Atlanticus Holdings Corp 10-Q

ITEM 1. FINANCIAL STATEMENTS       Atlanticus Holdings Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (Dollars in thousands)       June 30,     December 31,       2021     2020                     Assets                 Unrestricted cash and cash equivalents (including $ 156.9 million and $ 96.6 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)   $ 265,869     $ 178,102   Restricted cash and cash equivalents (including $ 49.8 million and $ 70.2 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)     67,884       80,859   Loans, interest and fees receivable:                 Loans, interest and fees receivable, at fair value (including $ 587.6 million and $ 374.2 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)     644,739       417,098   Loans, interest and fees receivable, gross (including $ 445.5 million and $ 560.2 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)     547,355       667,556   Allowances for uncollectible loans, interest and fees receivable (including $ 92.2 million and $ 120.9 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)     ( 95,183 )     ( 124,961 ) Deferred revenue (including $ 6.7 million and $ 10.3 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)     ( 31,344 )     ( 39,456 ) Net loans, interest and fees receivable     1,065,567       920,237   Property at cost, net of depreciation     1,704       2,240   Investments in equity-method investee     1,033       1,415   Operating lease right-of-use assets     6,970       9,181   Prepaid expenses and other assets     10,824       15,180   Total assets   $ 1,419,851     $ 1,207,214   Liabilities                 Accounts payable and accrued expenses   $ 38,656     $ 41,731   Operating lease liabilities     9,712       13,776   Notes payable, net (including $ 911.8 million and $ 827.1 million associated with variable interest entities at June 30, 2021 and December 31, 2020, respectively)     966,566       882,610   Notes payable associated with structured financings, at fair value (associated with variable interest entities)     2,562       2,919   Convertible senior notes     9,226       24,386   Income tax liability     37,211       25,932   Total liabilities     1,063,933       991,354                     Commitments and contingencies (Note 11)                                       Preferred stock, no par value, 10,000,000 shares authorized:                 Series A preferred stock, 400,000 shares issued and outstanding at June 30, 2021 (liquidation preference - $ 40.0 million); 400,000 shares issued and outstanding at December 31, 2020 (Note 4) (1)     40,000       40,000   Class B preferred units issued to noncontrolling interests (Note 4)     99,500       99,350                     Shareholders' Equity                 Series B preferred stock, no par value, 2,800,000 shares issued and outstanding at June 30, 2021 and 0 shares issued and outstanding at December 31, 2020 (liquidation preference - $ 70.0 million) (1)     —       —   Common stock, no par value, 150,000,000 shares authorized: 16,638,161 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at June 30, 2021; and 16,115,353 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at December 31, 2020     —       —   Paid-in capital     254,001       194,950   Retained deficit     ( 36,715 )     ( 117,666 ) Total shareholders’ equity     217,286       77,284   Noncontrolling interests     ( 868 )     ( 774 ) Total equity     216,418       76,510   Total liabilities, preferred stock and shareholders' equity   $ 1,419,851     $ 1,207,214     (1) Both the Series A preferred stock and the Series B preferred stock have no par value and are part of the same aggregate 10,000,000 shares authorized.   See accompanying notes.   1 Table of Contents     Atlanticus Holdings Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share data)       For the Three Months Ended     For the Six Months Ended       June 30,     June 30,       2021     2020     2021     2020   Revenue:                                 Consumer loans, including past due fees   $ 122,654     $ 100,112     $ 224,950     $ 203,259   Fees and related income on earning assets     49,553       32,399       86,573       67,044   Other revenue     7,312       2,910       11,891       5,636   Total operating revenue     179,519       135,421       323,414       275,939   Other non-operating revenue     2,586       325       3,426       315   Total revenue     182,105       135,746       326,840       276,254                                     Interest expense     ( 13,790 )     ( 12,252 )     ( 26,088 )     ( 25,836 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 11,096 )     ( 32,530 )     ( 15,231 )     ( 99,866 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 58,763 )     ( 25,667 )     ( 86,254 )     ( 40,858 ) Net margin     98,456       65,297       199,267       109,694                                     Operating expense:                                 Salaries and benefits     7,883       6,508       16,122       14,018   Card and loan servicing     18,212       15,601       35,599       31,438   Marketing and solicitation     13,678       10,190       23,979       19,507   Depreciation     320       320       632       605   Other     5,972       4,586       10,940       9,387   Total operating expense     46,065       37,205       87,272       74,955   Loss on repurchase of convertible senior notes     5,448       —       13,255       —   Income before income taxes     46,943       28,092       98,740       34,739   Income tax expense     ( 10,117 )     ( 4,975 )     ( 17,887 )     ( 6,260 ) Net income     36,826       23,117       80,853       28,479   Net loss attributable to noncontrolling interests     50       48       98       111   Net income attributable to controlling interests     36,876       23,165       80,951       28,590   Preferred dividends and discount accretion     ( 4,738 )     ( 4,736 )     ( 9,425 )     ( 7,495 ) Net income attributable to common shareholders   $ 32,138     $ 18,429     $ 71,526     $ 21,095   Net income attributable to common shareholders per common share—basic   $ 2.12     $ 1.28     $ 4.74     $ 1.46   Net income attributable to common shareholders per common share—diluted   $ 1.56     $ 0.93     $ 3.47     $ 1.12     See accompanying notes.     2 Table of Contents       Atlanticus Holdings Corporation and Subsidiaries Consolidated Statements of Shareholders’ Equity (Deficit) (Unaudited) For the Three and Six Months Ended June 30, 2021 and June 30, 2020 (Dollars in thousands)         Series B Preferred Stock     Common Stock                                     Temporary Equity       Shares Issued     Amount     Shares Issued     Amount     Paid-In Capital     Retained Deficit     Noncontrolling Interests     Total Equity     Class B Preferred Units     Series A Preferred Stock   Balance at December 31, 2020   $ —     $ —       16,115,353     $ —     $ 194,950     $ ( 117,666 )   $ ( 774 )   $ 76,510     $ 99,350     $ 40,000   Accretion of discount associated with issuance of subsidiary equity     —       —       —       —       ( 75 )     —       —       ( 75 )     75       —   Preferred dividends     —       —       —       —       ( 4,612 )     —       —       ( 4,612 )     —       —   Stock option exercises and proceeds related thereto     —       —       494,900       —       1,696       —       —       1,696       —       —   Compensatory stock issuances, net of forfeitures     —       —       39,942       —       —       —       —       —       —       —   Deferred stock-based compensation costs     —       —       —       —       545       —       —       545       —       —   Redemption and retirement of shares     —       —       ( 9,928 )     —       ( 297 )     —       —       ( 297 )     —       —   Net income     —       —       —       —       —       44,075       ( 48 )     44,027       —       —   Balance at March 31, 2021   $ —     $ —       16,640,267     $ —     $ 192,207     $ ( 73,591 )   $ ( 822 )   $ 117,794     $ 99,425     $ 40,000   Accretion of discount associated with issuance of subsidiary equity     —       —       —       —       ( 75 )     —       —       ( 75 )     75       —   Preferred dividends     —       —       —       —       ( 4,663 )     —       —       ( 4,663 )     —       —   Stock option exercises and proceeds related thereto     —       —       833       —       1       —       —       1       —       —   Compensatory stock issuances, net of forfeitures     —       —       5,808       —       —       —       —       —       —       —   Issuance of series B preferred stock, net     2,800,000       —       —       —       66,148       —       —       66,148       —       —   Contributions by owners of noncontrolling interests     —       —       —       —       —       —       4       4       —       —   Deferred stock-based compensation costs     —       —       —       —       687       —       —       687       —       —   Redemption and retirement of shares     —       —       ( 8,747 )     —       ( 304 )     —       —       ( 304 )     —       —   Net income     —       —       —       —       —       36,876       ( 50 )     36,826       —       —   Balance at June 30, 2021     2,800,000     $ —       16,638,161     $ —     $ 254,001     $ ( 36,715 )   $ ( 868 )   $ 216,418     $ 99,500     $ 40,000           Series B Preferred Stock     Common Stock                                     Temporary Equity       Shares Issued     Amount     Shares Issued     Amount     Paid-In Capital     Retained Deficit     Noncontrolling Interests     Total Equity     Class B Preferred Units     Series A Preferred Stock   Balance at December 31, 2019     —     $ —       15,885,314     $ —     $ 212,692     $ ( 211,786 )   $ ( 571 )   $ 335     $ 49,050     $ 40,000   Accretion of discount associated with issuance of subsidiary equity     —       —       —       —       ( 75 )     —       —       ( 75 )     75       —   Preferred dividends     —       —       —       —       ( 2,684 )     —       —       ( 2,684 )     —       —   Stock option exercises and proceeds related thereto     —       —       2,000       —       6       —       —       6       —       —   Compensatory stock issuances, net of forfeitures     —       —       64,915       —       —       —       —       —       —       —   Contributions by preferred unit holders     —       —       —       —       —       —       —       —       50,000       —   Deferred stock-based compensation costs     —       —       —       —       368       —       —       368       —       —   Redemption and retirement of shares     —       —       ( 74,724 )     —       ( 559 )     —       —       ( 559 )     —       —   Comprehensive income     —       —       —       —       —       5,425       ( 63 )     5,362       —       —   Balance at March 31, 2020     —     $ —       15,877,505     $ —     $ 209,748     $ ( 206,361 )   $ ( 634 )   $ 2,753     $ 99,125     $ 40,000   Accretion of discount associated with issuance of subsidiary equity     —       —       —       —       ( 75 )     —       —       ( 75 )     75       —   Preferred dividends     —       —       —       —       ( 4,661 )     —       —       ( 4,661 )     —       —   Stock option exercises and proceeds related thereto     —       —       37,667       —       114       —       —       114       —       —   Deferred stock-based compensation costs     —       —       —       —       281       —       —       281       —       —   Redemption and retirement of shares     —       —       ( 10,999 )     —       ( 112 )     —       —       ( 112 )     —       —   Comprehensive income     —       —       —       —       —       23,165       ( 48 )     23,117       —       —   Balance at June 30, 2020     —     $ —       15,904,173     $ —     $ 205,295     $ ( 183,196 )   $ ( 682 )   $ 21,417     $ 99,200     $ 40,000     See accompanying notes.   3 Table of Contents     Atlanticus Holdings Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands)       For the Six Months Ended June 30,       2021     2020   Operating activities                 Net income   $ 80,853     $ 28,479   Adjustments to reconcile net income to net cash provided by operating activities:                 Depreciation, amortization and accretion, net     1,727       3,955   Provision for losses on loans, interest and fees receivable     15,231       99,866   Interest expense from accretion of discount on notes     435       288   Income from accretion of merchant fees and discount associated with receivables purchases     ( 50,410 )     ( 66,526 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     86,254       40,858   Amortization of deferred loan costs     2,934       2,583   Income from equity-method investments     ( 8 )     ( 13 ) Loss on repurchase of convertible senior notes     13,255       —   Deferred stock-based compensation costs     1,232       649   Lease liability payments     ( 5,202 )     ( 5,101 ) Changes in assets and liabilities:                 Increase in uncollected fees on earning assets     ( 36,636 )     ( 19,847 ) Increase in income tax liability     11,279       5,984   Decrease in accounts payable and accrued expenses     ( 769 )     ( 10,605 ) Other     4,346       3,389   Net cash provided by operating activities     124,521       83,959                     Investing activities                 Proceeds from equity-method investee     390       546   Proceeds from recoveries on charged off receivables     6,626       8,891   Investments in earning assets     ( 895,287 )     ( 570,651 ) Proceeds from earning assets     728,533       494,474   Purchases and development of property, net of disposals     ( 95 )     ( 714 ) Net cash used in investing activities     ( 159,833 )     ( 67,454 )                   Financing activities                 Noncontrolling interests contributions     4       50,000   Proceeds from issuance of Series B preferred stock, net of issuance costs     66,148       —   Preferred dividends     ( 9,325 )     ( 4,187 ) Proceeds from exercise of stock options     1,697       121   Purchase and retirement of outstanding stock     ( 601 )     ( 671 ) Proceeds from borrowings     430,534       104,209   Repayment of borrowings     ( 378,363 )     ( 164,284 ) Net cash provided by (used in) financing activities     110,094       ( 14,812 ) Effect of exchange rate changes on cash     10       ( 44 ) Net increase in cash and cash equivalents     74,792       1,649   Cash and cash equivalents and restricted cash at beginning of period     258,961       176,394   Cash and cash equivalents and restricted cash at end of period   $ 333,753     $ 178,043   Supplemental cash flow information                 Cash paid for interest   $ 23,146     $ 23,802   Net cash income tax payments   $ 6,608     $ 276   (Decrease) increase in accrued and unpaid preferred dividends   $ ( 50 )   $ 3,158     See accompanying notes.   4 Table of Contents   Atlanticus Holdings Corporation and Subsidiaries Notes to Consolidated Financial Statements June 30, 2021 and 2020     1. Description of Our Business   Our accompanying consolidated financial statements include the accounts of Atlanticus Holdings Corporation (the “Company”) and those entities we control. We are primarily focused on facilitating consumer credit through the use of our financial technology and related services. Through our subsidiaries, we provide technology and other support services to lenders who offer an array of financial products and services to consumers who may have been declined by other providers of credit.   We are principally engaged in providing products and services to lenders in the U.S. and, in most cases, we invest in the receivables originated by lenders who utilize our technology platform and other related services. From time to time, we also purchase receivables portfolios from third parties. In these Notes to Consolidated Financial Statements, “receivables” or “loans” typically refer to receivables we have purchased from our bank partners or from third parties.   Within our Credit and Other Investments segment, we facilitate consumer finance programs offered by our bank partner to originate consumer loans through multiple channels, including retail and healthcare point-of-sale (collectively "point-of-sale"), direct mail solicitation, digital marketing and through partner relationships. In the point-of-sale channel, we partner with retailers and service providers in various industries across the United States (“U.S.”) to enable them to provide credit to their customers for the purchase of goods and services. These services of our bank partner are often extended to consumers who may have been declined by other providers of credit. We specialize in supporting this “second look” credit service in various market segments across the U.S. Additionally, we support lenders who market general purpose credit cards directly to consumers (collectively, the “direct-to-consumer” operations) through multiple channels enabling them to reach consumers through a diverse origination platform. Using our infrastructure and technology platform, we also provide loan servicing, including risk management and customer service outsourcing, for third parties.   We also report within our Credit and Other Investments segment: 1 ) the servicing income from our legacy credit card receivables, 2 ) the income earned from an investment in an equity-method investee that holds credit card receivables for which we are the servicer; and 3 ) gains or losses associated with investments previously made in consumer finance technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. These investments are carried at cost. None of these companies are publicly-traded and there are no material pending liquidity events.   Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business. We purchase auto loans at a discount and with dealer retentions or holdbacks that provide risk protection. Also within our Auto Finance segment, we are providing certain installment lending products in addition to our traditional loans secured by automobiles.   On March 13, 2020, a national emergency was declared under the National Emergencies Act due to a new strain of coronavirus ("COVID- 19" ). On March 11, 2021, the American Rescue Plan, a $1.9 trillion stimulus package that extended and expanded benefits provided under previous legislation, was signed into law. The long-term impacts of the new law on the economy and our consumers is currently unknown.   The duration and severity of the effects of COVID- 19 on our financial condition, results of operations and liquidity remain highly uncertain. Likewise, we do not know the duration and severity of the impact of COVID- 19 on all members of the Company’s ecosystem – our bank partner, merchants and consumers – as well as our employees. We continue to monitor the ongoing pandemic and have modified certain business practices including minimizing employee travel and executing on a company-wide remote work program. These practices have also been adopted by certain of our third party service partners.     2. Significant Accounting Policies and Consolidated Financial Statement Components   The following is a summary of significant accounting policies we follow in preparing our consolidated financial statements, as well as a description of significant components of our consolidated financial statements.   Basis of Presentation and Use of Estimates   We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements, as well as the reported amounts of revenues and expenses during each reporting period. We base these estimates on information available to us as of the date of the financial statements. Actual results could differ materially from these estimates. Certain estimates, such as credit losses, payment rates, costs of funds, discount rates and the yields earned on credit card receivables, significantly affect the reported amount (and changes thereon) of our Loans, interest and fees receivables, at fair value and Notes payable associated with structured financings recorded at fair value on our consolidated balance sheets and consolidated statements of operations. Additionally, estimates of future credit losses have a significant effect on loans, interest and fees receivable, net, as shown on our consolidated balance sheets, as well as on the provision for losses on loans, interest and fees receivable within our consolidated statements of operations. Certain prior year amounts on our consolidated statements of operations have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.    We have eliminated all significant intercompany balances and transactions for financial reporting purposes.   Loans, Interest and Fees Receivable   We maintain two categories of Loans, Interest and Fees Receivable on our consolidated balance sheets: those that are carried at fair value (Loans, interest and fees receivable, at fair value) and those that are carried at net amortized cost (Loans, interest and fees receivable, gross). For both categories of loans, interest and fees receivable, other than our Auto Finance receivables, interest and fees are discontinued when loans, interest and fees receivable become contractually 90 or more days past due. We charge off our Credit and Other Investments and Auto Finance segment receivables when they become contractually more than 180 days past due. For all of our products, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death. However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or estate large enough to pay the debt in full.   Loans, Interest and Fees Receivable, at Fair Value.  Loans, interest and fees receivable held at fair value represent both the receivables underlying credit card securitization trusts (the "Securitized Receivables") and those receivables for which we elected the fair value option on January 1, 2020 ( the "Fair Value Receivables"). Both the Securitized Receivables and the Fair Value Receivables are held by entities that qualify as variable interest entities ("VIE"), and are consolidated onto our consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities. Loans and finance receivables include accrued and unpaid interest and fees.   Further details concerning our loans, interest and fees receivable held at fair value are presented within Note 6, “Fair Values of Assets and Liabilities.”   5 Table of Contents   Loans, Interest and Fees Receivable, Gross. Our loans, interest and fees receivable, gross, currently consist of receivables associated with (a) a portion (those which are not part of our Fair Value Receivables) of our U.S. point-of-sale and direct-to-consumer financing and other credit products platform within our Credit and Other Investments segment and (b) our Auto Finance segment’s operations. Our Credit and Other Investments segment loans, interest and fees receivable generally are unsecured, while our Auto Finance segment loans, interest and fees receivable generally are secured by the underlying automobiles for which we hold the vehicle title. We purchased auto loans with outstanding principal of $ 47.8 million, $ 98.3 million, $ 45.2 million and $ 92.6 million for the three and six months ended June 30, 2021  and 2020, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies.   As of June 30, 2021 and  December 31, 2020 , the weighted average remaining accretion period for the $ 31.3 million and $ 39.5 million of deferred revenue reflected in the consolidated balance sheets was 15  months and 14  months, respectively. Included within deferred revenue, are merchant fees and discounts on purchased loans of $ 24.1 million and $ 28.2 million as of June 30, 2021 and  December 31, 2020 , respectively.   As a result of the recent COVID- 19 pandemic and subsequent declaration of a national emergency on March 13, 2020 under the National Emergencies Act, certain consumers have been offered the ability to defer their payment without penalty during the national emergency period. On March 22, 2020, the federal bank regulatory agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus”, ("COVID- 19 Guidance"). The COVID- 19 Guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID- 19. In accordance with the COVID- 19 Guidance, certain consumers negatively impacted by COVID- 19 have been provided short-term payment deferrals and fee waivers. Receivables enrolled in these short-term payment deferrals continue to accrue interest and their delinquency status will not change through the deferment period. Through June 30, 2021 we continue to actively work with consumers that indicate hardship as a result of COVID- 19;  however, the number of impacted consumers continues to be a diminishing part of our overall receivable base. In order to establish appropriate reserves for this population we considered various factors such as subsequent payment behavior and additional requests by the consumer for further deferrals or hardship claims.   