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Item 9A. Controls and Procedures

2024-03-04 compared with 2023-03-15 · 764 added, 955 removed, 751 unchanged (70% of the section changed)

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures  

As of December 31, 2022, 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).

Evaluation of Disclosure Controls and Procedures

As of December 31, 2023, 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, 2023.

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, 2022, 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) .

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, 2023, 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, 2023.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, 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, 2022.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, has been audited by BDO USA, P.C., an independent registered public accounting firm, as stated in their accompanying attestation report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.

BDO's report is on page F-1 of the attached financial statements.

Remediation of Previously Reported Material Weakness

As previously reported, the Company’s management determined that they did not maintain effective controls and retain sufficient documentary evidence to support the precision of review over the development of cash flow forecasts used in the calculation of the fair value estimate of loans at fair value.

This deficiency represented a material weakness in the Company’s internal control over financial reporting.

The Company’s management is committed to maintaining a strong internal control environment.

In response to the material weakness identified above, management, with the oversight of the Audit Committee of the Board of Directors, evaluated the material weakness described above and designed a remediation plan to enhance the Company’s internal control environment.

To remediate the material weakness, the Company’s management enhanced the design of certain review controls to include sufficient precision of management’s review as well as retain incremental evidence that supports the effectiveness of controls related to the development and review of cash flow forecasts used in the calculation of the fair value estimate of loans at fair value.

These enhanced controls were implemented as of June 30, 2023, and have been tested and determined to be operating effectively for a sufficient period of time.

Accordingly, the Company concluded that the material weakness identified above has been effectively remediated as of December 31, 2023.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2022, 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.

During the quarter ended December 31, 2023, 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.

The Company’s management, including its principal executive officer and principal financial officer, do not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting will prevent all errors and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;

over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate.

Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

OTHER INFORMATION

During the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a - 1 (f) of the Act) adopted or terminated a Rule 10b5 - 1 trading arrangement or non-Rule 10b5 - 1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item will be set forth in our Proxy Statement for the 2023 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.

The information required by this Item will be set forth in our Proxy Statement for the 2024 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.

EXECUTIVE COMPENSATION

The information required by this Item will be set forth in our Proxy Statement for the 2023 Annual Meeting of Shareholders in the section entitled “Executive and Director Compensation”

and is incorporated by reference.

The information required by this Item will be set forth in our Proxy Statement for the 2024 Annual Meeting of Shareholders in the section entitled "Executive and Director Compensation" and is incorporated by reference.

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 2023 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.

The information required by this Item will be set forth in our Proxy Statement for the 2024 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.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item will be set forth in our Proxy Statement for the 2023 Annual Meeting of Shareholders in the sections entitled “Related Party Transactions”

and “Corporate Governance”

and is incorporated by reference.

The information required by this Item will be set forth in our Proxy Statement for the 2024 Annual Meeting of Shareholders in the sections entitled "Related Party Transactions" and "Corporate Governance" and is incorporated by reference.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item will be set forth in our Proxy Statement for the 2023 Annual Meeting of Shareholders in the section entitled “Auditor Fees”

and is incorporated by reference.

The information required by this Item will be set forth in our Proxy Statement for the 2024 Annual Meeting of Shareholders in the section entitled "Auditor Fees" and is incorporated by reference.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Report: 

Financial Statements

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting ( BDO USA, LLP ;

Atlanta, GA ;

PCAOB ID# 243 )

Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements  ( BDO USA, LLP ;

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting ( BDO USA, P.C .;

Atlanta, GA ;

PCAOB ID# 243 )

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Income for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Shareholders’

Equity and Temporary Equity for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

Notes to Consolidated Financial Statements as of December 31, 2022 and 2021

Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements (BDO USA, P.C.;

PCAOB ID#243) F-2

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Shareholders’ Equity and Temporary Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Financial Statement Schedules

Description of Exhibit

Incorporated by Reference from Atlanticus’

Incorporated by Reference from Atlanticus’ SEC Filings

Unless Otherwise Indicated(1)

Amended and Restated Articles of Incorporation

Amended and Restated Articles of Incorporation

November 8, 2022, Form 10-Q, exhibit 3.1

Articles of Amendment Establishing Cumulative Convertible Preferred Stock, Series A (included as Exhibit B to Exhibit 3.1 hereto)

Articles of Amendment Establishing Cumulative Convertible Preferred Stock, Series A (included as Exhibit B to Exhibit 3.1 hereto)

November 8, 2022, Form 10-Q, exhibit 3.1

Amended and Restated Articles of Amendment Establishing the 7.625% Series B Cumulative Perpetual Preferred Stock (included as Exhibit C to Exhibit 3.1 hereto)

Amended and Restated Articles of Amendment Establishing the 7.625% Series B Cumulative Perpetual Preferred Stock (included as Exhibit C to Exhibit 3.1 hereto)

November 8, 2022, Form 10-Q, exhibit 3.1

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Description of Atlanticus Holdings Corporation's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

March 15, 2022, Form 10-K, exhibit 4.1

Filed herewith

Form of common stock certificate

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Indenture, dated as of November 22, 2021, by and between Atlanticus Holdings Corporation and U.S.

Bank Trust Company, National Association (as successor to U.S.

Bank National Association), as trustee

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First Supplemental Indenture, dated as of November 22, 2021, by and between Atlanticus Holdings Corporation and U.S.

Bank Trust Company, National Association (as successor to U.S.

Bank National Association), as trustee

November 22, 2021, Form 8-K, exhibit 4.2

Form of 6.125% Senior Notes due 2026 (included in Exhibit 4.4)

Form of 6.125% Senior Notes due 2026 (included in Exhibit 4.3(a)

November 22, 2021, Form 8-K, exhibit 4.3

Stockholders Agreement dated as of April 28, 1999

Second Supplemental Indenture, dated as of January 30, 2024, by and between Atlanticus Holdings Corporation and U.S.

Bank Trust Company, National Association, as trustee

February 2, 2024, Form 8-K, exhibit 4.1

Form of Additional 6.125% Senior Notes due 2026 (included in Exhibit 4.3(c))

February 2, 2024, Form 8-K, exhibit 4.2

Third Supplemental Indenture, dated as of January 30, 2024, by and between Atlanticus Holdings Corporation and U.S.

Bank Trust Company, National Association, as trustee

January 30, 2024, Form 8-K, exhibit 4.1

Form of 9.25% Senior Notes due 2029 (included in Exhibit 4.3(e))

January 30, 2024, Form 8-K, exhibit 4.2

Stockholders Agreement dated as of April 28, 1999

January 18, 2000, Form S-1, exhibit 10.1

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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

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April 10, 2018, Definitive Proxy Statement on Schedule 14A, Appendix A

Amended and Restated Employment Agreement, dated March 18, 2021, between Atlanticus Holdings Corporation and David G.

Amended and Restated Employment Agreement, dated March 18, 2021, between Atlanticus Holdings Corporation and David G.

May 14, 2021, Form 10-Q, exhibit 10.1

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Outside Director Compensation Package

November 8, 2022, Form 10-Q, exhibit 10.1

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

Filed herewith

Assumption Agreement dated June 30, 2009 between Atlanticus Holdings Corporation (formerly CompuCredit Holdings Corporation) and Atlanticus Services Corporation (formerly CompuCredit Corporation)

3 unchanged sentences

May 15, 2017, Form 10-Q, exhibit 10.1

Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated February 8, 2017

March 15, 2022, Form 10-K, exhibit 10.11(a)

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)

Description of Exhibit

Incorporated by Reference from Atlanticus’

Incorporated by Reference from Atlanticus’ SEC Filings

Unless Otherwise Indicated(1)

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)

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)

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)

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)

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)

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)

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)

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)

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

14 unchanged sentences

March 30, 2020, Form 10-K, exhibit 10.11(q)

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)

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)

Trust Agreement, dated February 8, 2017, between Perimeter Funding Corporation and Wilmington Trust, National Association

6 unchanged sentences

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)

Filed herewith

Amended and Restated Trust Agreement, dated November 9, 2018, between FRC Funding Corporation and Wilmington Trust, National Association

1 unchanged sentence

Description of Exhibit

Incorporated by Reference from Atlanticus’

SEC Filings Unless Otherwise Indicated(1)

Amended and Restated Program Management Agreement, dated April 1, 2020, between The Bank of Missouri and Atlanticus Services Corporation 

Incorporated by Reference from Atlanticus’ SEC Filings Unless Otherwise Indicated(1)

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

1 unchanged sentence

August 14, 2020, Form 10-Q, exhibit 10.1(a)

Amended and Restated Receivable Sales Agreement, dated April 1, 2020, between The Bank of Missouri and Fortiva Funding, LLC 

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

First Amendment to Amended and Restated Receivable Sales Agreement, dated June 30, 2020, between The Bank of Missouri and Fortiva Funding, LLC

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)

5 unchanged sentences

March 30, 2020, Form 10-K, exhibit 10.15

At Market Issuance Sales Agreement, dated August 10, 2022, between Atlanticus Holdings Corporation and B.

Riley Securities, Inc.

August 10, 2022, Form 8-K, exhibit 1.1

At-The-Market Sales Agreement, dated December 29, 2023, between Atlanticus Holdings Corporation and BTIG, LLC

January 2, 2024, Form 8-K, exhibit 1.1

Atlanticus Holdings Corporation Policy Statement Regarding Securities Trading

Filed herewith

Subsidiaries of the Registrant

Filed herewith

Consent of BDO USA, LLP

Consent of BDO USA, P.C.

Filed herewith

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Filed herewith

Atlanticus Holdings Corporation Clawback Policy

Filed Herewith

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.

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Management contract, compensatory plan or arrangement.

Documents incorporated by reference from SEC filings made prior to June 2009 were filed under CompuCredit Corporation (now Atlanticus Services Corporation) (File No.

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.

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.

FORM 10-K SUMMARY

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 14, 2023.

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 4, 2024.

Atlanticus Holdings Corporation

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President, Chief Executive Officer and Director (Principal Executive Officer)

March 14, 2023

March 4, 2024

/s/William R.

Chief Financial Officer (Principal Financial Officer)

March 14, 2023

March 4, 2024

/s/Mitchell C.

Chief Accounting Officer (Principal Accounting Officer)

March 14, 2023

March 4, 2024

Executive Chairman of the Board

March 14, 2023

March 4, 2024

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

Opinion on Internal Control over Financial Reporting

We have audited Atlanticus Holdings Corporation’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

We have audited Atlanticus Holdings Corporation’s (the "Company’s") internal control over financial reporting as of December 31, 2023, 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, 2023, 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, 2022 and 2021, the related consolidated statements of income, shareholders’

equity and temporary equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 14, 2023 expressed an unqualified opinion thereon.

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, 2023 and 2022, the related consolidated statements of income, shareholders’ equity and temporary equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes and our report dated March 4, 2024, 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.

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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.

/s/ BDO USA, LLP

/s/ BDO USA, P.C.

Atlanta, Georgia

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Atlanticus Holdings Corporation (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, shareholders’

equity and temporary equity, and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 , 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, 2022, 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 14, 2023, expressed an unqualified opinion thereon.

We have audited the accompanying consolidated balance sheets of Atlanticus Holdings Corporation (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, shareholders’ equity and temporary equity and cash flows for each of the years then ended, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended , 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, 2023, 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 4, 2024 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.

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 Public Company Accounting Oversight Board (United States) ("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.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate(s) 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 matter(s) 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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, at fair value of $1,818 million at December 31, 2022.

As of January 1, 2022 all receivables associated with the Company’s private label credit and general purpose credit cards are included within loans, interest, and fees receivable, at fair value.

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 the Company in the discounted cash flow model used to estimate the fair value of outstanding loans, interest, and fees receivable, at fair value to be a critical audit matter.

The significant assumptions impacting the fair value calculation include the timing of expected cash flows and discount rates applied.

Auditing these significant assumptions involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters including the involvement of individuals with specialized skill and knowledge.

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, including controls over management’s review of the significant assumptions and the completeness and accuracy of data used to develop the fair value calculation.

