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Item 1. Financial Statements

2024-07-31 compared with 2024-04-30 · 296 added, 126 removed, 1259 unchanged (25% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share data) As of

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 8.3 $ 13.2

21 unchanged sentences

Preferred stock, $ .01 par value, 1,000,000 shares authorized, none issued

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,220,580 and 12,522,397 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,111,128 and 12,522,397 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Paid-in capital 313.8 279.0

5 unchanged sentences

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions, except per share data) For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

Finance charges $ 497.7 $ 441.0 $ 966.9 $ 862.1

12 unchanged sentences

Provision for claims 20.3 19.7 37.3 37.6

Loss on sale of building 23.7 — 23.7 —

Total costs and expenses 593.5 450.0 1,015.1 777.0

Income before provision for income taxes 86.4 126.8

Provision for income taxes 22.1 27.3

Net income $ 64.3 $ 99.5

Net income per share:

Income (loss) before provision (benefit) for income taxes ( 55.3 ) 27.9 31.1 154.7

Provision (benefit) for income taxes ( 8.2 ) 5.7 13.9 33.0

Net income (loss) $ ( 47.1 ) $ 22.2 $ 17.2 $ 121.7

Net income (loss) per share:

Basic $ ( 3.83 ) $ 1.70 $ 1.39 $ 9.32

5 unchanged sentences

CREDIT ACCEPTANCE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions) For the Three Months Ended

Net income $ 64.3 $ 99.5

June 30, For the Six Months Ended

2024 2023 2024 2023

Net income (loss) $ ( 47.1 ) $ 22.2 $ 17.2 $ 121.7

Other comprehensive gain (loss), net of tax:

1 unchanged sentence

Other comprehensive gain (loss) — ( 0.6 ) ( 0.2 ) 0.2

Comprehensive income $ 64.1 $ 100.3

Comprehensive income (loss) $ ( 47.1 ) $ 21.6 $ 17.0 $ 121.9

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in millions) For the Three Months Ended March 31, 2024

(Dollars in millions) For the Three Months Ended June 30, 2024

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

1 unchanged sentence

Balance, beginning of period 12,220,580 $ 0.1 $ 303.5 $ 1,349.8 $ ( 1.2 ) $ 1,652.2

Net loss — — — ( 47.1 ) — ( 47.1 )

Stock-based compensation — — 10.6 — — 10.6

Repurchase of common stock

( 110,677 ) — ( 0.3 ) ( 60.5 ) — ( 60.8 )

Restricted stock units settled in common stock 1,225 — — — — —

Balance, end of period 12,111,128 $ 0.1 $ 313.8 $ 1,242.2 $ ( 1.2 ) $ 1,554.9

(Dollars in millions) For the Three Months Ended June 30, 2023

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Number of Shares Amount

Balance, beginning of period 12,836,907 $ 0.1 $ 252.1 $ 1,473.3 $ ( 2.1 ) $ 1,723.4

Net income — — — 22.2 — 22.2

4 unchanged sentences

Restricted stock units settled in common stock 1,000 — — — — —

Balance, end of period 12,821,681 $ 0.1 $ 261.7 $ 1,487.9 $ ( 2.7 ) $ 1,747.0

(Dollars in millions) For the Six Months Ended June 30, 2024

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Number of Shares Amount

Balance, beginning of period 12,522,397 $ 0.1 $ 279.0 $ 1,475.6 $ ( 1.0 ) $ 1,753.7

Net income — — — 17.2 — 17.2

Other comprehensive loss — — — — ( 0.2 ) ( 0.2 )

Stock-based compensation — — 21.5 — — 21.5

Repurchase of common stock ( 462,045 ) — ( 1.3 ) ( 250.6 ) — ( 251.9 )

Restricted stock units settled to common stock 8,350 — — — — —

Stock options exercised 42,426 — 14.6 — — 14.6

Balance, end of period 12,111,128 $ 0.1 $ 313.8 $ 1,242.2 $ ( 1.2 ) $ 1,554.9

(Dollars in millions) For the Three Months Ended March 31, 2023

(Dollars in millions) For the Six Months Ended June 30, 2023

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

5 unchanged sentences

Repurchase of common stock ( 49,261 ) — ( 7.8 ) ( 14.9 ) — ( 22.7 )

( 33,035 ) — ( 7.6 ) ( 7.3 ) — ( 14.9 )

Restricted stock units settled in common stock 100,757 — — — — —

Restricted stock units settled to common stock 101,757 — — — — —

Stock options exercised 12,300 — 4.1 — — 4.1

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) For the Three Months Ended March 31,

(In millions) For the Six Months Ended June 30,

Cash Flows From Operating Activities:

6 unchanged sentences

Stock-based compensation 21.5 19.7

Loss on sale of building 23.7 —

Other 0.4 0.4

Change in operating assets and liabilities:

Increase (decrease) in accounts payable and accrued liabilities 16.6 ( 6.0 )

Increase in accounts payable and accrued liabilities 14.2 3.3

Increase in income taxes receivable ( 35.6 ) ( 5.0 )

12 unchanged sentences

Purchases of property and equipment ( 0.7 ) ( 2.4 )

Proceeds from sale of building 3.2 —

Net cash used in investing activities ( 1,109.9 ) ( 712.0 )

9 unchanged sentences

Net cash provided by financing activities 642.6 127.1

Net increase in cash and cash equivalents and restricted cash and cash equivalents 96.7 70.4

Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents 46.7 ( 5.7 )

Cash and cash equivalents and restricted cash and cash equivalents beginning of period 470.9 417.7

15 unchanged sentences

Actual results could differ from those estimates.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of March 31, 2024 for items that could potentially be recognized or disclosed in these financial statements.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2024 for items that could potentially be recognized or disclosed in these financial statements.

We did not identify any items that would require disclosure in or adjustment to the consolidated financial statements.

13 unchanged sentences

The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

Consumer Loan Assignment Volume 2024 2023 2024 2023

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

In recent years, we have expanded our financing programs to consumers with higher credit ratings, which has contributed to the reduction in the percentage of total unit volume with either FICO ® scores below 650 or no FICO ® scores.

We have two programs:

2 unchanged sentences

Under the Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts collected from the consumer.

Dealer Loans and Purchased Loans are collectively referred to as “Loans.” The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last five quarters:

Unit Volume Dollar Volume (1)

5 unchanged sentences

March 31, 2024 78.2 % 21.8 % 76.6 % 23.4 %

June 30, 2024 78.5 % 21.5 % 77.3 % 22.7 %

(1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

46 unchanged sentences

Cash equivalents consist of readily marketable securities with original maturities at the date of acquisition of three months or less.

As of March 31, 2024 and December 31, 2023, we had $ 8.1 million and $ 12.8 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

As of June 30, 2024 and December 31, 2023, we had $ 8.0 million and $ 12.8 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

Restricted cash and cash equivalents consist of cash pledged as collateral for secured financings and cash held in a trust for future vehicle service contract claims.

As of March 31, 2024 and December 31, 2023, we had $ 554.7 million and $ 453.7 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

As of June 30, 2024 and December 31, 2023, we had $ 504.5 million and $ 453.7 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

(In millions) As of

March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2022

June 30, 2024 December 31, 2023 June 30, 2023 December 31, 2022

Cash and cash equivalents $ 8.3 $ 13.2 $ 3.2 $ 7.7

31 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Recognition and Measurement Policies.

Recognition and Measurement Policy.

On January 1, 2020, we adopted Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments, which is known as the current expected credit loss model, or CECL.

Loans outstanding prior to the adoption date qualified for transition relief and are accounted for as purchased financial assets with credit deterioration (“PCD Method”).

Under the PCD Method, for each reporting period subsequent to the adoption of CECL, we:

• recognize finance charge revenue using the effective interest rate that was calculated on the adoption date based on expected future net cash flows;

• adjust the allowance for credit losses so that the net carrying amount of each Loan equals the present value of expected future net cash flows discounted at the effective interest rate.

The adjustment to the allowance for credit losses is recognized as either provision for credit losses expense or a reversal of provision for credit losses expense.

Consumer Loans assigned to us on or subsequent to January 1, 2020 do not qualify for the PCD Method and are accounted for as originated financial assets (“Originated Method”).

While the cash flows we expect to collect at the time of assignment are significantly lower than the contractual cash flows owed to us due to credit quality, our Loans do not qualify for the PCD Method because the assignment of the Consumer Loan to us occurs a moment after the Consumer Loan is originated by the Dealer, so “a more-than-insignificant deterioration in credit quality since origination” has not occurred at the time of assignment.

In addition, Dealer Loans also do not qualify for the PCD Method because Consumer Loans assigned to us under the Portfolio Program are considered to be advances under Dealer Loans originated by us rather than Consumer Loans purchased by us.

Loans outstanding prior to the adoption date are no longer material to our consolidated financial statements.

Consumer Loans assigned to us on or subsequent to January 1, 2020 are accounted for as originated financial assets (“Originated Method”).

Under the Originated Method, at the time of assignment, we:

10 unchanged sentences

The adjustment to the allowance for credit losses is recognized as either provision for credit losses expense or a reversal of provision for credit losses expense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Loans Receivable .

Amounts advanced to Dealers for Consumer Loans assigned under the Portfolio Program are recorded as Dealer Loans and are aggregated by Dealer for purposes of recognizing revenue and measuring credit losses.

Amounts paid to Dealers for Consumer Loans assigned under the Purchase Program are recorded as Purchased Loans and, for purposes of recognizing revenue and measuring credit losses, are:

• not aggregated, if assigned on or subsequent to January 1, 2020;

• aggregated into pools based on the month of purchase, if assigned prior to January 1, 2020.

Amounts paid to Dealers for Consumer Loans assigned under the Purchase Program are recorded as Purchased Loans and, for purposes of recognizing revenue and measuring credit losses, are not aggregated.

The outstanding balance of each Loan included in Loans receivable is comprised of the following:

14 unchanged sentences

Expected future net cash flows for Purchased Loans are comprised of expected future collections on the assigned Consumer Loans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Expected future collections are forecasted for each individual Consumer Loan based on the historical performance of Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns.

2 unchanged sentences

Expected future Dealer Holdback payments are forecasted for each individual Dealer based on the expected future collections and current advance balance of each Dealer Loan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We fully write off the outstanding balances of a Loan and the related allowance for credit losses once we are no longer forecasting any expected future net cash flows on the Loan.

17 unchanged sentences

For Dealer Loans, the decline in the forecasted collections is substantially offset by a decline in forecasted payments of Dealer Holdback.

Methodology Changes .

For the three months ended March 31, 2024 and 2023, we did not make any methodology changes for Loans that had a material impact on our financial statements.

Methodolo gy Changes .

During the second quarter of 2024, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2022 through 2024.

During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan prepayment data.

For additional information, see Note 6.

For the three and six months ended June 30, 2024 and 2023, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Finance Charges

15 unchanged sentences

We market the vehicle service contracts directly to Dealers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We provide Dealers the ability to offer Guaranteed Asset Protection (“GAP”) to consumers through our relationships with TPPs.

13 unchanged sentences

We calculate finance charges on a monthly basis by applying the effective interest rate of the Loan to the net carrying amount of the Loan (Loan receivable less the related allowance for credit losses).

For Consumer Loans assigned on or subsequent to January 1, 2020, the effective interest rate is based on contractual future net cash flows.

For Consumer Loans assigned prior to January 1, 2020, the effective interest rate was determined based on expected future net cash flows.

The effective interest rate is based on contractual future net cash flows.

We report the change in the present value of credit losses attributable to the passage of time as a reduction to finance charges.

12 unchanged sentences

Capitalized acquisition costs are comprised of premium taxes and are amortized as general and administrative expense over the life of the contracts in proportion to premiums earned.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We have consolidated the trust within our financial statements based on our determination of the following:

8 unchanged sentences

In addition, VSC Re has the obligation to absorb losses of the trust that could potentially be significant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

New Accounting Updates Not Yet Adopted

35 unchanged sentences

Mortgage Note.

The fair value is determined by calculating the present value of the debt instrument based on current rates for debt with a similar risk profile and maturity.

The fair value was determined by calculating the present value of the debt instrument based on current rates for debt with a similar risk profile and maturity.

A comparison of the carrying amount and estimated fair value of these financial instruments is as follows:

(In millions) As of March 31, 2024 As of December 31, 2023

(In millions) As of June 30, 2024 As of December 31, 2023

Amount Estimated Fair

19 unchanged sentences

The following table provides the level of measurement used to determine the fair value for each of our financial instruments measured or disclosed at fair value:

(In millions) As of March 31, 2024

(In millions) As of June 30, 2024

Level 1 Level 2 Level 3 Total Fair Value

6 unchanged sentences

Senior notes (1) 1,034.6 — — 1,034.6

Mortgage note (1) — 8.3 — 8.3

(In millions) As of December 31, 2023

13 unchanged sentences

Restricted securities available for sale consist of the following:

(In millions) As of March 31, 2024

(In millions) As of June 30, 2024

Amortized Cost Gross Unrealized

18 unchanged sentences

The fair value and gross unrealized losses for restricted securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

(In millions) Securities Available for Sale with Gross Unrealized Losses as of March 31, 2024

(In millions) Securities Available for Sale with Gross Unrealized Losses as of June 30, 2024

Less than 12 Months 12 Months or More

26 unchanged sentences

(In millions) As of

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Contractual Maturity Amortized Cost Estimated Fair

8 unchanged sentences

Loans receivable and allowance for credit losses consist of the following:

(In millions) As of March 31, 2024

(In millions) As of June 30, 2024

Dealer Loans Purchased Loans Total

9 unchanged sentences

A summary of changes in Loans receivable and allowance for credit losses is as follows:

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

(In millions)

28 unchanged sentences

$ 7,980.6 $ 2,903.6 $ 10,884.2 $ ( 2,659.5 ) $ ( 677.0 ) $ ( 3,336.5 ) $ 5,321.1 $ 2,226.6 $ 7,547.7

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

(In millions)

28 unchanged sentences

$ 6,534.1 $ 3,065.5 $ 9,599.6 $ ( 2,188.4 ) $ ( 800.9 ) $ ( 2,989.3 ) $ 4,345.7 $ 2,264.6 $ 6,610.3

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Six Months Ended June 30, 2024

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total

Balance, beginning of period $ 7,065.5 $ 2,954.6 $ 10,020.1 $ ( 2,355.7 ) $ ( 709.1 ) $ ( 3,064.8 ) $ 4,709.8 $ 2,245.5 $ 6,955.3

Finance charges 912.0 457.0 1,369.0 ( 305.2 ) ( 96.9 ) ( 402.1 ) 606.8 360.1 966.9

Provision for credit losses — — — ( 334.0 ) ( 172.6 ) ( 506.6 ) ( 334.0 ) ( 172.6 ) ( 506.6 )

New Consumer Loan assignments (1) 1,959.1 586.4 2,545.5 — — — 1,959.1 586.4 2,545.5

Collections (2) ( 1,743.9 ) ( 841.3 ) ( 2,585.2 ) — — — ( 1,743.9 ) ( 841.3 ) ( 2,585.2 )

Accelerated Dealer Holdback payments 33.4 — 33.4 — — — 33.4 — 33.4

Dealer Holdback payments 130.5 — 130.5 — — — 130.5 — 130.5

Transfers (3) ( 71.4 ) 71.4 — 22.9 ( 22.9 ) — ( 48.5 ) 48.5 —

Write-offs ( 314.0 ) ( 326.4 ) ( 640.4 ) 314.0 326.4 640.4 — — —

Recoveries (4) 1.5 1.9 3.4 ( 1.5 ) ( 1.9 ) ( 3.4 ) — — —

Deferral of Loan origination costs 7.9 — 7.9 — — — 7.9 — 7.9

Balance, end of period $ 7,980.6 $ 2,903.6 $ 10,884.2 $ ( 2,659.5 ) $ ( 677.0 ) $ ( 3,336.5 ) $ 5,321.1 $ 2,226.6 $ 7,547.7

For the Six Months Ended June 30, 2023

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total

Balance, beginning of period $ 6,074.8 $ 3,090.7 $ 9,165.5 $ ( 2,000.0 ) $ ( 867.8 ) $ ( 2,867.8 ) $ 4,074.8 $ 2,222.9 $ 6,297.7

Finance charges 755.8 467.0 1,222.8 ( 250.7 ) ( 110.0 ) ( 360.7 ) 505.1 357.0 862.1

Provision for credit losses — — — ( 219.3 ) ( 168.6 ) ( 387.9 ) ( 219.3 ) ( 168.6 ) ( 387.9 )

New Consumer Loan assignments (1) 1,470.4 680.9 2,151.3 — — — 1,470.4 680.9 2,151.3

Collections (2) ( 1,601.5 ) ( 860.2 ) ( 2,461.7 ) — — — ( 1,601.5 ) ( 860.2 ) ( 2,461.7 )

Accelerated Dealer Holdback payments 24.6 — 24.6 — — — 24.6 — 24.6

Dealer Holdback payments 118.3 — 118.3 — — — 118.3 — 118.3

Transfers (3) ( 51.6 ) 51.6 — 19.0 ( 19.0 ) — ( 32.6 ) 32.6 —

Write-offs ( 263.5 ) ( 366.5 ) ( 630.0 ) 263.5 366.5 630.0 — — —

Recoveries (4) 0.9 2.0 2.9 ( 0.9 ) ( 2.0 ) ( 2.9 ) — — —

Deferral of Loan origination costs 5.9 — 5.9 — — — 5.9 — 5.9

Balance, end of period $ 6,534.1 $ 3,065.5 $ 9,599.6 $ ( 2,188.4 ) $ ( 800.9 ) $ ( 2,989.3 ) $ 4,345.7 $ 2,264.6 $ 6,610.3

(1) The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.

10 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Provision for Credit Losses

5 unchanged sentences

$ 212.3 $ 108.3 $ 320.6

(In millions) For the Three Months Ended March 31, 2023

(In millions) For the Three Months Ended June 30, 2023

Provision for Credit Losses Dealer Loans Purchased Loans Total

2 unchanged sentences

Total $ 144.6 $ 105.9 $ 250.5

(In millions)

For the Six Months Ended June 30, 2024

Provision for Credit Losses

Purchased Loans

New Consumer Loan assignments

$ 106.0 $ 75.6 $ 181.6

Forecast changes

228.0 97.0 325.0

$ 334.0 $ 172.6 $ 506.6

(In millions) For the Six Months Ended June 30, 2023

Provision for Credit Losses Dealer Loans Purchased Loans Total

New Consumer Loan assignments $ 71.5 $ 103.3 $ 174.8

Forecast changes 147.8 65.3 213.1

Total $ 219.3 $ 168.6 $ 387.9

The net Loan income (finance charge revenue less provision for credit losses expense) that we recognize over the life of a Loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the Dealer.

2 unchanged sentences

• finance charge revenue in subsequent periods that is significantly in excess of our expected yield.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Additional information related to new Consumer Loan assignments is as follows:

(In millions)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

New Consumer Loan Assignments

12 unchanged sentences

$ 391.9 $ 126.0 $ 517.9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

New Consumer Loan Assignments

12 unchanged sentences

$ 294.4 $ 129.8 $ 424.2

(In millions) For the Six Months Ended June 30, 2024

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 3,060.6 $ 1,201.9 $ 4,262.5

Expected net cash flows at the time of assignment (2) 2,779.4 853.0 3,632.4

Loans receivable at the time of assignment (3) 1,959.1 586.4 2,545.5

Provision for credit losses expense at the time of assignment $ ( 106.0 ) $ ( 75.6 ) $ ( 181.6 )

Expected future finance charges at the time of assignment (4) 926.3 342.2 1,268.5

Expected net Loan income at the time of assignment (5) $ 820.3 $ 266.6 $ 1,086.9

(In millions) For the Six Months Ended June 30, 2023

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 2,294.3 $ 1,371.2 $ 3,665.5

Expected net cash flows at the time of assignment (2) 2,083.0 950.1 3,033.1

Loans receivable at the time of assignment (3) 1,470.4 680.9 2,151.3

Provision for credit losses expense at the time of assignment $ ( 71.5 ) $ ( 103.3 ) $ ( 174.8 )

Expected future finance charges at the time of assignment (4) 684.1 372.5 1,056.6

Expected net Loan income at the time of assignment (5) $ 612.6 $ 269.2 $ 881.8

(1) The Dealer Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments.

10 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Expected Future Net Cash Flows

13 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Expected Future Net Cash Flows

12 unchanged sentences

$ 6,166.4 $ 3,509.9 $ 9,676.3

(In millions) For the Six Months Ended June 30, 2024

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

Balance, beginning of period $ 6,707.2 $ 3,472.0 $ 10,179.2

New Consumer Loan assignments (1) 2,779.4 853.0 3,632.4

Realized net cash flows (2) ( 1,580.0 ) ( 841.3 ) ( 2,421.3 )

Forecast changes ( 129.4 ) ( 90.7 ) ( 220.1 )

Transfers (3) ( 72.6 ) 76.8 4.2

Balance, end of period $ 7,704.6 $ 3,469.8 $ 11,174.4

(In millions) For the Six Months Ended June 30, 2023

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,637.9 $ 3,395.5 $ 9,033.4

New Consumer Loan assignments (1) 2,083.0 950.1 3,033.1

Realized net cash flows (2) ( 1,458.6 ) ( 860.2 ) ( 2,318.8 )

Forecast changes ( 49.0 ) ( 30.9 ) ( 79.9 )

Transfers (3) ( 46.9 ) 55.4 8.5

Balance, end of period $ 6,166.4 $ 3,509.9 $ 9,676.3

(1) The Dealer Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make.

4 unchanged sentences

We transfer the Dealer’s outstanding Dealer Loan balance, related allowance for credit losses balance, and related expected future net cash flows to Purchased Loans in the period this forfeiture occurs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Credit Quality

1 unchanged sentence

For additional information regarding credit quality, see Note 3.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table compares our aggregated forecast of Consumer Loan collection rates as of March 31, 2024 with the aggregated forecasts as of December 31, 2023 and at the time of assignment, segmented by year of assignment:

The following table compares our aggregated forecast of Consumer Loan collection rates as of June 30, 2024 with the aggregated forecasts as of March 31, 2024, December 31, 2023, and at the time of assignment, segmented by year of assignment:

Forecasted Collection Percentage as of (1) Current Forecast Variance from

Consumer Loan

Assignment Year March 31, 2024 December 31, 2023 Initial

Forecast December 31, 2023 Initial

Assignment Year June 30, 2024 March 31, 2024 December 31, 2023 Initial

Forecast March 31, 2024 December 31, 2023 Initial

2015 65.3 % 65.3 % 65.2 % 67.7 % 0.0 % 0.1 % - 2.4 %

10 unchanged sentences

Consumer Loan

Assignment Year March 31, 2024 December 31, 2023 Initial

Forecast December 31, 2023 Initial

Assignment Year June 30, 2024 March 31, 2024 December 31, 2023 Initial

Forecast March 31, 2024 December 31, 2023 Initial

2015 64.6 % 64.6 % 64.6 % 67.5 % 0.0 % 0.0 % - 2.9 %

8 unchanged sentences

2024 65.6 % 66.0 % — 66.3 % - 0.4 % — - 0.7 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Purchased Loans

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Consumer Loan

Assignment Year March 31, 2024 December 31, 2023 Initial

Forecast December 31, 2023 Initial

Assignment Year June 30, 2024 March 31, 2024 December 31, 2023 Initial

Forecast March 31, 2024 December 31, 2023 Initial

2015 69.0 % 68.9 % 68.9 % 68.5 % 0.1 % 0.1 % 0.5 %

12 unchanged sentences

(2) The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We evaluate and adjust the expected collection rate for each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior.

The following table summarizes the past-due status of Consumer Loan assignments as of March 31, 2024 and December 31, 2023, segmented by year of assignment:

The following table summarizes the past-due status of Consumer Loan assignments as of June 30, 2024 and December 31, 2023, segmented by year of assignment:

(In millions)

Total Loans as of March 31, 2024 (1) (2)

Total Loans as of June 30, 2024 (1) (2)

Pre-term Consumer Loans (3)

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(In millions)

Dealer Loans as of March 31, 2024 (1)

Dealer Loans as of June 30, 2024 (1)

Pre-term Consumer Loans (3)

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$ 5,681.7 $ 1,208.6 $ 936.0 $ 154.3 $ 7,980.6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

Purchased Loans as of March 31, 2024 (2)

Purchased Loans as of June 30, 2024 (2)

Pre-term Consumer Loans (3)

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$ 6,507.1 $ 1,694.5 $ 1,568.8 $ 249.7 $ 10,020.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

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$ 1,764.8 $ 513.2 $ 570.8 $ 105.8 $ 2,954.6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(1) As Consumer Loans are aggregated by Dealer for purposes of recognizing revenue and measuring credit losses, the Dealer Loan amount was estimated by allocating the balance of each Dealer Loan to the underlying Consumer Loans based on the forecasted future collections of each Consumer Loan.

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(5) We consider a Consumer Loan to be current for purposes of forecasting expected collection rates if contractual repayments are less than 11 days past due.

The following table summarizes the write-offs for Consumer Loan assignments for the three months ended March 31, 2024 and 2023, segmented by year of assignment:

(In millions) For the Three Months Ended March 31, 2024

The following table summarizes the write-offs for Consumer Loan assignments for the three and six months ended June 30, 2024 and 2023, segmented by year of assignment:

(In millions) For the Three Months Ended June 30, 2024

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

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$ 171.2 $ 157.8 $ 329.0

(In millions) For the Three Months Ended June 30, 2023

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

2018 and prior $ 33.9 $ 28.0 $ 61.9

2019 27.1 50.8 77.9

2020 27.6 26.1 53.7

2021 26.6 29.2 55.8

2022 27.3 40.1 67.4

2023 3.3 9.4 12.7

$ 145.8 $ 183.6 $ 329.4

(In millions) For the Six Months Ended June 30, 2024

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

2019 and prior $ 91.6 $ 77.3 $ 168.9

2020 54.1 41.0 95.1

2021 63.9 50.8 114.7

2022 79.1 76.2 155.3

2023 22.2 73.5 95.7

2024 3.1 7.6 10.7

$ 314.0 $ 326.4 $ 640.4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions) For the Three Months Ended March 31, 2023

(In millions) For the Six Months Ended June 30, 2023

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

6 unchanged sentences

$ 263.5 $ 366.5 $ 630.0

Consumer Loans assigned in 2022 have continued to underperform our expectations for the past several quarters.

More recently, Consumer Loans assigned in 2023 have also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.

During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate the magnitude by which we expect Consumer Loans assigned in 2022 through 2024 will likely underperform our historical collection rates on Consumer Loans with similar characteristics.

Accordingly, we applied an adjustment to Consumer Loans assigned in 2022 through 2024 to reduce forecasted collection rates to what we believe the ultimate collection rates will be based on these trends.

Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.

The implementation of this forecast adjustment during the second quarter of 2024 reduced forecasted net cash flows by $ 147.2 million, or 1.4 %, and increased provision for credit losses by $ 127.5 million.

We had experienced a decrease in Consumer Loan prepayments to below-average levels and as a result, slowed our forecasted net cash flow timing.

Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.

Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.

The implementation of the adjustment to our forecasting methodology during the second quarter of 2023 reduced forecasted net cash flows by $ 44.5 million, or 0.5 %, and increased provision for credit losses by $ 71.3 million.

PROPERTY AND EQUIPMENT

1 unchanged sentence

(In millions) As of

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Land and land improvements $ 2.7 $ 2.9

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Total property and equipment, net $ 16.1 $ 46.5

As the vast majority of our team members now work remotely, we have significant excess space in the two office buildings that we own, which are located in Southfield, Michigan.

After exploring options to reduce our office space, we have made the preliminary decision to sell the larger building and consolidate into the smaller building that has served as our headquarters since 1993.

The building that we intend to sell is currently scheduled for auction in mid-May 2024.

As there is currently a significant amount of unoccupied office space in our region, we do not know whether the auction will result in a sale.

Additionally, we believe the market value of the building and its improvements, together with the related land and land improvements and office furniture and equipment, is significantly less than the carrying value of $ 27.5 million.

We have evaluated the facts and circumstances of the potential auction sale, and we do not believe that the building currently meets all of the criteria necessary for us to reclassify it as held for sale.

If we were to reclassify the building as held for sale, we would record an impairment charge to reduce its carrying value to its estimated market value less costs to sell.

As the vast majority of our team members now work remotely, we had significant excess space in the two office buildings that we owned in Southfield, Michigan.

During the second quarter of 2024, we sold the larger building for net sales proceeds of $ 3.2 million, and recognized a loss on sale of the building of $ 23.7 million.

The loss on sale of the building represented the amount by which the $ 26.9 million carrying value of the building and its improvements, the related land and land improvements, and office furniture and equipment exceeded the net sales proceeds of $ 3.2 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

Net assumed written premiums $ 27.3 $ 23.5 $ 58.5 $ 48.9

4 unchanged sentences

(In millions) As of

Balance Sheet Location March 31, 2024 December 31, 2023

Balance Sheet Location June 30, 2024 December 31, 2023

Trust assets Restricted cash and cash equivalents $ 1.5 $ 1.4

4 unchanged sentences

Other income consists of the following:

(In millions) For the Three Months Ended March 31,

(In millions) For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

Ancillary product profit sharing $ 6.4 $ 9.1 $ 13.7 $ 16.6

13 unchanged sentences

The following table disaggregates our other income by major source of income and timing of the revenue recognition:

(In millions) For the Three Months Ended March 31, 2024

(In millions) For the Three Months Ended June 30, 2024

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

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Total $ 6.4 $ 6.4 $ 2.9 $ 0.5 $ 16.2

(In millions) For the Six Months Ended June 30, 2024

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

Source of Income

Third-Party Providers $ 13.7 $ 12.2 $ — $ 0.2 $ 26.1

Dealers — — 6.2 0.8 7.0

Total $ 13.7 $ 12.2 $ 6.2 $ 1.0 $ 33.1

Timing of Revenue Recognition

Over time $ 13.7 $ 12.2 $ — $ 0.4 $ 26.3

At a point in time — — 6.2 0.6 6.8

Total $ 13.7 $ 12.2 $ 6.2 $ 1.0 $ 33.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Debt consists of the following:

(In millions) As of March 31, 2024

(In millions) As of June 30, 2024

Principal Outstanding Unamortized Debt Issuance Costs Unamortized Discount Carrying

11 unchanged sentences

Total debt $ 5,106.6 $ ( 36.6 ) $ ( 2.5 ) $ 5,067.5

(1) Excludes deferred debt issuance costs of $ 3.8 million and $ 4.2 million as of March 31, 2024 and December 31, 2023, respectively, which are included in other assets.

(1) Excludes deferred debt issuance costs of $ 5.2 million and $ 4.2 million as of June 30, 2024 and December 31, 2023, respectively, which are included in other assets.

(2) Warehouse facilities and Term ABS financings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

General information for each of our financing transactions in place as of March 31, 2024 is as follows:

General information for each of our financing transactions in place as of June 30, 2024 is as follows:

(Dollars in millions)

2 unchanged sentences

Amount Interest Rate Basis as of

March 31, 2024

Revolving Secured Line of Credit Facility n/a 06/22/2026 $ 390.0 At our option, either the Bloomberg Short-Term Bank Yield Index rate (BSBY) plus 187.5 basis points or the prime rate plus 87.5 basis points

RTP Facility n/a — (1) 20.0 BSBY plus 187.5 basis points

Warehouse Facility II (2) CAC Warehouse Funding LLC II 04/30/2026 (3) 400.0 The Secured Overnight Financing Rate (SOFR) plus 230 basis points

June 30, 2024

Revolving Secured Line of Credit Facility n/a 06/22/2027 $ 390.0 At our option, either the Secured Overnight Financing Rate (SOFR) plus 197.5 basis points or the prime rate plus 87.5 basis points

RTP Facility n/a — (1) 20.0 SOFR plus 197.5 basis points

Warehouse Facility II (2) CAC Warehouse Funding LLC II 04/30/2026 (3) 400.0 SOFR plus 230.0 basis points

Warehouse Facility IV (2) CAC Warehouse Funding LLC IV 12/29/2026 (3) 300.0 SOFR plus 221.4 basis points (4)

Warehouse Facility V (2) CAC Warehouse Funding LLC V 12/29/2025 (5) 200.0 SOFR plus 245.0 basis points (4)

Warehouse Facility VI (2) CAC Warehouse Funding LLC VI 09/30/2026 (3) 75.0 BSBY plus 200 basis points

Warehouse Facility VI (2) CAC Warehouse Funding LLC VI 09/30/2026 (3) 75.0 The Bloomberg Short-Term Bank Yield Index rate (BSBY) plus 200 basis points

Warehouse Facility VIII (2) CAC Warehouse Funding LLC VIII 09/21/2026 (3) 200.0 SOFR plus 225.0 basis points (4)

4 unchanged sentences

Term ABS 2022-1 (2) Credit Acceptance Funding LLC 2022-1 06/17/2024 (3) 350.0 Fixed rate

Term ABS 2022-2 (2) Credit Acceptance Funding LLC 2022-2 06/15/2027 (6) 300.0 SOFR plus 246.4 basis points

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Term ABS 2024-1 (2) Credit Acceptance Funding LLC 2024-1 03/16/2026 (3) 500.0 Fixed rate

Term ABS 2024-2 (2) Credit Acceptance Funding LLC 2024-2 06/15/2026 (3) 550.0 Fixed rate

2026 Senior Notes n/a 03/15/2026 400.0 Fixed rate

2028 Senior Notes n/a 12/15/2028 600.0 Fixed rate

Mortgage Note (2) Chapter 4 Properties, LLC 08/06/2028 9.0 BSBY plus 150 basis points

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(1) Borrowings are subject to repayment on demand .

(2) Financing made available only to a specified subsidiary of the Company.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(3) Represents the revolving maturity date.

8 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

Revolving Secured Lines of Credit

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(Dollars in millions) As of

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Revolving Secured Lines of Credit

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(Dollars in millions) As of

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Term ABS 2021-1

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(Dollars in millions) As of

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Term ABS 2023-3

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Interest rate 6.01 % — %

Term ABS 2024-2

Principal balance outstanding $ 550.0 $ —

Loans pledged as collateral 767.0 —

Restricted cash and cash equivalents pledged as collateral 73.3 —

Interest rate 6.21 % — %

2026 Senior Notes

8 unchanged sentences

(1) Availability may be limited by the amount of assets pledged as collateral.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Revolving Secured Lines of Credit

1 unchanged sentence

(1) a $ 390.0 million revolving secured line of credit facility, to which we refer as our revolving secured line of credit facility, with a commercial bank syndicate and (2) an uncommitted $20.0 million revolving secured line of credit facility, to which we refer as the RTP facility, with a lender for use solely in facilitating payments by the Company through the lender’s real-time payments service.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Borrowings under our revolving secured line of credit facility, including any letters of credit issued under the facility, are subject to a borrowing-base limitation.

22 unchanged sentences

The Term ABS 2021-3, 2021-4, 2023-1, 2023-2, 2023-3, 2023-A, 2023-5, 2024-A, 2024-1, and 2024-2 financings each consist of three classes of notes (or, in the case of the Term ABS 2023-A, three classes of loans), while the Term ABS 2022-1 and Term ABS 2022-3 financings consist of four classes of notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Each Term ABS financing at the time of issuance has a specified revolving period during which we are likely to convey additional Loans to the applicable Funding LLC.

1 unchanged sentence

At the end of the applicable revolving period, the debt outstanding under each financing will begin to amortize.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Term ABS financings create indebtedness for which the applicable trust or Funding LLC is liable and which is secured by all the assets of the applicable trust or Funding LLC.

14 unchanged sentences

Term ABS 2021-1 January 29, 2021 125.1 Through February 17, 2026

Term ABS 2021-2 February 18, 2021 625.1 Through February 15, 2023

Term ABS 2021-3 May 20, 2021 562.6 Through May 15, 2023

1 unchanged sentence

Term ABS 2022-1 June 16, 2022 437.6 Through June 17, 2024

Term ABS 2022-2 December 15, 2022 250.1 Through December 15, 2025

Term ABS 2022-2 December 15, 2022 250.1 Through June 15, 2027

Term ABS 2022-3 November 3, 2022 500.1 Through October 15, 2024

6 unchanged sentences

Term ABS 2024-1 March 28, 2024 625.2 Through March 16, 2026

Term ABS 2024-2 June 20, 2024 687.7 Through June 15, 2026

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On December 19, 2023, we issued $ 600.0 million aggregate principal amount of 9.250 % senior notes due 2028 (the “2028 senior notes”).

1 unchanged sentence

and Vehicle Remarketing Services, Inc., as guarantors (collectively, the “Guarantors”), and the trustee under the indenture.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The 2028 senior notes mature on December 15, 2028 and bear interest at a rate of 9.250 % per annum, computed on the basis of a 360-day year composed of twelve 30-day months and payable semi-annually on June 15 and December 15 of each year, beginning on June 15, 2024.

10 unchanged sentences

Mortgage Note

We have a $ 9.0 million mortgage note with a commercial bank that is secured by a first mortgage lien on a building acquired by us and an assignment of all leases, rents, revenues, and profits under all present and future leases of the building.

The note matures on August 6, 2028, and bears interest at BSBY plus 150 basis points.

We had a $ 9.0 million mortgage note with a commercial bank that was secured by a first mortgage lien on a building acquired by us and an assignment of all leases, rents, revenues, and profits under all present and future leases of the building.

The note was paid off in full during the second quarter of 2024 in connection with the sale of the related building.

Debt Covenants

As of March 31, 2024, we were in compliance with our covenants under our revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

As of June 30, 2024, we were in compliance with our covenants under our revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

These covenants require a minimum ratio of (1) our net earnings, adjusted for specified items, before income taxes, depreciation, amortization, and fixed charges to (2) our fixed charges, as defined in the agreements.

3 unchanged sentences

Our Term ABS financings also contain covenants that measure the performance of the conveyed assets.

As of March 31, 2024, we were in compliance with all such covenants.

As of June 30, 2024, we were in compliance with all such covenants.

As of the end of the quarter, we were also in compliance with our covenants under the senior notes indentures and the RTP facility.

3 unchanged sentences

We utilize interest rate cap agreements to manage the interest rate risk on certain secured financings.

The following tables provide the terms of our interest rate cap agreements that were in effect as of March 31, 2024 and December 31, 2023:

The following tables provide the terms of our interest rate cap agreements that were in effect as of June 30, 2024 and December 31, 2023:

(Dollars in millions)

As of March 31, 2024

As of June 30, 2024

Facility Amount Facility Name Purpose Start End Notional Cap Interest Rate (1)

2 unchanged sentences

200.0 Warehouse Facility VIII Cap Floating Rate 09/2022 09/2025 200.0 5.42 %

100.0 Term ABS 2021-1 Cap Floating Rate 04/2023 06/2024 18.8 5.46 %

200.0 Term ABS 2022-2 Cap Floating Rate 12/2022 06/2024 200.0 6.50 %

(Dollars in millions)

8 unchanged sentences

The interest rate caps have not been designated as hedging instruments.

As of March 31, 2024 and December 31, 2023, the interest rate caps had a fair value of $ 0.1 million, as the capped rates were above market rates.

As of June 30, 2024 and December 31, 2023, the interest rate caps had a fair value of $ 0.1 million, as the capped rates were above market rates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

federal statutory income tax rate 21.0 % 21.0 % 21.0 % 21.0 %

4 unchanged sentences

Effective income tax rate 14.8 % 20.4 % 44.7 % 21.3 %

State and local income taxes

For the three months ended June 30, 2024 and 2023, state and local income taxes reduced our effective income tax rate primarily due to:

• Changes in state tax laws enacted during the second quarter of 2024 that were effective retroactively to the beginning of 2024 increased our state income taxes and reduced, rather than increased, our effective income tax rate, as we had a pre-tax loss this quarter compared to pre-tax income for the second quarter of 2023.

• The settlement of an uncertain tax position for state income taxes during the second quarter of 2023 decreased our effective income tax rate for that period.

For the six months ended June 30, 2024, the impact of state and local income taxes on our effective income tax rate increased from the same period in 2023 primarily due to:

• The increased impact of an adjustment to an uncertain tax position for state income taxes in the second quarter of 2024 primarily due to a decrease in pre-tax income.

• Changes in state tax laws enacted during the second quarter of 2024 that were effective retroactively to the beginning of 2024.

• The settlement of an uncertain tax position for state income taxes in the second quarter of 2023.

Non-deductible executive compensation expense

We recognize non-deductible executive compensation expense as an increase of provision for income taxes or a reduction of benefit for income taxes.

For the second quarter of 2024, the impact of non-deductible executive compensation expense reduced, rather than increased, our effective income tax rate, as we had a pre-tax loss in the period, compared to pre-tax income in the second quarter of 2023.

For the six months ended June 30, 2024, the impact of non-deductible executive compensation expense on our effective income tax rate increased from the same period in 2023 primarily due to a decrease in pre-tax income.

Excess tax benefits from stock-based compensation

2 unchanged sentences

Excess tax benefits reduce our effective income tax rate, while tax deficiencies increase our effective income tax rate.

The impact of excess tax benefits on our effective income tax rate for the three months ended March 31, 2024 decreased from the same period in 2023 primarily due to a decrease in the number of restricted stock units that were settled in common stock during the first quarter of 2023 due to the timing of long-term stock award grants.

NET INCOME PER SHARE

Basic net income per share has been computed by dividing net income by the basic number of weighted average shares outstanding.

Diluted net income per share has been computed by dividing net income by the diluted number of weighted average shares outstanding using the treasury stock method.

The decrease in the impact of excess tax benefits on our effective income tax rate for the six months ended June 30, 2024 was primarily due to a decrease in the number of restricted stock units that were settled in common stock during the first quarter of 2024 as compared to the first quarter of 2023 due to the timing of long-term stock award grants, partially offset by a decrease in pre-tax income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share has been computed by dividing net income (loss) by the basic number of weighted average shares outstanding.

Diluted net income (loss) per share has been computed by dividing net income (loss) by the diluted number of weighted average shares outstanding using the treasury stock method.

The share effect is as follows:

For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

Weighted average shares outstanding:

4 unchanged sentences

Dilutive number of weighted average shares outstanding 12,282,174 13,099,961 12,533,246 13,085,988

The following outstanding stock awards were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive :

The potential effects of stock options and restricted stock units were excluded from the diluted earnings per share calculation for the three months ended June 30, 2024 because their inclusion in a net loss period would have reduced the net loss per share.

The following outstanding stock awards were excluded from the computation of diluted net income (loss) per share because their inclusion would have been anti-dilutive :

For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

Stock options 195,324 228,625 67,750 241,201

3 unchanged sentences

STOCK REPURCHASES

The following table summarizes our stock repurchases for the three months ended March 31, 2024 and 2023:

(Dollars in millions) For the Three Months Ended March 31,

The following table summarizes our stock repurchases for the three and six months ended June 30, 2024 and 2023:

(Dollars in millions) For the Three Months Ended June 30,

Stock Repurchases Number of Shares Repurchased Cost (1) Number of Shares Repurchased Cost (1)

2 unchanged sentences

Total 110,677 $ 60.8 16,226 $ 7.8

(Dollars in millions) For the Six Months Ended June 30,

Stock Repurchases Number of Shares Repurchased Cost (1) Number of Shares Repurchased Cost (1)

Open Market (2) 459,437 $ 250.5 15,802 $ 7.6

Other (3) 2,608 1.4 33,459 15.1

Total 462,045 $ 251.9 49,261 $ 22.7

(1) Total cost of repurchases includes excise tax.

1 unchanged sentence

On August 21, 2023, the board of directors authorized the repurchase of up to two million shares of our common stock in addition to the board’s prior authorizations.

As of March 31, 2024, we had authorization to repurchase 1,456,751 shares of our common stock.

As of June 30, 2024, we had authorization to repurchase 1,346,570 shares of our common stock.

(3) Represents shares of common stock released to us by team members as payment of tax withholdings upon the vesting of restricted stock units and the conversion of restricted stock units to common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STOCK-BASED COMPENSATION PLANS

1 unchanged sentence

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2024 2023 2024 2023

Stock options $ 8.2 $ 8.6 $ 16.4 $ 17.1

42 unchanged sentences

Supreme Court’s decision in Consumer Financial Protection Bureau v.

Community Financial Services Association of America, Ltd., No.

Community Financial Services Association of America, Ltd.

22-448 (“CFSA”).

On July 1, 2024, the court lifted the stay in view of the decision in CFSA and requested revised briefing on the Company’s motion to dismiss that would address the intervening legal developments and sharpen the issues for resolution.

We are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this litigation.

13 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-Q

Item 1. Financial Statements