# Atlanticus Holdings Corp (ATLC) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Atlanticus Holdings Corp's 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1464343/000143774926007972/atlc20251231_10k.htm
Accession: 0001437749-26-007972
Filing date: 2026-03-12
Report date: 2025-12-31
Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub.
Confidence: high

Company profile: /company/ATLC/
All MD&A years: /company/ATLC/mda/
Previous year: /company/ATLC/mda/fy2024/ (FY 2024)

OVERVIEW

Atlanticus is a financial technology company powering more inclusive financial solutions for Everyday Americans. We leverage data, analytics, and innovative technology to unlock access to financial solutions for the millions of Americans who would otherwise be underserved. 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, 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. The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions. Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers and other service providers. Using our technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing which focus exclusively on consumers with higher FICO scores. Atlanticus’ decisioning platform is enhanced by machine learning, enabling lenders to make fast, sound decisions when it matters most.

We are principally engaged in providing products and services to lenders in the U.S. for which these lenders pay us a fee and in most circumstances, the lenders are then obligated to sell us the receivables they generate from these products and services. We acquire these receivables for the principal amount of the loan. We compensate our bank partners monthly for the regulatory oversight they provide associated with our acquired receivables, the underlying accounts of which they continue to own and service, and also based on variable levels of the underlying performance of the acquired receivables (collectively, "Bank partner fees"). From time to time, we also purchase receivables portfolios from third parties other than our bank partners. 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.

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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 $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. 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.

Using our infrastructure and technology, we also provide loan servicing, including risk management and customer service outsourcing, for third parties. Also, through our CaaS segment, we engage in testing and limited investment in consumer technology platforms as we seek to capitalize on our expertise and infrastructure. Additionally, we report within our CaaS segment: 1) servicing income; and 2) gains or losses associated with notes receivable and equity investments previously made in consumer technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. None of these companies are publicly-traded and the carrying value of our investment in these companies is not material. One of these companies, Fintiv Inc., has sued Apple, Inc., and Walmart, Inc. for patent infringement. Fintiv Inc. has approximately 150 patents related to secure money transfer on computer and mobile devices. The transaction volume in these areas has increased dramatically over the last five years. If Fintiv Inc. is successful in the patent litigation, there could be large exposure, including treble damages for these companies. The claimed losses sustained by this patent infringement are substantial and could be measured in the billions of dollars. We believe on a diluted basis that we will own over 10% of the company. Apple has vigorously contested the claims, and we expect it to continue doing so. In light of the uncertainty around these lawsuits, we will continue to carry these investments on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes.

All finance charges, fees and merchant fees are recognized into earnings through our Consumer loans, including past due fees (consisting of interest income, including finance charges, late payment fees on loans and merchant fees), Fees and related income on earning assets (consisting of annual or monthly maintenance fees, cash advance fees, and other fees directly associated with the extension of credit) and Other revenue (consisting of servicing income, service charges and other customer related fees), on our consolidated statements of income when they are billed to consumers or, in the case of merchant fees, upon completion of our services, which coincides with the funding of the loan by our bank partners. We value these loans and fee receivables within Changes in fair value of loans on our consolidated statements of income to reflect our best estimate of ongoing economics and cash flows associated with existing consumer accounts including future estimates of finance and fee billings and consumer payment rates typical of the assumptions a market participant would use to calculate fair value.

Our credit and other operations are heavily regulated, potentially causing us to change how we conduct our operations either in response to regulation or in keeping with our goal of leading the industry in adherence to consumer-friendly practices. 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 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. See "Consumer and Debtor Protection Laws and Regulations—CaaS Segment" above and "We operate in a heavily regulated industry" in Part I, Item 1A, "Risk Factors" contained in this Report.

Subject to possible disruptions caused by the uncertain economic environment, we believe that our private label credit and general purpose credit card receivables are generating, and will continue to generate, attractive returns on assets, thereby facilitating debt financing under terms and conditions (including advance rates and pricing) that will support attractive returns on equity, and we continue to pursue growth in this area.

The recurring cash flows we receive within our CaaS segment principally include those associated with (1) private label credit and general purpose credit card receivables, (2) servicing compensation and (3) credit card receivables portfolios that are unencumbered or where we own a portion of the underlying structured financing facility.

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Private Label Credit

Our bank partners work with both us and with our retail partners to provide financing options to retail consumers. These financing options vary by retail partner and consists of a range in APRs of 0% - 36% and a range in merchant fees of 0% - 65%. Merchant fees are paid to us by our retail partners to facilitate transactions between our retail partners and its consumers by connecting our bank partners with the retail partners’ consumers. The merchant fees vary by retail partner, and are based on the value of the goods purchased from our retail partners and consider factors such as the consumer’s credit risk and the terms of our bank partners' related product offering. Merchant fees are paid to us by our retail partners at the time our bank partners remit funds to the retail partner for a consumer transaction. These merchant fees are used to enhance the overall return on receivables we acquire when contractual APRs or other terms are insufficient due to promotional or other below market pricing retail merchants may offer to consumers (such as 0% APR offers). These fees are recognized upon completion of our services, which coincides with the funding of the loan by our bank partners, in Consumer loans, including past due fees on our consolidated statements of income. These merchant fees often offset the loss associated with the initial acquisition of the underlying receivable. As such, it is not always necessary for us to collect the aggregate unpaid gross balance of the underlying receivable to achieve desired returns.