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.

Involving professionals with specialized skills and knowledge in valuation to assist in the evaluation of the reasonableness of discount rates assumptions used by management to determine the fair value by comparing to market-based discount rates to determine if such assumptions 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.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2002.

(1) relates 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 the critical audit matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Discount rate utilized in estimating the fair value of Loans at Fair Value

As described in Note 6 to the Company’s consolidated financial statements, the Company has outstanding loans at fair value of $2,174 million at December 31, 2023.

As described in Note 2 to the consolidated financial statements, all loans associated with the Company’s private label credit and general-purpose credit cards are included within loans at fair value.

The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as credit losses, purchase rates, payment rates, servicing costs, contractual servicing fees, costs of funds, discount rates and yields earned on credit card receivables.

The Company re-evaluates the fair value of loans at the close of each measurement period.

The impact of changes in the fair value of loans 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 discount rates as the significant assumptions used by the Company to estimate the fair value of outstanding loans at fair value to be a critical audit matter.

The discount rates used to discount projected cash flows that third-party market participants would use are based upon unobservable inputs and are considered highly subjective as there is no active market for these loans.

Auditing the discount rates involved especially challenging auditor judgment due to the nature of audit evidence and nature and extent of audit effort required including the involvement of individuals with specialized skill and knowledge.

The primary procedures we performed to address this critical audit matter included:

Testing the relevance and reliability of data related to the discount rates by agreeing data to internal and external third-party sources.

Involving professionals with specialized skills and knowledge in valuation to assist in the evaluation of the reasonableness of discount rates used by management to determine the fair value by comparing to market-based discount rates to determine if such assumptions 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.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2002.

Atlanta, Georgia

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Unrestricted cash and cash equivalents (including $ 158.0 million and $ 202.2 million associated with variable interest entities at December 31, 2023 and December 31, 2022, respectively)

$ 384,984  

$ 409,660  

$ 339,338 $ 384,984

Restricted cash and cash equivalents (including $ 20.5 million and $ 27.6 million associated with variable interest entities at December 31, 2023 and December 31, 2022, respectively)

48,208  

96,968  

44,315 48,208

Loans, interest and fees receivable:

Loans, interest and fees receivable, at fair value (including $ 1,735.9 million and $ 925.5 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

1,817,976  

1,026,424  

Loans, interest and fees receivable, gross (including $ 0 and $ 369.6 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

105,267  

470,293  

Allowances for uncollectible loans, interest and fees receivable (including $ 0 and $ 55.1 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

( 1,643 )  

Deferred revenue (including $ 0 and $ 8.2 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

( 16,190 )  

Loans at fair value (including $ 2,128.6 million and $ 1,735.9 million associated with variable interest entities at December 31, 2023 and December 31, 2022, respectively)

2,173,759 1,817,976

Loans at amortized cost

118,045 105,267

Allowances for credit losses

( 1,759 ) ( 1,643 )

Deferred revenue

( 17,861 ) ( 16,190 )

Net loans, interest and fees receivable

1,905,410  

1,410,235  

2,272,184 1,905,410

Property at cost, net of depreciation

10,013  

11,445 10,013

Operating lease right-of-use assets

11,782  

11,310 11,782

Prepaid expenses and other assets

27,417  

15,649  

$ 2,387,814  

$ 1,943,863  

27,853 27,417

$ 2,706,445 $ 2,387,814

Accounts payable and accrued expenses

$ 44,332  

$ 42,287  

$ 61,634 $ 44,332

Operating lease liabilities

20,112  

20,180 20,112

Notes payable, net (including $ 1,795.9 million and $ 1,586.0 million associated with variable interest entities at December 31, 2023 and December 31, 2022, respectively)

1,653,306  

1,278,864  

1,861,685 1,653,306

Senior notes, net

144,385  

142,951  

144,453 144,385

Income tax liability

60,689  

47,770  

85,826 60,689

Total liabilities

1,922,824  

1,516,714  

2,173,778 1,922,824

Commitments and contingencies (Note 11)

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400,000 shares issued and outstanding at December 31, 2022 (Note 5) (1)

40,000  

40,000 40,000

Class B preferred units issued to noncontrolling interests (Note 5)

99,950  

99,650  

100,250 99,950

Shareholders' Equity

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Paid-in capital

121,996  

227,763  

87,415 121,996

Retained earnings

204,415  

60,236  

Total shareholders’

326,411  

287,999  

307,260 204,415

Total shareholders’ equity

394,675 326,411

Noncontrolling interests

( 1,371 )  

325,040  

287,499  

Total liabilities, preferred stock and equity

$ 2,387,814  

$ 1,943,863  

( 2,258 ) ( 1,371 )

392,417 325,040

Total liabilities, shareholders' equity and temporary equity

$ 2,706,445 $ 2,387,814

(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.

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Consumer loans, including past due fees

$ 879,123 $ 786,235

Fees and related income on earning assets

238,775 217,071

Other revenue

37,348 42,798

Total operating revenue, net

1,155,246 1,046,104

Other non-operating revenue

Total revenue

1,155,876 1,046,913

Interest expense

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

Operating expense:

( 109,342 ) ( 81,851 )

Provision for credit losses

( 2,152 ) ( 1,252 )

Changes in fair value of loans

( 689,577 ) ( 577,069 )

354,805 386,741

Operating expenses:

Salaries and benefits

43,906 43,063

Card and loan servicing

100,620 95,428

Marketing and solicitation

Total operating expense

Loss on repurchase and redemption of convertible senior notes

52,421 62,403

26,740 34,400

Total operating expenses

226,247 237,469

Income before income taxes

128,558 149,272

Income tax expense

( 26,604 ) ( 14,660 )

101,954 134,612

Net loss attributable to noncontrolling interests

Net income attributable to controlling interests

Preferred dividends and discount accretion

102,845 135,597

Preferred stock and preferred unit dividends and discount accretion

( 25,198 ) ( 25,076 )

Net income attributable to common shareholders

Net income attributable to common shareholders per common share—basic

Net income attributable to common shareholders per common share—diluted

$ 77,647 $ 110,521

Net income attributable to common shareholders per common share—basic

$ 5.35 $ 7.55

Net income attributable to common shareholders per common share—diluted

$ 4.24 $ 5.83

See accompanying notes.

Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Shareholders’

Equity and Temporary Equity

For the Years Ended December 31, 2022 and 2021

Consolidated Statements of Shareholders’ Equity and Temporary Equity

For the Years Ended December 31, 2023 and 2022

(Dollars in thousands)

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Noncontrolling Interests

Class B Preferred Units

Series A Preferred Stock

Balance at December 31, 2019

Accretion of discount associated with issuance of subsidiary equity

Preferred dividends

Stock option exercises and proceeds related thereto

Compensatory stock issuances, net of forfeitures

Contributions by preferred shareholders

Stock-based compensation costs

Redemption and retirement of shares

Net income (loss)

Balance at December 31, 2020

Class B Preferred Units

Balance at January 1, 2022

3,188,533 $ — 14,804,408 $ — $ 227,763 $ 60,236 $ ( 500 ) $ 287,499 $ 40,000 $ 99,650

Cumulative effects from adoption of the CECL standard

— — — — — 8,582 — 8,582 — —

Accretion of discount associated with issuance of subsidiary equity

Preferred dividends

— — — — ( 300 ) — — ( 300 ) — 300

Discount associated with repurchase of preferred stock

— — — — 18 — — 18 — —

Preferred stock and preferred unit dividends

— — — — ( 24,794 ) — — ( 24,794 ) — —

Stock option exercises and proceeds related thereto

— — 1,211,141 — 3,731 — — 3,731 — —

Compensatory stock issuances, net of forfeitures

— — 112,027 — — — — — — —

Issuance of series B preferred stock, net

19,607 — — — 437 — — 437 — —

Contributions by owners of noncontrolling interests

— — — — — — 114 114 — —

Stock-based compensation costs

Redemption and retirement of shares

— — — — 4,167 — — 4,167 — —

Redemption and retirement of preferred shares

( 3,500 ) — — — ( 87 ) — — ( 87 ) — —

Redemption and retirement of common shares

— — ( 1,674,161 ) — ( 88,939 ) — — ( 88,939 ) — —

Net income (loss)

Balance at December 31, 2021

See accompanying notes.

Series B Preferred Stock

Temporary Equity

Shares Issued

Paid-In Capital

Retained Earnings (Deficit)

Noncontrolling Interests

Class B Preferred Units

Series A Preferred Stock

— — — — — 135,597 ( 985 ) 134,612 —

Balance at December 31, 2022

Cumulative effects from adoption of the CECL standard

3,204,640 $ — 14,453,415 $ — $ 121,996 $ 204,415 $ ( 1,371 ) $ 325,040 $ 40,000 $ 99,950

Accretion of discount associated with issuance of subsidiary equity

— — — — ( 300 ) — — ( 300 ) — 300

Discount associated with repurchase of preferred stock

Preferred dividends

— — — — 16 — — 16 — —

Preferred stock and preferred unit dividends

— — — — ( 24,914 ) — — ( 24,914 ) — —

Stock option exercises and proceeds related thereto

— — 576,758 — 3,405 — — 3,405 — —

Compensatory stock issuances, net of forfeitures

— — 148,546 — — — — — — —

Issuance of series B preferred stock, net

53,727 — — — 1,118 — — 1,118 — —

Contributions by owners of noncontrolling interests

— — — — — — 4 4 — —

Stock-based compensation costs

— — — — 3,783 — — 3,783 — —

Redemption and retirement of preferred shares

( 1,806 ) — — — ( 45 ) — — ( 45 ) — —

Redemption and retirement of common shares

— — ( 575,156 ) — ( 17,644 ) — — ( 17,644 ) — —

Net income (loss)

— — — — — 102,845 ( 891 ) 101,954 — —

Balance at December 31, 2023

3,256,561 $ — 14,603,563 $ — $ 87,415 $ 307,260 $ ( 2,258 ) $ 392,417 $ 40,000 $ 100,250

See accompanying notes.

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Operating activities

$ 101,954 $ 134,612

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and accretion, net

Provision for losses on loans, interest and fees receivable

Interest expense from accretion of discount on notes

Provision for credit losses

Deferred income tax expense

37,825 20,975

Income from accretion of merchant fees and discount associated with receivables purchases

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

Amortization of deferred loan costs

Income from equity-method investments

Loss on repurchase and redemption of convertible senior notes

( 146,880 ) ( 137,179 )

Changes in fair value of loans

689,577 577,069

Amortization of debt issuance costs

Stock-based compensation costs

Lease liability payments

Gain on sale of property

( 1,871 ) ( 4,053 )

Changes in assets and liabilities:

Increase in uncollected fees on earning assets

Increase in income tax liability

( 247,353 ) ( 252,704 )

Decrease in income tax liability

( 12,688 ) ( 10,563 )

Increase in accounts payable and accrued expenses

3,182 ( 155 )

Net cash provided by operating activities

459,317 347,630

Investing activities

Investments in equity-method investee

Proceeds from equity-method investee

Proceeds from recoveries on charged off receivables

51,578 32,361

Investments in earning assets

( 2,516,359 ) ( 2,546,127 )

Proceeds from earning assets

Sale of property

Purchases and development of property, net of disposals

1,796,570 1,836,333

Purchases and development of property

( 3,992 ) ( 4,852 )

Net cash used in investing activities

( 672,203 ) ( 682,285 )

Financing activities

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Proceeds from issuance of Series B preferred stock, net of issuance costs

Preferred dividends

Preferred stock and preferred unit dividends

( 24,910 ) ( 24,793 )

Proceeds from exercise of stock options

Purchase and retirement of outstanding stock

Proceeds from issuance of Senior notes, net of issuance costs

( 17,673 ) ( 89,008 )

Proceeds from borrowings

955,278 680,527

Repayment of borrowings

( 753,877 ) ( 309,753 )

Net cash provided by financing activities

163,345 261,255

Effect of exchange rate changes on cash

Net (decrease) increase in cash and cash equivalents and restricted cash

Net decrease in cash and cash equivalents and restricted cash

( 49,539 ) ( 73,436 )

Cash and cash equivalents and restricted cash at beginning of period

433,192 506,628

Cash and cash equivalents and restricted cash at end of period

$ 383,653 $ 433,192

Supplemental cash flow information

Cash paid for interest

$ 99,450 $ 75,357

Net cash income tax payments

Increase in accrued and unpaid preferred dividends

$ 1,467 $ 4,248

Accretion of discount associated with issuance of subsidiary equity

Increase in accrued and unpaid preferred stock and preferred unit dividends

See accompanying notes.

