value (Level 3)
Loans held for sale	$	357,115	$	386,169	$	517,940	$	574,982
Loans held for investment	90,051		93,851		91,447		95,746
Total	$	447,166	$	480,020	$	609,387	$	670,728

As of March 31, 2022, $105.6 million of the carrying value of loans held for sale was attributable to loans under the Paycheck Protection Program ("PPP"). The PPP was intended to provide relief to eligible businesses impacted by COVID-19, and to incentivize businesses to keep their workers on the payroll. These loans are guaranteed by the U.S. government and are eligible for forgiveness if the borrowers meet certain criteria. As the loans under the PPP qualify for forgiveness if certain criteria are met or are guaranteed by the U.S. government through the Small Business Administration ("SBA"), the related credit losses as of March 31, 2022 were immaterial. As of March 31, 2022, the Company had facilitated the issuance of $1.5 billion of loans in the aggregate under the program, of which it had sold $399.1 million to an investor since the commencement of the PPP. As of March 31, 2022, $1.0 billion in PPP loans held for sale have been forgiven by the SBA, of which $299.7 million have been forgiven in the three months ended March 31, 2022. Overall, in the three months ended March 31, 2022, the Company recognized $51.5 million of revenue associated with PPP loans, primarily as a result of forgiveness. The Company approved and funded the last of its remaining PPP applications upon exhaustion of the funds in the program on May 21, 2021.

To determine the fair value of the loans held for sale, the Company utilizes discounted cash flow valuation modeling, taking into account the probability of default and estimated timing and amounts of periodic repayments. In estimating the expected timing and amounts of the future periodic repayments for the loans outstanding, the Company considered other relevant market data in developing such estimates and assumptions. With respect to PPP loans, the Company also considers the impact of government guarantees and loan forgiveness on the timing and amounts of future cash flows. As of March 31, 2022, there were no material changes to the Company's estimates of fair value and the Company will continue to evaluate facts and circumstances that could impact its estimates and affect its results of operations in future periods. The charges for the excess of amortized cost over fair value of the loans held for sale were immaterial for the three months ended March 31, 2022,

If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. During the three months ended March 31, 2022 and 2021, the Company did not have any transfers in or out of Level 1, Level 2, or Level 3 assets or liabilities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details