A roll-forward (in millions) of our allowance for uncollectible loans, interest and fees receivable by class of receivable is as follows:    For the Three Months Ended June 30, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at beginning of period   $ ( 75.1 )   $ ( 1.5 )   $ ( 29.3 )   $ ( 105.9 ) Provision for loan losses     ( 11.0 )     0.2       ( 0.3 )     ( 11.1 ) Charge offs     21.2       0.2       6.4       27.8   Recoveries     ( 3.1 )     ( 0.3 )     ( 2.6 )     ( 6.0 ) Balance at end of period   $ ( 68.0 )   $ ( 1.4 )   $ ( 25.8 )   $ ( 95.2 )   For the Six Months Ended June 30, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at beginning of period   $ ( 88.2 )   $ ( 1.7 )   $ ( 35.1 )   $ ( 125.0 ) Provision for loan losses     ( 15.2 )     0.1       ( 0.1 )     ( 15.2 ) Charge offs   40.2       0.8       13.7       54.7   Recoveries     ( 4.8 )     ( 0.6 )     ( 4.3 )     ( 9.7 ) Balance at end of period   $ ( 68.0 )   $ ( 1.4 )   $ ( 25.8 )   $ ( 95.2 )   As of June 30, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at end of period individually evaluated for impairment   $ —     $ ( 0.1 )   $ —     $ ( 0.1 ) Balance at end of period collectively evaluated for impairment   $ ( 68.0 )   $ ( 1.3 )   $ ( 25.8 )   $ ( 95.1 ) Loans, interest and fees receivable:                                 Loans, interest and fees receivable, gross   $ 299.2     $ 93.2     $ 155.0     $ 547.4   Loans, interest and fees receivable individually evaluated for impairment   $ —     $ 0.2     $ —     $ 0.2   Loans, interest and fees receivable collectively evaluated for impairment   $ 299.2     $ 93.0     $ 155.0     $ 547.2     6 Table of Contents   For the Three Months Ended June 30, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at beginning of period   $ ( 128.4 )   $ ( 1.8 )   $ ( 56.7 )   $ ( 186.9 ) Provision for loan losses     ( 30.2 )     ( 0.6 )     ( 1.7 )     ( 32.5 ) Charge offs     48.8       0.8       22.9       72.5   Recoveries     ( 2.7 )     ( 0.2 )     ( 8.3 )     ( 11.2 ) Balance at end of period   $ ( 112.5 )   $ ( 1.8 )   $ ( 43.8 )   $ ( 158.1 )   For the Six Months Ended June 30, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at beginning of period   $ ( 121.3 )   $ ( 1.6 )   $ ( 63.4 )   $ ( 186.3 ) Provision for loan losses     ( 81.2 )     ( 1.4 )     ( 17.3 )     ( 99.9 ) Charge offs     95.0       1.7       47.3       144.0   Recoveries     ( 5.0 )     ( 0.5 )     ( 10.4 )     ( 15.9 ) Balance at end of period   $ ( 112.5 )   $ ( 1.8 )   $ ( 43.8 )   $ ( 158.1 )   As of December 31, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at end of period individually evaluated for impairment   $ —     $ ( 0.3 )   $ —     $ ( 0.3 ) Balance at end of period collectively evaluated for impairment   $ ( 88.2 )   $ ( 1.4 )   $ ( 35.1 )   $ ( 124.7 ) Loans, interest and fees receivable:                                 Loans, interest and fees receivable, gross   $ 364.2     $ 93.2     $ 210.2     $ 667.6   Loans, interest and fees receivable individually evaluated for impairment   $ —     $ 2.3     $ —     $ 2.3   Loans, interest and fees receivable collectively evaluated for impairment   $ 364.2     $ 90.9     $ 210.2     $ 665.3     Recoveries, noted above, consist of amounts received from the efforts of third -party collectors we employ and through the sale of charged-off accounts to unrelated third -parties. All proceeds received, associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at net realizable value on our consolidated statements of operations. For the three and six months ended June 30, 2021, $ 2.7 million and $ 5.1 million, respectively, of our recoveries noted above related to collections from third -party collectors we employ and $ 3.3 million and $ 4.6 million, respectively, related to sales of charged-off accounts to unrelated third -parties. For the three and months ended June 30, 2020, $ 3.8 million and $ 7.0  million, respectively, of our recoveries noted above related to collections from third -party collectors we employ and $ 7.4 million and $ 8.9 million, respectively, related to sales of charged-off accounts to unrelated third -parties.   7 Table of Contents   An aging of our delinquent loans, interest and fees receivable, gross (in millions) by class of receivable as of June 30, 2021 and  December 31, 2020  is as follows:   As of June 30, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   30-59 days past due   $ 10.4     $ 5.6     $ 5.0     $ 21.0   60-89 days past due     13.3       1.7       5.5       20.5   90 or more days past due     21.2       1.2       7.9       30.3   Delinquent loans, interest and fees receivable, gross     44.9       8.5       18.4       71.8   Current loans, interest and fees receivable, gross     254.3       84.7       136.6       475.6   Total loans, interest and fees receivable, gross   $ 299.2     $ 93.2     $ 155.0     $ 547.4   Balance of loans greater than 90-days delinquent still accruing interest and fees   $ —     $ 0.8     $ —     $ 0.8     As of December 31, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   30-59 days past due   $ 12.4     $ 7.6     $ 5.1     $ 25.1   60-89 days past due     8.0       2.8       3.8       14.6   90 or more days past due     19.9       2.1       9.5       31.5   Delinquent loans, interest and fees receivable, gross     40.3       12.5       18.4       71.2   Current loans, interest and fees receivable, gross     323.9       80.7       191.8       596.4   Total loans, interest and fees receivable, gross   $ 364.2     $ 93.2     $ 210.2     $ 667.6   Balance of loans greater than 90-days delinquent still accruing interest and fees   $ —     $ 1.5     $ —     $ 1.5     Troubled Debt Restructurings. As part of ongoing collection efforts, once an account, the receivable of which is included in our Credit and Other Investments segment, becomes  90  days or more past due, the related receivable is placed on a non-accrual status. Placement on a non-accrual status results in the use of programs under which the contractual interest associated with a receivable may be reduced or eliminated, or a certain amount of accrued fees is waived, provided a minimum number or amount of payments have been made. Following this adjustment, if a customer demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, we will re-age the customer’s account. When we re-age an account, we adjust the status of the account to bring a delinquent account current, but generally do  not  make any further modifications to the payment terms or amount owed. Once an account is placed on a non-accrual status, it is closed for further purchases. Accounts that are placed on a non-accrual status and thereafter make at least  one  payment qualify as troubled debt restructurings (“TDRs”). The above referenced COVID- 19 Guidance issued by federal bank regulatory agencies, in consultation with the FASB staff, concluded that short-term modifications (e.g., six months) made on a good faith basis to borrowers who were impacted by COVID- 19 and who were less than 30 days past due as of the implementation date of a relief program are not TDRs. Although we are not a financial institution and therefore not directly subject to the COVID- 19 Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances. As a result, the below tables exclude certain accounts that are included under that guidance.    The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged, as of  June 30, 2021 and  December 31, 2020 :       As of       June 30, 2021     December 31, 2020       Point-of-sale     Direct-to-consumer     Point-of-sale     Direct-to-consumer   Number of TDRs     12,745       31,575       12,394       37,784   Number of TDRs that have been re-aged     1,716       5,827       2,788       7,846   Amount of TDRs on non-accrual status (in thousands)   $ 14,846     $ 21,507     $ 14,537     $ 26,989   Amount of TDRs on non-accrual status above that have been re-aged (in thousands)   $ 2,686     $ 4,602     $ 4,662     $ 6,890   Carrying value of TDRs (in thousands)   $ 10,171     $ 14,612     $ 9,583     $ 14,287   TDRs - Performing (carrying value, in thousands)*   $ 8,405     $ 13,233     $ 7,420     $ 11,855   TDRs - Nonperforming (carrying value, in thousands)*   $ 1,766     $ 1,379     $ 2,163     $ 2,432     *“TDRs - Performing” include accounts that are current on all amounts owed, while “TDRs - Nonperforming” include all accounts with past due amounts owed.   We do not separately reserve or impair these receivables outside of our general reserve process.   The Company modified 52,686 and 62,040 accounts in the amount of $ 57.4 million and $ 74.4 million during the twelve month periods ended June 30, 2021  and June 30, 2020 , respectively, that qualified as TDRs. The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the prior twelve months and subsequently defaulted.       Twelve Months Ended       June 30, 2021     June 30, 2020       Point-of-sale     Direct-to-consumer     Point-of-sale     Direct-to-consumer   Number of accounts     2,162       6,204       4,065       6,744   Loan balance at time of charge off (in thousands)   $ 2,779     $ 4,847     $ 5,764     $ 6,208     Accounts Payable and Accrued Expenses   Accounts payable and accrued expenses reflect both the billed and unbilled amounts owed at the end of a period for services rendered. Commencing in July 2019, accounts payable and accrued expenses includes payments owed under a deferred payment program started with an unrelated third -party for a portion of our marketing expenditures. As a result of this agreement, we were able to extend the payment terms associated with our growing marketing spend between 10 - 37 months.    Income Taxes   We experienced effective tax rates of 21.6 % and 18.1 %, for the three and six months ended June 30, 2021, compared to 17.7 % and 18.0 % for the three and six months ended June 30, 2020.    Our effective tax rate for the three months ended June 30, 2021,  is above the statutory rate due to state and foreign income tax expense, significantly offset, however, by ( 1 ) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes, and ( 2 ) the exclusion from taxable income of benefits received under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. These same two items served to offset the effects of state and foreign income tax expense and executive compensation deduction limits experienced in the first quarter of 2021 under Section 162 (m) of the Internal Revenue Code of 1986 on our effective tax rate for the six months ended June 30, 2021. Also offsetting such effects and thereby causing our effective tax rate to be below the statutory rate for the six months ended June 30, 2021, are ( 1 ) deductions in the first quarter of 2021 associated with the exercise of stock options and the vesting of restricted stock at stock fair values significantly exceeding such share-based awards’ grant date values; and ( 2 ) our release of state tax valuation allowances in the first quarter of 2021.   Our effective tax rates for the three and six months ended June 30, 2020  were below the statutory rate principally due to ( 1 ) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes and ( 2 ) deductions associated with the exercise of stock options and the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’ grant date values. Partially offsetting such effects on our effective tax rates were the effects of accruals of interest on unpaid federal tax liabilities and uncertain tax positions and state and foreign income tax expense during such periods.   We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our consolidated statements of operations. We likewise report within such line item the reversal of interest expense associated with our accrued liabilities for uncertain tax positions to the extent we resolve such liabilities in a manner favorable to our accruals therefor. We had de minimis interest expense or reversals thereof during the three and six months ended June 30, 2021, and 2020.   8 Table of Contents Revenue Recognition and Revenue from Contracts with Customers   Consumer Loans, Including Past Due Fees   Consumer loans, including past due fees reflect interest income, including finance charges, and late fees on loans in accordance with the terms of the related customer agreements. Premiums, discounts and merchant fees paid or received associated with installment or auto loans that are not included as part of our Fair Value Receivables are deferred and amortized over the average life of the related loans using the effective interest method. Premiums, discounts and merchant fees paid or received associated with Fair Value Receivables are recognized upon receivable acquisition. Finance charges and fees, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.   Fees and Related Income on Earning Assets   Fees and related income on earning assets primarily include fees associated with the credit products, including the receivables underlying our U.S. point-of-sale finance and direct-to-consumer platform, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others.   Other   revenue   Other revenue includes revenues associated with ancillary product offerings, interchange revenues and servicing income. We recognize these fees as income in the period earned.   Loss on repurchase of convertible senior notes   In periods where we repurchase outstanding 5.875 % convertible senior notes (“convertible senior notes”), we record any discount or premium paid for the repurchase (including accrued interest) relative to the amortized book value of the notes. In the three and six months ended June 30, 2021, we repurchased $ 6.4 million and $ 21.1 million, respectively, in face amount of our outstanding convertible senior notes for $ 10.2 million and $ 28.9 , respectively, million in cash (including accrued interest). The repurchase resulted in a loss of approximately $ 5.4 million and $ 13.3 million (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase, respectively). Upon acquisition, the notes were retired.   Other non-operating revenue   Other non-operating revenue includes revenues associated with investments in equity method investees and other revenues not associated with our ongoing business operations.    Revenue from Contracts with Customers   Components (in thousands) of our revenue from contracts with customers is as follows:       Credit and                   For the Three Months Ended June 30, 2021   Other Investments     Auto Finance     Total   Interchange revenues, net (1)   $ 4,269     $ —     $ 4,269   Servicing income     349       299       648   Service charges and other customer related fees     2,380       15       2,395   Total revenue from contracts with customers   $ 6,998     $ 314     $ 7,312   ( 1 ) Interchange revenue is presented net of customer reward expense.       Credit and                   For the Six Months Ended June 30, 2021   Other Investments     Auto Finance     Total   Interchange revenues, net (1)   $ 6,891     $ —     $ 6,891   Servicing income     737       624       1,361   Service charges and other customer related fees     3,609       30       3,639   Total revenue from contracts with customers   $ 11,237     $ 654     $ 11,891   ( 1 ) Interchange revenue is presented net of customer reward expense.       Credit and                   For the Three Months Ended June 30, 2020   Other Investments     Auto Finance     Total   Interchange revenues, net (1)   $ 1,842     $ —     $ 1,842   Servicing income     240       248       488   Service charges and other customer related fees     564       16       580   Total revenue from contracts with customers   $ 2,646     $ 264     $ 2,910   ( 1 ) Interchange revenue is presented net of customer reward expense.       Credit and                   For the Six Months Ended June 30, 2020   Other Investments     Auto Finance     Total   Interchange revenues, net (1)   $ 3,822     $ —     $ 3,822   Servicing income     624       468       1,092   Service charges and other customer related fees     689       33       722   Total revenue from contracts with customers   $ 5,135     $ 501     $ 5,636   ( 1 ) Interchange revenue is presented net of customer reward expense.   Recent Accounting Pronouncements   In  June 2016, the FASB issued Accounting Standards Update ("ASU") 2016 - 13, Measurement of Credit Losses on Financial Instruments. The guidance requires an assessment of credit losses based on expected rather than incurred losses (known as the current expected credit loss model). This generally will result in the recognition of allowances for losses earlier than under current accounting guidance for trade and other receivables, held to maturity debt securities and other instruments. The FASB has added several technical amendments (ASU 2018 - 19, 2019 - 04, 2019 - 10 and 2019 - 11 ) to clarify technical aspects of the guidance and applicability to specific financial instruments or transactions. In May 2019, the FASB issued ASU 2019 - 05, which allows entities to measure assets in the scope of ASC 326 - 20, except held to maturity securities, using the fair value option when they adopt the new credit impairment standard. The election can be made on an instrument by instrument basis. The standard will be adopted on a prospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. ASU 2016 - 13 (and ASU 2019 - 05 ) was initially effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The FASB recently delayed the effective date of this standard until annual and interim periods beginning after December 15, 2022 for non-accelerated and smaller reporting company filers, with early adoption permitted for smaller reporting companies (among others). We are currently in the process of reviewing accounting interpretations, including the recently added fair value option, expected data requirements and necessary changes to our loss estimation methods, processes and systems. This standard is expected to result in an increase to our allowance for loan losses for our amortized cost receivables given the change to expected losses for the estimated life of the financial asset. If the fair value option is elected for some or all of our eligible receivables, we would expect more potential volatility in the recorded value of the assets as these receivables are remeasured each period. The extent of the financial statement impact will depend on the asset quality of the portfolio, and economic conditions and forecasts at adoption.   In March 2020, the FASB issued ASU No. 2020 - 04,  Reference Rate Reform (Topic 848 ), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides an optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be adopted no later than December 1, 2022, with early adoption permitted. In January 2021, FASB issued ASU 2021 - 01,  Reference Rate Reform (Topic 848 ): Scope, which refines the scope of ASC 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate reform. We have not yet adopted this ASU and are evaluating the effect of adopting this new accounting guidance.   Subsequent Events   We evaluate subsequent events that occur after our consolidated balance sheet date but before our consolidated financial statements are issued. There are two types of subsequent events: ( 1 ) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements; and ( 2 ) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.    As described in greater detail under Note 4, "Shareholders' Equity and Preferred Stock," the Company issued 388,533 shares of Series B Cumulative Perpetual Preferred Stock on July 8, 2021.   We have evaluated subsequent events occurring after June 30, 2021 , and based on our evaluation we did not identify any recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements, other than those disclosed above.   9 Table of Contents     3. Segment Reporting   We operate primarily within one industry and manage our business through the following two reportable segments: Credit and Other Investments, and Auto Finance.   Summary operating segment information (in thousands) is as follows:     Three Months Ended June 30, 2021   Credit and Other Investments     Auto Finance     Total   Revenue:                         Consumer loans, including past due fees   $ 114,256     $ 8,398     $ 122,654   Fees and related income on earning assets     49,535       18       49,553   Other revenue     6,999       313       7,312   Other non-operating revenue     2,569       17       2,586   Total revenue     173,359       8,746       182,105   Interest expense     ( 13,515 )     ( 275 )     ( 13,790 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 11,296 )     200       ( 11,096 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 58,763 )     —       ( 58,763 ) Net margin   $ 89,785     $ 8,671     $ 98,456   Income before income taxes   $ 43,972     $ 2,971     $ 46,943   Income tax expense   $ ( 9,390 )   $ ( 727 )   $ ( 10,117 )   Six Months Ended June 30, 2021   Credit and Other Investments     Auto Finance     Total   Revenue:                         Consumer loans, including past due fees   $ 208,366     $ 16,584     $ 224,950   Fees and related income on earning assets     86,538       35       86,573   Other revenue     11,237       654       11,891   Other non-operating revenue     3,404       22       3,426   Total revenue     309,545       17,295       326,840   Interest expense     ( 25,559 )     ( 529 )     ( 26,088 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 15,303 )     72       ( 15,231 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 86,254 )     —       ( 86,254 ) Net margin   $ 182,429     $ 16,838     $ 199,267   Income before income taxes   $ 93,276     $ 5,464     $ 98,740   Income tax expense   $ ( 16,553 )   $ ( 1,334 )   $ ( 17,887 ) Total assets   $ 1,338,017     $ 81,834     $ 1,419,851     10     Three Months Ended June 30, 2020   Credit and Other Investments     Auto Finance     Total   Revenue:                         Consumer loans, including past due fees   $ 92,206     $ 7,906     $ 100,112   Fees and related income on earning assets     32,386       13       32,399   Other revenue     2,646       264       2,910   Other non-operating revenue     315       10       325   Total revenue     127,553       8,193       135,746   Interest expense     ( 11,977 )     ( 275 )     ( 12,252 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 31,899 )     ( 631 )     ( 32,530 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 25,667 )     —       ( 25,667 ) Net margin   $ 58,010     $ 7,287     $ 65,297   Income before income taxes   $ 25,924     $ 2,168     $ 28,092   Income tax expense   $ ( 4,403 )   $ ( 572 )   $ ( 4,975 )   Six Months Ended June 30, 2020   Credit and Other Investments     Auto Finance     Total   Revenue:                         Consumer loans, including past due fees   $ 187,459     $ 15,800     $ 203,259   Fees and related income on earning assets     67,013       31       67,044   Other revenue     5,135       501       5,636   Other non-operating revenue     302       13       315   Total revenue     259,909       16,345       276,254   Interest expense     ( 25,152 )     ( 684 )     ( 25,836 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 98,429 )     ( 1,437 )     ( 99,866 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 40,858 )     —       ( 40,858 ) Net margin   $ 95,470     $ 14,224     $ 109,694   Income before income taxes   $ 30,991     $ 3,748     $ 34,739   Income tax expense   $ ( 5,279 )   $ ( 981 )   $ ( 6,260 ) Total assets   $ 864,557     $ 79,692     $ 944,249         4. Shareholders’ Equity and Preferred Stock   On  November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove Ventures, LLC, a Nevada limited liability company (“Dove”). The agreement provided for a senior secured term loan facility in an amount of up to $ 40.0 million at any time outstanding. On December 27, 2019, the Company issued 400,000 shares ( 10,000,000 shares authorized, 400,000 shares outstanding) of its Series A Preferred Stock with an aggregate initial liquidation preference of $ 40.0 million, in exchange for full satisfaction of the $ 40.0 million that the Company owed Dove under the Loan and Security Agreement. Dividends on the preferred stock are  6 % per annum (cumulative, non-compounding) and are payable as declared, and in preference to any common stock dividends, in cash. The Series A Preferred Stock is perpetual and has no maturity date. The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $ 100 per share, plus any accumulated and unpaid dividends. At the request of holders of a majority of the shares of Series A Preferred Stock, the Company shall offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024.  Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $ 10 per share, subject to certain adjustment in certain circumstances to prevent dilution. Given the redemption rights contained within the Series A Preferred Stock, we account for the outstanding preferred stock as temporary equity in the consolidated balance sheets. Dividends paid on the Series A Preferred Stock are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders. The common stock issuable upon conversion of Series A Preferred Stock is included in our calculation of Net income attributable to common shareholders per share—diluted. See Note 12, “Net Income Attributable to Controlling Interests Per Common Share” for more information.   Dove is a limited liability company owned by three trusts. David G. Hanna is the sole shareholder and the President of the corporation that serves as the sole trustee of one of the trusts, and David G. Hanna and members of his immediate family are the beneficiaries of this trust. Frank J. Hanna, III is the sole shareholder and the President of the corporation that serves as the sole trustee of the other two trusts, and Frank J. Hanna, III and members of his immediate family are the beneficiaries of these other two trusts.   During the three and six months ended June 30, 2021 , we repurchased and contemporaneously retired 8,747  and 18,675 shares of our common stock at an aggregate cost of $ 304,000  and $ 601,000 , respectively, pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations. During the three and six months ended June 30, 2020, we repurchased and contemporaneously retired 10,999 and 85,723 shares of our common stock at an aggregate cost of $ 112,000  and $ 671,000 , respectively, pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations.   We had 1,459,233 loaned shares outstanding at June 30, 2021 and  December 31, 2020 , which were originally lent in connection with our November 2005 issuance of convertible senior notes. We retire lent shares as they are returned to us.   