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Notes to Consolidated Financial Statements

December 31, 2022 and 2021

December 31, 2023 and 2022

Description of Our Business

Our accompanying consolidated financial statements include the accounts of Atlanticus Holdings Corporation (the “Company”) and those entities we control.

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.

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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 $30 billion in consumer loans over more than 25  years of operating history, to support lenders in offering more inclusive financial services.

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 $39 billion in consumer loans over more than 25 years of 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.

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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.

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.

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.

None of these companies are publicly-traded and the carrying value of our investment in these companies is not material.

None of these companies are publicly-traded and the carrying values of our investments in these companies are not material.

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.

1 unchanged sentence

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" ).

The COVID- 19 pandemic has negatively impacted global supply chains and business operations.

In addition, rising inflation in 2021 and 2022 resulted in increased costs for many goods and services.

As a result of persistently high inflation, interest rates have been on the rise and are expected to continue rising in the near term.

The combination of rising inoculation rates in the U.S.

population and the federal COVID- 19 relief package contributed to increased economic recovery in 2021;

however, fiscal support of businesses and individuals has declined.

Russia’s invasion of Ukraine has intensified supply chain disruptions and heightened uncertainty surrounding the near-term outlook for the broader economy.

The impacts of new COVID- 19 variants, responses to the COVID- 19 pandemic by both consumers and governments, rising energy costs, inflation, rising interest rates, and the unresolved geopolitical tensions relating to Russia’s invasion of Ukraine could significantly affect the economic outlook.

The duration and severity of the effects of COVID- 19 on our financial condition, results of operations and liquidity remain 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, have modified certain business practices, including offering consumers greater payment flexibility.

These and similar practices have also been adopted by certain of our third party service partners.

As a result of the declaration of a national emergency and the associated government policy responses to COVID- 19 and corresponding inflation, certain consumers were previously 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 encouraged financial institutions to work prudently with borrowers that were 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 were provided short-term payment deferrals and fee waivers.

Receivables enrolled in these short-term payment deferrals continued to accrue interest and their delinquency status was not changed through the deferment period.

The Biden administration ended the COVID- 19 national and public health emergencies on May 11, 2023.

This action ended the flexibility provided under the COVID- 19 Guidance.

The long-term impact that the cessation of certain benefits provided under emergency relief programs will have on our consumers is uncertain although the remaining financial statement impact for those customers previously provided the aforementioned short-term payment deferrals and fee waivers is not material.

Significant Accounting Policies and Consolidated Financial Statement Components

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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.

1 unchanged sentence

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.

Certain estimates, such as credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables, significantly affect the reported amount (and changes thereon) of our Loans at fair value on our consolidated balance sheets and consolidated statements of income.

We have eliminated all significant intercompany balances and transactions for financial reporting purposes.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

The Company’s policy is to consolidate the financial statements of entities in which it has a controlling financial interest.

The Company determines whether it has a controlling financial interest in an entity by evaluating whether the entity is a voting interest entity or variable interest entity ("VIE") and if the accounting guidance requires consolidation.

For more information on the Company's VIEs, see Note 8 "Variable Interest Entities".

Unrestricted Cash and Cash Equivalents

1 unchanged sentence

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.

We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amounts that exceed FDIC insured amounts of approximately $4.5 million based on our current banking relationships.  

Cash equivalents are carried at cost, which approximates fair value.

We maintain unrestricted cash and cash equivalents for general operating purposes.

We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amounts that exceed FDIC insured amounts.

All cash balances are maintained at well capitalized institutions.

Restricted Cash

Restricted cash as of December 31, 2022  and 

2021 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.

Restricted cash 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 receivables, against our Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value, when they become contractually more than 180 days past due. 

We charge off our Auto Finance segment receivables, against our Allowance for uncollectible loans, interest and fees receivable, 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.

We maintain two categories of Loans on our consolidated balance sheets:

those that are carried at fair value (Loans at fair value) and those that are carried at net amortized cost (Loans at amortized cost).

For our Loans at fair value (within our CaaS segment), interest and fees are discontinued when the receivable becomes contractually 90 or more days past due.

For our Loans at amortized cost (within our Auto Finance segment), we continue interest and fee billings until the time of chargeoff if there is adequate value associated with the underlying asset serving as collateral for the receivable.

Once a loan discontinues accruing interest and fees it is ineligible to return to accrual status.

We charge off receivables underlying our Loans at fair value, against our Changes in fair value of loans, when they become contractually more than 180 days past due, or 120 days past due if they are enrolled in an installment loan product.

We charge off our Loans at amortized cost receivables, against our Allowances for credit losses, 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.

We adopted Accounting Standards Update ("ASU") 2016 - 13, Measurement of Credit Losses on Financial Instruments on January 1, 2022.

This ASU requires the use of an impairment model (the current expected credit loss (“CECL”) model) that is based on expected rather than incurred losses.

This ASU requires the use of an impairment model (the current expected credit loss ("CECL") model) that is based on expected rather than incurred losses.

The ASU also allows for a one -time fair value election for receivables.

Upon adoption, we elected the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost and recorded an increase to our Allowances for uncollectible loans, interest and fees receivable for our remaining Loans, interest and fees receivable associated with our Auto Finance segment.

Upon adoption, we elected the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost and recorded an increase to our Allowances for credit losses for our remaining Loans at amortized cost associated with our Auto Finance segment.

The adoption of CECL resulted in an increase to our opening balance of retained earnings of $ 8.6 million.

Loans, Interest and Fees Receivable, at Fair Value.

Loans, interest and fees receivable held at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables").

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 at fair value.

Loans at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables").

The Fair Value Receivables are held by entities that qualify as VIEs, 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.

1 unchanged sentence

Under the fair value option, 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 estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables.

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 our Auto Finance segment’s operations.

Prior to January 1, 2022 this category of receivable also included a portion (those which were not part of our Fair Value Receivables) of our private label credit and general purpose credit card receivables within our CaaS segment.

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.

Changes in the fair value of loans are recorded as a component of "Changes in fair value of loans" in the consolidated statements of income in the period of the fair value changes.

Changes in the fair value of loans include the impact of current period charge-offs associated with these receivables.

Further details concerning our loans at fair value are presented within Note 6, "Fair Values of Assets and Liabilities."

Loans at amortized cost.

Our loans at amortized cost, currently consist of receivables associated with our Auto Finance segment’s operations.

We purchased auto loans with outstanding principal of $ 233.6 million and $ 214.7 million for the years ended December 31, 2023 and 2022, 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.

Upon adoption of CECL, the allowance is an estimate of the expected losses (rather than incurred 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.

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 credit losses.

Each portfolio 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.

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.

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 nonperformance 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 (including those receivables associated with our private label credit and general purpose credit card receivables prior to their adoption of fair value accounting) also contain components of deferred revenue including merchant fees on the purchases of receivables for our private label credit receivables, loan discounts on the purchase of our auto finance receivables and annual fee billings for our general purpose credit card receivables.

Our private label credit, general purpose credit card 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, annual fees and loan discounts.

As of December 31, 2022 and December 31, 2021, the weighted average remaining accretion period for the $ 16.2  million and $ 29.3 million of deferred revenue reflected in the consolidated balance sheets was 27 months and 15 months, respectively.

Included within deferred revenue, are discounts on purchased auto loans of $ 16.2  million as of December 31, 2022 and merchant fees and discounts of $ 20.4 million as of December 31, 2021.

As a result of the COVID- 19 pandemic and subsequent declaration of a national emergency in March 2020 under the National Emergencies Act and the associated government policy responses and corresponding inflation, 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, 2022 we continued to actively work with consumers that indicated hardship as a result of COVID- 19 and inflation pressure;

however, the number of impacted consumers is a small 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, 2022

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Balance at beginning of period

$ ( 43.4 )  

$ ( 1.4 )  

$ ( 12.4 )  

Cumulative effects from adoption of fair value under the CECL standard

Cumulative effects from adoption of the CECL standard

( 0.2 )  

Provision for credit losses

( 1.3 )  

Balance at end of period

$ ( 1.6 )  

As of December 31, 2022

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Balance at end of period individually evaluated for impairment

Balance at end of period collectively evaluated for impairment

$ ( 1.6 )  

Loans, interest and fees receivable:

Loans, interest and fees receivable, gross

$ 105.3  

Loans, interest and fees receivable individually evaluated for impairment

Loans, interest and fees receivable collectively evaluated for impairment

$ 105.3  

We show an allowances for credit losses for our loans at amortized cost.

A considerable amount of judgment is required to assess the ultimate amount of expected losses on loans at amortized cost, and we regularly evaluate and update our methodologies to determine the most appropriate allowance necessary.

Our loans at amortized cost consist of smaller-balance, homogeneous loans in our Auto Finance segment.

These loans are further divided into pools based on common characteristics such as contract or acquisition channel.

For each pool, we determine the necessary allowances for credit losses using reasonable and supportable forecasts that analyze some or all of the following attributes unique to each type of receivable pool:

historical loss rates on similar loans; current delinquency and roll-rate trends which may indicate consumer loss rates in excess or less than those which historical trends might suggest; vintage analyses based on the number of months an account has been in existence; the effects of changes in the economy on consumers such as inflation or other macroeconomic changes; changes in underwriting criteria; unfunded commitments (to the extent they are unconditional), and estimated recoveries.

The aforementioned inputs are calculated using historical trends over the most recent five year period, and adjusted as needed for current trends and reasonable and supportable forecasts.

We may individually evaluate a receivable or pool of receivables for credit losses 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 at amortized cost also contain components of deferred revenue related to loan discounts on the purchase of our auto finance receivables.

As of December 31, 2023 and December 31, 2022, the weighted average remaining accretion period for the $ 17.9 million and $ 16.2 million of deferred revenue reflected in the consolidated balance sheets was 26 and 27 months, respectively.

A roll-forward (in millions) of our allowances for credit losses by class of receivable is as follows:

For the Year Ended December 31, 2023

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Allowances for credit losses:

Balance at beginning of period

$ ( 88.2 )  

$ ( 1.7 )  

$ ( 35.1 )  

Provision for credit losses

( 34.9 )  

( 0.2 )  

( 1.4 )  

( 8.9 )  

( 1.0 )  

( 7.0 )  

Balance at end of period

$ ( 43.4 )  

$ ( 1.4 )  

$ ( 12.4 )  

As of December 31, 2021

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Balance at end of period individually evaluated for impairment

$ ( 0.1 )  

Balance at end of period collectively evaluated for impairment

$ ( 43.4 )  

$ ( 1.3 )  

$ ( 12.4 )  

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

Loans, interest and fees receivable collectively evaluated for impairment

$ 259.5  

$ 94.2  

$ 116.2  

$ 469.9  

For the Year Ended December 31, 2022

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Allowances for credit losses:

Balance at beginning of period

$ ( 121.3 )  

$ ( 1.6 )  

$ ( 63.4 )  

$ ( 43.4 ) $ ( 1.4 ) $ ( 12.4 ) $ ( 57.2 )

Cumulative effects from adoption of fair value under the CECL standard

43.4 — 12.4 55.8

Cumulative effects from adoption of the CECL standard

— ( 0.2 ) ( 0.2 )

Provision for credit losses

( 112.1 )  

( 2.0 )  

( 28.6 )  

( 9.9 )  

( 1.1 )  

( 15.2 )  

— ( 1.3 ) — ( 1.3 )

Balance at end of period

$ ( 88.2 )  

$ ( 1.7 )  

$ ( 35.1 )  

As of December 31, 2020

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Balance at end of period individually evaluated for impairment

$ ( 0.3 )  

Balance at end of period collectively evaluated for impairment

$ ( 88.2 )  

$ ( 1.4 )  

$ ( 35.1 )  

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

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. 

