Atlanticus Holdings Corp 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES   Our common stock is traded on the NASDAQ Global Select Market under the symbol “ATLC.” As of March 8, 2022, there were 42 record holders of our common stock, which does not include persons whose stock is held in nominee or “street name” accounts through brokers, banks and intermediaries.   ISSUER PURCHASES OF EQUITY SECURITIES   The following table sets forth information with respect to our repurchases of common stock during the three months ended December 31, 2021.         Total Number of Shares Purchased     Average Price Paid per Share     Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)     Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (2)   October 1 - October 31     —     $ —       —       4,911,080   November 1 - November 30     42,997     $ 78.85       —       4,911,080   December 1 - December 31     263,397     $ 60.88       263,397       4,647,683   Total     306,394     $ 63.40       263,397       4,647,683       (1) Because withholding tax-related stock repurchases are permitted outside the scope of our 5,000,000 share Board-authorized repurchase plan, these amounts exclude shares of stock returned to us by employees in satisfaction of withholding tax requirements on vested stock grants. There were 42,997 such shares returned to us during the three months ended December 31, 2021.   (2) Pursuant to a share repurchase plan authorized by our Board of Directors on March 15, 2022, we are authorized to repurchase 5,000,000 shares of our common stock through June 30, 2024.   We will continue to evaluate our stock price relative to other investment opportunities and, to the extent we believe that the repurchase of our stock represents an appropriate return of capital, we will repurchase shares of our stock.   Dividends   We have no current plans to pay dividends to holders of our common stock. As we continue to pursue our growth strategy, we will assess our cash flow, the long-term capital needs of our business and other uses of cash. Payment of any cash dividends in the future will depend upon, among other things, our results of operations, financial condition, cash requirements and contractual restrictions. Furthermore, dividends on our Series A Convertible Preferred Stock and Series B Cumulative Perpetual Preferred Stock are payable in preference to any common stock dividends. For additional information, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity, Funding and Capital Resources.”   Common Stock Performance Graph   The following graph shows the cumulative total stockholder return on our common stock compared to an overall stock market index, the Russell 2000 Index (“Russell 2000”), and a published industry index, the NASDAQ Financial 100 Index (“NASDAQ Financial 100”), over the five-year period commencing December 31, 2016 and ended December 31, 2021. The stock performance graph assumes that $100 was invested in our common stock and each index and that all dividends were reinvested. The stock price performance on the graph below is not necessarily indicative of future performance.         2016     2017     2018     2019     2020     2021   Atlanticus Holdings Corp   $ 100.00     $ 84.53     $ 128.21     $ 317.34     $ 867.50     $ 2,511.98   Russell 2000     100.00       114.65       102.02       128.06       153.62       176.39   NASDAQ Financial 100     100.00       115.14       105.24       136.07       141.13       179.58     ITEM 6. [RESERVED]   22 Table of Contents   ITEM 7. 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, 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 Item 1A and elsewhere in this Report, that our actual experience will differ materially from these expectations. For more information, see “Cautionary Notice Regarding Forward-Looking Statements” at the beginning of this Report.   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   Atlanticus is a financial technology company powering more inclusive financial solutions for everyday Americans. We leverage data, analytics, and innovative technology to unlock access to financial solutions for the millions of Americans who would otherwise be underserved. According to data published by FICO, 37% of Americans had FICO® scores of less than 700 as of the second quarter of 2021. We believe this equates to a population of over 100 million everyday Americans in need of access to credit. These consumers often have financial needs that are not effectively met by larger financial institutions. By facilitating appropriately priced consumer credit and financial service alternatives with value-added features and benefits curated for the unique needs of these consumers, we endeavor to empower better financial outcomes for everyday Americans. Everyday Americans are underserved. Atlanticus is changing that.   Currently, within our Credit as a Service ("CaaS") segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $27 billion in consumer loans over our 25-year operating history, to support lenders in offering more inclusive financial services. These products include private label credit and general purpose credit cards originated by lenders through multiple channels, including retailers and healthcare providers, direct mail solicitation, digital marketing and partnerships with third parties. 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 solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers and service providers. Using our technology and proprietary predictive 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. Atlanticus’ underwriting process is enhanced by AI and machine learning, enabling fast, sound decision-making when it matters most.   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, we also provide loan servicing, including risk management and customer service outsourcing, for third parties. Also through our CaaS 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 CaaS segment: 1) servicing income; 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 CaaS segment principally include those associated with (1) private label credit and general purpose credit card 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 possible disruptions caused by COVID-19 and disruptions in supply chains, we believe that our private label credit and general purpose credit card 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.   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 private label credit and general purpose credit card 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 or retirement of debt and equity securities.   