Atlanticus Holdings Corp 10-K

ITEM 9A. CONTROLS AND PROCEDURES   Evaluation of Disclosure Controls and Procedures     As of December 31, 2021, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Act) was carried out on behalf of Atlanticus Holdings Corporation and our subsidiaries by our management and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer). Based upon the evaluation, our principal executive officer and principal financial officer concluded that these disclosure controls and procedures were effective as of December 31, 2021.   Management’s Report on Internal Control over Financial Reporting   Management of Atlanticus Holdings Corporation is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Act) for Atlanticus Holdings Corporation and our subsidiaries. Our management conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2021, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control-Integrated Framework (2013 framework) .   Based on our evaluation under the COSO 2013 framework, management has concluded that internal control over financial reporting was effective as of December 31, 2021.   The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their accompanying report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. BDO's report is on page F-1 of the attached financial statements.   Changes in Internal Control Over Financial Reporting   During the quarter ended December 31, 2021, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) occurred that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   Limitations on Controls   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   ITEM 9B. OTHER INFORMATION   None.   ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS   Not Applicable.   40 Table of Contents   PART III   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders in the sections entitled “Proposal One: Election of Directors,” “Executive Officers of Atlanticus,” “Delinquent Section 16(a) Reports” and “Corporate Governance” and is incorporated by reference.   ITEM 11. EXECUTIVE COMPENSATION   The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders in the section entitled “Executive and Director Compensation” and is incorporated by reference.   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders in the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” and is incorporated by reference.   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders in the sections entitled “Related Party Transactions” and “Corporate Governance” and is incorporated by reference.   ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES   The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Shareholders in the section entitled “Auditor Fees” and is incorporated by reference.   41 Table of Contents   PART IV   ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES   The following documents are filed as part of this Report:    1. Financial Statements   INDEX TO FINANCIAL STATEMENTS     Page Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting ( BDO USA, LLP ; Atlanta, GA ; PCAOB ID# 243 ) F-1 Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements  ( BDO USA, LLP ; Atlanta, GA ; PCAOB ID# 243 ) F-2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4 Consolidated Statements of Income for the Years Ended December 31, 2021 and 2020 F-5 Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2021 and 2020 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020 F-7 Notes to Consolidated Financial Statements as of December 31, 2021 and 2020 F-8   2. Financial Statement Schedules   None.   3. Exhibits   Exhibit Number   Description of Exhibit   Incorporated by Reference from Atlanticus’ SEC Filings Unless Otherwise Indicated(1) 3.1   Articles of Incorporation, as amended   May 16, 2017, Form 8-K, exhibit 3.1 3.1(a)   Articles of Amendment Establishing Cumulative Convertible Preferred Stock, Series A   December 30, 2019, Form 8-K, exhibit 3.1 3.1(b)   Articles of Amendment Establishing the 7.625% Series B Cumulative Perpetual Preferred Stock   June 11, 2021, Form 8-K, exhibit 3.1 3.2   Amended and Restated Bylaws (as amended through May 12, 2017)   May 16, 2017, Form 8-K, exhibit 3.2 4.1   Description of Atlanticus Holdings Corporation's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934   Filed herewith 4.2   Form of common stock certificate   March 30, 2016, Form 10-K, exhibit 4.1 4.3   Indenture, dated as of November 22, 2021, by and between Atlanticus Holdings Corporation and U.S. Bank National Association, as trustee   November 22, 2021, Form 8-K, exhibit 4.1 4.4   First Supplemental Indenture, dated as of November 22, 2021, by and between Atlanticus Holdings Corporation and U.S. Bank National Association, as trustee   November 22, 2021, Form 8-K, exhibit 4.2 4.5   Form of 6.125% Senior Notes due 2026 (included in Exhibit 4.4)   November 22, 2021, Form 8-K, exhibit 4.3 10.1   Stockholders Agreement dated as of April 28, 1999   January 18, 2000, Form S-1, exhibit 10.1 10.2†   Fourth Amended and Restated 2014 Equity Incentive Plan   April 11, 2019, Definitive Proxy Statement on Schedule 14A, Appendix A 10.2(a)†   Form of Restricted Stock Agreement–Directors   August 14, 2019, Form 10-Q, exhibit 10.2 10.2(b)†   Form of Restricted Stock Agreement–Employees   August 14, 2019, Form 10-Q, exhibit 10.3 10.2(c)†   Form of Stock Option Agreement–Directors   August 14, 2019, Form 10-Q, exhibit 10.4 10.2(d)†   Form of Stock Option Agreement–Employees   August 14, 2019, Form 10-Q, exhibit 10.5 10.2(e)†   Form of Restricted Stock Unit Agreement–Directors   August 14, 2019, Form 10-Q, exhibit 10.6 10.2(f)†   Form of Restricted Stock Unit Agreement–Employees   August 14, 2019, Form 10-Q, exhibit 10.7 10.3†   Second Amended and Restated Employee Stock Purchase Plan   April 10, 2018, Definitive Proxy Statement on Schedule 14A, Appendix A 10.4†   Amended and Restated Employment Agreement, dated March 18, 2021, between Atlanticus Holdings Corporation and David G. Hanna   May 14, 2021, Form 10-Q, exhibit 10.1 10.5†   Amended and Restated Employment Agreement, dated March 18, 2021, between Atlanticus Holdings Corporation and Jeffrey A. Howard   May 14, 2021, Form 10-Q, exhibit 10.2 10.6†   Employment Agreement for William R. McCamey   March 28, 2014, Form 10-K, exhibit 10.8 10.7†   Amended and Restated Consultant Agreement, dated May 1, 2020, between Atlanticus Services Corporation and Denise M. Harrod   May 14, 2021, Form 10-Q, exhibit 10.4 10.8†   Outside Director Compensation Package    Filed herewith 10.9   Amended and Restated Note Purchase Agreement, dated March 1, 2010, among Merrill Lynch Mortgage Capital Inc., CCFC Corp. (formerly CompuCredit Funding Corp.), Atlanticus Services Corporation (formerly CompuCredit Corporation), and CompuCredit Credit Card Master Note Business Trust   June 25, 2010, Form 8-K/A, exhibit 10.1 10.10   Assumption Agreement dated June 30, 2009 between Atlanticus Holdings Corporation (formerly CompuCredit Holdings Corporation) and Atlanticus Services Corporation (formerly CompuCredit Corporation)   July 7, 2009, Form 8-K, exhibit 10.1 10.11   Master Indenture for Perimeter Master Note Business Trust, dated February 8, 2017, among Perimeter Master Note Business Trust, U.S. Bank National Association and Atlanticus Services Corporation   May 15, 2017, Form 10-Q, exhibit 10.1 10.11(a)*   Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated February 8, 2017   Filed herewith 10.11(b)*   Amended and Restated Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated June 11, 2018   March 30, 2020, Form 10-K, exhibit 10.11(a)   42 Table of Contents   Exhibit Number   Description of Exhibit   Incorporated by Reference from Atlanticus’ SEC Filings Unless Otherwise Indicated(1) 10.11(c)*   First Amendment to the Amended and Restated Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated November 16, 2018   March 30, 2020, Form 10-K, exhibit 10.11(b) 10.11(d)*   Second Amendment to the Amended and Restated Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated September 20, 2019   March 30, 2020, Form 10-K, exhibit 10.11(c) 10.11(e)   Third Amendment to the Amended and Restated Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated November 13, 2019   March 30, 2020, Form 10-K, exhibit 10.11(d) 10.11(f)*   Fourth Amendment to the Amended and Restated Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated January 23, 2020   March 30, 2020, Form 10-K, exhibit 10.11(e) 10.11(g)*   Series 2018-Three Indenture Supplement for Perimeter Master Note Business Trust, dated November 16, 2018   March 30, 2020, Form 10-K, exhibit 10.11(f) 10.11(h)*   First Amendment to the Series 2018-Three Indenture Supplement for Perimeter Master Note Business Trust, dated October 9, 2019   March 30, 2020, Form 10-K, exhibit 10.11(g) 10.11(i)   Second Amendment to the Series 2018-Three Indenture Supplement for Perimeter Master Note Business Trust, dated November 13, 2019   March 30, 2020, Form 10-K, exhibit 10.11(h) 10.11(j)*   Third Amendment to Series 2018-Three Indenture Supplement for Perimeter Master Note Business Trust, dated January 23, 2020   March 30, 2020, Form 10-K, exhibit 10.11(i) 10.11(k)*   Purchase Agreement, dated February 8, 2017, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Atlanticus Services Corporation and Perimeter Master Note Business Trust   Filed herewith 10.11(l)*   First Amendment to Purchase Agreement, dated June 11, 2018, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(k) 10.11(m)*   Second Amendment to Purchase Agreement, dated November 16, 2018, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(l) 10.11(n)   Third Amendment to Purchase Agreement, dated November 13, 2019, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(m) 10.11(o)*   Fourth Amendment to Purchase Agreement, dated January 23, 2020, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(n) 10.11(p)*   Purchase Agreement, dated November 16, 2018, among TSO-Fortiva Notes Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(o) 10.11(q)   First Amendment to Purchase Agreement, dated November 13, 2019, among TSO-Fortiva Notes Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(p) 10.11(r)*   Second Amendment to Purchase Agreement, dated January 23, 2020, among TSO-Fortiva Notes Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust   March 30, 2020, Form 10-K, exhibit 10.11(q) 10.11(s)*   Series 2019-One Indenture Supplement for Perimeter Master Note Business Trust, dated June 12, 2019   March 30, 2020, Form 10-K, exhibit 10.11(r) 10.11(t)*   Series 2019-Two Indenture Supplement for Perimeter Master Note Business Trust, dated November 26, 2019   March 30, 2020, Form 10-K, exhibit 10.11(s) 10.11(u)   Trust Agreement, dated February 8, 2017, between Perimeter Funding Corporation and Wilmington Trust, National Association   May 15, 2017, Form 10-Q, exhibit 10.1(c) 10.11(v)   First Amendment to Trust Agreement, dated June 11, 2018, between Perimeter Funding Corporation and Wilmington Trust, National Association   March 30, 2020, Form 10-K, exhibit 10.11(u) 10.12   Master Indenture for Fortiva Retail Credit Master Note Business Trust, dated November 9, 2018, among Fortiva Retail Credit Master Note Business Trust, U.S. Bank National Association and Access Financing, LLC   March 27, 2019, Form 10-K, exhibit 10.12 10.12(a)*   Series 2018-One Indenture Supplement for Fortiva Retail Credit Master Note Business Trust, dated November 9, 2018   March 27, 2019, Form 10-K, exhibit 10.12(a) 10.12(b)   Amended and Restated Trust Agreement, dated November 9, 2018, between FRC Funding Corporation and Wilmington Trust, National Association   March 27, 2019, Form 10-K, exhibit 10.12(b)   43 Table of Contents   Exhibit Number   Description of Exhibit   Incorporated by Reference from Atlanticus’ SEC Filings Unless Otherwise Indicated(1) 10.13   Amended and Restated Program Management Agreement, dated April 1, 2020, between The Bank of Missouri and Atlanticus Services Corporation    August 14, 2020, Form 10-Q, exhibit 10.1 10.13(a)   First Amendment to Amended and Restated Program Management Agreement, dated June 30, 2020, between The Bank of Missouri and Atlanticus Services Corporation   August 14, 2020, Form 10-Q, exhibit 10.1(a) 10.13(b)*   Amended and Restated Receivable Sales Agreement, dated April 1, 2020, between The Bank of Missouri and Fortiva Funding, LLC    August 14, 2020, Form 10-Q, exhibit 10.2 10.13(c)   First Amendment to Amended and Restated Receivable Sales Agreement, dated June 30, 2020, between The Bank of Missouri and Fortiva Funding, LLC   August 14, 2020, Form 10-Q, exhibit 10.2(a) 10.13(d)   Assignment and Assumption Agreement, dated March 24, 2018, among Mid America Bank & Trust Company, Atlanticus Services Corporation and The Bank of Missouri   May 14, 2019, Form 10-Q, exhibit 10.2(b) 10.13(e)   Assignment and Assumption Agreement, dated March 24, 2018, among Mid America Bank & Trust Company, Fortiva Funding, LLC and The Bank of Missouri   May 14, 2019, Form 10-Q, exhibit 10.2(c) 10.14*   Amended and Restated Operating Agreement of Access Financial Holdings, LLC, dated November 14, 2019   March 30, 2020, Form 10-K, exhibit 10.15 21.1   Subsidiaries of the Registrant   Filed herewith 23.1   Consent of BDO USA, LLP   Filed herewith 31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a)   Filed herewith 31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a)   Filed herewith 32.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350   Filed herewith 101.INS   Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.   Filed herewith 101.SCH   Inline XBRL Taxonomy Extension Schema Document   Filed herewith 101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document   Filed herewith 101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document   Filed herewith 101.PRE   Inline XBRL Taxonomy Presentation Linkbase Document   Filed herewith 101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document   Filed herewith 104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)       † Management contract, compensatory plan or arrangement. (1) Documents incorporated by reference from SEC filings made prior to June 2009 were filed under CompuCredit Corporation (now Atlanticus Services Corporation) (File No. 000-25751), our predecessor issuer. * Certain portions of this document have been omitted because they are both not material and are the type that the Company treats as private or confidential.   ITEM 16. FORM 10-K SUMMARY   None.   44 Table of Contents   SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on March 15, 2022.       Atlanticus Holdings Corporation                   By: /s/ Jeffrey A. Howard       Jeffrey A. Howard President and Chief Executive Officer     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons in the capacities and on the dates indicated.   Signature Title Date       /s/Jeffrey A. Howard Jeffrey A. Howard President, Chief Executive Officer and Director (Principal Executive Officer) March 15, 2022         /s/William R. McCamey William R. McCamey Chief Financial Officer (Principal Financial Officer) March 15, 2022         /s/Mitchell C. Saunders Mitchell C. Saunders Chief Accounting Officer (Principal Accounting Officer) March 15, 2022       /s/David G. Hanna David G. Hanna Executive Chairman of the Board March 15, 2022       /s/Denise M. Harrod Denise M. Harrod Director March 15, 2022       /s/Deal W. Hudson Deal W. Hudson Director March 15, 2022       /s/Joann G. Jones Joann G. Jones Director March 15, 2022       /s/Mack F. Mattingly Mack F. Mattingly Director March 15, 2022     45 Table of Contents   Report of Independent Registered Public Accounting Firm   Shareholders and Board of Directors Atlanticus Holdings Corporation Atlanta, Georgia   Opinion on Internal Control over Financial Reporting   We have audited Atlanticus Holdings Corporation (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria .   We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and our report dated March 15, 2022 expressed an unqualified opinion thereon.   Basis for Opinion   The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.   Definition and Limitations of Internal Control over Financial Reporting   A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   /s/ BDO USA, LLP   Atlanta, Georgia March 15, 2022     F-1   Report of Independent Registered Public Accounting Firm   Shareholders and Board of Directors Atlanticus Holdings Corporation Atlanta, Georgia   Opinion on the Consolidated Financial Statements   We have audited the accompanying consolidated balance sheets of Atlanticus Holdings Corporation (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America.   We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 15, 2022, expressed an unqualified opinion thereon.   Basis for Opinion   These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.   Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.   F-2     Allowance for Uncollectible Loans, Interest and Fess Receivable, Gross   As described in Note 2 to the Company’s consolidated financial statements, the Company has outstanding loans of $375.7 million at gross amortized cost and a related allowance for uncollectible loans, interest and fees receivable, gross of $55.8 million at December 31, 2021 within its Credit as a Service (“CaaS”) Segment, which includes credit cards and other unsecured lending product classes of receivables.  