On  November 14, 2019, a wholly-owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $ 1.00 per unit to an unrelated third party. The units carry a 16 % preferred return to be paid quarterly, with up to 6 percentage points of the preferred return to be paid through the issuance of additional units or cash, at our election. The units have both call and put rights and are also subject to various covenants including a minimum book value, which if not satisfied, could allow for the securities to be put back to the subsidiary. On March 30, 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms. The proceeds from the transaction are being used for general corporate purposes. We have included the issuance of these Class B preferred units as temporary noncontrolling interest on the consolidated balance sheets. Dividends paid on the Class B preferred units are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders. See Note 12,  “Net Income Attributable to Controlling Interests Per Common Share” for more information.   On June 8, 2021, we issued an aggregate of 2.8 million shares of 7.625 % Series B Cumulative Perpetual Preferred Stock, no par value with a liquidation preference of $ 25.00 per share (the “Series B Cumulative Perpetual Preferred Stock”), in a public offering at a price to the public of $ 25.00 per share. The Company also granted the Underwriters an option to purchase additional shares of Series B Cumulative Perpetual Preferred Stock during the 30 days following the date of the Underwriting Agreement. The Company raised gross proceeds of $ 70.0 million before deducting underwriting discounts, the structuring fee and other offering expenses. The Series B Cumulative Perpetual Preferred Stock may be redeemed at our election (after 5 years) in whole or from time to time in part, by paying $ 25.00 per share, plus any accumulated and unpaid dividends. Dividends on the Series B Cumulative Perpetual Preferred Stock will be payable quarterly and are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders. On July 8, 2021, the Company issued an additional  388,533 shares of the Company's Series B Cumulative Perpetual Preferred Stock, pursuant to the exercise of the underwriters’ option to purchase additional shares.  Upon the closing of the second issuance, the Company raised additional gross proceeds of $ 9.7 million before deducting underwriting discounts, the structuring fee and other offering expenses.   11 Table of Contents     5. Investment in Equity-Method Investee   Our equity-method investment outstanding at June 30, 2021 consists of our 66.7 % interest in a joint venture formed to purchase a credit card receivable portfolio.   In the following tables, we summarize (in thousands) balance sheet and results of operations data for our equity-method investee:       As of       June 30, 2021     December 31, 2020   Loans, interest and fees receivables, at fair value   $ 1,457     $ 1,994   Total assets   $ 1,530     $ 2,105   Total liabilities   $ 8     $ 10   Members’ capital   $ 1,522     $ 2,095         Three Months Ended June 30,     Six Months Ended June 30,       2021     2020     2021     2020   Net margin   $ 6     $ 153     $ 61     $ 92   Net income (loss)   $ ( 17 )   $ 118     $ 12     $ 19   Net income (loss) attributable to our equity investment investee   $ ( 11 )   $ 79     $ 8     $ 13         6. Fair Values of Assets and Liabilities   As previously discussed, as of January 1, 2020, we elected the fair value option to account for certain loans receivable associated with our point-of-sale and direct-to-consumer platform that are acquired on or after January 1, 2020. We estimate the fair value of these receivables using a discounted cash flow model, and reevaluate the fair value of our Fair Value Receivables at the end of each quarter. Additionally, we may adjust our models to reflect macro events that we believe market participants would consider relevant. With the aforementioned market impacts of COVID- 19 and related government stimulus and relief measures, we have included some expected market degradation in our model to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in chargeoffs and decrease in payments) above the level that historical trends would suggest.   We previously elected the fair value option with respect to our credit card loans, interest and fees receivable portfolios, the retained interests in which we historically recorded at fair value under securitization structures that were off balance sheet prior to accounting rules changes requiring their consolidation into our financial statements.   Fair value differs from amortized cost accounting in various ways. Under the fair value option credit losses are recognized through income as they are incurred rather than through the establishment of an allowance and provision for losses. We update our fair value analysis each quarter, with changes since the prior reporting period reflected as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of operations. Changes in interest rates, credit spreads, realized and projected credit losses and cash flow timing will lead to changes in the fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value and therefore impact earnings.    Fair value differs from amortized cost accounting in the following ways:   • Receivables and notes are recorded at their fair value, not their principal and fee balance or cost basis;   • The fair value of the loans takes into consideration net charge-offs for the remaining life of the loans with no separate allowance for loan loss calculation;   • Certain fee billings (such as annual or merchant fees) and expenses of loans and notes are no longer deferred but recognized (when billed or incurred) in income or expense, respectively;   • Changes in the fair value of loans and notes impact recorded revenues; and   • Net charge-offs are recognized as they occur.   For all of our other receivables and debt (other than the notes payable underlying our formerly off-balance sheet credit card securitization structures), we have not elected the fair value option. Nevertheless, pursuant to applicable requirements, we include disclosures of the fair value of these other items to the extent practicable within the disclosures below. Additionally, we have other liabilities, associated with consolidated legacy credit card securitization trusts, that we are required to carry at fair value in our consolidated financial statements, and they also are addressed within the disclosures below.   Where applicable as noted above, we account for our financial assets and liabilities at fair value based upon a three -tiered valuation system. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Where inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input that is significant to the fair value measurement in its entirety.   Valuations and Techniques for Assets   Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The table below summarizes (in thousands) by fair value hierarchy the  June 30, 2021 and  December 31, 2020 fair values and carrying amounts of ( 1 ) our assets that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our assets not carried at fair value, but for which fair value disclosures are required:   Assets – As of June 30, 2021 (1)   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Assets   Loans, interest and fees receivable, net for which it is practicable to estimate fair value   $ —     $ —     $ 487,725     $ 420,828   Loans, interest and fees receivable, at fair value   $ —     $ —     $ 644,739     $ 644,739     Assets – As of December 31, 2020 (1)   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Assets   Loans, interest and fees receivable, net for which it is practicable to estimate fair value   $ —     $ —     $ 586,908     $ 503,139   Loans, interest and fees receivable, at fair value   $ —     $ —     $ 417,098     $ 417,098       ( 1 ) For cash, deposits and investments in equity securities, the carrying amount is a reasonable estimate of fair value.   For those asset classes above that are required to be carried at fair value in our consolidated financial statements, gains and losses associated with fair value changes are detailed on our consolidated statements of operations as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value". For our loans, interest and fees receivable included in the above tables, we assess the fair value of these assets based on our estimate of future cash flows net of servicing costs, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.   12 Table of Contents   For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the six months ended June 30, 2021  and 2020 :       Loans, Interest and Fees Receivables, at Fair Value       2021     2020   Balance at January 1,   $ 417,098     $ 4,386   Total gains—realized/unrealized:                 Net revaluations of loans, interest and fees receivable, at fair value     ( 49,628 )     ( 40,698 ) Chargeoffs, net of recoveries     ( 36,983 )     ( 640 ) Purchases     658,324       252,563   Settlements     ( 473,200 )     ( 67,928 ) Finance and fees     129,128       30,203   Balance at June 30,   $ 644,739     $ 177,886     The unrealized gains and losses for assets within the Level 3 category presented in the tables above include changes in fair value that are attributable to both observable and unobservable inputs. Impacts related to foreign currency translation are included as a component of other operating expense on the consolidated statements of operations when recognized.   Net Revaluation of Loans, Interest and Fees Receivable. We record the net revaluation of loans, interest and fees receivable (including those pledged as collateral) in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value category in our consolidated statements of operations. The net revaluation of loans, interest and fees receivable is based on the present value of future cash flows using a valuation model of expected cash flows and the estimated cost to service and collect those cash flows. We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third -party market participants would use in determining fair value, including estimates of net collected yield, principal payment rates, expected principal credit loss rates, costs of funds, discount rates and servicing costs. Interest income on receivables underlying our asset classes that are carried at fair value in our consolidated financial statements is recorded in Revenue - Consumer loans, including past due fees in our consolidated statements of operations.   For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of June 30, 2021 and  December 31, 2020 :   Quantitative Information about Level 3 Fair Value Measurements   Fair Value Measurement   Fair Value at June 30, 2021 (in thousands)   Valuation Technique   Unobservable Input   Range (Weighted Average)   Loans, interest and fees receivable, at fair value   $ 644,739   Discounted cash flows   Gross yield, net of finance charge charge-offs     22.9% to 54.1% (42.6%)                 Payment rate     5.1% to 11.6% (9.4%)                 Expected principal credit loss rate     5.3% to 31.7% (26.5%)                 Servicing rate     3.2% to 11.3% (4.5%)                 Discount rate     12.7% to 13.5% (13.2%)     Quantitative Information about Level 3 Fair Value Measurements   Fair Value Measurement   Fair Value at December 31, 2020 (in thousands)   Valuation Technique   Unobservable Input   Range (Weighted Average)   Loans, interest and fees receivable, at fair value   $ 417,098   Discounted cash flows   Gross yield, net of finance charge charge-offs     22.7% to 56.5% (43.3%)                 Payment rate     3.9% to 11.4% (8.5%)                 Expected principal credit loss rate     6.9% to 31.4% (24.8%)                 Servicing rate     2.9% to 14.2% (4.3%)                 Discount rate     12.8% to 13.5% (13.3%)     Valuations and Techniques for Liabilities   Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability. The table below summarizes (in thousands) by fair value hierarchy the June 30, 2021 and  December 31, 2020 fair values and carrying amounts of ( 1 ) our liabilities that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our liabilities not carried at fair value, but for which fair value disclosures are required:   Liabilities – As of June 30, 2021   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Liabilities   Liabilities not carried at fair value                                 Revolving credit facilities   $ —     $ —     $ 945,451     $ 945,451   Amortizing debt facilities   $ —     $ —     $ 21,115     $ 21,115   Convertible senior notes   $ —     $ 21,211     $ —     $ 9,226   Liabilities carried at fair value                                 Notes payable associated with structured financings, at fair value   $ —     $ —     $ 2,562     $ 2,562     Liabilities – As of December 31, 2020   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Liabilities   Liabilities not carried at fair value                                 Revolving credit facilities   $ —     $ —     $ 857,068     $ 857,068   Amortizing debt facilities   $ —     $ —     $ 25,542     $ 25,542   Convertible senior notes   $ —     $ 41,284     $ —     $ 24,386   Liabilities carried at fair value                                 Notes payable associated with structured financings, at fair value   $ —     $ —     $ 2,919     $ 2,919     For our notes payable, we assess the fair value of these liabilities based on our estimate of future cash flows generated from their underlying credit card receivables collateral, net of servicing compensation required under the note facilities, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk. Gains and losses associated with fair value changes for our notes payable associated with structured financing liabilities that are carried at fair value are detailed on our consolidated statements of operations as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value". For our convertible senior notes, we assess fair value based upon the most recent trade data available from third -party providers. We have evaluated the fair value of our third party debt by analyzing the expected repayment terms and credit spreads included in our recent financing arrangements obtained with similar terms. These recent financing arrangements provide positive evidence that the underlying data used in our assessment of fair value has not changed relative to the general market and therefore the fair value of our debt continues to be the same as the carrying value. See Note 9, “Notes Payable,” for further discussion on our other notes payable.   13 Table of Contents   For our material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the six months ended June 30, 2021 and 2020 .       Notes Payable Associated with Structured Financings, at Fair Value       2021     2020   Balance at January 1,   $ 2,919     $ 3,920   Total (gains) losses—realized/unrealized:                 Net revaluations of notes payable associated with structured financings, at fair value     ( 357 )     ( 480 ) Repayments on outstanding notes payable, net     —       —   Balance at June 30,   $ 2,562     $ 3,440     The unrealized gains and losses for liabilities within the Level 3 category presented in the table above include changes in fair value that are attributable to both observable and unobservable inputs. We provide below a brief description of the valuation techniques used for Level 3 liabilities.   Net Revaluation of Notes Payable Associated with Structured Financings, at Fair Value. We record the net revaluations of notes payable associated with structured financings, at fair value, in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value on our consolidated statements of operations. The legal entity associated with the securitization transaction is consolidated as a VIE as the Company is deemed the primary beneficiary of the entity. The Company is not liable for the full face value of the liability in the VIE so it is carried at fair value based upon amounts the borrower will receive from the legal entity. The net revaluation of these notes is based on the present value of future cash flows utilized in repayment of the outstanding principal and interest under the facilities using a valuation model of expected cash flows net of the contractual service expenses within the facilities. We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third -party market participants would use in determining fair value, including: estimates of gross yield, payment rates, expected credit loss rates, servicing costs, and discount rates on the credit card receivables that secure the non-recourse notes payable; costs of funds; discount rates; and contractual servicing fees. Accrued interest expense on notes payable underlying our notes payable associated with structured financings, at fair value is recorded in Interest expense in our consolidated statements of operations.   For material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of June 30, 2021 and  December 31, 2020 :   Quantitative Information about Level 3 Fair Value Measurements   Fair Value Measurement   Fair Value at June 30, 2021 (in thousands)   Valuation Technique   Unobservable Input   Weighted Average   Notes payable associated with structured financings, at fair value   $ 2,562   Discounted cash flows   Gross yield, net of finance charge charge-offs     27.1 %               Payment rate     5.9 %               Expected principal credit loss rate     9.2 %               Discount rate     13.2 %   Quantitative Information about Level 3 Fair Value Measurements   Fair Value Measurement   Fair Value at December 31, 2020 (in thousands)   Valuation Technique   Unobservable Input   Weighted Average   Notes payable associated with structured financings, at fair value   $ 2,919   Discounted cash flows   Gross yield, net of finance charge charge-offs     23.7 %               Payment rate     3.9 %               Expected principal credit loss rate     7.9 %               Discount rate     13.2 %   Other Relevant Data   Other relevant data (in thousands) as of June 30, 2021 and  December 31, 2020 concerning certain assets and liabilities we carry at fair value are as follows:   As of June 30, 2021   Loans, Interest and Fees Receivable at Fair Value     Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value   Aggregate unpaid gross balance of loans, interest and fees receivable that are reported at fair value   $ 516     $ 792,817   Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value   $ 484     $ 742,697   Aggregate fair value of loans, interest and fees receivable that are reported at fair value   $ 389     $ 644,350   Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)   $ —     $ 902   Unpaid principal balance of receivables within loans, interest and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans, interest and fees receivable   $ 5     $ 18,561     As of December 31, 2020   Loans, Interest and Fees Receivable at Fair Value     Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value   Aggregate unpaid gross balance of loans, interest and fees receivable that are reported at fair value   $ 630     $ 515,434   Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value   $ 589     $ 487,779   Aggregate fair value of loans, interest and fees receivable that are reported at fair value   $ 540     $ 416,558   Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)   $ 1     $ 1,847   Unpaid principal balance of receivables within loans, interest and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans, interest and fees receivable   $ 4     $ 12,972     Notes Payable   Notes Payable Associated with Structured Financings, at Fair Value as of June 30, 2021     Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2020   Aggregate unpaid principal balance of notes payable   $ 101,314     $ 101,314   Aggregate fair value of notes payable   $ 2,562     $ 2,919     14 Table of Contents     7. Variable Interest Entities   The following table presents a summary of VIEs in which we had continuing involvement or held a variable interest (in millions):       As of       June 30, 2021     December 31, 2020   Unrestricted cash and cash equivalents   $ 156.9     $ 96.6   Restricted cash and cash equivalents     49.8       70.2   Loans, interest and fees receivable, at fair value     587.6       374.2   Loans, interest and fees receivable, gross     445.5       560.2   Allowances for uncollectible loans, interest and fees receivable     ( 92.2 )     ( 120.9 ) Deferred revenue     ( 6.7 )     ( 10.3 ) Total Assets held by VIEs   $ 1,140.9     $ 970.0   Notes Payable, net held by VIEs   $ 911.8     $ 827.1   Notes Payable, at fair value held by VIEs   $ 2.6     $ 2.9   Maximum exposure to loss due to involvement with VIEs   $ 962.3     $ 864.4       8. Leases   We have operating leases primarily associated with our corporate offices and regional service centers as well as for certain equipment. Our leases have remaining lease terms of 1 to 5 years, some of which include options, at our discretion, to extend the leases for additional periods generally on one -year revolving periods. Other leases allow for us to terminate the lease based on appropriate notification periods. For certain of our leased offices, we sublease a portion of the unoccupied space. The terms of the sublease arrangement generally coincide with the underlying lease. The components of lease expense associated with our lease liabilities and supplemental cash flow information related to those leases were as follows (dollars in thousands):       For the Three Months Ended June 30,     For the Six Months Ended June 30,       2021     2020     2021     2020   Operating lease cost, gross   $ 1,721     $ 1,725     $ 3,447     $ 3,445   Sublease income     ( 1,291 )     ( 1,282 )     ( 2,584 )     ( 2,567 ) Net Operating lease cost   $ 430     $ 443     $ 863     $ 878   Cash paid under operating leases, gross   $ 2,618     $ 2,561     $ 5,202     $ 5,101                                     Weighted average remaining lease term - months     16                           Weighted average discount rate     6.5 %                           As of June 30, 2021 , maturities of lease liabilities were as follows (in thousands):       Gross Lease Payment     Payments received from Sublease     Net Lease Payment   2021 (excluding the six months ended June 30, 2021)   $ 5,267     $ ( 3,682 )   $ 1,585   2022     4,746       ( 3,112 )     1,634   2023     465       —       465   2024     261       —       261   2025     139       —       139   Thereafter     63       —       63   Total lease payments     10,941       ( 6,794 )     4,147   Less imputed interest     ( 1,229 )                 Total   $ 9,712                     In addition, we occasionally lease certain equipment under cancelable and non-cancelable leases, which are accounted for as capital leases in our consolidated financial statements. As of June 30, 2021 , we had no material non-cancelable capital leases with initial or remaining terms of more than one year.     15 Table of Contents   9. Notes Payable   Notes Payable, at Face Value and Notes Payable to Related Parties   Other notes payable outstanding as of June 30, 2021 and  December 31, 2020 that are secured by the financial and operating assets of either the borrower, another of our subsidiaries or both, include the following, scheduled (in millions); except as otherwise noted, the assets of our holding company (Atlanticus Holdings Corporation) are subject to creditor claims under these scheduled facilities:       As of       June 30, 2021     December 31, 2020   Revolving credit facilities at a weighted average interest rate equal to 4.6 % as of June 30, 2021 ( 4.8 % as of December 31, 2020) secured by the financial and operating assets of CAR and/or certain receivables and restricted cash with a combined aggregate carrying amount of $ 1,063.7 million as of June 30, 2021 ($ 943.6 million as of December 31, 2020)                 Revolving credit facility, not to exceed $ 55.0 million (expiring November 1, 2023 ) (1) (2) (3)   $ 36.1     $ 34.9   Revolving credit facility, not to exceed $ 50.0 million (expiring October 30, 2023 ) (2) (3) (4) (5)     23.6       50.0   Revolving credit facility, not to exceed $ 70.0 million (repaid in May 2021 ) (2) (3) (4) (5) (6)     —       5.8   Revolving credit facility, not to exceed $ 100.0 million (expiring October 15, 2022 ) (2) (3) (4) (5) (6)     10.0       10.0   Revolving credit facility, not to exceed $ 15.0 million (expiring July 15, 2022 ) (2) (3) (4) (5)     3.6       4.7   Revolving credit facility, not to exceed $ 100.0 million (expiring August 15, 2022 ) (2) (3) (4) (5) (6)     2.5       2.5   Revolving credit facility, not to exceed $ 200.0 million (repaid in June 2021 ) (3) (4) (5) (6)     —       200.0   Revolving credit facility, not to exceed $ 200.0 million (expiring May 15, 2024 ) (3) (4) (5) (6)     200.0       200.0   Revolving credit facility, not to exceed $ 25.0 million (expiring April 21, 2023 ) (2) (3) (4) (5)     18.0       7.8   Revolving credit facility, not to exceed $ 100.0 million (expiring January 15, 2025 ) (3) (4) (5) (6)   100.0       100.0   Revolving credit facility, not to exceed $ 250.0 million (expiring October 15, 2025 ) (3) (4) (5) (6)     250.0       250.0   Revolving credit facility, not to exceed $ 15.0 million (expiring February 15, 2024 ) (3) (4) (5)     10.0       —   Revolving credit facility, not to exceed $ 300.0 million (expiring December 15, 2026 ) (3) (4) (5) (6)     300.0       —   Other facilities                 Other debt with a weighted average interest rate equal to 5.5 %     1.2       3.2   Unsecured term debt (expiring August 26, 2024 ) with a weighted average interest rate equal to 8.0 % (3)     17.4       17.4   Amortizing debt facility (expiring September 30, 2021 ) with a weighted average interest rate equal to 4.6 % (2) (3) (4) (5)     2.5       5.0   Total notes payable before unamortized debt issuance costs and discounts     974.9       891.3   Unamortized debt issuance costs and discounts     ( 8.3 )     ( 8.7 ) Total notes payable outstanding, net   $ 966.6     $ 882.6     ( 1 ) Loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance by our CAR Auto Finance operations. ( 2 ) These notes reflect modifications to either extend the maturity date, increase the loan amount or both, and are treated as accounting modifications. ( 3 ) See below for additional information. ( 4 ) Loans are subject to certain affirmative covenants tied to default rates and other performance metrics the failure of which could result in required early repayment of the remaining unamortized balances of the notes.   ( 5 ) Loans are associated with VIEs. ( 6 ) Creditors do not have recourse against the general assets of the Company but only to the collateral within the VIEs. * As of June 30, 2021 , the LIBOR rate was 0.10 % and the prime rate was 3.25 %.   In  October 2015, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 50.0 million revolving borrowing limit that can be drawn to the extent of outstanding eligible principal receivables (of which $ 23.6 million was drawn as of June 30, 2021). This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 3.0 %. The facility matures on October 30, 2023  and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The facility is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.   In  October 2016, we (through a wholly owned subsidiary) entered a revolving credit facility with an initial $ 40.0 million borrowing limit available to the extent of outstanding eligible principal receivables of our CAR subsidiary (of which $ 36.1  million was drawn as of June 30, 2021). This facility is secured by the financial and operating assets of CAR and accrues interest at an annual rate equal to LIBOR plus a range between 2.4 % and 3.0 % based on certain ratios. The loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. In periods subsequent to October 2016, we amended the original agreement to either extend the maturity date and/or expand the capacity of this revolving credit facility. As of June 30, 2021, the borrowing limit was $ 55.0  million and the facility matures on November 1, 2023. There were no other material changes to the existing terms or conditions as a result of these amendments and the new maturity date and borrowing limit are reflected in the table above.   In  February 2017, we (through a wholly owned subsidiary) established a program under which we sell certain receivables to a consolidated trust in exchange for notes issued by the trust. The notes are secured by the receivables and other assets of the trust. Simultaneously with the establishment of the program, the trust issued a series of variable funding notes and sold an aggregate amount of up to $ 90.0 million (subsequently reduced to $ 70.0 million) of such notes to an unaffiliated third party. The facility was repaid in May 2021. In connection with the repayment, we removed an accrual of $ 1.5 million,  associated with a contingent liability incurred with the issuance of the notes. Removal of the contingent liability was recorded as a component of Other non-operating revenue on our consolidated statements of operations.   In  2018, we (through a wholly owned subsidiary) entered into two separate facilities associated with the above mentioned program to sell up to an aggregate $ 200.0 million of notes which are secured by the receivables and other assets of the trust (of which $ 12.5  million was outstanding as of June 30, 2021) to separate unaffiliated third parties pursuant to facilities that can be drawn upon to the extent of outstanding eligible receivables. Interest rates on the notes are based on commercial paper rates plus 3.15 % and LIBOR plus a range between 4.5 % and 6.5 %, respectively. The facilities mature on October 15, 2022  and August 15, 2022, respectively, and are subject to certain affirmative covenants and collateral performance tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance of notes. The facilities also may be prepaid subject to payment of a prepayment or other fee.   In December 2017, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 25.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 18.0 million was drawn as of June 30, 2021). This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 3.5 %. The facility matures on April 21, 2023  and is subject to certain affirmative covenants, including payment, delinquency and charge-off tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The note is guaranteed by Atlanticus.   In June 2019, we (through a wholly owned subsidiary) entered a revolving credit facility with a $ 15.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 3.6  million was drawn as of June 30, 2021). This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the prime rate. The note is guaranteed by Atlanticus.   16 Table of Contents   In June 2019, we sold $ 200.0 million of ABS secured by certain credit card receivables (expiring December 15, 2022).  The facility was repaid in June 2021.   In August 2019, we repurchased $ 54.4 million in face amount of our outstanding convertible senior notes for $ 16.3 million in cash (including accrued interest) and the issuance of a $ 17.4 million term note, which bears interest at a fixed rate of 8.0 % and is due in August 2024. See Note 10,  "Convertible Senior Notes" for additional information.   In September 2019, we (through a wholly owned subsidiary) entered a term facility with a $ 30.0 million revolving borrowing limit (of which $ 2.5  million was drawn as of June 30, 2021) that is available to the extent of outstanding eligible principal receivables. This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 4.5 %. The facility matures on September 30, 2021 and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The note is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.   In November 2019, we sold $ 200.0 million of ABS secured by certain credit card receivables (expiring May 15, 2024). A portion of the proceeds from the sale was used to pay-down our existing facilities associated with our credit card receivables and the remaining proceeds were available to fund the acquisition of future receivables. The terms of the ABS allow for a three -year revolving structure with a subsequent 12 -month to 18 -month amortization period. The weighted average interest rate on the securities is fixed at 4.91 %.   In July 2020, we sold $ 100.0 million of ABS secured by certain retail point-of-sale receivables. A portion of the proceeds from the sale were used to pay-down some of our existing revolving facilities associated with our point-of-sale receivables, and the remaining proceeds were used to fund the acquisition of receivables. The terms of the ABS allow for a three -year revolving structure with a subsequent 18 -month amortization period. The weighted average interest rate on the securities is fixed at 5.47 %.   In October 2020, we sold $ 250.0 million of ABS secured by certain retail point-of-sale receivables. A portion of the proceeds from the sale were used to pay-down our existing term ABS associated with our point-of-sale receivables, noted above, and the remaining proceeds have been invested in the acquisition of receivables. The terms of the ABS allow for a 41 month revolving structure with an 18 -month amortization period and the securities mature between August 2025 and October 2025. The weighted average interest rate on the securities is fixed at 4.1 %.   In January  2021, we (through a wholly owned subsidiary) entered a term facility with a $ 15.0 million revolving borrowing limit (of which $ 10.0 million was drawn as of June 30, 2021) that is available to the extent of outstanding eligible principal receivables. This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the greater of the prime rate or 4 %. The facility matures on February 15, 2024  and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The note is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.   In June 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring December 15, 2026). A portion of the proceeds from the sale was used to pay-down our existing facilities associated with our credit card receivables. The terms of the ABS allow for a four -year revolving structure with a subsequent 10 -month to 18 -month amortization period. The weighted average interest rate on the securities is fixed at 4.24 %.   As of June 30, 2021 , we were in compliance with the covenants underlying our various notes payable.   Notes Payable Associated with Structured Financings, at Fair Value   Scheduled (in millions) in the table below are ( 1 ) the carrying amount of our structured financing note secured by certain credit card receivables and reported at fair value as of June 30,   2021 and  December 31, 2020 , ( 2 ) the outstanding face amount of our structured financing note secured by certain credit card receivables and reported at fair value as of June 30, 2021 and  December 31, 2020 , and ( 3 ) the carrying amount of the credit card receivables and restricted cash that provide the exclusive means of repayment for the note (i.e., lenders have recourse only to the specific credit card receivables and restricted cash underlying each respective facility and cannot look to our general credit for repayment) as of June 30, 2021 and  December 31, 2020 .       Carrying Amounts at Fair Value as of       June 30, 2021     December 31, 2020   Securitization facility (stated maturity of December 2021 ), outstanding face amount of $ 101.3 million as of June 30, 2021 ($ 101.3 million as of December 31, 2020) bearing interest at a weighted average 5.6 % interest rate, based upon LIBOR, at June 30, 2021 ( 5.7 % at December 31, 2020), which is secured by credit card receivables and restricted cash aggregating $ 2.6 million as of June 30, 2021 ($ 2.9 million as of December 31, 2020) in carrying amount   $ 2.6     $ 2.9     Contractual payment allocations within this credit card receivables structured financing provide for a priority distribution of cash flows to us to service the credit card receivables, a distribution of cash flows to pay interest and principal due on the notes, and a distribution of all excess cash flows (if any) to us. The structured financing facility included in the above table is amortizing down along with collections of the underlying receivables and there are no provisions within the debt agreement that allow for acceleration or bullet repayment of the facility prior to its scheduled expiration date. The aggregate carrying amount of the credit card receivables and restricted cash that provide security for the $ 2.6  million in fair value of the structured financing facility indicated in the above table is $ 2.6  million, which means that we have no aggregate exposure to pre-tax equity loss associated with the above structured financing arrangement at June 30, 2021 .   As discussed elsewhere, the legal entity holding the securitization facility discussed in the table above, is a VIE. Beyond our role as servicer of the underlying assets within the credit cards receivables structured financing, we have provided no other financial or other support to the structure, and we have no explicit or implicit arrangements that could require us to provide financial support to the structure.   17 Table of Contents     10. Convertible Senior Notes   In November  2005, we issued $ 300.0 million aggregate principal amount of convertible senior notes. The convertible senior notes are unsecured, subordinate to existing and future secured obligations and structurally subordinate to existing and future claims of our subsidiaries’ creditors. These notes (net of repurchases since the issuance date) are reflected within convertible senior notes on our consolidated balance sheets.    In the three and six months ended June 30, 2021, we repurchased $ 6.4 million and $ 21.1 million, respectively, in face amount of our outstanding convertible senior notes for $ 10.2  million and $ 28.9  million, respectively, in cash (including accrued interest). The repurchase resulted in a loss of approximately $ 5.4 million and $ 13.3 million, respectively (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon acquisition, the notes were retired.   The following summarizes (in thousands) components of our consolidated balance sheets associated with our convertible senior notes:       As of       June 30, 2021     December 31, 2020   Face amount of convertible senior notes   $ 12,720     $ 33,839   Discount     ( 3,494 )     ( 9,453 ) Net carrying value   $ 9,226     $ 24,386   Carrying amount of equity component included in paid-in capital   $ 108,714     $ 108,714   Excess of instruments’ if-converted values over face principal amounts   $ —     $ —     On June 17, 2021, we provided notice of redemption of all outstanding convertible senior notes. Upon the redemption notice, holders were allowed to convert the convertible senior notes in lieu of the redemption consideration. At the expiration of the conversion option, holders with $ 11.8 million in principal amount of the convertible senior notes had elected to convert. The remaining $ 0.9 million of convertible senior notes were redeemed on July 19, 2021.  The convertible senior notes subject to the conversion election will be converted into cash and, if applicable, shares of our common stock based on a formula using an adjusted effective conversion rate of 40.63 shares of common stock per $1,000 principal amount of notes. Upon the final determination of the amount of the conversion consideration, we will deliver to holders of the converting notes cash of $ 1,000 per $1,000 aggregate principal amount of notes and either cash or shares of our common stock in respect of the remainder of the conversion obligation, if any. If required to issue shares of common stock in connection with the conversion obligation, we have a sufficient number of authorized shares of our common stock to do so.      11. Commitments and Contingencies   General   Under finance products available in the point-of-sale and direct-to-consumer channels, consumers have the ability to borrow up to the maximum credit limit assigned to each individual’s account. Unfunded commitments under these products aggregated $ 2.0 billion at June 30, 2021 . We have never experienced a situation in which all borrowers have exercised their entire available lines of credit at any given point in time, nor do we anticipate this will ever occur in the future. Moreover, there would be a concurrent increase in assets should there be any exercise of these lines of credit. We also have the effective right to reduce or cancel these available lines of credit at any time.   Additionally, our CAR operations provide floor-plan financing for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. The floor plan financing allows dealers and finance companies to borrow up to the maximum pre-approved credit limit allowed in order to finance ongoing inventory needs. These loans are secured by the underlying auto inventory and, in certain cases where we have other lending products outstanding with the dealer, are secured by the collateral under those lending arrangements as well, including any outstanding dealer reserves. As of June 30, 2021 , CAR had unfunded outstanding floor-plan financing commitments totaling $ 11.6  million. Each draw against unused commitments is reviewed for conformity to pre-established guidelines.   Under agreements with third -party originating and other financial institutions, we have pledged security (collateral) related to their issuance of consumer credit and purchases thereunder, of which $ 18.0  million remains pledged as of June 30, 2021 to support various ongoing contractual obligations.    18 Table of Contents   Under agreements with third -party originating and other financial institutions, we have agreed to indemnify the financial institutions for certain liabilities associated with the services we provide on behalf of the financial institutions—such indemnification obligations generally being limited to instances in which we either (a) have been afforded the opportunity to defend against any potentially indemnifiable claims or (b) have reached agreement with the financial institutions regarding settlement of potentially indemnifiable claims. As of June 30, 2021 , we have assessed the likelihood of any potential payments related to the aforementioned contingencies as remote. We would accrue liabilities related to these contingencies in any future period if and in which we assess the likelihood of an estimable payment as probable.   Under the account terms, consumers have the option of enrolling in a credit protection program with our lending partner which would make the minimum payments owed on their accounts for a period of up to six months upon the occurrence of an eligible event. Eligible events typically include loss of life, job loss, disability, or hospitalization. As an acquirer of receivables, our potential exposure under this program, if all eligible participants applied for this benefit, was $ 26.5 million as of June 30, 2021 ( of which we have accrued $ 0.3 million as of June 30, 2021  based on current claims). We have never experienced a situation in which all eligible participants have applied for this benefit at any given point in time, nor do we anticipate this will ever occur in the future.    We also are subject to certain minimum payments under cancelable and non-cancelable lease arrangements. For further information regarding these commitments, see Note 8, “Leases” .   Litigation   We are involved in various legal proceedings that are incidental to the conduct of our business. There are currently no pending legal proceedings that are expected to be material to us.     12. Net Income Attributable to Controlling Interests Per Common Share   The following table sets forth the computations of net income attributable to controlling interests per share of common stock (in thousands, except per share data):        For the Three Months Ended     For the Six Months Ended       June 30,     June 30,       2021     2020     2021     2020   Numerator:                                 Net income attributable to controlling interests   $ 36,876     $ 23,165     $ 80,951     $ 28,590   Preferred stock and preferred unit dividends and accretion     ( 4,738 )     ( 4,736 )     ( 9,425 )     ( 7,495 ) Net income attributable to common shareholders—basic     32,138       18,429       71,526       21,095   Effect of dilutive preferred stock dividends and accretion     598       596       1,190       1,193   Net income attributable to common shareholders—diluted   $ 32,736     $ 19,025     $ 72,716     $ 22,288   Denominator:                                 Basic (including unvested share-based payment awards) (1)     15,182       14,427       15,097       14,432   Effect of dilutive stock compensation arrangements and exchange of preferred stock     5,843       5,921       5,882       5,460   Diluted (including unvested share-based payment awards) (1)     21,025       20,348       20,979       19,892   Net income attributable to common shareholders per share—basic   $ 2.12     $ 1.28     $ 4.74     $ 1.46   Net income attributable to common shareholders per share—diluted   $ 1.56     $ 0.93     $ 3.47     $ 1.12       ( 1 ) Shares related to unvested share-based payment awards included in our basic and diluted share counts were 430,413 and 426,050 for the three and six months ended June 30, 2021 ,  respectively, compared to 418,081 and 445,984 for the three and six months ended June 30, 2020   As their effects were anti-dilutive, we excluded stock options to purchase 0.0 shares and 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the three and six months ended June 30, 2021,  respectively.  No stock options were excluded for either the three or six months ended June 30, 2020.   For the three and six months ended  June 30, 2021 and 2020, we included 4,000,000 , 4,000,000 , 4,000,000 and 3,587,737 shares, respectively, in our outstanding diluted share counts associated with our Series A Preferred Stock. See Note 4, "Shareholders' Equity and Preferred Stock", for a further discussion of these convertible securities.   For the three and six months ended June 30, 2021 and 2020 , we included 0.2  million, 0.2 million, 0.0 and 0.0  dilutive shares, respectively, in the diluted net income attributable to controlling interests per share of common stock calculations pursuant to our convertible senior notes. See Note 10, “Convertible Senior Notes,” for a further discussion of these convertible securities.     13. Stock-Based Compensation   We currently have two stock-based compensation plans, the Second Amended and Restated Employee Stock Purchase Plan (the “ESPP”) and the Fourth Amended and Restated 2014 Equity Incentive Plan (the “Fourth Amended 2014 Plan”). Our Fourth Amended  2014 Plan provides that we may grant options on or shares of our common stock (and other types of equity awards) to members of our Board of Directors, employees, consultants and advisors. The Fourth Amended 2014 Plan was approved by our shareholders in May 2019. Among other things, the Fourth Amended 2014 Plan (i) increased the number of shares of Common Stock available for issuance under the plan by 2,000,000 shares and (ii) extended the term of the plan by approximately two years. As of June 30, 2021, 55,133 shares remained available for issuance under the ESPP and 1,592,070 shares remained available for issuance under the Fourth Amended 2014 Plan.   Exercises and vestings under our stock-based compensation plans resulted in no income tax-related charges to paid-in capital during the three and six months ended June 30, 2021 and 2020 .   Restricted Stock and Restricted Stock Units   During the six   months ended June 30, 2021  and 2020, we granted 39,084 and 58,248 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 1.1 million and $ 0.6  million, respectively. We incurred expenses of $ 0.5 million and $ 0.4  million during the six months ended June 30, 2021  and 2020, respectively, related to restricted stock awards. When we grant restricted stock and restricted stock units, we defer the grant date value of the restricted stock and restricted stock unit and amortize that value (net of the value of anticipated forfeitures) as compensation expense with an offsetting entry to the paid-in capital component of our consolidated shareholders’ equity. Our restricted stock awards typically vest over a range of 12 to 60 months (or other term as specified in the grant which may include the achievement of performance measures) and are amortized to salaries and benefits expense ratably over applicable vesting periods. As of June 30, 2021, our unamortized deferred compensation costs associated with non-vested restricted stock awards were $ 1.0 million with a weighted-average remaining amortization period of 1.2 years. No forfeitures have been included in our compensation cost estimates based on historical forfeiture rates.   Stock Options   The exercise price per share of the options awarded under the Fourth Amended 2014 Plan must be equal to or greater than the market price on the date the option is granted. The option period may not exceed 10 years from the date of grant. Options granted during 2021  were valued using the Black-Scholes-Merton option pricing model with the following assumptions: a dividend yield of  zero , years to maturity of  5  years (which equals the expected term), volatility of 80.3 % (based on the average of daily historical volatility using the expected term), and a risk-free rate of 0.81 % (based on 5 year US Treasury securities). All options granted during the year vest ratably over a 3 year period conditioned upon continued employment with the Company. We had expense of $ 0.4  million,  $ 0.7 million, $ 0.1 million and $ 0.2 million related to stock option-related compensation costs during the three and six months ended June 30, 2021  and 2020, respectively. When applicable, we recognize stock option-related compensation expense for any awards with graded vesting on a straight-line basis over the vesting period for the entire award. The table below includes additional information about outstanding options:       Number of Shares     Weighted-Average Exercise Price     Weighted-Average of Remaining Contractual Life (in years)     Aggregate Intrinsic Value   Outstanding at December 31, 2020     2,423,466     $ 4.41                   Issued     55,000     $ 31.22                   Exercised     ( 495,733 )   $ 3.42                   Expired/Forfeited     ( 6,000 )   $ 15.30                   Outstanding at June 30, 2021     1,976,733     $ 5.38       1.6     $ 67,851,195   Exercisable at June 30, 2021     1,541,401     $ 3.50       1.1     $ 55,805,456     Options issued during the three and six months ended June 30, 2021 had an aggregate grant-date fair value of $ 90 thousand and $ 1.1 million, respectively. No options were issued during the corresponding periods in 2020.  We had $ 1.7  million and $ 1.4  million of unamortized deferred compensation costs associated with unvested stock options as of June 30, 2021 and  December 31, 2020 , respectively.   19 Table of Contents     ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   The following discussion should be read in conjunction with our consolidated financial statements and the related notes included therein and our Annual Report on Form 10-K for the year ended December 31, 2020, where certain terms have been defined.   