We elected the fair value option to account for certain loans receivable associated with our private label credit and general purpose credit card platform that were 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, are accounted for in our 2020 and 2021 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 23 Table of Contents   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, are 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. As discussed elsewhere in this Report we plan to adopt ASU 2016-13 beginning January 1, 2022. This ASU requires the use of the CECL model that is based on expected rather than incurred losses. The ASU also allows for a one-time fair value election for receivables. Upon adoption, we plan to elect the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform currently measured at amortized cost and will record an increase to our allowance for loan losses for our remaining Loans, interest and fees receivable associated with our Auto Finance Segment. See Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components-Recent Accounting Pronouncements” to our consolidated financial statements included herein for further discussion of our adoption of ASU 2016-13.   COVID-19 Pandemic    In March 2020, a national emergency was declared under the National Emergencies Act due to the COVID-19 pandemic. As of the date of filing this Annual Report on Form 10-K, 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. At the onset of the COVID-19 pandemic, Atlanticus quickly instituted a company-wide remote work program to promote the safety of all employees and their families. Once COVID-19 cases declined, Atlanticus transitioned to a hybrid remote work model where eligible positions may arrange with their manager to work partially or fully remote. Appropriate safety measures continue to be followed to protect employees working on site.  Atlanticus will continue to follow all government mandates and make adjustments to support employees and prioritize employee safety.   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 uncertainties about the extent and duration of the pandemic. Additionally, earlier government stimulus programs decreased consumer need for credit products and generally led to an increase in customer payments. While we have seen 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. Furthermore, a number of our merchants have recently experienced labor shortages and supply chain disruptions. These trends could decrease or delay consumer spending and our receivables growth.   Borrowers impacted by COVID-19 requesting hardship assistance have been receiving temporary relief from payments. While we expect these measures to mitigate credit losses, related economic disruptions could 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, related economic impacts, and labor shortages and supply chain disruptions could have on our financial condition and results of operations remains highly uncertain. For more information, refer to Part I, Item 1A “Risk Factors” and, in particular, “–  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 Year Ended December 31,     Increases (Decreases)   (In Thousands)   2021     2020     from 2020 to 2021   Total operating revenue   $ 743,855     $ 560,007     $ 183,848   Other non-operating revenue     4,201       3,403       798   Interest expense     (54,127 )     (51,548 )     (2,579 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     (36,455 )     (142,719 )     106,264   Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     (218,733 )     (108,548 )     (110,185 ) Net margin     438,741       260,595       178,146   Operating expenses:                         Salaries and benefits     34,024       29,079       (4,945 ) Card and loan servicing     75,397       63,047       (12,350 ) Marketing and solicitation     56,635       35,012       (21,623 ) Depreciation     1,493       1,247       (246 ) Other     22,180       17,819       (4,361 ) Total operating expenses:     189,729       146,204       (43,525 ) Loss on repurchase and redemption of convertible senior notes     29,439       —       (29,439 )                           Net income     177,789       93,917       83,872   Net loss attributable to noncontrolling interests     113       203       (90 ) Net income attributable to controlling interests     177,902       94,120       83,782   Net income attributable to controlling interests to common shareholders     155,539       77,050       78,489     24 Table of Contents   Year Ended December 31, 2021 Compared to Year Ended December 31, 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 private label credit and general purpose credit card products, the receivables of which increased from $1,085.9 million as of December 31, 2020 to $1,609.8 million as of December 31, 2021. While we noted some disruptions in consumer spending behavior due to the COVID-19 pandemic and labor shortages, supply chain disruptions and other related economic impacts, we are currently experiencing continued period-over-period growth in private label credit and general purpose credit card 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 for 2022. Future periods’ growth is also dependent on the addition of new retail partners to expand the reach of private label credit operations as well as growth within existing partnerships and continued growth and marketing within the general purpose credit card receivables. As discussed elsewhere in this Report, we have elected the fair value option to account for certain loan receivables associated with our private label credit and general purpose credit card 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 income). Other revenue on our consolidated statements of income 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 customers we serve use their cards 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. 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. As discussed elsewhere in this Report we plan to adopt the fair value option under ASU 2016-13, beginning January 1, 2022, for all remaining loans receivable associated with our private label credit and general purpose credit card platform currently measured at amortized cost and will record an increase to our allowance for loan losses for our remaining Loans, interest and fees receivable associated with our Auto Finance Segment under the CECL model. The impact of this adoption, for those accounts that are electing the fair value option, will result in an increase in the recognition of certain fee categories with future changes in the fair value associated with the associated receivables being included as part of our "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 income. The above discussions on expectations for finance, fee and other income are based on our current expectations. The potential impacts COVID-19 and related economic impacts 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. See Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components-Recent Accounting Pronouncements” to our consolidated financial statements included herein for further discussion of our adoption of ASU 2016-13.   