Management determines the necessary allowance for uncollectible loans, interest and fees receivable, gross by analyzing all of the following attributes: historical loss rates; current delinquency and roll-rate trends; vintage analyses based on the number of months an account has been in existence; effects of changes in the economy on consumers; changes in underwriting criteria; and estimated recoveries.  Changes in these assumptions can have a material effect on the Company’s financial results.   We identified the significant judgmental assumptions by management in determining the adequacy of the allowance for uncollectible loans, interest and fees receivable, gross within the CaaS Segment to be a critical audit matter.  The significant judgmental assumptions impacting the recorded allowance are the effects of changes in the economy on consumers and the changes in underwriting criteria.  Auditing these complex judgments involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.   The primary procedures we performed to address this critical audit matter included:   ● Obtaining an understanding, assessing the design and testing the operating effectiveness of controls over the Company’s estimate of the allowance for uncollectible loans, interest and fees receivable, gross within the CaaS Segment, including controls over management’s review of the significant assumptions and the completeness and accuracy of data used to develop the changes in the economy on consumers and the changes in underwriting criteria. ● Evaluating the judgmental assumptions used by management by comparing to historical results, current economic data, and changes to underwriting criteria to determine if such assumptions were relevant, reliable, and reasonable for the purpose used. ● Testing the relevance and reliability of the data used in determining the judgmental assumptions by testing the completeness and accuracy of data used including internal and external third-party sources. ● Evaluating any evidence (e.g., external economic data, peer data, internal company data) that is contradictory to the conclusions reached by management in establishing the judgmental assumptions supporting the allowance for uncollectible loans, interest and fees receivable, gross within the CaaS Segment.   Loans, Interest and Fees Receivable, at Fair Value.     As described in Note 2 and Note 6 to the Company’s consolidated financial statements, the Company has outstanding loans interest and fees receivable, fair value of $1,026.4 million within the CaaS Segment at December 31, 2021.  The loans, interest and fees receivable, fair value are associated with the Company’s private label credit and general purpose credit card platform that were acquired on or after January 1, 2020.  The Company estimates the fair value of these receivables using a discounted cash flow model and reevaluates their fair value at the end of each quarter.  The discounted cash flow model assumptions used to determine the performance expectation include timing of expected cash flows and discount rates.  The impact of changes in the fair value of loans, interest, and fees receivable, at fair value is reflected within the period incurred and can have a material impact on the financial results of the Company.   We identified the significant assumptions used by management in the discounted cash flow model used to estimate the fair value to be a critical audit matter.  The significant assumptions impacting the fair value calculation are timing of expected cash flows and discount rates.  Auditing these complex assumptions involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters including the extent of specialized skill or knowledge needed.   The primary procedures we performed to address this critical audit matter included:     ● Obtaining an understanding, assessing the design and testing the operating effectiveness of controls over the Company’s estimate of the fair value of loans, interest and fees receivable within the CaaS Segment, including controls over management’s review of the significant assumptions and the completeness and accuracy of data used to develop the fair value calculation and timing of cash flows and reasonableness of the discount rate. ● Testing the relevance and reliability of data related to the assumptions by agreeing data to internal and external third-party sources. ● Evaluating the assumptions used for the timing of expected cash flows by comparing to historical performance to determine if such assumptions were relevant, reliable, and reasonable for the purpose used, including consideration of evidence (e.g., external economic data and peer data) that may be contradictory to the conclusions reached by management. ● Evaluating the discount rates used by comparing to market-based discount rates to determine if such assumption were relevant, reliable, and reasonable for the purpose used, including consideration of evidence (e.g., external economic data, peer data, internal company data) that may be contradictory to the conclusion reached by management. ● Involving professionals with specialized skills and knowledge to evaluate the reasonableness of the timing of cash flows and discount rate assumptions used by management to determine the fair value.   /s/ BDO USA, LLP   We have served as the Company’s auditor since 2002. Atlanta, Georgia March 15, 2022   F-3 Table of Contents     Atlanticus Holdings Corporation and Subsidiaries Consolidated Balance Sheets (Dollars in thousands)       December 31,     December 31,       2021     2020                     Assets                 Unrestricted cash and cash equivalents (including $ 209.5 million and $ 96.6 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)   $ 409,660     $ 178,102   Restricted cash and cash equivalents (including $ 75.9 million and $ 70.2 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)     96,968       80,859   Loans, interest and fees receivable:                 Loans, interest and fees receivable, at fair value (including $ 925.5 million and $ 374.2 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)     1,026,424       417,098   Loans, interest and fees receivable, gross (including $ 369.6 million and $ 560.2 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)     470,293       667,556   Allowances for uncollectible loans, interest and fees receivable (including $ 55.1 million and $ 120.9 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)     ( 57,201 )     ( 124,961 ) Deferred revenue (including $ 8.2 million and $ 10.3 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)     ( 29,281 )     ( 39,456 ) Net loans, interest and fees receivable     1,410,235       920,237   Property at cost, net of depreciation     7,335       2,240   Investments in equity-method investee     —       1,415   Operating lease right-of-use assets     4,016       9,181   Prepaid expenses and other assets     15,649       15,180   Total assets   $ 1,943,863     $ 1,207,214   Liabilities                 Accounts payable and accrued expenses   $ 42,287     $ 41,731   Operating lease liabilities     4,842       13,776   Notes payable, net (including $ 1,223.4 million and $ 827.1 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)     1,278,864       882,610   Notes payable associated with structured financings, at fair value (associated with variable interest entities)     —       2,919   Convertible senior notes     —       24,386   Senior notes, net     142,951       —   Income tax liability     47,770       25,932   Total liabilities     1,516,714       991,354                     Commitments and contingencies (Note 12)                                       Preferred stock, no par value, 10,000,000 shares authorized:                 Series A preferred stock, 400,000 shares issued and outstanding at December 31, 2021 (liquidation preference - $ 40.0 million); 400,000 shares issued and outstanding at December 31, 2020 (Note 4) (1)     40,000       40,000   Class B preferred units issued to noncontrolling interests (Note 4)     99,650       99,350                     Shareholders' Equity                 Series B preferred stock, no par value, 3,188,533 shares issued and outstanding at December 31, 2021 and 0 shares issued and outstanding at December 31, 2020 (liquidation preference - $ 79.7 million) (1)     —       —   Common stock, no par value, 150,000,000 shares authorized: 14,804,408 and 16,115,353 shares issued at December 31, 2021 and December 31, 2020, respectively; 14,804,408 and 16,115,353 (including 1,459,233 loaned shares to be returned at December 31, 2020) shares outstanding at December 31, 2021 and December 31, 2020, respectively     —       —   Paid-in capital     227,763       194,950   Retained earnings (deficit )     60,236       ( 117,666 ) Total shareholders’ equity     287,999       77,284   Noncontrolling interests     ( 500 )     ( 774 ) Total equity     287,499       76,510   Total liabilities, preferred stock and equity   $ 1,943,863     $ 1,207,214     (1) Both the Series A preferred stock and the Series B preferred stock have no par value and are part of the same aggregate 10,000,000 shares authorized. See accompanying notes.   F-4 Table of Contents     Atlanticus Holdings Corporation and Subsidiaries Consolidated Statements of Income (Dollars in thousands, except per share data)         For the Year Ended       2021     2020   Revenue:                 Consumer loans, including past due fees   $ 518,783     $ 410,616   Fees and related income on earning assets     194,466       133,960   Other revenue     30,606       15,431                     Total operating revenue, net     743,855       560,007   Other non-operating revenue     4,201       3,403   Total revenue     748,056       563,410                     Interest expense     ( 54,127 )     ( 51,548 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 36,455 )     ( 142,719 ) 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 ) Net margin     438,741       260,595                     Operating expense:                 Salaries and benefits     34,024       29,079   Card and loan servicing     75,397       63,047   Marketing and solicitation     56,635       35,012   Depreciation     1,493       1,247   Other     22,180       17,819   Total operating expense     189,729       146,204   Loss on repurchase and redemption of convertible senior notes     29,439       —   Income before income taxes     219,573       114,391   Income tax expense     ( 41,784 )     ( 20,474 ) Net income     177,789       93,917   Net loss attributable to noncontrolling interests     113       203   Net income attributable to controlling interests     177,902       94,120   Preferred dividends and discount accretion     ( 22,363 )     ( 17,070 ) Net income attributable to common shareholders   $ 155,539     $ 77,050   Net income attributable to common shareholders per common share—basic   $ 10.32     $ 5.32   Net income attributable to common shareholders per common share—diluted   $ 7.56     $ 3.95   See accompanying notes.   F-5 Table of Contents     Atlanticus Holdings Corporation and Subsidiaries Consolidated Statements of Shareholders’ Equity For the Years Ended December 31, 2021 and 2020 (Dollars in thousands)       Series B Preferred Stock     Common Stock                                     Temporary Equity       Shares Issued     Amount     Shares Issued     Amount     Paid-In Capital     Retained Earnings (Deficit)     Noncontrolling Interests     Total Equity     Class B Preferred Units     Series A Preferred Stock   Balance at December 31, 2019     —     $ —       15,885,314     $ —     $ 212,692     $ ( 211,786 )   $ ( 571 )   $ 335     $ 49,050     $ 40,000   Accretion of discount associated with issuance of subsidiary equity     —       —       —       —       ( 300 )     —       —       ( 300 )     300       —   Preferred dividends     —       —       —       —       ( 16,770 )     —       —       ( 16,770 )     —       —   Stock option exercises and proceeds related thereto     —       —       407,533       —       1,326       —       —       1,326       —       —   Compensatory stock issuances, net of forfeitures     —       —       68,040       —       —       —       —       —       —       —   Contributions by preferred shareholders     —       —       —       —       —       —       —       —       50,000         Deferred stock-based compensation costs     —       —       —       —       1,355       —       —       1,355       —       —   Redemption and retirement of shares     —       —       ( 245,534 )     —       ( 3,353 )     —       —       ( 3,353 )     —       —   Net income (loss)     —       —       —       —       —       94,120       ( 203 )     93,917             —   Balance at December 31, 2020     —     $ —       16,115,353     $ —     $ 194,950     $ ( 117,666 )   $ ( 774 )   $ 76,510     $ 99,350     $ 40,000   Accretion of discount associated with issuance of subsidiary equity     —       —       —       —       ( 300 )     —       —       ( 300 )     300       —   Preferred dividends     —       —       —       —       ( 22,063 )     —       —       ( 22,063 )     —       —   Stock option exercises and proceeds related thereto     —       —       526,015       —       1,885       —       —       1,885       —       —   Compensatory stock issuances, net of forfeitures     —       —       56,654       —       —       —       —       —       —       —   Issuance of series B preferred stock, net     3,188,533       —       —       —       75,270       —       —       75,270       —       —   Contributions by owners of noncontrolling interests     —       —       —       —       —       —       387       387       —       —   Deferred stock-based compensation costs     —       —       —       —       3,240       —       —       3,240       —       —   Redemption and retirement of shares     —       —       ( 1,893,614 )     —       ( 25,219 )     —       —       ( 25,219 )     —       —   Net income     —       —       —       —       —       177,902       ( 113 )     177,789       —       —   Balance at December 31, 2021     3,188,533     $ —       14,804,408     $ —     $ 227,763     $ 60,236     $ ( 500 )   $ 287,499     $ 99,650     $ 40,000     See accompanying notes.   F-6 Table of Contents     Atlanticus Holdings Corporation and Subsidiaries Consolidated Statements of Cash Flows (Dollars in thousands)       For the Year Ended December 31,       2021     2020   Operating activities                 Net income   $ 177,789     $ 93,917   Adjustments to reconcile net income to net cash provided by operating activities:                 Depreciation, amortization and accretion, net     2,494       7,952   Provision for losses on loans, interest and fees receivable     36,455       142,719   Interest expense from accretion of discount on notes     453       585   Income from accretion of merchant fees and discount associated with receivables purchases     ( 166,266 )     ( 110,402 ) 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   Amortization of deferred loan costs     5,114       5,137   Income from equity-method investments     ( 16 )     ( 456 ) Loss on repurchase and redemption of convertible senior notes     29,439       —   Deferred stock-based compensation costs     3,240       1,355   Lease liability payments     ( 10,470 )     ( 10,278 ) Gain on sale of property     ( 599 )     —   Changes in assets and liabilities:                 Increase in uncollected fees on earning assets     ( 111,807 )     ( 43,319 ) Increase in income tax liability     21,838       20,147   Increase (decrease) in accounts payable and accrued expenses     6,005       ( 3,096 ) Other     ( 36 )     ( 75 ) Net cash provided by operating activities     212,366       212,734                     Investing activities                 Investments in equity-method investee     ( 398 )     —   Proceeds from equity-method investee     560       998   Proceeds from recoveries on charged off receivables     14,065       13,781   Investments in earning assets     ( 2,018,760 )     ( 1,330,980 ) Proceeds from earning assets     1,535,500       1,024,375   Sale of property     1,100       —   Purchases and development of property, net of disposals     ( 7,089 )     ( 749 ) Net cash used in investing activities     ( 475,022 )     ( 292,575 )                   Financing activities                 Noncontrolling interests contributions     387       50,000   Proceeds from issuance of Series B preferred stock, net of issuance costs     75,270       —   Preferred dividends     ( 21,809 )     ( 13,561 ) Proceeds from exercise of stock options     1,885       1,326   Purchase and retirement of outstanding stock     ( 25,219 )     ( 3,353 ) Proceeds from issuance of Senior notes, net of issuance costs     142,832       —   Proceeds from borrowings     923,477       588,229   Repayment of borrowings     ( 586,495 )     ( 460,256 ) Net cash provided by financing activities     510,328       162,385   Effect of exchange rate changes on cash     ( 5 )     23   Net increase in cash and cash equivalents and restricted cash     247,667       82,567   Cash and cash equivalents and restricted cash at beginning of period     258,961       176,394   Cash and cash equivalents and restricted cash at end of period   $ 506,628     $ 258,961   Supplemental cash flow information                 Cash paid for interest   $ 47,608     $ 46,526   Net cash income tax payments   $ 19,946     $ 327   Increase in accrued and unpaid preferred dividends   $ 254     $ 3,209     See accompanying notes.   