Atlanticus Holdings Corp 10-Q

ITEM 1. FINANCIAL STATEMENTS Atlanticus Holdings Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) June 30, December 31, 2024 2023 Assets Unrestricted cash and cash equivalents (including $ 146.0 million and $ 158.0 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) $ 350,907 $ 339,338 Restricted cash and cash equivalents (including $ 33.0 million and $ 20.5 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) 56,256 44,315 Loans at fair value (including $ 2,168.0 million and $ 2,128.6 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) 2,277,379 2,173,759 Loans at amortized cost, net (including $ 2.4 million and $ 1.8 million of allowance for credit losses at June 30, 2024 and December 31, 2023, respectively; and $ 18.1 million and $ 17.9 million of deferred revenue at June 30, 2024 and December 31, 2023, respectively) 97,469 98,425 Property at cost, net of depreciation 10,269 11,445 Operating lease right-of-use assets 11,111 11,310 Prepaid expenses and other assets 33,870 27,853 Total assets $ 2,837,261 $ 2,706,445 Liabilities Accounts payable and accrued expenses $ 70,579 $ 61,634 Operating lease liabilities 19,679 20,180 Notes payable, net (including $ 1,816.7 million and $ 1,795.9 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) 1,879,071 1,861,685 Senior notes, net 199,496 144,453 Income tax liability 97,128 85,826 Total liabilities 2,265,953 2,173,778 Commitments and contingencies (Note 10) Preferred stock, no par value, 10,000,000 shares authorized: Series A preferred stock, 400,000 shares issued and outstanding (liquidation preference - $ 40.0 million) at June 30, 2024 and December 31, 2023 (Note 5) (1) 40,000 40,000 Class B preferred units issued to noncontrolling interests (Note 5) 100,400 100,250 Shareholders' Equity Series B preferred stock, no par value, 3,300,704 shares issued and outstanding at June 30, 2024 (liquidation preference - $ 82.5 million); 3,256,561 shares issued and outstanding at December 31, 2023 (liquidation preference - $ 81.4 million) (1) — — Common stock, no par value, 150,000,000 shares authorized: 14,748,938 and 14,603,563 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively — — Paid-in capital 88,705 87,415 Retained earnings 345,110 307,260 Total shareholders’ equity 433,815 394,675 Noncontrolling interests ( 2,907 ) ( 2,258 ) Total equity 430,908 392,417 Total liabilities, shareholders' equity and temporary equity $ 2,837,261 $ 2,706,445 (1) Both the Series A preferred stock and the Series B preferred stock have no par value and are part of the same aggregate 10,000,000 shares authorized. See accompanying notes. 1 Table of Contents Atlanticus Holdings Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) For the Three Months Ended For the Six Months Ended June 30, June 30, 2024 2023 2024 2023 Revenue: Consumer loans, including past due fees $ 242,349 $ 220,042 $ 472,723 $ 429,743 Fees and related income on earning assets 59,506 62,874 107,411 107,231 Other revenue 13,786 7,835 25,681 14,759 Total operating revenue 315,641 290,751 605,815 551,733 Other non-operating revenue 382 87 914 146 Total revenue 316,023 290,838 606,729 551,879 Interest expense ( 37,948 ) ( 24,215 ) ( 73,011 ) ( 48,449 ) Provision for credit losses ( 1,746 ) ( 309 ) ( 4,690 ) ( 1,013 ) Changes in fair value of loans ( 186,251 ) ( 177,829 ) ( 345,422 ) ( 327,651 ) Net margin 90,078 88,485 183,606 174,766 Operating expenses: Salaries and benefits ( 11,973 ) ( 10,629 ) ( 25,285 ) ( 21,233 ) Card and loan servicing ( 27,698 ) ( 23,814 ) ( 54,520 ) ( 48,149 ) Marketing and solicitation ( 13,572 ) ( 14,486 ) ( 24,000 ) ( 24,892 ) Depreciation ( 653 ) ( 643 ) ( 1,307 ) ( 1,261 ) Other ( 7,579 ) ( 6,900 ) ( 17,070 ) ( 13,136 ) Total operating expenses ( 61,475 ) ( 56,472 ) ( 122,182 ) ( 108,671 ) Income before income taxes 28,603 32,013 61,424 66,095 Income tax expense ( 4,476 ) ( 7,199 ) ( 11,478 ) ( 15,387 ) Net income 24,127 24,814 49,946 50,708 Net loss attributable to noncontrolling interests 153 275 504 593 Net income attributable to controlling interests 24,280 25,089 50,450 51,301 Preferred stock and preferred unit dividends and discount accretion ( 6,308 ) ( 6,289 ) ( 12,600 ) ( 12,516 ) Net income attributable to common shareholders $ 17,972 $ 18,800 $ 37,850 $ 38,785 Net income attributable to common shareholders per common share—basic $ 1.22 $ 1.30 $ 2.57 $ 2.68 Net income attributable to common shareholders per common share—diluted $ 0.99 $ 1.02 $ 2.08 $ 2.11 See accompanying notes. 2 Table of Contents Atlanticus Holdings Corporation and Subsidiaries Condensed Consolidated Statements of Shareholders’ Equity and Temporary Equity (Unaudited) For the Six Months Ended June 30, 2024 and June 30, 2023 (Dollars in thousands) Series B Preferred Stock Common Stock Temporary Equity Shares Issued Amount Shares Issued Amount Paid-In Capital Retained Earnings Noncontrolling Interests Total Equity Series A Preferred Stock Class B Preferred Units Balance at January 1, 2024 3,256,561 $ — 14,603,563 $ — $ 87,415 $ 307,260 $ ( 2,258 ) $ 392,417 $ 40,000 $ 100,250 Accretion of discount associated with issuance of subsidiary equity — — — — — ( 75 ) — ( 75 ) — 75 Preferred stock and preferred unit dividends — — — — — ( 6,217 ) — ( 6,217 ) — — Compensatory stock issuances, net of forfeitures — — 206,629 — — — — — — — Issuance of series B preferred stock, net 44,143 — — — 1,071 — — 1,071 — — Distributions to owners of noncontrolling interests — — — — — — ( 148 ) ( 148 ) — — Contributions by owners of noncontrolling interests — — — — — — 3 3 — — Stock-based compensation costs — — — — 940 — — 940 — — Redemption and retirement of common shares — — ( 18,033 ) — ( 543 ) — — ( 543 ) — — Net income (loss) — — — — — 26,170 ( 351 ) 25,819 — — Balance at March 31, 2024 3,300,704 $ — 14,792,159 $ — $ 88,883 $ 327,138 $ ( 2,754 ) $ 413,267 $ 40,000 $ 100,325 Accretion of discount associated with issuance of subsidiary equity — — — — — ( 75 ) — ( 75 ) — 75 Preferred stock and preferred unit dividends — — — — — ( 6,233 ) — ( 6,233 ) — — Stock option exercises and proceeds related thereto — — 2,975 — 45 — — 45 — — Compensatory stock issuances, net of forfeitures — — 3,007 — — — — — — — Stock-based compensation costs — — — — 1,050 — — 1,050 — — Redemption and retirement of common shares — — ( 49,203 ) — ( 1,273 ) — — ( 1,273 ) — — Net income (loss) — — — — — 24,280 ( 153 ) 24,127 — — Balance at June 30, 2024 3,300,704 $ — 14,748,938 $ — $ 88,705 $ 345,110 $ ( 2,907 ) $ 430,908 $ 40,000 $ 100,400 3 Table of Contents Series B Preferred Stock Common Stock Temporary Equity Shares Issued Amount Shares Issued Amount Paid-In Capital Retained Earnings Noncontrolling Interests Total Equity Series A Preferred Stock Class B Preferred Units Balance at January 1, 2023 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 — — — — ( 75 ) — — ( 75 ) — 75 Discount associated with repurchase of preferred stock — — — — 16 — — 16 — — Preferred