Other non-operating revenue.  Included within our Other non-operating income 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 Other non-operating revenue of approximately $560,000. For the year ended December 31, 2020, other non-operating revenue included $2.0 million in distributions received from an investment in a consumer finance technology company. 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 10, "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 private label credit and general purpose credit card receivables and CAR operations as evidenced within Note 10, “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 private label credit and general purpose credit card platform increased from $827.1 million as of December 31, 2020 to $1,223.5 million as of December 31, 2021. The majority of this increase in outstanding debt relates to the addition of multiple revolving credit facilities during 2021. Additionally, the issuance of $150.0 million of Senior notes in November 2021 (included on our consolidated balance sheet as "Senior notes, net") will also serve to increase interest expense in future periods. Offsetting these increases in interest expense is an overall decrease in the weighted average cost of funds, coupled with the repurchase and redemption of our convertible senior notes. We anticipate additional debt financing over the next few quarters as we continue to grow coupled with increased effective interest rates resulting from anticipated federal fund rate increases, and as such, we expect our quarterly interest expense to be above that experienced in the prior periods for these operations.   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 December 31, 2020 and December 31, 2021 primarily reflecting: 1) the effects of our adoption of the fair value option to account for certain loans receivable that were 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 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 CaaS and Auto Finance segments for further credit quality statistics and analysis. Given 1) the ongoing impacts of our adoption of fair value accounting for certain receivables acquired on or after January 1, 2020; 2) our adoption of fair value accounting under ASU 2016-13 on January 1, 2022 for certain of our receivables discussed above, and 3) 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 as the underlying receivables that continue to be recorded at net realizable value are reduced.   25 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 will elect the fair value option on January 1, 2022), we expect our change in fair value of credit card receivables recorded at fair value to increase throughout 2022 commensurate with growth in these receivables. We may adjust our models to reflect macro economic events. With the aforementioned market impacts of COVID-19 and related economic impacts, we continue to include 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 recent 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 year ended December 31, 2020, relative to the year ended December 31, 2021, reflect the following:     • increases in salaries reflecting marginal growth in both the number of employees and increases in related benefit costs. We expect an increase in this cost for 2022 when compared to 2021 as we expect our receivables to continue to grow and as a result we expect to increase our employee base;   • increases in card and loan servicing expenses in the year ended December 31, 2021 when compared to the year ended December 31, 2020 due to growth in receivables associated with our investments in private label credit and general purpose credit card receivables, which grew from $1,085.9 million outstanding to $1,609.8 million outstanding at December 31, 2020 and December 31, 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 2022. As our receivables have grown, we have significantly reduced our servicing costs per account, through greater economies of scale and investments in technology.   • increases in marketing and solicitation costs for the year ended December 31, 2021 primarily due to receivables growth associated with our private label credit and general purpose credit card portfolios. We expect that increased origination and brand marketing support will result in overall increases in year-over-year costs during 2022 although the frequency and timing of marketing efforts could result in periodic 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. Some costs including travel expenses are variable based on growth. 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 relative to the corresponding growth in receivables.   Certain operating costs are variable based on the levels of accounts and receivables we service (both for our own receivables 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 private label credit and general purpose credit card 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.   26 Table of Contents   Notwithstanding our cost-management efforts, we expect increased levels of expenditures associated with anticipated growth in private label credit and general purpose credit card 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.   Loss on repurchase and redemption of convertible senior notes. In the year ended December 31, 2021, we repurchased $22.1 million in face amount of our outstanding convertible senior notes for $30.4 million in cash (including accrued interest). The repurchase resulted in a loss of approximately $14.1 million (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. Upon final determination of the conversion consideration amount, we delivered to holders of the converting notes, cash of $1,000 per $1,000 aggregate principal amount of notes and $12.1 million of cash in respect of the remainder of the conversion obligation. The redemption resulted in a loss of approximately $15.3 million (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon redemption, the notes were retired.   In conjunction with the original offering of the convertible senior notes, we entered into a share lending agreement with JPMorgan Chase & Co. (as successor to Bear, Stearns International Limited and Bear, Stearns & Co. Inc.). Pursuant to the share lending agreement, we lent JPMorgan Chase & Co. (“JPMorgan”) 5,677,950 shares of our common stock. JPMorgan agreed to use the loaned shares for the purpose of directly or indirectly facilitating the hedging of the convertible senior notes by the holders thereof or for such other purpose as reasonably determined by us. At the retirement of the convertible senior notes, 1,459,233 shares of common stock remained outstanding under the share lending agreement. In September 2021, JPMorgan returned the outstanding loaned shares, without consideration being payable in respect thereof. As of December 31, 2021, these shares have been retired.   