F-7 Table of Contents   Atlanticus Holdings Corporation and Subsidiaries Notes to Consolidated Financial Statements December 31, 2021 and 2020     1. Description of Our Business   Our accompanying consolidated financial statements include the accounts of Atlanticus Holdings Corporation (the “Company”) and those entities we control. We are a purpose driven financial technology company. We are primarily focused on facilitating consumer credit through the use of our financial technology and related services. Through our subsidiaries, we provide technology and other support services to lenders who offer an array of financial products and services to consumers who may have been declined by other providers of credit.   We are principally engaged in providing products and services to lenders in the U.S. and, in most cases, we invest in the receivables originated by lenders who utilize our technology platform and other related services. From time to time, we also purchase receivables portfolios from third parties. In these Notes to Consolidated Financial Statements, “receivables” or “loans” typically refer to receivables we have purchased from our bank partners or from third parties.   Within our Credit 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 artificial intelligence and machine learning, enabling fast, sound decision-making when it matters most.   We also 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 cost. None of these companies are publicly-traded and there are no material pending liquidity events.   Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business. We purchase auto loans at a discount and with dealer retentions or holdbacks that provide risk protection. Also within our Auto Finance segment, we are providing certain installment lending products in addition to our traditional loans secured by automobiles.   In March 2020, a national emergency was declared under the National Emergencies Act due to a new strain of coronavirus ("COVID- 19" ). In March 2021, the American Rescue Plan, a $1.9 trillion stimulus package that extended and expanded benefits provided under previous legislation, was signed into law. The long-term impacts of the new law on the economy and our consumers is currently unknown.   The duration and severity of the effects of COVID- 19 on our financial condition, results of operations and liquidity remain highly uncertain. Likewise, we do not know the duration and severity of the impact of COVID- 19 on all members of the Company’s ecosystem – our bank partner, merchants and consumers – as well as our employees. We continue to monitor the ongoing pandemic and have modified certain business practices including minimizing employee travel and transitioning to a hybrid remote work model. These practices have also been adopted by certain of our third party service partners.     2. Significant Accounting Policies and Consolidated Financial Statement Components   The following is a summary of significant accounting policies we follow in preparing our consolidated financial statements, as well as a description of significant components of our consolidated financial statements.   Basis of Presentation and Use of Estimates   We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements, as well as the reported amounts of revenues and expenses during each reporting period. We base these estimates on information available to us as of the date of the financial statements. Actual results could differ materially from these estimates. Certain estimates, such as credit losses, payment rates, costs of funds, discount rates and the yields earned on credit card receivables, significantly affect the reported amount (and changes thereon) of our Loans, interest and fees receivables, at fair value and Notes payable associated with structured financings recorded at fair value on our consolidated balance sheets and consolidated statements of income. Additionally, estimates of credit losses have a significant effect on loans, interest and fees receivable, net, as shown on our consolidated balance sheets, as well as on the provision for losses on loans, interest and fees receivable within our consolidated statements of income.    We have eliminated all significant intercompany balances and transactions for financial reporting purposes.   F- 8 Table of Contents   Unrestricted Cash and Cash Equivalents   Unrestricted cash and cash equivalents consist of cash, money market investments and overnight deposits. We consider all highly liquid cash investments with low interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market. We maintain unrestricted cash and cash equivalents for general operating purposes and to meet our longer term debt obligations. The majority of these cash balances are not insured.   Restricted Cash   Restricted cash as of December 31, 2021  and  2020 includes certain collections on loans, interest and fees receivable, the cash balances of which are required to be distributed to noteholders under our debt facilities. Our restricted cash balances also include minimum cash balances held in accounts at the request of certain of our business partners.   Loans, Interest and Fees Receivable   We maintain two categories of Loans, Interest and Fees Receivable on our consolidated balance sheets: those that are carried at fair value (Loans, interest and fees receivable, at fair value) and those that are carried at net amortized cost (Loans, interest and fees receivable, gross). For both categories of loans, interest and fees receivable, other than our Auto Finance receivables, interest and fees are discontinued when loans, interest and fees receivable become contractually 90 or more days past due. We charge off our CaaS and Auto Finance 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 estate large enough to pay the debt in full.   Loans, Interest and Fees Receivable, at Fair Value. Loans, interest and fees receivable held at fair value represent both the receivables underlying credit card securitization trusts (the "Securitized Receivables") and those receivables for which we elected the fair value option on January 1, 2020 ( the "Fair Value Receivables"). Both the Securitized Receivables and the Fair Value Receivables are held by entities that qualify as variable interest entities ("VIE"), and are consolidated onto our consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities. Loans and finance receivables include accrued and unpaid interest and fees.   Under the fair value option for both our Securitized Receivables and our Fair Value Receivables, direct loan origination fees (such as annual and merchant fees) are taken into income when billed to the consumer or upon loan acquisition and direct loan origination costs are expensed in the period incurred. The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as remaining cumulative charge-offs, remaining cumulative prepayments, average life and discount rate. The Company re-evaluates the fair value of loans receivable at the close of each measurement period. Changes in the fair value of loans, interest and fees receivable are recorded as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of income in the period of the fair value changes. Changes in the fair value of loans, interest and fees receivable recorded at fair value include the impact of current period charge offs associated with these receivables.    Further details concerning our loans, interest and fees receivable held at fair value are presented within Note 6, “Fair Values of Assets and Liabilities.”   Loans, Interest and Fees Receivable, Gross. Our loans, interest and fees receivable, gross, currently consist of receivables associated with (a) a portion (those which are not part of our Fair Value Receivables) of our private label credit and general purpose credit card receivables within our CaaS segment and (b) our Auto Finance segment’s operations. Our CaaS segment loans, interest and fees receivable generally are unsecured, while our Auto Finance segment loans, interest and fees receivable generally are secured by the underlying automobiles for which we hold the vehicle title. We purchased auto loans with outstanding principal of $ 194.8 million and $ 185.0 million for the years ended December 31, 2021  and 2020, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies.   We show both an allowance for uncollectible loans, interest and fees receivable and unearned fees (or “deferred revenue”) for our loans, interest and fees receivable that are not carried at fair value. The allowance is an estimate of the probable losses inherent within loans, interest and fees receivable that the Company does 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. While each of these categories has unique features, they share many of the same credit risk characteristics and thus share a similar approach to the establishment of an allowance for loan losses. Each portfolio segment is 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 attributes for 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. For our Auto Finance segment we may further reduce the expected charge-off, taking into consideration specific dealer level reserves which may allow us to offset our losses and, in the case of secured loans, the impact of collateral available to offset a potential loss. Conversely, for receivables in our CaaS segment, which generally do not have a secured interest in collateral, we look to reserve for the gross expected exposure to charge-offs. These reserves are considered in conjunction with (and potentially reduced by) any unearned fees and discounts that may be applicable for an outstanding loan receivable.   A considerable amount of judgment is required to assess the ultimate amount of uncollectible loans, interest and fees receivable, and we continuously evaluate and update our methodologies to determine the most appropriate allowance necessary. We may individually evaluate a receivable or pool of receivables for impairment if circumstances indicate that the receivable or pool of receivables may be at higher risk for non-performance than other receivables (e.g., if a particular retail or auto-finance partner has indications of non-performance (such as a bankruptcy) that could impact the underlying pool of receivables we purchased from the partner).   Certain of our loans, interest and fees receivable also contain components of deferred revenue including merchant fees on the purchases of receivables for our private label credit receivables and annual fee billings for our general purpose credit card receivables. Our private label credit and auto finance loans, interest and fees receivable include principal balances and associated fees and interest due from customers which are earned each period a loan is outstanding, net of the unearned portion of merchant fees and loan discounts. Additionally, many of our general purpose credit card receivables have an annual membership fee that is billed to the consumer on card activation and on each anniversary of that date thereafter. As of December 31, 2021  and December 31, 2020, the weighted average remaining accretion period for the $ 29.3 million and $ 39.5 million of deferred revenue reflected in the consolidated balance sheets was 15 months and 14 months, respectively. Included within deferred revenue, are merchant fees and discounts on purchased loans of $ 20.4 million and $ 28.2 million as of December 31, 2021  and December 31, 2020, respectively.   F- 9 Table of Contents   As a result of the COVID- 19 pandemic and subsequent declaration of a national emergency in March 2020 under the National Emergencies Act, certain consumers have been offered the ability to defer their payment without penalty during the national emergency period. In March 2020, the federal bank regulatory agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” ("COVID- 19 Guidance"). The COVID- 19 Guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID- 19. In accordance with the COVID- 19 Guidance, certain consumers negatively impacted by COVID- 19 have been provided short-term payment deferrals and fee waivers. Receivables enrolled in these short-term payment deferrals continue to accrue interest and their delinquency status will not change through the deferment period. Through December 31, 2021 we continued to actively work with consumers that indicated hardship as a result of COVID- 19;  however, the number of impacted consumers continued to be a diminishing part of our overall receivable base. In order to establish appropriate reserves for this population, we considered various factors such as subsequent payment behavior and additional requests by the consumer for further deferrals or hardship claims.     Our CaaS segment consists of two classes of receivable: credit cards and other unsecured lending products. A roll-forward (in millions) of our allowance for uncollectible loans, interest and fees receivable by class of receivable is as follows:    For the Year Ended December 31, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at beginning of period   $ ( 88.2 )   $ ( 1.7 )   $ ( 35.1 )   $ ( 125.0 ) Provision for loan losses     ( 34.9 )     ( 0.2 )     ( 1.4 )     ( 36.5 ) Charge offs     88.6       1.5       31.1       121.2   Recoveries     ( 8.9 )     ( 1.0 )     ( 7.0 )     ( 16.9 ) Balance at end of period   $ ( 43.4 )   $ ( 1.4 )   $ ( 12.4 )   $ ( 57.2 )   As of December 31, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at end of period individually evaluated for impairment   $ —     $ ( 0.1 )   $ —     $ ( 0.1 ) Balance at end of period collectively evaluated for impairment   $ ( 43.4 )   $ ( 1.3 )   $ ( 12.4 )   $ ( 57.1 ) Loans, interest and fees receivable:                                 Loans, interest and fees receivable, gross   $ 259.5     $ 94.6     $ 116.2     $ 470.3   Loans, interest and fees receivable individually evaluated for impairment   $ —     $ 0.4     $ —     $ 0.4   Loans, interest and fees receivable collectively evaluated for impairment   $ 259.5     $ 94.2     $ 116.2     $ 469.9     For the Year Ended December 31, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at beginning of period   $ ( 121.3 )   $ ( 1.6 )   $ ( 63.4 )   $ ( 186.3 ) Provision for loan losses     ( 112.1 )     ( 2.0 )     ( 28.6 )     ( 142.7 ) Charge offs     155.1       3.0       72.1       230.2   Recoveries     ( 9.9 )     ( 1.1 )     ( 15.2 )     ( 26.2 ) Balance at end of period   $ ( 88.2 )   $ ( 1.7 )   $ ( 35.1 )   $ ( 125.0 )   As of December 31, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   Allowance for uncollectible loans, interest and fees receivable:                                 Balance at end of period individually evaluated for impairment   $ —     $ ( 0.3 )   $ —     $ ( 0.3 ) Balance at end of period collectively evaluated for impairment   $ ( 88.2 )   $ ( 1.4 )   $ ( 35.1 )   $ ( 124.7 ) Loans, interest and fees receivable:                                 Loans, interest and fees receivable, gross   $ 364.2     $ 93.2     $ 210.2     $ 667.6   Loans, interest and fees receivable individually evaluated for impairment   $ —     $ 2.3     $ —     $ 2.3   Loans, interest and fees receivable collectively evaluated for impairment   $ 364.2     $ 90.9     $ 210.2     $ 665.3     Delinquent loans, interest and fees receivable reflect the principal, fee and interest components of loans we did not collect on or prior to the contractual due date. Amounts we believe we will not ultimately collect are included as a component in our overall allowance for uncollectible loans, interest and fees receivable.    F- 10 Table of Contents   Recoveries, noted above, consist of amounts received from the efforts of third -party collectors we employ and through the sale of charged-off accounts to unrelated third -parties. All proceeds received, associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at net realizable value on our consolidated statements of income. For the year ended December 31, 2021, $ 8.7 million of our recoveries noted above related to collections from third -party collectors we employ and $ 8.2  million related to sales of charged-off accounts to unrelated third -parties. For the year ended December 31, 2020, $ 12.4  million of our recoveries noted above related to collections from third -party collectors we employ and $ 13.8 million related to sales of charged-off accounts to unrelated third -parties.   