Recoveries, noted above, consist of amounts received from the efforts of third -party collectors 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 amortized cost on our consolidated statements of income.

For the year ended December 31, 2022, $ 1.3 million of our recoveries noted above related to collections from third -party collectors and $ 0.0 million related to sales of charged-off accounts to unrelated third parties.

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.

$ — $ ( 1.6 ) $ — $ ( 1.6 )

Delinquent loans at amortized cost 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 allowances for credit losses.

Recoveries, noted above, consist of amounts received from the efforts of third -party collectors.

All proceeds received, associated with charged-off accounts, are credited to the allowances for credit losses.

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 is as follows:

As of December 31, 2022

Other Unsecured Lending Products

30-59 days past due

60-89 days past due

90 or more days past due

Delinquent loans, interest and fees receivable, gross

Current loans, interest and fees receivable, gross

Total loans, interest and fees receivable, gross

$ 105.3  

Balance of loans greater than 90-days delinquent still accruing interest and fees

An aging of our delinquent loans at amortized cost (in millions) as of December 31, 2023 and December 31, 2022 is as follows:

As of December 31, 2023

Other Unsecured Lending Products

30-59 days past due

$ 17.6  

60-89 days past due

90 or more days past due

Delinquent loans, interest and fees receivable, gross

Current loans, interest and fees receivable, gross

Total loans, interest and fees receivable, gross

$ 259.5  

$ 94.6  

$ 116.2  

$ 470.3  

Delinquent loans at amortized cost

Current loans at amortized cost

Total loans at amortized cost

Balance of loans greater than 90-days delinquent still accruing interest and fees

As of December 31, 2022

Other Unsecured Lending Products

30-59 days past due

$ 12.4  

$ 25.1  

60-89 days past due

90 or more days past due

Delinquent loans, interest and fees receivable, gross

Current loans, interest and fees receivable, gross

Total loans, interest and fees receivable, gross

$ 364.2  

$ 93.2  

$ 210.2  

$ 667.6  

Delinquent loans at amortized cost

Current loans at amortized cost

Total loans at amortized cost

Balance of loans greater than 90-days delinquent still accruing interest and fees

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 

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 we serve demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, the customer’s account is re-aged.

When an account is re-aged, the status of the account is adjusted to bring a delinquent account current, but generally 

no  further modifications to the payment terms or amounts owed are made.

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 Financial Accounting Standards Board (“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 whose accounts were less than 

30  days past due as of the implementation date of a relief program are 

not  TDRs.

Although we are 

not  a financial institution and therefore 

not  directly subject to the COVID- 19  Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances.

As a result, the below tables exclude certain accounts that are included under that guidance.

The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged:

December 31, 2022

December 31, 2021

December 31, 2020

Private label credit

General purpose credit card

Private label credit

General purpose credit card

Private label credit

General purpose credit card

Number of TDRs

24,594  

171,729  

14,919  

39,322  

12,394  

37,784  

Number of TDRs that have been re-aged

28,598  

Amount of TDRs on non-accrual status (in thousands)

$ 31,350  

$ 119,785  

$ 17,152  

$ 25,154  

$ 14,537  

$ 26,989  

Amount of TDRs on non-accrual status above that have been re-aged (in thousands)

$ 4,606  

$ 24,440  

$ 1,205  

$ 1,553  

$ 4,662  

$ 6,890  

Carrying value of TDRs (in thousands)

$ 18,827  

$ 70,519  

$ 11,173  

$ 15,502  

$ 9,583  

$ 14,287  

TDRs - Performing (carrying value, in thousands)*

$ 15,001  

$ 59,735  

$ 8,797  

$ 13,387  

$ 7,420  

$ 11,855  

TDRs - Nonperforming (carrying value, in thousands)*

$ 3,826  

$ 10,784  

$ 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.

not  separately reserve or impair these receivables outside of our general reserve process.

The Company modified 

232,086 , 

65,125 and 60,908 accounts in the amount of $ 230.4 million, $ 70.0 million and $ 70.3 million during the 

twelve  month periods ended 

December 31, 2022, 2021 and 2020, respectively, that qualified as TDRs.

The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the prior 

twelve  months and subsequently defaulted.

Twelve Months Ended

December 31, 2022

December 31, 2021

December 31, 2020

Private label credit

General purpose credit card

Private label credit

General purpose credit card

Private label credit

General purpose credit card

Number of accounts

28,714  

Loan balance at time of charge off (in thousands)

$ 11,302  

$ 22,679  

$ 4,642  

$ 6,455  

$ 4,352  

$ 6,745  

Loan Modifications and Restructurings

We adopted Accounting Standards Update ("ASU") No.

2022 - 02, Financial Instruments - Credit Losses (Topic 326 ):

Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023.

The disclosures required by this ASU are required for receivables held at amortized cost and exclude those accounted for using fair value.

As the significant majority of the Company's receivables are held at fair value, the adoption of this ASU did not have a material impact on the Company's financial results and accompanying disclosures.

We review our Loans at amortized cost to determine if any modifications for borrowers experiencing financial difficulty were made that would qualify the receivable as a Financial Difficulty Modification ("FDM").

This could include a restructuring of the loan terms to alleviate the burden of the borrower's near-term cash requirements, such as a modification of terms to reduce or defer cash payments to help the borrower attempt to improve its financial condition.

For the years ended December 31, 2023, no Loans at amortized cost qualified as a FDM.

Prior to the adoption of ASU 2022 - 02, we reviewed our Loans at amortized cost to determine if any modifications for borrowers experiencing financial difficulty were made that would qualify the receivable as a troubled debt restructuring ("TDR").

For the years ended December 31, 2022, no Loans at amortized cost qualified as a TDR.

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.

We capitalize costs related to internal development and implementation of software used in our operating activities.

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.

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We periodically review our property to determine if it is impaired.

We incurred no impairment costs in 2022 and no  impairment costs in 2021 .

We incurred no impairment costs in the years ended December 31, 2023 and 2022 .

We determine if an arrangement contains a lease at inception, and leases are classified as either operating or finance leases at the lease commencement date.

An arrangement contains a lease if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in exchange for consideration.

Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term.

When readily determinable, we use the implicit rate within the lease.

As most of our leases do not provide an implicit interest rate, we generally use our incremental borrowing rate.

The incremental borrowing rate is based on the estimated rate of interest for fully collateralized and fully amortizing borrowings over a similar term as the lease payments at commencement date.

The incremental borrowing rate is used to determine the present value of lease payments.

Our expected lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.

Expenses associated with operating leases are recorded in Other expenses on our Consolidated Statements of Income.

Short-term leases with a term of 12 months or less are not capitalized.

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.

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. 

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.

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.

Discounts received associated with 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.

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Fees and Related Income on Earning Assets

Fees and related income on earning assets primarily include fees associated with credit products, including the receivables underlying the private label and general purpose credit cards we service, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others.

Fees are assessed on credit card accounts underlying our credit card receivables according to the terms of the related cardholder agreements and we recognize these fees as income when they are charged to the customers’

Fees and related income on earning assets primarily include fees associated with credit products such as annual fee billings and cash advance fees, among others.

These fees are assessed on the receivables underlying the private label and general purpose credit cards we service.

Fees are assessed on private label and general purpose credit card accounts underlying our credit card receivables according to the terms of the related agreements and we recognize these fees as income when 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 resulted in increased fees recognized on credit products throughout the periods presented.

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 issuing bank partner). We recognize these fees as income in the period earned.

Other revenue

We recognize these fees as income in the period earned.

Other non-operating revenue

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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".

The majority of our revenue is earned from financial instruments and is not included within the scope of Accounting Standards Codification ("ASC") 606, "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.

Interchange fees are earned when our customers’ cards are used over established card networks.

We earn a portion of the interchange fee the card networks charge merchants for the transaction and these fees are settled daily.

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, which can be settled daily or monthly.

Service charges and other customer related fees are earned from customers based on the occurrence of specific services and are paid by customers per the terms of their credit agreement.

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.

Revenue from these contracts with customers comprises Other revenue on our consolidated statements of income.

Components (in thousands) of our revenue from contracts with customers is as follows:

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Interchange revenues, net (1)

$ 24,926  

Servicing income

Service charges and other customer related fees

13,658  

13,725  

Total revenue from contracts with customers

$ 41,843  

$ 42,798  

1 ) Interchange revenue is presented net of customer reward expense.

For the Year Ended December 31, 2021

Interchange revenues, net (1)

$ 18,134  

$ 21,453 $ — $ 21,453

Servicing income

3,340 749 4,089

Service charges and other customer related fees

11,731 75 11,806

Total revenue from contracts with customers

$ 29,322  

$ 1,284  

$ 30,606  

$ 36,524 $ 824 $ 37,348

( 1 ) Interchange revenue is presented net of customer reward expense.

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Interchange revenues, net (1)

$ 9,500  

$ 24,926 $ — $ 24,926

Servicing income

3,259 888 4,147

Service charges and other customer related fees

13,658 67 13,725

Total revenue from contracts with customers

$ 14,372  

$ 1,059  

$ 15,431  

$ 41,843 $ 955 $ 42,798

( 1 ) Interchange revenue is presented net of customer reward expense.

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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 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.

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.

Recent Accounting Pronouncements

June 2016, the FASB issued Accounting Standards Update ("ASU") 2016 - 13, Measurement of Credit Losses on Financial Instruments.

In June 2016, the FASB issued 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).

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We elected the fair value option for all receivables in our CaaS segment previously measured at amortized cost.

For all other receivables, we recorded an increase to our Allowances for uncollectible loans, interest and fees receivable using the current expected credit loss model.

As a result of our adoption, we increased our Loans, interest and fees receivable (net of the related revaluation), at fair value by $ 315.0 million (with a corresponding decrease to Loans, interest and fees receivable, gross of $ 375.7 million), a decrease to our Allowances for uncollectible loans, interest and fees receivable of $ 55.6 million, a decrease to our Deferred revenue of $ 15.6 million, a decrease to Accounts payable and accrued expenses of $ 600 thousand, an increase to our deferred tax liability of $ 2.5 million, and an increase to our retained earnings of $ 8.6 million.

For all other receivables, we recorded an increase to our Allowances for credit losses using the current expected credit loss model.

As a result of our adoption, we increased our Loans at fair value (net of the related revaluation) by $ 315.0 million (with a corresponding decrease to Loans at amortized cost of $ 375.7 million), a decrease to our Allowances for credit losses of $ 55.6 million, a decrease to our Deferred revenue of $ 15.6 million, a decrease to Accounts payable and accrued expenses of $ 600 thousand, an increase to our deferred tax liability of $ 2.5 million, and an increase to our retained earnings of $ 8.6 million.

The aforementioned impacts associated with our adoption of ASU 2016 - 13 primarily relate to those assets within our CaaS segment with an immaterial impact to our Auto Finance segment receivables.

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The guidance provides an optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The ASU can be adopted no later than December 1, 2022, with early adoption permitted.

In January 2021, FASB issued ASU 2021 - 01, Reference Rate Reform (Topic 848 ):

Scope, which refines the scope of ASC 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate reform.

We have not yet adopted this ASU and are evaluating the effect of adopting this new accounting guidance.

Based on our preliminary analysis, the London Interbank Offered Rate ("LIBOR") impacts us in limited circumstances primarily related to our existing debt agreements and will not have a material impact upon adoption. 

In January 2021, the 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.

In December 2022, the FASB issued ASU 2022 - 06, "Reference Rate Reform (Topic 848 ):

Deferral of the Sunset Date of Topic 848", to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024.

These ASUs are effective for all entities upon their respective issuance dates through December 31, 2024.

We have reviewed all outstanding financial agreements, noting none utilize London Interbank Offered Rate ("LIBOR") as the reference rate and, as such, determined there is no impact to our consolidated financial statements.