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 income. 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.    In November 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. In March 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 income.   Income Taxes. We experienced an effective income tax expense rate of 19.0% and 17.9% for the years ended December 31, 2021, and December 31, 2020, respectively. Our effective income tax expense rate for the year ended December 31, 2021, was 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. Offsetting the above factors are the effects on our effective tax rate of state and foreign income tax expense and executive compensation deduction limitations under Section 162(m) of the Internal Revenue Code of 1986. Our effective income tax expense rate for the year ended December 31, 2020, was 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) the reversal in 2020 of our prior year accruals of interest and penalties on liabilities for unpaid taxes, such reversal arising from the complete abatement by the IRS of failure -to-pay penalties (and accrued interest thereon) related to a now-completed audit by the IRS of our 2008 tax returns.   We report income tax-related interest and penalties (including those associated with both our accrued liabilities for uncertain tax positions and unpaid tax liabilities) within our income tax line item on our consolidated statements of income. We likewise report the reversal of income tax-related interest and penalties within such line item to the extent we resolve our liabilities for uncertain tax positions or unpaid tax liabilities in a manner favorable to our accruals therefor. For 2021, we experienced only de minimis interest expense and reversals, and for 2020, we reported a net reversal of income tax-related interest and penalties of $1.0 million within our income tax line item.   27 Table of Contents   CaaS Segment   Our CaaS segment includes our activities relating to our servicing of and our investments in the private label credit and general purpose 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 private label credit and general purpose credit card receivables.   We record (i) the finance charges, merchant fees and late fees assessed on our CaaS segment receivables in the Revenue - Consumer loans, including past due fees category on our consolidated statements of income, (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 income, 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 income (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 income (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 income.   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 income.   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 non-GAAP financial measures to the most directly comparable GAAP financial measures or the calculation of the non-GAAP financial measures are 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 former equity method investee. As the receivables underlying our former 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   (in Millions)   Dec. 31 (1)     Sep. 30 (1)     Jun. 30 (1)     Mar. 31 (1)     Dec. 31 (1)     Sept. 30 (1)     Jun. 30 (1)     Mar. 31 (1)   Loans, interest and fees receivable, at fair value   $ 1,026.4     $ 846.2     $ 644.7     $ 481.4     $ 417.1     $ 310.8     $ 177.9     $ 89.4   Fair value mark against receivable (2)   $ 208.9     $ 182.2     $ 148.6     $ 112.3     $ 99.0     $ 71.8     $ 42.7     $ 17.5   Loans, interest and fees receivable, at face value   $ 1,235.3     $ 1,028.4     $ 793.3     $ 593.7     $ 516.1     $ 382.6     $ 220.6     $ 106.9     (1)  As discussed in more detail above in "—Overview," we elected the fair value option to account for certain loans receivable associated with our private label credit and general purpose credit card platform that were 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.   28 Table of Contents       At or for the Three Months Ended       2021     2020   (in Millions)   Dec. 31     Sep. 30     Jun. 30     Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31   Loans, interest and fees receivable, gross   $ 375.7     $ 417.8     $ 454.2     $ 498.8     $ 574.3     $ 604.8     $ 679.6     $ 810.6   Loans, interest and fees receivable, gross from fair value reconciliation above     1,235.3       1,028.4       793.3       593.7       516.1       382.6       220.6       106.9   Total managed receivables   $ 1,611.0     $ 1,446.2     $ 1,247.5     $ 1,092.5     $ 1,090.4     $ 987.4     $ 900.2     $ 917.5     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   (in Millions)     Dec. 31       Sep. 30       Jun. 30       Mar. 31       Dec. 31       Sept. 30       Jun. 30       Mar. 31   Consumer loans, including past due fees   $ 144.1     $ 132.7     $ 114.3     $ 94.1     $ 95.7     $ 95.6     $ 92.2     $ 95.3   Fees and related income on earning assets     53.8       54.1       49.5       37.0       31.4       35.5       32.4       34.6   Other revenue     9.7       8.4       7.0       4.2       4.8       4.5       2.6       2.5   Adjustments due to acceleration of merchant fee discount amortization under fair value accounting     (3.4 )     (14.7 )     (18.6 )     (5.5 )     (6.6 )     (19.2 )     (16.7 )     (10.5 ) Adjustments due to acceleration of annual fees recognition under fair value accounting     (4.4 )     (12.0 )     (12.3 )     (4.6 )     (1.1 )     (7.8 )     (6.2 )     (8.6 ) Removal of expense accruals under GAAP     —       0.2       (0.4 )     0.2       (0.1 )     (0.7 )     (0.1 )     1.4   Total managed yield   $ 199.8     $ 168.7     $ 139.5     $ 125.4     $ 124.1     $ 107.9     $ 104.2     $ 114.7     The calculation of Combined net charge offs used in our Combined net charge-off ratio, annualized is as follows (in millions):       At or for the Three Months Ended       2021     2020   (in Millions)     Dec. 31       Sep. 30       Jun. 30       Mar. 31       Dec. 31       Sept. 30       Jun. 30       Mar. 31   Net losses on impairment of loans, interest and fees receivable recorded at fair value   $ 46.7     $ 25.6     $ 22.7     $ 14.3     $ 8.6     $ 3.3     $ 0.4     $ 0.3   Gross charge offs on non-fair value accounts     38.7       27.1       27.6       26.3       30.6       54.3       71.8       70.5   Recoveries on non-fair value accounts     (4.1 )     (2.7 )     (5.7 )     (3.4 )     (4.3 )     (5.4 )     (11.0 )     (4.4 ) Combined net charge-offs   $ 81.3     $ 50.0     $ 44.6     $ 37.2     $ 34.9     $ 52.2     $ 61.2     $ 66.4     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”.   