We consider loan delinquencies a key indicator of credit quality because this measure provides the best ongoing estimate of how a particular class of receivables is performing. An aging of our delinquent loans, interest and fees receivable, gross (in millions) by class of receivable as of  December 31, 2021 and December 31, 2020  is as follows:   As of December 31, 2021   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   30-59 days past due   $ 7.3     $ 7.2     $ 3.3     $ 17.8   60-89 days past due     6.9       2.6       2.6       12.1   90 or more days past due     17.9       2.0       6.8       26.7   Delinquent loans, interest and fees receivable, gross     32.1       11.8       12.7       56.6   Current loans, interest and fees receivable, gross     227.4       82.8       103.5       413.7   Total loans, interest and fees receivable, gross   $ 259.5     $ 94.6     $ 116.2     $ 470.3   Balance of loans greater than 90-days delinquent still accruing interest and fees   $ —     $ 1.5     $ —     $ 1.5     As of December 31, 2020   Credit Cards     Auto Finance     Other Unsecured Lending Products     Total   30-59 days past due   $ 12.4     $ 7.6     $ 5.1     $ 25.1   60-89 days past due     8.0       2.8       3.8       14.6   90 or more days past due     19.9       2.1       9.5       31.5   Delinquent loans, interest and fees receivable, gross     40.3       12.5       18.4       71.2   Current loans, interest and fees receivable, gross     323.9       80.7       191.8       596.4   Total loans, interest and fees receivable, gross   $ 364.2     $ 93.2     $ 210.2     $ 667.6   Balance of loans greater than 90-days delinquent still accruing interest and fees   $ —     $ 1.5     $ —     $ 1.5     Troubled Debt Restructurings. As part of ongoing collection efforts, once an account, the receivable of which is included in our CaaS segment, becomes 90 days or more past due, the related receivable is placed on a non-accrual status. Placement on a non-accrual status results in the use of programs under which the contractual interest associated with a receivable may be reduced or eliminated, or a certain amount of accrued fees is waived, provided a minimum number or amount of payments have been made. Following this adjustment, if a customer demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, we will re-age the customer’s account. When we re-age an account, we adjust the status of the account to bring a delinquent account current, but generally do not make any further modifications to the payment terms or amount owed. Once an account is placed on a non-accrual status, it is closed for further purchases. Accounts that are placed on a non-accrual status and thereafter make at least one payment qualify as troubled debt restructurings (“TDRs”). The above referenced COVID- 19 Guidance issued by federal bank regulatory agencies, in consultation with the FASB staff, concluded that short-term modifications (e.g., six months) made on a good faith basis to borrowers who were impacted by COVID- 19 and who were less than 30 days past due as of the implementation date of a relief program are not TDRs. Although we are not a financial institution and therefore not directly subject to the COVID- 19 Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances. As a result, the below tables exclude certain accounts that are included under that guidance.   F- 11 Table of Contents   The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged, as of December 31, 2021 and December 31, 2020 :       As of       December 31, 2021     December 31, 2020       Private label credit     General purpose credit card     Private label credit     General purpose credit card   Number of TDRs     14,919       39,322       12,394       37,784   Number of TDRs that have been re-aged     812       2,035       2,788       7,846   Amount of TDRs on non-accrual status (in thousands)   $ 17,152     $ 25,154     $ 14,537     $ 26,989   Amount of TDRs on non-accrual status above that have been re-aged (in thousands)   $ 1,205     $ 1,553     $ 4,662     $ 6,890   Carrying value of TDRs (in thousands)   $ 11,173     $ 15,502     $ 9,583     $ 14,287   TDRs - Performing (carrying value, in thousands)*   $ 8,797     $ 13,387     $ 7,420     $ 11,855   TDRs - Nonperforming (carrying value, in thousands)*   $ 2,376     $ 2,115     $ 2,163     $ 2,432   *“TDRs - Performing” include accounts that are current on all amounts owed, while “TDRs - Nonperforming” include all accounts with past due amounts owed.   We do not separately reserve or impair these receivables outside of our general reserve process.   The Company modified 65,125  and 60,908 accounts, with a carrying amount of $ 70.0  million and $ 70.3 million during the twelve month periods ended December 31, 2021  and December 31, 2020 , respectively, that qualified as TDRs. The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the periods indicated and subsequently defaulted.       Twelve Months Ended       December 31, 2021     December 31, 2020       Private label credit     General purpose credit card     Private label credit     General purpose credit card   Number of accounts     3,119       7,765       3,065       7,665   Loan balance at time of charge off (in thousands)   $ 4,642     $ 6,455     $ 4,352     $ 6,745     Property at Cost, Net of Depreciation   We capitalize costs related to internal development and implementation of software used in our operating activities in accordance with applicable accounting literature. These capitalized costs consist almost exclusively of fees paid to third -party consultants to develop code and install and test software specific to our needs and to customize purchased software to maximize its benefit to us.   We record our property at cost less accumulated depreciation or amortization. We compute depreciation expense using the straight-line method over the estimated useful lives of our assets, which are approximately 5 years for furniture, fixtures and equipment, and 3 years for computers and software. We amortize leasehold improvements over the shorter of their estimated useful lives or the terms of their respective underlying leases.   We periodically review our property to determine if it is impaired. We incurred no impairment costs in 2021 and no  impairment costs in 2020 .   Investment in Equity-Method Investee   We account for an investment using the equity method of accounting if we have the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist based on ownership interest, although other factors, such as representation on an investee’s board of managers, specific voting and veto rights held by each investor and the effects of commercial arrangements, are considered in determining whether equity method accounting is appropriate. We record interests in the income of an equity-method investee within the equity in income of equity-method investee category on our consolidated statements of income.   We used the equity method for our 66.7 % investment in a limited liability company formed in 2004 to acquire a portfolio of credit card receivables. Prior to the acquisition of the outstanding noncontrolling interest in September 2021 ( and subsequent consolidation), we accounted for this investment using the equity method of accounting due to specific voting and veto rights held by each investor, which did  not allow us to control this investee.    F- 12 Table of Contents   Prepaid Expenses and Other Assets   Prepaid expenses and other assets include amounts paid to  third  parties for marketing and other services as well as amounts owed to us by  third  parties. Prepaid amounts are expensed as the underlying related services are performed. Also included are ( 1 ) commissions paid associated with our various office leases which we amortize into expense over the lease terms, ( 2 ) ongoing deferred costs associated with service contracts and ( 3 ) investments in consumer finance technology platforms carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes.   Accounts Payable and Accrued Expenses   Accounts payable and accrued expenses reflect both the billed and unbilled amounts owed at the end of a period for services rendered. Commencing in July 2019, accounts payable and accrued expenses includes payments owed under a deferred payment program started with an unrelated third -party for a portion of our marketing expenditures. As a result of this agreement, we were able to extend the payment terms associated with our growing marketing spend between 10 - 37 months.   Revenue Recognition and Revenue from Contracts with Customers   Consumer Loans, Including Past Due Fees   Consumer loans, including past due fees reflect interest income, including finance charges, and late fees on loans in accordance with the terms of the related customer agreements. Premiums, discounts and merchant fees paid or received associated with installment or auto loans that are not included as part of our Fair Value Receivables are deferred and amortized over the average life of the related loans using the effective interest method. Premiums, discounts and merchant fees paid or received associated with Fair Value Receivables are recognized upon receivable acquisition. Finance charges and fees, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.   Fees and Related Income on Earning Assets   Fees and related income on earning assets primarily include fees associated with the credit products, including the receivables underlying our 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 our amortized cost receivables, and when billed for those receivables that are included as part of our 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. The election of the fair value option to account for certain loans receivable that were acquired on or after January 1, 2020, resulted in increased fees recognized on credit products throughout the periods presented.   F- 13 Table of Contents   Other revenue   Other revenue includes revenues associated with interchange revenues, servicing income and ancillary product offerings (primarily associated with a credit protection program offered by our lending partner). We recognize these fees as income in the period earned.   Other non-operating revenue   Other non-operating revenue includes revenues associated with investments in equity method investees and other revenues not associated with our ongoing business operations. During the year ended December 31, 2020, we received $ 2.0 million in distributions from an investment in a consumer finance technology company. We retained our minority ownership stake in this company and will continue to carry the investment on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes.   Revenue from Contracts with Customers   The majority of our revenue is earned from financial instruments and is not included within the scope of ASU No. 2014 - 09, "Revenue from Contracts with Customers". We have determined that revenue from contracts with customers would primarily consist of interchange revenues in our CaaS segment and servicing revenue and other customer-related fees in both our CaaS segment and our Auto Finance segment. Interchange fees are earned when our customer's cards are used over established card networks. We earn a portion of the interchange fee the card networks charge merchants for the transaction. Servicing revenue is generated by meeting contractual performance obligations related to the collection of amounts due on receivables, and is settled with the customer net of our fee. Service charges and other customer related fees are earned from customers based on the occurrence of specific services.  None of these revenue streams result in an ongoing obligation beyond what has already been rendered. Revenue from these contracts with customers is included as a component of Other revenue on our consolidated statements of income. Components (in thousands) of our revenue from contracts with customers is as follows:                           For the Year Ended December 31, 2021   CaaS     Auto Finance     Total   Interchange revenues, net (1)   $ 18,134     $ —     $ 18,134   Servicing income     1,871       1,224       3,095   Service charges and other customer related fees     9,317       60       9,377   Total revenue from contracts with customers   $ 29,322     $ 1,284     $ 30,606   ( 1 ) Interchange revenue is presented net of customer reward expense.                           For the Year Ended December 31, 2020   CaaS     Auto Finance     Total   Interchange revenues, net (1)   $ 9,500     $ —     $ 9,500   Servicing income     1,187       994       2,181   Service charges and other customer related fees     3,685       65       3,750   Total revenue from contracts with customers   $ 14,372     $ 1,059     $ 15,431   ( 1 ) Interchange revenue is presented net of customer reward expense.   Card and Loan Servicing Expenses   Card and loan servicing costs primarily include collections and customer service expenses. Within this category of expenses are personnel, service bureau, cardholder correspondence and other direct costs associated with our collections and customer service efforts. Card and loan servicing costs also include outsourced collections and customer service expenses. We expense card and loan servicing costs as we incur them, with the exception of prepaid costs, which we expense over respective service periods.   Marketing and Solicitation Expenses   We expense product solicitation costs, including printing, credit bureaus, list processing, telemarketing, postage, and internet marketing fees, as we incur these costs or expend resources.    Loss on repurchase and redemption of convertible senior notes   In periods where we repurchased or redeemed outstanding 5.875 % convertible senior notes (“convertible senior notes”), we recorded any discount or premium paid for the repurchase or redemption (including accrued interest) relative to the amortized book value of the notes. For the year ended December 31, 2021, we repurchased or redeemed $ 33.8 million in face amount of our outstanding convertible senior notes for $ 54.3 million in cash (including accrued interest). The repurchase and redemption resulted in an aggregate loss of approximately $ 29.4 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. See Note 11,"Convertible Senior Notes" for more information.   F- 14 Table of Contents   Recent Accounting Pronouncements   In  June 2016, the FASB issued Accounting Standards Update ("ASU") 2016 - 13, Measurement of Credit Losses on Financial Instruments. The guidance requires an assessment of credit losses based on expected rather than incurred losses (known as the current expected credit loss model). This generally will result in the recognition of allowances for losses earlier than under current accounting guidance for trade and other receivables, held to maturity debt securities and other instruments. The FASB has added several technical amendments (ASU 2018 - 19, 2019 - 04, 2019 - 10 and 2019 - 11 ) to clarify technical aspects of the guidance and applicability to specific financial instruments or transactions. In May 2019, the FASB issued ASU 2019 - 05, which allows entities to measure assets in the scope of ASC 326 - 20, except held to maturity securities, using the fair value option when they adopt the new credit impairment standard. The election can be made on an instrument by instrument basis. ASU 2016 - 13 (and ASU 2019 - 05 ) was initially effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The FASB delayed the effective date of this standard until annual and interim periods beginning after December 15, 2022 for filers that qualified as smaller reporting companies at the time of the delay, with early adoption permitted. We plan to adopt ASU 2016 - 13 beginning January 1, 2022,  using the modified retrospective method of adoption. We plan to elect the fair value option for all receivables in our CaaS segment currently measured at amortized cost. For all other receivables we will record an increase to our allowance for loan losses using the current expected credit loss model. As a result of our adoption, we expect an increase to our Loans, interest and fees receivable (net of the related revaluation), at fair value of approximately $ 315 million (with a corresponding decrease to Loans, interest and fees receivable, gross of approximately $ 375  million), a decrease to our Allowances for uncollectible loans, interest and fees receivable of approximately $ 55 million, a decrease to our Deferred revenue of approximately $ 15  million, a decrease to Accounts payable and accrued expenses of approximately $ 600  thousand, an increase to our deferred tax liability of approximately $ 2  million, and an increase to our retained earnings of approximately $ 8  million. These amounts are subject to change as we finalize our adoption efforts. The aforementioned impacts associated with our planned adoption of ASU 2016 - 13 primarily relate to those assets within our CaaS segment with an immaterial impact to our Auto Finance segment receivables.   