PRA GROUP INC
For the period ended Dec 31, 2023. Filed Feb 29, 2024.
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FY2023 · Filed Feb 29, 2024
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8 - Derivatives
- Derivatives:
The following table summarizes the fair value of derivative financial instruments as of December 31, 2023 and 2022 (amounts in thousands):
| 2023 | 2022 | |||
|---|---|---|---|---|
| Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |
| Derivatives designated as hedging instruments: | ||||
| Interest rate contracts | Other assets | $21,770 | Other assets | $37,305 |
| Interest rate contracts | Other liabilities | 11,627 | Other liabilities | — |
| Derivatives not designated as hedging instruments: | ||||
| Foreign currency contracts | Other assets | 1,007 | Other assets | 487 |
| Foreign currency contracts | Other liabilities | 8,776 | Other liabilities | 19,120 |
Derivatives Designated as Hedging Instruments:
Changes in the fair value of derivative contracts designated as cash flow hedging instruments are recognized in OCI. As of December 31, 2023 and 2022, the notional amount of interest rate contracts designated as cash flow hedging instruments was $872.3 million and $719.7 million, respectively. Derivatives designated as cash flow hedging instruments were evaluated and remained highly effective as of December 31, 2023, and have remaining terms from one month tofive years. The Company estimates that approximately $13.2 million of net derivative gains included in OCI will be reclassified into earnings within the next 12 months.
The following tables summarize the effects of derivatives designated as cash flow hedging instruments for the years ended December 31, 2023, 2022 and 2021 (amounts in thousands):
| Gain/(loss) recognized in OCI, net of tax | |||
|---|---|---|---|
| Derivatives designated as cash flow hedging instruments | 2023 | 2022 | 2021 |
| Interest rate contracts | $468 | $32,650 | $17,961 |
| Gain/(loss) reclassified from OCI into income | |||
| Location of gain/(loss) reclassified from OCI into income | 2023 | 2022 | 2021 |
| Interest expense, net | $23,158 | $(976) | $(12,722) |
As of December 31, 2023, with the discontinuation of LIBOR on June 30, 2023, and transition of the Company's interest rate swaps from LIBOR to SOFR, the Company has discontinued all prior elections under ASU 2021-01, "Reference Rate Reform (Topic 848): Overall"; and ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848".
Derivatives Not Designated as Hedging Instruments:
The Company enters into foreign currency contracts to economically hedge foreign currency re-measurement exposure related to certain balances denominated in currencies other than the functional currency of the Company or its international subsidiaries. Changes in fair value of derivative contracts not designated as hedging instruments are recognized in earnings. As of December 31, 2023 and 2022, the notional amount of foreign currency contractswas $368.5 million and $460.8 million, respectively.
The following table summarizes the effects of derivatives not designated as hedging instruments in the Company’s Consolidated Income Statements for the years ended December 31, 2023, 2022 and 2021 (amounts in thousands):
| Gain/(loss) recognized in income | ||||
|---|---|---|---|---|
| Derivatives not designated as hedging instruments | Location of gain/(loss) recognized in income | 2023 | 2022 | 2021 |
| Foreign currency contracts | Foreign exchange gain/(loss), net | $(10,330) | $38,808 | $12,160 |
| Foreign currency contracts | Interest expense, net | 1,603 | (364) | 406 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.