29 Table of Contents   The following table presents the delinquency trends of the receivables we manage within our CaaS 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       Dec. 31     Sep. 30     Jun. 30     Mar. 31       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   $ 1,235,287     $ 375,713     $ 1,611,000             $ 1,028,367     $ 417,767     $ 1,446,134             $ 793,333     $ 454,191     $ 1,247,524             $ 593,703     $ 498,806     $ 1,092,509           30 or more days past due   $ 185,372     $ 44,801     $ 230,173       14.3 %   $ 114,156     $ 61,122     $ 175,278       12.1 %   $ 62,838     $ 63,139     $ 125,977       10.1 %   $ 46,150     $ 46,083     $ 92,233       8.4 % 60 or more days past due   $ 135,052     $ 34,207     $ 169,259       10.5 %   $ 79,393     $ 50,280     $ 129,673       9.0 %   $ 41,627     $ 47,774     $ 89,401       7.2 %   $ 35,132     $ 35,224     $ 70,356       6.4 % 90 or more days past due   $ 91,432     $ 24,739     $ 116,171       7.2 %   $ 51,061     $ 40,396     $ 91,457       6.3 %   $ 26,717     $ 29,022     $ 55,739       4.5 %   $ 25,732     $ 28,011     $ 53,743       4.9 % Average managed receivables                   $ 1,528,567                             $ 1,346,829                             $ 1,170,017                             $ 1,091,441           Total managed yield ratio, annualized (1)                     52.3 %                             50.1 %                             47.7 %                             46.0 %         Combined net charge-off ratio, annualized (2)                     21.3 %                             14.8 %                             15.2 %                             13.6 %               At or for the Three Months Ended       2020       Dec. 31     Sept. 30     Jun. 30     Mar. 31       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   $ 516,064     $ 574,309     $ 1,090,373             $ 382,580     $ 604,805     $ 987,385             $ 220,603     $ 679,593     $ 900,196             $ 106,899     $ 810,582     $ 917,481           30 or more days past due   $ 43,881     $ 58,744     $ 102,625       9.4 %   $ 20,238     $ 55,393     $ 75,631       7.7 %   $ 8,974     $ 87,214     $ 96,188       10.7 %   $ 1,322     $ 145,260     $ 146,582       16.0 % 60 or more days past due   $ 29,794     $ 41,214     $ 71,008       6.5 %   $ 12,844     $ 42,096     $ 54,940       5.6 %   $ 5,913     $ 74,443     $ 80,356       8.9 %   $ 221     $ 113,536     $ 113,757       12.4 % 90 or more days past due   $ 19,498     $ 29,382     $ 48,880       4.5 %   $ 8,355     $ 30,718     $ 39,073       4.0 %   $ 3,029     $ 58,821     $ 61,850       6.9 %   $ 155     $ 82,501     $ 82,656       9.0 % Average managed receivables                   $ 1,038,879                             $ 943,791                             $ 908,839                             $ 916,155           Total managed yield ratio, annualized (1)                     47.8 %                             45.7 %                             45.9 %                             50.1 %         Combined net charge-off ratio, annualized (2)                     13.4 %                             22.1 %                             26.9 %                             29.0 %         (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.   30 Table of Contents   The following table presents additional trends and data with respect to our private label credit (“Private Label Credit”) and general purpose credit card (“General Purpose Credit Card”) operations (dollars in thousands). Results of our legacy credit card receivables portfolios are excluded:        Private Label Credit - At or for the Three Months Ended       2021       Dec. 31     Sep. 30     Jun. 30     Mar. 31       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   $ 595,277     $ 116,225     $ 711,502             $ 553,343     $ 135,213     $ 688,556             $ 472,362     $ 154,865     $ 627,227             $ 384,220     $ 175,786     $ 560,006           30 or more days past due   $ 71,817     $ 12,735     $ 84,552       11.9 %   $ 53,348     $ 17,793     $ 71,141       10.3 %   $ 32,779     $ 18,300     $ 51,079       8.1 %   $ 23,254     $ 12,396     $ 35,650       6.4 % 60 or more days past due   $ 51,875     $ 9,450     $ 61,325       8.6 %   $ 37,464     $ 14,218     $ 51,682       7.5 %   $ 21,084     $ 13,311     $ 34,395       5.5 %   $ 17,317     $ 9,010     $ 26,327       4.7 % 90 or more days past due   $ 35,552     $ 6,834     $ 42,386       6.0 %   $ 25,277     $ 11,224     $ 36,501       5.3 %   $ 13,042     $ 7,860     $ 20,902       3.3 %   $ 12,681     $ 6,810     $ 19,491       3.5 % Average APR                     18.4 %                             18.4 %                             19.2 %                             19.7 %         Receivables purchased during period                   $ 177,441                             $ 211,272                             $ 217,015                             $ 157,607                 Private Label Credit - At or for the Three Months Ended       2020       Dec. 31     Sept. 30     Jun. 30     Mar. 31       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   $ 334,342     $ 209,878     $ 544,220             $ 260,338     $ 233,605     $ 493,943             $ 156,466     $ 274,652     $ 431,118             $ 72,803     $ 333,299     $ 406,102           30 or more days past due   $ 24,151     $ 18,400     $ 42,551       7.8 %   $ 12,339     $ 18,282     $ 30,621       6.2 %   $ 5,394     $ 26,795     $ 32,189       7.5 %   $ 962     $ 48,395     $ 49,357       12.2 % 60 or more days past due   $ 16,102     $ 13,290     $ 29,392       5.4 %   $ 7,299     $ 13,312     $ 20,611       4.2 %   $ 3,705     $ 21,918     $ 25,623       5.9 %   $ —     $ 37,657     $ 37,657       9.3 % 90 or more days past due   $ 10,807     $ 9,490     $ 20,297       3.7 %   $ 4,517     $ 9,478     $ 13,995       2.8 %   $ 2,014     $ 17,176     $ 19,190       4.5 %   $ —     $ 27,674     $ 27,674       6.8 % Average APR                     19.7 %                             19.0 %                             19.8 %                             21.3 %         Receivables purchased during period                   $ 152,855                             $ 170,232                             $ 141,094                             $ 110,479             31 Table of Contents       General Purpose Credit Card - At or for the Three Months Ended       2021       Dec. 31     Sep. 30     Jun. 30     Mar. 31       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   $ 638,761     $ 259,488     $ 898,249             $ 470,394     $ 282,554     $ 752,948             $ 317,370     $ 299,326     $ 616,696             $ 205,474     $ 