On March 31, 2022, the FASB issued ASU 2022 - 02, Financial Instruments - Credit Losses (Topic 326 ):

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This guidance requires an entity to determine whether a modification results in a new loan or a continuation of an existing loan.

Additionally, the ASU requires disclosure of current period gross writeoffs by year of origination for financing receivables.

The ASU is effective for the Company for fiscal years beginning after December 15, 2022.

The disclosures required by this ASU are required for receivables held at amortized cost. 

As the significant majority of the Company's receivables are held at fair value, the Company does not believe the adoption of this ASU will have a material impact on its financial results or accompanying disclosures.

Additionally, the ASU requires disclosure of current period gross write-offs by year of origination for financing receivables.

The disclosures required by this ASU are required for receivables held at amortized cost and exclude those accounted for using fair value.

The Company adopted this ASU on January 1, 2023.

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, 2022 and December 31, 2021 , we did not have a material amount of long-lived assets located 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.

Our two reportable segments are:

CaaS and Auto Finance.

We have no material amounts of long lived assets located 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.

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Consumer loans, including past due fees

Fees and related income on earning assets

Other revenue

Other non-operating revenue

Total revenue

Interest expense

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

Income before income taxes

Income tax expense

Year Ended December 31, 2021

Consumer loans, including past due fees

$ 839,995 $ 39,128 $ 879,123

Fees and related income on earning assets

238,691 84 238,775

Other revenue

36,524 824 37,348

Total operating revenue, net

1,115,210 40,036 1,155,246

Other non-operating revenue

Total revenue

1,115,632 40,244 1,155,876

Interest expense

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

( 105,990 ) ( 3,352 ) ( 109,342 )

Provision for credit losses

— ( 2,152 ) ( 2,152 )

Changes in fair value of loans

( 689,577 ) — ( 689,577 )

$ 320,065 $ 34,740 $ 354,805

Income before income taxes

$ 116,522 $ 12,036 $ 128,558

Income tax expense

$ ( 23,709 ) $ ( 2,895 ) $ ( 26,604 )

$ 2,602,615 $ 103,830 $ 2,706,445

Year Ended December 31, 2022

Consumer loans, including past due fees

$ 751,052 $ 35,183 $ 786,235

Fees and related income on earning assets

216,989 82 217,071

Other revenue

41,843 955 42,798

Total operating revenue, net

1,009,884 36,220 1,046,104

Other non-operating revenue

Total revenue

1,010,582 36,331 1,046,913

Interest expense

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

( 79,875 ) ( 1,976 ) ( 81,851 )

Provision for credit losses

— ( 1,252 ) ( 1,252 )

Changes in fair value of loans

( 577,069 ) — ( 577,069 )

$ 353,638 $ 33,103 $ 386,741

Income before income taxes

$ 146,577 $ 2,695 $ 149,272

Income tax expense

Shareholders’

Equity and Preferred Stock

During the years ended December 31, 2022, 2021 and 2020, we repurchased and contemporaneously retired 1,674,161 shares, 

434,381 shares and 245,534 shares of our common stock at an aggregate cost of $ 88,939,000 , $ 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.

During 2021,  we had 

1,459,233  loaned shares of common stock outstanding, which were originally lent in connection with our 

November 2005 

issuance of convertible senior notes.

December 31, 2021 ,  all loaned shares had been returned to us and subsequently retired.

In June and July 2021, we issued an aggregate of 3,188,533 shares of 7.625 % Series B Cumulative Perpetual Preferred Stock, liquidation preference of $ 25.00 per share (the “Series B Preferred Stock”), for net proceeds of approximately $ 76.5 million after deducting underwriting discounts and commissions, but before deducting expenses and the structuring fee.

$ ( 14,122 ) $ ( 538 ) $ ( 14,660 )

$ 2,295,092 $ 92,722 $ 2,387,814

Shareholders’ Equity and Preferred Stock

During the years ended December 31, 2023 and 2022, we repurchased and contemporaneously retired 575,156 shares and 1,674,161 shares of our common stock at an aggregate cost of $ 17.6 million and $ 88.9 million, 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.

Preferred Stock

In June and July 2021, we issued an aggregate of 3,188,533 shares of 7.625 % Series B Cumulative Perpetual Preferred Stock (the "Series B Preferred Stock"), liquidation preference of $ 25.00 per share (the "Series B Preferred Stock"), for net proceeds of approximately $ 76.5 million after deducting underwriting discounts and commissions, but before deducting expenses and the structuring fee.

We pay cumulative cash dividends on the Series B Preferred Stock, when and as declared by our Board of Directors, in the amount of $ 1.90625 per share each year, which is equivalent to 7.625% of the $25.00 liquidation preference per share.

During the year ending December 31, 

2022, we sold 19,607 shares of our Series B Preferred Stock under our “at-the-market”

offering program (the “ATM Program”) for net proceeds of $ 0.4  million.

During the year ended December 31, 2022, we repurchased and contemporaneously retired 3,500 shares of Series B Preferred Stock at an aggregate cost of $ 69,000 .

For further information regarding the ATM Program, see Note 15  “ATM Program.”

During the years ended December 31, 2023 and 2022, we repurchased and contemporaneously retired 1,806 shares and 3,500 shares of Series B Preferred Stock at an aggregate cost of $ 29,000 and $ 69,000 , respectively.

On August 10, 2022, the Company entered into an At Market Issuance Sales Agreement (the "Preferred Stock Sales Agreement") providing for the sale by the Company of up to an aggregate offering price of $ 100.0 million of our (i) Series B Preferred Stock and (ii) senior notes, from time to time through a sales agent, in connection with the Company's "at-the-market" offering program (the "Preferred Stock ATM Program").

Further, on December 29, 2023, the Company entered into an At-The-Market Sales Agreement (the "Common Stock Sales Agreement") providing for the sale by the Company of its common stock, no par value per share, up to an aggregate offering price of $ 50.0 million, from time to time to or through a sales agent, in connection with the Company’s Common Stock ATM Program ("Common Stock ATM Program").

Sales pursuant to both the Preferred Stock Sales Agreement and Common Stock Sales Agreement, if any, may be made in transactions that are deemed to be "at-the-market offerings" as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the NASDAQ Global Select Market.

The sales agents will make all sales using commercially reasonable efforts consistent with their normal trading and sales practices up to the amount specified in, and otherwise in accordance with the terms of, the placement notices.

During the years ended December 31, 2023 and 2022, we sold 53,727 shares and 19,607 shares, respectively of our Series B Preferred Stock under our Preferred Stock ATM Program for net proceeds of $ 1.1 million and $ 0.4 million, respectively.

During the year ended December 31, 2023, no common shares were sold under the Company’s Common Stock ATM Program.

Redeemable 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”).

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, noncompounding) and are payable as declared, and in preference to any common stock dividends, in cash.

Dividends on the preferred stock are 6 % per annum (cumulative, non-compounding) and are payable as declared, and in preference to any dividends on common stock and Series B Preferred Stock, in cash.

The Series A Preferred Stock is perpetual and has no maturity date.

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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 13, “Net Income Attributable to Controlling Interests Per Common Share”

for more information.

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 13, "Net Income Attributable to Controlling Interests Per Common Share" for more information.

Dove is a limited liability company owned by three trusts.

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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.

A holder of the Class B Preferred Units may, at its election, require the Company to redeem part or all of such holder’s Class B Preferred Units for cash on October 14, 2024.

In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms.

A holder of the Class B Preferred Units may, at its election, require the Company to redeem part or all of such holder’s Class B Preferred Units for cash at $1.00 per unit, on or after October 14, 2024.

The proceeds from the transaction are being used for general corporate purposes.

The Company has the right to redeem the Class B Preferred Units at any time with notice.

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 13, “Net Income Attributable to Controlling Interests Per Common Share”

for more information.

See Note 13, "Net Income Attributable to Controlling Interests Per Common Share" for more information.

Fair Values of Assets and Liabilities

As previously discussed, we adopted ASU 2016 - 13, electing the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost.

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 macroeconomic events.

With the aforementioned market impacts of COVID- 19 and related economic impacts, we continue to include market degradation in our models to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that historical and current trends would suggest.

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, discount rates, 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 is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

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" in the consolidated statements of income.

Changes in interest rates, credit spreads, discount rates, realized and projected credit losses and cash flow timing will lead to changes in the fair value of loans 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 credit 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;

Receivables 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 credit loss calculation;

Certain fee billings (such as annual or merchant fees) and expenses of loans are no longer deferred but recognized (when billed or incurred) in income or expense, respectively;

The net present value of cash flows associated with future fee billings on existing receivables are included in fair value;

Changes in the fair value of loans and notes impact net margins;

Net charge-offs are recognized as they occur rather than through the establishment of an allowance and provision for losses for those loans, interest and fees receivable carried at amortized cost.

For all of our other receivables, we have not elected the fair value option.

Nevertheless, pursuant to applicable requirements, we include disclosures of the fair value of these other receivables 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.

Changes in the fair value of loans impact net margins; and

Net charge-offs are recognized as they occur rather than through the establishment of an allowance and provision for credit losses for those loans, interest and fees receivable carried at amortized cost.

For receivables that are carried at net amortized cost, we include disclosures of the fair value of such receivables to the extent practicable within the disclosures below.

Where applicable, 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.

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The table below summarizes (in thousands) by fair value hierarchy the December 31, 2023 and December 31, 2022 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, 2022 (1)

Assets – As of December 31, 2023 (1)

Quoted Prices in Active Markets for Identical Assets (Level 1)

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Carrying Amount of Assets

Loans, interest and fees receivable, net for which it is practicable to estimate fair value and which are carried at net amortized cost

Loans, interest and fees receivable, at fair value

Assets –

As of December 31, 2021 (1)

Loans at amortized cost for which it is practicable to estimate fair value and which are carried at net amortized cost

$ — $ — $ 105,409 $ 98,425

Loans at fair value

$ — $ — $ 2,173,759 $ 2,173,759

For cash, deposits and investments in equity securities, the carrying amount is a reasonable estimate of fair value.

Assets – As of December 31, 2022 (1)

Quoted Prices in Active Markets for Identical Assets (Level 1)

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Carrying Amount of Assets

Loans, interest and fees receivable, net for which it is practicable to estimate fair value and which are carried at net amortized cost

Loans, interest and fees receivable, at fair value

Loans at amortized cost for which it is practicable to estimate fair value and which are carried at net amortized cost

$ — $ — $ 94,968 $ 87,434

Loans at fair value

$ — $ — $ 1,817,976 $ 1,817,976

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 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".

For our loans, interest and fees receivable included in the above table, 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.

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, 2023 and 2022:

Loans, Interest and Fees Receivables, at Fair Value

Loans at Fair Value

Balance at January 1,

$ 1,817,976 $ 1,026,424

Cumulative effects from adoption of fair value under the CECL standard

Net revaluations of loans, interest and fees receivable, at fair value, included in earnings

Principal charge-offs, net of recoveries, included in earnings

Finance and fees, included in earnings

Finance charge-offs, included in earnings

Changes in fair value of loans at fair value, included in earnings

71,024 ( 32,574 )

Changes in fair value due to principal charge-offs, net of recoveries

( 538,146 ) ( 367,213 )

Changes in fair value due to finance and fee charge-offs

( 222,455 ) ( 177,282 )

2,427,095 2,466,676

Finance and fees, added to the account balance

970,006 874,749

( 2,351,741 ) ( 2,287,789 )

Balance at December 31,

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 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, 2022, 2021 and 2020.

As discussed above, our fair value models include market degradation to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that historical and current trends would suggest.

This market degradation is included in the below quantitative information: 

Quantitative Information about Level 3 Fair Value Measurement

Fair Value Measurement

Fair Value at December 31, 2022 (in thousands)

Valuation Technique

Unobservable Input

Range (Weighted Average)

Loans, interest and fees receivable, at fair value

Discounted cash flows

Gross yield, net of finance charge charge-offs

24.7% to 36.1% (31.6%)

5.0% to 11.4% (10.3%)

Expected principal credit loss rate

9.2% to 30.3% (30.2%)

Servicing rate

3.5% to 6.4% (3.6%)

Discount rate

9.8% to 10.5% (10.1%)

$ 2,173,759 $ 1,817,976

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.