In March 2020, the FASB issued ASU No. 2020 - 04, Reference Rate Reform (Topic 848 ), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides an optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be adopted no later than December 1, 2022, with early adoption permitted. In January 2021, FASB issued ASU 2021 - 01, Reference Rate Reform (Topic 848 ): Scope, which refines the scope of ASC 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate reform. Based on our preliminary analysis, LIBOR impacts us in limited circumstances primarily related to our existing debt agreements.  We have not yet adopted this ASU and are evaluating the effect of adopting this new accounting guidance.   Subsequent Events   We evaluate subsequent events that occur after our consolidated balance sheet date but before our consolidated financial statements are issued. There are two types of subsequent events: ( 1 ) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements; and ( 2 ) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.    We have evaluated subsequent events occurring after December 31, 2021 , and based on our evaluation we did not identify any recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements other than the developments described below.   In February 2022,  options to purchase our common stock were exercised resulting in an increase to our common shares outstanding of 526,864  (net, after common stock withheld to satisfy the exercise price and tax withholding). These shares were previously included in our diluted share counts.   We purchased 451,407 shares of common stock through March 8, 2022, which were subsequently retired.   F- 15 Table of Contents     3. Segment Reporting   We operate primarily within one industry consisting of two reportable segments by which we manage our business. Our two reportable segments are: CaaS and Auto Finance.   As of both December 31, 2021 and December 31, 2020 , we did not have a material amount of long-lived assets located outside of the U.S., and only a negligible portion of our revenues for the years ended December 31, 2021 and 2020 were generated outside of the U.S.   We measure the profitability of our reportable segments based on their income after allocation of specific costs and corporate overhead; however, our segment results do not reflect any charges for internal capital allocations among our segments. Overhead costs are allocated based on headcounts and other applicable measures to better align costs with the associated revenues.   Summary operating segment information (in thousands) is as follows:   Year Ended December 31, 2021   CaaS     Auto Finance     Total   Revenue:                         Consumer loans, including past due fees   $ 485,241     $ 33,542     $ 518,783   Fees and related income on earning assets     194,392       74       194,466   Other revenue     29,322       1,284       30,606   Other non-operating revenue     4,135       66       4,201   Total revenue     713,090       34,966       748,056   Interest expense     ( 53,093 )     ( 1,034 )     ( 54,127 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 36,262 )     ( 193 )     ( 36,455 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 218,733 )     —       ( 218,733 ) Net margin   $ 405,002     $ 33,739     $ 438,741   Income before income taxes   $ 208,926     $ 10,647     $ 219,573   Income tax expense   $ ( 39,221 )   $ ( 2,563 )   $ ( 41,784 ) Total assets   $ 1,859,950     $ 83,913     $ 1,943,863     Year Ended December 31, 2020   CaaS     Auto Finance     Total   Revenue:                         Consumer loans, including past due fees   $ 378,817     $ 31,799     $ 410,616   Fees and related income on earning assets     133,891       69       133,960   Other revenue     14,372       1,059       15,431   Other non-operating revenue     3,360       43       3,403   Total revenue     530,440       32,970       563,410   Interest expense     ( 50,387 )     ( 1,161 )     ( 51,548 ) Provision for losses on loans, interest and fees receivable recorded at net realizable value     ( 140,683 )     ( 2,036 )     ( 142,719 ) Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value     ( 108,548 )     —       ( 108,548 ) Net margin   $ 230,822     $ 29,773     $ 260,595   Income before income taxes   $ 105,429     $ 8,962     $ 114,391   Income tax expense   $ ( 18,257 )   $ ( 2,217 )   $ ( 20,474 ) Total assets   $ 1,124,618     $ 82,596     $ 1,207,214     F- 16 Table of Contents     4. Shareholders’ Equity and Preferred Stock   On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove Ventures, LLC, a Nevada limited liability company (“Dove”). The agreement provided for a senior secured term loan facility in an amount of up to $ 40.0 million at any time outstanding. On December 27, 2019, the Company issued 400,000 shares of its Series A Preferred Stock with an aggregate initial liquidation preference of $ 40.0 million, in exchange for full satisfaction of the $ 40.0 million that the Company owed Dove under the Loan and Security Agreement. Dividends on the preferred stock are 6 % per annum (cumulative, non-compounding) and are payable as declared, and in preference to any common stock dividends, in cash. The Series A Preferred Stock is perpetual and has no maturity date. The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $ 100 per share, plus any accumulated and unpaid dividends. At the request of holders of a majority of the shares of Series A Preferred Stock, the Company shall offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024. Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $ 10 per share, subject to certain adjustment in certain circumstances to prevent dilution. Given the redemption rights contained within the Series A Preferred Stock, we account for the outstanding preferred stock as temporary equity in the consolidated balance sheets. Dividends paid on the Series A Preferred Stock are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders. The common stock issuable upon conversion of Series A Preferred Stock is included in our calculation of Net income attributable to common shareholders per share—diluted. See Note 14, “Net Income Attributable to Controlling Interests Per Common Share” for more information.   Dove is a limited liability company owned by three trusts. David G. Hanna is the sole shareholder and the President of the corporation that serves as the sole trustee of one of the trusts, and David G. Hanna and members of his immediate family are the beneficiaries of this trust. Frank J. Hanna, III is the sole shareholder and the President of the corporation that serves as the sole trustee of the other two trusts, and Frank J. Hanna, III and members of his immediate family are the beneficiaries of these other two trusts.   During the years ended December 30, 2021 and 2020, we repurchased and contemporaneously retired 434,381  and 245,534 shares of our common stock at an aggregate cost of $ 25,219,000 and $ 3,353,000 , respectively, pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations.   We had 1,459,233 loaned shares outstanding at December 31, 2020, which were originally lent in connection with our November 2005 issuance of convertible senior notes. As of December 31, 2021, all loaned shares had been returned to us and subsequently 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 are being used for general corporate purposes. We have included the issuance of these Class B preferred units as temporary noncontrolling interest on the consolidated balance sheets. Dividends paid on the Class B preferred units are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders. See Note 14, “Net Income Attributable to Controlling Interests Per Common Share” for more information.   In June 2021, we issued an aggregate of 2.8 million shares of 7.625 % Series B Cumulative Perpetual Preferred Stock, no par value with a liquidation preference of $ 25.00 per share (the “Series B Cumulative Perpetual Preferred Stock”), in a public offering at a price to the public of $ 25.00 per share. The Company also granted the Underwriters an option to purchase additional shares of Series B Cumulative Perpetual Preferred Stock during the 30 days following the date of the Underwriting Agreement. The Company raised gross proceeds of $ 70.0 million before deducting underwriting discounts, the structuring fee and other offering expenses. In July 2021, the Company issued an additional 388,533 shares of the Company's Series B Cumulative Perpetual Preferred Stock, pursuant to the exercise of the underwriters’ option to purchase additional shares. Upon the closing of the second issuance, the Company raised additional gross proceeds of $ 9.7 million before deducting underwriting discounts, the structuring fee and other offering expenses. The Series B Cumulative Perpetual Preferred Stock may be redeemed at our election (after 5 years) in whole or from time to time in part, by paying $ 25.00 per share, plus any accumulated and unpaid dividends. Dividends on the Series B Cumulative Perpetual Preferred Stock will be payable quarterly and are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders.     5. Investment in Equity-Method Investee   Our equity-method investment outstanding at December 31, 2020 consisted of our 66.7 % interest in a joint venture formed to purchase a credit card receivable portfolio. In September 2021, we acquired the outstanding noncontrolling interest.    In the following tables, we summarize (in thousands) balance sheet and results of operations data for our former equity-method investee:       As of       December 31, 2021     December 31, 2020   Loans, interest and fees receivables, at fair value   $ —     $ 1,994   Total assets   $ —     $ 2,105   Total liabilities   $ —     $ 10   Members’ capital   $ —     $ 2,095         Year ended December 31,       2021     2020   Net margin   $ 94     $ 819   Net income   $ 23     $ 684   Net income attributable to investee   $ 16     $ 456     F- 17 Table of Contents     6. Fair Values of Assets and Liabilities   As previously discussed, as of January 1, 2020, we elected the fair value option to account for certain loans receivable associated with our private label credit and general purpose credit card platform that were acquired on or after January 1, 2020. We estimate the fair value of these receivables using a discounted cash flow model, and reevaluate the fair value of our Fair Value Receivables at the end of each quarter. Additionally, we may adjust our models to reflect macro economic events. With the aforementioned market impacts of COVID- 19 and related economic impacts, we included expected market degradation in our model to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in chargeoffs and decrease in payments) above the level that historical trends would suggest.   We previously elected the fair value option with respect to our credit card loans, interest and fees receivable portfolios, the retained interests in which we historically recorded at fair value under securitization structures that were off balance sheet prior to accounting rules changes requiring their consolidation into our financial statements.   Fair value differs from amortized cost accounting in various ways. Under the fair value option credit losses are recognized through income as they are incurred rather than through the establishment of an allowance and provision for losses. We update our fair value analysis each quarter, with changes since the prior reporting period reflected as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of income. Changes in interest rates, credit spreads, realized and projected credit losses and cash flow timing will lead to changes in the fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value and therefore impact earnings.   Fair value differs from amortized cost accounting in the following ways:     • Receivables and notes are recorded at their fair value, not their principal and fee balance or cost basis;   • The fair value of the loans takes into consideration net charge-offs for the remaining life of the loans with no separate allowance for loan loss calculation;   • Certain fee billings (such as annual or merchant fees) and expenses of loans and notes are no longer deferred but recognized (when billed or incurred) in income or expense, respectively;   • Changes in the fair value of loans and notes impact recorded revenues; and   • Net charge-offs are recognized as they occur.   For all of our other receivables and debt (other than the notes payable underlying our formerly off-balance sheet credit card securitization structures), we have not elected the fair value option. Nevertheless, pursuant to applicable requirements, we include disclosures of the fair value of these other items to the extent practicable within the disclosures below. Additionally, we have other liabilities, associated with consolidated legacy credit card securitization trusts, that we are required to carry at fair value in our consolidated financial statements, and they also are addressed within the disclosures below.   Where applicable as noted above, we account for our financial assets and liabilities at fair value based upon a three -tiered valuation system. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Where inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input that is significant to the fair value measurement in its entirety.   Valuations and Techniques for Assets   Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The table below summarizes (in thousands) by fair value hierarchy the  December 31, 2021 and December 31, 2020 fair values and carrying amounts of ( 1 ) our assets that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our assets not carried at fair value, but for which fair value disclosures are required:   Assets – As of December 31, 2021 (1)   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Assets   Loans, interest and fees receivable, net for which it is practicable to estimate fair value   $ —     $ —     $ 402,380     $ 383,811   Loans, interest and fees receivable, at fair value   $ —     $ —     $ 1,026,424     $ 1,026,424     Assets – As of December 31, 2020 (1)   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Assets   Loans, interest and fees receivable, net for which it is practicable to estimate fair value   $ —     $ —     $ 586,908     $ 503,139   Loans, interest and fees receivable, at fair value   $ —     $ —     $ 417,098     $ 417,098       ( 1 ) For cash, deposits and investments in equity securities, the carrying amount is a reasonable estimate of fair value.   For those asset classes above that are required to be carried at fair value in our consolidated financial statements, gains and losses associated with fair value changes are detailed on our consolidated statements of income as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value". For our loans, interest and fees receivable included in the above tables, we assess the fair value of these assets based on our estimate of future cash flows net of servicing costs, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.   F- 18 Table of Contents   For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the years ended December 31, 2021 and 2020 :       Loans, Interest and Fees Receivables, at Fair Value       2021     2020   Balance at January 1,   $ 417,098     $ 4,386   Net revaluations of loans, interest and fees receivable, at fair value, included in earnings     ( 110,283 )     ( 96,948 ) Principal chargeoffs, net of recoveries, included in earnings     ( 78,463 )     ( 9,855 ) Finance chargeoffs, included in earnings     ( 30,794 )     ( 2,746 ) Purchases     1,626,062       713,579   Settlements     ( 1,163,503 )     ( 295,301 ) Finance and fees, included in earnings     366,307       103,983   Balance at December 31,   $ 1,026,424     $ 417,098     The unrealized gains and losses for assets within the Level 3 category presented in the tables above include changes in fair value that are attributable to both observable and unobservable inputs.    Net Revaluation of Loans, Interest and Fees Receivable. We record the net revaluation of loans, interest and fees receivable (including those pledged as collateral) in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value category in our consolidated statements of income. The net revaluation of loans, interest and fees receivable is based on the present value of future cash flows using a valuation model of expected cash flows and the estimated cost to service and collect those cash flows. We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third -party market participants would use in determining fair value, including estimates of net collected yield, principal payment rates, expected principal credit loss rates, costs of funds, discount rates and servicing costs. Interest income on receivables underlying our asset classes that are carried at fair value in our consolidated financial statements is recorded in Revenue - Consumer loans, including past due fees in our consolidated statements of income.   