Happen, Inc. (HAPN) lifts Q2 net income to 58,148
Happen, Inc., formerly LendingClub Corporation, operates a nationally chartered digital marketplace bank through its wholly owned Happen Bank. As of June 30, 2026, total assets were 12,549,040 (in thousands) and deposits were 10,765,267 (in thousands), with 115,407,464 common shares outstanding.
For the three months ended June 30, 2026, the company generated total net revenue of 262,855 (in thousands) and net income of 58,148 (in thousands), up from 38,178 (in thousands) a year earlier. Diluted earnings per share were 0.50 versus 0.33 in the prior-year quarter. Net interest income rose to 179,017 (in thousands), while provision for credit losses was a net benefit of 10,917 (in thousands) compared with an expense of 39,733 (in thousands) a year ago.
Non-interest income of 83,838 (in thousands) reflected stronger origination and gain-on-sale revenues offset by larger negative net fair value adjustments. Non-interest expense increased to 198,115 (in thousands), driven partly by higher marketing. The company elected the fair value option for new held-for-investment loans beginning January 1, 2026, aligning accounting for originated loans and shifting credit loss recognition into fair value adjustments. The allowance for loan and lease losses on amortized-cost loans was 192,893 (in thousands), and nonaccrual loans totaled 55,319 (in thousands).
Positive
- None.
Negative
- None.
Filing Explained
The June 30 filing reports a 3,713,660 maximum-loss-exposure line item for unconsolidated VIEs, while the June 22 renaming is already complete.
As an unaudited Form 10-Q for the quarter ended
Happen says it did not consolidate the variable interest entities used in its Structured Program transactions. Holders of the related securities therefore can look only to the VIE assets, with no direct recourse to the company’s assets.
At
The filing states that the VIE maximum-loss figure reflects severe hypothetical circumstances, such as the interests falling to zero, and is not an indication of expected losses. That distinction is the key qualification to the
Key Figures
Total assets: 12,549,040 (in thousands)
Total deposits: 10,765,267 (in thousands)
Q2 2026 net income: 58,148 (in thousands)
+5 more
8 metrics
Total assets
12,549,040 (in thousands)
Condensed Consolidated Balance Sheet at June 30, 2026
Total deposits
10,765,267 (in thousands)
Interest-bearing and noninterest-bearing deposits at June 30, 2026
Q2 2026 net income
58,148 (in thousands)
Three months ended June 30, 2026
First-half 2026 net income
109,751 (in thousands)
Six months ended June 30, 2026
Q2 2026 total net revenue
262,855 (in thousands)
Net interest income plus non-interest income for the quarter
Diluted EPS Q2 2026
0.50
Three months ended June 30, 2026
Loans at fair value
3,858,118 (in thousands)
Loans held for sale and investment at fair value at June 30, 2026
Allowance for loan and lease losses
192,893 (in thousands)
Loans and leases held for investment at amortized cost at June 30, 2026
Key Terms
Current Expected Credit Losses, fair value option, Structured Program transactions, Variable Interest Entity, +2 more
6 terms
Current Expected Credit Losses financial
"required the initial recognition of a CECL allowance for lifetime expected credit losses"
An accounting rule that requires lenders and creditors to estimate and record expected loan losses up front, based on current information and reasonable forecasts, rather than waiting until losses actually occur. Think of it as a bank setting aside a rainy-day fund based on the weather report instead of only after storms hit; for investors this affects reported profits, reserves and capital levels and can change perceptions of a firm’s financial strength.
fair value option financial
"Effective January 1, 2026, the Company elected the fair value option to account for held for investment"
An accounting election that lets a company measure eligible financial assets and liabilities at their current market price, recording gains and losses in the income statement as those prices move. For investors it matters because choosing the fair value option makes reported profits and asset values respond immediately to market swings—like revaluing a house to today’s sale price—so it can increase earnings volatility while giving a more up‑to‑date view of value.
Structured Program transactions financial
"Structured Program transactions where certain accredited investors and qualified institutional buyers"
Variable Interest Entity financial
"VIE | Variable Interest Entity"
A variable interest entity (VIE) is a company structure where one party controls another company’s operations and economic outcomes through contracts or special arrangements instead of owning a majority of its voting shares. For investors, VIEs matter because the controlling party’s financial results, debts and risks can appear in the controller’s reports even though ownership looks separate, so understanding VIEs helps assess true exposure, governance limits and transparency—like spotting a puppet controlled by strings rather than direct ownership.
portfolio layer method financial
"basis adjustment for securities previously designated in fair value hedges under the portfolio layer method"
Allowance for Credit Losses financial
"ACL | Allowance for Credit Losses (includes the allowance for loan and lease losses"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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FAQ
How did Happen, Inc. (HAPN) perform financially in Q2 2026?
Happen, Inc. reported net income of 58,148 (in thousands) on total net revenue of 262,855 (in thousands) for Q2 2026. Net income increased from 38,178 (in thousands) a year earlier, and diluted EPS rose to 0.50 from 0.33.
What were Happen, Inc. (HAPN)’s results for the first half of 2026?
For the six months ended June 30, 2026, Happen, Inc. generated net income of 109,751 (in thousands) on total net revenue of 515,106 (in thousands). Diluted earnings per share were 0.94, compared with 0.43 for the first half of 2025.
What key balance sheet changes did Happen, Inc. (HAPN) report as of June 30, 2026?
As of June 30, 2026, total assets were 12,549,040 (in thousands) and total deposits were 10,765,267 (in thousands). Loans measured at fair value increased to 3,858,118 (in thousands), while amortized-cost loans and leases declined to 2,993,252 (in thousands) net.
Did Happen, Inc. (HAPN) change its corporate name or structure in 2026?
On June 22, 2026, the company changed its name from LendingClub Corporation to Happen, Inc., and its banking subsidiary became Happen Bank, National Association. Happen, Inc. remains a bank holding company operating its digital marketplace bank model.
What accounting change affected Happen, Inc. (HAPN)’s loan reporting in 2026?
Effective January 1, 2026, Happen, Inc. elected the fair value option for new held-for-investment loans. All loans originated on or after that date are measured at fair value, shifting credit loss effects into net fair value adjustments instead of provision for credit losses.
What is the credit quality profile of Happen, Inc. (HAPN)’s loan portfolio?
At June 30, 2026, the allowance for loan and lease losses was 192,893 (in thousands), with an allowance ratio of 6.9% for consumer and 2.5% for commercial amortized-cost loans. Nonaccrual loans totaled 55,319 (in thousands), or 1.7% of loans and leases held for investment at amortized cost.
How large is Happen, Inc. (HAPN)’s exposure to Structured Program securities?
Securities available for sale related to Structured Program transactions totaled 3,651,874 (in thousands) at June 30, 2026. These include senior and other asset-backed securities that Happen, Inc. retains from its loan securitization activities with unconsolidated variable interest entities.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM | |||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2026
Commission File Number: 001-36771
| (Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (415 ) 930-7440
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the 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. Yes ☒ No ☐
Indicate by check mark whether the 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). Yes ☒ No ☐
Indicate by check mark whether the 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.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
| If an emerging growth company, indicate by check mark if the 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. | ☐ | |||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 17, 2026, there were 115,407,464 shares of the registrant’s common stock outstanding.
HAPPEN, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION | ||||||||
Item 1. | Financial Statements | |||||||
Condensed Consolidated Balance Sheets | 6 | |||||||
Condensed Consolidated Statements of Income | 7 | |||||||
Condensed Consolidated Statements of Comprehensive Income | 8 | |||||||
Condensed Consolidated Statements of Changes in Equity | 9 | |||||||
Condensed Consolidated Statements of Cash Flows | 10 | |||||||
Notes to Condensed Consolidated Financial Statements | 12 | |||||||
Note 1. Summary of Significant Accounting Policies | 12 | |||||||
Note 2. Earnings Per Share | 14 | |||||||
Note 3. Securities Available for Sale | 15 | |||||||
Note 4. Loans | 19 | |||||||
Note 5. Fair Value Measurements | 29 | |||||||
Note 6. Structured Program Transactions and Variable Interest Entities | 41 | |||||||
Note 7. Derivative Instruments and Hedging Activities | 42 | |||||||
Note 8. Property, Equipment and Software, net | 44 | |||||||
Note 9. Goodwill and Intangible Assets | 45 | |||||||
Note 10. Other Assets | 46 | |||||||
Note 11. Deposits | 46 | |||||||
Note 12. Borrowings | 47 | |||||||
Note 13. Other Liabilities | 47 | |||||||
Note 14. Equity | 47 | |||||||
Note 15. Income Taxes | 49 | |||||||
Note 16. Leases | 49 | |||||||
Note 17. Commitments and Contingencies | 52 | |||||||
Note 18. Regulatory Requirements | 53 | |||||||
Note 19. Segment Reporting | 55 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 59 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 92 | ||||||
Item 4. | Controls and Procedures | 92 | ||||||
PART II. OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | 92 | ||||||
Item 1A. | Risk Factors | 92 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 93 | ||||||
Item 3. | Defaults Upon Senior Securities | 94 | ||||||
Item 4. | Mine Safety Disclosures | 94 | ||||||
Item 5. | Other Information | 94 | ||||||
Item 6. | Exhibits | 96 | ||||||
Signatures | 97 | |||||||
1
Glossary
The following is a list of common acronyms and terms Happen, Inc. regularly uses in its financial reporting:
| ACL | Allowance for Credit Losses (includes the allowance for loan and lease losses, allowance for securities available for sale and the reserve for unfunded lending commitments) | ||||
| AFS | Available for Sale | ||||
| ALLL | Allowance for Loan and Lease Losses | ||||
| Annual Report | Annual Report on Form 10-K for the year ended December 31, 2025 | ||||
| ASU | Accounting Standards Update | ||||
| AUM | Assets Under Management (outstanding balances of Loan Originations serviced on the Company’s platform including loans sold to investors as well as loans retained by the Company) | ||||
| Balance Sheet | Condensed Consolidated Balance Sheets | ||||
| CECL | Current Expected Credit Losses (Accounting Standards Update 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) | ||||
| CET1 | Common Equity Tier 1 | ||||
| CET1 Capital Ratio | Common Equity Tier 1 capital divided by total risk-weighted assets as defined under the Basel III capital framework | ||||
| DCF | Discounted Cash Flow | ||||
| EPS | Earnings Per Share | ||||
| Exchange Act | Securities Exchange Act of 1934, as amended | ||||
| FRB or Federal Reserve | Board of Governors of the Federal Reserve System and, as applicable, Federal Reserve Bank(s) | ||||
| GAAP | Accounting Principles Generally Accepted in the United States of America | ||||
| Happen Bank | Happen Bank, National Association | ||||
| Happen, Inc., the Company, we, us, or our | Happen, Inc. and its subsidiaries | ||||
| HFI | Loans which are retained by the Company and held for investment | ||||
| HFS | Held for sale loans expected to be sold to investors | ||||
| Income Statement | Condensed Consolidated Statements of Income | ||||
| Loan Originations | Unsecured consumer loans, secured consumer auto loans and small business loans originated by the Company or facilitated by third-party issuing banks | ||||
| N/M | Not meaningful | ||||
| Parent | Happen, Inc. (the Parent Company of Happen Bank, National Association and other subsidiaries) | ||||
| SEC | United States Securities and Exchange Commission | ||||
| Securities Act | Securities Act of 1933, as amended | ||||
Statement of Cash Flow | Condensed Consolidated Statements of Cash Flows | ||||
| Structured Program transactions | Asset-backed securitization transactions where certain accredited investors and qualified institutional buyers have the opportunity to invest in securities backed by a pool of unsecured consumer loans | ||||
| Tier 1 Capital Ratio | Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by total risk-weighted assets as defined under the Basel III capital framework | ||||
| Tier 1 Leverage Ratio | Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by quarterly adjusted average assets as defined under the Basel III capital framework | ||||
2
| Total Capital Ratio | Total capital, which includes Common Equity Tier 1 capital, Tier 1 capital and allowance for credit losses and qualifying subordinated debt that qualifies as Tier 2 capital, divided by total risk-weighted assets as defined under the Basel III capital framework | ||||
Unsecured consumer loans | Unsecured consumer loans originated on the Company’s platforms, including an online direct to consumer platform (unsecured personal loans) and platforms connected with networks of education and patient finance providers and home improvement merchants and contractors (purchase finance loans) | ||||
| VIE | Variable Interest Entity | ||||
3
HAPPEN, INC.
On June 22, 2026, we changed our corporate name from LendingClub Corporation to Happen, Inc. In connection with the corporate name change, we also changed the name of our wholly-owned banking subsidiary from LendingClub Bank, National Association to Happen Bank, National Association (Happen Bank). We do not distinguish between our prior and current names and refer to our current names throughout this Quarterly Report on Form 10-Q. As such, unless expressly indicated or as the context requires otherwise, as used herein, “Happen, Inc.,” “Company,” “we,” “us,” and “our,” refer to Happen, Inc., a Delaware corporation, and, where appropriate, its consolidated subsidiaries, including Happen Bank, and various entities established to facilitate loan sale transactions under Happen, Inc.’s Structured Program.
Forward-looking Statements
This Quarterly Report on Form 10-Q (Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements in this Report include, without limitation, statements regarding borrowers, credit scoring, our strategy, future operations, expected losses, future financial position, future revenue, projected costs, prospects, plans, objectives of management, expected market growth and the impact on our business. You can identify these forward-looking statements by words such as “anticipate,” “appear,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or similar expressions.
These forward-looking statements include, among other things, statements about:
•our compliance, and that of third-party partners or providers, with applicable local, state and federal laws, regulations and regulatory developments or court decisions affecting our business;
•the impact of accounting standards, policies, elections or methodologies;
•the results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, require us to limit our business activities, increase our allowance for loan losses, increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits;
•our ability to effectively manage capital or liquidity to support our evolving business or operational needs, while remaining compliant with regulatory or supervisory requirements and appropriate risk-management standards;
•the impact of changes to our deposit base;
•the impact of the continuation of, or changes in, the interest rate environment and economic climate;
•the ability and willingness of borrowers to repay loans;
•our belief that certain loans and leases in our commercial loan portfolio will be fully repaid in accordance with the contractual loan terms;
•our ability to maintain investor confidence in the operation of our platform;
•the performance of our loan products and expected rates of return for investors;
•the impact of, and our ability to resolve, pending litigation and governmental inquiries and investigations;
•our intention not to sell our available for sale (AFS) investment portfolio securities in loss positions;
•our financial condition and performance, including the impact that management’s estimates have on our financial performance and the relationship between interim period and full year results;
•the inputs used in the fair value measurement of our financial instruments;
•our estimate of our interest rate sensitivity;
•our calculation of expected credit losses for our collateral-dependent loans;
•our estimated maximum exposure to losses;
•our expectation of loan servicing fee revenue based on forecasted prepayments and estimated market rate of servicing at the time of loan sale;
•capital expenditures;
•our compliance with contractual obligations or restrictions;
•our ability to develop and maintain effective internal controls;
•our ability to continue to realize the financial and strategic benefits of our digital marketplace bank business model;
4
HAPPEN, INC.
•our tax profile;
•the effects of natural disasters, public health issues, acts of war or terrorism, geopolitical uncertainty and other external events on our customers and business;
•shares acquired under, and the impact of, our share repurchase and acquisition program; and
•other risk factors listed from time to time in reports we file with the SEC.
We caution you that the foregoing list may not contain all of the forward-looking statements in this Report. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. We have included important factors in the “Risk Factors” section of this Report and our Annual Report on Form 10-K for the year ended December 31, 2025, as well as in our condensed consolidated financial statements, related notes, and other information appearing elsewhere in this Report and our other filings with the SEC that could, among other things, cause actual results or events to differ materially from forward-looking statements contained in this Report. Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Report carefully and completely and with the understanding that actual future results may be materially different from what we expect. We do not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, actual results, future events or otherwise, other than as required by law.
5
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HAPPEN, INC.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
| June 30, 2026 | December 31, 2025 | ||||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Interest-bearing deposits in banks | |||||||||||
| Total cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Securities available for sale at fair value ($ | |||||||||||
| Loans held for sale at fair value | |||||||||||
Loans held for investment at fair value | |||||||||||
Loans and leases held for investment at amortized cost | |||||||||||
| Allowance for loan and lease losses | ( | ( | |||||||||
Loans and leases held for investment at amortized cost, net | |||||||||||
| Property, equipment and software, net | |||||||||||
| Goodwill | |||||||||||
Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Equity | |||||||||||
| Deposits: | |||||||||||
| Interest-bearing | $ | $ | |||||||||
| Noninterest-bearing | |||||||||||
| Total deposits | |||||||||||
Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Equity | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements.
6
HAPPEN, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||
Interest on loans(1) | $ | $ | $ | $ | |||||||||||||||||||
| Interest on securities available for sale | |||||||||||||||||||||||
| Other interest income | |||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Interest on deposits | |||||||||||||||||||||||
Other interest expense | |||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
Non-interest income: | |||||||||||||||||||||||
Origination fees(1) | |||||||||||||||||||||||
Servicing fees(1) | |||||||||||||||||||||||
Gain on sales of loans(1) | |||||||||||||||||||||||
Net fair value adjustments(1) | ( | ( | ( | ( | |||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||
| Total non-interest income | |||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||
| Provision for credit losses | ( | ( | |||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Compensation and benefits | |||||||||||||||||||||||
| Marketing | |||||||||||||||||||||||
| Equipment and software | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Professional services | |||||||||||||||||||||||
| Occupancy | |||||||||||||||||||||||
| Other non-interest expense | |||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||
Income before income tax expense | |||||||||||||||||||||||
Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
Earnings per share: | |||||||||||||||||||||||
| Basic EPS | $ | $ | $ | $ | |||||||||||||||||||
| Diluted EPS | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares – Basic | |||||||||||||||||||||||
| Weighted-average common shares – Diluted | |||||||||||||||||||||||
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “ Note 1. Summary of Significant Accounting Policies” for additional information.
See Notes to Condensed Consolidated Financial Statements.
7
HAPPEN, INC.
Condensed Consolidated Statements of Comprehensive Income
(In Thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Net unrealized loss on securities available for sale | ( | ( | ( | ( | |||||||||||||||||||
| Income tax effect | ( | ||||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ( | ( | ( | |||||||||||||||||||
Total comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
8
HAPPEN, INC.
Condensed Consolidated Statements of Changes in Equity
(In Thousands, Except Share Data)
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2026 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net issuances under equity incentive plans | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized loss on securities available for sale, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2026 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net issuances under equity incentive plans | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share repurchases | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net unrealized loss on securities available for sale, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2026 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net issuances under equity incentive plans | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized loss on securities available for sale, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net issuances under equity incentive plans | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized loss on securities available for sale, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
9
HAPPEN, INC.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash used for operating activities: | |||||||||||
| Net fair value adjustments | |||||||||||
| Change in fair value of loan servicing assets | |||||||||||
| Gain on sales of loans | ( | ( | |||||||||
| Provision for credit losses | ( | ||||||||||
Accretion of deferred origination fees and marketing costs | ( | ( | |||||||||
| Stock-based compensation, net | |||||||||||
| Depreciation and amortization | |||||||||||
| Other, net | |||||||||||
| Net change to loans held for sale | ( | ( | |||||||||
| Net change in operating assets and liabilities: | |||||||||||
| Other assets | |||||||||||
| Other liabilities | ( | ||||||||||
Net cash used for operating activities | ( | ( | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
Net change in loans and leases held for investment | ( | ||||||||||
| Purchases of securities available for sale | ( | ( | |||||||||
Proceeds from maturities and paydowns of securities available for sale | |||||||||||
| Purchases of property, equipment and software, net | ( | ( | |||||||||
| Other investing activities | ( | ( | |||||||||
Net cash provided by investing activities | |||||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Net change in deposits | |||||||||||
Net issuances under equity incentive plans | ( | ( | |||||||||
Share repurchases | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
Net decrease in cash, cash equivalents and restricted cash | $ | ( | $ | ( | |||||||
Cash, cash equivalents and restricted cash, beginning of period | $ | $ | |||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Cash paid for operating leases included in the measurement of lease liabilities | $ | $ | |||||||||
Supplemental non-cash investing activity: | |||||||||||
| Net securities retained from Structured Program transactions | $ | $ | |||||||||
10
HAPPEN, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(In Thousands)
(Unaudited)
The following presents cash, cash equivalents and restricted cash by category within the Condensed Consolidated Balance Sheets (Balance Sheet):
| June 30, 2026 | June 30, 2025 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements.
11
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
On June 22, 2026, LendingClub Corporation changed its corporate name to Happen, Inc., and changed the name of its wholly-owned banking subsidiary from LendingClub Bank, National Association to Happen Bank, National Association (Happen Bank). The Company was founded in 2006 and operates a leading, nationally chartered, digital marketplace bank that leverages data and technology to increase access to credit, reduce borrowing costs, and improve returns on savings for its members. Happen, Inc. is registered as a bank holding company and operates the vast majority of its business through its wholly-owned subsidiary, Happen Bank.
The Company made the following presentation changes in the condensed consolidated financial statements and accompanying notes in the first quarter of 2026:
•The components previously aggregated under “Marketplace revenue” on the Condensed Consolidated Statements of Income (Income Statement), namely “Origination fees,” “Servicing fees,” “Gain on sales of loans,” and “Net fair value adjustments,” are now presented as separate line items on the Income Statement.
•“Interest on loans held for sale,” “Interest and fees on loans and leases held for investment,” and “Interest on loans held for investment at fair value,” which previously appeared as separate line items on the Income Statement, have been combined into a single line item titled “Interest on loans.”
In all instances, the respective prior period amounts have been reclassified to conform to the current period presentation.
The accompanying interim condensed consolidated financial statements and these related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (Annual Report) filed on February 12, 2026.
12
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Election of Fair Value Option
Effective January 1, 2026, the Company elected the fair value option to account for held for investment (HFI) loans that were originated on or after that date. Prior to this election, loans that were originated as HFI were, and will continue to be, accounted for at amortized cost, which required the initial recognition of a CECL allowance for lifetime expected credit losses, recognized within “Provision for credit losses” on the Income Statement. The Company believes that applying the fair value option, rather than amortized cost accounting with the CECL methodology, to HFI loans more accurately reflects the in-period economic performance of the loans by better aligning the value of the loan to its then fair value. Under the fair value option, origination fee revenue and marketing costs are recognized at the time of loan origination within “Origination fees” and “Marketing expense,” respectively, on the Income Statement, rather than being deferred. Fair value adjustments on loans are also recognized in current period earnings within “Net fair value adjustments” and include the impact of credit losses that previously would have been recognized within “Provision for credit losses” under CECL. Further, by applying the fair value option to HFI loans, the Company is applying the same accounting methodology to all loans it originates on or after January 1, 2026, as both HFI and held for sale (HFS) loans will be measured at fair value.
Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Part II – Item 8. Financial Statements and Supplementary Data – Note 1. Summary of Significant Accounting Policies” in the Annual Report. There have been no changes to these significant accounting policies for the six months ended June 30, 2026.
Adoption of New Accounting Standards
The Company did not adopt new accounting standards during the six months ended June 30, 2026.
New Accounting Standards Not Yet Adopted
In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which makes incremental improvements to GAAP. The updates cover a broad range of topics arising from technical corrections, unintended applications of the codification, and other minor improvements. The new standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within those annual reporting periods. The standard can be applied prospectively or retrospectively on a topic by topic basis. Early adoption is also permitted on a topic by topic basis. The Company is evaluating the impact of this ASU but does not expect it to be material.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) – Narrow-Scope Improvements, which improves the navigability of the required interim disclosures and clarifies when the guidance is applicable. The amendments also provide guidance on what disclosures are required during the interim reporting periods. Additionally, the amendments also include a disclosure principle that requires entities to disclose events since the end of the last reporting period that have a material impact. The amendments of this standard are effective for interim reporting periods beginning after December 15, 2027. The amendments can be applied either prospectively or retrospectively. Early adoption is also permitted. The Company is evaluating the impact of this ASU but does not expect it to be material.
13
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the guidance to reflect the software development approaches currently used. Specifically, the ASU eliminates accounting consideration of software project development stages and enhances the guidance around the “probable-to-complete” threshold. The new standard is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The amendments of this standard can be applied retrospectively, prospectively or on a modified prospective basis. Early adoption is also permitted. The Company is evaluating the impact of this ASU but does not expect it to be material.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures, which improves income statement expense disclosure requirements, primarily through disaggregated disclosures of certain expense captions into specified categories within the footnotes to the financial statements. The new standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendments of this standard should be applied prospectively, with retrospective application permitted. Early adoption is also permitted. The Company is evaluating the impact of this ASU but does not expect it to be material.
2. Earnings Per Share
The following table details the computation of the Company’s basic and diluted earnings per share (EPS):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Basic EPS: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares – Basic | |||||||||||||||||||||||
| Basic EPS | $ | $ | $ | $ | |||||||||||||||||||
| Diluted EPS: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares – Diluted | |||||||||||||||||||||||
| Diluted EPS | $ | $ | $ | $ | |||||||||||||||||||
14
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
3. Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and fair value of available for sale (AFS) securities were as follows:
| June 30, 2026 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | ||||||||||||||||||||||||
Senior asset-backed securities related to Structured Program transactions(1) | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Other asset-backed securities related to Structured Program transactions(2) | ( | ( | |||||||||||||||||||||||||||
| U.S. agency residential mortgage-backed securities | ( | ||||||||||||||||||||||||||||
| U.S. agency securities | ( | ||||||||||||||||||||||||||||
| Mortgage-backed securities | ( | ||||||||||||||||||||||||||||
| Municipal securities | ( | ||||||||||||||||||||||||||||
Other securities | ( | ||||||||||||||||||||||||||||
Total securities available for sale | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
| December 31, 2025 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | ||||||||||||||||||||||||
Senior asset-backed securities related to Structured Program transactions(1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Other asset-backed securities related to Structured Program transactions(2) | ( | ( | |||||||||||||||||||||||||||
| U.S. agency residential mortgage-backed securities | ( | ||||||||||||||||||||||||||||
| U.S. agency securities | ( | ||||||||||||||||||||||||||||
| Mortgage-backed securities | ( | ||||||||||||||||||||||||||||
| Municipal securities | ( | ||||||||||||||||||||||||||||
Other securities | ( | ||||||||||||||||||||||||||||
Total securities available for sale | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
(1) Excludes the basis adjustment for securities previously designated in fair value hedges under the portfolio layer method. See “Note 7. Derivative Instruments and Hedging Activities” for additional information.
(2) As of June 30, 2026 and December 31, 2025, $226.7 million and $200.0 million, respectively, of the other asset-backed securities related to Structured Program transactions at fair value are subject to restrictions on transfer pursuant to the Company’s obligations as a “sponsor” under the U.S. Risk Retention Rules.
15
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
A summary of AFS securities with unrealized losses, aggregated by period of continuous unrealized loss, is as follows:
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||
| June 30, 2026 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||
| Senior asset-backed securities related to Structured Program transactions | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
| U.S. agency residential mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other asset-backed securities related to Structured Program transactions | ( | ( | ( | ||||||||||||||||||||||||||||||||
| U.S. agency securities | ( | ( | |||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Municipal securities | ( | ( | |||||||||||||||||||||||||||||||||
Other securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total securities with unrealized losses | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||
| December 31, 2025 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||
| U.S. agency residential mortgage-backed securities | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
| Other asset-backed securities related to Structured Program transactions | ( | ( | ( | ||||||||||||||||||||||||||||||||
| U.S. agency securities | ( | ( | |||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Municipal securities | ( | ( | |||||||||||||||||||||||||||||||||
Other securities | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total securities with unrealized losses | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
The majority of unrealized losses as of both June 30, 2026 and December 31, 2025 were related to U.S. agency-backed securities and mortgage-backed securities. Management considers these securities to be of the highest credit quality and rating given the guarantee of principal and interest by certain U.S. government agencies or government-sponsored agencies. Most of the remaining securities in an unrealized loss position in the Company’s AFS investment portfolio at June 30, 2026 were rated investment grade. Substantially all of these unrealized losses were caused by prior increases in interest rates. Additionally, the Company does not intend to sell the securities in loss positions, nor is it more likely than not that it will be required to sell the securities prior to recovery of the amortized cost basis. For a description of management’s quarterly evaluation of AFS securities in an unrealized loss position, see “Part II – Item 8. Financial Statements and Supplementary Data – Note 1. Summary of Significant Accounting Policies” in our Annual Report.
16
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the activity in the allowance for credit losses (ACL) for AFS securities, by security type:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Other asset-backed securities related to Structured Program transactions: | |||||||||||||||||||||||
Allowance for credit losses, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Credit loss expense (benefit) for securities available for sale | ( | ( | |||||||||||||||||||||
Allowance for credit losses, end of period | $ | $ | $ | $ | |||||||||||||||||||
17
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The contractual maturities of AFS securities were as follows:
| June 30, 2026 | Amortized Cost | Fair Value | Weighted- average Yield(1) | ||||||||||||||
| Due within 1 year: | |||||||||||||||||
| U.S. agency securities | $ | $ | |||||||||||||||
| Total due within 1 year | % | ||||||||||||||||
| Due after 1 year through 5 years: | |||||||||||||||||
| Senior asset-backed securities related to Structured Program transactions | |||||||||||||||||
| Other asset-backed securities related to Structured Program transactions | |||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||
| U.S. agency securities | |||||||||||||||||
Municipal securities | |||||||||||||||||
| U.S. agency residential mortgage-backed securities | |||||||||||||||||
| Other securities | |||||||||||||||||
| Total due after 1 year through 5 years | % | ||||||||||||||||
| Due after 5 years through 10 years: | |||||||||||||||||
| U.S. agency securities | |||||||||||||||||
| U.S. agency residential mortgage-backed securities | |||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||
| Municipal securities | |||||||||||||||||
Other securities | |||||||||||||||||
| Total due after 5 years through 10 years | % | ||||||||||||||||
| Due after 10 years: | |||||||||||||||||
| U.S. agency residential mortgage-backed securities | |||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||
| U.S. agency securities | |||||||||||||||||
| Municipal securities | |||||||||||||||||
Other securities | |||||||||||||||||
| Total due after 10 years | % | ||||||||||||||||
| Total securities available for sale | $ | $ | % | ||||||||||||||
(1) The weighted-average yield is computed using the average month-end amortized cost during the six months ended June 30, 2026.
There were no
18
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
4. Loans
The Company’s loan portfolios consist of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Loans held for sale at fair value | $ | $ | |||||||||
| Loans held for investment at fair value | |||||||||||
| Total loans at fair value | |||||||||||
| Loans and leases held for investment at amortized cost, net | |||||||||||
| Total loans and leases | $ | $ | |||||||||
For loans held at fair value, see “Note 5. Fair Value Measurements” for the assumptions used in the Company’s fair value model.
Loans and Leases Held for Investment at Amortized Cost, Net
The Company defines its loans and leases HFI portfolio segments as (i) consumer and (ii) commercial. The following table presents the components of each portfolio segment by class of financing receivable:
| June 30, 2026 | December 31, 2025 | ||||||||||
Unsecured consumer | $ | $ | |||||||||
| Residential mortgages | |||||||||||
| Secured consumer | |||||||||||
Total consumer loans held for investment at amortized cost | |||||||||||
Equipment finance(1) | |||||||||||
Commercial real estate(2)(3) | |||||||||||
| Commercial and industrial | |||||||||||
Total commercial loans and leases held for investment at amortized cost | |||||||||||
Total loans and leases held for investment at amortized cost(4) | |||||||||||
| Allowance for loan and lease losses | ( | ( | |||||||||
Loans and leases held for investment at amortized cost, net | $ | $ | |||||||||
(1) Comprised of sales-type leases for equipment. See “Note 16. Leases” for additional information.
(2) Includes $279.6 million and $286.8 million in loans originated through the Small Business Administration (SBA) as of June 30, 2026 and December 31, 2025, respectively.
(3) As of both June 30, 2026 and December 31, 2025, the Commercial Real Estate (CRE) office loan balance was under $35
(4) Accrued interest receivable is excluded from the amortized cost basis of loans and leases HFI and is reported within “Other assets” on the Balance Sheet. Net accrued interest receivable related to loans and leases HFI at amortized cost was $13.4 million and $17.9 million as of June 30, 2026 and December 31, 2025, respectively.
19
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the components of the allowance for loan and lease losses (ALLL):
| June 30, 2026 | December 31, 2025 | ||||||||||
Gross allowance for loan and lease losses(1) | $ | $ | |||||||||
Recovery asset value(2) | ( | ( | |||||||||
| Allowance for loan and lease losses | $ | $ | |||||||||
(1) Represents the allowance for future estimated net charge-offs on existing portfolio balances.
(2) Represents the negative allowance for expected recoveries of amounts previously charged-off.
| June 30, 2026 | Consumer | Commercial | Total | ||||||||||||||
Loans and leases held for investment at amortized cost | $ | $ | $ | ||||||||||||||
| Allowance for loan and lease losses | $ | $ | $ | ||||||||||||||
Allowance ratio(1) | % | % | % | ||||||||||||||
| Gross allowance for loan and lease losses | $ | $ | $ | ||||||||||||||
Gross allowance ratio(1) | % | % | % | ||||||||||||||
| December 31, 2025 | Consumer | Commercial | Total | ||||||||||||||
Loans and leases held for investment at amortized cost | $ | $ | $ | ||||||||||||||
Allowance for loan and lease losses | $ | $ | $ | ||||||||||||||
Allowance ratio(1) | % | % | % | ||||||||||||||
Gross allowance for loan and lease losses | $ | $ | $ | ||||||||||||||
Gross allowance ratio(1) | % | % | % | ||||||||||||||
(1) Calculated as ALLL or gross ALLL, where applicable, to the corresponding portfolio segment balance of loans and leases HFI at amortized cost.
20
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The activity in the ACL by portfolio segment was as follows:
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | Commercial | Total | Consumer | Commercial | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan and lease losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Credit loss (benefit) expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||||||||
End of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Reserve for unfunded lending commitments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Credit loss benefit | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
End of period(1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Consumer | Commercial | Total | Consumer | Commercial | Total | ||||||||||||||||||||||||||||||
Allowance for loan and lease losses: | |||||||||||||||||||||||||||||||||||
Beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Credit loss (benefit) expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Charge-offs | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||
End of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Reserve for unfunded lending commitments: | |||||||||||||||||||||||||||||||||||
Beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Credit loss (benefit) expense | ( | ( | |||||||||||||||||||||||||||||||||
End of period(1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Relates to $35.2 million and $103.4 million of unfunded commitments as of June 30, 2026 and 2025, respectively.
21
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
As a result of the Company’s election of the fair value option, all loan originations in the first half of 2026 were accounted for at fair value. See “Note 1. Summary of Significant Accounting Policies” for additional information. Accordingly, no originations subsequent to 2025 are presented in the tables below.
The following table presents charge-offs by origination year for the first half of 2026:
| Gross Charge-Offs by Origination Year | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | Prior | Total | |||||||||||||||||||||||||||||||||||||||||||||
Unsecured consumer(1) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgages | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Secured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans held for investment at amortized cost | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment at amortized cost | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total loans and leases held for investment at amortized cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
(1) Unsecured consumer loans are generally charged-off when a borrower is contractually 120 days past due.
22
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Consumer Lending Credit Quality Indicators
The Company evaluates the credit quality of its consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is based upon borrower payment activity relative to the contractual terms of the loan. The following tables present the classes of financing receivables within the consumer portfolio segment by credit quality indicator based on delinquency status and origination year:
| June 30, 2026 | Term Loans and Leases by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | Prior | Total | |||||||||||||||||||||||||||||||||||||||||||||
Unsecured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total unsecured consumer(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgages | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgages | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Secured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total secured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans held for investment at amortized cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
(1) Excludes basis adjustment for loans previously designated in fair value hedges under the portfolio layer method. As of June 30, 2026, the remaining unamortized basis adjustment totaled $0.4 million and represents an increase to the amortized cost of the previously hedged loans. See “Note 7. Derivative Instruments and Hedging Activities” for additional information.
23
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| December 31, 2025 | Term Loans and Leases by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total | ||||||||||||||||||||||||||||||||||||||||||||
Unsecured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total unsecured consumer(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgages | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgages | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Secured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 60-89 days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total secured consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans held for investment at amortized cost | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
(1) Excludes cumulative basis adjustment for loans designated in fair value hedges under the portfolio layer method. As of December 31, 2025, the basis adjustment totaled $1.6 million and represents an increase to the amortized cost of the hedged loans. See “Note 7. Derivative Instruments and Hedging Activities” for additional information.
Commercial Lending Credit Quality Indicators
The Company evaluates the credit quality of its commercial loan portfolio based on regulatory risk ratings. The Company categorizes loans and leases into risk ratings based on relevant information about the quality and realizable value of collateral, if any, and the ability of obligors to service their debts, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans and leases based on their associated credit risk and performs this analysis whenever credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans. Risk rating classifications consist of the following:
Pass – Loans and leases that the Company believes will fully repay in accordance with the contractual loan terms.
Special Mention – Loans and leases with a potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Company’s credit position at some future date.
Substandard – Loans and leases that are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Normal payment from the borrower is in jeopardy, although loss of principal, while still possible, is not imminent.
24
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Doubtful – Loans and leases that have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
Loss – Loans and leases that are considered uncollectible and of little value.
The following tables present the classes of financing receivables within the commercial portfolio segment by risk rating and origination year:
| June 30, 2026 | Term Loans and Leases by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | Prior | Total | Guaranteed Amount(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total equipment finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment at amortized cost | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
(1) Represents loan balances guaranteed by the SBA.
25
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| December 31, 2025 | Term Loans and Leases by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total | Guaranteed Amount(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total equipment finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment at amortized cost | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
(1) Represents loan balances guaranteed by the SBA.
The following tables present loans and leases HFI at amortized cost within the commercial portfolio segment by delinquency status:
| June 30, 2026 | Current | 30-59 Days | 60-89 Days | 90 or More Days | Total | ||||||||||||||||||||||||||||||
| Equipment finance | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment at amortized cost | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| December 31, 2025 | Current | 30-59 Days | 60-89 Days | 90 or More Days | Total | ||||||||||||||||||||||||||||||||||||||||||
| Equipment finance | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment at amortized cost | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
26
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Loan Modifications
The Company has loan modification programs to assist borrowers experiencing financial difficulty and to mitigate losses and maximize collections for loans serviced by the Company. The table below presents the amortized cost of loans that were modified during the periods presented, by modification type:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Short-term payment reduction | $ | $ | $ | $ | |||||||||||||||||||
Permanent loan modification | |||||||||||||||||||||||
Debt settlement | |||||||||||||||||||||||
Total loan modifications – unsecured consumer loans | $ | $ | $ | $ | |||||||||||||||||||
% of unsecured consumer loans at amortized cost as of period end | % | % | % | % | |||||||||||||||||||
The Company expanded its digital channels to enable borrowers experiencing financial difficulty to qualify for a short-term payment reduction modification program. Under this program, borrowers may receive a temporary payment reduction for three months . If the borrower meets the temporary payment reduction requirements during the first three-month term, they may qualify for a payment reduction for an additional three months . Receiving an additional three months of payment reduction is considered an other-than-insignificant payment delay and becomes a short-term payment reduction modification. The short-term payment reduction modification results in a term extension of four to nine months compared to the original maturity date of the loan and does not include any principal or interest forgiveness. At the time of receiving a payment reduction, a delinquent loan resets to current status. However, if a borrower fails to comply with the modified terms, the delinquency status returns to the original contractual terms of the loan. Borrowers who were in their first three months of temporary payment reduction had a total of $9.9 million of loan balances at amortized cost outstanding as of June 30, 2026, and may subsequently be eligible for a short-term payment reduction modification.
Permanent loan modifications include both a reduction in contractual interest rates and an extension to the contractual maturity date of up to twelve months and do not include any principal forgiveness. To qualify for this modification, borrowers must meet the Company’s debt-to-income ratio requirements. During the second quarter and first half of 2026, the weighted-average interest rate reduction under this program was approximately 8.8 8.0 % and 8.1 %, respectively. The weighted-average maturity date extension was approximately twelve months
Debt settlement modifications, which include engaging with debt settlement companies, reduce the principal and interest amounts owed by borrowers. The Company typically charges-off such loans within a few months following the modification, as payments under the modified agreement are less than the original contractual amounts.
27
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the delinquency status of the amortized cost of loan modifications as of the periods presented below that were modified during the preceding twelve months:
| June 30, 2026 | June 30, 2025 | ||||||||||||||||||||||||||||||||||
| Short-term Payment Reduction | Permanent Loan Modification | Debt Settlement | Short-term Payment Reduction | Permanent Loan Modification | Debt Settlement | ||||||||||||||||||||||||||||||
Unsecured consumer loans | |||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| 30-59 days | |||||||||||||||||||||||||||||||||||
| 60-89 days | |||||||||||||||||||||||||||||||||||
| 90 or more days | |||||||||||||||||||||||||||||||||||
| Total loan modifications | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
A modified loan is generally charged-off in the event of a borrower defaulting at 120 days past due. The table below presents the total amount of charge-offs during the period for loan modifications that were entered into within the preceding twelve months of charge-off:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Short-term payment reduction | $ | $ | $ | $ | |||||||||||||||||||
Permanent loan modification | |||||||||||||||||||||||
Debt settlement | |||||||||||||||||||||||
Total loan modifications – unsecured consumer loans | $ | $ | $ | $ | |||||||||||||||||||
Nonaccrual Assets
Nonaccrual loans and leases are those for which accrual of interest has been suspended. Loans and leases are generally placed on nonaccrual status when contractually past due 90 days or more, or earlier if management believes that the probability of collection does not warrant further accrual.
Certain loans on nonaccrual status may be considered collateral-dependent loans if the borrower is experiencing financial difficulty and repayment of the loan is expected to be substantially through sale of the collateral. Such loans are secured by various types of collateral, including real estate, auto and equipment, among others. Expected credit losses for the Company’s collateral-dependent loans are calculated as the difference between the amortized cost basis and the fair value of the underlying collateral less costs to sell, if applicable. The fair value of the underlying collateral is generally based on third-party appraisals, which are updated on a case-by-case basis.
28
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents nonaccrual loans and leases HFI at amortized cost:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
Nonaccrual | Nonaccrual with no related ACL(1) | Nonaccrual | Nonaccrual with no related ACL(1) | ||||||||||||||||||||||||||||||||||||||
Unsecured consumer | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Residential mortgages | |||||||||||||||||||||||||||||||||||||||||
| Secured consumer | |||||||||||||||||||||||||||||||||||||||||
Total nonaccrual consumer loans held for investment at amortized cost | |||||||||||||||||||||||||||||||||||||||||
| Equipment finance | |||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
Total nonaccrual commercial loans and leases held for investment at amortized cost(2) | |||||||||||||||||||||||||||||||||||||||||
Total nonaccrual loans and leases held for investment at amortized cost | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
(1) Subset of total nonaccrual loans and leases HFI at amortized cost.
(2) Includes $28.3 million and $29.7 million in loan balances guaranteed by the SBA as of June 30, 2026 and December 31, 2025, respectively.
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Nonaccrual | Nonaccrual Ratios(1) | Nonaccrual | Nonaccrual Ratios(1) | ||||||||||||||||||||||||||||||||||||||
Total nonaccrual consumer loans held for investment at amortized cost | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||
Total nonaccrual commercial loans and leases held for investment at amortized cost | % | % | |||||||||||||||||||||||||||||||||||||||
Total nonaccrual loans and leases held for investment at amortized cost | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||
(1) Calculated as the ratio of nonaccrual loans and leases to loans and leases HFI at amortized cost.
5. Fair Value Measurements
For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Part II – Item 8. Financial Statements and Supplementary Data – Note 1. Summary of Significant Accounting Policies” in the Annual Report. The Company records certain assets and liabilities at fair value as listed in the following tables.