Loans at Fair Value.

The fair value of loans at fair value is based on the present value of future cash flows using a valuation model of expected cash flows and the estimated cost to service and collect those cash flows.

We estimate the present value of these future cash flows using internally-developed estimates of assumptions third -party market participants would use in determining fair value, including estimates of credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables.

For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents quantitative information about the valuation techniques and the inputs used in the fair value measurement as of December 31, 2023 and December 31, 2022.

Our fair value models include market degradation to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that historical and current trends would suggest.

This market degradation is included in the below quantitative information:

Quantitative Information about Level 3 Fair Value Measurement

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Range (Weighted Average)(1)

Loans, interest and fees receivable, at fair value

Loans at fair value

$ 2,173,759 Discounted cash flows

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7.1% to 13.1% (10.0%)

Quantitative Information about Level 3 Fair Value Measurement

Fair Value Measurement

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Range (Weighted Average)(1)

Loans, interest and fees receivable, at fair value

Loans at fair value

$ 1,817,976 Discounted cash flows

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5.6% to 15.0% (10.1%)

Weighted average rates are calculated using the quotient of the gross outstanding balance of receivables at period end for each pool of receivables and the entire pool of receivables multiplied by the applicable rate for each pool of receivables

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, 2022 and 2021 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, 2022

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, 2023 and 2022 fair values and carrying amounts of our liabilities not carried at fair value, but for which fair value disclosures are required:

Liabilities – As of December 31, 2023

Quoted Prices in Active Markets for Identical Assets (Level 1)

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Revolving credit facilities

$ — $ — $ 1,838,647 $ 1,838,647

Amortizing debt facilities

$ — $ — $ 23,038 $ 23,038

Senior notes, net

Liabilities –

As of December 31, 2021

$ 138,229 $ — $ — $ 144,453

Liabilities – As of December 31, 2022

Quoted Prices in Active Markets for Identical Assets (Level 1)

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Revolving credit facilities

$ — $ — $ 1,630,111 $ 1,630,111

Amortizing debt facilities

$ — $ — $ 23,195 $ 23,195

Senior notes, net

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".

$ 125,640 $ — $ — $ 144,385

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.

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 year ended December 31, 2021 ( no amounts were outstanding as of December 31, 2022):

Notes Payable Associated with Structured Financings, at Fair Value

Balance at January 1,

Net revaluations of notes payable associated with structured financings, at fair value, included in earnings

Repayments on outstanding notes payable, net

Balance at December 31,

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 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.

See Note 10, "Notes Payable," for further discussion on our other notes payable.

Other Relevant Data

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As of December 31, 2023

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

Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value

Aggregate fair value of loans, interest and fees receivable that are reported at fair value

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)

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

Loans at Fair Value

Loans at Fair Value Pledged as Collateral under Structured Financings

Aggregate unpaid gross balance of loans at fair value

$ 507 $ 2,410,748

Aggregate unpaid principal balance included within loans at fair value

$ 491 $ 2,176,845

Aggregate fair value of loans at fair value

$ 508 $ 2,173,251

Aggregate fair value of loans at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)

Unpaid principal balance of loans 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

$ 9 $ 147,803

As of December 31, 2022

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

Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value

Aggregate fair value of loans, interest and fees receivable that are reported at fair value

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)

Details (in thousands) of our property on our consolidated balance sheets are as follows: 

Loans at Fair Value

Loans at Fair Value Pledged as Collateral under Structured Financings

Aggregate unpaid gross balance of loans at fair value

$ 786 $ 2,119,340

Aggregate unpaid principal balance included within loans at fair value

$ 760 $ 1,910,090

Aggregate fair value of loans at fair value

$ 765 $ 1,817,211

Aggregate fair value of loans at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)

$ 4 $ 144,767

Details (in thousands) of our property on our consolidated balance sheets are as follows:

As of December 31,

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Leasehold improvements

18,368 14,571

Less accumulated depreciation

( 6,923 ) ( 4,558 )

Property, net

Depreciation expense totaled $ 2.2 million and $ 1.5  million for the years ended December 31, 2022  and 2021 , respectively.

$ 11,445 $ 10,013

Depreciation expense totaled $ 2.6 million and $ 2.2 million for the years ended December 31, 2023 and 2022 , respectively.

Variable Interest Entities

The Company contributes the vast majority of receivables to VIEs.

The Company contributes the vast majority of receivables to VIEs.

These entities are sometimes established to facilitate third party financing.

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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 we retain significant exposure to certain receivables and therefore, are the primary beneficiary.

Through our role as servicer, 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 all of our VIEs, we continue to service the receivables (in accordance with defined servicing procedures), and as such, have the ability to significantly impact the economic performance of those VIEs.

In certain circumstances we guarantee the performance of the underlying debt or agree to contribute additional collateral when necessary.

We consolidate VIEs when we hold a variable interest and we have exposure to loss that has the potential to be significant and therefore, are the primary beneficiary.

Through our role as servicer, we have the power to direct activities to service the receivables (in accordance with defined servicing procedures), and as such, have the ability to significantly impact the economic performance of those VIEs.

In certain circumstances we guarantee the performance of the underlying debt or agree to contribute additional collateral when necessary, which results in retention of exposure to loss that has the potential to be significant.

As a result, the Company is the primary beneficiary and consolidates the VIEs.

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.

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Unrestricted cash and cash equivalents

$ 158.0 $ 202.2

Restricted cash and cash equivalents

Loans, interest and fees receivable, at fair value

Loans, interest and fees receivable, gross

Allowances for uncollectible loans, interest and fees receivable

Deferred revenue

Loans at fair value

2,128.6 1,735.9

Total Assets held by VIEs

$ 2,307.1 $ 1,965.7

Notes Payable, net held by VIEs

$ 1,795.9 $ 1,586.0

Maximum exposure to loss due to involvement with VIEs

$ 2,099.0 $ 1,756.0

We have operating leases primarily associated with our corporate offices and regional service centers as well as for certain equipment.

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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):

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Operating lease cost, gross

$ 2,558 $ 4,431

Sublease income

( 96 ) ( 2,165 )

Net Operating lease cost

$ 2,462 $ 2,266

Cash paid under operating leases, gross

$ 1,871 $ 4,053

Weighted average remaining lease term - months

Weighted average discount rate

As of December 31, 2022 , maturities of lease liabilities were as follows (in thousands):

As of December 31, 2023 , maturities of lease liabilities were as follows (in thousands):

Gross Lease Payment

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Net Lease Payment

$ 2,948 $ ( 40 ) $ 2,908

2,807 — 2,807

2,672 — 2,672

2,555 — 2,555

2,536 — 2,536

14,848 — 14,848

Total lease payments

28,366 ( 40 ) 28,326

Less imputed interest

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 commenced in June 2022 for a 146 month term.

The total commitment under the new lease is approximately $ 27.8 million and is included in the table above.

In connection with the commencement of this new lease, we discontinued most of the subleasing arrangements with third parties for space at our corporate headquarters.

A right-of-use asset and liability was recorded at the commencement date of the lease.

This lease covers approximately 73,000 square feet and commenced in June 2022 for a 146 month term.

The total commitment under this lease is approximately $ 27.8 million and is included in the table above.

In connection with the commencement of this lease, we discontinued most of the subleasing arrangements with third parties for space at our corporate headquarters.

A right-of-use asset and liability was recorded at the commencement date of this lease.

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.

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Revolving credit facility, not to exceed $ 65.0 million (expiring November 1, 2025 ) (1) (2) (3)

$ 44.1  

$ 32.1  

$ 42.7 $ 44.1

Revolving credit facility, not to exceed $ 50.0 million (expiring October 30, 2025 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 100.0 million (expiring December 15, 2025 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 50.0 million (expiring July 20, 2025 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 100.0 million (expiring March 15, 2024 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 200.0 million (expiring May 15, 2024 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 25.0 million (expiring April 21, 2023 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 100.0 million (expiring January 15, 2025 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 20.0 million (expiring December 11, 2024 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 200.0 million (paid off in September 2023 )

Revolving credit facility, not to exceed $ 88.9 million (paid off in November 2023 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 250.0 million (expiring October 15, 2025 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 25.0 million (expiring June 16, 2025 ) (3) (4) (5)

Revolving credit facility, not to exceed $ 35.0 million (expiring July 31, 2026 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 300.0 million (expiring December 15, 2026 ) (3) (4) (5) (6)

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)

Revolving credit facility, not to exceed $ 75.0 million (expiring September 1, 2025 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 300.0 million (expiring May 15, 2026 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 250.0 million (expiring January 15, 2029 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 100.0 million (expiring August 5, 2024 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 100.0 million (expiring March 15, 2027 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 20.0 million (expiring May 26, 2026 ) (3) (4) (5)

Revolving credit facility, not to exceed $ 300.0 million (expiring February 15, 2028 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 150.0 million (expiring May 17, 2027 ) (3) (4) (5) (6)

Other facilities

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Total notes payable before unamortized debt issuance costs and discounts

1,666.9  

1,289.0  

1,881.1 1,666.9

Unamortized debt issuance costs and discounts

( 13.6 )  

( 19.4 ) ( 13.6 )

Total notes payable outstanding, net

$ 1,653.3  

$ 1,278.9  

$ 1,861.7 $ 1,653.3

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.

These notes reflect modifications to either extend the maturity date, increase the loan amount or both, and are treated as accounting modifications.

These notes reflect modifications to either extend the maturity date, increase the loan amount or both, and are treated as accounting modifications.

See below for additional information.

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Creditors do not have recourse against the general assets of the Company but only to the collateral within the VIEs.

As of December 31, 2022 , the LIBOR rate was 4.39 %, the Prime Rate was 7.50 % and the SOFR Rate was 4.30 %.

* As of December 31, 2023 , the Prime Rate was 8.50 % and the Secured Overnight Financing Rate ("SOFR") was 5.38 %.

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 $ 38.6 million was drawn as of December 31, 2023).

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to Secured Overnight Financing Rate ("SOFR") plus 3.0 %.

The facility matures on October 30, 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.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to SOFR plus 3.0 %.

The facility matures on October 30, 2025 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.

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 $ 44.1 million was drawn as of December 31, 2022).

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.

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 $ 42.7 million was drawn as of December 31, 2023).

This facility is secured by the financial and operating assets of CAR and accrues interest at an annual rate equal to SOFR plus a range between 2.25 % and 2.6 % 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.

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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 January 2023, the note was amended to change the underlying reference rate from LIBOR to SOFR, the facility size was increased to $ 65.0 million and the maturity date was extended to November 1, 2025. 

All other terms remained materially consistent with the amended facility.  

In 2018, we (through a wholly owned subsidiary) entered into a revolving credit facility to sell up to an aggregate $ 100.0 million of notes that are secured by the receivables and other assets of the trust (of which $ 0.0 million was outstanding as of December 31, 2022) that can be drawn upon to the extent of outstanding eligible receivables.

The interest rate on the notes equals the SOFR plus 3.1 %.

The facility matures on March 15, 2024, and is 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.

As of December 31, 2022, the aggregate borrowing limit was $ 100.0 million.

In December 2017, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 50.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 47.5 million was drawn as of December 31, 2023 ).

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to SOFR plus 3.6 %.

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.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to Term Secured Overnight Financing Rate ("Term SOFR") plus 3.6 %.

An amendment was completed in July 2023 that extended the maturity to July 20, 2025.

There were no other material changes to the existing terms.

The facility 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 2018, we (through a wholly owned subsidiary) entered a revolving credit facility to sell up to an aggregate $ 100.0 million of notes that are secured by the receivables and other assets of the trust (of which $ 0.0 million was outstanding as of December 31, 2023) that can be drawn upon to the extent of outstanding eligible receivables.

