PRA GROUP INC

(Unaudited)

Note 1. Organization and Business

As used herein, the terms "PRA Group," the "Company," or similar terms refer to PRA Group, Inc. and its subsidiaries.

Nature of operations

PRA Group, Inc., a Delaware corporation headquartered in Norfolk, Virginia, is a global financial services company with operations in the Americas, Europe and Australia. The Company's primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company also purchases and provides fee-based services for class action claims recoveries in the United States ("U.S.").

Basis of presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and the instructions for Quarterly Reports on Form 10-Q of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for a fair presentation have been included. These unaudited Consolidated Financial Statements include the accounts of PRA Group and other entities in which the Company has a controlling interest. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed, and realized results could differ from those estimates and assumptions.

These unaudited Consolidated Financial Statements may not be indicative of future results and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K").

Prior period reclassifications

In the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, certain prior period amounts have been reclassified for consistency with the current period presentation.

Note 2. Finance Receivables, net

Finance receivables, net consisted of the following as of September 30, 2025 and December 31, 2024 (in thousands):

Changes in Finance receivables, net by portfolio type for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):

(1) Initial negative allowance for expected recoveries on current period purchases

The initial negative allowance for expected recoveries on purchases made during the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):

The purchase price for purchases made during the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):

(2) Recoveries collected and applied to Finance receivables, net

Recoveries collected and applied to Finance receivables, net for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):

(a)Includes cash collections, buybacks and other cash-based adjustments.

(b)Reclassifications from Finance receivables, net to Portfolio income based on the effective interest rate of the underlying account pools.

(3) Changes in expected recoveries

Changes in expected recoveries for the three months ended September 30, 2025 and 2024 were as follows (in thousands):

Changes in expected recoveries for the three months ended September 30, 2025 were $51.4 million, which included $27.4 million in recoveries collected in excess of forecast and a $24.0 million positive adjustment to changes in expected future recoveries. Recoveries collected in excess of forecast were due largely to cash collections overperformance in Europe, and also included overperformance in South America and the U.S. Collections overperformance in the U.S. was net of a one-time payment of $15.0 million to a seller to modify the terms and conditions of certain previously purchased portfolios to allow for increased use of legal collections. Changes in expected future recoveries were driven by the results of the Company's forecasting models, combined with evaluations of recent performance, and were due in large part to increases in the collections forecasts for certain European and South American pools and the 2024 U.S. Core pool (driven by the increase in estimated remaining collections resulting from the above-mentioned contract modification) and 2017 to 2020 U.S. Core pools. These increases were partially offset by negative changes in expected future recoveries on the 2021 to 2023 U.S. Core pools, a portion of which was driven by changes in the expected timing of the recoveries.

Changes in expected recoveries for the three months ended September 30, 2024 were $60.6 million, which included $34.2 million in recoveries collected in excess of forecast, due primarily to collections performance in the U.S. and Europe. Changes in expected future recoveries of $26.5 million mainly reflect the Company's assessment of the 2013 to 2020 U.S. Core pools and a number of pools in Europe, which resulted in increases to the expected cash flows considering that recent performance of those pools is expected to continue.

Changes in expected recoveries for the nine months ended September 30, 2025 and 2024 were as follows (in thousands):

Changes in expected recoveries for the nine months ended September 30, 2025 were $112.6 million, which included $84.2 million in recoveries collected in excess of forecast and a $28.4 million positive adjustment to changes in expected future recoveries. Recoveries collected in excess of forecast were primarily due to cash collections overperformance in Europe, South America, and to a lesser extent the U.S., where collections overperformance was impacted by a one-time payment of $15.0 million to a seller to modify the terms and conditions of certain previously purchased portfolios to allow for increased use of legal collections. Changes in expected future recoveries were driven by the results of the Company's forecasting models, combined with evaluations of recent performance, and were due in large part to increases in the collections forecasts for certain European and South American pools and the U.S. 2024 Core pool (driven by the increase in estimated remaining collections resulting from the above-mentioned contract modification). These increases were partially offset by negative changes in expected future recoveries on the 2021 to 2023 U.S. Core pools, a portion of which was driven by changes in the expected timing of the recoveries.