For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of December 31, 2021 and December 31, 2020 :   Quantitative Information about Level 3 Fair Value Measurement   Fair Value Measurement   Fair Value at December 31, 2021 (in thousands)   Valuation Technique   Unobservable Input   Range (Weighted Average)   Loans, interest and fees receivable, at fair value   $ 1,026,424   Discounted cash flows   Gross yield, net of finance charge charge-offs     27.8% to 46.9% (40.9%)                 Payment rate     5.4% to 12.9% (10.6%)                 Expected principal credit loss rate     7.8% to 26.4% (23.5%)                 Servicing rate     3.4% to 5.7% (4.6%)                 Discount rate     12.3% to 13.5% (12.9%)     Quantitative Information about Level 3 Fair Value Measurement   Fair Value Measurement   Fair Value at December 31, 2020 (in thousands)   Valuation Technique   Unobservable Input   Range (Weighted Average)   Loans, interest and fees receivable, at fair value   $ 417,098   Discounted cash flows   Gross yield, net of finance charge charge-offs     22.7% to 56.5% (43.3%)                 Payment rate     3.9% to 11.4% (8.5%)                 Expected principal credit loss rate     6.9% to 31.4% (24.8%)                 Servicing rate     2.9% to 14.2% (4.3%)                 Discount rate     12.8% to 13.5% (13.3%)     F- 19 Table of Contents   Valuations and Techniques for Liabilities   Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability. The table below summarizes (in thousands) by fair value hierarchy the December 31, 2021 and December 31, 2020 fair values and carrying amounts of ( 1 ) our liabilities that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our liabilities not carried at fair value, but for which fair value disclosures are required:   Liabilities – As of December 31, 2021   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Liabilities   Liabilities not carried at fair value                                 Revolving credit facilities   $ —     $ —     $ 1,255,518     $ 1,255,518   Amortizing debt facilities   $ —     $ —     $ 23,346     $ 23,346   Senior notes, net   $ 153,000     $ —     $ —     $ 142,951     Liabilities – As of December 31, 2020   Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Carrying Amount of Liabilities   Liabilities not carried at fair value                                 Revolving credit facilities   $ —     $ —     $ 857,068     $ 857,068   Amortizing debt facilities   $ —     $ —     $ 25,542     $ 25,542   Convertible senior notes   $ —     $ 41,284     $ —     $ 24,386   Liabilities carried at fair value                                 Notes payable associated with structured financings, at fair value   $ —     $ —     $ 2,919     $ 2,919     F- 20 Table of Contents   For our notes payable where market prices are not available, we assess the fair value of these liabilities based on our estimate of future cash flows generated from their underlying credit card receivables collateral, net of servicing compensation required under the note facilities, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk. Gains and losses associated with fair value changes for our notes payable associated with structured financing liabilities that are carried at fair value are detailed on our consolidated statements of income as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value". For our convertible senior notes, we assess fair value based upon the most recent trade data available from third -party providers. We have evaluated the fair value of our third party debt by analyzing the expected repayment terms and credit spreads included in our recent financing arrangements obtained with similar terms. These recent financing arrangements provide positive evidence that the underlying data used in our assessment of fair value has not changed relative to the general market and therefore the fair value of our debt continues to be the same as the carrying value. See Note 10, “Notes Payable,” for further discussion on our other notes payable.   For our material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the years ended December 31, 2021 and 2020 :       Notes Payable Associated with Structured Financings, at Fair Value       2021     2020   Balance at January 1,   $ 2,919     $ 3,920   Net revaluations of notes payable associated with structured financings, at fair value, included in earnings     ( 807 )     ( 1,001 ) Repayments on outstanding notes payable, net     ( 2,112 )     —   Balance at December 31,   $ —     $ 2,919     The unrealized gains and losses for liabilities within the Level 3 category presented in the table above include changes in fair value that are attributable to both observable and unobservable inputs. We provide below a brief description of the valuation techniques used for Level 3 liabilities.   Net Revaluation of Notes Payable Associated with Structured Financings, at Fair Value. We record the net revaluations of notes payable associated with structured financings, at fair value, in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value on our consolidated statements of income. The legal entity associated with the securitization transaction is consolidated as a VIE as the Company is deemed the primary beneficiary of the entity. The Company is not liable for the full face value of the liability in the VIE so it is carried at fair value based upon amounts the borrower will receive from the legal entity. The net revaluation of these notes is based on the present value of future cash flows utilized in repayment of the outstanding principal and interest under the facilities using a valuation model of expected cash flows net of the contractual service expenses within the facilities. We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third -party market participants would use in determining fair value, including: estimates of gross yield, payment rates, expected credit loss rates, servicing costs, and discount rates on the credit card receivables that secure the non-recourse notes payable; costs of funds; discount rates; and contractual servicing fees. Accrued interest expense on notes payable underlying our notes payable associated with structured financings, at fair value is recorded in Interest expense in our consolidated statements of income.   For material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement at  December 31, 2020 :   Quantitative Information about Level 3 Fair Value Measurement   Fair Value Measurement   Fair Value at December 31, 2020 (in thousands)   Valuation Technique   Unobservable Input   Weighted Average   Notes payable associated with structured financings, at fair value   $ 2,919   Discounted cash flows   Gross yield, net of finance charge charge-offs     23.7 %               Payment rate     3.9 %               Expected principal credit loss rate     7.9 %               Discount rate     13.2 %   F- 21 Table of Contents   Other Relevant Data   Other relevant data (in thousands) as of December 31, 2021 and December 31, 2020 concerning certain assets and liabilities we carry at fair value are as follows:   As of December 31, 2021   Loans, Interest and Fees Receivable at Fair Value     Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value   Aggregate unpaid gross balance of loans, interest and fees receivable that are reported at fair value   $ 1,249     $ 1,234,039   Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value   $ 1,204     $ 1,131,895   Aggregate fair value of loans, interest and fees receivable that are reported at fair value   $ 1,215     $ 1,025,209   Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)   $ 8     $ 4,640   Unpaid principal balance of receivables within loans, interest and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans, interest and fees receivable   $ 13     $ 59,656     As of December 31, 2020   Loans, Interest and Fees Receivable at Fair Value     Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value   Aggregate unpaid gross balance of loans, interest and fees receivable that are reported at fair value   $ 630     $ 515,434   Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value   $ 589     $ 487,779   Aggregate fair value of loans, interest and fees receivable that are reported at fair value   $ 540     $ 416,558   Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)   $ 1     $ 1,847   Unpaid principal balance of receivables within loans, interest and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans, interest and fees receivable   $ 4     $ 12,972     Notes Payable   Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2020   Aggregate unpaid principal balance of notes payable   $ 101,314   Aggregate fair value of notes payable   $ 2,919     F- 22 Table of Contents     7. Property   Details (in thousands) of our property on our consolidated balance sheets are as follows:        As of December 31,       2021     2020   Software   $ 1,695     $ 4,122   Furniture and fixtures     3,540       6,548   Data processing and telephone equipment     692       7,728   Leasehold improvements     10,539       10,570   Other     6,909       1,156   Total cost     23,375       30,124   Less accumulated depreciation     ( 16,040 )     ( 27,884 ) Property, net   $ 7,335     $ 2,240     Depreciation expense totaled $ 1.5  million and $ 1.2  million for the years ended December 31, 2021  and 2020 , respectively.     8. Leases   We have operating leases primarily associated with our corporate offices and regional service centers as well as for certain equipment. Our leases have remaining lease terms of 1 to 6  years, some of which include options, at our discretion, to extend the leases for additional periods generally on one -year revolving periods. Other leases allow for us to terminate the lease based on appropriate notification periods. For certain of our leased offices, we sublease a portion of the unoccupied space. The terms of the sublease arrangement generally coincide with the underlying lease. The components of lease expense associated with our lease liabilities and supplemental cash flow information related to those leases were as follows (dollar amounts in thousands):       For the Year Ended December 31,       2021     2020   Operating lease cost, gross   $ 6,905     $ 6,879   Sublease income     ( 5,234 )     ( 5,133 ) Net Operating lease cost   $ 1,671     $ 1,746   Cash paid under operating leases, gross   $ 10,470     $ 10,278                     Weighted average remaining lease term - months     14           Weighted average discount rate     6.0 %           As of December 31, 2021 , maturities of lease liabilities were as follows (in thousands):       Gross Lease Payment     Payments received from Sublease     Net Lease Payment   2022   $ 4,767     $ ( 3,112 )   $ 1,655   2023     511       —       511   2024     308       —       308   2025     163       —       163   2026     53       —       53   Thereafter     10       —       10   Total lease payments     5,812       ( 3,112 )     2,700   Less imputed interest     ( 970 )                 Total   $ 4,842                     In addition, we occasionally lease certain equipment under cancelable and non-cancelable leases, which are accounted for as capital leases in our consolidated financial statements. As of December 31, 2021 , we had no material non-cancelable capital leases with initial or remaining terms of more than one year.   In August 2021, we entered into an operating lease agreement for our corporate headquarters in Atlanta, Georgia with an unaffiliated third party. The new lease covers approximately 73,000 square feet and commences in June 2022 for a 146 month term. The total commitment under the new lease is approximately $ 27.8 million and is not included in the table above. A right-of-use asset and liability will be recorded at the commencement date of the lease.   F- 23 Table of Contents     9. Variable Interest Entities   The Company contributes certain receivables to VIEs. These entities are sometimes established to facilitate third party financing. When assets are contributed to the VIE, they serve as collateral for the debt securities issued by the VIE. The evaluation of whether the entity qualifies as a VIE is based upon the sufficiency of the equity at risk in the legal entity. This evaluation is generally a function of the level of excess collateral in the legal entity. We consolidate VIEs when we hold a variable interest and are the primary beneficiary. We are the primary beneficiary when we have the power to direct activities that most significantly affect the economic performance and have the obligation to absorb the majority of the losses or benefits. In certain circumstances we guarantee the performance of the underlying debt or agree to contribute additional collateral when necessary. When collateral is pledged it is not available for the general use of the Company and can only be used to satisfy the related debt obligation. The results of operations and financial position of consolidated VIEs are included in our consolidated financial statements.   The following table presents a summary of VIEs in which we had continuing involvement or held a variable interest (in millions):       As of       December 31, 2021     December 31, 2020   Unrestricted cash and cash equivalents   $ 209.5     $ 96.6   Restricted cash and cash equivalents     75.9       70.2   Loans, interest and fees receivable, at fair value     925.5       374.2   Loans, interest and fees receivable, gross     369.6       560.2   Allowances for uncollectible loans, interest and fees receivable     ( 55.1 )     ( 120.9 ) Deferred revenue     ( 8.2 )     ( 10.3 ) Total Assets held by VIEs   $ 1,517.2     $ 970.0   Notes Payable, net held by VIEs   $ 1,223.4     $ 827.1   Notes Payable, at fair value held by VIEs   $ -     $ 2.9   Maximum exposure to loss due to involvement with VIEs   $ 1,289.1     $ 864.4       F- 24 Table of Contents       10. Notes Payable   Notes Payable, at Face Value   Other notes payable outstanding as of December 31, 2021 and December 31, 2020 that are secured by the financial and operating assets of either the borrower, another of our subsidiaries or both, include the following, scheduled (in millions); except as otherwise noted, the assets of our holding company (Atlanticus Holdings Corporation) are subject to creditor claims under these scheduled facilities:       As of       December 31, 2021     December 31, 2020   Revolving credit facilities at a weighted average interest rate equal to 4.3 % as of December 31, 2021 ( 4.8 % as of December 31, 2020) secured by the financial and operating assets of CAR and/or certain receivables and restricted cash with a combined aggregate carrying amount of $ 1,391.6 million as of December 31, 2021 ($ 943.6 million as of December 31, 2020)                 Revolving credit facility, not to exceed $ 55.0 million (expiring November 1, 2023 ) (1) (2) (3)   $ 32.1     $ 34.9   Revolving credit facility, not to exceed $ 50.0 million (expiring October 30, 2023 ) (2) (3) (4) (5)     48.7       50.0   Revolving credit facility, not to exceed $ 70.0 million (repaid in May 2021 ) (2) (3) (4) (5) (6)     —       5.8   Revolving credit facility, not to exceed $ 100.0 million (expiring October 15, 2022 ) (2) (3) (4) (5) (6)     —       10.0   Revolving credit facility, not to exceed $ 15.0 million (expiring July 15, 2022 ) (2) (3) (4) (5)     5.7       4.7   Revolving credit facility, not to exceed $ 100.0 million (expiring August 15, 2022 ) (2) (3) (4) (5) (6)     —       2.5   Revolving credit facility, not to exceed $ 200.0 million (repaid in June 2021 ) (3) (4) (5) (6)     —       200.0   Revolving credit facility, not to exceed $ 200.0 million (expiring May 15, 2024 ) (3) (4) (5) (6)     200.0       200.0   Revolving credit facility, not to exceed $ 25.0 million (expiring April 21, 2023 ) (2) (3) (4) (5)     19.2       7.8   Revolving credit facility, not to exceed $ 100.0 million (expiring January 15, 2025 ) (3) (4) (5) (6)   100.0       100.0   Revolving credit facility, not to exceed $ 250.0 million (expiring October 15, 2025 ) (3) (4) (5) (6)     250.0       250.0   Revolving credit facility, not to exceed $ 15.0 million (expiring February 15, 2024 ) (3) (4) (5)     10.0       —   Revolving credit facility, not to exceed $ 300.0 million (expiring December 15, 2026 ) (3) (4) (5) (6)     300.0       —   Revolving credit facility, not to exceed $ 75.0 million (expiring March 15, 2025 ) (3) (4) (5) (6)     —       —   Revolving credit facility, not to exceed $ 300.0 million (expiring May 15, 2026 ) (3) (4) (5) (6)     300.0       —   Other facilities                 Other debt     5.9       3.2   Unsecured term debt (expiring August 26, 2024 ) with a weighted average interest rate equal to 8.0 % (3)     17.4       17.4   Amortizing debt facility (repaid in September 2021 ) (2) (3) (4) (5)     —       5.0   Total notes payable before unamortized debt issuance costs and discounts     1,289.0       891.3   Unamortized debt issuance costs and discounts     ( 10.1 )     ( 8.7 ) Total notes payable outstanding, net   $ 1,278.9     $ 882.6     ( 1 ) Loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance by our CAR Auto Finance operations. ( 2 ) These notes reflect modifications to either extend the maturity date, increase the loan amount or both, and are treated as accounting modifications. ( 3 ) See below for additional information. ( 4 ) Loans are subject to certain affirmative covenants tied to default rates and other performance metrics the failure of which could result in required early repayment of the remaining unamortized balances of the notes.   ( 5 ) Loans are associated with variable interest entities. ( 6 ) Creditors do not have recourse against the general assets of the Company but only to the collateral within the VIEs. * As of December 31, 2021 , the LIBOR rate was 0.10 % and the prime rate was 3.25 %.   In  October 2015, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 50.0 million revolving borrowing limit that can be drawn to the extent of outstanding eligible principal receivables (of which $ 48.7 million was drawn as of December 31, 2021 ). This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 3.0 %. The facility matures on October 30, 2023  and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The facility is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.   F- 25 Table of Contents   In  October 2016, we (through a wholly owned subsidiary) entered a revolving credit facility available to the extent of outstanding eligible principal receivables of our CAR subsidiary (of which $ 32.1  million was drawn as of December 31, 2021 ). This facility is secured by the financial and operating assets of CAR and accrues interest at an annual rate equal to LIBOR plus a range between 2.4 % and 3.0 % based on certain ratios. The loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. In periods subsequent to October 2016, we amended the original agreement to either extend the maturity date and/or expand the capacity of this revolving credit facility. As of December 31, 2021 , the borrowing limit was $ 55.0 million and the maturity is November 1, 2023. There were no other material changes to the existing terms or conditions as a result of these amendments and the new maturity date and borrowing limit are reflected in the table above.   In February 2017, we (through a wholly owned subsidiary) established a program under which we sell certain receivables to a consolidated trust in exchange for notes issued by the trust. The notes were secured by the receivables and other assets of the trust. Simultaneously with the establishment of the program, the trust issued a series of variable funding notes and sold an aggregate amount of up to $ 90.0 million (subsequently reduced to $ 70.0 million) of such notes to an unaffiliated third party. The facility was repaid in May 2021. In connection with the repayment, we removed an accrual of $ 1.5 million associated with a contingent liability incurred with the issuance of the notes. Removal of the contingent liability was recorded as a component of Other non-operating revenue on our consolidated statements of income.   In 2018, we (through a wholly owned subsidiary) entered into two separate facilities associated with the above mentioned program to sell up to an aggregate $ 200.0 million of notes which are secured by the receivables and other assets of the trust (of which $ 0.0 million was outstanding as of December 31, 2021) to separate unaffiliated third parties pursuant to facilities that can be drawn upon to the extent of outstanding eligible receivables. Interest rates on the notes are based on commercial paper rates plus 3.15 % and LIBOR plus a range between 4.5 % and 6.5 %, respectively. The facilities mature on October 15, 2022 and August 15, 2022, respectively, and are subject to certain affirmative covenants and collateral performance tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance of notes.   In December 2017, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 25.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 19.2 million was drawn as of December 31, 2021). This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 3.5 %. The facility matures on April 21, 2023 and is subject to certain affirmative covenants, including payment, delinquency and charge-off tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The note is guaranteed by Atlanticus.   In June 2019, we (through a wholly owned subsidiary) entered a revolving credit facility with a $ 15.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 5.7  million was drawn as of December 31, 2021). This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the prime rate. The note is guaranteed by Atlanticus.   In June 2019, we sold $ 200.0 million of ABS secured by certain credit card receivables (expiring December 15, 2022). The facility was repaid in June 2021.   In August 2019, we issued a $ 17.4 million term note, which bears interest at a fixed rate of 8.0 % and is due in August 2024.    In September 2019, we (through a wholly owned subsidiary) entered a term facility with a $ 30.0 million revolving borrowing limit. The facility was repaid in September 2021.   In November 2019, we sold $ 200.0 million of ABS secured by certain credit card receivables (expiring May 15, 2024). A portion of the proceeds from the sale was used to pay-down our existing facilities associated with our credit card receivables and the remaining proceeds were used to fund the acquisition of future receivables. The terms of the ABS allow for a three -year revolving structure with a subsequent 12 -month to 18 -month amortization period. The weighted average interest rate on the securities is fixed at 4.91 %.   In July 2020, we sold $ 100.0 million of ABS secured by certain private label credit receivables. A portion of the proceeds from the sale were used to pay-down some of our existing revolving facilities associated with our private label credit receivables, and the remaining proceeds were used to fund the acquisition of receivables. The terms of the ABS allow for a three -year revolving structure with a subsequent 18 -month amortization period. The weighted average interest rate on the securities is fixed at 5.47 %.     F- 26 Table of Contents   In October 2020, we sold $ 250.0 million of ABS secured by certain private label credit receivables. A portion of the proceeds from the sale were used to pay-down our existing term ABS associated with our private label credit receivables, noted above, and the remaining proceeds have been invested in the acquisition of receivables. The terms of the ABS allow for a 41 month revolving structure with an 18 -month amortization period and the securities mature between August 2025 and October 2025. The weighted average interest rate on the securities is fixed at 4.1 %.   In January 2021, we (through a wholly owned subsidiary) entered a revolving credit facility with a $ 15.0 million borrowing limit (of which $ 10.0 million was drawn as of December 31, 2021) that is available to the extent of outstanding eligible principal receivables. This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the greater of the prime rate or 4 %. The facility matures on February 15, 2024 and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance. The note is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.   In June 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring May 15, 2026 through December 15, 2026). The terms of the ABS allow for a four -year revolving structure with a subsequent 11 -month to 18 -month amortization period. The weighted average interest rate on the securities is fixed at 4.24 %.   In September 2021, we entered a term facility with a $ 75 million limit (of which $ 0 was drawn as of December 31, 2021) that is available to the extent of outstanding eligible principal receivables. This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to 2.75 %. The terms of the facility allow for a 24 month revolving structure with an 18 -month amortization period and the facility matures in March 2025.   In November 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring May 15, 2026). The terms of the ABS allow for a three -year revolving structure with a subsequent 18 -month amortization period. The weighted average interest rate on the securities is fixed at 3.53 %.   As of December 31, 2021 , we were in compliance with the covenants underlying our various notes payable.   Notes Payable Associated with Structured Financings, at Fair Value   Scheduled (in millions) in the table below are ( 1 ) the carrying amount of our structured financing note secured by certain credit card receivables and reported at fair value as of  December 31, 2020 , ( 2 ) the outstanding face amount of our structured financing note secured by certain credit card receivables and reported at fair value as of  December 31, 2020 , and ( 3 ) the carrying amount of the credit card receivables and restricted cash that provide the exclusive means of repayment for the note (i.e., lenders have recourse only to the specific credit card receivables and restricted cash underlying each respective facility and cannot look to our general credit for repayment) as of  December 31, 2020 . The facility was repaid in December 2021.       Carrying Amounts at Fair Value as of       December 31, 2020   Securitization facility (repaid in December 2021 ), outstanding face amount of $ 101.3 million as of December 31, 2020 bearing interest at a weighted average 5.7 % interest rate, based upon LIBOR which was secured by credit card receivables and restricted cash aggregating $ 2.9 million as of December 31, 2020 in carrying amount   $ 2.9     Senior Notes, net   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.  We are amortizing fees associated with the issuance of the senior notes into interest expense over the expected life of the notes. Amortization of these fees for the year ended  December 31, 2021  totaled $ 0.1  million.    11. Convertible Senior Notes   In November 2005, we issued $ 300.0 million aggregate principal amount of convertible senior notes. These notes (net of repurchases since the issuance date) are reflected within convertible senior notes on our consolidated balance sheets.   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.   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.   The following summarizes (in thousands) components of our consolidated balance sheets associated with our convertible senior notes:       December 31, 2020   Face amount of convertible senior notes   $ 33,839   Discount     ( 9,453 ) Net carrying value   $ 24,386   Carrying amount of equity component included in paid-in capital   $ 108,714   Excess of instruments’ if-converted values over face principal amounts   $ —     F- 27 Table of Contents   In conjunction with the offering of the convertible senior notes, we lent Bear, Stearns International Limited (“BSIL”) and Bear, Stearns & Co. Inc, as agent for BSIL ("collectively "Bear Stearns"), 5,677,950 shares of our common stock. The obligations of Bear Stearns were assumed by JP Morgan in 2008 who returned the remaining loaned shares to us upon redemption of the notes. The loaned shares were retired in December 2021.   12. Commitments and Contingencies   General   Under finance products available in the private label credit and general purpose credit card channels, consumers have the ability to borrow up to the maximum credit limit assigned to each individual’s account. Unfunded commitments under these products aggregated $ 2.0  billion at December 31, 2021. We have never experienced a situation in which all borrowers have exercised their entire available lines of credit at any given point in time, nor do we anticipate this will ever occur in the future. Moreover, there would be a concurrent increase in assets should there be any exercise of these lines of credit.   Additionally, our CAR operations provide floor-plan financing for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. The floor plan financing allows dealers and finance companies to borrow up to the maximum pre-approved credit limit allowed in order to finance ongoing inventory needs. These loans are secured by the underlying auto inventory and, in certain cases where we have other lending products outstanding with the dealer, are secured by the collateral under those lending arrangements as well, including any outstanding dealer reserves. As of December 31, 2021, CAR had unfunded outstanding floor-plan financing commitments totaling $ 12.6  million. Each draw against unused commitments is reviewed for conformity to pre-established guidelines.   Under agreements with third -party originating and other financial institutions, we have pledged security (collateral) related to their issuance of consumer credit and purchases thereunder, of which $ 21.1 million remains pledged as of December 31, 2021 to support various ongoing contractual obligations.   Under agreements with third -party originating and other financial institutions, we have agreed to indemnify the financial institutions for certain liabilities associated with the services we provide on behalf of the financial institutions—such indemnification obligations generally being limited to instances in which we either (a) have been afforded the opportunity to defend against any potentially indemnifiable claims or (b) have reached agreement with the financial institutions regarding settlement of potentially indemnifiable claims. As of December 31, 2021, we have assessed the likelihood of any potential payments related to the aforementioned contingencies as remote. We would accrue liabilities related to these contingencies in any future period if and in which we assess the likelihood of an estimable payment as probable.   Under the account terms, consumers have the option of enrolling in a credit protection program with our lending partner which would make the minimum payments owed on their accounts for a period of up to six months upon the occurrence of an eligible event. Eligible events typically include loss of life, job loss, disability, or hospitalization. As an acquirer of receivables, our potential exposure under this program, if all eligible participants applied for this benefit, was $ 53.3 million as of December 31, 2021 ( of which we have accrued $ 0.6 million as of December 31, 2021 based on current claims). We have never experienced a situation in which all eligible participants have applied for this benefit at any given point in time, nor do we anticipate this will ever occur in the future.   We also are subject to certain minimum payments under cancelable and non-cancelable lease arrangements. For further information regarding these commitments, see Note 8, “Leases”.   Litigation   We are involved in various legal proceedings that are incidental to the conduct of our business. There are currently no pending legal proceedings that are expected to be material to us.   F- 28 Table of Contents     13. Income Taxes   Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.   The current and deferred portions (in thousands) of federal, foreign and state income tax benefit or expense are as follows:       For the Year Ended December 31,       2021     2020   Federal income tax (expense) benefit:                 Current tax (expense) benefit   $ ( 34,910 )   $ 1,351   Deferred tax (expense)     ( 2,369 )     ( 21,752 ) Total federal income tax (expense)   $ ( 37,279 )   $ ( 20,401 ) Foreign income tax (expense) benefit:                 Current tax (expense)   $ ( 107 )   $ ( 143 ) Deferred tax benefit (expense)     1       ( 5 ) Total foreign income tax (expense)   $ ( 106 )   $ ( 148 ) State and other income tax benefit (expense):                 Current tax (expense)   $ ( 4,910 )   $ ( 1,228 ) Deferred tax benefit     511       1,303   Total state and other income tax (expense) benefit   $ ( 4,399 )   $ 75   Total income tax (expense)   $ ( 41,784 )   $ ( 20,474 )   The $ 34.9  million of 2021 current federal income tax expense in the above table is net of $ 13.8 million of tax benefits related to federal net operating loss and capital loss carry forwards. Similarly, the $ 4.9 million of 2021 current state and other income tax expense above is net of $ 0.8 million of tax benefits related to state net operating loss carry forwards.   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.   