dividends — — — — ( 6,168 ) — — ( 6,168 ) — — Stock option exercises and proceeds related thereto — — 1,258 — 19 — — 19 — — Compensatory stock issuances, net of forfeitures — — 146,227 — — — — — — — Issuance of series B preferred stock, net 51,327 — — — 1,069 — — 1,069 — — Contributions by owners of noncontrolling interests — — — — — — 4 4 — — Stock-based compensation costs — — — — 931 — — 931 — — Redemption and retirement of preferred shares ( 1,806 ) — — — ( 45 ) — — ( 45 ) — — Redemption and retirement of shares — — ( 72,354 ) — ( 1,947 ) — — ( 1,947 ) — — Net income (loss) — — — — — 26,212 ( 318 ) 25,894 — — Balance at March 31, 2023 3,254,161 $ — 14,528,546 $ — $ 115,796 $ 230,627 $ ( 1,685 ) $ 344,738 $ 40,000 $ 100,025 Accretion of discount associated with issuance of subsidiary equity — — — — ( 75 ) — — ( 75 ) — 75 Preferred dividends — — — — ( 6,214 ) — — ( 6,214 ) — — Stock option exercises and proceeds related thereto — — 5,160 — 40 — — 40 — — Compensatory stock issuances, net of forfeitures — — ( 220 ) — — — — — — — Issuance of series B preferred stock, net 2,100 — — — 43 — — 43 — — Stock-based compensation costs — — — — 1,031 — — 1,031 — — Redemption and retirement of shares — — ( 105,447 ) — ( 2,988 ) — — ( 2,988 ) — — Net income (loss) — — — — — 25,089 ( 275 ) 24,814 — — Balance at June 30, 2023 3,256,261 $ — 14,428,039 $ — $ 107,633 $ 255,716 $ ( 1,960 ) $ 361,389 $ 40,000 $ 100,100 See accompanying notes. 4 Table of Contents Atlanticus Holdings Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) For the Six Months Ended June 30, 2024 2023 Operating activities Net income $ 49,946 $ 50,708 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion, net 2,504 1,696 Provision for credit losses 4,690 1,013 Income from accretion of merchant fees and discount associated with receivables purchases ( 79,666 ) ( 82,680 ) Changes in fair value of loans 345,422 327,651 Amortization of debt issuance costs 5,289 2,904 Stock-based compensation costs 1,990 1,962 Lease liability payments ( 1,499 ) ( 361 ) Changes in assets and liabilities: Increase in uncollected fees on earning assets ( 110,557 ) ( 113,268 ) Increase in income tax liability 11,302 14,951 Increase in accounts payable and accrued expenses 8,996 3,950 Other ( 3,978 ) 1,261 Net cash provided by operating activities 234,439 209,787 Investing activities Proceeds from recoveries on charged off receivables 23,449 30,101 Investments in earning assets ( 1,238,058 ) ( 1,192,213 ) Proceeds from earning assets 949,988 924,499 Purchases and development of property ( 131 ) ( 3,798 ) Net cash used in investing activities ( 264,752 ) ( 241,411 ) Financing activities Noncontrolling interests contributions 3 4 Noncontrolling interests distributions ( 148 ) — Proceeds from issuance of Series B preferred stock, net of issuance costs 1,071 1,112 Preferred stock and preferred unit dividends ( 12,500 ) ( 12,429 ) Proceeds from exercise of stock options 45 59 Purchase and retirement of outstanding stock ( 1,816 ) ( 4,964 ) Proceeds from issuance of Senior notes, net of issuance costs 54,559 — Proceeds from borrowings 423,898 252,212 Repayment of borrowings ( 411,289 ) ( 243,159 ) Net cash provided by (used for) financing activities 53,823 ( 7,165 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash — 4 Net increase (decrease) in cash and cash equivalents and restricted cash 23,510 ( 38,785 ) Cash and cash equivalents and restricted cash at beginning of period 383,653 433,192 Cash and cash equivalents and restricted cash at end of period $ 407,163 $ 394,407 Supplemental cash flow information Cash paid for interest $ 65,181 $ 45,501 Net cash income tax payments $ 176 $ 436 Accretion of discount associated with issuance of subsidiary equity $ 150 $ 150 Decrease in accrued and unpaid preferred stock and preferred unit dividends $ ( 50 ) $ ( 47 ) See accompanying notes. 5 Table of Contents Atlanticus Holdings Corporation and Subsidiaries Notes to Condensed Consolidated Financial Statements June 30, 2024 and 2023 1. Description of Our Business Our accompanying condensed consolidated financial statements include the accounts of Atlanticus Holdings Corporation (the "Company") and those entities we control. We are a purpose driven financial technology company. We are primarily focused on facilitating consumer credit through the use of our financial technology and related services. Through our subsidiaries, we provide technology and other support services to lenders who offer an array of financial products and services to consumers who may have been declined by other providers of credit. We are principally engaged in providing these products and services to lenders in the U.S. and, in most cases, we invest in the receivables originated by lenders who utilize our technology platform and other related services. From time to time, we also purchase receivables portfolios from third parties. In these Notes to Condensed 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 $40 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. The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions. Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers and other service providers. Using our technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing who focus exclusively on consumers with higher FICO scores. Atlanticus’ underwriting process is enhanced by artificial intelligence and machine learning, enabling fast, sound decision-making when it matters most. We also report within our CaaS segment: 1 ) servicing income; and 2 ) gains or losses associated with investments previously made in consumer finance technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. 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. We purchase auto loans at a discount and with dealer retentions or holdbacks that provide risk protection. Also within our Auto Finance segment, we are providing certain installment lending products in addition to our traditional loans secured by automobiles. 2. Significant Accounting Policies and Condensed Consolidated Financial Statement Components The following is a summary of significant accounting policies we follow in preparing our interim condensed consolidated financial statements, as well as a description of significant components of our interim condensed consolidated financial statements. The unaudited condensed financial statements furnished have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10 -Q and Rule 10 - 01 of Regulation S- X and reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. 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 condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during each reporting period. We base these estimates on information available to us as of the date of the financial statements. Actual results could differ materially from these estimates. Recent rules enacted by the Consumer Financial Protection Bureau ("CFPB"), which, if implemented, would limit the late fees charged to consumers in most instances, are expected to adversely impact the revenue recognized on our receivables. In order to mitigate these impacts, our bank partners have taken a number of steps, from modifying products and policies (such as further tightening the criteria used to evaluate new loans) to changing prices (including increasing interest rates and fees charged to consumers). We believe these product, policy and pricing changes will offset the negative impact of a reduced late fee. The changes will take several quarters to fully implement. These modifications could result in changes to certain estimates such as credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables and affect the reported amount (and changes thereon) of our Loans at fair value on our condensed consolidated balance sheets and condensed consolidated statements of income. We maintain two categories of Loans on our condensed 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). Consolidation The condensed 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 7 "Variable Interest Entities". Loans at fair value. Loans at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables"). Further details concerning our loans at fair value are presented within Note 6, "Fair Values of Assets and Liabilities." 6 Table of Contents Loans at amortized cost, net. Our loans at amortized cost, net, currently consist of receivables associated with our Auto Finance segment’s operations and are presented in the condensed consolidated balance sheets net of the related allowance for credit losses and deferred revenue. We purchased auto loans with outstanding principal of $ 51.2 million, $ 112.2 million, $ 55.3 million and $ 120.3 million for the three and six months ended June 30, 2024 and 2023, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies. Certain of our loans at amortized cost, net, also contain components of deferred revenue related to loan discounts on the purchase of our auto finance receivables. As of June 30, 2024 and December 31, 2023, the weighted average remaining accretion period for the $ 18.1 million and $ 17.9 million of deferred revenue reflected in the condensed consolidated balance sheets was 24 and 26 months, respectively. A roll-forward (in millions) of our allowance for credit losses by class of receivable is as follows: For the Three Months Ended June 30, 2024 2023 Allowances for credit losses: Balance at beginning of period $ ( 3.4 ) $ ( 1.7 ) Provision for credit losses ( 1.7 ) ( 0.3 ) Charge-offs 3.4 0.8 Recoveries ( 0.7 ) ( 0.5 ) Balance at end of period $ ( 2.4 ) $ ( 1.7 ) For the Six Months Ended June 30, 2024 2023 Allowances for credit losses: Balance at beginning of period $ ( 1.8 ) $ ( 1.6 ) Provision for credit losses ( 4.7 ) ( 1.0 ) Charge-offs 5.3 1.8 Recoveries ( 1.2 ) ( 0.9 ) Balance at end of period $ ( 2.4 ) $ ( 1.7 ) June 30, December 31, As of 2024 2023 Allowances for credit losses: Balance at end of period individually evaluated for impairment $ ( 0.6 ) $ — Balance at end of period collectively evaluated for impairment $ ( 1.8 ) $ ( 1.8 ) Loans at amortized cost: Loans at amortized cost $ 118.0 $ 118.0 Loans at amortized cost individually evaluated for impairment $ 0.6 $ — Loans at amortized cost collectively evaluated for impairment $ 117.4 $ 118.0 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 at amortized cost (in millions) as of June 30, 2024 and December 31, 2023 is as follows: June 30, December 31, As of 2024 2023 30-59 days past due $ 9.2 $ 9.4 60-89 days past due 3.8 3.4 90 or more days past due 4.9 3.5 Delinquent loans at amortized cost 17.9 16.3 Current loans at amortized cost 100.1 101.7 Total loans at amortized cost $ 118.0 $ 118.0 Balance of loans greater than 90-days delinquent still accruing interest and fees $ 2.8 $ 2.6 Loan Modifications and Restructurings We review our Loans at amortized cost, net, associated with our Auto Finance segment’s operations 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 six months ended June 30, 2024, no Loans at amortized cost qualified as a FDM. Income Taxes We experienced effective tax rates of 15.6 % and 18.5 % for the three and six months ended June 30, 2024, respectively, compared to 22.3 % and 23.1 % for the three and six months ended June 30, 2023, respectively. Our effective tax rates for the three and six months ended June 30, 2024 are below the statutory rate principally due to our deduction for income tax purposes of ( 1 ) amounts characterized in our condensed consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes, and ( 2 ) a loss related to our unrecovered investment in a foreign subsidiary—such subsidiary which ceased operations in the three months ended June 30, 2024, and with respect to which we had used “permanently reinvested earnings” accounting in our condensed consolidated financial statements. Offsetting the foregoing items were ( 1 ) state and foreign income tax expense including the effects of law changes enacted in the three months ended June 30, 2024 in certain states in which we operate, ( 2 ) taxes on global intangible low-taxed income, and ( 3 ) deduction disallowance under Section 162 (m) of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to compensation paid to our covered employees. 7 Table of Contents Our effective tax rates for the three and six months ended June 30, 2023 are above the statutory rate principally due to ( 1 ) state and foreign income tax expense, ( 2 ) interest accrued on uncertain tax positions, ( 3 ) taxes on global intangible low-taxed income, and ( 4 ) deduction disallowance under the Code with respect to compensation paid to our covered employees. Partially offsetting the foregoing items was our deduction for income tax purposes of amounts characterized in our condensed consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes. We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our condensed consolidated statements of income. We likewise report within such line item the reversal of interest expense associated with our accrued liabilities for uncertain tax positions to the extent we resolve such liabilities in a manner favorable to our accruals therefor. Our interest expense was $ 93 thousand for the six months ended June 30, 2024, and $ 1.14 million for the six months ended June 30, 2023. Revenue from Contracts with Customers Revenue from contracts with customers is included in Other revenue on our condensed consolidated statements of income. Components (in thousands) of our revenue from contracts with customers are as follows: For the Three Months Ended June 30, 2024 CaaS Auto Finance Total Interchange revenues, net (1) $ 4,783 $ — $ 4,783 Servicing income 1,849 190 2,039 Service charges and other customer related fees 6,948 16 6,964 Total revenue from contracts with customers $ 13,580 $ 206 $ 13,786 ( 1 ) Interchange revenue is presented net of customer reward expense. For the Six Months Ended June 30, 2024 CaaS Auto Finance Total Interchange revenues, net (1) $ 9,447 $ — $ 9,447 Servicing income 3,184 390 3,574 Service charges and other customer related fees 12,627 33 12,660 Total revenue from contracts with customers $ 25,258 $ 423 $ 25,681 ( 1 ) Interchange revenue is presented net of customer reward expense. For the Three Months Ended June 30, 2023 CaaS Auto Finance Total Interchange revenues, net (1) $ 5,003 $ — $ 5,003 Servicing income 636 189 825 Service charges and other customer related fees 1,989 18 2,007 Total revenue from contracts with customers $ 7,628 $ 207 $ 7,835 ( 1 ) Interchange revenue is presented net of customer reward expense. For the Six Months Ended June 30, 2023 CaaS Auto Finance Total Interchange revenues, net (1) $ 9,619 $ — $ 9,619 Servicing income 1,341 380 1,721 Service charges and other customer related fees 3,382 37 3,419 Total revenue from contracts with customers $ 14,342 $ 417 $ 14,759 ( 1 ) Interchange revenue is presented net of customer reward expense. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023 - 09, "Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures" ("Topic 740" ). Topic 740 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income (loss) from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). Topic 740 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This guidance should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures. In November 2023, the FASB issued ASU 2023 - 07, "Segment Reporting (Topic 280 ): Improvements to Reportable Segments Disclosures" ("Topic 280" ). Topic 280 enhances disclosures of significant segment expenses and other segment items regularly provided to the chief operating decision maker ("CODM"), extends certain annual disclosures to interim periods and permits more than one measure of segment profit (loss) to be reported under certain conditions. The amendments are effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective adoption to all periods presented is required, and early adoption of the amendments is permitted. We are currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures. 8 Table of Contents On March 31, 2022, the FASB issued ASU 2022 - 02, Financial Instruments - Credit Losses (Topic 326 ): Troubled Debt Restructurings and Vintage Disclosures. Topic 326 eliminates the accounting guidance for troubled debt restructurings by creditors while adding disclosures for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. This guidance requires an entity to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, Topic 326 requires disclosure of current period gross write-offs by year of origination for financing receivables. The disclosures required by Topic 326 are required for receivables held at amortized cost and exclude those accounted for using fair value. The Company adopted Topic 326 on January 1, 2023. As the significant majority of the Company's receivables are held at fair value, the adoption of Topic 326 did not have a material impact on the Company's financial results and accompanying disclosures. 3. Segment Reporting We operate primarily within one industry consisting of two reportable segments by which we manage our business. Our two reportable segments are: CaaS and Auto Finance. 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. Summary operating segment information (in thousands) is as follows: Three Months Ended June 30, 2024 CaaS Auto Finance Total Revenue: Consumer loans, including past due fees $ 232,014 $ 10,335 $ 242,349 Fees and related income on earning assets 59,484 22 59,506 Other revenue 13,582 204 13,786 Total operating revenue 305,080 10,561 315,641 Other non-operating revenue 79 303 382 Total revenue 305,159 10,864 316,023 Interest expense ( 37,126 ) ( 822 ) ( 37,948 ) Provision for credit losses — ( 1,746 ) ( 1,746 ) Changes in fair value of loans ( 186,251 ) — ( 186,251 ) Net margin $ 81,782 $ 8,296 $ 90,078 Income before income taxes $ 26,180 $ 2,423 $ 28,603 Income tax expense $ ( 3,836 ) $ ( 640 ) $ ( 4,476 ) Six Months Ended June 30, 2024 CaaS Auto Finance Total Revenue: Consumer loans, including past due fees $ 452,053 $ 20,670 $ 472,723 Fees and related income on earning assets 107,369 42 107,411 Other revenue 25,259 422 25,681 Total operating revenue 584,681 21,134 605,815 Other non-operating revenue 361 553 914 Total revenue 585,042 21,687 606,729 Interest expense ( 71,362 ) ( 1,649 ) ( 73,011 ) Provision for credit losses — ( 4,690 ) ( 4,690 ) Changes in fair value of loans ( 345,422 ) — ( 345,422 ) Net margin $ 168,258 $ 15,348 $ 183,606 Income before income taxes $ 57,994 $ 3,430 $ 61,424 Income tax expense $ ( 10,577 ) $ ( 901 ) $ ( 11,478 ) Total assets $ 2,733,909 $ 103,352 $ 2,837,261 9 Table of Contents Three Months Ended June 30, 2023 CaaS Auto Finance Total Revenue: Consumer loans, including past due fees $ 210,268 $ 9,774 $ 220,042 Fees and related income on earning assets 62,852 22 62,874 Other revenue 7,627 208 7,835 Total operating revenue 280,747 10,004 290,751 Other non-operating revenue 89 ( 2 ) 87 Total revenue 280,836 10,002 290,838 Interest expense ( 23,363 ) ( 852 ) ( 24,215 ) Provision for credit losses — ( 309 ) ( 309 ) Changes in fair value of loans ( 177,829 ) — ( 177,829 ) Net margin $ 79,644 $ 8,841 $ 88,485 Income before income taxes $ 28,883 $ 3,130 $ 32,013 Income tax expense $ ( 6,346 ) $ ( 853 ) $ ( 7,199 ) Six Months Ended June 30, 2023 CaaS Auto Finance Total Revenue: Consumer loans, including past due fees $ 410,797 $ 18,946 $ 429,743 Fees and related income on earning assets 107,191 40 107,231 Other revenue 14,342 417 14,759 Total operating revenue 532,330 19,403 551,733 Other non-operating revenue 103 43 146 Total revenue 532,433 19,446 551,879 Interest expense ( 46,823 ) ( 1,626 ) ( 48,449 ) Provision for credit losses — ( 1,013 ) ( 1,013 ) Changes in fair value of loans ( 327,651 ) — ( 327,651 ) Net margin $ 157,959 $ 16,807 $ 174,766 Income before income taxes $ 60,736 $ 5,359 $ 66,095 Income tax expense $ ( 13,913 ) $ ( 1,474 ) $ ( 15,387 ) Total assets $ 2,355,177 $ 99,525 $ 2,454,702 10 Table of Contents 4. Shareholders’ Equity and Preferred Stock During the three and six months ended June 30, 2024 and 2023, we repurchased and contemporaneously retired 49,203 shares, 67,236 shares, 105,447 shares and 177,801 shares of our common stock at an aggregate cost of $ 1.3 million, $ 1.8 million, $ 3.0 million and $ 4.9 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, 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 A Preferred Stock, when and as declared by our Board of Directors, in the amount of 6 % of the $ 100.00 liquidation preference per share annually. 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 three and six months ended June 30, 2023, we repurchased and contemporaneously retired 0 shares and 1,806 shares of Series B preferred stock at an aggregate cost of $ 0 and $ 29,000 . No shares of Series B preferred stock were repurchased in the three and six months ended June 30, 2024. ATM Programs 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) 2026 Senior Notes, from time to time through a sales agent, in connection with the Company's Series B preferred stock and 2026 Senior Notes "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 (the "Securities Act"), 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 three and six months ended June 30, 2024 and 2023, we sold 0 shares, 44,143 shares, 2,100 shares and 53,427 shares, respectively, of our Series B preferred stock under our Preferred Stock ATM Program for net proceeds of $ 0 million, $ 1.1 million, $ 0.0 million and $ 1.1 million, respectively. During the three and six months ended June 30, 2024 and 2023, no 2026 Senior Notes were sold under the Company's Preferred Stock ATM Program. During the three and six months ended June 30, 2024, no common shares were sold under the Company’s Common Stock ATM Program. 5. 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"). The agreement provided for a senior secured term loan facility in an amount of up to $ 40.0 million at any time outstanding. On December 27, 2019, the Company issued 400,000 shares of its Series A Preferred Stock with an aggregate initial liquidation preference of $ 40.0 million, in exchange for full satisfaction of the $ 40.0 million that the Company owed Dove under the Loan and Security Agreement. Dividends on the preferred stock are 6 % per annum (cumulative, non-compounding) and are payable as declared, and in preference to any dividends on common stock and Series B preferred stock, in cash. The Series A Preferred Stock is perpetual and has no maturity date. The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $ 100 per share, plus any accumulated and unpaid dividends. At the request of holders of a majority of the shares of Series A Preferred Stock, the Company shall offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024. Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $ 10 per share, subject to certain adjustment in certain circumstances to prevent dilution. Given the redemption rights contained within the Series A Preferred Stock, we account for the outstanding preferred stock as temporary equity in the condensed 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 11, "Net Income Attributable to Controlling Interests Per Common Share" for more information. Dove is a limited liability company owned by three trusts. David G. Hanna is the sole shareholder and the President of the corporation that serves as the sole trustee of one of the trusts, and David G. Hanna and members of his immediate family are the beneficiaries of this trust. Frank J. Hanna, III is the sole shareholder and the President of the corporation that serves as the sole trustee of the other two trusts, and Frank J. Hanna, III and members of his immediate family are the beneficiaries of these other two trusts. On November 14, 2019, a wholly-owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $ 1.00 per unit to an unrelated third party. The units carry a 16 % preferred return to be paid quarterly, with up to 6 percentage points of the preferred return to be paid through the issuance of additional units or cash, at our election. The units have both call and put rights and are also subject to various covenants including a minimum book value, which if not satisfied, could allow for the securities to be put back to the subsidiary. In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms. A holder of the Class B preferred units may, at its election and with notice, 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 condensed 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 11, "Net Income Attributable to Controlling Interests Per Common Share" for more information. 11 Table of Contents 6. Fair Values of Assets and Liabilities 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 condensed 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. Further, our retail asset typically has seasonal growth during the summer months, impacting the fair value of assets. Fair value differs from amortized cost accounting in the following ways: • 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 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. Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Where inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input that is significant to the fair value measurement in its entirety. Valuations and Techniques for Assets Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The table below summarizes (in thousands) by fair value hierarchy the June 30, 2024 and December 31, 2023 fair values and carrying amounts of ( 1 ) our assets that are required to be carried at fair value in our condensed consolidated financial statements and ( 2 ) our assets not carried at fair value, but for which fair value disclosures are required: Assets – As of June 30, 2024 (1) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Carrying Amount of Assets Loans at amortized cost, net for which it is practicable to estimate fair value and which are carried at net amortized cost $ — $ — $ 105,456 $ 97,469 Loans at fair value $ — $ — $ 2,277,379 $ 2,277,379 Assets – As of December 31, 2023 (1) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Carrying Amount of Assets Loans at amortized cost, net 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 ( 1 ) For cash, deposits and investments in equity securities, the carrying amount is a reasonable estimate of fair value. For those asset classes above that are required to be carried at fair value in our condensed consolidated financial statements, gains and losses associated with fair value changes are detailed on our condensed consolidated statements of income as a component of "Changes in fair value of loans". For our loans 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. 12 Table of Contents For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2024 and 2023: Loans at Fair Value 2024 2023 Balance at January 1, $ 2,173,759 $ 1,817,976 Changes in fair value of loans at fair value, included in earnings 103,326 44,212 Changes in fair value due to principal charge-offs, net of recoveries ( 322,174 ) ( 256,000 ) Changes in fair value due to finance and fee charge-offs ( 126,574 ) ( 115,863 ) Purchases 1,203,662 1,157,313 Finance and fees, added to the account balance 501,038 453,766 Settlements ( 1,255,658 ) ( 1,185,341 ) Balance at June 30, $ 2,277,379 $ 1,916,063 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. 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 current trends would suggest. Recent rules enacted by the CFPB, which, if implemented, would limit the late fees charged to consumers in most instances, are expected to adversely impact the revenue recognized on our receivables. In order to mitigate these impacts, our bank partners have taken a number of steps, from modifying products and policies (such as further tightening the criteria used to evaluate new loans) to changing prices (including increasing interest rates and fees charged to consumers). We believe these product, policy and pricing changes will offset the negative impact of a reduced late fee. The changes will take several quarters to fully implement. These modifications could result in changes to certain estimates such as credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables and affect the reported amount (and changes thereon) of our Loans at fair value on our condensed consolidated balance sheets and condensed consolidated statements of income. Valuations and Techniques for Liabilities Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability. The table below summarizes (in thousands) by fair value hierarchy the June 30, 2024 and December 31, 2023 fair values and carrying amounts of our liabilities not carried at fair value, but for which fair value disclosures are required: Liabilities – As of June 30, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Carrying Amount of Liabilities Liabilities not carried at fair value Revolving credit facilities $ — $ — $ 1,856,114 $ 1,856,114 Amortizing debt facilities $ — $ — $ 22,957 $ 22,957 Senior notes, net $ 190,315 $ — $ — $ 199,496 Liabilities – As of December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Carrying Amount of Liabilities Liabilities not carried at fair value Revolving credit facilities $ — $ — $ 1,838,647 $ 1,838,647 Amortizing debt facilities $ — $ — $ 23,038 $ 23,038 Senior notes, net $ 138,229 $ — $ — $ 144,453 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 9, "Notes Payable," for further discussion on our other notes payable. 13 Table of Contents Other Relevant Data Other relevant data (in thousands) as of June 30, 2024 and December 31, 2023 concerning certain assets we carry at fair value are as follows: As of June 30, 2024 Loans at Fair Value Loans at Fair Value Pledged as Collateral under Structured Financings Aggregate unpaid gross balance of loans at fair value $ 396 $ 2,414,696 Aggregate unpaid principal balance included within loans at fair value $ 385 $ 2,196,823 Aggregate fair value of loans at fair value $ 396 $ 2,276,983 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) $ — $ 25,489 Unpaid principal balance of loans at fair value that 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 $ 6 $ 131,505 As of December 31, 2023 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) $ — $ 29,149 Unpaid principal balance of loans at fair value that 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 7. Variable Interest Entities The following table presents a summary of VIEs in which we had continuing involvement and held a variable interest (in millions): As of June 30, 2024 December 31, 2023 Unrestricted cash and cash equivalents $ 146.0 $ 158.0 Restricted cash and cash equivalents 33.0 20.5 Loans at fair value 2,168.0 2,128.6 Total Assets held by VIEs $ 2,347.0 $ 2,307.1 Notes Payable, net held by VIEs $ 1,816.7 $ 1,795.9 Maximum exposure to loss due to involvement with VIEs $ 2,138.2 $ 2,099.0 14 Table of Contents 8. Leases The components of lease expense associated with our lease liabilities and supplemental cash flow information related to those leases were as follows (dollar amounts in thousands): For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Operating lease cost, gross $ 637 $ 637 $ 1,264 $ 1,276 Sublease income ( 24 ) ( 23 ) ( 48 ) ( 47 ) Net Operating lease cost $ 613 $ 614 $ 1,216 $ 1,229 Cash paid under operating leases, gross $ 752 $ 181 $ 1,499 $ 361 Weighted average remaining lease term - months 116 128 Weighted average discount rate 6.6 % 6.6 % As of June 30, 2024 , maturities of lease liabilities were as follows (in thousands): Gross Lease Payment Payments received from Sublease Net Lease Payment 2024 (excluding the six months ended June 30, 2024) $ 1,504 $ ( 49 ) $ 1,455 2025 2,903 ( 41 ) 2,862 2026 2,769 — 2,769 2027 2,638 — 2,638 2028 2,590 — 2,590 Thereafter 14,865 — 14,865 Total lease payments 27,269 ( 90 ) 27,179 Less imputed interest ( 7,590 ) Operating lease liabilities $ 19,679 In August 2021, we entered into an operating lease agreement for our corporate headquarters in Atlanta, Georgia with an unaffiliated third party. 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 condensed consolidated financial statements. As of June 30, 2024, we had no material non-cancelable capital leases with initial or remaining terms of more than one year. 15 Table of Contents 9. Notes Payable Notes Payable, at Face Value Other notes payable outstanding as of June 30, 2024 and December 31, 2023 that are secured by the financial and operating assets of either the borrower, another of our subsidiaries or both, include the following, scheduled (in millions); except as otherwise noted, the assets of our holding company (Atlanticus Holdings Corporation) are subject to creditor claims under these scheduled facilities: As of June 30, 2024 December 31, 2023 Revolving credit facilities at a weighted average interest rate equal to 7.0 % as of June 30, 2024 ( 6.3 % as of December 31, 2023) secured by the financial and operating assets of CAR and/or certain receivables and restricted cash with a combined aggregate carrying amount of $ 2,304.4 million as of June 30, 2024 ($ 2,252.9 million as of December 31, 2023) Revolving credit facility, not to exceed $ 65.0 million (expiring December 1, 2026 ) (1) (2) (3) $ 39.4 $ 42.7 Revolving credit facility, not to exceed $ 50.0 million (expiring October 30, 2025 ) (2) (3) (4) (5) 28.5 38.6 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) 31.3 47.5 Revolving credit facility, not to exceed $ 20.0 million (expiring December 11, 2024 ) (2) (3) (4) (5) 20.0 14.3 Revolving credit facility, not to exceed $ 250.0 million, repaid in May 2024 — 250.0 Revolving credit facility, not to exceed $ 35.0 million (expiring July 31, 2026 ) (2) (3) (4) (5) 35.0 15.0 Revolving credit facility, not to exceed $ 300.0 million (expiring December 15, 2026 ) (3) (4) (5) (6) 300.0 300.0 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) 300.0 300.0 Revolving credit facility, not to exceed $ 325.0 million (expiring November 15, 2028 ) (2) (3) (4) (5) (6) 325.0 250.0 Revolving credit facility, not to exceed $ 100.0 million (expiring August 5, 2024 ) (3) (4) (5) (6) — 50.0 Revolving credit facility, not to exceed $ 100.0 million (expiring March 15, 2027 ) (3) (4) (5) (6) 100.0 100.0 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) 300.0 300.0 Revolving credit facility, not to exceed $ 150.0 million (expiring May 17, 2027 ) (3) (4) (5) (6) 150.0 150.0 Revolving credit facility, not to exceed $ 250.0 million (expiring November 15, 2028 ) (3) (4) (5) (6) 250.0 — Other facilities Other debt 5.5 5.6 Unsecured term debt (expiring August 26, 2024 ) with a weighted average interest rate equal to 8.0 % (3) 17.4 17.4 Total notes payable before unamortized debt issuance costs and discounts 1,902.1 1,881.1 Unamortized debt issuance costs and discounts ( 23.0 ) ( 19.4 ) Total notes payable outstanding, net $ 1,879.1 $ 1,861.7 ( 1 ) Loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance by our CAR Auto Finance operations. ( 2 ) These notes reflect modifications to either extend the maturity date, increase the loan amount or both, and are treated as accounting modifications. ( 3 ) See below for additional information. ( 4 ) Loans are subject to certain affirmative covenants tied to default rates and other performance metrics the failure of which could result in required early repayment of the remaining unamortized balances of the notes. ( 5 ) Loans are associated with VIEs. See Note 7, "Variable Interest Entities" for more information. ( 6 ) Creditors do not have recourse against the general assets of the Company but only to the collateral within the VIEs. * As of June 30, 2024 , the Prime Rate was 8.50 % and the Secured Overnight Financing Rate ("SOFR") was 5.33 %. 16 Table of Contents 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 $ 28.5 million was drawn as of June 30, 2024). 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. 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 $ 39.4 million was drawn as of June 30, 2024). 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. In periods subsequent to October 2016, we amended the original agreement to either extend the maturity date and/or expand the capacity of this revolving credit facility. As of June 30, 2024, the facility's borrowing limit was $ 65.0 million and the facility matures on December 1, 2026. 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 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 $ 31.3 million was drawn as of June 30, 2024). 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 was outstanding as of June 30, 2024) 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 June 30, 2024, 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 $ 20.0 million was drawn as of June 30, 2024). 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, 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 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. The facility was repaid in May 2024. In January 2021, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 35.0 million borrowing limit (of which $ 35.0 million was drawn as of June 30, 2024) that is available to the extent of outstanding eligible principal receivables. This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the greater of the Prime Rate or 4 %. The facility matures on 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. 17 Table of Contents 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 (through a wholly owned subsidiary) entered a term facility with a $ 75.0 million limit (of which $ 0 was outstanding as of June 30, 2024) 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 (through a wholly owned subsidiary) entered a (as subsequently amended) $ 325.0 million ABS agreement (of which $ 325.0 million was drawn as of June 30, 2024) secured by certain credit card receivables (expiring November 15, 2028). 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 (through a wholly owned subsidiary) entered a $ 100.0 million ABS agreement secured by certain credit card receivables (of which $ 0 was outstanding as of June 30, 2024) 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 (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. The terms of the ABS allow for a 3 -year revolving structure with an 18 -month amortization period. 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 was drawn as of June 30, 2024). 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). 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. 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 %. In May 2024, we (through a wholly owned subsidiary) sold $ 250.0 million of ABS secured by certain private label credit receivables (expiring November 15, 2028). 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. The terms of the ABS allow for a 3 -year revolving structure with an 18 -month amortization period. The weighted average interest rate on the securities is fixed at 8.86 %. As of June 30, 2024, we were in compliance with the covenants underlying our various notes payable and credit facilities. Senior Notes, net In November 2021, we issued $ 150.0 million aggregate principal amount of 6.125% Senior Notes due 2026 (the "2026 Senior Notes"). The 2026 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 2026 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 2026 Senior Notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries (excluding any amounts owed by such subsidiaries to the Company). The 2026 Senior Notes bear interest at the rate of 6.125 % per annum. Interest on the 2026 Senior Notes is payable quarterly in arrears on February 1, May 1, August 1 and November 1 of each year. The 2026 Senior Notes will mature on November 30, 2026. We are amortizing fees associated with the issuance of the 2026 Senior Notes into interest expense over the expected life of such notes. Amortization of these fees for the three and six months ended June 30, 2024 and 2023 totaled $ 0.3 million. $ 0.7 million, $ 0.3 million and $ 0.7 million, respectively. We repurchased $ 0 , $ 0.4 million, $ 0.8 million and $ 0.8 million of the outstanding principal amount of these 2026 Senior Notes in the three and six months ended June 30, 2024 and 2023, respectively. In January and February 2024, we issued an aggregate of $ 57.2 million aggregate principal amount of 9.25% Senior Notes due 2029 (the "2029 Senior Notes"). The 2029 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 2029 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 2029 Senior Notes are structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries (excluding any amounts owed by such subsidiaries to the Company). The 2029 Senior Notes bear interest at the rate of 9.25 % per annum. Interest on the 2029 Senior Notes is payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The 2029 Senior Notes will mature on January 31, 2029. We are amortizing fees associated with the issuance of the 2029 Senior Notes into interest expense over the expected life of such notes. Amortization of these fees for the three and six months ended June 30, 2024 totaled $ 0.1 million and $ 0.2 million, respectively. The 2026 Senior Notes and 2029 Senior Notes are collectively included on our condensed consolidated balance sheet as "Senior Notes, net". 18 Table of Contents 10. Commitments and Contingencies General Under finance products available in the private label credit and general purpose credit card channels, consumers have the ability to borrow up to the maximum credit limit assigned to each individual’s account. Unfunded commitments under these products aggregated $ 3.4 billion at June 30, 2024. We have never experienced a situation in which all borrowers have exercised their entire available lines of credit at any given point in time, nor do we anticipate this will ever occur in the future. Moreover, there would be a concurrent increase in assets should there be any exercise of these lines of credit. Additionally, our CAR operations provide floor-plan financing for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. The floor plan financing allows dealers and finance companies to borrow up to the maximum pre-approved credit limit allowed in order to finance ongoing inventory needs. These loans are secured by the underlying auto inventory and, in certain cases where we have other lending products outstanding with the dealer, are secured by the collateral under those lending arrangements as well, including any outstanding dealer reserves. As of June 30, 2024, CAR had unfunded outstanding floor-plan financing commitments totaling $ 11.4 million. 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 $ 23.2 million remains pledged as of June 30, 2024 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 June 30, 2024, 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 when we assess the likelihood of an estimable payment as probable. 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 $ 80.7 million as of June 30, 2024. 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. Concentrations We acquire all of our fair value receivables under agreements with two third -party originating institutions. Our five largest retail partners accounted for over 70 % of our outstanding private label credit receivables as of June 30, 2024. Our general purpose credit card and private label credit receivables base is diverse and spread across individual consumers in the U.S. As of June 30, 2024, only one state (Texas) had receivables concentration in excess of 10% of our total pool of receivables. Litigation We are involved in various legal proceedings that are incidental to the conduct of our business. There are currently no pending legal proceedings that are expected to be material to us. 19 Table of Contents 11. 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): For the Three Months Ended For the Six Months Ended June 30, June 30, 2024 2023 2024 2023 Numerator: Net income attributable to controlling interests $ 24,280 $ 25,089 $ 50,450 $ 51,301 Preferred stock and preferred unit dividends and discount accretion ( 6,308 ) ( 6,289 ) ( 12,600 ) ( 12,516 ) Net income attributable to common shareholders—basic 17,972 18,800 37,850 38,785 Effect of dilutive preferred stock dividends and discount accretion 596 598 1,193 1,190 Net income attributable to common shareholders—diluted $ 18,568 $ 19,398 $ 39,043 $ 39,975 Denominator: Basic (including unvested share-based payment awards) (1) 14,771 14,439 14,722 14,457 Effect of dilutive stock compensation arrangements and exchange of preferred stock 4,037 4,520 4,044 4,513 Diluted (including unvested share-based payment awards) (1) 18,808 18,959 18,766 18,970 Net income attributable to common shareholders per share—basic $ 1.22 $ 1.30 $ 2.57 $ 2.68 Net income attributable to common shareholders per share—diluted $ 0.99 $ 1.02 $ 2.08 $ 2.11 ( 1 ) Shares related to unvested share-based payment awards included in our basic and diluted share counts were 390,096 and 341,837 for the three and six months ended June 30, 2024 , respectively, compared to 246,994 and 217,851 for the three and six months ended June 30, 2023, respectively. 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 both the three and six months ended June 30, 2024, respectively. 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 both the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024 and 2023, 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. 20 Table of Contents 12. 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 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 June 30, 2024, 44,652 shares remained available for issuance under the ESPP and 1,945,463 shares remained available for issuance under the Fourth Amended 2014 Plan. Exercises and vestings under our stock-based compensation plans resulted in no income tax-related charges to paid-in capital during the three and six months ended June 30, 2024 and 2023. Restricted Stock and Restricted Stock Units During the three and six months ended June 30, 2024 and 2023, we granted 3,007 shares, 209,636 shares, ( 220 ) shares and 146,007 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 0.1 million, $ 6.5 million, $ 0 and $ 3.6 million, respectively. We incurred expenses of $ 1.0 million, $ 1.9 million, $ 0.8 million and $ 1.5 million during the three and six months ended June 30, 2024 and 2023, 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 condensed consolidated shareholders’ equity. Our restricted stock awards typically vest over a range of 12 to 60 months (or other term as specified in the grant which may include the achievement of performance measures) and are amortized to salaries and benefits expense ratably over applicable vesting periods. As of June 30, 2024, our unamortized deferred compensation costs associated with non-vested restricted stock awards were $ 8.5 million with a weighted-average remaining amortization period of 3.5 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, 2023 244,225 $ 32.75 Issued 213,921 $ 30.99 Vested ( 64,120 ) $ 33.08 Forfeited ( 4,285 ) $ 32.47 Outstanding at June 30, 2024 389,741 $ 31.73 Stock Options The exercise price per share of the options awarded under the Fourth Amended 2014 Plan must be equal to or greater than the market price on the date the option is granted. The option period may not exceed 10 years from the date of grant. We had expense of $ 0.1 million, $ 0.1 million, $ 0.2 million and $ 0.4 million related to stock option-related compensation costs during the three and six months ended June 30, 2024 and 2023, respectively. When applicable, we recognize stock option-related compensation expense for any awards with graded vesting on a straight-line basis over the vesting period for the entire award. The table below includes additional information about outstanding options: Number of Shares Weighted Average Exercise Price Weighted Average of Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at December 31, 2023 223,406 $ 28.52 Issued — $ — Exercised ( 2,975 ) $ 15.30 Expired/Forfeited ( 2,000 ) $ 15.30 Outstanding at June 30, 2024 218,431 $ 28.82 1.7 $ 1,090,353 Exercisable at June 30, 2024 192,148 $ 27.07 1.6 $ 1,090,353 No options were issued during the three and six months ended June 30, 2024 and 2023. We had $ 0.0 million and $ 0.1 million of unamortized deferred compensation costs associated with non-vested stock options as of June 30, 2024 and December 31, 2023, respectively, with a weighted average remaining amortization period of 0 years as of June 30, 2024. Upon exercise of outstanding options, the Company issues new shares. 21 Table of Contents