This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. We base these forward-looking statements on our current plans, expectations and beliefs about future events. There are risks, including the factors discussed in “Risk Factors” in Part II, Item 1A and elsewhere in this Report, that our actual experience will differ materially from these expectations. For more information, see “Forward-Looking Information” below.   In this Report, except as the context suggests otherwise, the words “Company,” “Atlanticus Holdings Corporation,” “Atlanticus,” “we,” “our,” “ours,” and “us” refer to Atlanticus Holdings Corporation and its subsidiaries and predecessors.   OVERVIEW   We utilize proprietary analytics and a flexible technology platform to enable financial institutions to provide various credit and related financial services and products to everyday Americans. According to data published by Experian, 41% of Americans had FICO® scores of less than 700 as of the second quarter of 2019. A recent survey conducted by Highland Solutions found that 63% of Americans lived “paycheck to paycheck” and 82% of people do not have access to an emergency fund. We believe this equates to a population of over 100 million everyday Americans in need of additional access to credit. These consumers often have financial needs that are not effectively met by larger financial institutions. By facilitating fairly priced consumer credit and financial service alternatives with value added features and benefits specifically curated for the unique needs of these consumers, we endeavor to empower everyday Americans on a path to improved financial well-being.   Currently, within our Credit and Other Investments segment, we are applying the experiences gained and infrastructure built from servicing over $26 billion in consumer loans over our 24-year operating history to support lenders who originate a range of consumer loan products. These products include private label and general purpose credit cards originated by lenders through multiple channels, including retail and healthcare point-of-sale (collectively "point-of-sale"), direct mail solicitation, online and partnerships with third parties. In the point-of-sale channel, we partner with retailers and service providers in various industries across the U.S. to allow them to provide credit to their customers for the purchase of a variety of goods and services including consumer electronics, furniture, elective medical procedures, healthcare, educational services and home-improvements. The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions. We specialize in supporting this “second-look” credit service. Our flexible technology platform allows our bank partners to integrate our paperless process and instant decisioning platform with the technology infrastructure of participating retailers and service providers. Using this technology platform and proprietary analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing who focus exclusively on consumers with higher FICO scores. By supporting a range of products through a multitude of channels, we enable lenders to provide the right type of credit, whenever and wherever the consumer has a need.   We are principally engaged in providing products and services to lenders in the U.S. and, in most cases, we invest in the receivables originated by lenders who utilize our technology platform and other related services. From time to time, we also purchase receivables portfolios from third parties. In this Report, “receivables” or “loans” typically refer to receivables we have purchased from our bank partners or from third parties.   Using our infrastructure and technology platform, we also provide loan servicing, including risk management and customer service outsourcing, for third parties. Also through our Credit and Other Investments segment, we engage in testing and limited investment in consumer finance technology platforms as we seek to capitalize on our expertise and infrastructure.   Additionally, we report within our Credit and Other Investments segment: (1) the income earned from an investment in an equity-method investee that holds credit card receivables for which we are the servicer; and (2) gains or losses associated with investments previously made in consumer finance technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. These investments are carried at the lower of cost or market valuation. None of these companies are publicly-traded and there are no material pending liquidity events. We will continue to carry the investments on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes.   The recurring cash flows we receive within our Credit and Other Investments segment principally include those associated with (1) point-of-sale and direct-to-consumer receivables, (2) servicing compensation and (3) credit card receivables portfolios that are unencumbered or where we own a portion of the underlying structured financing facility (such as those associated with our legacy credit card operations).   Subject to potential disruptions caused by COVID-19, we believe that our point-of-sale and direct-to-consumer receivables are generating, and will continue to generate, attractive returns on assets, thereby facilitating debt financing under terms and conditions (including advance rates and pricing) that will support attractive returns on equity, and we continue to pursue growth in this area.   Beyond these activities within our Credit and Other Investments segment, we invest in and service portfolios of credit card receivables.   Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business. We purchase auto loans at a discount and with dealer retentions or holdbacks that provide risk protection. Also within our Auto Finance segment, we are providing certain installment lending products in addition to our traditional loans secured by automobiles.   Subject to the availability of capital at attractive terms and pricing, we plan to continue to evaluate and pursue a variety of activities, including: (1) investments in additional financial assets associated with point-of-sale and direct-to-consumer finance and credit activities as well as the acquisition of interests in receivables portfolios; (2) investments in other assets or businesses that are not necessarily financial services assets or businesses and (3) the repurchase of our convertible senior notes and other debt and our outstanding common stock.   We elected the fair value option to account for certain loans receivable associated with our point-of-sale and direct-to-consumer platform that are acquired on or after January 1, 2020. We believe the use of fair value for these receivables more closely approximates the true economics of these receivables, better matching the yields and corresponding charge-offs. We believe the fair value option also enables us to report GAAP net income that provides increased transparency into our profitability and asset quality. Receivables arising in accounts originated prior to January 1, 2020 will continue to be accounted for in our 2020 and subsequent financial statements at amortized cost, net. We estimate the Fair Value Receivables using a discounted cash flow model, which considers various factors such as expected yields on consumer receivables, the timing of expected payments, customer default rates, estimated costs to service the portfolio, interest rates, and valuations of comparable portfolios. As a result of this fair value adoption, our loans, interest and fees receivable arising in accounts originated subsequent to January 1, 2020 will be carried at fair value with changes in fair value recognized directly in earnings, and certain fee billings (such as annual membership fees and merchant fees) and origination costs associated with these receivables will no longer be deferred. We reevaluate the fair value of our Fair Value Receivables at the end of each quarter.   COVID-19 Pandemic     On March 13, 2020, a national emergency was declared under the National Emergencies Act due to the COVID-19 pandemic. As of the date of filing this Quarterly Report on Form 10-Q, the duration and severity of the effects of the COVID-19 pandemic remain unknown. Likewise, we do not know the duration and severity of the impact of the COVID-19 pandemic on all members of the Company’s ecosystem – our bank partner, merchants and consumers – as well as our employees. In addition to instituting a Company-wide remote work program to ensure the safety of all employees and their families, we are communicating to employees on a regular basis regarding such efforts as planning for contingencies related to the COVID-19 pandemic, providing updated information and policies related to the safety and health of employees, and monitoring the ongoing pandemic for new developments that may impact the Company, our work locations or our employees and are taking reasonable measures.    20 Table of Contents   The following are anticipated key impacts on our business and response initiatives taken by the Company, in coordination with our partners, to mitigate such impacts:   Consumer spending behavior has been significantly impacted by the COVID-19 pandemic, principally due to restrictions on “non-essential” businesses, issuances of stay-at-home orders, and uncertainties about the extent and duration of the pandemic. Additionally, government stimulus programs have decreased consumer need for credit products and generally led to an increase in customer payments. While we have seen some improvements in this area, to the extent this change in consumer spending behavior continues, receivables purchases could decline relative to the prior year. The extent to which our merchants have remained open for business has varied across merchant category and geographic location within the U.S.    Borrowers impacted by COVID-19 requesting hardship assistance have been receiving temporary relief from payments. While we expect these measures to mitigate credit losses, we anticipate that the elevated unemployment rate, while partially mitigated by the effects of government stimulus and relief measures (such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan), may result in increased portfolio credit losses in the future.   As the impact of COVID-19 continues to evolve, the Company remains committed to serving our bank partner, merchants and consumers, while caring for the safety of our employees and their families. The potential impact that COVID-19 and related government stimulus and relief measures could have on our financial condition and results of operations remains highly uncertain. For more information, refer to Part II, Item 1A “Risk Factors” and, in particular, “–  The global outbreak of COVID-19   has caused severe disruptions in the U.S. economy, and may have an adverse impact on our performance, results of operations and access to capital. ”   CONSOLIDATED RESULTS OF OPERATIONS                       Income       For the Three Months Ended June 30,     Increases (Decreases)   (In Thousands)   2021     2020     from 2020 to 2021   Total operating revenue   $ 179,519     $ 135,421     $ 44,098   Other non-operating revenue     2,586       325       2,261   Interest expense     (13,790 )     (12,252 )     (1,538 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     (11,096 )     (32,530 )     21,434   Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     (58,763 )     (25,667 )     (33,096 ) Net margin     98,456       65,297       33,159   Operating expenses:                         Salaries and benefits     7,883       6,508       (1,375 ) Card and loan servicing     18,212       15,601       (2,611 ) Marketing and solicitation     13,678       10,190       (3,488 ) Depreciation     320       320       —   Other     5,972       4,586       (1,386 ) Total operating expenses:     46,065       37,205       (8,860 ) Loss on repurchase of convertible senior notes     5,448       —       (5,448 )                           Net income     36,826       23,117       13,709   Net loss attributable to noncontrolling interests     50       48       2   Net income attributable to controlling interests     36,876       23,165       13,711   Net income attributable to controlling interests to common shareholders     32,138       18,429       13,709                         Income       For the Six Months Ended June 30,     Increases (Decreases)   (In Thousands)   2021     2020     from 2020 to 2021   Total operating revenue   $ 323,414     $ 275,939     $ 47,475   Other non-operating revenue     3,426       315       3,111   Interest expense     (26,088 )     (25,836 )     (252 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     (15,231 )     (99,866 )     84,635   Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     (86,254 )     (40,858 )     (45,396 ) Net margin     199,267       109,694       89,573   Operating expenses:                         Salaries and benefits     16,122       14,018       (2,104 ) Card and loan servicing     35,599       31,438       (4,161 ) Marketing and solicitation     23,979       19,507       (4,472 ) Depreciation     632       605       (27 ) Other     10,940       9,387       (1,553 ) Total operating expenses:     87,272       74,955       (12,317 ) Loss on repurchase of convertible senior notes     13,255       —       (13,255 )                           Net income     80,853       28,479       52,374   Net loss attributable to noncontrolling interests     98       111       (13 ) Net income attributable to controlling interests     80,951       28,590       52,361   Net income attributable to controlling interests to common shareholders     71,526       21,095       50,431     21 Table of Contents   Three and Six Months Ended June 30, 2021, Compared to Three and Six Months Ended June 30, 2020   Total operating revenue.  Total operating revenue consists of: 1) interest income, finance charges and late fees on consumer loans, 2) other fees on credit products including annual and merchant fees and 3) ancillary, interchange and servicing income on loan portfolios.   Period-over-period results primarily relate to growth in point-of-sale finance and direct-to-consumer products, the receivables of which increased from $895.1 million as of June 30, 2020 to $1,243.9 million as of June 30, 2021. While we noted some disruptions in consumer spending behavior due to the COVID-19 pandemic and the related economic impacts, we are currently experiencing continued period-over-period growth in point-of-sale and direct-to-consumer receivables and to a lesser extent in our CAR receivables—growth which we expect to result in net period-over-period growth in our total interest income and related fees for these operations throughout 2021. Future periods’ growth is also dependent on the addition of new retail partners to expand the reach of point-of-sale operations as well as growth within existing partnerships and continued growth and marketing within the direct-to-consumer receivables. As discussed elsewhere in this Report, we have elected the fair value option to account for certain loan receivables associated with our point-of-sale and direct-to-consumer platform that are originated on or after January 1, 2020. As a result, annual fees and merchant fees that are charged upon the acquisition of the receivable will no longer be deferred and will be recognized in the loan acquisition period. This difference in recognition also served to increase our other fees on credit products (included as a component of "Fees and related income on earning assets" on our Consolidated Statements of Operations). Other revenue on our Consolidated Statements of Operations consists of ancillary, interchange and servicing income. Ancillary and interchange revenues are largely impacted by growth in our receivables as discussed above. These fees are earned when our customer's cards are used over established card networks. We earn a portion of the interchange fee the card networks charge merchants for the transaction. We earn servicing income by servicing loan portfolios for third parties (including our equity-method investee). Unless and/or until we grow the number of contractual servicing relationships we have with third parties or our current relationships grow their loan portfolios, we will not experience significant growth and income within this category, and we currently expect to experience continued declines in this category of revenue relative to revenue earned in prior periods. The above discussions on expectations for finance, fee and other income are based on our current expectations. The unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable could result in changes in these assumptions in the near term.   Other non-operating revenue.  Included within our Other non-operating revenue category is income (or loss) associated with investments in non-core businesses or other items not directly associated with our ongoing operations. We liquidated one of these investments during 2021, resulting in income of approximately $560,000. As previously discussed, these investments are carried at the lower of cost or market valuation. None of these companies are publicly-traded and there are no material pending liquidity events. We will continue to carry the investments on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes. Further impacting our second quarter 2021 results was income resulting from the extinguishment of a contingent liability associated with the repayment of outstanding notes issued by a trust in February 2017. See Note 9, "Notes Payable," to our consolidated financial statements for additional information.   Interest expense. Variations in interest expense are due to new borrowings associated with growth in point-of-sale and direct-to-consumer receivables and CAR operations as evidenced within Note 9, “Notes Payable,” to our consolidated financial statements, offset by our debt facilities being repaid commensurate with net liquidations of the underlying credit card, auto finance and installment loan receivables that serve as collateral for the facilities. Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our point-of-sale and direct-to-consumer platform increased from $643.2 million as of June 30, 2020 to $911.9 million as of June 30, 2021. Despite, this increase, an overall decrease in the weighted average cost of funds, coupled with repurchases of our convertible senior notes, resulted in a year over year decline in interest expense. We anticipate additional debt financing over the next few quarters as we continue to grow, and as such, we expect our quarterly interest expense to be above that experienced in the prior periods for these operations.   Loss on repurchase of convertible senior notes.  In the three and six months ended June 30, 2021, we repurchased $6.4 million and $21.1 million, respectively, in face amount of our outstanding convertible senior notes for $10.2 million and $28.9 million, respectively, in cash (including accrued interest). The repurchase resulted in a loss of approximately $5.4 million and $13.3 million, respectively, (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon acquisition, the notes were retired.   On June 17, 2021, we provided notice of redemption of all outstanding convertible senior notes. Upon the redemption notice, holders were allowed to convert the convertible senior notes in lieu of the redemption consideration. At the expiration of the conversion option, holders with $11.8 million in principal amount of the convertible senior notes had elected to convert. The remaining $0.9 million of convertible senior notes were redeemed on July 19, 2021. The convertible senior notes subject to the conversion election will be converted into cash and, if applicable, shares of our common stock based on a formula using an adjusted effective conversion rate of 40.63 shares of common stock per $1,000 principal amount of notes. Upon the final determination of the amount of the conversion consideration, we will deliver to holders of the converting notes cash of $1,000 per $1,000 aggregate principal amount of notes and either cash or shares of our common stock in respect of the remainder of the conversion obligation, if any. If required to issue shares of common stock in connection with the conversion obligation, we have a sufficient number of authorized shares of our common stock to do so.    Provision for losses on loans, interest and fees receivable recorded at net realizable value.  Our provision for losses on loans, interest and fees receivable recorded at net realizable value covers, with respect to such receivables, changes in estimates regarding our aggregate loss exposures on (1) principal receivable balances, (2) finance charges and late fees receivable underlying income amounts included within our total interest income category, and (3) other fees receivable. Recoveries of charged off receivables, consist of amounts received from the efforts of third-party collectors we employ and through the sale of charged-off accounts to unrelated third-parties. All proceeds received associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at net realizable value.   We have experienced a period-over-period decrease in this category between the years ended June 30, 2020 and June 30, 2021 primarily reflecting: 1) the effects of our adoption of the fair value option to account for certain loans receivable that are acquired on or after January 1, 2020 which has resulted in a decline in the outstanding receivables subject to this provision and 2) the overall reduction in delinquencies associated with these receivables in part due to recent government stimulus programs, which have served to increase payments on outstanding receivables. This reduction in provision has been offset somewhat due to additional reserves associated with accounts that have been impacted due to COVID-19. See Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components,” to our consolidated financial statements and the discussions of our Credit and Other Investments and Auto Finance segments for further credit quality statistics and analysis. Given our adoption of fair value accounting for certain receivables acquired on or after January 1, 2020, and absent the unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on our customers' ability to make payments on outstanding loans and fees receivable, we expect that our provision for losses on loans will continue to diminish, relative to levels experienced in prior periods, as the underlying receivables that continue to be recorded at net realizable value liquidate.   22 Table of Contents   Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value. For credit card receivables for which we use fair value accounting (including those for which we elected the fair value option on January 1, 2020), we expect our change in fair value of credit card receivables recorded at fair value to increase throughout 2021 commensurate with growth in these receivables. Inversely (and to a lesser degree), we expect our change in fair value of notes payable associated with structured financings for our legacy credit card receivables recorded at fair value amounts to gradually diminish (absent significant changes in the assumptions used to determine these fair values) in the future. We may adjust our models to reflect macro events that we believe market participants would consider relevant. With the aforementioned market impacts of COVID-19 and related government stimulus and relief measures, we have included some expected market degradation in our model to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in chargeoffs and decrease in payments) above the level that historical trends would suggest. These amounts, however, are subject to potentially high levels of volatility if we experience changes in the quality of our credit card receivables or if there are significant changes in market valuation factors (e.g., interest rates and spreads) in the future.    Total operating expense. Total operating expense variances for the three and six months ended June 30, 2020, relative to the three and six months ended June 30, 2021, reflect the following:     • increases in salaries reflecting marginal growth in both the number of employees and increases in related benefit costs. We expect some marginal increase in this cost for 2021 when compared to 2020 as we expect our receivables to continue to grow and as a result we expect to modestly increase our number of employees;   • increases in card and loan servicing expenses in the three and six months ended June 30, 2021 when compared to the three and six months ended June 30, 2020 due to growth in receivables associated with our investments in point-of-sale and direct-to-consumer receivables, which grew from $895.1 million outstanding to $1,243.9 million outstanding at June 30, 2020 and June 30, 2021, respectively. As many of the expenses associated with our card and loan servicing efforts are now variable based on the amount of underlying receivables, we would expect this number to continue to grow throughout 2021. As our receivables have grown, we have significantly reduced our servicing costs per account, realizing greater economies of scale.   • increases in marketing and solicitation costs for the three and six months ended June 30, 2021 primarily due to receivables growth associated with our direct-to-consumer and retail point-of-sale portfolios. We expect that increased origination and brand marketing support will result in overall increases in year-over-year costs during 2021 although the frequency and timing of marketing efforts could result in reductions in quarter-over-quarter marketing costs; and   • other expenses primarily relate to fixed costs associated with occupancy or other third party expenses that are largely fixed in nature. While we expect some increase in these costs as we continue to grow our receivable portfolios, we do not anticipate the increases to be meaningful.   Certain operating costs are variable based on the levels of accounts and receivables we service (both for our own account and for others) and the pace and breadth of our growth in receivables. However, a number of our operating costs are fixed and until recently have comprised a larger percentage of our total costs. This trend is reversing as we continue to grow our earning assets (including loans, interest and fees receivable) based principally on growth of point-of-sale and direct-to-consumer receivables and to a lesser extent, growth within our CAR operations. This is evidenced by the growth we experienced in our managed receivables levels over the past two years with minimal growth in the fixed portion of our card and loan servicing expenses as well as our salaries and benefits costs as we were able to better utilize our fixed costs to grow our asset base.   Notwithstanding our cost-management efforts, we expect increased levels of expenditures associated with anticipated growth in point-of-sale and direct-to-consumer credit card-related operations. These expenses will primarily relate to the variable costs of marketing efforts and card and loan servicing expenses associated with new receivable acquisitions. The above referenced unknown potential impacts related to COVID-19 could result in more variability in these expenses and could impair our ability to acquire new receivables, resulting in increased costs despite our efforts to manage costs effectively.   Noncontrolling interests.  We reflect the ownership interests of noncontrolling holders of equity in our majority-owned subsidiaries as noncontrolling interests in our consolidated statements of operations. Unless we enter into significant new majority-owned subsidiary ventures with noncontrolling interest holders in the future, we expect to have negligible noncontrolling interests in our majority-owned subsidiaries and negligible allocations of income or loss to noncontrolling interest holders in future quarters.    On November 14, 2019, a wholly-owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $1.00 per unit to an unrelated third party. The units carry a 16% preferred return to be paid quarterly, with up to 6 percentage points of the preferred return to be paid through the issuance of additional units or cash, at our election. The units have both call and put rights and are also subject to various covenants including a minimum book value, which if not satisfied, could allow for the securities to be put back to the subsidiary. On March 30, 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms. The proceeds from the transaction are being used for general corporate purposes. We have included the issuance of these Class B preferred units as temporary noncontrolling interests on the consolidated balance sheets and the associated dividends are included as a reduction of our net income attributable to common shareholders on the consolidated statements of operations.   Income Taxes. We experienced effective tax rates of 21.6% and 18.1%, for the three and six months ended June 30, 2021, compared to 17.7% and 18.0% for the three and six months ended June 30, 2020.    Our effective tax rate for the three months ended June 30, 2021, is above the statutory rate due to state and foreign income tax expense, significantly offset, however, by (1) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes, and (2) the exclusion from taxable income of benefits received under the CARES Act. These same two items served to offset the effects of state and foreign income tax expense and executive compensation deduction limits experienced in the first quarter of 2021 under Section 162(m) of the Internal Revenue Code of 1986 on our effective tax rate for the six months ended June 30, 2021. Also offsetting such effects and thereby causing our effective tax rate to be below the statutory rate for the six months ended June 30, 2021, are (1) deductions in the first quarter of 2021 associated with the exercise of stock options and the vesting of restricted stock at stock fair values significantly exceeding such share-based awards’ grant date values; and (2) our release of state tax valuation allowances in the first quarter of 2021.   Our effective tax rates for the three and six months ended June 30, 2020 were below the statutory rate principally due to (1) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes and (2) deductions associated with the exercise of stock options and the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’ grant date values. Partially offsetting such effects on our effective tax rates were the effects of accruals of interest on unpaid federal tax liabilities and uncertain tax positions and state and foreign income tax expense during such periods.   We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our consolidated statements of operations. We likewise report within such line item the reversal of interest expense associated with our accrued liabilities for uncertain tax positions to the extent we resolve such liabilities in a manner favorable to our accruals therefor. We had de minimis interest expense or reversals thereof during the three and six months ended June 30, 2021, and 2020.   23 Table of Contents   Credit and Other Investments Segment   Our Credit and Other Investments segment includes our activities relating to our servicing of and our investments in the point-of-sale and direct-to-consumer credit card operations, our various credit card receivables portfolios, as well as other product testing and investments that generally utilize much of the same infrastructure. The types of revenues we earn from our investments in receivables portfolios and services primarily include fees and finance charges, merchant fees or annual fees associated with the point-of-sale and direct-to-consumer receivables.   We record (i) the finance charges, merchant fees and late fees assessed on our Credit and Other Investments segment receivables in the Revenue - Consumer loans, including past due fees category on our consolidated statements of operations, (ii) the annual, monthly maintenance, returned-check, cash advance and other fees in the Revenue - Fees and related income on earning assets category on our consolidated statements of operations, and (iii) the charge offs (and recoveries thereof) within our Provision for losses on loans, interest and fees receivable recorded at net realizable value on our consolidated statements of operations (for all credit product receivables other than those for which we have elected the fair value option) and within Changes in fair value of loans, interest and fees receivable and notes payable on our consolidated statements of operations (for all of our other receivables for which we have elected the fair value option). Additionally, we show the effects of fair value changes for those credit card receivables for which we have elected the fair value option as a component of Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value in our consolidated statements of operations.   We historically have invested in receivables portfolios through subsidiary entities. If we control through direct ownership or exert a controlling interest in the entity, we consolidate it and reflect its operations as noted above. If we exert significant influence but do not control the entity, we record our share of its net operating results in the equity in income of equity-method investee category on our consolidated statements of operations.   Non-GAAP Financial Measures   In addition to financial measures presented in accordance with GAAP, we present managed receivables, total managed yield, total managed yield ratio, combined net charge-off ratio, percent of managed receivables 30 or more days past due, percent of managed receivables 60 or more days past due and percent of managed receivables 90 or more days past due, all of which are non-GAAP financial measures. These non-GAAP financial measures aid in the evaluation of the performance of our credit portfolios, including our risk management, servicing and collection activities and our valuation of purchased receivables. The credit performance of our managed receivables provides information concerning the quality of loan originations and the related credit risks inherent with the portfolios. Management relies heavily upon financial data and results prepared on the “managed basis” in order to manage our business, make planning decisions, evaluate our performance and allocate resources.   These non-GAAP financial measures are presented for supplemental informational purposes only. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, GAAP financial measures. These non-GAAP financial measures may differ from the non-GAAP financial measures used by other companies. A reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is provided below for each of the fiscal periods indicated.    These non-GAAP financial measures include only the performance of those receivables underlying consolidated subsidiaries (for receivables carried at amortized cost basis and fair value) and exclude the performance of receivables held by our equity method investee. As the receivables underlying our equity method investee reflect a small and diminishing portion of our overall receivables base, we do not believe their inclusion or exclusion in the overall results is material. Additionally, we calculate average managed receivables based on the quarter-end balances.    The comparison of non-GAAP managed receivables to our GAAP financial statements requires an understanding that managed receivables reflect the face value of loans, interest and fees receivable without any consideration for potential loan losses or other adjustments to reflect fair value.   Below are (i) the reconciliation of Loans, interest and fees receivable, at fair value to Loans, interest and fees receivable, at face value and (ii) the calculation of managed receivables:       At or for the Three Months Ended       2021     2020     2019   (in Millions)   Jun. 30 (1)     Mar. 31 (1)     Dec. 31 (1)     Sept. 30 (1)     Jun. 30 (1)     Mar. 31 (1)     Dec. 31     Sept. 30   Loans, interest and fees receivable, at fair value   $ 644.7     $ 481.4     $ 417.1     $ 310.8     $ 177.9     $ 89.4     $ 4.4     $ 4.5   Fair value mark against receivable (2)   $ 148.6     $ 112.3     $ 99.0     $ 71.8     $ 42.7     $ 17.5     $ 2.0     $ 2.6   Loans, interest and fees receivable, at face value   $ 793.3     $ 593.7     $ 516.1     $ 382.6     $ 220.6     $ 106.9     $ 6.4     $ 7.1     (1) As discussed in more detail above in "—Overview," we elected the fair value option to account for certain loans receivable associated with our point-of-sale and direct-to-consumer platform that are acquired on or after January 1, 2020.   (2) The fair value mark against receivables reflects the difference between the face value of a receivable and the net present value of the expected cash flows associated with that receivable. See Note 6, “Fair Value of Assets and Liabilities” to our consolidated financial statements included herein for further discussion on assumptions underlying this calculation.       At or for the Three Months Ended       2021     2020     2019   (in Millions)   Jun. 30     Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31     Dec. 31     Sept. 30   Loans, interest and fees receivable, gross   $ 454.2     $ 498.8     $ 574.3     $ 604.8     $ 679.6     $ 810.6     $ 908.4     $ 769.0   Loans, interest and fees receivable, gross from fair value reconciliation above     793.3       593.7       516.1       382.6       220.6       106.9       6.4       7.1   Total managed receivables   $ 1,247.5     $ 1,092.5     $ 1,090.4     $ 987.4     $ 900.2     $ 917.5     $ 914.8     $ 776.1     As discussed above, our managed receivables data differ in certain aspects from our GAAP data in certain areas. First, managed receivables data are based on billings and actual charge offs as they occur without regard to any changes in our allowance for uncollectible loans, interest and fees receivable. Second, for managed receivables data, we amortize certain fees (such as annual and merchant fees) associated with our Fair Value Receivables over the expected life of the corresponding receivable and recognize certain costs, such as claims made under credit deferral programs, when paid. Under fair value accounting, these fees are recognized when billed or upon receivable acquisition. Third, managed receivables data excludes the impacts of equity in income of equity method investees. A reconciliation of our operating revenues to comparable amounts used in our calculation of Total managed yield ratios are as follows:       At or for the Three Months Ended       2021     2020     2019   (in Millions)     Jun. 30       Mar. 31       Dec. 31       Sept. 30       Jun. 30       Mar. 31       Dec. 31       Sept. 30   Consumer loans, including past due fees   $ 114.3     $ 94.1     $ 95.7     $ 95.6     $ 92.2     $ 95.3     $ 77.1     $ 62.7   Fees and related income on earning assets     49.5       37.0       31.4       35.5       32.4       34.6       24.2       19.7   Other revenue     7.0       4.2       4.8       4.5       2.6       2.5       4.4       3.9   Adjustments due to acceleration of merchant fee discount amortization under fair value accounting     (18.6 )     (5.5 )     (6.6 )     (19.2 )     (16.7 )     (10.5 )     —       —   Adjustments due to acceleration of annual fees recognition under fair value accounting     (12.3 )     (4.6 )     (1.1 )     (7.8 )     (6.2 )     (8.6 )     —       —   Removal of expense accruals under GAAP     (0.4 )     0.2       (0.1 )     (0.7 )     (0.1 )     1.4       —       —   Total managed yield   $ 139.5     $ 125.4     $ 124.1     $ 107.9     $ 104.2     $ 114.7     $ 105.7     $ 86.3     24 Table of Contents   The calculation of Combined net charge offs used in our Combined net charge-off ratio, annualized is as follows:       At or for the Three Months Ended       2021     2020     2019   (in Millions)     Jun. 30       Mar. 31       Dec. 31       Sept. 30       Jun. 30       Mar. 31       Dec. 31       Sept. 30   Net losses on impairment of loans, interest and fees receivable recorded at fair value   $ 22.7     $ 14.3     $ 8.6     $ 3.3     $ 0.4     $ 0.3     $ 0.2     $ 0.2   Gross charge offs on non fair value accounts     27.6       26.3       30.6       54.3       71.8       70.5       49.9       34.8   Recoveries on non fair value accounts     (5.7 )     (3.4 )     (4.3 )     (5.4 )     (11.0 )     (4.4 )     (2.6 )     (4.3 ) Combined net charge-offs   $ 44.6     $ 37.2     $ 34.9     $ 52.2     $ 61.2     $ 66.4     $ 47.5     $ 30.7     Our delinquency and charge-off data at any point in time reflect the credit performance of our managed receivables. The average age of the accounts underlying our receivables, the timing and size of portfolio purchases, the success of our collection and recovery efforts and general economic conditions all affect our delinquency and charge-off rates. The average age of the accounts underlying our receivables portfolio also affects the stability of our delinquency and loss rates. We consider this delinquency and charge-off data in our allowance for uncollectible loans, interest and fees receivable for our other credit product receivables that we report at net realizable value. Our strategy for managing delinquency and receivables losses consists of account management throughout the life of the receivable. This strategy includes credit line management and pricing based on the risks. See also our discussion of collection strategy under “Collection Strategy” in Item 1, “Business” of our Annual Report on Form 10K for the year ended December 31, 2020.   The following table presents the delinquency trends of the receivables we manage within our Credit and Other Investments segment, as well as charge-off data and other non-GAAP managed receivables statistics (in thousands; percentages of total):       At or for the Three Months Ended       2021     2020       Jun. 30     Mar. 31     Dec. 31     Sept. 30       Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables   Period-end managed receivables   $ 793,333     $ 454,191     $ 1,247,524             $ 593,703     $ 498,806     $ 1,092,509             $ 516,064     $ 574,309     $ 1,090,373             $ 382,580     $ 604,805     $ 987,385           30 or more days past due   $ 62,838     $ 63,139     $ 125,977       10.1 %   $ 46,150     $ 46,083     $ 92,233       8.4 %   $ 43,881     $ 58,744     $ 102,625       9.4 %   $ 20,238     $ 55,393     $ 75,631       7.7 % 60 or more days past due   $ 41,627     $ 47,774     $ 89,401       7.2 %   $ 35,132     $ 35,224     $ 70,356       6.4 %   $ 29,794     $ 41,214     $ 71,008       6.5 %   $ 12,844     $ 42,096     $ 54,940       5.6 % 90 or more days past due   $ 26,717     $ 29,022     $ 55,739       4.5 %   $ 25,732     $ 28,011     $ 53,743       4.9 %   $ 19,498     $ 29,382     $ 48,880       4.5 %   $ 8,355     $ 30,718     $ 39,073       4.0 % Averaged managed receivables                   $ 1,170,017                             $ 1,091,441                             $ 1,038,879                             $ 943,791           Total managed yield ratio, annualized (1)                     47.7 %                             46.0 %                             47.8 %                             45.7 %         Combined net charge-off ratio, annualized (2)                     15.2 %                             13.6 %                             13.4 %                             22.1 %               At or for the Three Months Ended       2020     2019       Jun. 30     Mar. 31     Dec. 31     Sept. 30       Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables   Period-end managed receivables   $ 220,603     $ 679,593     $ 900,196             $ 106,899     $ 810,582     $ 917,481             $ 6,404     $ 908,424     $ 914,828             $ 7,070     $ 769,032     $ 776,102           30 or more days past due   $ 8,974     $ 87,214     $ 96,188       10.7 %   $ 1,322     $ 145,260     $ 146,582       16.0 %   $ 427     $ 139,661     $ 140,088       15.3 %   $ 419     $ 99,524     $ 99,943       12.9 % 60 or more days past due   $ 5,913     $ 74,443     $ 80,356       8.9 %   $ 221     $ 113,536     $ 113,757       12.4 %   $ 314     $ 103,870     $ 104,184       11.4 %   $ 281     $ 71,374     $ 71,655       9.2 % 90 or more days past due   $ 3,029     $ 58,821     $ 61,850       6.9 %   $ 155     $ 82,501     $ 82,656       9.0 %   $ 221     $ 73,868     $ 74,089       8.1 %   $ 185     $ 47,358     $ 47,543       6.1 % Averaged managed receivables                   $ 908,839                             $ 916,155                             $ 845,465                             $ 693,117           Total managed yield ratio, annualized (1)                     45.9 %                             50.1 %                             50.0 %                             49.8 %         Combined net charge-off ratio, annualized (2)                     26.9 %                             29.0 %                             22.5 %                             17.7 %           (1) The Total managed yield ratio, annualized is calculated using the annualized total managed yield as the numerator and period-end average managed receivables as the denominator.   (2) The Combined net charge-off ratio, annualized is calculated using the annualized combined net chargeoffs as the numerator and period-end average managed receivables as the denominator.   The following table presents additional trends and data with respect to our point-of-sale (“Retail”) and direct-to-consumer (“Direct”) receivables (dollars in thousands). Results of our legacy credit card receivables portfolios are excluded:   25 Table of Contents       Retail - At or for the Three Months Ended       2021     2020       Jun. 30     Mar. 31     Dec. 31     Sept. 30       Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables   Period-end managed receivables   $ 472,362     $ 154,865     $ 627,227             $ 384,220     $ 175,786     $ 560,006             $ 334,342     $ 209,878     $ 544,220             $ 260,338     $ 233,605     $ 493,943           30 or more days past due   $ 32,779     $ 18,300     $ 51,079       8.1 %   $ 23,254     $ 12,396     $ 35,650       6.4 %   $ 24,151     $ 18,400     $ 42,551       7.8 %   $ 12,339     $ 18,282     $ 30,621       6.2 % 60 or more days past due   $ 21,084     $ 13,311     $ 34,395       5.5 %   $ 17,317     $ 9,010     $ 26,327       4.7 %   $ 16,102     $ 13,290     $ 29,392       5.4 %   $ 7,299     $ 13,312     $ 20,611       4.2 % 90 or more days past due   $ 13,042     $ 7,860     $ 20,902       3.3 %   $ 12,681     $ 6,810     $ 19,491       3.5 %   $ 10,807     $ 9,490     $ 20,297       3.7 %   $ 4,517     $ 9,478     $ 13,995       2.8 % Average APR                     19.2 %                             19.7 %                             19.7 %                             19.0 %         Receivables purchased during period                   $ 217,015                             $ 157,607                             $ 152,855                             $ 170,232                   Retail - At or for the Three Months Ended       2020     2019       Jun. 30     Mar. 31     Dec. 31     Sept. 30       Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables   Period-end managed receivables   $ 156,466     $ 274,652     $ 431,118             $ 72,803     $ 333,299     $ 406,102             $ —     $ 397,691     $ 397,691             $ —     $ 365,652     $ 365,652           30 or more days past due   $ 5,394     $ 26,795     $ 32,189       7.5 %   $ 962     $ 48,395     $ 49,357       12.2 %   $ —     $ 52,777     $ 52,777       13.3 %   $ —     $ 42,318     $ 42,318       11.6 % 60 or more days past due   $ 3,705     $ 21,918     $ 25,623       5.9 %   $ —     $ 37,657     $ 37,657       9.3 %   $ —     $ 38,728     $ 38,728       9.7 %   $ —     $ 29,980     $ 29,980       8.2 % 90 or more days past due   $ 2,014     $ 17,176     $ 19,190       4.5 %   $ —     $ 27,674     $ 27,674       6.8 %   $ —     $ 27,225     $ 27,225       6.8 %   $ —     $ 20,307     $ 20,307       5.6 % Average APR                     19.8 %                             21.3 %                             22.1 %                             22.5 %         Receivables purchased during period                   $ 141,094                             $ 110,479                             $ 116,327                             $ 133,528                   Direct - At or for the Three Months Ended       2021     2020       Jun. 30     Mar. 31     Dec. 31     Sept. 30       Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables   Period-end managed receivables   $ 317,370     $ 299,326     $ 616,696             $ 205,474     $ 323,020     $ 528,494             $ 177,281     $ 364,431     $ 541,712             $ 117,379     $ 371,200     $ 488,579           30 or more days past due   $ 29,894     $ 44,839     $ 74,733       12.1 %   $ 22,743     $ 33,687     $ 56,430       10.7 %   $ 19,556     $ 40,344     $ 59,900       11.1 %   $ 7,730     $ 37,111     $ 44,841       9.2 % 60 or more days past due   $ 20,443     $ 34,463     $ 54,906       8.9 %   $ 17,713     $ 26,214     $ 43,927       8.3 %   $ 13,571     $ 27,924     $ 41,495       7.7 %   $ 5,429     $ 28,784     $ 34,213       7.0 % 90 or more days past due   $ 13,612     $ 21,162     $ 34,774       5.6 %   $ 12,988     $ 21,201     $ 34,189       6.5 %   $ 8,616     $ 19,892     $ 28,508       5.3 %   $ 3,756     $ 21,240     $ 24,996       5.1 % Average APR                     27.1 %                             26.3 %                             26.6 %                             26.1 %         Receivables purchased during period                   $ 283,931                             $ 174,792                             $ 190,596                             $ 174,768             26 Table of Contents       Direct - At or for the Three Months Ended       2020     2019       Jun. 30     Mar. 31     Dec. 31     Sept. 30       Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables     Fair Value Receivables     Amortized Cost Receivables     Total     % of Period-end managed receivables   Period-end managed receivables   $ 59,026     $ 404,941     $ 463,967             $ 28,332     $ 477,283     $ 505,615             $ —     $ 510,733     $ 510,733             $ —     $ 403,380     $ 403,380           30 or more days past due   $ 3,351     $ 60,419     $ 63,770       13.7 %   $ 31     $ 96,865     $ 96,896       19.2 %   $ —     $ 86,884     $ 86,884       17.0 %   $ —     $ 57,206     $ 57,206       14.2 % 60 or more days past due   $ 2,023     $ 52,525     $ 54,548       11.8 %   $ —     $ 75,879     $ 75,879       15.0 %   $ —     $ 65,142     $ 65,142       12.8 %   $ —     $ 41,394     $ 41,394       10.3 % 90 or more days past due   $ 889     $ 41,645     $ 42,534       9.2 %   $ —     $ 54,827     $ 54,827       10.8 %   $ —     $ 46,643     $ 46,643       9.1 %   $ —     $ 27,051     $ 27,051       6.7 % Average APR                     24.6 %                             26.1 %                             27.0 %                             28.2 %         Receivables purchased during period                   $ 117,367                             $ 127,825                             $ 195,243                             $ 174,026             The following discussion relates to the tables above.   Managed receivables levels.  We have continued to experience overall period-over-period quarterly receivables growth with over $348.8 million in net receivables growth associated with the point-of-sale and direct-to-consumer products offered by our bank partners between June 2020 and June 2021. The addition of large point-of-sale retail partners and ongoing purchases of receivables arising in accounts issued by our bank partners to customers of our existing retail partners helped net growth in our point-of-sale receivables by $196.1 million and $122.7 million in the twelve months ended June 30, 2021 and 2020, respectively. Our direct-to-consumer receivables experienced net growth of over $152.7 million and $170.0 million, net during the twelve months ended June 30, 2021 and 2020, respectively. The decline in the pace of receivables growth for our direct-to-consumer receivables was largely driven by reduced consumer demand for general-purpose card products coupled with higher payments on outstanding amounts largely as a result of the various government stimulus programs in effect. We have noted recent recoveries in consumer spending behavior and increased demand for general-purpose credit products, that have helped to increase the overall combined managed receivables levels, and we currently expect this trend to continue through the remainder of the year (absent further unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable). Growth in future periods largely is dependent on the addition of new retail partners to the point-of-sale origination platform, the timing and size of solicitations within the direct-to-consumer platform by our bank partner, as well as purchase activity of consumers. Further, the loss of existing retail partner relationships could adversely affect new loan acquisition levels. Our top five retail partnerships accounted for over 65% of the above referenced Retail period-end managed receivables outstanding as of June 30, 2021.    Delinquencies. Delinquencies have the potential to impact net income in the form of net credit losses. Delinquencies also are costly in terms of the personnel and resources dedicated to resolving them. We intend for the receivables management strategies we use on our portfolios to manage and, to the extent possible, reduce the higher delinquency rates that can be expected with the younger average age of the newer receivables in our managed portfolio. These management strategies include conservative credit line management and collection strategies intended to optimize the effective account-to-collector ratio across delinquency categories. We measure the success of these efforts by reviewing delinquency rates. These rates exclude receivables that have been charged off.   As we continue to acquire newer point-of-sale and direct-to-consumer receivables, we expect our delinquency rates to increase when compared to the same periods in prior years. Our delinquency rates have continued to be somewhat lower than what we ultimately expect for our new point-of-sale and direct-to-consumer receivables given the continued growth and age of the related accounts as well as recent government stimulus efforts. The aforementioned positive impacts related to recent government stimulus programs have served to increase consumer payment rates beyond expectations. The impact due to growth in the receivable base can be seen in periods of large growth in the charts above which result in lower delinquency rates. If and when growth for these product lines moderate, with no further government stimulus programs or other interventions, we expect increased overall delinquency rates when compared to prior periods, as the existing receivables mature through their peak charge-off periods. Additionally, in accordance with prescribed guidance discussed elsewhere in this Report, certain consumers negatively impacted by COVID-19 have been offered short-term payment deferrals and fee waivers. Receivables enrolled in these short-term payment deferrals continue to accrue interest and their delinquency status will not change through the deferment period. Through June 30, 2021 we continue to actively work with consumers that indicate hardship as a result of COVID-19, however, the number of impacted consumers continues to be a diminishing part of our overall receivable base. In order to establish appropriate reserves for this population we considered various factors such as subsequent payment behavior and additional requests by the consumer for further deferrals or hardship claims. Nearly all of these customers are considered current and thus not included as delinquent receivables. The exclusion of these accounts has resulted in lower delinquency rates than we would otherwise expect. Given this, and absent the unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable and the corresponding impact on our delinquency rates, we expect to continue to see seasonal payment patterns on these receivables that impact our delinquencies in line with prior periods. For example, delinquency rates historically are lower in the first quarter of each year due to the benefits of seasonally strong payment patterns associated with year-end tax refunds for most consumers.   Total managed yield ratio, annualized .  We continue to experience growth in newer, higher yielding receivables, including direct-to-consumer receivables and our point-of-sale receivables. While this growth has contributed to consistently higher total managed yield ratios, we expect this growth also will continue to (absent the beneficial impacts of recent government stimulus programs discussed elsewhere) result in higher charge-off and delinquency rates than those experienced historically. Direct-to-consumer receivables tend to have higher total yields than point-of-sale receivables, so declines in the growth of our managed receivables that includes direct-to-consumer receivables has contributed to slightly lower total managed yield ratios for 2021 and 2020 when compared to comparable periods in 2019. Additionally, lower delinquencies (and thus associated fee billings) noted during 2020 (and continuing in 2021), in addition to reductions in the prime rate that corresponds to lower yields charged on credit card receivables, contributed to an overall lower total managed yield ratio. Our fourth and third quarter 2019 total managed yield ratios exclude the impacts of $37.8 million and $26.7 million, respectively, associated with reductions in reserves associated with one of our portfolios.   Absent the unknown impacts COVID-19 may have on our ability to acquire new receivables or the impact it may have on consumers' ability to make payments on outstanding loans and fees receivable, we expect total managed yield ratios to continue to fluctuate somewhat based on the relative mix of growth in point-of-sale receivables and higher yielding direct-to-consumer credit card receivables.    Combined net charge-off ratio, annualized.  We charge off our Credit and Other Investments segment receivables when they become contractually more than 180 days past due. For all of our products, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death. However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or an estate large enough to pay the debt in full.   Growth within our direct-to-consumer receivables (as a percent of outstanding receivables) has resulted in increases in our charge-off rates over time. The combined net charge-off ratio in the third quarter of 2019 reflects the positive impacts of a bulk sale of charged off receivables. Absent this sale, the combined net charge-off ratio would have been 18.6%. The first and second quarters 2020 combined net charge-off ratios reflect receivable growth during 2019 reaching peak charge-off during those periods. Slightly offsetting the combined net charge-off ratio in the second quarter of 2020 are the positive impacts of a bulk sale of charged off receivables in that period. Absent this sale, the combined net charge-off ratio would have been 29.1%. Improvements in our delinquency rates throughout 2020 and continuing into 2021 as a result of the increases in customer payments noted above have resulted in lower charge-offs than we would have otherwise expected. As we continue to experience lower than expected delinquency rates, we expect these improvements will continue to result in lower combined net charge-off rates for the remainder of 2021, when compared to comparable prior periods (those periods prior to COVID-19 and the resulting government stimulus programs).   27 Table of Contents   Notwithstanding the improvements we expect to see in the next few quarters due to recent improvements in delinquency rates, we expect the growth in point-of-sale and direct-to-consumer receivables to result in higher charge-offs than those experienced in 2020. This expectation is based on the following: (1) higher expected charge off rates on the point-of-sale and direct-to-consumer receivables corresponding with higher yields on these receivables, (2) continued testing of receivables with higher risk profiles, which could lead to periodic increases in combined net charge-offs, (3) recent vintages reaching peak charge-off periods, (4) our current expectation for receivables growth during 2021 and (5) negative impacts on some consumers' ability to make payments on outstanding loans and fees receivable as a result of COVID-19. Further impacting our charge-off rates are the timing and size of solicitations that serve to minimize charge off rates in periods of high receivable acquisitions but also exacerbate charge-off rates in periods of lower receivable acquisitions. The unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable could lead to changes in these expectations.   We previously referred to this financial measure as "combined gross charge-off ratio." We have renamed this financial measure to more accurately describe its content and have not changed the calculation of this measure.    Average APR. Our average annual percentage rate (“APR”) charged to customers varies by receivable type, credit history and other factors. The APR for receivables originated through our point-of-sale platform range from 0% to 36.0%. For direct-to-consumer receivables, APR ranges from 19.99% to 36.0%. We have experienced minor fluctuations in our average APR based on the relative product mix of receivables purchased during a period. We currently expect our average APRs in 2021 to remain consistent with average APRs over the past several quarters; however, the timing and relative mix of receivables acquired could cause some minor fluctuations.   Receivables purchased during period. Receivables purchased during the period reflect the gross amount of investments we have made in a given period, net of any credits issued to consumers during that same period. For most periods presented, our point-of-sale receivable purchases experienced overall growth throughout the periods presented largely based on the addition of new point-of-sale retail partners, as previously discussed. We may experience periodic declines in these acquisitions due to: the loss of one or more retail partners; seasonal purchase activity by consumers; or the timing of new customer originations by our lending partners. We currently expect to see increases in receivable acquisitions when compared to the same period in prior years. Our direct-to-consumer receivable acquisitions tend to have more volatility based on the issuance of new credit card accounts by our lending partner and the availability of capital to fund new purchases. Nonetheless, absent the unknown impacts COVID-19 may have on our ability to acquire new receivables or the impact it may have on consumers' ability to make payments on outstanding loans and fees receivable, we expect continued growth in the acquisition of these receivables throughout 2021.   Auto Finance Segment   CAR, our auto finance platform acquired in April 2005, principally purchases and/or services loans secured by automobiles from or for, and also provides floor-plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. We have expanded these operations to also include certain installment lending products in addition to our traditional loans secured by automobiles both in the U.S. and U.S. territories.   Collectively, as of June 30, 2021, we served more than 600 dealers through our Auto Finance segment in 33 states, the District of Columbia and two U.S. territories.   Non-GAAP Financial Measures   For reasons set forth above within our Credit and Other Investments segment discussion, we also provide managed receivables-based financial, operating and statistical data for our Auto Finance segment. Reconciliation of the auto finance managed receivables data to GAAP data requires an understanding that our managed receivables data are based on billings and actual charge offs as they occur, without regard to any changes in our allowance for uncollectible loans, interest and fees receivable. Similar to the managed calculation above, the average managed receivables used in the ratios below is calculated based on the quarter ending balances of consolidated receivables.   A reconciliation of our operating revenues to comparable amounts used in our calculation of Total managed yield ratios follows (in millions):     At or for the Three Months Ended       2021     2020     2019       Jun. 30     Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31     Dec. 31     Sept. 30   Consumer loans, including past due fees   $ 8.4     $ 8.2     $ 8.0     $ 8.0     $ 7.9     $ 7.9     $ 7.9     $ 7.9   Other revenue     0.4       0.3       0.3       0.3       0.3       0.2       0.2       0.2   Total managed yield   $ 8.8     $ 8.5     $ 8.3     $ 8.3     $ 8.2     $ 8.1     $ 8.1     $ 8.1     The calculation of Combined net charge offs used in our Combined net charge-off ratio follows (in millions):       At or for the Three Months Ended       2021     2020     2019       Jun. 30     Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31     Dec. 31     Sept. 30   Gross charge offs   $ 0.2     $ 0.6     $ 0.7     $ 0.6     $ 0.8     $ 0.9     $ 1.2     $ 1.0   Recoveries     (0.3 )     (0.3 )     (0.3 )     (0.3 )     (0.2 )     (0.3 )     (0.3 )     (0.4 ) Combined net charge-offs   $ (0.1 )   $ 0.3     $ 0.4     $ 0.3     $ 0.6     $ 0.6     $ 0.9     $ 0.6     Financial, operating and statistical metrics for our Auto Finance segment are detailed (in thousands; percentages of total) in the following table:       At or for the Three Months Ended       2021     2020     2019       Jun. 30     % of Period-end managed receivables     Mar. 31     % of Period-end managed receivables     Dec. 31     % of Period-end managed receivables     Sept. 30     % of Period-end managed receivables     Jun. 30     % of Period-end managed receivables     Mar. 31     % of Period-end managed receivables     Dec. 31     % of Period-end managed receivables     Sept. 30     % of Period-end managed receivables   Period-end managed receivables   $ 93,164             $ 94,128             $ 93,247             $ 90,514             $ 89,637             $ 90,226             $ 89,785             $ 89,451           30 or more days past due   $ 8,473       9.1 %   $ 8,088       8.6 %   $ 12,580       13.5 %   $ 10,120       11.2 %   $ 9,866       11.0 %   $ 11,261       12.5 %   $ 13,647       15.2 %   $ 12,984       14.5 % 60 or more days past due   $ 2,913       3.1 %   $ 3,529       3.7 %   $ 4,942       5.3 %   $ 4,101       4.5 %   $ 3,959       4.4 %   $ 4,519       5.0 %   $ 5,581       6.2 %   $ 5,322       5.9 % 90 or more days past due   $ 1,234       1.3 %   $ 1,693       1.8 %   $ 2,141       2.3 %   $ 1,865       2.1 %   $ 2,029       2.3 %   $ 2,452       2.7 %   $ 2,573       2.9 %   $ 2,814       3.1 % Average managed receivables   $ 93,646             $ 93,688             $ 91,881             $ 90,076             $ 89,932             $ 90,006             $ 89,618             $ 89,471           Total managed yield ratio, annualized (1)     37.6 %             36.3 %             36.1 %             36.9 %             36.5 %             36.0 %             36.2 %             36.2 %         Combined net charge-off ratio, annualized (2)     -0.4 %             1.3 %             1.7 %             1.3 %             2.7 %             2.7 %             4.0 %             2.7 %         Recovery ratio, annualized (3)     1.3 %             1.3 %             1.3 %             1.3 %             0.9 %             1.3 %             1.3 %             1.8 %           (1) The total managed yield ratio, annualized is calculated using the annualized Total managed yield as the numerator and Period-end average managed receivables as the denominator. (2) The Combined net charge-off ratio, annualized is calculated using the annualized Combined net chargeoffs as the numerator and Period-end average managed receivables as the denominator. (3) The Recovery ratio, annualized is calculated using annualized Recoveries as the numerator and Period-end average managed receivables as the denominator.   28 Table of Contents   Managed receivables.  Absent the unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable, we expect modest growth in the level of our managed receivables for 2021 when compared to the same periods in prior years as CAR expands within its current geographic footprint and continues plans for service area expansion. Although we are expanding our CAR operations, the Auto Finance segment faces strong competition from other specialty finance lenders, as well as the indirect effects on us of our buy-here, pay-here dealership partners’ competition with other franchise dealerships for consumers interested in purchasing automobiles. Included in the fourth quarter of 2020 was an unplanned bulk purchase of receivables that increased our period over period growth and kept receivables levels higher in the first quarter of 2021 when compared to the first quarter of 2020. While we continually evaluate bulk purchases of receivables, the timing and size of the purchases are difficult to predict. Although receivable levels in each period of 2020 were roughly equal to those in 2019 (with the exception of the fourth quarter of 2020), this primarily reflects strong customer payments throughout 2020 offsetting receivables growth when compared to the same periods of 2019.    Delinquencies.  Current delinquency levels are consistent with our expectations for levels in the near term with some improvement noted in the first quarter of 2021 and in 2020 periods (when compared to the same periods in 2019) due to stronger than anticipated customer payment behavior. Delinquency rates also tend to fluctuate based on seasonal trends and historically are lower in the first quarter of each year as seen above due to the benefits of strong payment patterns associated with year-end tax refunds for most consumers. As discussed, elsewhere in this Report, recent delinquency rates have benefitted from government stimulus programs that have resulted in customer payments in excess of historical experience. We are not concerned with modest fluctuations in delinquency rates and do not believe they will have a significantly positive or adverse impact on our results of operations; even at slightly elevated rates, we earn significant yields on CAR’s receivables and have significant dealer reserves (i.e., retainages or holdbacks on the amount of funding CAR provides to its dealer customers) to protect against meaningful credit losses.   Total managed yield ratio, annualized. We have experienced modest fluctuations in our total managed yield ratio largely impacted by the relative mix of receivables in various products offered by CAR as some shorter term product offerings tend to have higher yields. Yields on our CAR products over the last few quarters are consistent with our expectations. Further, we expect our total managed yield ratio to remain in line with current experience, with moderate fluctuations based on relative growth or declines in average managed receivables for a given quarter. These variations would be based on the relative mix of receivables in our various product offerings. Additionally, our product offerings in the U.S. territories tend to have slightly lower yields than those offered in the U.S. As such, growth in that region also will serve to slightly depress our overall total managed yield ratio, yet we expect growth in that region to continue to generate attractive returns on assets.   Combined net charge-off ratio, annualized and recovery ratio, annualized. We charge off auto finance receivables when they are between 120 and 180 days past due, unless the collateral is repossessed and sold before that point, in which case we will record a charge off when the proceeds are received. Combined net charge-off ratios in the above table reflect the lower delinquency rates we have recently experienced. While we anticipate our charge-offs to be incurred ratably across our portfolio of dealers, specific dealer-related losses are difficult to predict and can negatively influence our combined net charge-off ratio. This is evidenced by the slightly elevated combined net charge-off rate we experienced during 2019. We continually re-assess our dealers and will take appropriate action if we believe a particular dealer’s risk characteristics adversely change. While we have appropriate dealer reserves to mitigate losses across the majority of our pool of receivables, the timing of recognition of these reserves as an offset to charge offs is largely dependent on various factors specific to each of our dealer partners including ongoing purchase volumes, outstanding balances of receivables and current performance of outstanding loans. As such, the timing of charge-off offsets is difficult to predict; however, we believe that these reserves are adequate to offset any loss exposure we may incur. Additionally, the products we issue in the U.S. territories do not have dealer reserves with which we can offset losses. We also expect our recovery rate to fluctuate modestly from quarter to quarter due to the timing of the sale of repossessed autos. Given the unknown impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable, we could experience variation in these expectations.   Definitions of Certain Non-GAAP Financial Measures   Total managed yield ratio, annualized.  Represents an annualized fraction, the numerator of which includes (as appropriate for each applicable disclosed segment) the: 1) finance charge and late fee income billed on all consolidated outstanding receivables and the amortization of merchant fees, collectively included in the consumer loans, including past due fees category on our consolidated statements of income; plus 2) credit card fees (including over-limit fees, cash advance fees, returned check fees and interchange income), earned, amortized amounts of annual membership fees with respect to certain credit card receivables, collectively included in our fees and related income on earning assets category on our consolidated statements of income; plus 3) servicing, other income and other activities collectively included in our other operating income category on our consolidated statements of income. The denominator used represents our average managed receivables.   Combined net charge-off ratio, annualized . Represents an annualized fraction, the numerator of which is the aggregate consolidated amounts of finance charge, fee and principal losses from consumers unwilling or unable to pay their receivables balances, as well as from bankrupt and deceased consumers, less current-period recoveries (including recoveries from dealer reserve offsets for our CAR operations) and the related portion of unamortized fees and discounts, as reflected in Note 2 “Significant Accounting Policies and Consolidated Financial Statement Components—Loans, Interest and Fees Receivable”, and the denominator of which is average managed receivables. Recoveries on managed receivables represent all amounts received related to managed receivables that previously have been charged off, including payments received directly from consumers and proceeds received from the sale of those charged-off receivables. Recoveries typically have represented less than 2% of average managed receivables.    We previously referred to this financial measure as "combined gross charge-off ratio." We have renamed this financial measure to more accurately describe its content and have not changed the calculation of this measure.    LIQUIDITY, FUNDING AND CAPITAL RESOURCES   As discussed elsewhere in this Report, we are closely monitoring the impacts of the COVID-19 pandemic across our business, including the resulting uncertainties around consumer spending, credit quality and levels of liquidity. The ultimate impact of COVID-19 on our business, financial condition, liquidity and results of operations is dependent on future developments, which are highly uncertain.   We believe that our actions taken to date, future cash provided by operating activities, availability under our debt facilities, and access to the capital markets will provide adequate resources to fund our operating and financing needs.   Our primary focus is growing the point-of-sale and direct-to-consumer credit card receivables so that our revenues from these investments will help us maintain consistent profitability. Increases in new and existing retail partnerships and the expansion of our investments in direct-to-consumer finance products have resulted in year-over-year growth of total managed receivables levels, and we expect growth to continue in the coming quarters.   Accordingly, we will continue to focus on (i) obtaining the funding necessary to meet capital needs required by the growth of our receivables, (ii) adding new retail partners to our platform to continue growth of the point-of-sale receivables, (iii) continuing growth in direct-to-consumer credit card receivables and (iv) effectively managing costs.   All of our Credit and Other Investments segment’s structured financing facilities are expected to amortize down with collections on the receivables within their underlying trusts and should not represent significant refunding or refinancing risks to our consolidated balance sheets. Facilities that could represent near-term significant refunding or refinancing needs (within the next 24 months) as of June 30, 2021 are those associated with the following notes payable in the amounts indicated (in millions):   Revolving credit facility (expiring July 15, 2022) that is secured by certain receivables and restricted cash   $ 3.6   Revolving credit facility (expiring August 15, 2022) that is secured by certain receivables and restricted cash     2.5   Amortizing debt facility (expiring September 30, 2021) that is secured by certain receivables and restricted cash     2.5   Revolving credit facility (expiring October 15, 2022) that is secured by certain receivables and restricted cash     10.0   Revolving credit facility (expiring April 21, 2023) that is secured by certain receivables and restricted cash     18.0   Total   $ 36.6     Based on the state of the debt capital markets, the performance of our assets that serve as security for the above facilities, and our relationships with lenders, we view imminent refunding or refinancing risks with respect to the above facilities as low in the current environment, and we believe that the quality of our new receivables should allow us to raise more capital through increasing the size of our facilities with our existing lenders and attracting new lending relationships. Further details concerning the above debt facilities, other debt facilities we use to fund the acquisition of receivables and our convertible senior notes are provided in Note 9, “Notes Payable,” and Note 10, “Convertible Senior Notes,” to our consolidated financial statements included herein.   In the three and six months ended June 30, 2021, we repurchased $6.4 million and $21.1 million, respectively, in face amount of our outstanding convertible senior notes for $10.2 million and $28.9 million, respectively, in cash (including accrued interest), respectively. The repurchase resulted in a loss of approximately $5.4 million and $13.3 million, respectively (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon acquisition, the notes were retired.   29 Table of Contents On June 17, 2021, we provided notice of redemption of all outstanding convertible senior notes (the “convertible senior notes”). Upon the redemption notice, holders were allowed to convert the convertible senior notes in lieu of the redemption consideration. At the expiration of the conversion option, holders with $11.8 million in principal amount of the convertible senior notes had elected to convert. The remaining $0.9 million of convertible senior notes were redeemed on July 19, 2021. The convertible senior notes subject to the conversion election will be converted into cash and, if applicable, shares of our common stock based on a formula using an adjusted effective conversion rate of 40.63 shares of common stock per $1,000 principal amount of notes. Upon the final determination of the amount of the conversion consideration, we will deliver to holders of the converting notes cash of $1,000 per $1,000 aggregate principal amount of notes and either cash or shares of our common stock in respect of the remainder of the conversion obligation, if any. We have sufficient cash to meet this obligation.  If required to issue shares of common stock in connection with the conversion obligation, we have a sufficient number of authorized shares of our common stock to do so.    On November 14, 2019, a wholly-owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $1.00 per unit to an unrelated third party. The units carry a 16% preferred return to be paid quarterly, with up to 6 percentage points of the preferred return to be paid through the issuance of additional units or cash, at our election. The units have both call and put rights and are also subject to various covenants including a minimum book value, which if not satisfied, could allow for the securities to be put back to the subsidiary. On March 30, 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms. The proceeds from the transaction are being used for general corporate purposes. We have included the issuance of these Class B preferred units as temporary noncontrolling interest on the consolidated balance sheets. Dividends paid on the Class B preferred units are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders. See Note 12, “Net Income Attributable to Controlling Interests Per Common Share” to our consolidated financial statements for more information.   On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove Ventures, LLC, a Nevada limited liability company (“Dove”). The agreement provided for a senior secured term loan facility in an amount of up to $40.0 million at any time outstanding. On December 27, 2019, the Company issued 400,000 shares of its Series A Preferred Stock with an aggregate initial liquidation preference of $40.0 million, in exchange for full satisfaction of the $40.0 million that the Company owed Dove under the Loan and Security Agreement. Dividends on the preferred stock are 6% per annum (cumulative, non-compounding) and are payable as declared, and in preference to any common stock dividends, in cash. The Series A Preferred Stock is perpetual and has no maturity date. The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends. At the request of the holders of a majority of the shares of the Series A Preferred Stock, the Company is required to offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024. Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $10 per share, subject to adjustment in certain circumstances to prevent dilution.   The use of the London Interbank Offered Rate (“LIBOR”) is expected to be phased out by mid-2023. Currently, LIBOR is used as a reference rate for certain of our financial instruments. In any event, the majority of our revolving credit facilities mature prior to the expected phase out of LIBOR. At this time, there is no definitive information regarding the future utilization of LIBOR or of any particular replacement rate; however, we continue to monitor the efforts of various parties, including government agencies, seeking to identify an alternative rate to replace LIBOR. Going forward, we will work with our lenders to use suitable alternative reference rates for our financial instruments. We will continue to monitor, assess and plan for the phase out of LIBOR; however, we currently do not expect the impact to be material to the Company.   At June 30, 2021, we had $265.9 million in unrestricted cash held by our various business subsidiaries. Because the characteristics of our assets and liabilities change, liquidity management has been a dynamic process for us, driven by the pricing and maturity of our assets and liabilities. We historically have financed our business through cash flows from operations, asset-backed structured financings and the issuance of debt and equity. Details concerning our cash flows for the six months ended June 30, 2021 and 2020 are as follows:     • During the six months ended June 30, 2021, we generated $124.5 million of cash flows from operations compared to our generating $84.0 million of cash flows from operations during the six months ended June 30, 2020. The increase in cash provided by operating activities was principally related to increases in finance and fee collections associated with growing point-of-sale and direct-to-consumer receivables.    • During the six months ended June 30, 2021, we used $159.8 million of cash in our investing activities, compared to use of $67.5 million of cash in investing activities during the six months ended June 30, 2020. This increase in cash used is primarily due to significant increases in the level of net investments in the point-of-sale and direct-to-consumer receivables relative to the same period in 2020 primarily due to increased consumer spending offset by continued strong customer payments noted in the first and second quarters of 2021. While we are now seeing some increases in consumer spending behavior, the impacts COVID-19 and related government stimulus and relief measures may have on our ability to acquire new receivables or the impact they may have on consumers' ability to make payments on outstanding loans and fees receivable are unknown.    • During the six months ended June 30, 2021, we generated $110.1 million of cash in financing activities, compared to the use of $14.8 million of cash in financing activities during the six months ended June 30, 2020. In both periods, the data reflect borrowings associated with point-of-sale and direct-to-consumer receivables offset by net repayments of amortizing debt facilities as payments are made on the underlying receivables that serve as collateral. Further, during the second quarter of 2021, we issued Series B Cumulative Perpetual Preferred Stock, which resulted in net proceeds (after associated expenses) of $66.1 million. Offsetting capital raised through the preferred stock issuance was the repurchase of $21.1 million in face amount of our outstanding convertible senior notes for $28.9 million in cash (including accrued interest). The repurchase resulted in a loss of approximately $13.3 million (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Further, on March 30, 2020, a wholly-owned subsidiary issued 50.0 million Class B preferred units at a purchase price of $1.00 per unit.   Beyond our immediate financing efforts discussed throughout this Report, we will continue to evaluate debt and equity issuances as a means to fund our investment opportunities. We expect to take advantage of any opportunities to raise additional capital if terms and pricing are attractive to us. Any proceeds raised under these efforts or additional liquidity available to us could be used to fund (1) additional investments in point-of-sale and direct-to-consumer finance receivables as well as the acquisition of credit card receivables portfolios and (2) further repurchases of our common stock. Pursuant to a share repurchase plan authorized by our Board of Directors on May 7, 2020, we are authorized to repurchase up to 5,000,000 shares of our common stock through June 30, 2022. As of June 30, 2021, we were authorized to repurchase a remaining 4,911,080 shares under this share repurchase plan.   CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE-SHEET ARRANGEMENTS   See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2020.   Commitments and Contingencies   We do not currently have any off-balance-sheet arrangements; however, we do have certain contractual arrangements that would require us to make payments or provide funding if certain circumstances occur; we refer to these arrangements as contingent commitments. We do not currently expect that these contingent commitments will result in any material amounts being paid by us. See Note 11, “Commitments and Contingencies,” to our consolidated financial statements included herein for further discussion of these matters.   RECENT ACCOUNTING PRONOUNCEMENTS   See Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components,” to our consolidated financial statements included herein for a discussion of recent accounting pronouncements.   CRITICAL ACCOUNTING ESTIMATES   We have prepared our financial statements in accordance with GAAP. These principles are numerous and complex. We have summarized our significant accounting policies in the notes to our consolidated financial statements. In many instances, the application of GAAP requires management to make estimates or to apply subjective principles to particular facts and circumstances. A variance in the estimates used or a variance in the application or interpretation of GAAP could yield a materially different accounting result. It is impracticable for us to summarize every accounting principle that requires us to use judgment or estimates in our application. Nevertheless, we describe below the areas for which we believe that the estimations, judgments or interpretations that we have made, if different, would have yielded the most significant differences in our consolidated financial statements.   On a quarterly basis, we review our significant accounting policies and the related assumptions, in particular, those mentioned below, with the audit committee of the Board of Directors.   30 Table of Contents   Revenue Recognition   Consumer Loans, Including Past Due Fees   Consumer loans, including past due fees reflect interest income, including finance charges, and late fees on loans in accordance with the terms of the related customer agreements. Premiums, discounts and merchant fees paid or received associated with installment or auto loans that are not included as part of our Fair Value Receivables are deferred and amortized over the average life of the related loans using the effective interest method. Premiums, discounts and merchant fees paid or received associated with Fair Value Receivables are recognized upon receivable acquisition. Finance charges and fees, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.   Fees and Related Income on Earning Assets   Fees and related income on earning assets primarily include fees associated with the credit products, including the receivables underlying our U.S. point-of-sale finance and direct-to-consumer platform, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others.   We assess fees on credit card accounts underlying our credit card receivables according to the terms of the related cardholder agreements and, except for annual membership fees, we recognize these fees as income when they are charged to the customers’ accounts. We accrete annual membership fees associated with our credit card receivables into income on a straight-line basis over the cardholder privilege period which is generally 12 months for amortized cost receivables, and when billed for Fair Value Receivables. Similarly, fees on our other credit products are recognized when earned, which coincides with the time they are charged to the customers' accounts. Fees and related income on earning assets, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.   Measurements for Loans, Interest and Fees Receivable at Fair Value and Notes Payable Associated with Structured Financings at Fair Value   Our valuation of loans, interest and fees receivable, at fair value is based on the present value of future cash flows using a valuation model of expected cash flows and the estimated cost to service and collect those cash flows. We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third-party market participants would use in determining fair value, including estimates of gross yield, payment rates, expected credit loss rates, servicing costs, and discount rates. Similarly, our valuation of notes payable associated with structured financings, at fair value is based on the present value of future cash flows utilized in repayment of the outstanding principal and interest under the facilities using a valuation model of expected cash flows net of the contractual service expenses within the facilities. We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third-party market participants would use in determining fair value, including: estimates of gross yield, payment rates, expected credit loss rates, servicing costs, and discount rates.   The estimates for credit losses, payment rates, servicing costs, contractual servicing fees, costs of funds, discount rates and yields earned on credit card receivables significantly affect the reported amount (and changes thereon) of our loans, interest and fees receivable, at fair value and our notes payable associated with structured financings, at fair value on our consolidated balance sheets and consolidated statements of operations.   Allowance for Uncollectible Loans, Interest and Fees   Through our analysis of loan performance, delinquency data, charge-off data, economic trends and the potential effects of those economic trends on consumers, we establish an allowance for uncollectible loans, interest and fees receivable as an estimate of the probable losses inherent within those loans, interest and fees receivable that we do not report at fair value. Our loans, interest and fees receivable consist of smaller-balance, homogeneous loans, divided into two portfolio segments: Credit and Other Investments; and Auto Finance. Each of these portfolio segments is further divided into pools based on common characteristics such as contract or acquisition channel. For each pool, we determine the necessary allowance for uncollectible loans, interest and fees receivable by analyzing some or all of the following unique to each type of receivable pool: historical loss rates; current delinquency and roll-rate trends; vintage analyses based on the number of months an account has been in existence; the effects of changes in the economy on consumers; changes in underwriting criteria; and estimated recoveries. These inputs are considered in conjunction with (and potentially reduced by) any unearned fees and discounts that may be applicable for an outstanding loan receivable. To the extent that actual results differ from our estimates of uncollectible loans, interest and fees receivable, our results of operations and liquidity could be materially affected.   RELATED PARTY TRANSACTIONS   Under a shareholders’ agreement which we entered into with certain shareholders, including David G. Hanna, Frank J. Hanna, III and certain trusts that were Hanna affiliates, following our initial public offering (1) if one or more of the shareholders accepts a bona fide offer from a third party to purchase more than 50% of the outstanding common stock, each of the other shareholders that is a party to the agreement may elect to sell his shares to the purchaser on the same terms and conditions, and (2) if shareholders that are a party to the agreement owning more than 50% of the common stock propose to transfer all of their shares to a third party, then such transferring shareholders may require the other shareholders that are a party to the agreement to sell all of the shares owned by them to the proposed transferee on the same terms and conditions.   In June 2007, we entered into a sublease for 1,000 square feet (as later adjusted to 600 square feet) of excess office space at our Atlanta headquarters with HBR Capital, Ltd. (“HBR”), a company co-owned by David G. Hanna and his brother Frank J. Hanna, III. The sublease rate per square foot is the same as the rate that we pay under the prime lease. Under the sublease, HBR paid us $16,960 and $16,627 for 2020 and 2019, respectively. The aggregate amount of payments required under the sublease from January 1, 2021 to the expiration of the sublease in May 2022 is $24,567.   In January 2013, HBR began leasing the services of four employees from us. HBR reimburses us for the full cost of the employees, based on the amount of time devoted to HBR. In the six months ended June 30, 2021 and 2020, we received $191,788 and $144,138, respectively, of reimbursed costs from HBR associated with these leased employees.   On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove. The agreement provided for a senior secured term loan facility in an amount of up to $40.0 million at any time outstanding. On December 27, 2019, the Company issued 400,000 shares (aggregate initial liquidation preference of $40 million) of its Series A Preferred Stock in exchange for full satisfaction of the $40.0 million that the Company owed Dove under the Loan and Security Agreement. Dividends on the preferred stock are 6% per annum (cumulative, non-compounding) and are payable in preference to any common stock dividends, in cash. The Series A Preferred Stock is perpetual and has no maturity date. The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends. At the request of the holders of a majority of the shares of the Series A Preferred Stock, the Company shall offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024. Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $10 per share, subject to certain adjustment in certain circumstances to prevent dilution. Given the redemption rights contained within the Series A Preferred Stock, we account for the outstanding preferred stock as temporary equity in the consolidated balance sheets. Dove is a limited liability company owned by three trusts. David G. Hanna is the sole shareholder and the President of the corporation that serves as the sole trustee of one of the trusts, and David G. Hanna and members of his immediate family are the beneficiaries of this trust. Frank J. Hanna, III is the sole shareholder and the President of the corporation that serves as the sole trustee of the other two trusts, and Frank J. Hanna, III and members of his immediate family are the beneficiaries of these other two trusts.   31 Table of Contents   FORWARD-LOOKING INFORMATION   We make forward-looking statements in this Report and in other materials we file with the Securities and Exchange Commission (“SEC”) or otherwise make public. This Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements. In addition, our senior management might make forward-looking statements to analysts, investors, the media and others. Statements with respect to the macroeconomic environment; expected revenue; income; receivables; income ratios; net interest margins; long-term shareholder returns; acquisitions of financial assets and other growth opportunities; divestitures and discontinuations of businesses; loss exposure and loss provisions; delinquency and charge-off rates; the extent and duration of the COVID-19 pandemic and its impact on the Company, our bank partners, merchant network, financing sources, borrowers, loan demand, legal and regulatory matters, borrower payment patterns, information security and consumer privacy, the capital markets, the economy in general and changes in the U.S. economy that could materially impact consumer spending behavior, unemployment and demand for our products; changes in the credit quality and fair value of our credit card loans, interest and fees receivable and the fair value of their underlying structured financing facilities; the impact of actions by the Federal Deposit Insurance Corporation (“FDIC”), Federal Reserve Board, Federal Trade Commission (“FTC”), Consumer Financial Protection Bureau (“CFPB”) and other regulators on both us, banks that issue credit cards and other credit products on our behalf, and merchants that participate in our retail and healthcare point-of-sale (collectively "point-of-sale") finance operations; account growth; the performance of investments that we have made; operating expenses; marketing plans and expenses; the performance of our Auto Finance segment; the impact of our credit card receivables on our financial performance; the sufficiency of available capital; future interest costs; sources of funding operations and acquisitions; growth and profitability of our point-of-sale finance operations; our ability to raise funds or renew financing facilities; share repurchases, share issuances or dividends; debt retirement; the results associated with our equity-method investee; our servicing income levels; gains and losses from investments in securities; experimentation with new products and other statements of our plans, beliefs or expectations are forward-looking statements. These and other statements using words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions also are forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. The forward-looking statements we make are not guarantees of future performance, and we have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or historical earnings levels.   Although it is not possible to identify all factors, we continue to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially from our expectations are the risks and uncertainties described under “Risk Factors” set forth in Part II, Item 1A, and the risk factors and other cautionary statements in other documents we file with the SEC, including the following:     • the availability of adequate financing to support growth;   • the extent to which federal, state and local governmental regulation of our various business lines and the products we service for others limits or prohibits the operation of our businesses;   • current and future litigation and regulatory proceedings against us;   • the effect of adverse economic conditions on our revenues, loss rates and cash flows;   • competition from various sources providing similar financial products, or other alternative sources of credit, to consumers;   • impacts due to delays or interruptions associated with ongoing system conversions;    • the adequacy of our allowances for uncollectible loans, interest and fees receivable and estimates of loan losses used within our risk management and analyses;   • the possible impairment of assets;   • the duration and magnitude of the impact of the COVID-19 pandemic on credit usage, payment patterns and the capital markets;   • our ability to manage costs in line with the expansion or contraction of our various business lines;   • our relationship with (i) the merchants that participate in point-of-sale finance operations and (ii) the banks that issue credit cards and provide certain other credit products utilizing our technology platform and related services; and   • theft and employee errors.   Most of these factors are beyond our ability to predict or control. Any of these factors, or a combination of these factors, could materially affect our future financial condition or results of operations and the ultimate accuracy of our forward-looking statements. There also are other factors that we may not describe (because we currently do not perceive them to be material) that could cause actual results to differ materially from our expectations.   We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide this information.