29
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Recurring Fair Value Measurements
The following tables present, by level within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis:
| June 30, 2026 | Level 1 | Level 2 | Level 3 | Balance at Fair Value | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Loans held for sale at fair value | $ | $ | $ | $ | |||||||||||||||||||
Loans held for investment at fair value | |||||||||||||||||||||||
| Securities available for sale: | |||||||||||||||||||||||
| Senior asset-backed securities related to Structured Program transactions | |||||||||||||||||||||||
| Other asset-backed securities related to Structured Program transactions | |||||||||||||||||||||||
| U.S. agency residential mortgage-backed securities | |||||||||||||||||||||||
| U.S. agency securities | |||||||||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||||||||
| Municipal securities | |||||||||||||||||||||||
Other securities | |||||||||||||||||||||||
| Total securities available for sale | |||||||||||||||||||||||
| Servicing assets | |||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Other liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
30
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
December 31, 2025 | Level 1 | Level 2 | Level 3 | Balance at Fair Value | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Loans held for sale at fair value | $ | $ | $ | $ | |||||||||||||||||||
Loans held for investment at fair value | |||||||||||||||||||||||
| Securities available for sale: | |||||||||||||||||||||||
| Senior asset-backed securities related to Structured Program transactions | |||||||||||||||||||||||
| U.S. agency residential mortgage-backed securities | |||||||||||||||||||||||
Other asset-backed securities related to Structured Program transactions | |||||||||||||||||||||||
| U.S. agency securities | |||||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||||
| Municipal securities | |||||||||||||||||||||||
Other securities | |||||||||||||||||||||||
| Total securities available for sale | |||||||||||||||||||||||
| Servicing assets | |||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Other liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
Financial instruments are categorized in the valuation hierarchy based on the significance of observable or unobservable factors in the overall fair value measurement. For the financial instruments listed in the tables above that 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. The Company primarily uses a discounted cash flow (DCF) model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that inherently require judgment and reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value. The Company did not transfer any assets or liabilities in or out of Level 3 during the second quarters and first halves of 2026 or 2025.
The following significant unobservable inputs, as applicable, were used in the fair value measurement of the Company’s Level 3 assets:
•Discount rate – The weighted-average rate at which the expected cash flows are discounted to arrive at the net present value of the loan. The discount rate is primarily determined based on the Company’s estimate of market participants’ return expectations.
•Annualized net credit loss rate – The annualized rate of lifetime charge-offs, net of recoveries, expressed as a percentage of the average lifetime principal balance of loan pools with similar risk characteristics.
•Annualized prepayment rate – The annualized rate of lifetime prepayments expressed as a percentage of the average lifetime principal balance of loan pools with similar risk characteristics.
An increase in each of the inputs above, in isolation, would result in a decrease in the fair value measurement.
The sensitivity calculations are hypothetical and should not be considered to be predictive of future performance. The effect on fair value of a variation in assumptions generally cannot be determined because the relationship of the
31
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
change in assumptions to the fair value may not be linear. Changes in one factor may lead to changes in other factors, which could impact the hypothetical results.
Loans Held for Sale at Fair Value
Significant Unobservable Inputs
The following significant unobservable inputs were used in the fair value measurement of HFS loans:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Minimum | Maximum | Weighted- Average(1) | Minimum | Maximum | Weighted- Average(1) | |||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized net credit loss rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized prepayment rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
(1) The weighted-average rate is calculated using the principal balance of each loan pool with similar risk characteristics.
Fair Value Sensitivity
The sensitivity of HFS loans at fair value to adverse changes in key assumptions was as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||
Loans held for sale at fair value | $ | $ | |||||||||||||||
Expected remaining weighted-average life (in years) | |||||||||||||||||
Discount rate: | |||||||||||||||||
| 100 basis point increase | $ | ( | $ | ( | |||||||||||||
| 200 basis point increase | $ | ( | $ | ( | |||||||||||||
Annualized net credit loss rate: | |||||||||||||||||
| 10% increase | $ | ( | $ | ( | |||||||||||||
| 20% increase | $ | ( | $ | ( | |||||||||||||
Annualized prepayment rate: | |||||||||||||||||
| 10% increase | $ | ( | $ | ( | |||||||||||||
| 20% increase | $ | ( | $ | ( | |||||||||||||
32
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Reconciliation
The following table presents the activity for HFS loans at fair value:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Originations | |||||||||||||||||||||||
| Sales | ( | ( | ( | ( | |||||||||||||||||||
| Principal payments | ( | ( | ( | ( | |||||||||||||||||||
Realized charge-offs, net of recoveries, recorded in earnings | ( | ( | ( | ( | |||||||||||||||||||
Fair value adjustments recorded in earnings(1) | ( | ( | ( | ( | |||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | |||||||||||||||||||
(1) Includes unrealized fair value adjustments related to HFS loans at fair value held at the end of the periods presented of $3.9 million and $1.0 million for the second quarters of 2026 and 2025, respectively, and $27.2 million and $4.5 million for the first halves of 2026 and 2025, respectively.
The following table summarizes the aggregate fair value of the Company’s HFS loans as of the periods presented, as well as the amount that was 90 days or more past due:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Total | 90 or more days past due | Total | 90 or more days past due | ||||||||||||||||||||
| Aggregate unpaid principal balance | $ | $ | $ | $ | |||||||||||||||||||
| Cumulative fair value adjustments | ( | ( | ( | ( | |||||||||||||||||||
Fair value of loans held for sale | $ | $ | $ | $ | |||||||||||||||||||
33
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Loans Held for Investment at Fair Value
Effective January 1, 2026, the Company elected the fair value option for HFI loans originated on or after that date. As a result, the current period includes all newly originated loans across multiple products, including unsecured consumer loans (personal loans and purchase finance loans), auto loans, and small business loans. In periods prior to this election, the Company’s HFI loan portfolio measured at fair value consisted solely of purchased unsecured personal loans that it had previously originated and sold. Accordingly, the significant unobservable inputs presented in the table below reflect a different loan product mix in the current period compared to the prior period.
Significant Unobservable Inputs
The following significant unobservable inputs were used in the fair value measurement of HFI loans:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Minimum | Maximum | Weighted- Average(1) | Minimum | Maximum | Weighted- Average(1) | |||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized net charge-off rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized prepayment rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
(1) The weighted-average rate is calculated using the principal balance of each loan pool with similar risk characteristics.
Fair Value Sensitivity
The sensitivity of HFI loans at fair value to adverse changes in key assumptions was as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||
| Loans held for investment at fair value | $ | $ | |||||||||||||||
Expected remaining weighted-average life (in years) | |||||||||||||||||
Discount rate: | |||||||||||||||||
| 100 basis point increase | $ | ( | $ | ( | |||||||||||||
| 200 basis point increase | $ | ( | $ | ( | |||||||||||||
Annualized net credit loss rate: | |||||||||||||||||
| 10% increase | $ | ( | $ | ( | |||||||||||||
| 20% increase | $ | ( | $ | ( | |||||||||||||
Annualized prepayment rate: | |||||||||||||||||
| 10% increase | $ | ( | $ | ( | |||||||||||||
| 20% increase | $ | ( | $ | ( | |||||||||||||
34
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Reconciliation
The following table presents the activity for HFI loans at fair value:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Originations | |||||||||||||||||||||||
Purchases | |||||||||||||||||||||||
| Principal payments | ( | ( | ( | ( | |||||||||||||||||||
Realized charge-offs, net of recoveries, recorded in earnings | ( | ( | ( | ( | |||||||||||||||||||
Fair value adjustments recorded in earnings(1) | ( | ( | |||||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | |||||||||||||||||||
(1) Represents unrealized fair value adjustments recorded in earnings related to HFI loans at fair value held at the end of the periods presented.
The following table summarizes the aggregate fair value of the Company’s HFI loans at fair value as of the periods presented, as well as the amount that was 90 days or more past due:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Total | 90 or more days past due | Total | 90 or more days past due | ||||||||||||||||||||
| Aggregate unpaid principal balance | $ | $ | $ | $ | |||||||||||||||||||
| Cumulative fair value adjustments | ( | ( | ( | ( | |||||||||||||||||||
| Fair value of loans held for investment | $ | $ | $ | $ | |||||||||||||||||||
Asset-Backed Securities Related to Structured Program Transactions
Senior Asset-Backed Securities Related to Structured Program Transactions
Significant Unobservable Inputs
The following significant unobservable input, which includes credit spreads, was used in the fair value measurement of senior asset-backed securities related to Structured Program transactions:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Minimum | Maximum | Weighted- Average | Minimum | Maximum | Weighted- Average | |||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
35
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Sensitivity
The sensitivity in the fair value of senior asset-backed securities related to Structured Program transactions to adverse changes in key assumptions was as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Fair value of interests held | $ | $ | |||||||||
Expected remaining weighted-average life (in years) | |||||||||||
Discount rate: | |||||||||||
| 100 basis point increase | $ | ( | $ | ( | |||||||
| 200 basis point increase | $ | ( | $ | ( | |||||||
Fair Value Reconciliation
The following table presents the activity for senior asset-backed securities related to Structured Program transactions:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Cash received | ( | ( | ( | ( | |||||||||||||||||||
Change in unrealized loss | ( | ( | ( | ( | |||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | |||||||||||||||||||
Other Asset-Backed Securities Related to Structured Program Transactions
Significant Unobservable Inputs
The following significant unobservable inputs were used in the fair value measurement of other asset-backed securities related to Structured Program transactions:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Minimum | Maximum | Weighted- Average(1) | Minimum | Maximum | Weighted- Average(1) | |||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized net charge-off rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized prepayment rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
(1) The weighted-average rate is calculated using the principal balance of each security.
36
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Fair Value Sensitivity
The sensitivity in the fair value of other asset-backed securities related to Structured Program transactions to adverse changes in key assumptions was as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Fair value of interests held | $ | $ | |||||||||
Expected remaining weighted-average life (in years) | |||||||||||
Discount rate: | |||||||||||
| 100 basis point increase | $ | ( | $ | ( | |||||||
| 200 basis point increase | $ | ( | $ | ( | |||||||
Annualized net charge-off rate: | |||||||||||
| 10% increase | $ | ( | $ | ( | |||||||
| 20% increase | $ | ( | $ | ( | |||||||
Annualized prepayment rate: | |||||||||||
| 10% increase | $ | ( | $ | ( | |||||||
| 20% increase | $ | ( | $ | ( | |||||||
Fair Value Reconciliation
The following table presents the activity for other asset-backed securities related to Structured Program transactions:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Cash received | ( | ( | ( | ( | |||||||||||||||||||
| Credit loss (expense) benefit for securities available for sale | ( | ( | |||||||||||||||||||||
| Change in unrealized loss | ( | ( | ( | ( | |||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | |||||||||||||||||||
37
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Servicing Assets
Significant Unobservable Inputs
The following significant unobservable inputs were used in the fair value measurement for servicing assets related to loans sold to investors:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Minimum | Maximum | Weighted- Average | Minimum | Maximum | Weighted- Average | |||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized net charge-off rate(1) | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Annualized prepayment rate(1) | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
Market servicing rate(2) | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
(1) The weighted-average rate is calculated using the principal balance of each loan pool with similar risk characteristics.
(2) The fees a willing market participant would require for the servicing of loans with similar characteristics as those in the Company’s serviced portfolio.
Fair Value Sensitivity
The sensitivity of the fair value of servicing assets to adverse changes in key assumptions was as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Fair value of servicing assets | $ | $ | |||||||||
Expected remaining weighted-average life (in years) | |||||||||||
Discount rate: | |||||||||||
| 100 basis point increase | $ | ( | $ | ( | |||||||
| 200 basis point increase | $ | ( | $ | ( | |||||||
Annualized net charge-off rate: | |||||||||||
| 10% increase | $ | ( | $ | ( | |||||||
| 20% increase | $ | ( | $ | ( | |||||||
Annualized prepayment rate: | |||||||||||
| 10% increase | $ | ( | $ | ( | |||||||
| 20% increase | $ | ( | $ | ( | |||||||
38
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The Company’s selection of the most representative market servicing rates for servicing assets inherently require judgment. The Company reviews third-party servicing rates for its loans, loans in similar credit sectors, and market servicing benchmarking analyses provided by third-party valuation firms, when available. The table below shows the impact on the estimated fair value of servicing assets, calculated using different market servicing rate assumptions:
| June 30, 2026 | December 31, 2025 | ||||||||||
Weighted-average market servicing rate assumptions | % | % | |||||||||
| Change in fair value from: | |||||||||||
Market servicing rate increase by | $ | ( | $ | ( | |||||||
Market servicing rate decrease by | $ | $ | |||||||||
Fair Value Reconciliation
The following table presents activity for servicing assets:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Issuances(1) | |||||||||||||||||||||||
Change in fair value(2) | ( | ( | ( | ( | |||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | |||||||||||||||||||
(1) Represents the servicing assets recorded when the loans are sold. Included in “Gain on sales of loans” on the Income Statement.
(2) Included in “Net fair value adjustments” on the Income Statement.
39
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Financial Instruments Not Recorded at Fair Value
The following tables present the carrying amount and estimated fair values, by level within the fair value hierarchy, of the Company’s assets and liabilities that are not recorded at fair value on a recurring basis:
| June 30, 2026 | Carrying Amount | Level 1 | Level 2 | Level 3 | Balance at Fair Value | ||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
Loans and leases held for investment at amortized cost, net | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
Deposits(1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| December 31, 2025 | Carrying Amount | Level 1 | Level 2 | Level 3 | Balance at Fair Value | ||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
Loans and leases held for investment at amortized cost, net | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
Deposits(1) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) Excludes deposit liabilities with no defined or contractual maturities.
40
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
6. Structured Program Transactions and Variable Interest Entities
The Company’s VIEs relate to its Structured Program transactions. As of both June 30, 2026 and December 31, 2025, the Company did not consolidate any VIEs. Accordingly, holders of the related securities can look only to the assets of the VIEs that issued the securities and there is no direct recourse to the Company’s assets.
The following table presents the classifications of assets and liabilities on the Company’s Balance Sheet for its transactions with unconsolidated VIEs:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Securities available for sale at fair value | $ | $ | |||||||||||||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||||||||||||||
| Total liabilities | |||||||||||||||||||||||||||||||||||
| Total net assets (maximum loss exposure) | $ | $ | |||||||||||||||||||||||||||||||||
Maximum loss exposure represents estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is extremely remote, such as where the value of interests declines to zero. Accordingly, this required disclosure is not an indication of expected losses.
The following table summarizes activity related to unconsolidated VIEs where the transfers were accounted for as a sale on the Company’s financial statements:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fair value of consideration received: | |||||||||||||||||||||||
| Cash | $ | $ | $ | $ | |||||||||||||||||||
| Net securities retained from Structured Program transactions | |||||||||||||||||||||||
| Other assets, net | |||||||||||||||||||||||
| Total consideration | |||||||||||||||||||||||
| Fair value of loans sold | ( | ( | ( | ( | |||||||||||||||||||
Gain on sales of loans(1) | $ | $ | $ | $ | |||||||||||||||||||
| Cash proceeds from continuing involvement: | |||||||||||||||||||||||
| Servicing and other administrative fees | $ | $ | $ | $ | |||||||||||||||||||
| Interest received on securities retained from Structured Program transactions | $ | $ | $ | $ | |||||||||||||||||||
(1) Consists primarily of servicing assets recognized at the time of loan sale, less any transaction costs, and excludes origination fees and fair value adjustments recognized prior to the sale.
As of June 30, 2026, the aggregate unpaid principal balance attributable to off-balance sheet loans held by unconsolidated VIEs was $5.2 billion, of which $67.7 million was 30 days or more past due. As of December 31, 2025, the aggregate unpaid principal balance attributable to off-balance sheet loans held by unconsolidated VIEs was $4.4 billion, of which $64.9 million was 30 days or more past due. For such loans, the Company would only
41
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
experience a loss if it was required to repurchase a loan due to a breach in representations and warranties associated with its loan sale or servicing contracts.
7. Derivative Instruments and Hedging Activities
The Company uses derivative instruments, including interest rate contracts such as caps and swaps, to manage exposure to interest rate risk associated with its fixed-rate assets. The Company’s interest rate contracts are indexed to the Secured Overnight Financing Rate (SOFR). Interest rate swaps involve the payment of fixed-rate amounts to a counterparty in exchange for the receipt of variable-rate payments. With interest rate caps, the Company receives payments from a counterparty when SOFR exceeds a specified strike rate.
Derivatives Not Designated as Accounting Hedges
During the first quarter of 2026, the Company voluntarily de-designated all of its interest rate swaps previously designated as fair value hedges. Following de-designation, changes in the fair value of these derivatives are recorded in “Net fair value adjustments” on the Income Statement, and the remaining unamortized basis adjustments on the previously hedged items are amortized through interest income over the remaining life of the underlying instruments. As of June 30, 2026, the remaining unamortized basis adjustment totaled $0.4 million for previously hedged unsecured consumer loans and $0.1 million for previously hedged AFS securities.
The table below presents the notional and gross fair value amounts of the Company’s derivatives:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||
| Notional | Derivative Asset(1) | Derivative Liability(1) | Notional | Derivative Asset(1) | Derivative Liability(1) | |||||||||||||||||||||||||||||||||||||||
| Credit derivatives | $ | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||||||||||||||||||||||||
| Interest rate caps | ||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Total interest rate contracts | $ | $ | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
(1) Recorded in “Other assets” or “Other liabilities” on a net basis, as applicable, on the Balance Sheet and in “Operating activities” on the Statement of Cash Flows.
The table below presents the gains (losses) recognized on the Company’s derivatives:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Credit derivatives(1) | $ | $ | $ | $ | |||||||||||||||||||
Interest rate contracts(2) | ( | ( | |||||||||||||||||||||
Total gains | $ | $ | $ | $ | |||||||||||||||||||
(1) The initial fair value of the credit derivative liabilities is recorded in “Gain on sales of loans” with incremental changes in the fair value recorded in “Net fair value adjustments,” both on the Income Statement.
(2) Recorded in “Net fair value adjustments” on the Income Statement.
42
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Derivatives Designated as Accounting Hedges
As of June 30, 2026, there were no derivatives designated as hedging instruments. Prior period amounts in the tables below reflect periods in which hedge accounting was applied.
The table below presents the notional and gross fair value amounts of the Company’s interest rate swaps that were designated as fair value hedges:
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Notional | Derivative Asset(1) | Derivative Liability(1) | ||||||||||||||||||||||||||||||||||||
Unsecured consumer loans | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||
Securities available for sale | ( | |||||||||||||||||||||||||||||||||||||
Total interest rate swaps | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||
(1) Recorded in “Other assets” or “Other liabilities,” as applicable, on the Balance Sheet and in “Operating activities” on the Statement of Cash Flows.
The following table summarizes the gain (loss) recognized on the Company’s fair value hedges:
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | ||||||||||||||||||||||
| Gains (losses) recognized on: | |||||||||||||||||||||||
| Unsecured consumer loans: | |||||||||||||||||||||||
| Hedged item | $ | ( | $ | ( | |||||||||||||||||||
| Derivatives | |||||||||||||||||||||||
Interest settlement on derivative(1) | ( | ||||||||||||||||||||||
Total gain (loss) on hedged unsecured consumer loans(2) | ( | ||||||||||||||||||||||
| Securities available for sale: | |||||||||||||||||||||||
| Hedged item | |||||||||||||||||||||||
| Derivatives | ( | ( | |||||||||||||||||||||
Interest settlement on derivative(1) | |||||||||||||||||||||||
Total gain on hedged securities available for sale(3) | |||||||||||||||||||||||
| Total gain on fair value hedges | $ | $ | |||||||||||||||||||||
(1) Includes accrued interest receivable and accrued interest payable.
(2) Recorded in “Interest on loans” on the Income Statement.
(3) Recorded in “Interest on securities available for sale” on the Income Statement.
43
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the cumulative basis adjustments for fair value hedges:
| December 31, 2025 | |||||||||||||||||||||||
| Balance Sheet Line Item | Carrying Amount of Closed Portfolio(1) | Cumulative Fair Value Adjustment Included in the Carrying Amount of the Hedged Items | |||||||||||||||||||||
| Loans and leases held for investment at amortized cost | $ | $ | |||||||||||||||||||||
| Securities available for sale | $ | $ | |||||||||||||||||||||
(1) Represents the total closed portfolio of assets (at amortized cost) designated in a portfolio method hedge relationship in which the hedged item is a stated layer that is expected to be remaining at the end of the hedging relationship. At December 31, 2025, the amortized cost of unsecured consumer loans and AFS securities, designated as the hedged items in the portfolio layer hedging relationship, was $575.0 million and $475.0 million, respectively.
8. Property, Equipment and Software, Net
Property, equipment and software, net, consist of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
Software(1) | $ | $ | |||||||||
Land, building and building improvements(2) | |||||||||||
| Leasehold improvements | |||||||||||
Computer equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Total property, equipment and software | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Total property, equipment and software, net | $ | $ | |||||||||
(1) Includes $36.0 million and $28.3 million of development in progress for internally-developed software and $6.9 million and $6.8 million of development in progress to customize purchased software as of June 30, 2026 and December 31, 2025, respectively.
(2) Includes $7.7 million of building improvements in progress as December 31, 2025.
Depreciation and amortization expense on property, equipment and software was $15.4 million and $30.5 million for the second quarter and first half of 2026, respectively. Depreciation and amortization expense on property, equipment and software was $14.8 million and $27.9 million for the second quarter and first half of 2025, respectively.
The Company recognized impairment expense of $2.1 No
44
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
9. Goodwill and Intangible Assets
Goodwill
The Company’s goodwill balance was $75.7 no
Intangible Assets
Intangible assets consist primarily of customer relationships. These intangible assets are amortized on an accelerated basis from ten to fourteen years .
Intangible assets, net of accumulated amortization, are included in “Other assets” on the Balance Sheet. The gross and net carrying values and accumulated amortization were as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Gross carrying value | $ | $ | |||||||||
| Accumulated amortization | ( | ( | |||||||||
| Net carrying value | $ | $ | |||||||||
Amortization expense associated with intangible assets for the second quarter and first half of 2026 was $0.6 million and $1.4 million, respectively. Amortization expense associated with intangible assets for the second quarter and first half of 2025 was $0.7 million and $1.5 million, respectively. There was no
The expected future amortization expense for intangible assets as of June 30, 2026, is as follows:
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
2030 | |||||
| Thereafter | |||||
| Total | $ | ||||
45
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
10. Other Assets
Other assets consist of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
Deferred tax assets, net(1) | $ | $ | |||||||||
Servicing assets(2) | |||||||||||
| Nonmarketable equity investments | |||||||||||
Accrued interest receivable | |||||||||||
| Operating lease assets | |||||||||||
Intangible assets, net(3) | |||||||||||
| Other | |||||||||||
| Total other assets | $ | $ | |||||||||
(1) See “Note 15. Income Taxes” for additional detail.
(2) Loans underlying servicing assets had a total outstanding principal balance of $8.3 billion and $7.6 billion as of June 30, 2026 and December 31, 2025, respectively.