323,020     $ 528,494           30 or more days past due   $ 113,508     $ 32,066     $ 145,574       16.2 %   $ 60,647     $ 43,329     $ 103,976       13.8 %   $ 29,894     $ 44,839     $ 74,733       12.1 %   $ 22,743     $ 33,687     $ 56,430       10.7 % 60 or more days past due   $ 83,147     $ 24,757     $ 107,904       12.0 %   $ 41,823     $ 36,062     $ 77,885       10.3 %   $ 20,443     $ 34,463     $ 54,906       8.9 %   $ 17,713     $ 26,214     $ 43,927       8.3 % 90 or more days past due   $ 55,860     $ 17,905     $ 73,765       8.2 %   $ 25,701     $ 29,172     $ 54,873       7.3 %   $ 13,612     $ 21,162     $ 34,774       5.6 %   $ 12,988     $ 21,201     $ 34,189       6.5 % Average APR                     26.8 %                             27.0 %                             27.1 %                             26.3 %         Receivables purchased during period                   $ 390,189                             $ 351,474                             $ 283,931                             $ 174,792                 General Purpose Credit Card - At or for the Three Months Ended       2020       Dec. 31     Sept. 30     Jun. 30     Mar. 31       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   $ 177,281     $ 364,431     $ 541,712             $ 117,379     $ 371,200     $ 488,579             $ 59,026     $ 404,941     $ 463,967             $ 28,332     $ 477,283     $ 505,615           30 or more days past due   $ 19,556     $ 40,344     $ 59,900       11.1 %   $ 7,730     $ 37,111     $ 44,841       9.2 %   $ 3,351     $ 60,419     $ 63,770       13.7 %   $ 31     $ 96,865     $ 96,896       19.2 % 60 or more days past due   $ 13,571     $ 27,924     $ 41,495       7.7 %   $ 5,429     $ 28,784     $ 34,213       7.0 %   $ 2,023     $ 52,525     $ 54,548       11.8 %   $ —     $ 75,879     $ 75,879       15.0 % 90 or more days past due   $ 8,616     $ 19,892     $ 28,508       5.3 %   $ 3,756     $ 21,240     $ 24,996       5.1 %   $ 889     $ 41,645     $ 42,534       9.2 %   $ —     $ 54,827     $ 54,827       10.8 % Average APR                     26.6 %                             26.1 %                             24.6 %                             26.1 %         Receivables purchased during period                   $ 190,596                             $ 174,768                             $ 117,367                             $ 127,825             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 $523.9 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners during 2021. The addition of large private label credit retail partners and ongoing purchases of receivables arising in accounts issued by our bank partners to customers of our existing retail partners helped grow our private label credit receivables by $167.3 million and $146.5 million in the years ended December 31, 2021 and 2020, respectively. Our general purpose credit card acquisitions grew by over $356.5 million and $31.0 million, net during the years ended December 31, 2021 and 2020, respectively. We have noted recent recoveries in consumer spending behavior that have helped to increase the overall combined managed receivables levels, and we currently expect this trend to continue into 2022 (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 private label credit origination platform, the timing and size of solicitations within the general purpose credit card 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 private label credit period-end managed receivables outstanding as of December 31, 2021.    32 Table of Contents   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 private label credit and general purpose credit card 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 private label credit and general purpose credit card receivables given the continued growth and age of the related accounts as well as government stimulus efforts. The aforementioned positive impacts related to 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. We continue to actively work with consumers that indicate hardship as a result of COVID-19, however, the number of impacted consumers is a small and 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. In 2020 and early 2021, nearly all of these customers were considered current and thus not included as delinquent receivables. The exclusion of these accounts resulted in lower delinquency rates for those periods than we would have otherwise expected. Given this, and absent the potential impacts COVID-19 and related economic impacts 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 private label credit and general purpose credit card 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 government stimulus programs discussed elsewhere) result in higher charge-off and delinquency rates than those experienced historically. General purpose credit card receivables tend to have higher total yields than private label credit receivables, so declines in the growth of our managed receivables that includes general purpose credit card receivables in periods noted above, contributed to slightly lower total managed yield ratios for those periods in 2021 and 2020. Additionally, lower delinquencies (and thus associated fee billings) noted during 2020 and 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. Recent growth in our general purpose credit card receivables in excess of the growth experienced in our private label credit receivables, along with expected increased delinquency rates associated with those receivables, has resulted in an increase in our total managed yield ratio. We currently expect continued higher growth rates for our general purpose credit card receivables when compared to growth rates for our private label credit receivables and, as such, expect to see managed yield ratios similar to those experienced in the third and fourth quarter of 2021.    Combined net charge-off ratio, annualized.  We charge off our CaaS segment receivables when they become contractually more than 180 days past due. For all of our receivables portfolios, 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 general purpose credit card receivables (as a percent of outstanding receivables) has resulted in increases in our charge-off rates over time. 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 throughout 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 and early 2022 (with some increases expected over current ratios), when compared to comparable prior periods (i.e., those periods prior to COVID-19 and the related government stimulus programs).   