The interest rate on the notes equals the SOFR plus 3.75 %.

The facility matures on December 15, 2025, and is 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.

As of December 31, 2023, the aggregate borrowing limit was $ 100.0 million.

In June 2019, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 20.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 14.3 million was drawn as of December 31, 2023).

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 facility matures on December 11, 2024.

The note is guaranteed by Atlanticus.

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 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 %. 

This facility is currently in contractual scheduled amortization.

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 %.

In October 2020, we sold $ 250.0 million of ABS secured by certain private label credit receivables.

In August 2019, Atlanticus Holdings Corporation issued a $ 17.4 million term note, which bears interest at a fixed rate of 8.0 % and is due in August 2024.

In November 2019, we (through a wholly owned subsidiary) sold $ 200.0 million of ABS secured by certain credit card receivables.

The terms of the ABS allowed for a three -year revolving structure with a subsequent 12 -month to 18 -month amortization period.

The weighted average interest rate on the securities was fixed at 4.91 %.

This facility was paid off in September 2023.

In July 2020, we (through a wholly owned subsidiary) sold $ 100.0 million of ABS secured by certain private label credit receivables.

The terms of the ABS allowed for a three -year revolving structure with a subsequent 18 -month amortization period.

The weighted average interest rate on the securities was fixed at 5.47 %.

This facility was paid off in November 2023.

In October 2020, we (through a wholly owned subsidiary) sold $ 250.0 million of ABS secured by certain private label credit receivables.

A portion of the proceeds from the sale was used to pay down our existing term ABS associated with our private label credit receivables, noted above, and the remaining proceeds were used to fund the acquisition of receivables.

3 unchanged sentences

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 June 16, 2025 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 matures on July 31, 2026 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.

June 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring May 15, 2026 through December 15, 2026).

In June 2021, we (through a wholly owned subsidiary) 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 $ 75.0 million limit (of which $ 0.0 million was outstanding of December 31, 2022) that is available to the extent of outstanding eligible principal receivables.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 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).

In September 2021, we (through a wholly owned subsidiary) entered a term facility with a $ 75.0 million limit (of which $ 0.0 million was outstanding as of December 31, 2023) 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 Term SOFR plus 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 (as subsequently amended) September 2025.

In November 2021, we (through a wholly owned subsidiary) 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 %.

In May 2022, we entered a $ 250.0 million ABS agreement (of which $ 250.0 million was drawn as of December 31, 2022) secured by certain credit card receivables (expiring May 15, 2030).

In May 2022, we (through a wholly owned subsidiary) entered a $ 250.0 million ABS agreement (of which $ 250.0 million was drawn as of December 31, 2023) secured by certain credit card receivables (expiring January 15, 2029).

The terms of the ABS allow for a five -year revolving structure with a subsequent 18 -month amortization period.

The weighted average interest rate on the securities is fixed at 6.33 %.

In August 2022, we entered a $ 100.0 million ABS agreement secured by certain credit card receivables (of which $ 0.0 million was outstanding as of December 31, 2022) that can be drawn upon to the extent of outstanding eligible receivables.

The interest rate on the notes is based on the Term Secured Overnight Financing Rate ("Term SOFR") plus 1.8 %.

In August 2022, we (through a wholly owned subsidiary) entered a $ 100.0 million ABS agreement secured by certain credit card receivables (of which $ 50.0 million was outstanding as of December 31, 2023) that can be drawn upon to the extent of outstanding eligible receivables.

The interest rate on the notes is based on the Term SOFR plus 1.8 %.

The facility matures on August 5, 2024.

In September 2022, we sold $ 100.0 million of ABS secured by certain private label credit receivables.

In September 2022, we (through a wholly owned subsidiary) sold $ 100.0 million of ABS secured by certain private label credit receivables (expiring March 15, 2027).

A portion of the proceeds from the sale was used to pay down other revolving facilities associated with our private label credit receivables, noted above, and the remaining proceeds have been invested in the acquisition of receivables.

1 unchanged sentence

The weighted average interest rate on the securities is fixed at 7.32 %.

In May 2023, we (through a wholly owned subsidiary) entered a revolving credit facility with a $ 20.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 0.0 million was drawn as of December 31, 2023).

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 Term SOFR plus 3.75 %.

The facility matures on May 26, 2026 and is subject to certain covenants and restrictions of which the failure could result in required early repayment of all or a portion of the outstanding balance.

The note is guaranteed by Atlanticus.

In September 2023, we (through a wholly owned subsidiary) sold $ 300.0 million of ABS secured by certain credit card receivables (expiring February 15, 2028).

A portion of the proceeds from the sale was used to pay down other facilities associated with our credit card receivables, noted above, and the remaining proceeds have been invested in 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 9.51 %.

In November 2023, we (through a wholly owned subsidiary) sold $ 150.0 million of ABS secured by certain private label credit receivables (expiring May 17, 2027).

The terms of the ABS allow for a 2 -year revolving structure with an 18 -month amortization period.

The weighted average interest rate on the securities is fixed at 9.39 %.

As of December 31, 2023, we were in compliance with the covenants underlying our various notes payable and credit facilities.

Senior Notes, net

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).

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 bear interest at the rate of 6.125 % per annum.

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Amortization of these fees for the years ended December 31, 2023 and 2022 totaled $ 1.4 million and $ 1.4 million, respectively.

We repurchased $ 1.4 million and $ 0.0 of the outstanding principal amount of these senior notes for years ended December 31, 2023 and 2022, respectively.

Commitments and Contingencies

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.

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 $ 2.5 billion at December 31, 2023.

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As of December 31, 2023, CAR had unfunded outstanding floor-plan financing commitments totaling $ 10.2 million.

Each draw against unused commitments is reviewed for conformity to pre-established guidelines.

Each draw against unused commitments is reviewed for conformity to pre-established guidelines and is not unconditional.

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 $ 23.8 million remains pledged as of December 31, 2023 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, 2023, 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 issuing bank 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.

Under the account terms, consumers have the option of enrolling with our issuing bank partners in a credit protection program, 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 $ 69.4  million as of December 31, 2022.

As an acquirer of receivables, our potential exposure under this program, if all eligible participants applied for this benefit, was $ 75.2 million as of December 31, 2023.

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 include our estimate of future claims under this program within our fair value analysis of the associated receivables.

We also are subject to certain minimum payments under cancelable and non-cancelable lease arrangements.

For further information regarding these commitments, see Note 9, “Leases”.

Concentrations

We acquire all of our fair value receivables under agreements with two third -party originating institutions.

Our five largest retail partners account for over 70 % of our outstanding private label credit receivables as of December 31, 2023.

Our receivables base is diverse and spread across individual consumers in the U.S.

As of December 31, 2023, only one state (Texas) had receivables concentration in excess of 10% of the total pool of receivables.

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. 

Included in the first quarter of 2022 is an $ 8.5 million expense related to a settlement of outstanding litigation associated with our Auto Finance segment. 

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 our federal, foreign, and state and other income tax expenses or benefits are as follows:

There are currently no pending legal proceedings that are expected to be material to us.

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 our federal, foreign, and state and other income tax expenses or benefits are as follows:

For the Year Ended December 31,

Federal income tax (expense) benefit:

Current tax benefit (expense)

Federal income tax (expense):

Current tax benefit

$ 11,536 $ 4,352

Deferred tax (expense)

( 34,056 ) ( 16,623 )

Total federal income tax (expense)

Foreign income tax (expense) benefit:

$ ( 22,520 ) $ ( 12,271 )

Foreign income tax (expense):

Current tax (expense)

Deferred tax benefit (expense)

$ ( 124 ) $ ( 183 )

Deferred tax benefit

Total foreign income tax (expense)

State and other income tax benefit (expense):

Current tax benefit (expense)

Deferred tax (expense) benefit

Total state and other income tax (expense) benefit

$ ( 114 ) $ ( 180 )

State and other income tax (expense):

Current tax (expense) benefit

$ ( 191 ) $ 2,146

Deferred tax (expense)

( 3,779 ) ( 4,355 )

Total state and other income tax (expense)

$ ( 3,970 ) $ ( 2,209 )

Total income tax (expense)

We experienced an effective income tax expense rate of 9.8 % and 19.0 % for the years ended December 31, 2022, and December 31, 2021, respectively.

grant date values—such deductions being significantly higher in 2022 than in 2021 given stock option exercises in 2022 by the Executive Chairman of our Board of Directors, such options being grandfathered from executive compensation deduction limitations under Section 162 (m) of the Internal Revenue Code of 1986, as amended (the “Code”) and ( 2 ) 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. Offsetting the above factors are the effects on our effective tax rate of state and foreign income tax expense, taxes on global intangible low-taxed income, and executive compensation deduction limitations under Section 162 (m) of the Code.

$ ( 26,604 ) $ ( 14,660 )

We experienced an effective income tax expense rate of 20.6 % and 9.8 % for the years ended December 31, 2023, and December 31, 2022, respectively.

Our effective income tax expense rates for these years are below the statutory rate principally due to ( 1 ) deductions associated with the exercise of stock options and the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’ grant date values and ( 2 ) 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.

Offsetting the above factors are the effects on our effective tax rate of state and foreign income tax expense, taxes on global intangible low-taxed income, and executive compensation deduction limitations under Section 162 (m) of the Code.

Further details related to the above are reflected in the table below reconciling our effective income tax expense rate to the statutory rate.

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 2022 and 2021, we experienced only de minimis interest expense and reversals within our income tax line item.

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.

We recognized $ 0.4 million in potential interest expense associated with uncertain tax positions during the year ended December 31, 2023, compared to de minimis interest expense experienced in 2022.

The following table reconciles our effective income tax expense rate to the statutory rate for 2023 and 2022:

3 unchanged sentences

Share-based compensation

( 2.3 ) ( 10.5 )

Section 162(m) of the Code executive compensation deduction limitations

1 unchanged sentence

Interest expense on preferred stock classified as debt for tax purposes

Foreign taxes, net of valuation allowance effects

State taxes, net of valuation allowance effects

( 2.6 ) ( 2.3 )

Foreign taxes

( 0.2 ) ( 0.2 )

State taxes, net of federal tax benefit

Valuation allowances changes affecting the provision for income taxes

( 1.5 ) ( 1.3 )

Prior year provision to return reconciling items, tax effects of non-controlling interests, and other

( 0.4 ) ( 0.1 )

Global intangible low-taxed income tax

Effective tax expense rate

As of December 31, 2022, and December 31, 2021, 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, 2023, and December 31, 2022, 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,

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Capitalized research and experimentation expenditures and fixed assets

$ 1,612 $ 1,445

Provision for credit loss

Credit card and other loans receivable fair value election differences

54,208 70,966

Equity-based compensation

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Accruals for state taxes and interest associated with unrecognized tax benefits and unpaid accrued tax liabilities

Federal net operating loss and capital loss carry-forwards

Federal net operating loss carry-forwards

35,199 22,626

Federal credit carry-forward

Foreign net operating loss carry-forward

State tax benefits, primarily from net operating losses

26,550 28,796

Deferred tax assets, gross

$ 123,433 $ 128,587

Valuation allowances

( 18,729 ) ( 20,699 )

Deferred tax assets, net of valuation allowances

$ 104,704 $ 107,888

Deferred tax (liabilities):

Prepaid expenses and other

Software development costs and fixed assets

$ ( 1,096 ) $ ( 1,030 )

Equity in income of equity-method investee

( 945 ) ( 792 )

Market discount on acquired marked discount bonds

( 190,918 ) ( 155,879 )

Deferred costs

( 24 ) ( 641 )

Deferred tax (liabilities), gross

$ ( 192,983 ) $ ( 158,342 )

Deferred tax (liabilities), net

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.

$ ( 88,279 ) $ ( 50,454 )

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.

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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 $ 20.7 million and $ 22.7 million as of December 31, 2022, and December 31, 2021, respectively.

Certain of our deferred tax assets relate to federal, foreign, and state net operating losses, and we have no other net operating losses, capital losses, or credit carryforwards other than those noted herein.