(3) See “Note 9. Goodwill and Intangible Assets” for additional detail.
11. Deposits
Deposits consist of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||
| Savings and money market accounts | $ | $ | |||||||||||||||
Certificates of deposit | |||||||||||||||||
| Checking accounts | |||||||||||||||||
| Total | |||||||||||||||||
| Noninterest-bearing deposits | |||||||||||||||||
| Total deposits | $ | $ | |||||||||||||||
Total certificates of deposit at June 30, 2026 are scheduled to mature as follows:
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
Total certificates of deposit(1) | $ | ||||
(1) Certificates of deposit in excess of the FDIC insurance limit of $250 thousand per account holder totaled $163.6 million at June 30, 2026.
46
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
12. Borrowings
The Company did no
Borrowing Capacity
The following table summarizes the Company’s available borrowing capacity and the related pledged collateral:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
Available Borrowing Capacity | Pledged Collateral(1) | Available Borrowing Capacity | Pledged Collateral(2) | ||||||||||||||||||||
| FRB Discount Window | $ | $ | $ | $ | |||||||||||||||||||
FHLB of Des Moines | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
(1) As of June 30, 2026, the Company had $4.5 billion in loans pledged under the Federal Reserve System (FRB) Discount Window, and $467.7 million in loans and $375.6 million in securities available for sale at fair value pledged to the Federal Home Loan Bank (FHLB) of Des Moines.
(2) As of December 31, 2025, the Company had $4.2 billion in loans pledged under the FRB Discount Window, and $486.2 million in loans and $375.7 million in securities available for sale at fair value pledged to the FHLB of Des Moines.
13. Other Liabilities
Other liabilities consist of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||||
Due to borrowers(1) | |||||||||||
Payable to investors(2) | |||||||||||
| Operating lease liabilities | |||||||||||
| Other | |||||||||||
| Total other liabilities | $ | $ | |||||||||
(1) Represents originated loans for which disbursement of funds is pending to borrowers.
(2) Represents principal and interest on loans collected by the Company and pending disbursement to investors.
14. Equity
Share Repurchases
On November 4, 2025, the Company’s Board of Directors approved a program to repurchase and acquire up to $100 million of the Company’s common stock through December 31, 2026. During the six months ended June 30, 2026, the Company repurchased 1,221,938 shares of Happen, Inc. common stock on the open market at an average price of $16.68 per share and retired those shares upon repurchase.
47
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Employee Incentive Plans
The Company’s equity incentive plans provide for granting awards, including restricted stock units (RSUs), performance-based restricted stock units (PBRSUs), cash awards and stock options to employees, officers and directors.
Stock-based Compensation
Stock-based compensation expense, included in “Compensation and benefits” expense on the Income Statement, was as follows for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
RSUs | $ | $ | $ | $ | |||||||||||||||||||
| PBRSUs | |||||||||||||||||||||||
| Stock-based compensation expense, gross | |||||||||||||||||||||||
| Less: Capitalized stock-based compensation expense | |||||||||||||||||||||||
| Stock-based compensation expense, net | $ | $ | $ | $ | |||||||||||||||||||
Restricted Stock Units
The following table summarizes the Company’s RSU activity:
| Number of Units | Weighted- Average Grant Date Fair Value | ||||||||||
Unvested at December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
Forfeited | ( | $ | |||||||||
Unvested at June 30, 2026 | $ | ||||||||||
During the first half of 2026, the Company granted 1,979,722 RSUs with an aggregate fair value of $30.8 million.
As of June 30, 2026, there was $47.0 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 1.9 years, subject to any forfeitures.
Performance-based Restricted Stock Units
The Company’s outstanding PBRSU awards consist of awards with a market-based metric and awards with an operating-based metric, all with a three-year performance period, following which any earned portion is immediately vested. With respect to PBRSU awards with a market-based metric, the compensation expense of the award is fixed at the time of grant (incorporating the probability of achieving the market-based metric) and expensed over the performance period. With respect to PBRSU awards with an operating-based metric, the compensation expense of the award is set at the time of grant (assuming a target level of achievement), subsequently adjusted for actual performance during the performance period and expensed over the performance/vesting period.
48
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table summarizes the Company’s PBRSU activity:
| Number of Units | Weighted- Average Grant Date Fair Value | ||||||||||
Unvested at December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
Unvested at June 30, 2026 | $ | ||||||||||
During the first half of 2026, the Company granted 641,982 PBRSUs with an aggregate fair value of $9.4 million.
As of June 30, 2026, there was $10.0 million of unrecognized compensation cost related to unvested PBRSUs, which is expected to be recognized over a weighted-average period of approximately 1.8 years, subject to any forfeitures.
15. Income Taxes
For the second quarter and first half of 2026, the Company recorded an income tax expense of $17.5 million and $33.2 million, respectively, representing an effective tax rate of 23.1 % and 23.2 %, respectively. For the second quarter and first half of 2025, the Company recorded an income tax expense of $15.8 million and $19.8 million, respectively, representing an effective tax rate of 29.3 % and 28.5 %, respectively. The effective tax rate differs from the federal statutory rate primarily due to state taxes, the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the net discrete impact of stock-based compensation. The decrease in the effective tax rate period over period was primarily driven by the discrete tax expense recognized in the second quarter of 2025 related to the revaluation of the Company’s deferred tax assets following the enactment of California Senate Bill 132 on June 27, 2025, and the reduction in the overall effective state tax rate resulting from the law’s requirement that banks and financial companies use a single-sales-factor apportionment formula, effective for tax years beginning in 2025.
The following table summarizes the Company’s net deferred tax assets:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Deferred tax assets, net of liabilities | $ | $ | |||||||||
| Valuation allowance | ( | ( | |||||||||
| Deferred tax assets, net of valuation allowance | $ | $ | |||||||||
16. Leases
Lessee Arrangements
Following the expiration of its prior headquarters lease, the Company relocated its headquarters in April 2026 to an office building in San Francisco, California.
The Company has various operating leases for office space in the Salt Lake City, Utah area, Boston, Massachusetts, and New York, New York, with remaining lease terms ranging from approximately two to three years as of June 30, 2026.
49
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Balance sheet information related to leases was as follows:
| ROU Assets and Lease Liabilities | Balance Sheet Classification | June 30, 2026 | December 31, 2025 | ||||||||||||||
| Operating lease assets | Other assets | $ | $ | ||||||||||||||
| Operating lease liabilities | Other liabilities | $ | $ | ||||||||||||||
Net lease costs were $1.6 million and $4.4 million during the second quarter and first half of 2026, respectively. Such costs are recorded within “Occupancy” expense on the Income Statement. Net lease costs were $2.7 million and $5.5 million during the second quarter and first half of 2025, respectively.
The Company’s future minimum undiscounted lease payments under operating leases as of June 30, 2026 were as follows:
Operating Lease Payments | |||||||||||||||||
| 2026 | $ | ||||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| 2029 | |||||||||||||||||
| Total lease payments | $ | ||||||||||||||||
| Discount effect | ( | ||||||||||||||||
| Present value of future minimum lease payments | $ | ||||||||||||||||
The weighted-average remaining lease term and discount rate used in the calculation of the Company’s operating lease assets and liabilities were as follows:
| Lease Term and Discount Rate | June 30, 2026 | December 31, 2025 | |||||||||||||||
| Weighted-average remaining lease term (in years) | |||||||||||||||||
| Weighted-average discount rate | % | % | |||||||||||||||
50
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Lessor Arrangements
Operating Leases
The Company leases space in its office building to third-party tenants under operating lease agreements with initial term expiration dates extending until 2034. Some of the agreements include options to extend the lease term for an additional five years .
Rental income earned from such leases was as follows for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Rental income(1) | $ | $ | $ | $ | |||||||||||||||||||
(1) Recorded in “Other non-interest income” on the Income Statement.
Future fixed lease payments to be received by the Company as of June 30, 2026, under non-cancelable operating leases, were as follows:
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
Total lease payments | $ | ||||
Sales-type Leases
The Company has sales-type leases for equipment (Equipment Finance). Such arrangements may include options to renew or to purchase the leased equipment at the end of the lease term.
Interest earned on Equipment Finance was as follows for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Interest earned(1) | $ | $ | $ | $ | |||||||||||||||||||
(1) Recorded in “Interest on loans” on the Income Statement.
The components of Equipment Finance assets are as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||
| Lease receivables | $ | $ | |||||||||||||||
| Unguaranteed residual asset values | |||||||||||||||||
| Unearned income | ( | ( | |||||||||||||||
Deferred costs | |||||||||||||||||
| Total | $ | $ | |||||||||||||||
51
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Future minimum lease payments based on maturity of the Company’s sales-type leases as of June 30, 2026 were as follows:
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Total lease payments | $ | ||||
| Discount effect | ( | ||||
| Present value of future minimum lease payments | $ | ||||
17. Commitments and Contingencies
Operating Lease Commitments
For discussion regarding the Company’s operating lease commitments, see “Note 16. Leases.”
Loan Repurchase Obligations
The Company is generally required to repurchase loans or interests therein from marketplace investors in cases of (i) confirmed identity theft or certain other types of fraud on the part of the borrower or a service provider; (ii) certain failures of loans to comply with the investor’s purchase order or as an investor accommodation; or (iii) confirmed material breach of representations made with respect to such loans that result in a material adverse effect on such loan. The Company believes such provisions are customary and consistent with institutional loan and securitization market standards.
Unfunded Lending Commitments
As of June 30, 2026 and December 31, 2025, the contractual amount of unfunded lending commitments totaled $122.6 million and $98.2 million, respectively, of which $35.2 million and $52.0 million, respectively, are commitments for loans (at amortized cost) to be funded. See “Note 4. Loans” for additional detail related to the reserve for unfunded lending commitments.
Legal
The Company is subject to various claims brought in a litigation or regulatory context. These include lawsuits and regulatory exams, investigations, or inquiries. In accordance with applicable accounting standards, the Company accrues for costs related to contingencies when a loss from such claims is probable and the amount of loss can be reasonably estimated. In determining whether a loss from a claim is probable and the loss can be reasonably estimated, the Company reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If the Company determines an unfavorable outcome is not probable or the amount of loss cannot be reasonably estimated, the Company does not accrue for a potential litigation loss. In those situations, the Company discloses an estimate or range of the reasonably possible losses, if such estimates can be made.
Based on information available to the Company as of the date of this Report, the Company does not believe that the resolution of the pending claims will have a material adverse effect on its financial position, results of operations or cash flows.
52
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Regulatory Examinations and Actions Relating to the Company’s Business Practices, and Compliance with Applicable Laws
The Company is and has been subject to periodic inquiries, exams and enforcement actions brought by federal and state regulatory agencies relating to the Company’s business practices, and operating in compliance with applicable laws.
In the past, the Company has successfully resolved such matters in a manner that was not material to its results of financial operations in any period and that did not materially limit the Company’s ability to conduct its business. However, no assurances can be given as to the timing, outcome or consequences of these matters or other similar matters if or as they arise.
18. Regulatory Requirements
Happen, Inc. and Happen Bank are subject to comprehensive supervision, examination and enforcement, and regulation by the FRB and the Office of the Comptroller of the Currency (OCC), respectively, including generally similar capital adequacy requirements adopted by both agencies.
These requirements establish required minimum ratios for Common Equity Tier 1 (CET1) risk-based capital, Tier 1 risk-based capital, total risk-based capital and a Tier 1 leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; and define what qualifies as capital for purposes of meeting the capital requirements. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company. The minimum capital requirements under the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (Basel III) capital framework are: a CET1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. Additionally, a capital conservation buffer of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases, and certain discretionary bonus payments. In addition to these guidelines, the regulators assess any particular institution’s capital adequacy based on numerous factors and may require a particular banking organization to maintain capital at levels higher than the generally applicable minimums prescribed under the Basel III capital framework. The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (PCA). The PCA framework provides for capitalization categories ranging from “well-capitalized” to “critically undercapitalized.” An institution’s PCA category is determined primarily by its regulatory capital ratios. The PCA requires remedial actions and imposes limitations that become increasingly stringent as its PCA capitalization category declines, including the ability to accept and/or rollover brokered deposits. At June 30, 2026 and December 31, 2025, the Company’s and Happen Bank’s regulatory capital ratios exceeded the thresholds required to be regarded as “well-capitalized” institutions and met all capital adequacy requirements to which they are subject. There have been no events or conditions since June 30, 2026 that management believes would change the Company’s categorization.
53
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
The following table presents the actual capital amounts and ratios of the Company and Happen Bank as well as the regulatory minimum and “well capitalized” requirements (dollars in millions):
| June 30, 2026 | December 31, 2025 | Required Minimum(1) | Well-Capitalized Minimum | ||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
| Happen, Inc.: | |||||||||||||||||||||||||||||||||||
CET1 capital(2) | $ | % | $ | % | 7.0 | % | N/A | ||||||||||||||||||||||||||||
| Tier 1 capital | $ | % | $ | % | 8.5 | % | % | ||||||||||||||||||||||||||||
| Total capital | $ | % | $ | % | 10.5 | % | % | ||||||||||||||||||||||||||||
| Tier 1 leverage | $ | % | $ | % | 4.0 | % | N/A | ||||||||||||||||||||||||||||
| Risk-weighted assets | $ | N/A | $ | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Quarterly adjusted average assets | $ | N/A | $ | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Happen Bank: | |||||||||||||||||||||||||||||||||||
CET1 capital(2) | $ | % | $ | % | 7.0 | % | % | ||||||||||||||||||||||||||||
| Tier 1 capital | $ | % | $ | % | 8.5 | % | % | ||||||||||||||||||||||||||||
| Total capital | $ | % | $ | % | 10.5 | % | % | ||||||||||||||||||||||||||||
| Tier 1 leverage | $ | % | $ | % | 4.0 | % | % | ||||||||||||||||||||||||||||
| Risk-weighted assets | $ | N/A | $ | N/A | N/A | N/A | |||||||||||||||||||||||||||||
| Quarterly adjusted average assets | $ | N/A | $ | N/A | N/A | N/A | |||||||||||||||||||||||||||||
N/A – Not applicable
(1) Required minimums presented for risk-based capital ratios include the required capital conservation buffer of 2.5%.
(2) CET1 capital consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including deductions for goodwill and other intangible assets.
Federal laws and regulations limit the ability of national banks, such as Happen Bank, to pay dividends based upon, among other things, maintaining required levels of regulatory capital and retained net profits for the preceding two calendar years plus retained net profits up to the date of any dividend declaration in the current calendar year. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. During the first quarter of 2025, Happen Bank paid a $50 million cash dividend to Happen, Inc. to return a capital contribution made by Happen, Inc. to Happen Bank in the second half of 2024. Happen Bank has not otherwise declared any dividends.
Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. These covered transactions may not exceed 10% of the bank’s capital and surplus (which for this purpose represents tier 1 and tier 2 capital, as calculated under the risk-based capital rules, plus the balance of the ACL excluded from tier 2 capital) with any single nonbank affiliate and 20% of the bank’s capital and surplus with all its nonbank affiliates. Covered transactions that are extensions of credit may require collateral to be pledged to provide added security to the bank.
54
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
19. Segment Reporting
The Company defines operating segments to be components of the Company for which discrete financial information is evaluated regularly by the Chief Operating Decision Maker (CODM) to allocate resources and evaluate financial performance. The measure of segment profit used by the CODM in this evaluation is net income. The CODM consists of the Company’s Chief Executive Officer and Chief Financial Officer. This information is reviewed according to the legal organizational structure of the Company’s operations with products and services presented separately for the parent bank holding company and its wholly-owned subsidiary, Happen Bank, which are both considered reportable segments. Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return.
Happen Bank
The Happen Bank operating segment represents the national bank legal entity and reflects operating activities after its formation. This segment provides a full complement of financial products and solutions, including loans and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to marketplace investors and manages relationships with deposit holders.
Happen, Inc. (Parent Only)
The Happen, Inc. (Parent only) operating segment represents the holding company legal entity and predominately reflects the operations of the Company prior to the formation of Happen Bank. This activity includes, but is not limited to, servicing fee revenue on purchased servicing assets, and interest income and interest expense related to transactions entered into prior to Happen Bank’s formation.
55
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
Financial information for the segments is presented in the following tables:
| Happen Bank | Happen, Inc. (Parent only) | Total Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Origination fees(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Servicing fees(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sales of loans(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net fair value adjustments(1) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment and software | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional services | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Occupancy | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest expense | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income(2) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Note 1. Summary of Significant Accounting Policies” for additional information.
(2) Total net income from reportable segments reflects net income on a consolidated basis.
56
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| Happen Bank | Happen, Inc. (Parent only) | Total Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Origination fees(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Servicing fees(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sales of loans(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net fair value adjustments(1) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment and software | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional services | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Occupancy | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest expense | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax expense | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income(2) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Note 1. Summary of Significant Accounting Policies” for additional information.
(2) Total net income from reportable segments reflects net income on a consolidated basis.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Total net revenue – reportable segments | $ | $ | $ | $ | |||||||||||||||||||
| Intercompany eliminations | ( | ( | ( | ( | |||||||||||||||||||
| Total net revenue – consolidated | $ | $ | $ | $ | |||||||||||||||||||
Each expense item reported above represents the Company’s “significant segment expenses” as they are separately evaluated by the CODM, with the exception of “Other non-interest expense” which represents “other segment items” and encompasses various miscellaneous operating expenses.
57
HAPPEN, INC.
Notes to Condensed Consolidated Financial Statements
(Tabular Amounts in Thousands, Except Share and Per Share Amounts, Ratios, or as Noted)
(Unaudited)
| Happen Bank | Happen, Inc. (Parent only) | Total Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total cash and cash equivalents | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities available for sale at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for investment at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans and leases held for investment at amortized cost, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, equipment and software, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment in subsidiary | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | December 31, 2025 | ||||||||||
| Total assets – reportable segments | $ | $ | |||||||||
| Intercompany eliminations | ( | ( | |||||||||
| Total assets – consolidated | $ | $ | |||||||||
| June 30, 2026 | December 31, 2025 | ||||||||||
| Total liabilities and equity – reportable segments | $ | $ | |||||||||
| Intercompany eliminations – liabilities | ( | ( | |||||||||
| Intercompany eliminations – equity | ( | ( | |||||||||
| Total liabilities and equity – consolidated | $ | $ | |||||||||
Concentration and Geographic Information
58
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (Report). In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in “Part I – Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (Annual Report) and, if applicable, as modified by “Part II – Item 1A. Risk Factors” in this Report. The forward-looking statements included in this Report are made only as of the date hereof and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview | 60 | |||||||
Results of Operations | 63 | |||||||
Net Interest Income | 65 | |||||||
Non-Interest Income | 70 | |||||||
Provision for Credit Losses | 74 | |||||||
Non-Interest Expense | 78 | |||||||
Income Taxes | 80 | |||||||
Segment Information | 81 | |||||||
Non-GAAP Financial Measures | 83 | |||||||
Supervision and Regulatory Environment | 85 | |||||||
Capital Management | 86 | |||||||
Liquidity | 87 | |||||||
Market Risk | 89 | |||||||
Contingencies | 90 | |||||||
Critical Accounting Estimates | 90 | |||||||
59
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Overview
On June 22, 2026, we changed our corporate name from LendingClub Corporation to Happen, Inc., and the name of our wholly-owned banking subsidiary from LendingClub Bank, National Association to Happen Bank, National Association (Happen Bank). Happen, Inc. operates a leading, nationally chartered, digital marketplace bank that leverages data and technology to increase access to credit, reduce borrowing costs, and improve returns on savings for our members. Happen, Inc. is registered as a bank holding company and operates the vast majority of its business through its wholly-owned subsidiary, Happen Bank.
Election of Fair Value Option
Effective January 1, 2026, we elected the fair value option to account for held for investment (HFI) loans that were originated on or after that date (fair value option election). Prior to this election, loans that were originated as HFI were, and will continue to be, accounted for at amortized cost, which required the initial recognition of a CECL allowance for lifetime expected credit losses. We believe that applying the fair value option, rather than amortized cost accounting with the CECL methodology, to HFI loans more accurately reflects the in-period economic performance of the loans by better aligning the value of the loan to its then fair value. Under the fair value option, origination fee revenue and marketing costs are recognized in earnings at the time of loan origination, rather than being deferred. Fair value adjustments on loans are recognized in current period earnings within “Net fair value adjustments” and include the impact of credit losses that previously would have been recorded as a provision expense under CECL. Further, by applying the fair value option to HFI loans, we are applying the same accounting methodology to all loans we originate on or after January 1, 2026, as both HFI and held for sale (HFS) loans are now measured at fair value.
Financial Highlights
We delivered several financial achievements in the second quarter of 2026, including total net revenue of $262.9 million, an increase of 6% compared to the same period in the prior year. This growth was primarily driven by an increase in loan origination volume, an increase in loan sales and loan sale pricing, as well as higher net interest income due to an increase in total interest-earning assets. Net income grew to $58.1 million, with diluted EPS of $0.50, compared to $38.2 million, with diluted EPS of $0.33, in the prior year.