Notwithstanding the improvements we have recently experienced in delinquency rates, we expect the continued growth in private label credit and general purpose credit card receivables to result in higher charge-offs than those experienced in 2021. This expectation is based on the following: (1) higher expected charge off rates on the private label credit and general purpose credit card 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 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 and the related economic impacts. 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 potential impacts COVID-19 and related economic impacts, 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.   Average APR. The average annual percentage rate (“APR”) charged to customers varies by receivable type, credit history and other factors. The APR for receivables originated through our private label credit platform range from 0% to 36.0%. For general purpose credit card 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 2022 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.  None of the programs we service have APRs in excess of 36%.   33 Table of Contents   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 private label credit receivable purchases experienced overall growth largely based on the addition of new private label credit 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; labor shortages and supply chain disruptions; 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 general purpose credit card 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 potential 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 during 2022.   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 December 31, 2021, we served more than 600 dealers through our Auto Finance segment in 34 states, the District of Columbia and two U.S. territories.   Non-GAAP Financial Measures   For reasons set forth above within our CaaS 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       Dec. 31     Sep. 30     Jun. 30     Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31   Consumer loans, including past due fees   $ 8.5     $ 8.4     $ 8.4     $ 8.2     $ 8.0     $ 8.0     $ 7.9     $ 7.9   Other revenue     0.3       0.3       0.4       0.3       0.3       0.3       0.3       0.2   Total managed yield   $ 8.8     $ 8.7     $ 8.8     $ 8.5     $ 8.3     $ 8.3     $ 8.2     $ 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       Dec. 31     Sep. 30     Jun. 30     Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31   Gross charge offs   $ 0.4     $ 0.3     $ 0.2     $ 0.6     $ 0.7     $ 0.6     $ 0.8     $ 0.9   Recoveries     (0.2 )     (0.2 )     (0.3 )     (0.3 )     (0.3 )     (0.3 )     (0.2 )     (0.3 ) Combined net charge-offs   $ 0.2     $ 0.1     $ (0.1 )   $ 0.3     $ 0.4     $ 0.3     $ 0.6     $ 0.6     34 Table of Contents   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       Dec. 31     % of Period-end managed receivables     Sep. 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     Jun. 30     % of Period-end managed receivables     Mar. 31     % of Period-end managed receivables   Period-end managed receivables   $ 94,580           $ 93,374           $ 93,164           $ 94,128           $ 93,247           $ 90,514           $ 89,637           $ 90,226         30 or more days past due   $ 11,733     12.4 %   $ 9,403     10.1 %   $ 8,473     9.1 %   $ 8,088     8.6 %   $ 12,580     13.5 %   $ 10,120     11.2 %   $ 9,866     11.0 %   $ 11,261     12.5 % 60 or more days past due   $ 4,574     4.8 %   $ 3,548     3.8 %   $ 2,913     3.1 %   $ 3,529     3.7 %   $ 4,942     5.3 %   $ 4,101     4.5 %   $ 3,959     4.4 %   $ 4,519     5.0 % 90 or more days past due   $ 1,977     2.1 %   $ 1,534     1.6 %   $ 1,234     1.3 %   $ 1,693     1.8 %   $ 2,141     2.3 %   $ 1,865     2.1 %   $ 2,029     2.3 %   $ 2,452     2.7 % Average managed receivables   $ 93,977           $ 93,269           $ 93,646           $ 93,688           $ 91,881           $ 90,076           $ 89,932           $ 90,006         Total managed yield ratio, annualized (1)     37.5 %           37.3 %           37.6 %           36.3 %           36.1 %           36.9 %           36.5 %           36.0 %       Combined net charge-off ratio, annualized (2)     0.9 %           0.4 %           -0.4 %           1.3 %           1.7 %           1.3 %           2.7 %           2.7 %       Recovery ratio, annualized (3)     0.9 %           0.9 %           1.3 %           1.3 %           1.3 %           1.3 %           0.9 %           1.3 %         (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.   Managed receivables.  Absent the potential impacts COVID-19 and related economic impacts 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 2022 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.    35 Table of Contents   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 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 over the coming quarters. 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. 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 potential impacts COVID-19 and related economic impacts 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.  36 Table of Contents   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, levels of liquidity, labor availability and supply chain management. 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 expanding the reach of our financial technology so that we grow our private label credit and general purpose credit card receivables and generate revenues from these investments that will allow us to maintain consistent profitability. Increases in new and existing retail partnerships and the expansion of our investments in general purpose credit card 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 private label credit receivables, (iii) continuing growth in general purpose credit card receivables and (iv) effectively managing costs.   All of our CaaS 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 December 31, 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   $ 5.7   Revolving credit facility (expiring April 21, 2023) that is secured by certain receivables and restricted cash     19.2   Revolving credit facility (expiring October 30, 2023) that is secured by certain receivables and restricted cash     48.7   Revolving credit facility (expiring November 1, 2023) that is secured by financial and operating assets of our CAR subsidiary     32.1   Total   $ 105.7     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 and other debt facilities we use to fund the acquisition of receivables are provided in Note 10, “Notes Payable,” to our consolidated financial statements included herein.   