We have recorded a federal deferred tax asset of $ 22.6 million (based on indefinite-lived federal net operating loss carryforwards of $ 104.0 million). 

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 $ 18.7 million and $ 20.7 million as of December 31, 2023, and December 31, 2022, respectively.

Certain of our deferred tax assets relate to federal, foreign, and state net operating losses, and we have no other net operating loss, capital loss, or credit carryforwards other than those noted herein.

We have recorded a federal deferred tax asset of $ 35.2 million (based on indefinite-lived federal net operating loss carryforwards of $ 167.3 million).

We have recorded state deferred tax assets of $ 26.5 million based on state net operating loss carryforwards, some of which are indefinite-lived and some which expire in various years beginning in 2024;

Our subsidiaries file federal, foreign, and/or state and other income tax returns.

valuation allowances of $ 18.2 million have be recorded, however, against the $26.5 million of such state deferred tax assets.

Our subsidiaries file federal, foreign, and/or state and other 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.

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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 2019.

Reconciliations (in thousands) of our unrecognized tax benefits from the beginning to the end of 2022 and 2021, respectively, are as follows: 

Roll-forwards (in thousands) of our unrecognized tax benefits (excluding accrued interest related thereto of $ 1.1 million as of December 31, 2023, and $ 0.9 million as of December 31, 2022) from the beginning to the end of 2023 and 2022, respectively, are as follows:

Balance at January 1,

$ ( 22,692 ) $ ( 605 )

Reductions based on tax positions related to prior years

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(Additions) based on tax positions related to the current year

( 29 ) ( 10,201 )

Balance at December 31,

Our unrecognized tax benefits that, if recognized, would affect the effective tax rate are not material at only $ 0.9 million, $ 0.7 million and $ 0.6 million as of 

December 31, 2022, 2021 and 2020,  respectively.

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.

$ ( 738 ) $ ( 22,692 )

Our unrecognized tax benefits that, if recognized, would affect our effective tax expense rate are not material at only $1.1million and $ 0.9 million as of December 31, 2023, and December 31, 2022, respectively.

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 use the treasury stock method to 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): 

Net income attributable to controlling interests

Preferred stock and preferred unit dividends and accretion

Net income attributable to common shareholders—basic

Effect of dilutive preferred stock dividends and accretion

Net income attributable to common shareholders—diluted

$ 102,845 $ 135,597

Preferred stock and preferred unit dividends and discount accretion

( 25,198 ) ( 25,076 )

Net income attributable to common shareholders—basic

77,647 110,521

Effect of dilutive preferred stock dividends and discount accretion

Net income attributable to common shareholders—diluted

$ 80,047 $ 112,921

Basic (including unvested share-based payment awards) (1)

14,504 14,629

Effect of dilutive stock compensation arrangements and exchange of preferred stock

Diluted (including unvested share-based payment awards) (1)

Net income attributable to common shareholders per share—basic

Net income attributable to common shareholders per share—diluted

Shares related to unvested share-based payment awards included in our basic and diluted share counts were 137,046 for the year ended  

December 31, 2022 , compared to 312,792 for the year ended  

December 31, 2021 .

As their effects were anti-dilutive, we excluded stock options to purchase 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2022.  

No shares were excluded from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2021. 

We excluded stock options to purchase 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2020.

For the years ended December 31, 2022, 2021 and 2020, we included 4.0 million, 4.0 million and 3.8 million shares of common stock for each period in our outstanding diluted share counts associated with our Series A Preferred Stock.

18,882 19,376

Net income attributable to common shareholders per share—basic

$ 5.35 $ 7.55

Net income attributable to common shareholders per share—diluted

$ 4.24 $ 5.83

Shares related to unvested share-based payment awards included in our basic and diluted share counts were 230,428 for the year ended December 31, 2023 , compared to 137,046 for the year ended December 31, 2022 .

As their effects were anti-dilutive, we excluded stock options to purchase 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2023.

We excluded stock options to purchase 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2022.

For the years ended December 31, 2023 and 2022, we included 4.0 million shares of common stock for each period in our outstanding diluted share counts associated with our Series A Preferred Stock.

See Note 5, "Redeemable Preferred Stock", for a further discussion of these convertible securities.

For the year ended December 31, 2021, we included 0.1 million shares of common stock in the diluted net income attributable to controlling interests per share of common stock calculations associated with our convertible senior notes.

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.

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 ESPP provides that we may issue up to 500,000 shares of our common stock under the plan.

Our Fourth Amended 2014 Plan provides that we may grant up to 5,750,000 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.

As of December 31, 2022, 51,041  shares remained available for issuance under the ESPP and 2,085,158 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, 2022 and 2021.

As of December 31, 2023, 47,111 shares remained available for issuance under the ESPP and 2,134,266 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, 2023 and 2022.

Restricted Stock and Restricted Stock Units

During the years ended December 31, 2022, 2021 and 2020, we granted 105,360 shares, 49,988 shares and 61,373 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 4.9 million, $ 1.7 million and $ 0.6 million, respectively.

We incurred expenses of $ 2.6 million, $ 1.2 million and $ 0.8 million during the years ended December 31, 2022, 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’

During the years ended December 31, 2023 and 2022, we granted 148,546 shares and 105,360 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 3.7 million and $ 4.9 million, respectively.

We incurred expenses of $ 3.1 million and $ 2.6 million during the years ended December 31, 2023 and 2022, respectively, related to restricted stock awards.

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, 2022, our unamortized deferred compensation costs associated with non-vested restricted stock awards were $ 3.3  million with a weighted-average remaining amortization period of 2.8  years.

As of December 31, 2023, our unamortized deferred compensation costs associated with non-vested restricted stock awards were $ 3.9 million with a weighted-average remaining amortization period of 2.6 years.

No forfeitures have been included in our compensation cost estimates based on historical forfeiture rates.

The table below includes additional information about outstanding restricted stock and restricted stock units:

Number of Shares

Weighted Average Grant Date Fair Value

Outstanding at December 31, 2022

147,317 $ 40.88

152,446 $ 25.26

( 51,638 ) $ 33.51

( 3,900 ) $ 37.51

Outstanding at December 31, 2023

244,225 $ 32.75

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 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.

We had expense of $ 1.6 million, $ 2.0 million and $ 0.5 million related to stock option-related compensation costs during the years ended December 31, 2022, 2021 and 2020, respectively.

We had expense of $ 0.7 million and $ 1.6 million related to stock option-related compensation costs during the years ended December 31, 2023 and 2022, 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.

5 unchanged sentences

Outstanding at December 31, 2022

2,017,969  

$ 6.74  

( 1,211,141 )  

$ 3.08  

802,163 $ 12.23

( 576,758 ) $ 5.90

Expired/Forfeited

( 4,665 )  

$ 15.30  

( 1,999 ) $ 15.30

Outstanding at December 31, 2023

802,163  

$ 12.23  

$ 12,704,473  

223,406 $ 28.52 2.2 $ 2,502,824

Exercisable at December 31, 2023

673,137  

$ 8.71  

$ 12,270,696  

178,790 $ 26.31 2.1 $ 2,366,192

Information on stock options granted, exercised and vested is as follows (in thousands, except per share data):

1 unchanged sentence

Weighted average fair value per share of options granted

$ 24.00  

Cash received from options exercised, net

$ 3,731  

$ 1,885  

$ 3,405 $ 3,731

Aggregate intrinsic value of options exercised

$ 74,296  

$ 13,673  

$ 15,497 $ 74,296

Grant date fair value of shares vested

$ 1,802  

Options issued during the years ended December 31, 2021 and 2020 had aggregate grant-date fair values of $ 3.1 million and $ 1.4 million, respectively.

No options were issued during the year ended December 31, 2022.

We had $ 0.8 million and $ 2.4 million of unamortized deferred compensation costs associated with non-vested stock options as of December 31, 2022 and December 31, 2021, respectively, with a weighted average remaining amortization period of 1.1 years as of December 31, 2022.

$ 1,435 $ 1,802

No options were issued during the years ended December 31, 2023 and 2022.

We had $ 0.1 million and $ 0.8 million of unamortized deferred compensation costs associated with non-vested stock options as of December 31, 2023 and 2022, respectively, with a weighted average remaining amortization period of 0.5 years as of December 31, 2023.

Upon exercise of outstanding options, the Company issues new shares.

On August 10, 2022, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) providing for the sale by the Company of up to an aggregate offering price of $ 100,000,000 of our (i) Series B Preferred Stock and (ii) senior notes, from time to time through a sales agent, in connection with the ATM Program.

Sales pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at-the-market offerings”

as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the NASDAQ Global Select Market.

The sales agent will make all sales using commercially reasonable efforts consistent with its normal trading and sales practices up to the amount specified in, and otherwise in accordance with the terms of, the placement notice.

For further information regarding the ATM Program, see Note 4, “Shareholders’

Equity and Preferred Stock.” 

Employee Benefit Plans

We maintain a defined contribution retirement plan ( “401 (k) plan”) for our U.S.

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 $ 341,245 , $ 274,759 and $ 197,214 for the years ended December 31, 

2021  and 2020, respectively.

employees are eligible to participate in the 401 (k) plan.

We made matching contributions of $ 748,734 and $ 341,245 for the years ended December 31, 2023 and 2022, respectively, which were included as a component of Salaries and benefits in the accompanying Consolidated Statements of Income.

Also, all employees, excluding executive officers, are eligible to participate in the ESPP.

2 unchanged sentences

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 $ 107,995 to purchase 3,280 shares of common stock in 2022 , $ 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.

Employees contributed $ 108,351 to purchase 3,929 shares of common stock in 2023 and $ 107,995 to purchase 3,280 shares of common stock in 2022 under the ESPP.

The ESPP covers up to 100,000 shares of common stock.

Our charge to expense associated with the ESPP was $ 35,348 , $ 28,937 and $ 31,748 in 2022 , 

2021 , and 2020  respectively.

Our charge to expense associated with the ESPP was $ 35,691 and $ 35,348 in 2023 and 2022 respectively, which were included as a component of Salaries and benefits in the accompanying Consolidated Statements of Income.

Related Party Transactions

Under a shareholders’

agreement which we entered into with certain shareholders, including David G.

Under a shareholders’ agreement which we entered into with certain shareholders, including David G.

Hanna, Frank J.

1 unchanged sentence

In June 2007, we entered into a sublease for 1,000 square feet (as later adjusted to 3,100 square feet) of excess office space at our Atlanta headquarters with HBR Capital, Ltd.

(“HBR”), a company co-owned by David G.

("HBR"), a company co-owned by David G.

Hanna and his brother Frank J.

1 unchanged sentence

Under the sublease, HBR paid us $ 95,653 and $ 62,422 for 2023 and 2022, respectively.

The aggregate amount of payments required under the sublease from January 1, 2023 

to the expiration of the sublease in May 2023 is $ 39,400 .

In January 2013, HBR began leasing the services of four employees from us.

The aggregate amount of payments required under the sublease from January 1, 2024 to the expiration of the sublease in May 2024 is $ 40,184 .

In January 2013, HBR began leasing the services of certain 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, 2022, 2021 and 2020, we received $ 404,302 , $ 380,733 and $ 334,526 , respectively, of reimbursed costs from HBR associated with these leased employees.

In the years ended December 31, 2023 and 2022, we received $ 605,374 and $ 404,302 , 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.

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See Note 5 "Redeemable Preferred Stock" for more information.

During 2022, the Company utilized Axiom Bank, NA to provide legal and other services related to various commercial opportunities. David G.

During 2022, the Company utilized Axiom Bank, NA to provide legal and other services related to various commercial opportunities.

Hanna, Frank J.

Hanna, III and members of their immediate families, control and own Axiom Bancshares, Inc., which is the bank holding company for Axiom Bank, NA.

The aggregate amount of payments made to Axiom Bank during 2022 was $ 1.0 million.

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, 2022 , 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.

We purchased 16,313 shares of common stock through February 28, 2023, which were subsequently retired.

The aggregate amount of payments made to Axiom Bank, NA during 2022 was $ 1.0 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures