What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-12 compared with 2025-03-13 · 226 added, 165 removed, 551 unchanged (42% of the section changed)

8 unchanged sentences

We leverage data, analytics, and innovative technology to unlock access to financial solutions for the millions of Americans who would otherwise be underserved.

According to data published by Experian, 40% of Americans had FICO® scores of less than 700.

We believe this equates to a population of over 100 million everyday Americans in need of access to credit.

These consumers often have financial needs that are not effectively met by larger financial institutions.

By facilitating appropriately priced consumer credit and financial service alternatives with value-added features and benefits curated for the unique needs of these consumers, we endeavor to empower better financial outcomes for Everyday Americans.

We provide technology and other support services to lenders who offer an array of financial products and services to consumers.

Both private label and general purpose card products are originated by The Bank of Missouri and WebBank (collectively, our “bank partners”).

Both private label and general purpose card products are originated by The Bank of Missouri, WebBank and First Bank and Trust (collectively, our “bank partners”).

Our bank partners originate these accounts through multiple channels, including retail and healthcare point-of-sale locations, direct mail solicitation, digital marketing and partnerships with third parties.

9 unchanged sentences

In this Report, "receivables" or "loans" typically refer to receivables we have purchased from our bank partners or from other third parties.

On September 11, 2025, the Company closed the acquisition of all outstanding equity interests of Mercury, a leading data- and tech-centric credit card platform utilized by bank partners to provide credit cards to near-prime consumers in the U.S.

The acquisition aligns with Atlanticus’ strategic objective to expand its consumer credit offerings and increase scale within its credit card operations.

At the closing, Mercury became a wholly owned subsidiary of Atlanticus.

The acquisition of Mercury adds an established top 25 credit card program to the suite of programs that Atlanticus manages on behalf of bank partners.

Mercury’s credit card offerings, including Mercury-branded and co-branded programs, complement Atlanticus’ general purpose credit card, retail credit, patient financing, and dealer solutions products.

The total purchase consideration was approximately $166.5 million in cash.

In addition to the purchase consideration, the seller has the opportunity under the purchase agreement to receive earn out payments for up to three years following the closing of the acquisition in an amount equal to 75% of the amount by which the charge-offs of Mercury’s acquired receivables are less than agreed-upon charge-off levels over a limited period of time.

We have determined the contingent consideration meets the definition of a derivative instrument under Accounting Standards Codification ("ASC") 815.

We have recorded the derivative at fair value calculated using internally-developed estimates.

These estimates on performance of the acquired portfolio include expected credit losses, payment rates, servicing costs, discount rates and yields earned on our general purpose credit card receivables.

See Note 7, "Fair Values of Assets and Liabilities" for more information.

As a result of the acquisition, the Company added approximately $3.2 billion in gross credit card receivables and increased the number of customers served on behalf of our bank partners by 1.3 million.

These receivables have been included with our existing general purpose credit card receivables in our reported results of operations and other discussions below.

Credit as a Service Segment

Currently, within our CaaS segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $42 billion in consumer loans over more than 25 years of operating history, to support lenders in offering more inclusive financial services.

Currently, within our CaaS segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing $50 billion in consumer loans over more than 30 years of operating history, to support lenders in offering more inclusive financial services.

These products include private label credit cards using the Fortiva and Curae brand names as well as merchant associated brands.

Private label credit products associated with the healthcare space are generally issued under the Curae brand while all other retail partnerships, including those in consumer electronics, furniture, elective medical procedures, and home-improvement use the Fortiva brand or use our retail partners’ brands.

Our general purpose credit cards use the Aspire, Imagine and Fortiva brand names.

General purpose credit cards use the Aspire, Imagine, Mercury and Fortiva brand names.

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.

5 unchanged sentences

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

One of these companies, Fintiv Inc., has sued Apple, Inc., Walmart, Inc., and PayPal Holdings, Inc.

One of these companies, Fintiv Inc., has sued Apple, Inc., and Walmart, Inc.

for patent infringement.

11 unchanged sentences

We have made meaningful changes to our practices over the past several years, and because our account management practices are evolutionary and dynamic, it is possible that we may make further changes to these practices, some of which may produce positive, and others of which may produce adverse, effects on our operating results and financial position.

Customers at the lower end of the credit score range intrinsically have higher loss rates than do customers at the higher end of the credit score range.

Customers at the lower end of the credit score range intrinsically have higher loss rates than customers at the higher end of the credit score range.

As a result, the products we support are priced to reflect expected loss rates for our various risk categories.

51 unchanged sentences

Marketing and solicitation

Depreciation and amortization

Total operating expenses:

1 unchanged sentence

Net income attributable to controlling interests

Net income attributable to controlling interests to common shareholders

Net income attributable to common shareholders

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

3 unchanged sentences

Period-over-period results primarily relate to growth in private label credit and general purpose credit card products, the receivables of which increased to $6,953.4 million as of December 31, 2025, from $2,724.8 million as of December 31, 2024.

We experienced growth in total operating revenues for both our general purpose credit card and our private label credit receivables for the year ended December 31, 2024, when compared to the same period in 2023.

These increases were primarily due to consistent quarterly growth in both new credit card customers serviced and seasonally driven growth with private label credit receivables and corresponding merchant fees.

Growth also reflected increased fee and finance pricing requirements for all new receivable acquisitions in response to increased costs of capital used to finance these receivable acquisitions.

Additionally , growth within our private label credit receivables for the second and third quarters of 2024 was largely due to continued growth associated with our largest existing retail partners, growth which typically increases late in the second quarter and into the third quarter of each year based on our retail partners' seasonal sale cycles.

This seasonal growth in private label credit receivables was at its highest in the third quarter of 2024 when we increased receivable purchases by $152.3 million when compared to the third quarter of 2023.

Growth in these receivables includes general purpose credit card receivables associated with our acquisition, and subsequent growth of Mercury, which added $3,214.0 million in receivables as of December 31, 2025 and contributed $309.0 million to Total operating revenue and other income for the period ending December 31, 2025.

Excluding the receivables acquired pursuant to this acquisition, receivables were $3,739.4 million as of December 31, 2025.

We experienced growth in total operating revenues and other income for both our general purpose credit card and our private label credit receivables for the year ended December 31, 2025, when compared to the same period in 2024.

These increases were primarily due to quarterly growth in both new credit card and private label customers serviced, the total active accounts of which increased by over 1.0 million as of December 31, 2025 when compared to December 31, 2024 (excluding those serviced accounts added as part of our acquisition of Mercury) and also due to the recognition of merchant fees associated with new private label receivable acquisitions, which increased $52.8 million for the year ended December 31, 2025, from the same period in 2024.

For our general purpose credit card receivables, we experienced strong growth in finance and fee income (increasing $558.2 million for the year ended December 31, 2025 compared to the same period in 2024) resulting from the above noted growth in the acquisition of receivables and our acquisition of Mercury.

The relative mix of receivable acquisitions can lead to some variation in our corresponding revenue as general purpose credit card receivables typically generate higher gross yields than private label credit receivables do.

We are currently experiencing continued period-over-period growth in private label credit and general purpose credit card receivables—growth that we expect to result in net period-over-period growth in our total interest income and related fees for these operations throughout 2025.

During 2024 we experienced higher growth rates for our private label credit receivables than for our general purpose credit card receivables.

As discussed above, these private label receivables typically generate lower gross yields than our general purpose credit card receivables.

This growth in private label credit receivables, relative to growth in general purpose credit card receivables offset some of the increased fee and finance pricing requirements discussed above.

We experienced period-over-period increases in private label credit and general purpose credit card receivables.

During 2024 and 2025, we experienced higher growth rates for our private label credit receivables than for our general purpose credit card receivables.

While the products are designed to provide for similar net returns, private label credit receivables typically generate lower gross yields and lower gross losses than our general purpose credit card receivables.

As our private label credit receivables growth is typically strongest during the second and third quarters of each year, we expect seasonal contraction in receivable acquisitions for that portfolio in other quarters.

Growth in our general purpose credit card receivables is expected to continue throughout 2026 and to outpace growth in our private label credit receivables as we continue to expand our marketing efforts.

We currently expect our private label credit receivable balance to increase modestly in 2026 as volumes of receivables acquisitions, for which we have limited loss exposure due to agreements with retail partners, are expected to slow.

Additionally, as part of our acquisition of Mercury, we are currently enacting a number of product, policy and pricing changes on the newly acquired portfolio of general purpose credit card receivables.

We expect these changes to result in increased yield for this portfolio and result in additions to our Total operating revenue and other income in 2026 and beyond.

Certain of the product, policy and pricing changes, and their impact on the acquisition of new receivables, will take several quarters to be fully realized.

Future periods’ growth is dependent on the addition of new retail partners to expand the reach of private label credit operations as well as growth within existing partnerships and the level of marketing investment for the general purpose credit card operations.

5 unchanged sentences

We earn a portion of the interchange fee the card networks charge merchants for the transaction.

Additionally, we receive network incentives for credit card transactions, associated with accounts we service, processed through interchange networks.

We earn servicing income by servicing loan portfolios for third parties.

1 unchanged sentence

The above discussions on expectations for finance, fee and other income are based on our current expectations.

Recent rules enacted by the Consumer Financial Protection Bureau ("CFPB"), which, if implemented, would further 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 and continue to serve consumers, we have worked collaboratively with our bank partners to assist them in taking 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).

While our bank partners have the flexibility to unilaterally make changes to program offerings and must approve all changes to existing or new program offerings, we are only obligated to acquire receivables originated by our bank partners when they utilize mutually agreed upon underwriting standards.

We believe these product, policy, and pricing changes will offset the negative impact of potential reduced late fees.

The changes will take several quarters to fully implement.

For more information, refer to Part I, Item 1A "Risk Factors" and, in particular, " The CFPB recently issued a final rule regarding credit card late fees, which represents a significant departure from the rules that are currently in effect.

The rules are currently enjoined from implementation.

If implemented in the future, we expect the rule would have an adverse impact on our business, results of operations and financial condition for at least the short term and, depending on the effectiveness of our actions taken in response to the rule, potentially over the long term ."

Other non-operating income.

Other non-operating revenue.

Included within our Other non-operating income category is income (or loss) associated with investments in non-core businesses or other items not directly associated with our ongoing operations.

2 unchanged sentences

Interest expense.

Variations in interest expense are due to new borrowings and increased costs of capital associated with growth in private label credit and general purpose credit card receivables and CAR operations as evidenced within Note 10, "Notes Payable," to our consolidated financial statements, offset by our debt facilities being repaid commensurate with net liquidations of the underlying credit card, auto finance and installment loan receivables that serve as collateral for the facilities.

Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our private label credit and general purpose credit card platform increased to $2,157.8 million as of December 31, 2024, from $1,796.0 million as of December 31, 2023.

Variations in interest expense are due to new borrowings and increased costs of capital associated with growth in private label credit, general purpose credit card receivables, and CAR operations as evidenced within Note 11, "Notes Payable," to our consolidated financial statements, as well as the addition of Mercury and its associated collateralized borrowings.

This growth was offset by our debt facilities being repaid commensurate with net liquidations of the underlying credit card, auto finance and installment loan receivables that serve as collateral for the facilities.

Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our private label credit and general purpose credit card platform (including those associated with the Mercury acquisition) increased to $5,788.6 million as of December 31, 2025, from $2,157.8 million as of December 31, 2024.

This growth, period over period, included notes payable associated with our Mercury acquisition of $2,847.9 million as of December 31, 2025.

Interest expense increased $141.7 million for the year ended December 31, 2025, when compared to the year ended December 31, 2024.

The majority of this increase in outstanding debt relates to the addition of multiple credit facilities in 2023 and 2024 associated with growth in our card and loan receivables, coupled with issuances of 9.25% Senior Notes due 2029 (the "2029 Senior Notes").

In the twelve months ended December 31, 2024, we sold approximately $142.2 million aggregate principal amount of 2029 Senior Notes.

The majority of this increase in interest expense relates to the addition of multiple credit facilities in 2024 and 2025 associated with growth in our card and loan receivables, coupled with the issuances of 9.25% Senior Notes due 2029 (the "2029 Senior Notes") and our issuance of $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 (the "2030 Senior Notes").

Recent increases in the effective interest rates on debt have increased our interest expense as we have raised additional capital (or replaced existing facilities) over the last two years.

We anticipate additional debt financing over the next few quarters as we continue to grow coupled with higher effective interest rates on new debt compared to rates on maturing debt.

As such, we expect our quarterly interest expense for these operations to increase compared to prior periods.

We anticipate additional debt financing over the next few quarters as we continue to grow our receivables.

As such, and when coupled with the interest expense associated with the acquired Mercury debt facilities, we expect our quarterly interest expense to increase compared to prior periods throughout 2026.

Provision for credit losses.

2 unchanged sentences

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

We have experienced a period-over-period increase of $14.2 million in our provision for credit losses (when comparing the year ended December 31, 2024 to the same period in 2023) primarily associated with increases in loss estimates associated with our Auto Finance segment's floorplan loans.

We have experienced a period-over-period decrease of $10.1 million in our provision for credit losses (when comparing the year ended December 31, 2025 to the same period in 2024) as losses decreased between periods while estimates for our receivables future losses have remained consistent with no significant changes in receivable balances.

Most risk of loss in our Auto Finance segment is widely diversified with consumer auto loans across the U.S.

2 unchanged sentences

Nevertheless, the timing of losses is difficult to predict.

Recent stress noted at some dealer locations is incorporated into our loss estimates for floorplan and consumer loans and resulted in increased provisions for credit losses for the year ended December 31, 2024.

Additionally, we recorded a provision for credit losses associated with our notes receivable from consumer technology platforms.

These include notes receivable from 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.

Stress, first noted at some dealer locations was incorporated into our loss estimates for floorplan and consumer loans and resulted in increased provisions for credit losses during 2024.

With those increased loss rates already incorporated in our current allowance for credit losses, we do not expect to see increases in year over year amounts absent significant growth in the associated receivables.

See Note 3, "Significant Accounting Policies and Consolidated Financial Statement Components," to our consolidated financial statements for further credit quality statistics and analysis.

Changes in fair value of loans.

We experienced losses in our total Changes in fair value of loans of $1,103.0 million for the year ended December 31, 2025.

This compares to losses of $733.5 million for the year ended December 31, 2024.

Changes in fair value of loans includes 1) current period principal and finance charge-offs of fair value receivables, 2) the normal accretion (or amortization) of fair value related to prior period finance charges and fees less than (or in excess of) the contractual amounts billed, which is recognized in revenue during the period, and offset by gains typically recognized in current period earnings as the fair value of finance charges and fees is greater than the contractual amounts billed during a period, 3) losses on acquisitions of our private label credit receivables and 4) the impact of changes in the fair value assumptions underlying receivables at the end of the measurement period.

The increase in losses in Changes in fair value of loans for the year ended December 31, 2025 when compared to the year ended December 31, 2024, was largely due to a decrease in the net positive impacts of Changes in fair value of loans at fair value, included in earnings, which offset charge-offs incurred during the period.

These impacts totaled $(48.0) million for the year ended December 31, 2025, compared to $129.8 million for the year ended December 31, 2024.

Results impacting the $(48.0) million and $129.8 million in Changes in fair value of loans at fair value, included in earnings for the years ended December 31, 2025 and 2024, respectively, are as follows:

1) net gains of $136.6 million for the year ended December 31, 2025, associated with the normal (net) accretion of fair value related to finance charges and fees, which is recognized in revenue during the period, and gains typically recognized in earnings as the fair value of certain finance charges and fees is greater than the contractual amounts billed during a period (compared to $114.5 million of such gains for the year ended December 31, 2024, respectively), 2) net losses of $176.0 million for the year ended December 31, 2025, respectively, on the acquisition of private label credit receivables, which often have below market pricing and for which we often receive merchant fees which ensure we earn adequate returns (compared to $161.6 million of such losses for the year ended December 31, 2024, respectively) and 3) net losses of $8.6 million (compared to $176.9 million of such increase for the year ended December 31, 2024) related to unfavorable changes for the year ended December 31, 2025 but favorable changes for the year ended December 31, 2024, in fair value assumptions.

These unfavorable assumption changes year-over-year were largely due to a marginal decline in the fair value associated with our general purpose credit card receivables, largely due to significant increases in new customers served added in the third and fourth quarters of 2025, which tend to have lower initial fair values until the associated receivables have seasoned through peak charge off periods.

Additionally, during 2025 we continued to have significant increases in retail and general purpose credit card receivables acquired, which tend to have a lower fair values on the date of acquisition than those that have matured past peak charge off periods.

This unfavorable change was offset by improvements in the underlying performance in the form of generally lower delinquencies and higher net returns.

Adding to this decline in Changes in fair value of loans were slight increases in principal and finance charge-offs (net of recoveries), which totaled $1,055.0 million for the year ended December 31, 2025 compared to $863.3 million for the year ended December 31, 2024.

These charge-offs increased period over period primarily due to increases in our period end managed receivables although the increase was offset due to the improved performance in both our private label credit and general purpose credit card delinquencies rates over the past several quarters as well as changes to our relative mix of receivables that include significant increases in the acquisition of private label credit receivables for which we have limited loss exposure due to agreements with retail partners (see additional discussion related to delinquencies and charge-offs below).

For all periods presented, we included asset performance degradation in our forecasts to reflect both changes in assumed asset level economics and 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.

In recent periods we have removed some of this expected degradation based on observed asset stabilization, implementation of mitigants to a potential change in late fee billings and general improvements in U.S.

economic expectations due to the improved inflation environment.

See Note 6 "Fair Values of Assets and Liabilities" to our consolidated financial statements included herein for further discussion of this calculation.

In recent periods we have removed some of this expected degradation based on observed asset stabilization and an improved inflation environment.

See Note 7 "Fair Values of Assets and Liabilities" to our consolidated financial statements included herein for further discussion of our fair value calculation.

We may, however, adjust our forecasts to reflect observed macroeconomic events.

Thus, the fair values are subject to potentially high levels of volatility if we experience changes in the quality of our credit card receivables or if there are significant changes in market valuation factors (e.g., interest rates and spreads) in the future.

Tightened underwriting standards shifted new receivable acquisitions to consumers at the higher end of the FICO bands in which our bank partners participate, presumably resulting in improved overall credit performance of our acquired receivables.

When coupled with those existing assets negatively impacted by inflation gradually becoming a smaller percentage of the outstanding portfolio, we expect to see overall improvements in the measured fair value of our portfolios of acquired receivables.

We expect to see overall improvements in the measured fair value of our portfolios of acquired receivables although growth rates of our portfolios may impact the timing of these improvements as receivables associated with newer serviced customers tend to have lower associated fair values until they have seasoned through peak charge off periods.

As part of our analysis to determine the fair value of our receivables, we look at several key factors that influence the overall fair value.

Additionally, receivables acquired as part of our acquisition of Mercury were initially valued at a lower fair value than our existing portfolio of credit card receivables.

We are currently enacting a number of product, policy and pricing changes on the Mercury portfolio of general purpose credit card receivables.

Once implemented, we would expect to see continued improvement in the fair value of these receivables.

Qualitative discussion of these factors is as follows:

1 unchanged sentence

As the size and composition of our portfolio fluctuates, or as we experience periods of growth or decline in our acquisition of new receivables, this rate can fluctuate.

We have experienced marginal declines in our weighted-average, Gross yield, net of finance charge charge-offs rate used in our fair value calculations as of December 31, 2024, when compared to rates used as of December 31, 2023 largely due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

Our general purpose credit card receivables experienced an increase in this same rate for the noted periods due to the aforementioned product, policy, and pricing changes.

As these product policy and pricing changes continue to further impact both newly acquired and existing private label credit receivables and general purpose credit card receivables, we expect our gross yield, net of finance charge charge-offs rate to increase over time although the pace and timing of purchases for new general purpose credit card receivables, relative to those of private label credit receivables, could result in near term declines in this rate.

We have experienced marginal declines in our weighted-average, Gross yield, net of finance charge charge-offs rate used in our fair value calculations of our private label credit receivables as of December 31, 2025, when compared to rates used as of December 31, 2024 largely due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

Largely offsetting this decline, our general purpose credit card receivables experienced an increase in this same rate for the noted periods due to changes in the mix of receivables acquired towards higher yielding assets which partially offset the net $(48.0) million of net loss noted above for the year ended December 31, 2025.

This shift in our mix of acquired receivables will continue to positively impact both newly acquired and existing private label credit receivables and general purpose credit card receivables throughout 2026.

We expect our gross yield, net of finance charge charge-offs rate to increase over time although the pace and timing of purchases for new general purpose credit card receivables, relative to those of private label credit receivables, could result in near term declines in this rate.

The acquisition of private label credit receivables, particularly those noted above, is largely seasonal in nature, peaking in the second and third quarters of each year.

As a result, we would expect this weighted average rate to decrease in those periods absent the offset of our higher yielding general purpose credit card receivables acquired during the same period.

While our bank partners have enacted product, policy, and pricing changes on our existing receivables (and all newly acquired receivables), these changes will take several quarters to be fully realized.

Payment Rate – Our total portfolio payment rate has declined marginally over time largely due to the increased relative weight of acquisitions of private label credit receivables to our overall pool of receivables.

These receivables tend to include less finance and fee billings that factor into monthly payment amounts (due to associated merchant fee billings that provide us adequate returns on the receivables) and have payment terms that extend over longer periods.

As a result, we would expect this weighted average rate to decrease in those periods (as was noted during the second and third quarter of 2025) absent the offset of our higher yielding general purpose credit card receivables acquired during the same period.

While our bank partners have enacted some product, policy, and pricing changes on our portfolio of receivables associated with our acquisition of Mercury, some of these changes have not yet been fully implemented and will take several quarters to be fully realized.

While the addition of receivables associated with the Mercury acquisition muted this decline in 2025, private label credit receivables tend to include less finance and fee billings that factor into monthly payment amounts (due to associated merchant fee billings that provide us adequate returns on the receivables) and have payment terms that extend over longer periods.

As a result, payment rates on private label credit receivables are naturally lower than those associated with our general purpose credit card receivables.

This was particularly influenced by strong growth in the aforementioned private label credit receivables acquired during the second and third quarters of 2024 that have limited loss exposure and tend to have longer associated terms and lower effective payment rates.

This decline in payment rates is not evident in our credit card portfolio, which maintained relatively stable payment rates for the years ended December 31, 2024 and 2023.

This was particularly influenced by strong growth in the aforementioned private label credit receivables acquired during the second and third quarters of 2024 and 2025 that have limited loss exposure and tend to have longer associated terms and lower effective payment rates.

This decline in payment rates is not evident in our credit card portfolio, which has maintained relatively stable payment rates for all periods in 2025 and 2024.

Servicing Rate – Our servicing rate has fluctuated marginally over time as we continue to implement processes and strategies to more efficiently and effectively service the accounts underlying our outstanding receivables portfolios.

As delinquent accounts tend to have a higher cost of servicing, recent trending declines in our receivables that are 90 or more days past due also has resulted in lower expected future costs.

We expect our servicing rate will remain relatively consistent over the next several quarters.

Expected Net Principal Credit Loss Rate – Our Expected net principal credit loss rate is chiefly impacted by the relative makeup of receivables within our pools.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners, particularly in the second and third quarters of 2024, our Expected net principal credit loss rate has decreased.

Additionally, we have noted reductions in the Expected net principal credit loss rate associated with our general purpose credit card receivables, which have shown continued overall improvements in delinquency rates.

With growth in the acquisition of our private label credit receivables, particularly those noted above with limited loss exposure, and growth in better performing general purpose credit card receivables, we expect this weighted average rate to decrease over the next several quarters (when compared to similar periods in prior years) before stabilizing.

Discount Rate – Our weighted average discount rate has remained relatively consistent over the past several quarters (and is expected to continue to remain consistent or go down).

We expect our servicing rate will remain relatively consistent over the next several quarters and as such, do not expect changes in our Servicing Rate to create a meaningful impact in our fair value calculations.

Expected Net Principal Credit Loss Rate – Our Expected net principal credit loss rate is chiefly impacted by the relative makeup of receivables within our pools rather than changes in expected performance of those underlying pools.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners, particularly in the second and third quarters of 2024 and 2025, our Expected net principal credit loss rate has decreased.

Offsetting this, while expected net principal credit loss rates associated with our general purpose credit card receivables have shown continued overall improvements as evidenced by delinquency rates period-over-period, recent strong growth in this portfolio of receivables associated with newer serviced accounts has resulted in an overall increase to our Expected Net Principal Credit Loss Rate as these receivables associated with newer accounts have not seasoned and continue to make up a larger percentage of the overall receivables portfolio.

With growth in the acquisition of our general purpose credit receivables with slightly higher loss rates expected to exceed those associated with private label credit, particularly those noted above with limited loss exposure, we expect this weighted average rate to increase marginally over the next several quarters.

This decline in the Expected Net Principal Credit Loss Rate is included as a component of the net $(48.0) million loss in Changes in fair value of loans at fair value noted above.

Discount Rate – Our weighted average discount rate has remained relatively consistent over the past several quarters.

Primarily impacting modest changes in our weighted average discount rate are mix shifts in the type of receivables acquired, as different receivable types (general purpose credit card receivables versus private label credit receivables) have different expected return requirements used by third-party market participants.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners that reimburse us for credit losses, our weighted average discount rate has decreased marginally.

We have assigned a lower discount rate when assessing the fair value of these receivables to reflect the significantly lower risk and return characteristics.

As a result, our weighted average discount rate has decreased marginally.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners that reimburse us for credit losses, we would expect our weighted average discount rate to decrease marginally as these receivables have appropriately lower expected return requirements.

Offsetting this expected decline is continued growth in our general purpose credit receivables which tend to have slightly higher return requirements.

While changes in this mix do impact the weighted average discount rate, they do not have a direct impact on the calculation of fair value for our individual pools.

We consider asset specific financing costs associated with our receivables (coupled with our internal cost of equity capital in agreements that require credit enhancements) as the best indicator of return requirements used by third-party market participants.

If the Federal Reserve continues to decrease interest rates or we observe a corresponding decrease in return requirements used by third-party market participants, we may further reduce our weighted average discount rate.

If the Federal Reserve continues to decrease interest rates or we observe a corresponding consistent decrease in return requirements used by third-party market participants, we may further reduce our weighted average discount rate.

Total operating expenses.

Total operating expenses variances for the year ended December 31, 2025, relative to the year ended December 31, 2024, reflect the following:

increases in salaries and benefit costs related to both the growth in the number of employees and inflationary compensation pressure.

We expect some continued increase in this cost in 2025 compared to 2024 as we expect to continue to invest in technology, risk underwriting and compliance and as a result we expect to increase our number of employees;

increases in card and loan servicing expenses due to growth in receivables associated with our investments in private label credit and general purpose credit card receivables, which grew to $2,724.8 million outstanding from $2,411.3 million outstanding at December 31, 2024 and December 31, 2023, respectively, and costs associated with the implementation of product, policy, and pricing changes discussed above.

increases in salaries and benefit costs related to both the growth in the number of employees, including those added as part of our acquisition of Mercury, and increases in related compensation.

Subsequent to our acquisition of Mercury, we eliminated certain redundant positions, which resulted in termination costs of approximately $4.3 million for the year ended December 31, 2025.

We expect continued increase in salaries and benefits for 2026 compared to comparable periods in 2025 due to this acquired workforce;

increases in card and loan servicing expenses for the year ended December 31, 2025, when compared to the same period in 2024 due to growth in receivables associated with our investments in private label credit and general purpose credit card receivables, which grew to $6,953.4 million outstanding from $2,724.8 million outstanding at December 31, 2025 and December 31, 2024, respectively, and costs associated with the implementation of product, policy, and pricing changes discussed above.

As many of the expenses associated with our card and loan servicing efforts are now variable based on the amount of underlying receivables, we would expect this number to continue to grow in 2026 commensurate with growth in our receivables;

Offsetting a portion of this increase are significant reductions in our servicing costs per account, resulting from the realization of greater economies of scale and increased use of automation as our receivables have grown.

modest increases in marketing and solicitation costs for the year ended December 31, 2024, when compared to the same period in 2023, as growth in new accounts serviced during 2024 was in line with growth observed throughout 2023.

These modest increases in marketing and solicitation costs are a direct result of the increased costs associated with assisting our bank partners to acquire new consumers using tightened underwriting standards resulting from CFPB plans to restrict late fee assessments.

As we continue to adjust our underwriting standards to reflect changes in fee and finance assumptions on new receivables, and allow for overall increases in the cost to successfully market to consumers, we expect period over period marketing costs for 2025 to increase relative to those experienced in 2024, although the frequency and timing of increased marketing efforts could vary and are dependent on macroeconomic factors such as national unemployment rates and federal funds rates; and

other expenses primarily relate to costs associated with occupancy or other third party expenses that are largely fixed in nature.

increases in marketing and solicitation costs for the year ended December 31, 2025, when compared to the same period in 2024, primarily due to quarterly growth in both new credit card and private label customers serviced, the total accounts of which increased over 2.3 million as of December 31, 2025 when compared to December 31, 2024 (including approximately 1.3 million serviced accounts added as part of the Mercury acquisition).

These increases in marketing and solicitation costs are a direct result of the increased costs associated with assisting our bank partners to acquire new consumers.

As we continue to adjust our underwriting standards to reflect changes in fee and finance assumptions on new receivables, continue to expand under our newly acquired Mercury brand and allow for overall increases in the cost to successfully market to consumers, we expect period over period marketing costs for 2025 to increase relative to those experienced in 2024, although the frequency and timing of increased marketing efforts could vary and are dependent on macroeconomic factors such as national unemployment rates and federal funds rates; and

increases in other expenses for the year ended December 31, 2025, when compared to the same period in 2024, primarily related to costs associated with occupancy or other third party expenses that are largely fixed in nature.

Some costs including occupancy, legal and travel expenses can be variable based on growth and have grown as we expand our marketing and growth efforts.

Increases in this category for the year ended December 31, 2024, when compared to the year ended December 31, 2023 primarily relate to certain nonrecurring costs associated with accounting and legal expenditures.

While we expect some increase in these costs as we continue to grow our receivable portfolios, we do not anticipate the increase to be meaningful.

Increases in this category for the year ended December 31, 2025, when compared to the same period in 2024 primarily relate to ongoing increased costs associated with accounting and legal expenses as well as certain transaction costs associated with our Mercury acquisition.

These increased costs are offset by certain nonrecurring costs in these categories experienced in the first quarter of 2024.

While we expect some continued increase in these associated costs as we continue to grow our receivable portfolios, we do not anticipate the increase to be meaningful.

Certain operating costs are variable based on the levels of accounts and receivables we service (both for our own receivables and for others) and the pace and breadth of our growth in receivables.

1 unchanged sentence

As we have significantly grown our managed receivables levels over the past two years with minimal increase in the fixed portion of our card and loan servicing expenses as well as our salaries and benefits costs, we have realized greater operating efficiency.

Notwithstanding our cost management activities, we expect increased levels of expenditures associated with anticipated growth in private label credit and general purpose credit card operations.

As many expenses associated with our card and loan servicing efforts are now variable based on the amount of underlying receivables, we would expect certain expenses to continue to grow in 2026 commensurate with growth in our receivables balances.

These expenses will primarily relate to the variable costs of marketing efforts and card and loan servicing expenses associated with new receivable acquisitions.

Unknown ongoing potential impacts related to the aforementioned inflation and other global disruptions could result in more variability in these expenses and could impair our ability to acquire new receivables, resulting in increased costs despite our efforts to manage costs effectively.

Unknown ongoing potential impacts related to potential inflation and other global disruptions could result in more variability in these expenses and could impair our ability to acquire new receivables, resulting in increased costs despite our efforts to manage costs effectively.

Noncontrolling interests.

1 unchanged sentence

In November 2019, a wholly owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $1.00 per unit to an unrelated third party.

The units carry a 16% preferred return 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.

The units carried a 16% preferred return paid quarterly.

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 Company has the right to redeem the Class B preferred units at any time with notice.

During the year ended December 31, 2024, we redeemed 50.5 million of the Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon.

In March 2025, we redeemed the remaining 50.0 million of Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon.

We include the Class B preferred units as temporary noncontrolling interests on the consolidated balance sheets and the associated dividends are included as a reduction of our net income attributable to common shareholders on the consolidated statements of income.

In periods where present, we include the Class B preferred units as temporary noncontrolling interests on the consolidated balance sheets and the associated dividends are included as a reduction of our net income attributable to common shareholders on the consolidated statements of income.

Income Taxes.

We experienced an effective income tax expense rate of 20.4% and 20.6% for the years ended December 31, 2024, and December 31, 2023, respectively.

Our effective income tax expense rate for the year ended December 31, 2024, is below the statutory rate principally due to (1) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes and (2) a loss related to our unrecovered investment in a foreign subsidiary which ceased operations during the year and with respect to which we had used “permanently reinvested earnings” accounting in our consolidated financial statements.

Our effective income tax expense rate for the year ended December 31, 2023, is below the statutory rate principally due to 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.

In both years, our effective income tax expense rate would have been even lower relative to the statutory rate but not for (1) state and foreign income tax expense, (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, with respect to compensation paid to our covered employees—such deduction disallowance which fully offset the tax benefit of 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.

Further details related to the above are reflected in Note 12, "Income Taxes".

We experienced effective income tax rates of 24.2% and 20.4% for the years ended December 31, 2025, and December 31, 2024, respectively.

Our effective income tax rate for the year ended December 31, 2025, is above the statutory rate principally due to our expenses for (1) state income taxes, including the effects of law changes enacted in the year ended December 31, 2025, in certain states in which we operate and (2) taxes on global intangible low-taxed income.

Offsetting the foregoing items were the tax effects of deductions associated with (1) exercises of stock options and vestings of restricted stock at the times when the fair value of our stock exceeded such share-based awards’ grant date values and (2) amounts characterized in our condensed consolidated financial statements as dividends on preferred stock (which was outstanding until its redemption in the first quarter of 2025), such amounts which constituted deductible interest expense on debt for tax purposes.

Our effective income tax rate for the year ended December 31, 2024, is below the statutory rate principally due to the tax effects of deductions associated with (1) amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituted which deductible interest expense on debt for tax purposes and (2) a loss related to our unrecovered investment in a foreign subsidiary which ceased operations during the year and with respect to which we had used “permanently reinvested earnings” accounting in our consolidated financial statements.

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.

1 unchanged sentence

We recognized $0.2 million and $0.6 million in potential interest associated with uncertain tax positions during the years ended December 31, 2025, and December 31, 2024, respectively.

Recent Tax Law Changes and Accounting Pronouncements

On July 4, 2025 , the One Big Beautiful Bill Act ("OBBBA") was enacted into law.

OBBBA includes significant changes to existing U.S.

federal and international tax provisions, none of which, however, resulted in material changes to our reported effective income tax rates for 2025 and 2024.

In December 2023, the FASB issued 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 their rate reconciliations, (ii) income or 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 (separately by federal, state and local, and foreign jurisdictions).

Among other changes, Topic 740 also requires entities to disclose their income tax payments to federal, state and local, and foreign jurisdictions.

The guidance is effective for annual periods beginning after December 15, 2024.

We adopted ASU 2023-09 for the year ended December 31, 2025, and elected to apply the standard retrospectively to all periods presented.

Adoption of this standard did not have a material effect on our consolidated financial statements, but it did result in additional income tax disclosures within Note 13 "Income Taxes" to our consolidated financial statements.

Non-GAAP Financial Measures

16 unchanged sentences

If we control through direct ownership or exert a controlling interest in the entity, we consolidate it and reflect its operations as noted above.

Below are (i) the reconciliation of Loans at fair value to Loans at amortized cost and (ii) the calculation of managed receivables:

The following discussion of our managed receivables includes the aforementioned acquisition of Mercury and its portfolio of approximately $3,214.0 million (as of December 31, 2025) in general purpose credit card receivables.

As we acquired the receivables on September 11, 2025, the financial impact of the acquisition on the quarter is limited to fees, billings and expenses subsequent to that date, however the receivables acquired are included in the denominator of the ratios calculated below.

Below is the reconciliation of Loans at fair value to Total managed receivables:

At or for the Three Months Ended

11 unchanged sentences

First, managed receivables data include the undiscounted contractual amounts due on the underlying consumer receivable plus fee billings (including fees and finance charges), less actual charge-offs.

Second, managed receivables data is also based on actual charge-offs as they occur and without regard to any merchant fees or changes in fair value of loans.

Third, for managed receivables data, we amortize certain fees (such as annual and merchant fees) and expenses (such as marketing expenses) associated with our Fair Value Receivables over the expected life of the corresponding receivable and recognize other costs, such as claims made under credit deferral programs, when paid.

Under fair value accounting, these fees are recognized when billed or in the case of merchant fees, are recognized when the merchant confirms the transaction with us, which fulfills the terms of the associated merchant and marketing expenses are recognized when incurred.

A reconciliation of our operating revenues and other income, net of finance and fee charge-offs, to comparable amounts used in our calculation of Total managed yield ratios is as follows:

123 unchanged sentences

Managed receivables levels.

We continue to experience overall period-over-period quarterly receivables growth with over $314.1 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners from December 31, 2023 to December 31, 2024.

The addition of large private label credit retail partners and ongoing purchases of receivables arising in accounts issued by our bank partners to customers of our existing retail partners helped grow our private label credit receivables by $292.4 million in the twelve months ended December 31, 2024.

We continue to experience overall period-over-period quarterly receivables growth with over $4,228.7 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners between December 31, 2025 and December 31, 2024.

The increased purchases of receivables arising in accounts issued by our bank partners to customers of our existing retail partners helped grow our private label credit receivables by $625.1 million in the twelve months ended December 31, 2025 primarily related to seasonal expansion with one of our retail partners.

The seasonal expansion with this retail partner tends to peak in the second and third quarters of each year.

Our general purpose credit card receivables grew by $3,603.6 million during the twelve months ended December 31, 2025.

While some of our merchant partners continue to face year-over-year growth challenges, others are benefiting from continued consumer spending and a growing economy and have expanded their relationship with us.

Our general purpose credit card portfolio continues to experience modest growth in total managed receivables.

Growth in 2024 was somewhat restricted due to our initial response to rule changes enacted by the CFPB.

In order to mitigate these impacts and continue to serve consumers, 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 potential reduced late fees.

The changes will take several quarters to fully implement and some changes (for private label credit receivables) will only be implemented upon an effective date for the potential CFPB rules.

In the short term, these changes could impact new receivable acquisitions.

Growth in future periods for our private label credit receivables largely is dependent on the addition of new retail partners to the private label credit origination platform, the timing and size of solicitations within the general purpose credit card platform by our bank partners, as well as purchase activity of consumers.

This increase included receivables added as part of the Mercury acquisition which totaled $3,214.0 million as of December 31, 2025.

Some of our larger merchant partners have expanded their relationships with us and our bank partner, which resulted in an increased flow of acquired receivables.

While we currently expect continued period-over-period quarterly growth in our general purpose credit card receivables, we expect purchases associated with the above mentioned retail partner to moderate, resulting in modest increases in expected period over period retail receivables.

Growth in future periods receivables is dependent on the addition of new retail partners to the private label credit origination platform, the timing and size of solicitations within the general purpose credit card platform by our bank partners, as well as purchase activity of consumers.

Similarly, the loss of existing retail partner relationships could adversely affect new loan acquisition levels.

Our top five retail partnerships accounted for over 75% of our private label receivables outstanding as of December 31, 2024.

Our top five retail partnerships accounted for 85% of our private label credit receivables outstanding as of December 31, 2025.

The volume of receivables purchased each period varies based on a number of factors, including seasonal consumer purchase patterns and growth (or contraction) within merchant retail locations.

9 unchanged sentences

These rates exclude receivables that have been charged off.

During 2023, we experienced increased delinquency rates in conjunction with slower receivables growth, higher energy costs and rising inflation and the resulting negative impact on consumers.

These increases abated in the third and fourth quarters of 2023 as certain of these costs decreased and consumers adjusted to new price points for these consumer staples while simultaneously enjoying a strong employment environment.

Increases in the first and second quarters of 2024 in our Private label credit receivables were largely due to a mix shift in receivables acquired to certain receivables that have higher observed delinquencies but correspondingly higher yields.

Increases in delinquencies in the first and second quarters of 2024 in our private label credit receivables were largely due to a mix shift in receivables acquired to certain receivables that have higher observed delinquencies and higher associated yields.

Late in the second quarter of 2024 and early in the third quarter of 2024, we additionally acquired receivables that have higher observed delinquencies, but for which we have limited loss exposure due to agreements with retail partners.

As a result of these limited loss exposures, these receivables are not included in our delinquency rates for private label credit receivables and served to decrease our delinquency rates for the third and fourth quarters of 2024.

Our delinquency rates for our general purpose credit cards receivables were higher in the first quarter of 2024 due to both a reduction in the growth of our managed receivables and accounts that were enrolled in short-term payment deferrals, due to hardship claims resulting from COVID-19.

As a result of these limited loss exposures, these receivables are not included in our delinquency rates for private label credit receivables.

Delinquency rates for our general purpose credit card receivables were higher in the first quarter of 2024 due to both a reduction in the growth of our managed receivables and accounts that were enrolled in short-term payment deferrals, due to hardship claims resulting from COVID-19.

Receivables enrolled in these short-term payment deferrals continued to accrue interest and their delinquency status did not change through their respective deferment periods.

3 unchanged sentences

Delinquency rates in the third and fourth quarter of 2024 remained largely consistent with those noted in the same period of prior year.

As we continue to acquire newer private label credit and general purpose credit card receivables, we expect our delinquency rates to marginally increase when compared to the same periods in prior years due to a planned shift in our general purpose and private label credit receivables originated as our bank partners expand product offerings to a broader range of consumers.

This expected increase in delinquencies will be offset somewhat by using more restrictive product, policy, and pricing changes which we believe will result in a more profitable asset overall.

For 2025 we have observed lower overall delinquency rates in both our general purpose credit card receivables and our private label credit receivables.

Receivables added as part of the Mercury acquisition in the third quarter of 2025 have lower overall delinquency rates (and lower associated yields) than those of our existing portfolios.

The addition of these receivables resulted in a lower combined delinquency rate as of December 31, 2025.

As we continue to acquire newer private label credit and general purpose credit card receivables, we expect our delinquency rates to marginally increase when compared to the same periods in prior years due to a planned shift in our general purpose and private label credit receivables originated as our bank partners continue to expand product offerings to a broader range of consumers.

This expected increase in delinquencies will be accompanied by higher yielding assets, which we believe will result in a more profitable asset overall.

Additionally, as the receivables added from the Mercury acquisition tend to have lower delinquency and charge off rates than our existing portfolios of receivables and when coupled with expected growth in our general purpose credit card receivables, we expect the increase in delinquency rates noted above to be muted.

We also expect continued seasonal payment patterns on these receivables that impact our delinquencies in line with prior periods.

For example, delinquency rates historically are lower in the second quarter of each year due to the benefits of seasonally strong payment patterns associated with tax refunds for many consumers.

Included in this expected decrease in delinquencies is continued growth in the portfolio which will also mute delinquency metrics.

Our beliefs for future delinquency rates are predicated on the assumption that the slowing rate of inflation will continue and our recent tightened underwriting standards will prove effective at reducing account delinquencies.

Our beliefs for future delinquency rates are predicated on the assumption that the slowing rate of inflation will continue and prove effective at reducing account delinquencies.

Total managed yield ratio, annualized.

As discussed above, growth in higher yielding assets has resulted in higher charge-off and delinquency rates in some periods.

General purpose credit card receivables tend to have higher total yields than private label credit receivables (and corresponding higher charge off rates).

As a result, in periods where we have declines in rates of growth of these general purpose credit card receivables, as was noted in 2024 (relative to growth in private label credit receivables), we expect to have slightly lower total managed yield ratios.

We currently expect increases in the acquisition of receivables and correspondingly higher period-over-period operating revenue and other income for 2025 although the timing of these acquisitions could result in some fluctuations of our Total managed yield ratio, annualized when comparing quarterly rates in 2025 to corresponding quarterly periods in 2024.

This growth also includes an expected seasonal shift in our mix of acquired private label receivables to higher FICO receivables that have lower gross yields (and correspondingly lower charge-off expectations) in the third quarter of each year, which may result in marginally lower managed yield ratios when compared to the corresponding periods in prior years.

General purpose credit card receivables tend to have higher total yields than private label credit receivables (and higher associated charge-off rates).

As a result, in periods where we have slower rates of growth of general purpose credit card receivables, as was noted in 2024 (relative to growth in private label credit receivables), we expect to have slightly lower total managed yield ratios.

Additionally, receivables added as part of the Mercury acquisition tend to have lower yields (and lower associated delinquency and charge off rates).

The addition of these receivables (and without a full quarter of associated yield) contributed to the decline in our Total managed yield ratio, annualized, for the third quarter of 2025 and will serve to offset some of our expected growth in Total managed yield ratios going forward.

As previously discussed, these receivables are expected to have lower overall yields (thus negatively impacting our Total managed yield ratio), but also lower principal and finance charge-offs resulting in a similarly profitable asset.

We currently expect increases in the rates of acquisition of our general purpose credit card receivables relative to private label credit receivables and higher associated period-over-period operating revenue and other income for 2026 although the timing of these acquisitions and impact of the Mercury acquisition could result in some fluctuations of our Total managed yield ratio, annualized when comparing quarterly rates in 2026 to corresponding quarterly periods in 2025.

Our managed yield ratios, however, may be marginally lower due to an expected seasonal shift in our mix of acquired private label credit receivables to higher FICO receivables that have lower gross yields (and lower associated charge-off expectations) in the third quarter of each year.

Combined principal net charge-off ratio, annualized.

4 unchanged sentences

Growth within our general purpose credit card receivables (as a percent of outstanding receivables) has resulted in increases in our charge-offs over time.

The increase in the combined principal net charge-off ratio, annualized throughout 2023 and the first two quarters of 2024 is a reflection of increased delinquencies noted as consumer behavior reverted to historical norms (similar to those experienced in periods prior to COVID-19) and decreases in the acquisition of new general purpose credit card receivables.

The increase in the combined principal net charge-off ratio, annualized in the first two quarters of 2024 is a reflection of increased delinquencies noted as consumer behavior reverted to historical norms (similar to those experienced in periods prior to COVID-19) and decreases in the acquisition of new general purpose credit card receivables.

Additionally, inflation, particularly as it relates to higher gas prices, negatively impacted some consumers' ability to make payments on outstanding loans and fees receivable.

We noted improvements in this rate during the third and fourth quarters due to both improvements in consumer payment behavior and strong growth in our receivables base.

Despite expected marginal increases in delinquency rates as discussed above, we expect our overall combined principal net charge-off ratios to continue to decrease for 2025, when compared to the comparable prior period.

We noted improvements in this rate in the fourth quarter of 2024 and in the first and second quarters of 2025 as delinquencies continued to improve, consumer payment behavior improved and we experienced strong growth in our receivables base.

The significant improvement noted in the third quarter of 2025 was largely due to the addition of receivables associated with the Mercury acquisition which have lower delinquencies and principal charge-offs than our existing portfolios of receivables.

This improvement continued in the fourth quarter of 2025 and we expect this trend to continue in 2026 offset somewhat by higher expected growth in our general purpose credit cards.

Despite expected marginal increases in delinquency rates as discussed above, we expect our recent overall combined principal net charge-off ratios to remain consistent into 2026.

These charge-off rates are expected to return to historically normalized levels, adjusted for the mix shift discussed above, and will benefit from planned growth in the underlying receivables which we expect will further reduce our combined principal net charge-off ratio.

Our charge-off ratio has also been impacted due to (and will continue to be impacted by):

1) higher expected charge-off rates on the private label credit and general purpose credit card receivables corresponding with higher yields on these receivables, (2) continued testing of receivables with higher risk profiles, leading to periodic increases in combined principal net charge offs, (3) the aforementioned tightened underwriting standards that will slow the pace of growth in our receivables base, and (4) negative impacts on some consumers' ability to make payments on outstanding loans and fees receivable as a result of inflation pressures.

(1) higher expected charge-off rates on the private label credit and general purpose credit card receivables associated with higher yields on these receivables, (2) continued testing of receivables with higher risk profiles, leading to periodic increases in combined principal net charge-offs, (3) the aforementioned tightened underwriting standards that slowed the pace of growth in our receivables base, and (4) negative impacts on some consumers' ability to make payments on outstanding loans and fees receivable as a result of inflation pressures.

While charge-offs associated with previously mentioned accounts enrolled in short-term payment deferrals had a negative impact on our Combined principal net charge-off ratio, annualized through the second quarter of 2024, they did not have a material impact on our consolidated statements of income as the majority of these accounts were already considered in our changes in fair value.

5 unchanged sentences

Historically, we obtained lower cost financing with fixed interest rates, resulting in lower interest expense ratios.

Increases in the federal funds borrowing rate in 2022 and 2023 have led to an increase in spreads for newly-originated debt and for that portion of debt which does not have fixed rates.

As such, we have seen our Interest expense ratio, annualized increase throughout 2023 and 2024 and we expect the Interest expense ratio to increase when compared to prior quarters into 2025 as we replace existing financing arrangements with new ones at a higher cost of capital.

Increases in the federal funds borrowing rate in 2022 and 2023 have led to an increase in interest rates for newly-originated debt and for that portion of debt which does not have fixed rates.

As such, we have seen our Interest expense ratio, annualized increase throughout 2024 and 2025 and we expect the Interest expense ratio to marginally increase as we replace existing financing arrangements with new ones at a higher cost of capital.

The addition of debt assumed as part of the Mercury acquisition will also contribute to our Interest expense ratio although the cost of this debt is largely in-line with our existing facilities and, as such, should not result in a meaningful impact to the Interest expense ratio, annualized.

Net interest margin ratio, annualized.

Our Net interest margin ratio, annualized represents the difference between our Total managed yield ratio, annualized, our Combined principal net charge-off ratio, annualized and our Interest expense ratio, annualized.

Recent declines in this ratio, when compared to corresponding prior periods, relate primarily to recent increases in our principal net charge-offs as noted above.

Given the above noted expectations for marginal improvements in our Combined principal net charge-off ratio, annualized, we expect this ratio to start to improve relative to corresponding periods in 2024.

Changes in the mix shift of acquired receivables, noted above, will also lead to increases in the Net interest margin, annualized as the higher yielding receivables become a larger component of our total portfolio.

Declines in this ratio in 2024 relate primarily to increases in our principal net charge-offs in those periods, as noted above.

This trend reversed in 2025 as we realized improvements in delinquencies and subsequent charge-offs.

We currently expect minimal improvements for 2026 in our Combined principal net charge-off ratio, annualized, relative to corresponding periods in 2025 which should continue to result in a consistent net interest margin ratio year-over-year.

Changes in the mix shift of acquired receivables, noted above, will lead to improvements in the Net interest margin, annualized as the higher yielding receivables become a larger component of our total portfolio, however the lower yielding but also lower delinquent accounts associated with the Mercury acquisition will continue to offset some of the expected improvement until such time that product, policy and pricing changes associated with this portfolio have taken effect.

The average annual percentage rate ("APR") charged to customers varies by receivable type, credit history and other factors.

2 unchanged sentences

We have experienced minor fluctuations in our average APR based on the relative product mix of receivables purchased during a period.

For those receivables that did not contain fixed APRs we have seen some increases in rates charged, as the underlying rates are tied to the federal funds borrowing rate which increased in 2022 and 2023.

Our average APRs for general purpose credit card receivables remained largely consistent throughout 2024 with some increases noted as new product, policy, and pricing changes were implemented which raised the APRs associated with new receivable acquisitions.

We expect some continued improvements in our average APRs as newly acquired receivables with higher APRs become a larger part of our overall portfolio of receivables.

Our average APRs for Private label credit fell throughout 2024 due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

We expect this declining trend to continue, however, the timing and relative mix of receivables acquired could cause some minor fluctuations.

Our average APRs for general purpose credit card receivables remained largely consistent throughout 2025 with some modest increases noted resulting from the aforementioned mix shift in yield characteristics of acquired receivables.

We expect some continued improvements in our general purpose credit card receivable average APRs as newly acquired receivables with higher APRs become a larger part of our overall portfolio of receivables.

Our average APRs for private label credit fell throughout 2024 and in 2025 due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

This trend continued in the second and third quarters of 2025 with increased acquisitions of these receivables.

We expect this declining trend in Average APR to abate in 2026 with planned higher growth rates in our general purpose credit card receivables, however, the timing and relative mix of receivables acquired could cause some minor fluctuations.

We do not acquire or service receivables that have an APR above 36.0%.

1 unchanged sentence

Receivables purchased during period reflect the gross amount of investments we have made in a given period, net of any credits issued to consumers during that same period.

For 2025 we noted increases in the amount of receivables purchased associated with our general purpose credit card receivables and also a larger increase in receivables purchased associated with our private label credit receivables.

This growth in Private Label Credit Receivables purchased primarily relates to growth in purchases associated with our largest retail partner.

For most periods presented in 2024, our private label credit receivable purchases experienced overall growth, when compared to the same periods in 2023, largely based on the addition of new private label credit retail partners as well as growth within existing retail partnerships, as previously discussed.

1 unchanged sentence

the loss of one or more retail partners; seasonal purchase activity by consumers; labor shortages and supply chain disruptions; or the timing of new customer originations by our issuing bank partners.

We currently expect private label credit receivable acquisitions in 2025 to be consistent with those in 2024, although the timing of the receivable acquisitions may vary based on seasonal spending patterns by consumers and our retail partners overall sales cycles.

We currently expect private label credit receivable acquisitions in the first quarter of 2026 to be consistent with those in the same period of 2025, although the timing of the receivable acquisitions may vary based on seasonal spending patterns by consumers and our retail partners overall sales cycles.

As discussed above, we also expect some retail partner programs to moderate in the second and third quarters of 2026 which will result in slower receivable acquisitions during those periods, when compared to the same periods in 2025.

Our general purpose credit card receivable acquisitions tend to have more volatility based on the issuance of new credit card accounts by our issuing bank partners.

As a result, the timing of new receivable acquisitions, particularly as it relates to general purpose credit cards, could be impacted in the short term.

Nonetheless, we expect continued growth in the acquisition of these general purpose credit card receivables into 2025.

Nonetheless, we expect continued growth in the acquisition of these general purpose credit card receivables throughout 2025.

The acquisition of Mercury and its portfolio of general purpose credit card receivables is also expected to result in additional receivable acquisitions in future quarters as our bank partner continues to market to new consumers.

Auto Finance Segment

CAR, our auto finance platform acquired in April 2005, principally purchases and/or services loans secured by automobiles from or for, and also provides floor-plan financing for, a prequalified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business.

CAR, our auto finance platform acquired in April 2005, principally purchases and/or services loans secured by automobiles from or for, and also provides floorplan financing for, a prequalified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business.

We have expanded these operations to also include certain installment lending products in addition to our traditional loans secured by automobiles both in the U.S.

49 unchanged sentences

Managed receivables.

Recent stress noted at some dealer locations has resulted in higher than anticipated credit losses associated with floorplan loans.

When coupled with increased delinquencies associated with the underlying consumers loans, we have experienced period over period declines in our managed receivables for the third and fourth quarter of 2024.

We expect modest growth in the level of our managed receivables for 2025 although we may continue to be below managed receivables levels (when compared to the same periods in prior years ) for the next few quarters as we rebuild our receivables base and CAR expands within its current geographic footprint and continues plans for service area expansion.

Stress noted at some dealer locations resulted in higher than anticipated credit losses associated with floorplan loans during 2024.

For the third and fourth quarters of 2025, we continued to grow the portfolio as we continued to recover from the floorplan loan losses experienced in 2024.

We expect modest growth in the level of our managed receivables for 2026 as CAR continues to rebuild its receivables base, expands within its current geographic footprint and continues plans for service area expansion.

Although we continue to expand our CAR operations, the Auto Finance segment faces strong competition from other specialty finance lenders, as well as the indirect effects on us of our buy-here, pay-here dealership partners’ competition with other franchise dealerships for consumers interested in purchasing automobiles.

We continually evaluate bulk purchases of receivables and experienced good growth in our receivables base throughout 2023 resulting from several bulk purchases; however, the timing and size of such purchases are difficult to predict.

We continually evaluate bulk purchases of receivables, however, the timing and size of such purchases are difficult to predict.

Delinquencies and charge-offs.

Delinquent loans reflect the principal, fee and interest components of loans we did not collect on or prior to the contractual due date and are considered "past due".

While we have experienced recent increases in our delinquency rates (and related charge-offs), we do not believe they will have a significantly adverse impact on our results of operations in 2025 as we have established appropriate reserves for these losses.

While we have experienced some recent increases in our delinquency rates (and related charge-offs), we do not believe they will have a significantly adverse impact on our results of operations in 2026 as we have established appropriate reserves for these losses.

Even at slightly elevated rates, we earn significant yields on CAR’s receivables and have significant dealer reserves (i.e., retainages or holdbacks on the amount of funding CAR provides to its dealer customers) and other collateral to protect against meaningful credit losses.

Delinquency rates also tend to fluctuate based on seasonal trends and historically are lower in the second quarter of each year as seen above due to the benefits of strong payment patterns associated with tax refunds for many consumers.

Delinquency rates also tend to fluctuate based on inflationary pressures and seasonal trends and historically are lower in the second quarter of each year as seen above due to the benefits of strong payment patterns associated with tax refunds for many consumers.

Total managed yield ratio, annualized.

6 unchanged sentences

Combined principal net charge-off ratios in the above table reflect the lower delinquency rates we have recently experienced.

Increases in our Combined principal net charge-off ratios throughout 2023 are indicative of our charge off levels returning to historically normalized levels (i.e., those periods prior to COVID-19 and the related government stimulus programs).

While we anticipate our charge-offs to be incurred ratably across our portfolio of dealers, specific dealer-related losses are difficult to predict and can negatively influence our combined principal net charge-off ratio as was evidenced throughout 2024.

12 unchanged sentences

Represents an annualized fraction, the numerator of which is the aggregate consolidated amounts of principal losses from consumers unwilling or unable to pay their receivables balances, as well as from bankrupt and deceased consumers, less current-period recoveries (including recoveries from dealer reserve offsets for our CAR operations), as reflected in Note 3 "Significant Accounting Policies and Consolidated Financial Statement Components" and Note 7 "Fair Values of Assets and Liabilities" and the denominator of which is average managed receivables.

Recoveries on managed receivables represent all amounts received related to managed receivables that previously have been charged off, including payments received directly from consumers and proceeds received from the sale of those charged-off receivables.

Recoveries on managed receivables represent all amounts received related to managed receivables that previously have been charged off, including payments received directly from consumers, proceeds received from the sale of those charged-off receivables, and proceeds from receivables for which we have limited loss exposure due to agreements with retail partners.

Recoveries typically have represented less than 5% of average managed receivables.

9 unchanged sentences

All of our CaaS segment’s structured financing facilities are expected to amortize down with collections on the receivables within their underlying trusts and should not represent significant refunding or refinancing risks to our consolidated balance sheets.

Facilities that could represent near-term and longer-term refunding or refinancing needs as of December 31, 2024 are those associated with the following notes payable in the amounts indicated (in millions):

Revolving credit facility (expiring April 10, 2025) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring March 29, 2025) that is secured by restricted cash

Class B preferred units issued to noncontrolling interests(1)

Total short term refinancing needs (within 12 months)

Facilities that could represent near-term and longer-term refunding or refinancing needs as of December 31, 2025 are those associated with the following notes payable and senior notes in the amounts indicated (in millions):

Revolving credit facility (expiring July 20, 2026) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring October 30, 2026) that is secured by certain receivables and restricted cash

2026 Senior notes

Total short term refinancing needs (within 12 months)

Revolving credit facility (expiring March 31, 2028) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring April 7, 2028) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring July 18, 2028) that is secured by certain assets

Revolving credit facility (expiring December 1, 2028) that is secured by certain assets

Revolving credit facility (expiring July 15, 2027) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring August 30, 2027) that is secured by certain receivables and restricted cash

2029 Senior notes

Total long term refinancing needs (in excess of 12 months)

Total refinancing needs

1) In March 2025, we redeemed the remaining 50.0 million of Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon.

Based on the state of the debt capital markets, the performance of our assets that serve as security for the above facilities, and our relationships with lenders, we view imminent refunding or refinancing risks with respect to the above facilities as moderate in the current environment.

We believe that the quality of our new receivables should allow us to raise more capital through increasing the size of our facilities with our existing lenders and attracting new lending relationships, albeit at increased costs due to the aforementioned recent interest rate increases.

Further details concerning the above debt facilities and other debt facilities we use to fund the acquisition of receivables are provided in Note 11, "Notes Payable," to our consolidated financial statements included herein.

6 unchanged sentences

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 year ended December 31, 2024 and 2023 totaled $1.4 million and $1.4 million, respectively.

We repurchased $0.4 million and $1.4 million of the outstanding principal amount of these 2026 Senior Notes in the year ended December 31, 2024 and 2023, respectively.

Amortization of these fees for the years ended December 31, 2025 and 2024 totaled $1.4 million and $1.4 million, respectively.

We repurchased $12.5 million and $0.4 million of the outstanding principal amount of these 2026 Senior Notes in the years ended December 31, 2025 and 2024, respectively.

In January and February 2024, we issued an aggregate of $57.2 million aggregate principal amount of 2029 Senior Notes.

6 unchanged sentences

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 years ended December 31, 2025 and 2024 totaled $0.9 million and $0.8 million, respectively.

In August 2025, we issued an aggregate of $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 (the "2030 Senior Notes").

The 2030 Senior Notes bear interest at the rate of 9.75% per annum.

Interest on the 2030 Senior Notes is payable semi-annually in arrears on March 1 and September 1 of each year.

The 2030 Senior Notes will mature on September 1, 2030.

We are amortizing fees associated with the issuance of the 2030 Senior Notes into interest expense over the expected life of such notes.

Amortization of these fees for the year ended December 31, 2025 totaled $0.3 million.

8 unchanged sentences

During the years ended December 31, 2025 and 2024, no 2026 Senior Notes were sold under the Company's Preferred Stock ATM Program.

During years ended December 31, 2024 and 2023, we sold $24.9 million and $0, respectively, principal amount of our 2029 Senior Notes under our Preferred Stock ATM Program for net proceeds of $24.6 million and $0, respectively.

During the year ended December 31, 2024, we sold 125,000 common shares under the Company’s Common Stock ATM Program for net proceeds of $7.1 million.

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

During the years ended December 31, 2025 and 2024, we sold $38.9 million and $24.9 million, respectively, principal amount of our 2029 Senior Notes under our Preferred Stock ATM Program for net proceeds of $38.2 million and $24.6 million, respectively.

During the years ended December 31, 2025 and 2024, we sold 200,000 common shares and 125,000 common shares, respectively, under the Company’s Common Stock ATM Program for net proceeds of $11.6 and $7.1 million, respectively.

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 carried a 16% preferred return to be paid quarterly.

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

The proceeds from the transaction were used for general corporate purposes.

The Company has the right to redeem the Class B preferred units at any time with notice.

During the year ended December 31, 2024, we redeemed 50.5 million of the Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon.

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 5, "Redeemable Preferred Stock" and Note 13, "Net Income Attributable to Controlling Interests Per Common Share" to our consolidated financial statements for more information.

In March 2025, we redeemed the remaining 50.0 million of Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon.

In periods where present, 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 were 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.

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").

12 unchanged sentences

While payment rates for our consumers stayed consistent period over period, we experienced an increase in cash provided by operating activities principally related to finance and fee collections associated with growing private label credit and general purpose credit card receivables and increased recoveries on charged-off receivables.

Most of this change was due to growth in the underlying receivables (and collections thereon) along with the implementation of new product and pricing changes, which effectively increased the minimum payment amounts required by consumers.

During the year ended December 31, 2024, we used $747.0 million of cash from our investing activities, compared to use of $672.2 million of cash from investing activities during the year ended December 31, 2023.

Most of this change was due to growth in the underlying receivables (and collections thereon) along with higher yielding receivables effectively increasing the minimum payment amounts required by consumers.

Offsetting a portion of this increase in cash provided by operations were one-time expenses associated with our acquisition of Mercury (and related severance costs) which totaled $6.8 million for the year ended December 31, 2025.

During the year ended December 31, 2025, we used $1,511.9 million of cash from our investing activities, compared to the use of $747.0 million of cash from investing activities during the year ended December 31, 2024.

This increase in cash used is primarily due to marginal increases in the level of net investments in private label credit and general purpose credit card receivables relative to the same period in 2024.

For the year ended December 31, 2024, we purchased $2.6 billion in private label and general purpose credit card receivables compared to $2.4 billion for the year ended December 31, 2023.

For the year ended December 31, 2025, we purchased $4,436.2 million in private label and general purpose credit card receivables compared to $2,628.9 million for the year ended December 31, 2024.

Adding to this use of cash was the acquisition of Mercury which used net, $72.9 million ($166.5 million cash purchase price less $93.6 million of cash acquired as part of the acquisition).

Slightly offsetting this increase in cash used in operations were increased recoveries associated with the sale of charged off receivables due to increases in the contractual purchase rates we receive from third parties.

As we continue to grow our receivables base, we would expect for purchases of new receivables to outpace payments thereon throughout 2026.

During the year ended December 31, 2025, we generated $1,141.7 million of cash from financing activities, compared to our generating $393.6 million of cash from financing activities during the year ended December 31, 2024.

The increase in cash generated is primarily due to the issuance of $142.2 million of 2029 Senior Notes (for net proceeds of $135.3 million after issuance costs) and $7.2 million of common stock (for net proceeds of $7.1 million after issuance costs), both during the year ended December 31, 2024.

Offsetting this increase was the repurchase and retirement of 50.5 million of the Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon.

Additionally, we repaid a $17.4 million term note in August 2024.

The increase in cash provided by financing activities is primarily due to the issuance $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 as well as an increase in net borrowings (proceeds from borrowings less repayment of borrowings) of $450.8 million.

Additionally, we received proceeds from the issuance of 200,000 shares of common stock for net proceeds of $11.6 million in 2025.

This increase was offset by the redemption of the remaining 50.0 million of Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon during the year ended December 31, 2025 coupled with the sale of $142.2 million of 2029 Senior Notes during the year ended December 31, 2024 (compared to sales of $38.9 million for the year ended December 31, 2025).

In both periods, the data reflect borrowings associated with private label credit and general purpose credit card receivables offset by net repayments of amortizing debt facilities as payments are made on the underlying receivables that serve as collateral.

For the year ended December 31, 2024, when compared to the year ended December 31, 2023, these net draws on debt facilities increased $126.3 million to fund growth in the underlying receivables.

As discussed above, we expect to have continued growth in our receivables base and as a result, expect to continue raising additional capital to fund these acquisitions.

Additionally, we purchased and retired $17.7 million of our common stock during the year ended December 31, 2023 pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations with no corresponding purchases of common stock for the year ended December 31, 2024.

Beyond our immediate financing efforts discussed throughout this Report, we will continue to evaluate debt and equity issuances as a means to fund our investment opportunities.

10 unchanged sentences

CRITICAL ACCOUNTING ESTIMATES

We have prepared our financial statements in accordance with GAAP.

We have prepared our consolidated financial statements in accordance with GAAP.

In connection with the preparation of our financial statements, we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of certain assets and liabilities, and in some instances, the reported amounts of revenues and expenses during the period.

2 unchanged sentences

On a quarterly basis, we review our significant accounting policies and the related assumptions, in particular, those mentioned below, with the audit committee of the Board of Directors.

Acquisition of Receivable Portfolios (Asset Acquisitions)

The Company periodically acquires portfolios of receivables in transactions that are accounted for as asset acquisitions.

In these transactions, the total purchase price, including any contingent consideration, is allocated to the individual assets acquired and liabilities assumed based on their relative fair values at the acquisition date.

These transactions do not meet the definition of a business under ASC 805 and goodwill is not recognized.

Instead, the purchase price is allocated to the acquired receivables and any other identifiable assets and liabilities.

Significant judgment is required to estimate the fair value of acquired receivable portfolios.

The Company determines the purchase price allocation based on discounted cash flow models that incorporate assumptions regarding gross yield billed by our bank partner, payment rates by consumers, expected credit loss rates due to nonpayment on the receivables, expected servicing costs to collect cash flows, and discount rates which estimate required returns by a purchaser of expected cash flows.

These estimates are highly sensitive to changes in projected credit performance and macroeconomic conditions.

Changes in these assumptions could materially affect the carrying value of the acquired receivables and the related yield recognized over time.

When asset acquisitions include contingent consideration arrangements, the Company includes the estimated fair value of the contingent consideration as part of the initial cost of the acquired assets.

The fair value of contingent consideration is generally estimated using probability-weighted cash flow models that incorporate assumptions regarding future performance metrics.

Subsequent changes in the estimated fair value of contingent consideration are recognized in earnings, which may result in volatility in the Company’s results of operations.

The estimates used for the above mentioned assumptions significantly affect the valuation of acquired receivables and contingent consideration.

Actual results may differ materially from those estimates which could materially impact the carrying value of the acquired assets and future earnings.

Measurements for Loans at Fair Value

18 unchanged sentences

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 7. Management’s Discussion and Analysis