Financing arrangements may include fees to enhance yields on a product including annual and/or monthly maintenance fees. Additionally, terms of these products offered by our bank partners to consumers may include deferred interest options whereby consumers pay no interest on their purchases over periods ranging from 6-12 months. Terms of these products can range from 12 months to 84 months based on the retail merchant partner. Each offer is customized for retail clients based on the expected performance of the underlying receivables, receivable purchase volumes and overall return requirements. Our flexible technology allows retail partners to present financing offers to their customers through a variety of delivery options including retail point of sale locations, online transactions, or through in home sales. These financing arrangements are based on underwriting standards tailored to each retail partner and are the result of a close collaboration between our bank partners and us to ensure all products are compliant with regulatory requirements and to ensure they provide attractive terms to consumers. When a consumer accepts the terms of a financing arrangement for the purchase of a good or service and completes the underlying transaction, our bank partners forward the net purchase price (net of merchant or other fees remitted to us) to the retail partner. Our bank partners are then obligated to sell, and we are obligated to purchase, the receivable (along with rights to all future finance and fee billings associated with the receivable) from our bank partners under similar terms.

General Purpose Credit Cards

We work closely with our bank partners to assist them in creating general purpose credit card offers. These offers have varying lines of credit ranging from $750 to $5,500, annual percentage rates (“APRs”) ranging from 19.99% to 36%, annual fees ranging from $0 to $175 and monthly maintenance fees ranging from $0 to $15. Working collaboratively with our bank partners, each offer our bank partners extend to a consumer is tailored based on the consumer’s individual risk profile. These offers include finance and fee structures designed to provide us with an adequate return on invested capital upon acquisition of any associated receivable. As a result, at the time an offer is extended to a consumer, the offer reflects market value and, when combined with other pooled receivables that have similar characteristics, would result in earnings associated with any upfront fees (such as annual or monthly maintenance fees) on the date of acquisition, net of any fair value assessment that may value the receivables at less than the gross amount of the receivable.

Our agreements with our bank partners obligate them to sell and for us to acquire the receivables associated with underlying purchases and subsequent fee and finance billings. We acquire these receivables for the principal amount of any related purchase which best reflects the receivables fair value at the time of acquisition with no gain or loss recognized beyond those described above. As discussed above, our bank partners continue to provide ongoing account management and oversight for both our private label credit and general purpose credit card receivables, for which we compensate the bank partners monthly.

Auto Finance Segment

Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor-plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. We generate revenues on purchased loans through interest earned on the face value of the installment agreements combined with the accretion of discounts on loans purchased. We generally earn discount income over the life of the applicable loan. Additionally, we generate revenues from servicing loans on behalf of dealers for a portion of actual collections and by providing back-up servicing for similar quality assets owned by unrelated third parties. We offer a number of other products to our network of buy-here, pay-here dealers (including our floor-plan financing offering), but the majority of our activities are represented by our purchases of auto loans at discounts and our servicing of auto loans for a fee. As of December 31, 2025, our CAR operations served over 700 dealers in 33 states and two U.S. territories. The core operations continue to achieve profitability and generate positive cash flows.

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CONSOLIDATED RESULTS OF OPERATIONS

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

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

Total operating revenue and other income. Total operating revenue and other income consists of: 1) interest income, finance charges and late fees on consumer loans, 2) other fees on credit products including annual and merchant fees and 3) interchange and servicing income on loan portfolios and other customer related fees.

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. 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 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. Other revenue on our consolidated statements of income consists of servicing income, service charges and other customer related fees. Growth in customer related fees was largely due to the use of new marketing channels which increased customer engagement with these products. When coupled with increases in interchange revenues, which are largely impacted by growth in our receivables, this resulted in an increase in this category of revenues for the year ended December 31, 2025, when compared to the same period in 2024. See Note 3, "Significant Accounting Policies and Consolidated Financial Statement Components" to our consolidated financial statements for additional information related to this revenue from contracts with customers. Interchange fees are earned when customers we serve use their cards over established card networks. 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. Unless and/or until we grow the number of contractual servicing relationships we have with third parties or our current relationships grow their loan portfolios, we will not experience significant growth and income within this category. The above discussions on expectations for finance, fee and other income are based on our current expectations.

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. None of these companies are publicly-traded and there are no material pending liquidity events. We will continue to carry the investments on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes.

Interest expense. 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 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 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.

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Provision for credit losses. Our provision for credit losses covers, with respect to such receivables, changes in estimates regarding our aggregate loss exposures on (1) principal receivable balances, (2) finance charges and late fees receivable underlying income amounts included within our total interest income category, and (3) other fees and notes receivable. Recoveries of charged off receivables, consist of amounts received from the efforts of third-party collectors and through the sale of charged-off accounts to unrelated third parties. All proceeds received associated with charged-off accounts, are credited to the allowance for credit losses.

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. Floorplan loans offered to dealers to finance auto inventory increase our exposure to loss not only for the amount of a floorplan loan but also for specific dealer related consumer loans. We take several steps to mitigate this risk including holding title to the underlying collateral, ongoing reassessments of collateral value and regular audits at participating dealer locations. Nevertheless, the timing of losses is difficult to predict. 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).

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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 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. 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:

Gross yield, net of finance charge charge-offs – We utilize gross yield, net of finance charge charge-offs in our fair value assessments to best reflect the expected net collected yield on fee billings on our receivables. 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 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 (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.

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 and did not contribute meaningfully to shifts in the fair value of receivables noted above. 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 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 and as such, do not expect changes in our Servicing Rate to create a meaningful impact in our fair value calculations.

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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, 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 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:

[[GREPCENT_TABLE]]
[["","\u2022","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\u037e"],["","\u2022","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;"],["","\u2022","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\u037e and"],["","\u2022","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, 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."]]
[[/GREPCENT_TABLE]]

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. However, a number of our operating costs are fixed. 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.

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 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. We reflect the ownership interests of noncontrolling holders of equity in our majority-owned subsidiaries as noncontrolling interests in our consolidated statements of income. 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 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. 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. 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.

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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. We likewise report the reversal of income tax-related interest and penalties within such line item to the extent we resolve our liabilities for uncertain tax positions or unpaid tax liabilities in a manner favorable to our accruals therefor. We recognized $0.2 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

In addition to financial measures presented in accordance with GAAP, we present managed receivables, total managed yield, total managed yield ratio, combined principal net charge-off ratio, percent of managed receivables 30-59 days past due, percent of managed receivables 60-89 days past due and percent of managed receivables 90 or more days past due, all of which are non-GAAP financial measures. These non-GAAP financial measures aid in the evaluation of the performance of our credit portfolios, including our risk management, servicing and collection activities and our valuation of purchased receivables. The credit performance of our managed receivables provides information concerning the quality of loan originations and the related credit risks inherent with the portfolios. Management relies heavily upon financial data and results prepared on the "managed basis" in order to manage our business, make planning decisions, evaluate our performance and allocate resources.

These non-GAAP financial measures are presented for supplemental informational purposes only. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, GAAP financial measures. These non-GAAP financial measures may differ from the non-GAAP financial measures used by other companies. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures or the calculation of the non-GAAP financial measures are provided below for each of the fiscal periods indicated.

These non-GAAP financial measures include only the performance of those receivables underlying consolidated subsidiaries (for receivables carried at amortized cost basis and fair value). Additionally, we calculate average managed receivables based on the quarter-end balances.

The comparison of non-GAAP managed receivables to our GAAP financial statements requires an understanding that managed receivables reflect the face value of loans, interest and fees receivable without any adjustment for potential credit losses to reflect fair value.

CaaS Segment

Our CaaS segment includes our activities related to our servicing of and our investments in the private label credit and general purpose credit card operations, our various credit card receivables portfolios, as well as other product testing and investments that generally utilize much of the same infrastructure. The types of revenues we earn from our investments in receivables portfolios and services primarily include fees and finance charges, merchant fees or annual fees associated with the private label credit and general purpose credit card receivables.

We record (i) the finance charges, merchant fees and late fees assessed on our CaaS segment receivables in the Revenue - Consumer loans, including past due fees category on our consolidated statements of income, (ii) the annual, monthly maintenance, returned-check, cash advance and other fees in the Revenue - Fees and related income on earning assets category on our consolidated statements of income, and (iii) the charge-offs (and recoveries thereof) as a component within our Changes in fair value of loans on our consolidated statements of income. Additionally, we show the effects of fair value changes for those credit card receivables for which we have elected the fair value option as a component of Changes in fair value of loans in our consolidated statements of income.

We historically have invested in receivables portfolios through subsidiary entities. If we control through direct ownership or exert a controlling interest in the entity, we consolidate it and reflect its operations as noted above.

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.

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

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025","","","2024"],["(in Millions)","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31","","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["Loans at fair value","","$","6,647.9","","","$","6,350.0","","","$","3,004.7","","","$","2,668.5","","","$","2,630.3","","","$","2,511.6","","","$","2,277.4","","","$","2,150.6"],["Fair value mark against receivable (1)","","","305.5","","","","250.1","","","","41.8","","","","37.8","","","","94.5","","","","142.5","","","","137.7","","","","167.5"],["Total managed receivables (2)","","$","6,953.4","","","$","6,600.1","","","$","3,046.5","","","$","2,706.3","","","$","2,724.8","","","$","2,654.1","","","$","2,415.1","","","$","2,318.1"],["Fair value to Total managed receivables ratio (3)","","","95.6","%","","","96.2","%","","","98.6","%","","","98.6","%","","","96.5","%","","","94.6","%","","","94.3","%","","","92.8","%"]]
[[/GREPCENT_TABLE]]

(1) The fair value mark against receivables reflects the difference between the face value of a receivable and the net present value of the expected cash flows associated with that receivable. See Note 7, "Fair Values of Assets and Liabilities" to our consolidated financial statements included herein for further discussion of assumptions underlying this calculation.

(2) Total managed receivables are equal to the Aggregate unpaid gross balance of loans carried at fair value. See Note 7, "Fair Value of Assets and Liabilities" to our consolidated financial statements included herein for further discussion of the Aggregate unpaid gross balance of loans carried at fair value.

(3) The Fair value to Total managed receivables ratio is calculated using Loans at fair value as the numerator, and Total managed receivables as the denominator.

As discussed above, our managed receivables data differ in certain aspects from our GAAP data. 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:

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025","","","2024"],["(in Millions)","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31","","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["Consumer loans, including past due fees","","$","528.7","","","$","331.7","","","$","267.2","","","$","238.5","","","$","242.1","","","$","245.3","","","$","232.1","","","$","220.0"],["Fees and related income on earning assets","","","155.8","","","","122.5","","","","94.3","","","","78.3","","","","83.8","","","","78.5","","","","59.5","","","","47.9"],["Other revenue","","","39.5","","","","30.4","","","","23.0","","","","18.7","","","","17.5","","","","16.8","","","","13.6","","","","11.7"],["Total operating revenue and other income - CaaS Segment","","","724.0","","","","484.6","","","","384.5","","","","335.5","","","","343.4","","","","340.6","","","","305.2","","","","279.6"],["Adjustments due to acceleration of merchant fee discount amortization under fair value accounting","","","(6.1",")","","","(16.0",")","","","(26.6",")","","","0.1","","","","0.7","","","","(15.1",")","","","(12.6",")","","","4.0"],["Adjustments due to acceleration of annual fees recognition under fair value accounting","","","(8.3",")","","","(24.4",")","","","(8.8",")","","","(4.2",")","","","(10.5",")","","","(8.0",")","","","1.1","","","","10.1"],["Removal of finance charge-offs","","","(114.1",")","","","(78.8",")","","","(68.2",")","","","(70.0",")","","","(64.9",")","","","(60.6",")","","","(62.9",")","","","(63.7",")"],["Total managed yield","","$","595.5","","","$","365.4","","","$","280.9","","","$","261.4","","","$","268.7","","","$","256.9","","","$","230.8","","","$","230.0"]]
[[/GREPCENT_TABLE]]

The calculation of Combined principal net charge-offs used in our Combined principal net charge-off ratio, annualized is as follows:

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025","","","2024"],["(in Millions)","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31","","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["Charge-offs on loans at fair value","","$","377.9","","","$","231.8","","","$","211.8","","","$","233.5","","","$","213.1","","","$","201.5","","","$","217.0","","","$","231.7"],["Finance charge-offs (1)","","","(114.1",")","","","(78.8",")","","","(68.2",")","","","(70.0",")","","","(64.9",")","","","(60.6",")","","","(62.9",")","","","(63.7",")"],["Combined principal net charge-offs","","$","263.8","","","$","153.0","","","$","143.6","","","$","163.5","","","$","148.2","","","$","140.9","","","$","154.1","","","$","168.0"]]
[[/GREPCENT_TABLE]]

(1) Finance charge-offs are included as a component of our Changes in fair value of loans in the accompanying consolidated statements of income.

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Our delinquency and charge-off data at any point in time reflect the credit performance of our managed receivables. The average age of the accounts underlying our receivables, the timing and size of receivable purchases, the success of our collection and recovery efforts and general economic conditions all affect our delinquency and charge-off rates. The average age of the accounts underlying our portfolios of receivables also affects the stability of our delinquency and loss rates. Our strategy for managing delinquency and receivables losses consists of account management throughout the life of the receivable. This strategy includes credit line management and pricing based on the risks. See also our discussion of collection strategy under "Collection Strategy" in Item 1, "Business".

The following table presents the delinquency trends of the receivables we manage within our CaaS segment, as well as charge-off data and other non-GAAP managed receivables statistics (in thousands; percentages of total):

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables"],["Period-end managed receivables","","$","6,953,445","","","","","","","$","6,600,135","","","","","","","$","3,046,477","","","","","","","$","2,706,264"],["30-59 days past due","","$","206,249","","","","3.0","%","","$","179,339","","","","2.7","%","","$","100,472","","","","3.3","%","","$","89,132","","","","3.3","%"],["60-89 days past due","","$","188,321","","","","2.7","%","","$","158,201","","","","2.4","%","","$","85,611","","","","2.8","%","","$","84,559","","","","3.1","%"],["90 or more days past due","","$","445,475","","","","6.4","%","","$","374,650","","","","5.7","%","","$","210,925","","","","6.9","%","","$","233,205","","","","8.6","%"],["Average managed receivables","","$","6,776,790","","","","","","","$","4,823,306","","","","","","","$","2,876,371","","","","","","","$","2,715,523"],["Total managed yield ratio, annualized (1)","","","35.1","%","","","","","","","30.3","%","","","","","","","39.1","%","","","","","","","38.5","%"],["Combined principal net charge-off ratio, annualized (2)","","","15.6","%","","","","","","","12.7","%","","","","","","","20.0","%","","","","","","","24.1","%"],["Interest expense ratio, annualized (3)","","","7.4","%","","","","","","","6.2","%","","","","","","","7.4","%","","","","","","","6.9","%"],["Net interest margin ratio, annualized (4)","","","12.1","%","","","","","","","11.4","%","","","","","","","11.7","%","","","","","","","7.5","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2024"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables"],["Period-end managed receivables","","$","2,724,782","","","","","","","$","2,654,112","","","","","","","$","2,415,092","","","","","","","$","2,318,104"],["30-59 days past due","","$","104,022","","","","3.8","%","","$","106,303","","","","4.0","%","","$","99,620","","","","4.1","%","","$","94,389","","","","4.1","%"],["60-89 days past due","","$","97,953","","","","3.6","%","","$","96,673","","","","3.6","%","","$","88,544","","","","3.7","%","","$","87,761","","","","3.8","%"],["90 or more days past due","","$","253,511","","","","9.3","%","","$","227,418","","","","8.6","%","","$","218,215","","","","9.0","%","","$","243,830","","","","10.5","%"],["Average managed receivables","","$","2,689,447","","","","","","","$","2,534,602","","","","","","","$","2,366,598","","","","","","","$","2,364,680"],["Total managed yield ratio, annualized (1)","","","40.0","%","","","","","","","40.5","%","","","","","","","39.0","%","","","","","","","38.9","%"],["Combined principal net charge-off ratio, annualized (2)","","","22.0","%","","","","","","","22.2","%","","","","","","","26.0","%","","","","","","","28.4","%"],["Interest expense ratio, annualized (3)","","","6.5","%","","","","","","","6.6","%","","","","","","","6.3","%","","","","","","","5.8","%"],["Net interest margin ratio, annualized (4)","","","11.5","%","","","","","","","11.7","%","","","","","","","6.7","%","","","","","","","4.7","%"]]
[[/GREPCENT_TABLE]]

(1) The Total managed yield ratio, annualized is calculated using the annualized total managed yield as the numerator and period-end average managed receivables as the denominator.

(2) The Combined principal net charge-off ratio, annualized is calculated using the annualized combined principal net charge-offs as the numerator and period-end average managed receivables as the denominator.

(3) Interest expense ratio, annualized is calculated using the annualized interest expense associated with the CaaS segment (See Note 4, "Segment Reporting" to our consolidated financial statements) as the numerator and period-end average managed receivables as the denominator.

(4) Net interest margin ratio, annualized is calculated using the Total managed yield ratio, annualized less the Combined principal net charge-off ratio, annualized less the Interest expense ratio, annualized.

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The following table presents additional trends and data with respect to our private label credit and general purpose credit card receivables (dollars in thousands). Results of our legacy credit card receivables portfolios are excluded:

[[GREPCENT_TABLE]]
[["","","Private Label Credit - At or for the Three Months Ended"],["","","2025"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables"],["Period-end managed receivables","","$","1,856,811","","","","","","","$","1,725,708","","","","","","","$","1,524,399","","","","","","","$","1,253,215"],["30-59 days past due","","$","37,727","","","","2.0","%","","$","30,336","","","","1.8","%","","$","29,981","","","","2.0","%","","$","27,166","","","","2.2","%"],["60-89 days past due","","$","33,588","","","","1.8","%","","$","25,988","","","","1.5","%","","$","23,745","","","","1.6","%","","$","23,938","","","","1.9","%"],["90 or more days past due","","$","74,940","","","","4.0","%","","$","62,066","","","","3.6","%","","$","58,146","","","","3.8","%","","$","67,414","","","","5.4","%"],["Average APR","","","9.6","%","","","","","","","9.4","%","","","","","","","10.3","%","","","","","","","11.9","%"],["Receivables purchased during period","","$","413,988","","","","","","","$","436,711","","","","","","","$","506,738","","","","","","","$","265,360"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Private Label Credit - At or for the Three Months Ended"],["","","2024"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables"],["Period-end managed receivables","","$","1,231,750","","","","","","","$","1,205,714","","","","","","","$","1,013,529","","","","","","","$","907,367"],["30-59 days past due","","$","33,664","","","","2.7","%","","$","34,658","","","","2.9","%","","$","36,477","","","","3.6","%","","$","32,209","","","","3.5","%"],["60-89 days past due","","$","29,297","","","","2.4","%","","$","30,216","","","","2.5","%","","$","29,766","","","","2.9","%","","$","27,094","","","","3.0","%"],["90 or more days past due","","$","75,294","","","","6.1","%","","$","70,190","","","","5.8","%","","$","67,368","","","","6.6","%","","$","74,414","","","","8.2","%"],["Average APR","","","12.9","%","","","","","","","13.3","%","","","","","","","15.8","%","","","","","","","17.1","%"],["Receivables purchased during period","","$","241,442","","","","","","","$","396,900","","","","","","","$","316,304","","","","","","","$","191,106"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","General Purpose Credit Card - At or for the Three Months Ended"],["","","2025"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables"],["Period-end managed receivables","","$","5,096,634","","","","","","","$","4,874,427","","","","","","","$","1,522,078","","","","","","","$","1,453,049"],["30-59 days past due","","$","168,522","","","","3.3","%","","$","149,003","","","","3.1","%","","$","70,490","","","","4.6","%","","$","61,966","","","","4.3","%"],["60-89 days past due","","$","154,733","","","","3.0","%","","$","132,214","","","","2.7","%","","$","61,866","","","","4.1","%","","$","60,621","","","","4.2","%"],["90 or more days past due","","$","370,535","","","","7.3","%","","$","312,584","","","","6.4","%","","$","152,779","","","","10.0","%","","$","165,791","","","","11.4","%"],["Average APR","","","28.2","%","","","","","","","28.7","%","","","","","","","29.4","%","","","","","","","28.7","%"],["Receivables purchased during period","","$","1,347,982","","","","","","","$","701,557","","","","","","","$","442,957","","","","","","","$","347,550"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","General Purpose Credit Card - At or for the Three Months Ended"],["","","2024"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables","","","Managed Receivables","","","% of Period-end managed receivables"],["Period-end managed receivables","","$","1,493,032","","","","","","","$","1,448,060","","","","","","","$","1,401,168","","","","","","","$","1,410,281"],["30-59 days past due","","$","70,358","","","","4.7","%","","$","71,645","","","","4.9","%","","$","63,141","","","","4.5","%","","$","62,173","","","","4.4","%"],["60-89 days past due","","$","68,656","","","","4.6","%","","$","66,454","","","","4.6","%","","$","58,777","","","","4.2","%","","$","60,664","","","","4.3","%"],["90 or more days past due","","$","178,216","","","","11.9","%","","$","157,222","","","","10.9","%","","$","150,839","","","","10.8","%","","$","169,402","","","","12.0","%"],["Average APR","","","28.6","%","","","","","","","28.9","%","","","","","","","27.4","%","","","","","","","27.1","%"],["Receivables purchased during period","","$","370,269","","","","","","","$","373,231","","","","","","","$","360,425","","","","","","","$","342,834"]]
[[/GREPCENT_TABLE]]

The following discussion relates to the tables above.

34

Managed receivables levels. 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. 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 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. Further impacting receivable purchase amounts in a period are consumer application volumes that retail partners may direct to our bank partners versus competitors who offer similar financing products to those retail merchant partners. See Note 12, "Commitments and Contingencies," to our consolidated financial statements included herein for further discussion of these concentrations.

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". Delinquencies have the potential to impact net income in the form of net credit losses. Delinquencies also are costly in terms of the personnel and resources dedicated to resolving them. We intend for the receivables management strategies we use on our portfolios to manage and, to the extent possible, reduce the higher delinquency rates that can be expected with the younger average age of the newer receivables in our managed portfolio. These management strategies include conservative credit line management and collection strategies intended to optimize the effective account-to-collector ratio across delinquency categories. We measure the success of these efforts by reviewing delinquency rates. These rates exclude receivables that have been charged off.

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. 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. The remainder of these accounts were removed from hardship status with the end of the COVID-19 national and public health emergencies in May 2023. While these accounts resulted in higher than normal reported delinquency rates for the first quarter of 2024 (and correspondingly higher charge-offs in the first and second quarters of 2024), the charge-offs did not result in a further economic impact to us as the majority of these accounts were already considered in our changes in fair value in prior periods. As these accounts were largely charged off by the end of the first quarter of 2024, we saw some modest improvement in our second quarter 2024 delinquencies offset by slower net receivables growth during this period. Delinquency rates in the third and fourth quarter of 2024 remained largely consistent with those noted in the same period of prior year. 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. 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 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.

35

Combined principal net charge-off ratio, annualized. We charge off our CaaS segment receivables when they become contractually more than 180 days past due or 120 days past due if they are enrolled in an installment loan product. For all of our products, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death. However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or an estate large enough to pay the debt in full. When the principal of an outstanding loan is charged off, the related finance charges and fees are simultaneously charged off, resulting in a reduction to our Total managed yield.

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 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 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 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. Further impacting our charge-off rates are the timing and size of solicitations that serve to minimize charge-off rates in periods of high receivable acquisitions but also exacerbate charge-off rates in periods of lower receivable acquisitions.

Interest expense ratio, annualized. Our interest expense ratio, annualized reflects interest costs associated with our CaaS segment. This includes both direct receivables funding costs as well as general unsecured lending. Recent impacts to this ratio primarily relate to the timing and size of outstanding debt as well as the addition of new funding facilities. 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 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. 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.

Average APR. The average annual percentage rate ("APR") charged to customers varies by receivable type, credit history and other factors. The APRs for receivables originated through our private label credit platform range from 0% to 36.0%. For general purpose credit card receivables, APRs range from 19.99% to 36.0%. We have experienced minor fluctuations in our average APR based on the relative product mix of receivables purchased during a period. 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%.

36

Table of Contents

Receivables purchased during period. 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. We may experience periodic declines in these acquisitions due to: 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 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 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 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. and U.S. territories.

Non-GAAP Financial Measures

For reasons set forth above within our CaaS segment discussion, we also provide managed receivables-based financial, operating and statistical data for our Auto Finance segment. Reconciliation of the auto finance managed receivables data to GAAP data requires an understanding that our managed receivables data are based on billings and actual charge-offs as they occur, without regard to any changes in our allowance for credit losses. Similar to the managed calculation above, the average managed receivables used in the ratios below is calculated based on the quarter ending balances of consolidated receivables.

A reconciliation of our operating revenues and other income to comparable amounts used in our calculation of Total managed yield ratios follows (in millions):

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025","","","2024"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31","","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["Consumer loans, including past due fees","","$","9.8","","","$","9.4","","","$","9.1","","","$","9.2","","","$","9.6","","","$","10.0","","","$","10.4","","","$","10.3"],["Fees and related income on earning assets","","","0.3","","","","1.1","","","","\u2014","","","","\u2014","","","","\u2014","","","","0.1","","","","\u2014","","","","\u2014"],["Other income","","","0.3","","","","0.1","","","","0.2","","","","0.2","","","","0.2","","","","0.2","","","","0.2","","","","0.2"],["Total operating revenue and other income","","","10.4","","","","10.6","","","","9.3","","","","9.4","","","","9.8","","","","10.3","","","","10.6","","","","10.5"],["Finance charge-offs","","","0.1","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Total managed yield","","$","10.5","","","$","10.6","","","$","9.3","","","$","9.4","","","$","9.8","","","$","10.3","","","$","10.6","","","$","10.5"]]
[[/GREPCENT_TABLE]]

The calculation of Combined principal net charge-offs used in our Combined principal net charge-off ratio, annualized follows (in millions):

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025","","","2024"],["","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31","","","Dec. 31","","","Sep. 30","","","Jun. 30","","","Mar. 31"],["Gross charge-offs","","$","2.1","","","$","1.9","","","$","1.7","","","$","1.8","","","$","1.5","","","$","3.1","","","$","3.5","","","$","1.8"],["Finance charge-offs (1)","","","0.1","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014"],["Recoveries","","","(0.7",")","","","(0.7",")","","","(0.6",")","","","(0.6",")","","","(0.6",")","","","(0.7",")","","","(0.7",")","","","(0.5",")"],["Combined principal net charge-offs","","$","1.5","","","$","1.2","","","$","1.1","","","$","1.2","","","$","0.9","","","$","2.4","","","$","2.8","","","$","1.3"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Finance charge-offs are included as a component of our Provision for credit losses in the accompanying consolidated statements of income."]]
[[/GREPCENT_TABLE]]

37

Table of Contents

Financial, operating and statistical metrics for our Auto Finance segment are detailed (in thousands; percentages of total) in the following tables:

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2025"],["","","Dec. 31","","","% of Period-end managed receivables","","","Sep. 30","","","% of Period-end managed receivables","","","Jun. 30","","","% of Period-end managed receivables","","","Mar. 31","","","% of Period-end managed receivables"],["Period-end managed receivables (1)","","$","107,093","","","","","","","$","111,068","","","","","","","$","106,632","","","","","","","$","106,099"],["30-59 days past due","","$","9,056","","","","8.5","%","","$","8,430","","","","7.6","%","","$","6,576","","","","6.2","%","","$","6,344","","","","6.0","%"],["60-89 days past due","","$","3,198","","","","3.0","%","","$","2,545","","","","2.3","%","","$","2,391","","","","2.2","%","","$","2,061","","","","1.9","%"],["90 or more days past due","","$","3,040","","","","2.8","%","","$","3,214","","","","2.9","%","","$","3,741","","","","3.5","%","","$","4,221","","","","4.0","%"],["Average managed receivables","","$","109,081","","","","","","","$","108,850","","","","","","","$","106,366","","","","","","","$","107,541"],["Total managed yield ratio, annualized (2)","","","38.5","%","","","","","","","39.0","%","","","","","","","35.0","%","","","","","","","35.0","%"],["Combined principal net charge-off ratio, annualized (3)","","","5.5","%","","","","","","","4.4","%","","","","","","","4.1","%","","","","","","","4.5","%"],["Recovery ratio, annualized (4)","","","2.6","%","","","","","","","2.6","%","","","","","","","2.3","%","","","","","","","2.2","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","At or for the Three Months Ended"],["","","2024"],["","","Dec. 31","","","% of Period-end managed receivables","","","Sep. 30","","","% of Period-end managed receivables","","","Jun. 30","","","% of Period-end managed receivables","","","Mar. 31","","","% of Period-end managed receivables"],["Period-end managed receivables (1)","","$","108,982","","","","","","","$","110,638","","","","","","","$","117,951","","","","","","","$","122,321"],["30-59 days past due","","$","7,590","","","","7.0","%","","$","8,873","","","","8.0","%","","$","9,200","","","","7.8","%","","$","7,796","","","","6.4","%"],["60-89 days past due","","$","3,217","","","","3.0","%","","$","3,801","","","","3.4","%","","$","3,834","","","","3.3","%","","$","3,031","","","","2.5","%"],["90 or more days past due","","$","4,723","","","","4.3","%","","$","5,305","","","","4.8","%","","$","4,944","","","","4.2","%","","$","3,220","","","","2.6","%"],["Average managed receivables","","$","109,810","","","","","","","$","114,295","","","","","","","$","120,136","","","","","","","$","120,183"],["Total managed yield ratio, annualized (2)","","","35.7","%","","","","","","","36.0","%","","","","","","","35.3","%","","","","","","","34.9","%"],["Combined principal net charge-off ratio, annualized (3)","","","3.3","%","","","","","","","8.4","%","","","","","","","9.3","%","","","","","","","4.3","%"],["Recovery ratio, annualized (4)","","","2.2","%","","","","","","","2.4","%","","","","","","","2.3","%","","","","","","","1.7","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Period-end managed receivables equal the corresponding amount of loans at amortized cost included in Note 3 \"Significant Accounting Policies and Consolidated Financial Statement Components\" in our consolidated financial statements."],["(2)","The total managed yield ratio, annualized is calculated using the annualized Total managed yield as the numerator and Period-end average managed receivables as the denominator."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","The Combined principal net charge-off ratio, annualized is calculated using the annualized Combined principal net charge-offs as the numerator and Period-end average managed receivables as the denominator."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","The Recovery ratio, annualized is calculated using annualized Recoveries as the numerator and Period-end average managed receivables as the denominator."]]
[[/GREPCENT_TABLE]]

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Table of Contents

Managed receivables. Stress noted at some dealer locations resulted in higher than anticipated credit losses associated with floorplan loans during 2024. 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 and the first and second quarters of 2025. 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, 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 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 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. We have experienced modest fluctuations in our total managed yield ratio largely impacted by the relative mix of receivables in various products offered by CAR as some shorter-term product offerings tend to have higher yields. Yields on our CAR products over the last few quarters are consistent with our expectations over the coming quarters. Further, we expect our total managed yield ratio to remain in line with current experience, with moderate fluctuations based on relative growth or declines in average managed receivables for a given quarter. These variations depend on the relative mix of receivables in our various product offerings.

Combined principal net charge-off ratio, annualized and recovery ratio, annualized. We charge off auto finance receivables when they are between 120 and 180 days past due, unless the collateral is repossessed and sold before that point, in which case we will record a charge-off when the proceeds are received. Combined principal net charge-off ratios in the above table reflect the lower delinquency rates we have recently experienced. 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. We continually re-assess our dealers and will take appropriate action if we believe a particular dealer’s risk characteristics adversely change. While we have appropriate dealer reserves to mitigate losses across the majority of our pool of receivables, the timing of recognition of these reserves as an offset to charge-offs is largely dependent on various factors specific to each of our dealer partners including ongoing purchase volumes, outstanding balances of receivables and current performance of outstanding loans. As such, the timing of charge-off offsets is difficult to predict; however, we believe that these reserves are adequate to offset any loss exposure we may incur. Additionally, the products we issue in the U.S. territories do not have dealer reserves with which we can offset losses. We also expect our recovery rate to fluctuate modestly from quarter to quarter due to the timing of the sale of repossessed autos.