The following tables summarize our selected financial data:
As of and for the three months ended | As of and for the six months ended June 30, | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| Net interest income | $ | 179,017 | $ | 176,234 | $ | 154,249 | $ | 355,251 | $ | 304,206 | |||||||||||||||||||
| Non-interest income | 83,838 | 76,017 | 94,186 | 159,855 | 161,940 | ||||||||||||||||||||||||
| Total net revenue | 262,855 | 252,251 | 248,435 | 515,106 | 466,146 | ||||||||||||||||||||||||
| Provision for credit losses | (10,917) | 390 | 39,733 | (10,527) | 97,882 | ||||||||||||||||||||||||
| Non-interest expense | 198,115 | 184,533 | 154,718 | 382,648 | 298,585 | ||||||||||||||||||||||||
| Income before income tax expense | 75,657 | 67,328 | 53,984 | 142,985 | 69,679 | ||||||||||||||||||||||||
| Income tax expense | (17,509) | (15,725) | (15,806) | (33,234) | (19,830) | ||||||||||||||||||||||||
| Net income | $ | 58,148 | $ | 51,603 | $ | 38,178 | $ | 109,751 | $ | 49,849 | |||||||||||||||||||
| Diluted EPS | $ | 0.50 | $ | 0.44 | $ | 0.33 | $ | 0.94 | $ | 0.43 | |||||||||||||||||||
Total loan originations (in millions)(1) | $ | 3,145 | $ | 2,669 | $ | 2,433 | $ | 5,814 | $ | 4,465 | |||||||||||||||||||
Current period originations sold or held for sale | $ | 2,039 | $ | 1,717 | $ | 1,702 | $ | 3,756 | $ | 3,016 | |||||||||||||||||||
Current period originations held for investment | $ | 1,107 | $ | 952 | $ | 731 | $ | 2,059 | $ | 1,448 | |||||||||||||||||||
Total servicing portfolio (in millions)(2) | $ | 14,596 | $ | 13,854 | $ | 12,524 | |||||||||||||||||||||||
| Loans serviced for others | $ | 8,231 | $ | 7,750 | $ | 7,185 | |||||||||||||||||||||||
60
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
As of and for the three months ended | As of and for the six months ended June 30, | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | 2026 | 2025 | |||||||||||||||||||||||||
Performance Metrics: | |||||||||||||||||||||||||||||
| Net interest margin | 6.14 | % | 6.28 | % | 6.14 | % | 6.21 | % | 6.05 | % | |||||||||||||||||||
Profit margin(3) | 28.8 | % | 26.7 | % | 21.7 | % | 27.8 | % | 14.9 | % | |||||||||||||||||||
Return on average equity (ROE)(4) | 15.1 | % | 13.7 | % | 11.1 | % | 14.4 | % | 7.3 | % | |||||||||||||||||||
Return on tangible common equity (ROTCE)(5)(6) | 15.9 | % | 14.5 | % | 11.8 | % | 15.2 | % | 7.8 | % | |||||||||||||||||||
Return on average total assets (ROA)(7) | 1.9 | % | 1.8 | % | 1.5 | % | 1.8 | % | 1.0 | % | |||||||||||||||||||
Marketing expense as a % of loan originations(1) | 1.99 | % | 2.08 | % | 1.38 | % | 2.03 | % | 1.41 | % | |||||||||||||||||||
Average balance - total loans and leases held for investment | $ | 5,108,678 | $ | 4,797,639 | $ | 4,899,272 | $ | 4,954,018 | $ | 4,965,101 | |||||||||||||||||||
Net charge-offs - total loans and leases held for investment | $ | 40,599 | $ | 42,493 | $ | 46,078 | $ | 83,092 | $ | 122,206 | |||||||||||||||||||
Net charge-off ratio - total loans and leases held for investment(8) | 3.2 | % | 3.5 | % | 3.8 | % | 3.4 | % | 4.9 | % | |||||||||||||||||||
Capital Metrics: | |||||||||||||||||||||||||||||
| Common equity tier 1 capital ratio | 16.9 | % | 17.0 | % | 17.5 | % | |||||||||||||||||||||||
| Tier 1 leverage ratio | 11.9 | % | 11.9 | % | 12.2 | % | |||||||||||||||||||||||
| Book value per common share | $ | 13.58 | $ | 13.19 | $ | 12.25 | |||||||||||||||||||||||
Tangible book value per common share(6) | $ | 12.89 | $ | 12.49 | $ | 11.53 | |||||||||||||||||||||||
(1) Beginning in the first quarter of 2026, includes all loans originated during the respective periods (unsecured consumer loans, auto loans and small business loans). Previously this included unsecured consumer loans and auto loans only. Prior periods have been reclassified to conform to the current period presentation. See “Non-Interest Income” for additional information.
(2) Reflects loans serviced on our platform, which includes unsecured consumer loans and auto loans serviced for others for which servicing rights are retained by the Company.
(3) Calculated as the ratio of income before income tax expense to total net revenue.
(4) Calculated as annualized net income divided by average equity for the period presented.
(5) Calculated as annualized net income divided by average tangible common equity for the period presented.
(6) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” for additional information.
(7) Calculated as annualized net income divided by average total assets for the period presented.
(8) Beginning in the first quarter of 2026, the net charge-off ratio is calculated as annualized net charge-offs for total loans and leases held for investment (at amortized cost and fair value) divided by average total outstanding loans and leases held for investment during the period. Prior to the first quarter of 2026, this was calculated based on loans and leases held for investment at amortized cost only. Prior period amounts have been reclassified to conform to the current period presentation.
As of the period ended | |||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | |||||||||||||||||||||||||||
| Balance Sheet Data: | |||||||||||||||||||||||||||||
Securities available for sale | $ | 4,046,761 | $ | 3,867,576 | $ | 3,527,142 | |||||||||||||||||||||||
Loans held for sale | $ | 1,773,052 | $ | 1,836,121 | $ | 1,008,168 | |||||||||||||||||||||||
Loans and leases held for investment | $ | 5,078,318 | $ | 4,700,990 | $ | 4,765,068 | |||||||||||||||||||||||
Total loans and leases | $ | 6,851,370 | $ | 6,537,111 | $ | 5,773,236 | |||||||||||||||||||||||
| Total assets | $ | 12,549,040 | $ | 11,939,839 | $ | 10,775,333 | |||||||||||||||||||||||
Total deposits(1) | $ | 10,765,267 | $ | 10,189,511 | $ | 9,136,124 | |||||||||||||||||||||||
| Total liabilities | $ | 10,981,575 | $ | 10,416,311 | $ | 9,369,298 | |||||||||||||||||||||||
| Total equity | $ | 1,567,465 | $ | 1,523,528 | $ | 1,406,035 | |||||||||||||||||||||||
(1) As of June 30, 2026, Federal Deposit Insurance Corporation (FDIC)-insured deposits represent approximately 88% of total deposits.
61
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Credit Quality Indicators
We evaluate the credit quality of our loan and leases held for investment based on delinquency status and payment activity. The following tables present loans and leases held for investment (at amortized cost and fair value) by delinquency status:
| June 30, 2026 | Current | 30-59 Days | 60-89 Days | 90 or More Days | Total | Guaranteed Amount(1) | |||||||||||||||||||||||||||||||||||||||||
Unsecured consumer(2) | $ | 3,966,514 | $ | 19,724 | $ | 16,249 | $ | 14,386 | $ | 4,016,873 | $ | — | |||||||||||||||||||||||||||||||||||
| Residential mortgages | 146,498 | — | — | 962 | 147,460 | — | |||||||||||||||||||||||||||||||||||||||||
| Secured consumer | 406,339 | 2,378 | 741 | 157 | 409,615 | — | |||||||||||||||||||||||||||||||||||||||||
| Total consumer loans held for investment | 4,519,351 | 22,102 | 16,990 | 15,505 | 4,573,948 | — | |||||||||||||||||||||||||||||||||||||||||
Equipment finance(3) | 29,827 | — | — | 3,422 | 33,249 | — | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate(4) | 490,680 | 1,765 | — | 6,373 | 498,818 | 38,783 | |||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 136,122 | 2,560 | 2,888 | 23,230 | 164,800 | 115,001 | |||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment | 656,629 | 4,325 | 2,888 | 33,025 | 696,867 | 153,784 | |||||||||||||||||||||||||||||||||||||||||
Total loans and leases held for investment | $ | 5,175,980 | $ | 26,427 | $ | 19,878 | $ | 48,530 | $ | 5,270,815 | $ | 153,784 | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | Current | 30-59 Days | 60-89 Days | 90 or More Days | Total | Guaranteed Amount(1) | |||||||||||||||||||||||||||||||||||||||||
Unsecured consumer(2) | $ | 3,600,434 | $ | 24,075 | $ | 19,685 | $ | 18,929 | $ | 3,663,123 | $ | — | |||||||||||||||||||||||||||||||||||
| Residential mortgages | 150,099 | — | 888 | 86 | 151,073 | — | |||||||||||||||||||||||||||||||||||||||||
| Secured consumer | 257,063 | 3,015 | 596 | 395 | 261,069 | — | |||||||||||||||||||||||||||||||||||||||||
| Total consumer loans held for investment | 4,007,596 | 27,090 | 21,169 | 19,410 | 4,075,265 | — | |||||||||||||||||||||||||||||||||||||||||
Equipment finance(3) | 35,973 | 696 | — | 3,088 | 39,757 | — | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate(4) | 461,307 | — | — | 11,182 | 472,489 | 39,507 | |||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 133,526 | 1,540 | 1,878 | 20,074 | 157,018 | 108,826 | |||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases held for investment | 630,806 | 2,236 | 1,878 | 34,344 | 669,264 | 148,333 | |||||||||||||||||||||||||||||||||||||||||
Total loans and leases held for investment | $ | 4,638,402 | $ | 29,326 | $ | 23,047 | $ | 53,754 | $ | 4,744,529 | $ | 148,333 | |||||||||||||||||||||||||||||||||||
(1) Represents loan balances guaranteed by the Small Business Administration (SBA).
(2) Excludes basis adjustment for loans previously designated in fair value hedges under the portfolio layer method of $0.4 million and $1.6 million as of June 30, 2026 and December 31, 2025, respectively.
(3) Comprised of sales-type leases for equipment.
(4) Includes $309.9 million and $286.8 million in loans originated through the SBA as of June 30, 2026 and December 31, 2025, respectively.
The above summary should be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety. For additional discussion related to our operating segments, see “Segment Information.”
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Results of Operations
The following tables set forth the Income Statement data for each of the periods presented:
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025(1) | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||
| Interest on loans | $ | 206,397 | $ | 199,897 | $ | 174,645 | 3 | % | 18 | % | |||||||||||||||||||||||||
| Interest on securities available for sale | 55,114 | 54,411 | 55,339 | 1 | % | — | % | ||||||||||||||||||||||||||||
| Other interest income | 7,424 | 6,899 | 7,113 | 8 | % | 4 | % | ||||||||||||||||||||||||||||
| Total interest income | 268,935 | 261,207 | 237,097 | 3 | % | 13 | % | ||||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||||||
| Interest on deposits | 89,916 | 84,971 | 82,845 | 6 | % | 9 | % | ||||||||||||||||||||||||||||
| Other interest expense | 2 | 2 | 3 | — | % | (33) | % | ||||||||||||||||||||||||||||
| Total interest expense | 89,918 | 84,973 | 82,848 | 6 | % | 9 | % | ||||||||||||||||||||||||||||
| Net interest income | 179,017 | 176,234 | 154,249 | 2 | % | 16 | % | ||||||||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||||||||
| Origination fees | 164,006 | 130,088 | 87,578 | 26 | % | 87 | % | ||||||||||||||||||||||||||||
| Servicing fees | 12,890 | 13,113 | 16,395 | (2) | % | (21) | % | ||||||||||||||||||||||||||||
| Gain on sales of loans | 21,461 | 16,269 | 13,540 | 32 | % | 59 | % | ||||||||||||||||||||||||||||
| Net fair value adjustments | (121,145) | (88,925) | (27,869) | (36) | % | (335) | % | ||||||||||||||||||||||||||||
| Other non-interest income | 6,626 | 5,472 | 4,542 | 21 | % | 46 | % | ||||||||||||||||||||||||||||
| Total non-interest income | 83,838 | 76,017 | 94,186 | 10 | % | (11) | % | ||||||||||||||||||||||||||||
| Total net revenue | 262,855 | 252,251 | 248,435 | 4 | % | 6 | % | ||||||||||||||||||||||||||||
| Provision for credit losses | (10,917) | 390 | 39,733 | N/M | N/M | ||||||||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||||||||
| Compensation and benefits | 68,221 | 65,514 | 61,989 | 4 | % | 10 | % | ||||||||||||||||||||||||||||
| Marketing | 62,580 | 55,415 | 33,580 | 13 | % | 86 | % | ||||||||||||||||||||||||||||
| Equipment and software | 15,846 | 15,293 | 14,495 | 4 | % | 9 | % | ||||||||||||||||||||||||||||
| Depreciation and amortization | 18,152 | 15,819 | 15,460 | 15 | % | 17 | % | ||||||||||||||||||||||||||||
| Professional services | 11,989 | 11,767 | 10,300 | 2 | % | 16 | % | ||||||||||||||||||||||||||||
| Occupancy | 4,982 | 6,391 | 4,787 | (22) | % | 4 | % | ||||||||||||||||||||||||||||
| Other non-interest expense | 16,345 | 14,334 | 14,107 | 14 | % | 16 | % | ||||||||||||||||||||||||||||
| Total non-interest expense | 198,115 | 184,533 | 154,718 | 7 | % | 28 | % | ||||||||||||||||||||||||||||
| Income before income tax expense | 75,657 | 67,328 | 53,984 | 12 | % | 40 | % | ||||||||||||||||||||||||||||
| Income tax expense | (17,509) | (15,725) | (15,806) | 11 | % | 11 | % | ||||||||||||||||||||||||||||
| Net income | $ | 58,148 | $ | 51,603 | $ | 38,178 | 13 | % | 52 | % | |||||||||||||||||||||||||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025(1) | Change (%) | |||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||
| Interest on loans | $ | 406,294 | $ | 340,818 | 19 | % | |||||||||||||||||
| Interest on securities available for sale | 109,525 | 111,619 | (2) | % | |||||||||||||||||||
| Other interest income | 14,323 | 16,719 | (14) | % | |||||||||||||||||||
| Total interest income | 530,142 | 469,156 | 13 | % | |||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Interest on deposits | 174,887 | 164,945 | 6 | % | |||||||||||||||||||
| Other interest expense | 4 | 5 | (20) | % | |||||||||||||||||||
| Total interest expense | 174,891 | 164,950 | 6 | % | |||||||||||||||||||
| Net interest income | 355,251 | 304,206 | 17 | % | |||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Origination fees | 294,094 | 157,522 | 87 | % | |||||||||||||||||||
| Servicing fees | 26,003 | 29,143 | (11) | % | |||||||||||||||||||
| Gain on sales of loans | 37,730 | 25,742 | 47 | % | |||||||||||||||||||
| Net fair value adjustments | (210,070) | (57,120) | (268) | % | |||||||||||||||||||
| Other non-interest income | 12,098 | 6,653 | 82 | % | |||||||||||||||||||
| Total non-interest income | 159,855 | 161,940 | (1) | % | |||||||||||||||||||
| Total net revenue | 515,106 | 466,146 | 11 | % | |||||||||||||||||||
| Provision for credit losses | (10,527) | 97,882 | N/M | ||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| Compensation and benefits | 133,735 | 120,378 | 11 | % | |||||||||||||||||||
| Marketing | 117,995 | 62,819 | 88 | % | |||||||||||||||||||
| Equipment and software | 31,139 | 29,139 | 7 | % | |||||||||||||||||||
| Depreciation and amortization | 33,971 | 29,369 | 16 | % | |||||||||||||||||||
| Professional services | 23,756 | 20,064 | 18 | % | |||||||||||||||||||
| Occupancy | 11,373 | 9,132 | 25 | % | |||||||||||||||||||
| Other non-interest expense | 30,679 | 27,684 | 11 | % | |||||||||||||||||||
| Total non-interest expense | 382,648 | 298,585 | 28 | % | |||||||||||||||||||
| Income before income tax expense | 142,985 | 69,679 | 105 | % | |||||||||||||||||||
| Income tax expense | (33,234) | (19,830) | 68 | % | |||||||||||||||||||
| Net income | $ | 109,751 | $ | 49,849 | 120 | % | |||||||||||||||||
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
The analysis below is presented for the following periods: Second quarter of 2026 compared to the first quarter of 2026 (sequential), second quarter of 2026 compared to the second quarter of 2025 (year over year) and first half of 2026 compared to the first half of 2025 (six months over six months).
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Net Interest Income
The following tables present net interest income information for interest-earning assets and interest-bearing funding sources for the periods presented, as well as an analysis of changes in interest income and interest expense resulting from changes in volume and rate. The average yield/rate is calculated by dividing the annualized period-end interest income/expense by the average balance.
Three Months Ended June 30, 2026 | Three Months Ended March 31, 2026 | Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate | Average Balance | Interest Income/ Expense | Average Yield/ Rate | Average Balance | Interest Income/ Expense | Average Yield/ Rate | |||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash, cash equivalents, restricted cash and other | $ | 825,029 | $ | 7,424 | 3.60 | % | $ | 775,385 | $ | 6,899 | 3.56 | % | $ | 679,603 | $ | 7,113 | 4.19 | % | |||||||||||||||||||||||||||||||||||
| Securities available for sale at fair value | 3,880,678 | 55,114 | 5.68 | % | 3,737,199 | 54,411 | 5.82 | % | 3,411,020 | 55,339 | 6.49 | % | |||||||||||||||||||||||||||||||||||||||||
Loans held for sale at fair value | 1,850,763 | 64,039 | 13.84 | % | 1,910,017 | 64,531 | 13.51 | % | 1,061,845 | 32,489 | 12.24 | % | |||||||||||||||||||||||||||||||||||||||||
| Loans held for investment at fair value | 1,667,694 | 46,540 | 11.16 | % | 807,486 | 25,467 | 12.62 | % | 722,685 | 19,761 | 10.94 | % | |||||||||||||||||||||||||||||||||||||||||
Loans and leases held for investment at amortized cost: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unsecured consumer loans | 2,438,480 | 80,830 | 13.26 | % | 2,934,584 | 94,763 | 12.92 | % | 3,177,439 | 107,829 | 13.57 | % | |||||||||||||||||||||||||||||||||||||||||
| Commercial and secured consumer loans | 1,002,504 | 14,988 | 5.98 | % | 1,055,569 | 15,136 | 5.74 | % | 999,148 | 14,566 | 5.83 | % | |||||||||||||||||||||||||||||||||||||||||
Loans and leases held for investment at amortized cost | 3,440,984 | 95,818 | 11.14 | % | 3,990,153 | 109,899 | 11.02 | % | 4,176,587 | 122,395 | 11.72 | % | |||||||||||||||||||||||||||||||||||||||||
Total loans and leases held for investment | 5,108,678 | 142,358 | 11.15 | % | 4,797,639 | 135,366 | 11.29 | % | 4,899,272 | 142,156 | 11.61 | % | |||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 11,665,148 | 268,935 | 9.22 | % | 11,220,240 | 261,207 | 9.31 | % | 10,051,740 | 237,097 | 9.44 | % | |||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks and restricted cash | 25,687 | 26,343 | 38,746 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | (218,977) | (262,466) | (247,133) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest earning assets | 695,671 | 668,486 | 633,711 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 12,167,529 | $ | 11,652,603 | $ | 10,477,064 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits(2): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings and money market accounts | $ | 6,897,169 | $ | 61,372 | 3.57 | % | $ | 6,694,780 | $ | 58,714 | 3.56 | % | $ | 6,152,936 | $ | 58,934 | 3.84 | % | |||||||||||||||||||||||||||||||||||
| Certificates of deposit | 2,736,658 | 27,381 | 4.01 | % | 2,488,015 | 25,174 | 4.10 | % | 1,997,980 | 22,469 | 4.51 | % | |||||||||||||||||||||||||||||||||||||||||
| Checking accounts | 389,934 | 1,163 | 1.20 | % | 393,963 | 1,083 | 1.12 | % | 426,107 | 1,442 | 1.36 | % | |||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | 10,023,761 | 89,916 | 3.60 | % | 9,576,758 | 84,971 | 3.60 | % | 8,577,023 | 82,845 | 3.87 | % | |||||||||||||||||||||||||||||||||||||||||
| Other interest-bearing liabilities | 220 | 2 | 3.81 | % | 222 | 2 | 3.79 | % | 220 | 3 | 4.54 | % | |||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 10,023,981 | 89,918 | 3.60 | % | 9,576,980 | 84,973 | 3.60 | % | 8,577,243 | 82,848 | 3.87 | % | |||||||||||||||||||||||||||||||||||||||||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Three Months Ended June 30, 2026 | Three Months Ended March 31, 2026 | Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate | Average Balance | Interest Income/ Expense | Average Yield/ Rate | Average Balance | Interest Income/ Expense | Average Yield/ Rate | |||||||||||||||||||||||||||||||||||||||||||||
Noninterest-bearing deposits | 343,281 | 334,136 | 282,113 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 256,029 | 233,776 | 236,509 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | 10,623,291 | $ | 10,144,892 | $ | 9,095,865 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total equity | $ | 1,544,238 | $ | 1,507,711 | $ | 1,381,199 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 12,167,529 | $ | 11,652,603 | $ | 10,477,064 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 5.62 | % | 5.71 | % | 5.57 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income and net interest margin | $ | 179,017 | 6.14 | % | $ | 176,234 | 6.28 | % | $ | 154,249 | 6.14 | % | |||||||||||||||||||||||||||||||||||||||||
(1) Nonaccrual loans and any related income are included in their respective loan categories.
(2) Prior period amounts have been reclassified to conform to the current period presentation.
Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 | |||||||||||||||||
| Increase (Decrease) Due to Change in: | |||||||||||||||||
Average Volume(1) | Average Yield/Rate(1) | Total | |||||||||||||||
| Interest-earning assets | |||||||||||||||||
| Cash, cash equivalents, restricted cash and other | $ | 445 | $ | 80 | $ | 525 | |||||||||||
| Securities available for sale at fair value | 2,058 | (1,355) | 703 | ||||||||||||||
| Loans held for sale at fair value | (2,029) | 1,537 | (492) | ||||||||||||||
Loans held for investment at fair value | 24,311 | (3,238) | 21,073 | ||||||||||||||
| Loans and leases held for investment at amortized cost | (15,280) | 1,199 | (14,081) | ||||||||||||||
Total increase (decrease) in interest income on interest-earning assets | $ | 9,505 | $ | (1,777) | $ | 7,728 | |||||||||||
| Interest-bearing liabilities | |||||||||||||||||
| Savings and money market accounts | $ | 2,386 | $ | 272 | $ | 2,658 | |||||||||||
| Certificates of deposit | 2,729 | (522) | 2,207 | ||||||||||||||
| Checking accounts | (10) | 90 | 80 | ||||||||||||||
| Interest-bearing deposits | 5,105 | (160) | 4,945 | ||||||||||||||
Other interest-bearing liabilities | — | — | — | ||||||||||||||
Total increase (decrease) in interest expense on interest-bearing liabilities | $ | 5,105 | $ | (160) | $ | 4,945 | |||||||||||
| Increase (decrease) in net interest income | $ | 4,400 | $ | (1,617) | $ | 2,783 | |||||||||||
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 | |||||||||||||||||
| Increase (Decrease) Due to Change in: | |||||||||||||||||
Average Volume(1) | Average Yield/Rate(1) | Total | |||||||||||||||
| Interest-earning assets | |||||||||||||||||
| Cash, cash equivalents, restricted cash and other | $ | 1,393 | $ | (1,082) | $ | 311 | |||||||||||
| Securities available for sale at fair value | 7,122 | (7,347) | (225) | ||||||||||||||
| Loans held for sale at fair value | 26,824 | 4,726 | 31,550 | ||||||||||||||
Loans held for investment at fair value | 26,364 | 415 | 26,779 | ||||||||||||||
| Loans and leases held for investment at amortized cost | (20,720) | (5,857) | (26,577) | ||||||||||||||
Total increase (decrease) in interest income on interest-earning assets | $ | 40,983 | $ | (9,145) | $ | 31,838 | |||||||||||
| Interest-bearing liabilities | |||||||||||||||||
| Savings and money market accounts | $ | 6,825 | $ | (4,387) | $ | 2,438 | |||||||||||
| Certificates of deposit | 7,611 | (2,699) | 4,912 | ||||||||||||||
| Checking accounts | (117) | (162) | (279) | ||||||||||||||
| Interest-bearing deposits | 14,319 | (7,248) | 7,071 | ||||||||||||||
Other interest-bearing liabilities | — | (1) | (1) | ||||||||||||||
Total increase (decrease) in interest expense on interest-bearing liabilities | $ | 14,319 | $ | (7,249) | $ | 7,070 | |||||||||||
Increase (decrease) in net interest income | $ | 26,664 | $ | (1,896) | $ | 24,768 | |||||||||||
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
| Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate | Average Balance | Interest Income/ Expense | Average Yield/ Rate | ||||||||||||||||||||||||||||||
Interest-earning assets(1) | |||||||||||||||||||||||||||||||||||
| Cash, cash equivalents, restricted cash and other | $ | 800,344 | $ | 14,323 | 3.58 | % | $ | 786,920 | $ | 16,719 | 4.25 | % | |||||||||||||||||||||||
| Securities available for sale at fair value | 3,809,335 | 109,525 | 5.75 | % | 3,404,333 | 111,619 | 6.56 | % | |||||||||||||||||||||||||||
| Loans held for sale at fair value | 1,880,226 | 128,570 | 13.68 | % | 891,975 | 54,303 | 12.18 | % | |||||||||||||||||||||||||||
Loans held for investment at fair value | 1,239,966 | 72,007 | 11.61 | % | 822,395 | 45,171 | 10.99 | % | |||||||||||||||||||||||||||
| Loans and leases held for investment at amortized cost: | |||||||||||||||||||||||||||||||||||
| Unsecured consumer loans | 2,685,162 | 175,593 | 13.08 | % | 3,137,066 | 212,552 | 13.55 | % | |||||||||||||||||||||||||||
| Commercial and secured consumer loans | 1,028,890 | 30,124 | 5.86 | % | 1,005,640 | 28,792 | 5.73 | % | |||||||||||||||||||||||||||
| Loans and leases held for investment at amortized cost | 3,714,052 | 205,717 | 11.08 | % | 4,142,706 | 241,344 | 11.65 | % | |||||||||||||||||||||||||||
Total loans and leases held for investment | 4,954,018 | 277,724 | 11.21 | % | 4,965,101 | 286,515 | 11.54 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 11,443,923 | 530,142 | 9.27 | % | 10,048,329 | 469,156 | 9.34 | % | |||||||||||||||||||||||||||
| Cash and due from banks and restricted cash | 26,013 | 34,391 | |||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | (240,601) | (243,350) | |||||||||||||||||||||||||||||||||
| Other non-interest earning assets | 682,154 | 613,615 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 11,911,489 | $ | 10,452,985 | |||||||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
Interest-bearing deposits(2): | |||||||||||||||||||||||||||||||||||
| Savings and money market accounts | $ | 6,796,534 | $ | 120,085 | 3.56 | % | $ | 6,034,746 | $ | 114,815 | 3.84 | % | |||||||||||||||||||||||
| Certificates of deposit | 2,613,024 | 52,555 | 4.06 | % | 2,085,592 | 47,335 | 4.58 | % | |||||||||||||||||||||||||||
| Checking accounts | 391,938 | 2,247 | 1.16 | % | 428,290 | 2,795 | 1.32 | % | |||||||||||||||||||||||||||
Interest-bearing deposits | 9,801,496 | 174,887 | 3.60 | % | 8,548,628 | 164,945 | 3.89 | % | |||||||||||||||||||||||||||
Other interest-bearing liabilities | 221 | 4 | 3.80 | % | 221 | 5 | 4.51 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 9,801,717 | 174,891 | 3.60 | % | 8,548,849 | 164,950 | 3.89 | % | |||||||||||||||||||||||||||
Noninterest-bearing deposits | 338,734 | 302,055 | |||||||||||||||||||||||||||||||||
| Other liabilities | 244,963 | 236,833 | |||||||||||||||||||||||||||||||||
| Total liabilities | $ | 10,385,414 | $ | 9,087,737 | |||||||||||||||||||||||||||||||
| Total equity | $ | 1,526,075 | $ | 1,365,248 | |||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 11,911,489 | $ | 10,452,985 | |||||||||||||||||||||||||||||||
| Interest rate spread | 5.67 | % | 5.45 | % | |||||||||||||||||||||||||||||||
| Net interest income and net interest margin | $ | 355,251 | 6.21 | % | $ | 304,206 | 6.05 | % | |||||||||||||||||||||||||||
(1) Nonaccrual loans and any related income are included in their respective loan categories.
(2) Prior period amounts have been reclassified to conform to the current period presentation.
68
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 | |||||||||||||||||
| Increase (Decrease) Due to Change in: | |||||||||||||||||
Average Volume(1) | Average Yield/Rate(1) | Total | |||||||||||||||
| Interest-earning assets | |||||||||||||||||
| Cash, cash equivalents, restricted cash and other | $ | 280 | $ | (2,676) | $ | (2,396) | |||||||||||
| Securities available for sale at fair value | 12,476 | (14,570) | (2,094) | ||||||||||||||
| Loans held for sale at fair value | 66,835 | 7,432 | 74,267 | ||||||||||||||
Loans held for investment at fair value | 24,116 | 2,720 | 26,836 | ||||||||||||||
| Loans and leases held for investment at amortized cost | (24,139) | (11,488) | (35,627) | ||||||||||||||
Total increase (decrease) in interest income on interest-earning assets | $ | 79,568 | $ | (18,582) | $ | 60,986 | |||||||||||
| Interest-bearing liabilities | |||||||||||||||||
| Savings and money market accounts | $ | 13,921 | $ | (8,651) | $ | 5,270 | |||||||||||
| Certificates of deposit | 11,092 | (5,872) | 5,220 | ||||||||||||||
| Checking accounts | (225) | (323) | (548) | ||||||||||||||
| Interest-bearing deposits | 24,788 | (14,846) | 9,942 | ||||||||||||||
Other interest-bearing liabilities | — | (1) | (1) | ||||||||||||||
Total increase (decrease) in interest expense on interest-bearing liabilities | $ | 24,788 | $ | (14,847) | $ | 9,941 | |||||||||||
| Increase (decrease) in net interest income | $ | 54,780 | $ | (3,735) | $ | 51,045 | |||||||||||
(1) Volume and rate changes have been allocated on a consistent basis using the respective percentage changes in average balances and average rates.
69
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Non-Interest Income
Non-interest income consists of the following:
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||||||||
| Origination fees | $ | 164,006 | $ | 130,088 | $ | 87,578 | 26 | % | 87 | % | |||||||||||||||||||||||||
| Servicing fees | 12,890 | 13,113 | 16,395 | (2) | % | (21) | % | ||||||||||||||||||||||||||||
| Gain on sales of loans | 21,461 | 16,269 | 13,540 | 32 | % | 59 | % | ||||||||||||||||||||||||||||
| Net fair value adjustments | (121,145) | (88,925) | (27,869) | (36) | % | (335) | % | ||||||||||||||||||||||||||||
Other non-interest income | 6,626 | 5,472 | 4,542 | 21 | % | 46 | % | ||||||||||||||||||||||||||||
Total non-interest income | $ | 83,838 | $ | 76,017 | $ | 94,186 | 10 | % | (11) | % | |||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||||||||
| Origination fees | $ | 294,094 | $ | 157,522 | 87 | % | |||||||||||||||||
| Servicing fees | 26,003 | 29,143 | (11) | % | |||||||||||||||||||
| Gain on sales of loans | 37,730 | 25,742 | 47 | % | |||||||||||||||||||
| Net fair value adjustments | (210,070) | (57,120) | (268) | % | |||||||||||||||||||
Other non-interest income | 12,098 | 6,653 | 82 | % | |||||||||||||||||||
Total non-interest income | $ | 159,855 | $ | 161,940 | (1) | % | |||||||||||||||||
Origination Fees
Origination fees are fees charged to borrowers in connection with the origination of a loan. As a result of our fair value option election, origination fees for newly originated HFI loans are now recognized in earnings at the time of origination, rather than being deferred and recognized over time under amortized cost accounting. Accordingly, origination fee revenue beginning in the first quarter of 2026 includes revenue from both HFI and HFS loan originations, whereas prior periods reflect HFS loan originations only.
70
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following tables present loan origination volume during each of the periods set forth below, as well as the volume of loans originated under the fair value option, which is a key driver of origination fee revenue:
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||||||||||||||
Current period originations sold or held for sale | $ | 2,038,544 | $ | 1,717,275 | $ | 1,702,108 | 19 | % | 20 | % | |||||||||||||||||||||||||||||||
Current period originations held for investment | 1,106,631 | 951,898 | 730,702 | 16 | % | 51 | % | ||||||||||||||||||||||||||||||||||
Total loan originations(1) | $ | 3,145,175 | $ | 2,669,173 | $ | 2,432,810 | 18 | % | 29 | % | |||||||||||||||||||||||||||||||
Fair value option loan originations | $ | 3,145,175 | $ | 2,669,173 | $ | 1,702,108 | 18 | % | 85 | % | |||||||||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||
Current period originations sold or held for sale | $ | 3,755,819 | $ | 3,016,372 | 25 | % | |||||||||||
Current period originations held for investment | 2,058,529 | 1,448,155 | 42 | % | |||||||||||||
Total loan originations(1) | $ | 5,814,348 | $ | 4,464,527 | 30 | % | |||||||||||
Fair value option loan originations | $ | 5,814,348 | $ | 3,016,372 | 93 | % | |||||||||||
(1) Beginning in the first quarter of 2026, includes all loans originated during the respective periods (unsecured consumer loans, auto loans and small business loans). Previously this included unsecured consumer loans and auto loans only. In the second and first quarters of 2026, this update included small business loan originations of $38 million and $15 million, respectively. Prior periods have been reclassified to conform to the current period presentation.
Sequential: Origination fees were $164.0 million and $130.1 million for the second and first quarters of 2026, respectively, an increase of 26%.
Year Over Year: Origination fees were $164.0 million and $87.6 million for the second quarter of 2026 and 2025, respectively, an increase of 87%.
Six Months Over Six Months: Origination fees were $294.1 million and $157.5 million for the first halves of 2026 and 2025, respectively, an increase of 87%.
The increases in origination fees were primarily driven by higher loan origination volume, including HFI loan originations which contribute to origination fee revenue following our election of the fair value option.
Servicing Fees
We receive servicing fees to compensate us for servicing loans on behalf of marketplace investors, including managing payments from borrowers and remittances to those investors. Servicing fee revenue related to loans sold also includes the change in fair value of servicing assets associated with the loans.
71
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The tables below illustrate the average balance of loans sold and subsequently serviced on behalf of the investors on our marketplace platform (in millions):
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||||||||
Average AUM – Loans sold | $ | 7,991 | $ | 7,676 | $ | 7,158 | 4 | % | 12 | % | |||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||
Average AUM – Loans sold | $ | 7,861 | $ | 7,174 | 10 | % | |||||||||||
In addition to the loans serviced on our marketplace platform, we serviced $37.2 million, $38.3 million and $52.8 million in outstanding principal balance of commercial loans sold as of June 30, 2026, March 31, 2026 and June 30, 2025, respectively.
Sequential: Servicing fees were $12.9 million and $13.1 million for the second and first quarters of 2026, respectively, a decrease of 2%. The decrease was primarily driven by an increase in fair value amortization of the servicing asset, partially offset by higher servicing fees as a result of an increase in the average principal balance of loans serviced.
Year Over Year: Servicing fees were $12.9 million and $16.4 million for the second quarter of 2026 and 2025, respectively, a decrease of 21%. The decrease was primarily driven by an increase in fair value amortization of the servicing asset and a reduction in collection fees on delinquent loans, partially offset by higher servicing fees as a result of an increase in the average principal balance of loans serviced.
Six Months Over Six Months: Servicing fees were $26.0 million and $29.1 million for the first halves of 2026 and 2025, respectively, a decrease of 11%. The decrease was primarily driven by an increase in fair value amortization of the servicing asset and a reduction in collection fees on delinquent loans, partially offset by higher servicing fees as a result of an increase in the average principal balance of loans serviced.
Gain on Sales of Loans
In connection with loan sales to marketplace investors, we capitalize the initial fair value of servicing rights. A gain or loss is recorded based on the level to which the contractual servicing fee is above or below an estimated market rate of servicing at the time of sale. Additionally, we recognize transaction costs, if any, as a loss on sale of loans.
72
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following tables present the unpaid principal balance of the volume of loans sold, which is a key driver of our gain on sales revenue, during each of the periods set forth below:
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||||||||||||||
Loans sold | $ | 1,859,157 | $ | 1,407,187 | $ | 1,242,740 | 32 | % | 50 | % | |||||||||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||
| Loans sold | $ | 3,266,344 | $ | 2,360,713 | 38 | % | |||||||||||
Sequential: Gain on sales of loans was $21.5 million and $16.3 million for the second and first quarters of 2026, respectively, an increase of 32%.
Year Over Year: Gain on sales of loans was $21.5 million and $13.5 million for the second quarter of 2026 and 2025, respectively, an increase of 59%.
Six Months Over Six Months: Gain on sales of loans was $37.7 million and $25.7 million for the first halves of 2026 and 2025, respectively, an increase of 47%.
The increases in gain on sales of loans were primarily driven by the increase in the volume of loans sold.
Net Fair Value Adjustments
We record adjustments to the carrying value of loans, for which we have elected to account for under the fair value option, to reflect their fair value. These adjustments include gains or losses from sale prices in excess of or less than the loan principal amount sold and realized net charge-offs. In addition, as loans are held on the Balance Sheet, incremental fair value adjustments on the loans are recorded in “Net fair value adjustments” within “Non-interest income,” whereas the associated interest income is recorded within “Net interest income.”
As a result of our fair value option election, net fair value adjustments beginning in the first quarter of 2026 include adjustments related to newly originated HFI loans in addition to HFS and purchased HFI loans measured at fair value, whereas prior periods included only HFS and purchased HFI loans.
The following tables present the volume of loans originated under the fair value option, which is a key driver of the initial recognition of fair value adjustments:
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||||||||||||||
Fair value option loan originations | $ | 3,145,175 | $ | 2,669,173 | $ | 1,702,108 | 18 | % | 85 | % | |||||||||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||
Fair value option loan originations | $ | 5,814,348 | $ | 3,016,372 | 93 | % | |||||||||||
Sequential: Net fair value adjustments were $(121.1) million and $(88.9) million for the second and first quarters of 2026, respectively, an increased negative fair value adjustment of $32.2 million.
73
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Year Over Year: Net fair value adjustments were $(121.1) million and $(27.9) million for the second quarter of 2026 and 2025, respectively, an increased negative fair value adjustment of $93.3 million.
Six Months Over Six Months: Net fair value adjustments were $(210.1) million and $(57.1) million for the first halves of 2026 and 2025, respectively, an increased negative fair value adjustment of $153.0 million.
The increases in net fair value adjustments were primarily driven by a higher volume of loans originated under the fair value option, resulting in greater initial fair value marks, as well as recurring fair value adjustments on a higher balance of loans measured at fair value.
See “Notes to Condensed Consolidated Financial Statements – Note 5. Fair Value Measurements” for additional information on the significant unobservable inputs used in the fair value measurement of HFI and HFS loans, as well as activity within these loan portfolios.
Other Non-interest Income
Other non-interest income primarily consists of (i) rental income earned from third-party tenants under operating lease agreements and (ii) referral revenue that relates to fees earned from third-party companies when customers referred by us consider or purchase products or services from such third-party companies. The tables below illustrate the composition of other non-interest income for each period presented:
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||
Rental income | $ | 1,415 | $ | 1,992 | $ | 1,854 | (29) | % | (24) | % | |||||||||||||||||||
| Referral revenue | 3,372 | 1,970 | 855 | 71 | % | 294 | % | ||||||||||||||||||||||
| Other | 1,839 | 1,510 | 1,833 | 22 | % | — | % | ||||||||||||||||||||||
| Other non-interest income | $ | 6,626 | $ | 5,472 | $ | 4,542 | 21 | % | 46 | % | |||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||
Rental income | $ | 3,407 | $ | 1,854 | 84 | % | |||||||||||
| Referral revenue | 5,342 | 1,595 | 235 | % | |||||||||||||
| Other | 3,349 | 3,204 | 5 | % | |||||||||||||
| Other non-interest income | $ | 12,098 | $ | 6,653 | 82 | % | |||||||||||
Provision for Credit Losses
The allowance for loan and lease losses (ALLL) for lifetime expected losses under CECL on loans and leases HFI at amortized cost is initially recognized as “Provision for credit losses” at the time of origination. The ALLL is estimated using a discounted cash flow (DCF) approach, where effective interest rates are used to calculate the net present value (NPV) of expected cash flows. The effective interest rates are calculated based on the periodic interest income received from the loan’s contractual cash flows and the net investment in the loan, which includes deferred origination fees and marketing costs, to provide a constant rate of return over the loan term. The NPV from the DCF approach is then compared to the amortized cost basis of the loans and leases to determine the ALLL. Under the DCF approach, the provision for credit losses in subsequent periods includes a credit loss expense related to the discounting effect due to the passage of time after the initial recognition of the ALLL on originated loans and leases HFI at amortized cost.
74
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
As a result of our fair value option election for HFI loans originated on or after January 1, 2026, there will no longer be an initial recognition of an allowance for lifetime expected credit losses as required under amortized cost accounting. Therefore, following this election, the provision for credit losses reflects changes in credit loss assumptions associated with HFI loans originated prior to January 1, 2026 that continue to be accounted for at amortized cost.
The table below illustrates the composition of the provision for credit losses for each period presented, as well as the loan originations HFI at amortized cost during each period, which was a key driver for credit loss expense:
| Three Months Ended | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| Credit loss (benefit) expense for loans and leases held for investment at amortized cost | $ | (10,885) | $ | 846 | $ | 40,596 | $ | (10,039) | $ | 96,978 | |||||||||||||||||||
| Credit loss expense (benefit) for securities available for sale | 165 | (277) | (819) | (112) | 502 | ||||||||||||||||||||||||
Credit loss (benefit) expense for unfunded lending commitments | (197) | (179) | (44) | (376) | 402 | ||||||||||||||||||||||||
| Total provision for credit losses | $ | (10,917) | $ | 390 | $ | 39,733 | $ | (10,527) | $ | 97,882 | |||||||||||||||||||
Loan originations held for investment at amortized cost(1) | $ | — | $ | — | $ | 730,702 | $ | — | $ | 1,448,155 | |||||||||||||||||||
| Balance of loans and leases held for investment at amortized cost, net | $ | 2,993,252 | $ | 3,463,140 | $ | 4,133,332 | $ | 2,993,252 | $ | 4,133,332 | |||||||||||||||||||
(1) Prior period amounts were reclassified to include small business loan origination volume. See “Overview” for additional information.
Sequential: The provision benefit was $10.9 million for the second quarter of 2026 compared to a provision expense of $0.4 million for the first quarter of 2026. The change in provision was primarily due to strong credit performance, including lower observed net charge-offs and an improved credit outlook on our loan portfolio.
Year Over Year: The provision benefit was $10.9 million for the second quarter of 2026 compared to a provision expense of $39.7 million for the second quarter of 2025. The change in provision was primarily due to our election of the fair value option in 2026, under which newly originated HFI loans no longer required an initial allowance for credit losses (ACL). The second quarter of 2026 also reflected strong credit performance, including lower observed net charge-offs and an improved credit outlook on our loan portfolio.
Six Months Over Six Months: The provision benefit was $10.5 million for the first half of 2026 compared to a provision expense of $97.9 million for the first half of 2025. The change in provision was primarily due to our election of the fair value option in 2026, under which newly originated HFI loans no longer required an initial ACL. The first half of 2026 also reflected strong credit performance, including lower observed net charge-offs and an improved credit outlook on our loan portfolio.
75
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Allowance for Credit Losses
The activity in the ACL was as follows:
| Three Months Ended | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | 2026 | 2025 | |||||||||||||||||||||||||
Allowance for loan and lease losses: | |||||||||||||||||||||||||||||
Beginning of period | $ | 237,697 | $ | 275,743 | $ | 244,193 | $ | 275,743 | $ | 236,734 | |||||||||||||||||||
| Credit loss (benefit) expense for loans and leases held for investment at amortized cost | (10,885) | 846 | 40,596 | (10,039) | 96,978 | ||||||||||||||||||||||||
| Charge-offs | (46,427) | (52,770) | (49,854) | (99,197) | (116,430) | ||||||||||||||||||||||||
| Recoveries | 12,508 | 13,878 | 18,054 | 26,386 | 35,707 | ||||||||||||||||||||||||
End of period | $ | 192,893 | $ | 237,697 | $ | 252,989 | $ | 192,893 | $ | 252,989 | |||||||||||||||||||
Allowance for securities available for sale: | |||||||||||||||||||||||||||||
Beginning of period | $ | 3,816 | $ | 4,093 | $ | 4,848 | $ | 4,093 | $ | 3,527 | |||||||||||||||||||
| Credit loss expense (benefit) for securities available for sale | 165 | (277) | (819) | (112) | 502 | ||||||||||||||||||||||||
End of period | $ | 3,981 | $ | 3,816 | $ | 4,029 | $ | 3,981 | $ | 4,029 | |||||||||||||||||||
Reserve for unfunded lending commitments: | |||||||||||||||||||||||||||||
Beginning of period | $ | 830 | $ | 1,009 | $ | 1,629 | $ | 1,009 | $ | 1,183 | |||||||||||||||||||
Credit loss (benefit) expense for unfunded lending commitments | (197) | (179) | (44) | (376) | 402 | ||||||||||||||||||||||||
End of period(1) | $ | 633 | $ | 830 | $ | 1,585 | $ | 633 | $ | 1,585 | |||||||||||||||||||
(1) Relates to $35.2 million, $44.1 million and $103.4 million of unfunded commitments as of June 30, 2026, March 31, 2026 and June 30, 2025, respectively.