In November 2021, we issued $150.0 million aggregate principal amount of senior notes (included on our consolidated balance sheet as "Senior notes, net"). The senior notes are general unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness, and will rank senior in right of payment to the Company’s future subordinated indebtedness, if any. The senior notes are effectively subordinated to all of the Company’s existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and the senior notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries (excluding any amounts owed by such subsidiaries to the Company). The senior notes bear interest at the rate of 6.125% per annum. Interest on the senior notes is payable quarterly in arrears on February 1, May 1, August 1 and November 1 of each year. The senior notes will mature on November 30, 2026. In June and July 2021, we issued an aggregate of 3,188,533 shares of 7.625% Series B Cumulative Perpetual Preferred Stock, liquidation preference of $25.00 per share (the “Series B Preferred Stock”) for net proceeds of approximately $76.5 million after deducting underwriting discounts and commissions, but before deducting expenses and the structuring fee. We pay cumulative cash dividends on the Series B Preferred Stock, when and as declared by our Board of Directors, in the amount of $1.90625 per share each year, which is equivalent to 7.625% of the $25.00 liquidation preference per share.   We repurchased $22.1 million in face amount of our outstanding convertible senior notes during the year ended December 31, 2021 for $30.4 million in cash (including accrued interest). The repurchase resulted in a loss of approximately $14.1 million (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.   In June 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. Upon final determination of the conversion consideration amount, we delivered to holders of the converting notes, cash of $1,000 per $1,000 aggregate principal amount of notes and $12.1 million of cash in respect of the remainder of the conversion obligation. The redemption resulted in a loss of approximately $15.3 million (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon redemption, the notes were retired.   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. In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms. The proceeds from the transaction were 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 14, “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,   37 Table of Contents   noncompounding) 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 December 31, 2021, we had $409.7 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 years ended December 31, 2021 and 2020 are as follows:     • During the year ended December 31, 2021, we generated $212.4 million of cash flows from operations compared to our generation of $212.7 million of cash flows from operations during the year ended December 31, 2020. The increase in cash provided by operating activities was principally related to an increase in finance and fee collections associated with growing private label credit and general purpose credit card receivables and increased recoveries on charged-off receivables. Offsetting these collections were increased year over year payments made to pay federal and state taxes. Collections on receivables have generally benefited from increased consumer payments as a result of government stimulus payments. As these stimulus payments decrease, we expect consumer payments to return to historical levels.   • During the year ended December 31, 2021, we used $475.0 million of cash from our investing activities, compared to use of $292.6 million of cash from investing activities during the year ended December 31, 2020. This increase in cash used is primarily due to significant increases in the level of net investments in the private label credit and general purpose credit card receivables relative to the same period in 2020. Net investments in 2020 were lower than expected due to reduced consumer spending patterns as a result of the COVID-19 outbreak and the associated economic shutdowns. These spending patterns, while still somewhat lower than we would otherwise expect, increased significantly throughout 2021. Increases in spending were offset somewhat by strong customer payments noted in the first and second quarters of 2021. While we continue to see increases in consumer spending behavior, the impacts COVID-19 and related economic impacts 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 year ended December 31, 2021, we generated $510.3 million of cash from financing activities, compared to our generating $162.4 million of cash from financing activities during the year ended December 31, 2020. In both periods, the data reflect borrowings associated with private label credit and general purpose credit card receivables (including $600 million from two asset-backed securitizations associated with our general purpose credit card 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 and third quarters of 2021, we issued Series B Preferred Stock, which resulted in net proceeds (after associated expenses) of $75.3 million. During November 2021 we issued $150.0 million aggregate principal amount of senior notes which resulted in net proceeds (after associated expenses) of $142.8 million. Offsetting capital raised through the preferred stock issuance and senior note issuance was the repurchase and redemption of $33.8 million in face amount of our outstanding convertible senior notes for $54.3 million in cash (including accrued interest) and purchases of $25.2 million of our outstanding common stock pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations. Impacting cash generated from financing activities during the year ended December 31, 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 private label credit and general purpose credit card finance receivables as well as the acquisition of credit card receivables portfolios and (2) further repurchases or redemptions of preferred and common stock. Pursuant to a share repurchase plan authorized by our Board of Directors on March 15, 2022, we are authorized to repurchase up to 5,000,000 shares of our common stock through June 30, 2024.    CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE-SHEET ARRANGEMENTS   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 12, “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.   38 Table of Contents   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.   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 private label credit and general purpose credit card 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 income.   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: CaaS 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.   39 Table of Contents   ITEM 7A. 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.    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   See the Index to Financial Statements in Item 15, “Exhibits and Financial Statement Schedules.”   ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   None.