The following table reconciles our effective income tax expense or benefit rates for 2021 and 2020 :       For the Year Ended December 31,       2021     2020   Statutory federal expense rate     21.0 %     21.0 % (Decrease) increase in statutory federal tax expense rate resulting from:                 Share-based compensation, net of executive compensation deduction limitations     ( 1.4 )     —   Global intangible low-taxed income tax     0.1       0.2   Net interest and penalties related to uncertain tax positions and unpaid tax liabilities (including reversals thereof from IRS settlement in 2020)     —       ( 0.6 ) Interest expense on preferred stock classified as debt for tax purposes     ( 1.6 )     ( 2.6 ) Foreign taxes, net of valuation allowance effects     ( 0.1 )     ( 0.2 ) State taxes, net of valuation allowance effects     1.6       ( 0.1 ) Prior year provision to return reconciling items, tax effects of non-controlling interests, and other     ( 0.6 )     0.2   Effective tax expense rate     19.0 %     17.9 %   F- 29 Table of Contents   As of December 31, 2021 and December 31, 2020 , the respective significant components (in thousands) of our deferred tax assets and liabilities (which are included as a component of our Income tax liability on our consolidated balance sheets) were:       As of December 31,       2021     2020   Deferred tax assets:                 Software development costs/fixed assets   $ —     $ 75   Provision for loan loss     14,647       30,080   Credit card fair value election differences     48,730       173   Equity-based compensation     967       715   Accrued expenses     159       466   Accruals for state taxes and interest associated with unrecognized tax benefits and unpaid accrued tax liabilities     149       121   Federal net operating loss and capital loss carry-forwards     —       11,279   Federal tax credits and minimum tax credit carry-forward     —       25   Foreign net operating loss carry-forward     304       306   Interest expense on debt with equity treatment for tax purposes     —       631   Other     506       202   State tax benefits, primarily from net operating losses     27,081       36,052   Deferred tax assets, gross   $ 92,543     $ 80,125   Valuation allowances     ( 22,716 )     ( 31,701 ) Deferred tax assets, net of valuation allowances   $ 69,827     $ 48,424   Deferred tax (liabilities):                 Prepaid expenses and other   $ ( 513 )   $ ( 225 ) Software development costs and fixed assets     ( 41 )     —   Equity in income of equity-method investee     ( 697 )     ( 1,457 ) Market discount on acquired credit card and other loans receivable     ( 94,958 )     ( 61,255 ) Deferred costs     ( 590 )     ( 545 ) Convertible senior notes     —       ( 10,057 ) Deferred tax (liabilities), gross   $ ( 96,799 )   $ ( 73,539 ) Deferred tax (liabilities), net   $ ( 26,972 )   $ ( 25,115 )   We undertook a detailed review of our deferred taxes and determined that a valuation allowance was required for certain deferred tax assets in state tax jurisdictions within the U.S. and in the U.K. We reduce our deferred tax assets by valuation allowances if it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. In making our valuation allowance determinations, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods, and the implementation of tax planning strategies. Because our valuation allowance evaluations require consideration of future events, significant judgment is required in making the evaluations, and our conclusions could be materially different if our expectations are not met. Our valuation allowances totaled $ 22.7 million and $ 31.7 million as of December 31, 2021, and December 31, 2020, respectively; a release of approximately $ 1.1 million of state valuation allowances accounted for part of the decline in valuation allowance balances between December 31, 2020, and December 31, 2021.     F- 30 Table of Contents   Our subsidiaries file federal, state and/or foreign income tax returns. In the normal course of our business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the U.S., the U.K., and various U.S. states and territories. With a few exceptions of a non-material nature, we are no longer subject to federal, state, local, or foreign income tax examinations for years prior to 2016.   Reconciliations (in thousands) of our unrecognized tax benefits from the beginning to the end of 2021 and 2020 , respectively, are as follows:       2021     2020   Balance at January 1,   $ ( 577 )   $ ( 513 ) Reductions based on tax positions related to prior years     33       —   (Additions) reductions based on tax positions related to prior years     ( 26 )     48   Additions based on tax positions related to the current year     ( 107 )     ( 82 ) Interest and penalties accrued     ( 31 )     ( 30 ) Balance at December 31,   $ ( 708 )   $ ( 577 )   Further, our unrecognized tax benefits that, if recognized, would affect the effective tax rate are not material at only $ 0.7  million and $ 0.6  million as of  December 31, 2021 , and 2020 , respectively.     14. Net Income Attributable to Controlling Interests Per Common Share   We compute net income attributable to controlling interests per common share by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock (including participating securities) outstanding during the period, as discussed below. Diluted computations applicable in financial reporting periods in which we report income reflect the potential dilution to the basic income per share of common stock computations that could occur if securities or other contracts to issue common stock were exercised, were converted into common stock or were to result in the issuance of common stock that would share in our results of operations. In performing our net income attributable to controlling interests per share of common stock computations, we apply accounting rules that require us to include all unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, in the number of shares outstanding in our basic and diluted calculations. Common stock and certain unvested share-based payment awards earn dividends equally, and we have included all outstanding restricted stock awards in our basic and diluted calculations for current and prior periods.   The following table sets forth the computations of net income attributable to controlling interests per share of common stock (in thousands, except per share data):              December 31,       2021     2020   Numerator:                 Net income attributable to controlling interests   $ 177,902     $ 94,120   Preferred stock and preferred unit dividends and accretion     ( 22,363 )     ( 17,070 ) Net income attributable to common shareholders—basic     155,539       77,050   Effect of dilutive preferred stock dividends and accretion     2,400       2,400   Net income attributable to common shareholders—diluted   $ 157,939     $ 79,450   Denominator:                 Basic (including unvested share-based payment awards) (1)     15,074       14,486   Effect of dilutive stock compensation arrangements and exchange of preferred stock     5,824       5,616   Diluted (including unvested share-based payment awards) (1)     20,898       20,102   Net income attributable to common shareholders per share—basic   $ 10.32     $ 5.32   Net income attributable to common shareholders per share—diluted   $ 7.56     $ 3.95       ( 1 ) Shares related to unvested share-based payment awards included in our basic and diluted share counts were 312,792 for the year ended   December 31, 2021 , compared to 431,262 for the year ended   December 31, 2020 .   As their effects were anti-dilutive, we excluded stock options to purchase 0.0  million and 0.1  million shares from our net income attributable to controlling interests per share of common stock calculations for the years ended December 31, 2021 and 2020 , respectively.    For the years ended December 31, 2021 and 2020 , we included 4,000,000 and 3,793,869  shares, respectively, in our outstanding diluted share counts associated with our Series A Preferred Stock. See Note 4, "Shareholders' Equity and Preferred Stock", for a further discussion of these convertible securities.    F- 31 Table of Contents     15. Stock-Based Compensation   We currently have two stock-based compensation plans, the Second Amended and Restated Employee Stock Purchase Plan (the “ESPP”) and the Fourth Amended and Restated 2014 Equity Incentive Plan (the “Fourth Amended 2014 Plan”). Our Fourth Amended  2014 Plan provides that we may grant options on or shares of our common stock (and other types of equity awards) to members of our Board of Directors, employees, consultants and advisors. The Fourth Amended 2014 Plan was approved by our shareholders in May 2019. Among other things, the Fourth Amended 2014 Plan (i) increased the number of shares of Common Stock available for issuance under the plan by 2,000,000 shares and (ii) extended the term of the plan by approximately two years. As of December 31, 2021 , 54,321 shares remained available for issuance under the ESPP and 1,661,957 shares remained available for issuance under the Fourth Amended 2014 Plan.   Exercises and vestings under our stock-based compensation plans resulted in no income tax-related charges to paid-in capital during the years ended December 31, 2021 and 2020 .   Restricted Stock and Restricted Stock Units   During the years ended December 31, 2021 and 2020 , we granted 49,988 and 61,373 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 1.7  million and $ 0.6  million, respectively. We incurred expenses of $ 1.2  million and $ 0.8  million during the years ended December 31, 2021 and 2020 , respectively, related to restricted stock awards. When we grant restricted stock and restricted stock units, we defer the grant date value of the restricted stock and restricted stock unit and amortize that value (net of the value of anticipated forfeitures) as compensation expense with an offsetting entry to the paid-in capital component of our consolidated shareholders’ equity. Our restricted stock awards typically vest over a range of 12 to 60 months (or other term as specified in the grant which may include the achievement of performance measures) and are amortized to salaries and benefits expense ratably over applicable vesting periods. As of December 31, 2021 , our unamortized deferred compensation costs associated with non-vested restricted stock awards were $ 0.9  million with a weighted-average remaining amortization period of 1 .5  years. No forfeitures have been included in our compensation cost estimates based on historical forfeiture rates.   Stock Options   The exercise price per share of the options awarded under the Fourth Amended 2014 Plan must be equal to or greater than the market price on the date the option is granted. The option period may not exceed 10 years from the date of grant. Options granted during 2021  were valued using the Black-Scholes-Merton option pricing model with the following assumptions: a dividend yield of zero, years to maturity of  5  years (which equals the expected term), volatility of 80.9 % (based on the average of daily historical volatility using the expected term), and a risk-free rate of  0.86 % (based on 5 year US Treasury securities). We had expense of $ 2.0  million and $ 0.5  million related to stock option-related compensation costs during the years ended December 31, 2021 and 2020 , respectively. When applicable, we recognize stock option-related compensation expense for any awards with graded vesting on a straight-line basis over the vesting period for the entire award. The table below includes additional information about outstanding options:       Number of Shares     Weighted-Average Exercise Price     Weighted-Average of Remaining Contractual Life (in years)     Aggregate Intrinsic Value   Outstanding at December 31, 2020     2,423,466     $ 4.41                   Issued     133,850     $ 37.37                   Exercised     ( 526,015 )   $ 3.58                   Expired/Forfeited     ( 13,332 )   $ 15.30                   Outstanding at December 31, 2021     2,017,969     $ 6.74       1.2     $ 130,311,334   Exercisable at December 31, 2021     1,599,199     $ 3.82       0.7     $ 107,945,775     Information on stock options granted, exercised and vested is as follows (in thousands, except per share data):       Year ended December 31,         2021       2020   Weighted average fair value per share of options granted   $ 24.00     $ 9.47   Cash received from options exercised, net   $ 1,885     $ 1,326   Aggregate intrinsic value of options exercised   $ 13,673     $ 5,726   Grant date fair value of shares vested   $ 834     $ 944     Options issued during the years ended December 31, 2021 and 2020  had an aggregate grant-date fair value of $ 3.1 million and $ 1.4 million, respectively. We had $ 2.4  million and $ 1.4  million of unamortized deferred compensation costs associated with non-vested stock options as of December 31, 2021 and December 31, 2020 ,  respectively, with a weighted average remaining amortization period of 1.6 years as of December 31, 2021.  Upon exercise of outstanding options the Company issues new shares.    F- 32 Table of Contents     16. Employee Benefit Plans   We maintain a defined contribution retirement plan ( “401 (k) plan”) for our U.S. employees that provides for a matching contribution by us. All full time U.S. employees are eligible to participate in the 401 (k) plan. We made matching contributions of $ 274,759 and $ 197,214 in  2021 and 2020 , respectively.   Also, all employees, excluding executive officers, are eligible to participate in the ESPP. Under the ESPP, employees can elect to have up to 10 % of their annual wages withheld to purchase our common stock up to a fair market value of $ 10,000 . The amounts deducted and accumulated by each participant are used to purchase shares of common stock on or as promptly as practicable after the last business day of each month. The price of stock purchased under the ESPP is approximately 85 % of the fair market value per share of our common stock on the purchase date. Employees contributed $ 79,095 to purchase 2,241  shares of common stock in 2021  and $ 106,775 to purchase 9,209 shares of common stock in 2020  under the ESPP. The ESPP covers up to 100,000 shares of common stock. Our charge to expense associated with the ESPP was $ 28,937 and $ 31,748 in 2021 and 2020 , respectively.     17. Related Party Transactions   Under a shareholders’ agreement which we entered into with certain shareholders, including David G. Hanna, Frank J. Hanna, III and certain trusts that were Hanna affiliates, following our initial public offering ( 1 ) if one or more of the shareholders accepts a bona fide offer from a third party to purchase more than 50 % of the outstanding common stock, each of the other shareholders that is a party to the agreement may elect to sell his shares to the purchaser on the same terms and conditions, and ( 2 ) if shareholders that are a party to the agreement owning more than 50% of the common stock propose to transfer all of their shares to a third party, then such transferring shareholders may require the other shareholders that are a party to the agreement to sell all of the shares owned by them to the proposed transferee on the same terms and conditions.   In June 2007, we entered into a sublease for 1,000 square feet (as later adjusted to 600 square feet) of excess office space at our Atlanta headquarters with HBR Capital, Ltd. (“HBR”), a company co-owned by David G. Hanna and his brother Frank J. Hanna, III. The sublease rate per square foot is the same as the rate that we pay under the prime lease. Under the sublease, HBR paid us $ 17,299 and $ 16,960 for 2021  and 2020, respectively. The aggregate amount of payments required under the sublease from January 1, 2022  to the expiration of the sublease in May 2022 is $ 7,267 .   In January 2013, HBR began leasing the services of four employees from us. HBR reimburses us for the full cost of the employees, based on the amount of time devoted to HBR. In the years ended December 31, 2021  and 2020 , we received $ 380,733 and $ 334,526 , respectively, of reimbursed costs from HBR associated with these leased employees.   On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove. The agreement provided for a senior secured term loan facility in an amount of up to $ 40.0 million at any time outstanding. On December 27, 2019, the Company issued 400,000 shares (aggregate initial liquidation preference of $ 40 million) of its Series A Preferred Stock in exchange for full satisfaction of the $ 40.0 million that the Company owed Dove under the Loan and Security Agreement. Dividends on the preferred stock are 6 % per annum (cumulative, non-compounding) and are payable in preference to any common stock dividends, in cash. The Series A Preferred Stock is perpetual and has no maturity date. The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $ 100 per share, plus any accumulated and unpaid dividends. At the request of the holders of a majority of the shares of the Series A Preferred Stock, the Company shall offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024. Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $ 10 per share, subject to certain adjustment in certain circumstances to prevent dilution. Given the redemption rights contained within the Series A Preferred Stock, we account for the outstanding preferred stock as temporary equity in the consolidated balance sheets. Dove is a limited liability company owned by three trusts. David G. Hanna is the sole shareholder and the President of the corporation that serves as the sole trustee of one of the trusts, and David G. Hanna and members of his immediate family are the beneficiaries of this trust. Frank J. Hanna, III is the sole shareholder and the President of the corporation that serves as the sole trustee of the other two trusts, and Frank J. Hanna, III and members of his immediate family are the beneficiaries of these other two trusts.   F-33