The following table presents the components of the ALLL:
| June 30, 2026 | March 31, 2026 | June 30, 2025 | |||||||||||||||
Gross allowance for loan and lease losses(1) | $ | 227,500 | $ | 274,256 | $ | 293,707 | |||||||||||
Recovery asset value(2) | (34,607) | (36,559) | (40,718) | ||||||||||||||
| Allowance for loan and lease losses | $ | 192,893 | $ | 237,697 | $ | 252,989 | |||||||||||
(1) Represents the allowance for future estimated net charge-offs on existing portfolio balances.
(2) Represents a negative allowance for expected recoveries of amounts previously charged-off.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
| June 30, 2026 | March 31, 2026 | June 30, 2025 | |||||||||||||||
Total loans and leases held for investment at amortized cost | $ | 3,186,145 | $ | 3,700,837 | $ | 4,386,321 | |||||||||||
| Allowance for loan and lease losses | $ | 192,893 | $ | 237,697 | $ | 252,989 | |||||||||||
Allowance ratio(1) | 6.1 | % | 6.4 | % | 5.8 | % | |||||||||||
| Gross allowance for loan and lease losses | $ | 227,500 | $ | 274,256 | $ | 293,707 | |||||||||||
Gross allowance ratio(1) | 7.1 | % | 7.4 | % | 6.7 | % | |||||||||||
(1) Calculated as ALLL or gross ALLL, where applicable, to total loans and leases held for investment at amortized cost.
Net Charge-Offs
The following table presents information regarding average loan and lease balances at amortized cost, the associated net charge-offs and the annualized ratio of net charge-offs to average outstanding loans and leases HFI at amortized cost, net, during the period. Net charge-offs are impacted by the expected timing of the charge-offs, anticipated recoveries and the age of the overall portfolio.
| Three Months Ended | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| Average loans and leases held for investment at amortized cost | $ | 3,440,984 | $ | 3,990,153 | $ | 4,176,587 | $ | 3,714,052 | $ | 4,142,706 | |||||||||||||||||||
| Net charge-offs | $ | 33,919 | $ | 38,892 | $ | 31,800 | $ | 72,811 | $ | 80,723 | |||||||||||||||||||
| Net charge-off ratio | 3.9 | % | 3.9 | % | 3.0 | % | 3.9 | % | 3.9 | % | |||||||||||||||||||
Nonaccrual
Loans and leases are generally placed on nonaccrual status when contractually past due 90 days or more, or earlier if management believes that the probability of collection does not warrant further accrual. Unsecured consumer loans are generally charged-off when a borrower is contractually 120 days past due.
The following table presents nonaccrual loans and leases HFI at amortized cost:
| June 30, 2026 | March 31, 2026 | June 30, 2025 | |||||||||||||||||||||
| Nonaccrual loans and leases held for investment at amortized cost | $ | 55,319 | $ | 58,726 | $ | 56,964 | |||||||||||||||||
% of total loans and leases held for investment at amortized cost | 1.7 | % | 1.6 | % | 1.3 | % | |||||||||||||||||
For additional information on the ACL and nonaccrual loans and leases, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” in our Annual Report and “Notes to Condensed Consolidated Financial Statements – Note 4. Loans” in this Report.
77
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Non-Interest Expense
Non-interest expense primarily consists of (i) compensation and benefits, which include salaries and wages, benefits and stock-based compensation expense, (ii) marketing, which includes costs attributable to borrower and deposit customer acquisition efforts and building general brand awareness, (iii) equipment and software, (iv) depreciation and amortization, (v) professional services, which primarily consist of consulting fees, and (vi) occupancy, which includes rent expense and all other costs related to occupying our office spaces.
| Three Months Ended | Change (%) | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | Q2 2026 vs Q1 2026 | Q2 2026 vs Q2 2025 | |||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||
| Compensation and benefits | $ | 68,221 | $ | 65,514 | $ | 61,989 | 4 | % | 10 | % | |||||||||||||||||||
| Marketing | 62,580 | 55,415 | 33,580 | 13 | % | 86 | % | ||||||||||||||||||||||
| Equipment and software | 15,846 | 15,293 | 14,495 | 4 | % | 9 | % | ||||||||||||||||||||||
| Depreciation and amortization | 18,152 | 15,819 | 15,460 | 15 | % | 17 | % | ||||||||||||||||||||||
| Professional services | 11,989 | 11,767 | 10,300 | 2 | % | 16 | % | ||||||||||||||||||||||
| Occupancy | 4,982 | 6,391 | 4,787 | (22) | % | 4 | % | ||||||||||||||||||||||
| Other non-interest expense | 16,345 | 14,334 | 14,107 | 14 | % | 16 | % | ||||||||||||||||||||||
| Total non-interest expense | $ | 198,115 | $ | 184,533 | $ | 154,718 | 7 | % | 28 | % | |||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change (%) | |||||||||||||||
| Non-interest expense: | |||||||||||||||||
| Compensation and benefits | $ | 133,735 | $ | 120,378 | 11 | % | |||||||||||
| Marketing | 117,995 | 62,819 | 88 | % | |||||||||||||
| Equipment and software | 31,139 | 29,139 | 7 | % | |||||||||||||
| Depreciation and amortization | 33,971 | 29,369 | 16 | % | |||||||||||||
| Professional services | 23,756 | 20,064 | 18 | % | |||||||||||||
| Occupancy | 11,373 | 9,132 | 25 | % | |||||||||||||
| Other non-interest expense | 30,679 | 27,684 | 11 | % | |||||||||||||
| Total non-interest expense | $ | 382,648 | $ | 298,585 | 28 | % | |||||||||||
Compensation and Benefits
Sequential: Compensation and benefits expense increased $2.7 million, or 4%, for the second quarter of 2026 compared to the first quarter of 2026. The increase in compensation and benefits expense was primarily due to an increase in variable compensation expense.
Year Over Year: Compensation and benefits expense increased $6.2 million, or 10%, for the second quarter of 2026 compared to the same period in 2025. The increase was primarily due to an increase in headcount.
Six Months Over Six Months: Compensation and benefits expense increased $13.4 million, or 11%, for the first half of 2026 compared to the same period in 2025. The increase in compensation and benefits expense was primarily due to an increase in headcount.
78
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Marketing
As a result of our fair value option election, marketing expenses associated with newly originated HFI loans are now recognized in current period earnings at the time of origination, rather than being deferred and recognized over time under amortized cost accounting. Accordingly, marketing expense for the first half of 2026 includes costs associated with the origination of both HFI and HFS loans, whereas prior periods reflect only marketing expenses related to the origination of HFS loans.
Sequential: Marketing expense increased $7.2 million, or 13%, for the second quarter of 2026 compared to the first quarter of 2026.
Year Over Year: Marketing expense increased $29.0 million, or 86%, for the second quarter of 2026 compared to the same period in 2025.
Six Months Over Six Months: Marketing expense increased $55.2 million, or 88%, for the first half of 2026 compared to the same period in 2025.
The increases in marketing expense were primarily due to an increase in variable marketing expenses based on higher origination volume. In addition, marketing expense for 2026 includes the immediate recognition of marketing costs for newly originated HFI loans under the fair value option.
Equipment and Software
Sequential: Equipment and software expense remained relatively flat for the second quarter of 2026 compared to the first quarter of 2026.
Year Over Year: Equipment and software expense increased $1.4 million, or 9%, for the second quarter of 2026 compared to the same period in 2025.
Six Months Over Six Months: Equipment and software expense increased $2.0 million, or 7%, for the first half of 2026 compared to the same period in 2025.
The increases in equipment and software expense were primarily due to an increase in software license expense and cloud services.
Depreciation and Amortization
Sequential: Depreciation and amortization expense increased $2.3 million, or 15%, for the second quarter of 2026 compared to the first quarter of 2026.
Year Over Year: Depreciation and amortization expense increased $2.7 million, or 17%, for the second quarter of 2026 compared to the same period in 2025.
Six Months Over Six Months: Depreciation and amortization expense increased $4.6 million, or 16%, for the first half of 2026 compared to the same period in 2025.
The increases in depreciation and amortization expense were primarily due to impairment of internally-developed software recognized in the second quarter of 2026 and an increase in the amortization of internally-developed software placed into service.
79
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Professional Services
Sequential: Professional services remained relatively flat for the second quarter of 2026 compared to the first quarter of 2026.
Year Over Year: Professional services increased $1.7 million, or 16%, for the second quarter of 2026 compared to the same period in 2025.
Six Months Over Six Months: Professional services increased $3.7 million, or 18%, for the first half of 2026 compared to the same period in 2025.
The increases in professional services expense were primarily due to an increase in business consulting services.
Occupancy
Sequential: Occupancy expense decreased $1.4 million, or 22%, for the second quarter of 2026 compared to the first quarter of 2026.
Year Over Year: Occupancy expense remained relatively flat for the second quarter of 2026 compared to the same period in 2025.
Six Months Over Six Months: Occupancy expense increased $2.2 million, or 25%, for the first half of 2026 compared to the same period in 2025.
The changes in occupancy expense were primarily due to costs incurred in the first quarter of 2026 in connection with the relocation of our headquarters, partially offset by the expiration of our former headquarters’ lease in April 2026.
Other non-interest expense
Sequential: Other non-interest expense increased $2.0 million, or 14%, for the second quarter of 2026 compared to the first quarter of 2026.
Year Over Year: Other non-interest expense increased $2.2 million, or 16%, for the second quarter of 2026 compared to the same period in 2025.
Six Months Over Six Months: Other non-interest expense increased $3.0 million, or 11%, for the first half of 2026 compared to the same period in 2025.
The changes in other non-interest expense were primarily due to changes in miscellaneous operating expenses.
Income Taxes
For the second quarter and first half of 2026, we recorded an income tax expense of $17.5 million and $33.2 million, respectively, representing an effective tax rate of 23.1% and 23.2%, respectively. For the second quarter and first half of 2025, we recorded an income tax expense of $15.8 million and $19.8 million, respectively, representing an effective tax rate of 29.3% and 28.5%, respectively. The effective tax rate differs from the federal statutory rate primarily due to state taxes, the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the net discrete impact of stock-based compensation. The decrease in the effective tax rate period over period was primarily driven by the discrete
80
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
tax expense recognized in the second quarter of 2025 related to the revaluation of our deferred tax assets following the enactment of California Senate Bill 132 on June 27, 2025, and the reduction in the overall effective state tax rate resulting from the law’s requirement that banks and financial companies use a single-sales-factor apportionment formula, effective for tax years beginning in 2025.
As of June 30, 2026, we maintained a valuation allowance of $48.0 million related to certain state net operating loss carryforwards (NOLs) and state tax credit carryforwards. The realization and timing of any remaining state NOLs and state tax credit carryforwards is uncertain and may expire before being utilized, based primarily on limitations related to the allocation of taxable income to the Parent and not related to our earnings. Changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions are recorded as current period income tax expense or benefit.
Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return. Differences between separate entity and consolidated tax returns are eliminated upon consolidation.
Segment Information
Reportable Segments
We define operating segments to be components of the Company for which discrete financial information is evaluated regularly by the Chief Operating Decision Maker (CODM) to allocate resources and evaluate financial performance. The measure of segment profit used by the CODM in this evaluation is net income. The CODM consists of our Chief Executive Officer and Chief Financial Officer. This information is reviewed according to the legal organizational structure of our operations with products and services presented separately for the parent bank holding company and its wholly-owned subsidiary, Happen Bank, which are both considered reportable segments. Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return.
Happen Bank
The Happen Bank operating segment represents the national bank legal entity and reflects operating activities after its formation. This segment provides a full complement of financial products and solutions, including loans and deposits. It originates loans to individuals and businesses, retains loans for investment, sells loans to marketplace investors and manages relationships with deposit holders.
Happen, Inc. (Parent Only)
The Happen, Inc. (Parent only) operating segment represents the holding company legal entity and predominately reflects the operations of the Company prior to the formation of Happen Bank. This activity includes, but is not limited to, servicing fee revenue on purchased servicing assets, and interest income and interest expense related to transactions entered into prior to Happen Bank’s formation.
81
HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Financial information for the segments is presented in the following tables:
| Happen Bank | Happen, Inc. (Parent only) | Total Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 268,709 | $ | 236,958 | $ | 226 | $ | 139 | $ | 268,935 | $ | 237,097 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | (89,918) | (82,848) | — | — | (89,918) | (82,848) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | 178,791 | 154,110 | 226 | 139 | 179,017 | 154,249 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Origination fees(1) | 163,656 | 87,574 | 350 | 4 | 164,006 | 87,578 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Servicing fees(1) | 5,638 | 2,512 | 5,147 | 7,652 | 10,785 | 10,164 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sales of loans(1) | 21,461 | 13,540 | — | — | 21,461 | 13,540 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net fair value adjustments(1) | (121,594) | (30,202) | 449 | 2,333 | (121,145) | (27,869) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest income | 11,317 | 14,095 | 1,677 | 1,789 | 12,994 | 15,884 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | 80,478 | 87,519 | 7,623 | 11,778 | 88,101 | 99,297 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total net revenue | 259,269 | 241,629 | 7,849 | 11,917 | 267,118 | 253,546 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 10,917 | (39,733) | — | — | 10,917 | (39,733) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest expense: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits | (66,728) | (60,207) | (1,493) | (1,782) | (68,221) | (61,989) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing | (62,580) | (33,580) | — | — | (62,580) | (33,580) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment and software | (15,814) | (14,474) | (32) | (21) | (15,846) | (14,495) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | (17,742) | (14,251) | (410) | (1,209) | (18,152) | (15,460) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional services | (11,759) | (10,019) | (230) | (281) | (11,989) | (10,300) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Occupancy | (3,639) | (2,845) | (1,343) | (1,942) | (4,982) | (4,787) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest expense | (16,928) | (15,557) | (3,680) | (3,661) | (20,608) | (19,218) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | (195,190) | (150,933) | (7,188) | (8,896) | (202,378) | (159,829) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | (17,174) | (13,534) | (335) | (2,272) | (17,509) | (15,806) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income(2) | $ | 57,822 | $ | 37,429 | $ | 326 | $ | 749 | $ | 58,148 | $ | 38,178 | |||||||||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | 27,967 | $ | 90,694 | $ | — | $ | — | $ | 27,967 | $ | 90,694 | |||||||||||||||||||||||||||||||||||||||||||||||
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
(2) Total net income from reportable segments reflects net income on a consolidated basis.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
| Happen Bank | Happen, Inc. (Parent only) | Total Reportable Segments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 529,654 | $ | 468,713 | $ | 488 | $ | 443 | $ | 530,142 | $ | 469,156 | ||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | (174,891) | (164,950) | — | — | (174,891) | (164,950) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | 354,763 | 303,763 | 488 | 443 | 355,251 | 304,206 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Origination fees(1) | 293,644 | 157,507 | 450 | 15 | 294,094 | 157,522 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Servicing fees(1) | 10,980 | 2,710 | 10,138 | 12,564 | 21,118 | 15,274 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sales of loans(1) | 37,730 | 25,742 | — | — | 37,730 | 25,742 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net fair value adjustments(1) | (211,260) | (60,325) | 1,190 | 3,205 | (210,070) | (57,120) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest income | 22,447 | 27,036 | 3,805 | 3,780 | 26,252 | 30,816 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | 153,541 | 152,670 | 15,583 | 19,564 | 169,124 | 172,234 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total net revenue | 508,304 | 456,433 | 16,071 | 20,007 | 524,375 | 476,440 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 10,527 | (97,882) | — | — | 10,527 | (97,882) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest expense: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits | (130,823) | (117,070) | (2,912) | (3,308) | (133,735) | (120,378) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing | (117,995) | (62,819) | — | — | (117,995) | (62,819) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment and software | (31,107) | (29,093) | (32) | (46) | (31,139) | (29,139) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | (32,734) | (26,794) | (1,237) | (2,575) | (33,971) | (29,369) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional services | (23,446) | (19,656) | (310) | (408) | (23,756) | (20,064) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Occupancy | (7,610) | (5,246) | (3,763) | (3,886) | (11,373) | (9,132) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest expense | (34,224) | (30,004) | (5,724) | (7,974) | (39,948) | (37,978) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | (377,939) | (290,682) | (13,978) | (18,197) | (391,917) | (308,879) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax expense | (32,069) | (18,406) | (1,165) | (1,424) | (33,234) | (19,830) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income(2) | $ | 108,823 | $ | 49,463 | $ | 928 | $ | 386 | $ | 109,751 | $ | 49,849 | ||||||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | $ | 53,751 | $ | 103,760 | $ | — | $ | — | $ | 53,751 | $ | 103,760 | ||||||||||||||||||||||||||||||||||||||||||||
(1) Prior period amounts have been reclassified to conform to the current period presentation. See “Notes to Condensed Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies” for additional information.
(2) Total net income from reportable segments reflects net income on a consolidated basis.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Total net revenue – reportable segments | $ | 267,118 | $ | 253,546 | $ | 524,375 | $ | 476,440 | |||||||||||||||
| Intercompany eliminations | (4,263) | (5,111) | (9,269) | (10,294) | |||||||||||||||||||
| Total net revenue – consolidated | $ | 262,855 | $ | 248,435 | $ | 515,106 | $ | 466,146 | |||||||||||||||
An analysis of the Company’s results of operations and material drivers and trends of the financial results of the segments presented above are consistent with those provided on a consolidated basis in "Results of Operations."
Non-GAAP Financial Measures
To supplement our financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Tangible Book Value (TBV) Per Common Share and Return on Tangible Common Equity (ROTCE). Our non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
We believe these non-GAAP financial measures provide management and investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies.
We believe TBV Per Common Share is an important measure used to evaluate the Company’s use of equity. TBV Per Common Share is a non-GAAP financial measure representing tangible common equity for the period (common equity reduced by goodwill and customer relationship intangible assets), divided by the ending number of common shares issued and outstanding.
We believe ROTCE is an important measure because it reflects the Company's ability to generate income from its core assets. ROTCE is a non-GAAP financial measure calculated by dividing annualized net income by the average tangible common equity for the applicable period.
The following table provides a reconciliation of TBV Per Common Share to the nearest GAAP measure:
| As of | June 30, 2026 | March 31, 2026 | June 30, 2025 | ||||||||||||||
| GAAP common equity | $ | 1,567,465 | $ | 1,523,528 | $ | 1,406,035 | |||||||||||
| Less: Goodwill | (75,717) | (75,717) | (75,717) | ||||||||||||||
Less: Customer relationship intangible assets | (4,492) | (5,039) | (7,068) | ||||||||||||||
| Tangible common equity | $ | 1,487,256 | $ | 1,442,772 | $ | 1,323,250 | |||||||||||
| Book value per common share | |||||||||||||||||
| GAAP common equity | $ | 1,567,465 | $ | 1,523,528 | $ | 1,406,035 | |||||||||||
| Common shares issued and outstanding | 115,407,464 | 115,497,890 | 114,740,147 | ||||||||||||||
| Book value per common share | $ | 13.58 | $ | 13.19 | $ | 12.25 | |||||||||||
| Tangible book value per common share | |||||||||||||||||
| Tangible common equity | $ | 1,487,256 | $ | 1,442,772 | $ | 1,323,250 | |||||||||||
| Common shares issued and outstanding | 115,407,464 | 115,497,890 | 114,740,147 | ||||||||||||||
| Tangible book value per common share | $ | 12.89 | $ | 12.49 | $ | 11.53 | |||||||||||
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following table provides a reconciliation of ROTCE to the nearest GAAP measure:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||||||||||||||
| Average GAAP common equity | $ | 1,544,238 | $ | 1,507,711 | $ | 1,381,199 | $ | 1,526,075 | $ | 1,365,248 | |||||||||||||||||||
| Less: Average goodwill | (75,717) | (75,717) | (75,717) | (75,717) | (75,717) | ||||||||||||||||||||||||
| Less: Average customer relationship intangible assets | (4,766) | (5,362) | (7,423) | (5,072) | (7,811) | ||||||||||||||||||||||||
| Average tangible common equity | $ | 1,463,755 | $ | 1,426,632 | $ | 1,298,059 | $ | 1,445,286 | $ | 1,281,720 | |||||||||||||||||||
| Return on average equity | |||||||||||||||||||||||||||||
| Annualized GAAP net income | $ | 232,592 | $ | 206,412 | $ | 152,712 | $ | 219,502 | $ | 99,698 | |||||||||||||||||||
| Average GAAP common equity | 1,544,238 | 1,507,711 | 1,381,199 | 1,526,075 | 1,365,248 | ||||||||||||||||||||||||
| Return on average equity | 15.1 | % | 13.7 | % | 11.1 | % | 14.4 | % | 7.3 | % | |||||||||||||||||||
| Return on tangible common equity | |||||||||||||||||||||||||||||
| Annualized GAAP net income | $ | 232,592 | $ | 206,412 | $ | 152,712 | $ | 219,502 | $ | 99,698 | |||||||||||||||||||
| Average tangible common equity | 1,463,755 | 1,426,632 | 1,298,059 | 1,445,286 | 1,281,720 | ||||||||||||||||||||||||
| Return on tangible common equity | 15.9 | % | 14.5 | % | 11.8 | % | 15.2 | % | 7.8 | % | |||||||||||||||||||
Supervision and Regulatory Environment
We are subject to supervision, regulation, examination, enforcement and other proceedings by multiple federal banking regulatory bodies. Specifically, as a bank holding company, the Company is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Board of Governors of the Federal Reserve System (FRB). Further, as a national bank, Happen Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Office of the Comptroller of the Currency (OCC). Additionally, as a depository institution with assets over $10 billion, Happen Bank is subject to supervision and enforcement authority relating to federal consumer financial laws and regulations by the Consumer Financial Protection Bureau (CFPB). Accordingly, we have been and continue to invest in regulatory compliance and be subject to certain parameters, obligations and/or limitations set forth by the banking regulations and regulators with respect to the operation of our business.
Further, we are subject to periodic supervision, regulation, examination, enforcement and other proceedings from various other federal and state regulatory and/or law enforcement agencies. Additionally, we are subject to claims, individual and class action lawsuits, and lawsuits alleging regulatory violations. Although historically the Company has generally resolved these matters in a manner that was not materially adverse to its financial results or business operations, no assurance can be given as to the timing, outcome or consequences of any of these matters in the future.
If we are found to not have complied with applicable laws, regulations or requirements, we could: (i) lose one or more of our licenses or authorizations, or be required to obtain a new license or authorization, (ii) become subject to a consent order or administrative enforcement action, (iii) face lawsuits (including class action lawsuits), sanctions, penalties, or other monetary losses due to judgments, orders, or settlements, (iv) be in breach of certain contracts, which may void or cancel such contracts, (v) decide or be compelled to modify or suspend certain of our business practices and/or (vi) be unable to execute on certain Company initiatives, which may have an adverse effect on our ability to operate and/or evolve our lending marketplace and other products and/or services; any of which may harm our business or financial results.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
See “Part I – Item 1. Business – Regulation and Supervision,” “Part I – Item 1A. Risk Factors – Risks Related to Regulation, Supervision and Compliance,” and “Part I – Item 1A. Risk Factors – Risks Related to Operating Our Business” in our Annual Report for further discussion regarding our supervision and regulatory environment.
Capital Management
The prudent management of capital is fundamental to the successful achievement of our business initiatives. We actively review capital through a process that continuously assesses and monitors the Company’s overall capital adequacy. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations.
The formation of Happen Bank as a nationally chartered association and the organization of the Company as a bank holding company subjects us to various capital adequacy guidelines issued by the OCC and the FRB, including the requirement to maintain regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (Basel III). As a Basel III standardized approach institution, we selected the one-time election to opt-out of the requirements to include all the components of accumulated other comprehensive income included in common stockholder’s equity. The minimum capital requirements under the Basel III capital framework are: a Common Equity Tier 1 (CET1) risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%. Additionally, a capital conservation buffer of 2.5% must be maintained above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, share repurchases, and certain discretionary bonus payments. In addition to these guidelines, the banking regulators may require a banking organization to maintain capital at levels higher than the minimum ratios prescribed under the Basel III capital framework. See “Part I – Item 1. Business – Regulation and Supervision – Capital and Liquidity Requirements and Prompt Corrective Action” in our Annual Report and “Notes to Condensed Consolidated Financial Statements – Note 18. Regulatory Requirements” of this Report for additional information regarding regulatory capital requirements.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following table presents the actual capital amounts and ratios of the Company and Happen Bank as well as the regulatory capital minimum and “well capitalized” requirements (dollars in millions):
| June 30, 2026 | December 31, 2025 | Required Minimum(1) | Well Capitalized Minimum | ||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
| Happen, Inc.: | |||||||||||||||||||||||||||||||||||
CET1 capital(2) | $ | 1,436.2 | 16.9 | % | $ | 1,342.6 | 17.4 | % | 7.0 | % | N/A | ||||||||||||||||||||||||
| Tier 1 capital | $ | 1,436.2 | 16.9 | % | $ | 1,342.6 | 17.4 | % | 8.5 | % | 6.0 | % | |||||||||||||||||||||||
| Total capital | $ | 1,543.5 | 18.2 | % | $ | 1,441.0 | 18.7 | % | 10.5 | % | 10.0 | % | |||||||||||||||||||||||
| Tier 1 leverage | $ | 1,436.2 | 11.9 | % | $ | 1,342.6 | 12.0 | % | 4.0 | % | N/A | ||||||||||||||||||||||||
| Risk-weighted assets | $ | 8,499.0 | N/A | $ | 7,696.1 | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Quarterly adjusted average assets | $ | 12,048.2 | N/A | $ | 11,174.0 | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Happen Bank: | |||||||||||||||||||||||||||||||||||
CET1 capital(2) | $ | 1,315.7 | 15.6 | % | $ | 1,183.9 | 15.5 | % | 7.0 | % | 6.5 | % | |||||||||||||||||||||||
| Tier 1 capital | $ | 1,315.7 | 15.6 | % | $ | 1,183.9 | 15.5 | % | 8.5 | % | 8.0 | % | |||||||||||||||||||||||
| Total capital | $ | 1,422.4 | 16.8 | % | $ | 1,281.8 | 16.8 | % | 10.5 | % | 10.0 | % | |||||||||||||||||||||||
| Tier 1 leverage | $ | 1,315.7 | 11.0 | % | $ | 1,183.9 | 10.7 | % | 4.0 | % | 5.0 | % | |||||||||||||||||||||||
| Risk-weighted assets | $ | 8,452.0 | N/A | $ | 7,652.0 | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Quarterly adjusted average assets | $ | 11,987.1 | N/A | $ | 11,090.4 | N/A | N/A | N/A | |||||||||||||||||||||||||||
N/A – Not applicable
(1) Required minimums presented for risk-based capital ratios include the required capital conservation buffer of 2.5%.
(2) CET1 capital consists of common stockholders’ equity as defined under U.S. GAAP and certain adjustments made in accordance with regulatory capital guidelines, including deductions for goodwill and other intangible assets.
The higher risk-based capital ratios for the Company reflect higher capital at Happen, Inc. as compared with Happen Bank.
Liquidity
We manage liquidity to meet our cash flow and collateral obligations in a timely manner at a reasonable cost. We must maintain operating liquidity to meet our expected daily and forecasted cash flow requirements, as well as contingent liquidity to meet unexpected funding requirements.
As our primary business at Happen Bank involves taking deposits and originating loans, a key role of liquidity management is to ensure that customers have timely access to funds from deposits and for loans. Liquidity management also involves maintaining sufficient liquidity to repay borrowings, pay operating expenses and support extraordinary funding requirements when necessary.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Happen Bank Liquidity
The following table summarizes Happen Bank’s primary sources of short-term liquidity as of the periods presented:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Cash and cash equivalents | $ | 899,767 | $ | 901,246 | |||||||
Securities available for sale(1) | $ | 384,500 | $ | 384,846 | |||||||
| Deposits | $ | 10,854,299 | $ | 9,948,426 | |||||||
| Available borrowing capacity: | |||||||||||
FRB Discount Window(2) | $ | 3,446,444 | $ | 3,294,827 | |||||||
FHLB of Des Moines(3) | 672,819 | 679,361 | |||||||||
| Total available borrowing capacity | $ | 4,119,263 | $ | 3,974,188 | |||||||
(1) Excludes illiquid securities available for sale.
(2) As of June 30, 2026 and December 31, 2025, the Company had $4.5 billion and $4.2 billion in loans pledged under the FRB Discount Window, respectively.
(3) As of June 30, 2026, the Company had $467.7 million in loans and $375.6 million in securities pledged to the Federal Home Loan Bank (FHLB) of Des Moines. As of December 31, 2025, the Company had $486.2 million in loans and $375.7 million in securities pledged to the FHLB of Des Moines.
The primary uses of Happen Bank liquidity include (i) the funding/acquisition of loans and securities purchases, (ii) withdrawals, maturities and the payment of interest on deposits, (iii) compensation and benefits expense, (iv) taxes, (v) capital expenditures and (vi) costs associated with the continued development and support of our digital marketplace bank.
Deposits
Deposits represent an important source of funding for Happen Bank. We offer deposit accounts to our members, which include both interest-bearing and noninterest-bearing deposits. As of June 30, 2026 and December 31, 2025, the amount of uninsured deposits totaled $1.3 billion and $1.2 billion, respectively, or 12% of total deposits for both periods. Uninsured time deposits as of June 30, 2026, by remaining time to maturity, were as follows:
3 months or less | $ | 51,896 | |||
Over 3 months through 6 months | 39,871 | ||||
Over 6 months through 12 months | 68,202 | ||||
Over 12 months | 3,619 | ||||
Total uninsured time deposits(1) | $ | 163,588 | |||
(1) Consist of certificates of deposit accounts that are in excess of the FDIC insurance limit of $250 thousand per account holder.
Capital Expenditures
Net capital expenditures were $53.8 million, or 10.6% of total net revenue, and $103.8 million, or 22.7% of total net revenue, for the first halves of 2026 and 2025, respectively. Capital expenditures in 2026 are expected to be approximately $90 million, primarily driven by costs associated with the continued development and support of our digital marketplace bank as well as improvements to the office building we purchased.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Happen, Inc. Liquidity
The primary source of liquidity at the holding company is $100.9 million and $127.1 million in cash and cash equivalents as of June 30, 2026 and December 31, 2025, respectively. The decrease in cash and cash equivalents was primarily driven by share repurchases. Additionally, the holding company has the ability to access the capital markets through additional registrations and public equity offerings.
Uses of cash at the holding company include the routine cash flow requirements as a bank holding company, such as interest and expenses (including those associated with our office leases), share repurchases, the needs of Happen Bank for additional equity and, as required, its need for debt financing and support for extraordinary funding requirements when necessary.
Factors Impacting Liquidity
Our liquidity could be adversely impacted by deteriorating financial and market conditions, the inability or unwillingness of a creditor to provide funding, an idiosyncratic event (e.g., a major loss, causing a perceived or actual deterioration in our financial condition), an adverse systemic event (e.g., default or bankruptcy of a significant capital markets participant), or others.
We believe, based on our projections, that our cash on hand, liquid available for sale (AFS) securities, deposits, available borrowing capacity, and net cash flows from operating, investing and financing activities are sufficient to meet our liquidity needs for the next twelve months, as well as beyond the next twelve months. See “Item 1. Financial Statements – Condensed Consolidated Statements of Cash Flows” for additional detail regarding our cash flows.
Market Risk
Market risk represents the risk of potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices. The primary market risk to which we are exposed is interest rate risk. Interest rate risk arises from financial instruments including loans, securities and borrowings, all entered into for purposes other than trading.
Interest Rate Sensitivity
Happen Bank
Our net interest income is affected by changes in the level of interest rates, the impact of interest rate fluctuations on asset prepayments, and the level and composition of deposits and liabilities, among other factors.
HFI loans and AFS securities at Happen Bank are funded primarily through our deposit base. The majority of HFI loans and AFS securities are fixed-rate instruments over the term of the loan or security. As a result, the primary component of interest rate risk on our financial instruments arises from the impact of fluctuations in loan, security, and deposit rates on our net interest income. Therefore, we use a sensitivity analysis to assess the impact of hypothetical changes in interest rates on our net interest income results. The outcome of the analysis is influenced by a variety of assumptions, including the maturity profile and prepayment level of our unsecured consumer loans and expected consumer responses to changes in rates paid on non-maturity deposit products. Our assumptions are periodically calibrated to observed data and/or expected outcomes. We actively monitor the level of exposure to movements in interest rates and have entered into interest rate hedging instruments to manage such risk. See “Notes to Condensed Consolidated Financial Statements – Note 7. Derivative Instruments and Hedging Activities” for additional information.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
The following table presents the change in projected net interest income for the next twelve months due to a hypothetical instantaneous parallel change in interest rates relative to current rates:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||
| Instantaneous Change in Interest Rates: | ||||||||||||||||||||
| + 200 basis points | (6.8) | % | (7.8) | % | ||||||||||||||||
| + 100 basis points | (3.2) | % | (3.8) | % | ||||||||||||||||
| – 100 basis points | 3.4 | % | 3.2 | % | ||||||||||||||||
| – 200 basis points | 6.5 | % | 5.9 | % | ||||||||||||||||
As illustrated in the table above, net interest income is projected to decrease over the next twelve months during hypothetical rising interest rate environments primarily as a result of higher rates paid on interest-bearing deposits, partially offset by higher rates earned on new loans, security purchases, and cash and cash equivalents, offset by the impact of our hedging activity. Conversely, net interest income is projected to increase over the next twelve months during hypothetical declining interest rate environments. Interest rate sensitivity as of June 30, 2026 compared to December 31, 2025 primarily reflects changes in loan and deposit portfolio composition and interest rate hedging activity.
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix, size of our balance sheet, or other business developments that could affect net income. Actual results could differ materially from the estimated outcomes of our simulations.
For additional details regarding maturities of loans and leases HFI, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” in our Annual Report.
For the contractual maturities and weighted-average yields on the Company’s AFS securities portfolio, see “Notes to Condensed Consolidated Financial Statements – Note 3. Securities Available for Sale.”
Happen, Inc.
At the holding company level, we continue to measure interest rate sensitivity by evaluating the change in fair value of certain assets and liabilities due to a hypothetical change in interest rates. Principal payments on our HFI loans continue to reduce the outstanding balance of this portfolio, and, as a result, the fair value impact from changes in interest rates continues to diminish.
Contingencies
For a comprehensive discussion of contingencies as of June 30, 2026, see “Notes to Condensed Consolidated Financial Statements – Note 17. Commitments and Contingencies.”
Critical Accounting Estimates
Certain of the Company’s accounting policies that involve a higher degree of judgment and complexity are discussed in “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our Annual Report. There have been no significant changes to these critical accounting estimates during the first half of 2026, except as noted below, where the estimate has been updated to incorporate all loans held at fair value, regardless of their classification as HFS or HFI.
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HAPPEN, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted)
Loans at Fair Value
Loans that we elect to account for under fair value option are classified as Level 3 instruments. We use a DCF approach to calculate the NPV of expected cash flows. This model uses significant unobservable inputs that inherently require judgment and reflect our best estimates of the assumptions a market participant would use to calculate fair value. Those significant unobservable inputs used in the fair value measurement of loans include:
•Discount Rate – The weighted-average rate at which the expected cash flows are discounted to arrive at the net present value of the loan. The discount rate is primarily determined based on the Company’s estimate of market participants’ return expectations.
•Annualized net credit loss rate – The annualized rate of lifetime charge-offs, net of recoveries, expressed as a percentage of the average lifetime principal balance of loan pools with similar risk characteristics.
•Annualized prepayment rate – The annualized rate of lifetime prepayments expressed as a percentage of the average principal balance of loan pools with similar risk characteristics.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a comprehensive discussion regarding quantitative and qualitative disclosures about market risk, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2026. In designing and evaluating its disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, of achieving the desired control objectives, and is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures as of June 30, 2026 were designed and functioned effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the second quarter of 2026, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a comprehensive discussion of legal proceedings, see “Part I. Financial Information – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 17. Commitments and Contingencies – Legal,” which is incorporated herein by reference.
Item 1A. Risk Factors
The risks described in “Part I – Item 1A. Risk Factors” in our Annual Report, could materially and adversely affect our business, financial condition, operating results and prospects, and the trading price of our common stock could decline. While we believe the risks and uncertainties described therein include all material risks currently known by us, it is possible that these may not be the only ones we face. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The Risk Factors section of our Annual Report remains current in all material respects, with the exception below.
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HAPPEN, INC.
Our business operations may be adversely impacted by political events, terrorism, military conflict or acts of war, cyber-attacks, public health issues, natural disasters, severe weather, climate change, infrastructure failure or outages, labor disputes and other business interruptions.
Our business operations are subject to interruption by, among other things, political events, terrorism, military conflict or acts of war, cyber-attacks, public health issues, natural disasters, severe weather, climate change (including longer-term shifts in climate patterns, such as extreme heat, sea level rise and more frequent and prolonged drought), infrastructure failure or outages (including power outages), labor disputes and other events which could: (i) decrease demand for our products and services, (ii) adversely affect the macroeconomy and/or our customers, or (iii) make it difficult or impossible for us to deliver a satisfactory experience to our customers. Any such events could also affect the Company by impacting the stability of our deposit base, impairing the ability of our borrowers to repay their outstanding loans, causing significant property damage or otherwise impair the value of collateral securing our loans, and/or resulting in loss of revenue and/or causing us to incur additional expenses. While we may undertake measures indicated to mitigate the adverse impacts of such events, there are no assurances that any of the measures we take will be sufficient or successful.
Furthermore, in the event of any disruption to our operations or those of the companies with whom we do business, we could experience delays in product development, marketing, operations and customer service efforts, incur significant losses, require substantial recovery time and experience significant expenditures in order to resume or maintain operations, any of which could have a material adverse impact on our business, financial condition and results of operations.
Similarly, natural disasters have had, and likely will continue to have, unpredictable and/or adverse effects on our customers. With increases to the frequency, breadth and impact of natural disasters, such as fires and hurricanes, the potential for a single or series of natural disaster(s) to have a material adverse impact on our business is also increasing.
Finally, geopolitical conflicts as well as natural disasters, and their impacts, have had, and may continue to have, the effect of heightening many of the other risks described in “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K, such as elevating inflation, macroeconomic uncertainty and the possibility of a decline in economic conditions. For example, although we do not have operations or customers in Iran, the 2026 Iran conflict is, among other things, impacting inflation in the United States which could have an adverse effect on our customers and thereby our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We did not have any unregistered sales of equity securities during the three months ended June 30, 2026.
Issuer Purchases of Equity Securities
On November 4, 2025, our Board of Directors approved a program to repurchase and acquire up to $100 million of our common stock through December 31, 2026 (the Repurchase and Acquisition Program). The Repurchase and Acquisition Program is inclusive of the anticipated fair market value of shares of our common stock acquired by holding back a portion of vesting restricted stock units held by our employees to satisfy applicable tax withholding obligations. The timing, amount and methodology of shares acquired through the Repurchase and Acquisition Program are discretionary and will depend on our stock price, business and market conditions, and other factors.
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The following table sets forth information on Happen, Inc.’s share repurchase activity for the second quarter of 2026 (dollars in millions, except per share data):
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program(1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(1) | |||||||||||||||||||
| April 1 – April 30, 2026 | 186,387 | $ | 16.08 | 186,387 | $ | 58.6 | |||||||||||||||||
| May 1 – May 31, 2026 | 189,942 | $ | 16.12 | 189,942 | $ | 51.4 | |||||||||||||||||
| June 1 – June 30, 2026 | 98,802 | $ | 17.49 | 98,802 | $ | 49.7 | |||||||||||||||||
Total | 475,131 | $ | 16.39 | 475,131 | |||||||||||||||||||
(1) In May 2026, we utilized $4.1 million to hold back 261,458 shares of our common stock at an average per share price of $15.63 to satisfy applicable tax withholding obligations in connection with the vesting of restricted units held by our employees. Since the inception of the program in November 2025 through June 30, 2026, we have utilized a total of $50.3 million of the $100 million authorization under the Repurchase and Acquisition Program to acquire a total of 2,991,083 shares of our common stock at an average per share price of $16.81 (inclusive of the amount held back to satisfy applicable tax withholding obligations).
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
The following table shows the trading arrangements intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) adopted
Name and Title | Adoption Date | Expiration Date | Aggregate Number of Shares to be Sold | |||||||||||||||||
Up to | ||||||||||||||||||||
Up to | ||||||||||||||||||||
Up to | ||||||||||||||||||||
(1) The aggregate number of shares to be sold pursuant to this trading arrangement includes shares from outstanding restricted stock units that are subject to applicable service-based vesting conditions.
Other than disclosed above, during the second quarter of 2026, none of the Company’s directors or executive officers adopted or terminated
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Ninth Amended and Restated Certificate of Incorporation and Third Amended and Restated Bylaws
On June 2, 2026, the Company convened its annual meeting of stockholders at which the Company’s stockholders approved (i) an amendment of the Company’s Eighth Amended and Restated Certificate of Incorporation, as amended (the Certificate of Incorporation), to phase in declassification of the Company’s Board of Directors (the Declassification Amendment) and (ii) an amendment of the Company’s Certificate of Incorporation to remove the supermajority voting requirements to amend the Certificate of Incorporation or for the Company’s stockholders to amend the Company’s bylaws (the Supermajority Voting Amendment). The Declassification Amendment and the Supermajority Voting Amendment had each previously been approved, subject to stockholder approval, by the Company’s Board of Directors.
On July 28, 2026, the Company filed a Ninth Amended and Restated Certificate of Incorporation (the Ninth Amended and Restated Certificate) with the Secretary of State of the State of Delaware to (i) effectuate the Declassification Amendment and the Supermajority Voting Amendment and (ii) incorporate a previous amendment to the Company’s Certificate of Incorporation changing the name of the corporation from “LendingClub Corporation” to “Happen, Inc.”. The foregoing description of the Ninth Amended and Restated Certificate is qualified in its entirety by reference to the complete text of the Ninth Amended and Restated Certificate, which is filed as Exhibit 3.2 to this Report and is incorporated herein by reference.
Effective July 28, 2026, the Company also amended and restated its bylaws (as amended and restated, the Third Amended and Restated Bylaws) to make revisions consistent with the Declassification Amendment. The foregoing description of the Third Amended and Restated Bylaws is qualified in its entirety by reference to the complete text of the Third Amended and Restated Bylaws, which is filed as Exhibit 3.4 to this Report and is incorporated herein by reference.
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Item 6. Exhibits
Exhibit Index
The exhibits noted in the accompanying Exhibit Index are filed or incorporated by reference as a part of this Report and such Exhibit Index is incorporated herein by reference.
| Incorporated by Reference | ||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed Herewith | ||||||||||||||
3.1 | Certificate of Amendment of Eighth Amended and Restated Certificate of Incorporation, effective June 22, 2026 | 8-K | 001-36771 | 3.1 | June 22, 2026 | |||||||||||||||
3.2 | Ninth Amended and Restated Certificate of Incorporation, effective July 28, 2026 | X | ||||||||||||||||||
3.3 | Second Amended and Restated Bylaws of the Company, effective June 22, 2026 | 8-K | 001-36771 | 3.2 | June 22, 2026 | |||||||||||||||
3.4 | Third Amended and Restated Bylaws of the Company, effective July 28, 2026 | X | ||||||||||||||||||
10.1 | Non-Employee Director Compensation Policy, effective June 2, 2026 | X | ||||||||||||||||||
10.2 | 2014 Equity Incentive Plan, as amended and restated on June 8, 2023, and forms of award agreements thereunder | X | ||||||||||||||||||
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||
| 101.INS | XBRL Instance Document‡ | X | ||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | X | ||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | X | ||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | X | ||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | X | ||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||
‡ The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
96
HAPPEN, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HAPPEN, INC. | ||||||||||||||
| (Registrant) | ||||||||||||||
| Date: | July 30, 2026 | /s/ SCOTT SANBORN | ||||||||||||
| Scott Sanborn | ||||||||||||||
| Chief Executive Officer | ||||||||||||||
| Date: | July 30, 2026 | /s/ ANDREW LABENNE | ||||||||||||
| Andrew LaBenne | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
97