Changes in expected recoveries for the nine months ended September 30, 2024 were $185.6 million, which included $124.3 million in recoveries collected in excess of forecast, due primarily to collections performance in the U.S. and Europe. Changes in expected future recoveries of $61.4 million mainly reflect the Company's assessment of the 2013 to 2020 U.S. Core pools and a number of pools in Europe, which resulted in increases to the expected cash flows considering that recent performance of those pools is expected to continue.

Note 3. Investments

Investments consisted of the following as of September 30, 2025 and December 31, 2024 (in thousands):

Debt securities

As of September 30, 2025, the Company's debt securities consisted of Swedish treasury securities maturing within one year. As of September 30, 2025 and December 31, 2024, the amortized cost and fair value of these investments were as follows (in thousands):

Equity method investment

The Company sold its 11.7% interest in RCB Investimentos S.A., a servicing company for nonperforming loans in Brazil, in April 2025.

Note 4. Goodwill

Changes in goodwill for the three and nine months ended September 30, 2025 and 2024, were as follows (in thousands):

The Company performs an annual impairment test of goodwill as of October 1 of each year, or more frequently if indicators of impairment exist. As of September 30, 2025, as part of the Company’s interim impairment assessment, based on a sustained decrease in its stock price and market capitalization, the Company determined there to be an indicator of potential goodwill impairment in its Debt Buying and Collection (“DBC”) reporting unit. As a result, the Company performed a quantitative impairment test of the DBC reporting unit as of September 30, 2025, using the income approach, and also compared the estimated fair value to the Company’s market capitalization.

The Company estimates fair value based on the present value of estimated future cash flows and a residual terminal value. Forecasted financial results for the DBC reporting unit are developed considering several inputs and assumptions, including portfolio purchasing volume, purchase price multiples, ERC growth rate, terminal value and operating expenses.

Based on the quantitative impairment test performed as of September 30, 2025, driven in large part by the comparison to market capitalization and the impact on estimated fair value of a decrease in the terminal value assumption and an increase in the discount rate assumption since the most recent annual impairment test, the Company determined that the goodwill in its DBC reporting unit was fully impaired, and as a result, recorded a goodwill impairment charge of $412.6 million in the Consolidated Income Statement for the three months ended September 30, 2025.

As of September 30, 2025, goodwill of $26.9 million related to the Company’s Claims Compensation Bureau, LLC (“CCB”) reporting unit, and the Company determined there were no indicators of impairment related to this reporting unit as of September 30, 2025.

Note 5. Borrowings

Borrowings consisted of the following as of September 30, 2025 and December 31, 2024 (in thousands):

(1)Revolving credit facility under the Company's North American credit agreement with a combined domestic and Canadian limit of $1.1 billion (subject to the borrowing base and debt covenants, including advance rates), maturing on October 28, 2029.

(2)Term loan under the Company's North American credit agreement, with a final maturity date of October 28, 2029.

(3)Revolving credit facility with a limit of $725.0 million (subject to the borrowing base and debt covenants, including advance rates), maturing on October 30, 2029.

(4)Revolving credit facility with an aggregate limit of approximately €730.0 million (subject to the borrowing base and debt covenants, including advance rates), maturing on November 23, 2027.

For additional information about the North American revolving credit facility and term loan, United Kingdom revolving credit facility, European revolving credit facility and the Company's senior notes, refer to Note 7 to the Consolidated Financial Statements in the 2024 Form 10-K and description of the 2032 senior notes below.

The Company was in compliance with the covenants contained in its financing arrangements as of September 30, 2025.

2032 senior notes

On September 30, 2025, the Company completed the private offering of €300.0 million ($352.0 million) in aggregate principal amount of its 6.250% senior notes due September 30, 2032 through its wholly-owned subsidiary, PRA Group Europe Holding II S.à r.l. ("Issuer"). The notes are senior unsecured obligations of the Issuer and are guaranteed on a senior unsecured basis by the Company and all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American revolving credit facility, subject to certain exceptions. Interest on the notes is payable semi-annually, in arrears, on March 31 and September 30 of each year.

Prior to September 30, 2028, the Issuer may redeem the notes, in whole or in part, at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus the applicable "make whole" premium. On or before September 30, 2028, the Issuer may redeem up to 40% of the aggregate principal amount of the notes at a redemption price of 106.250% plus accrued and unpaid interest with the net cash proceeds of a public offering of common stock of the Company provided, that at least 60% in aggregate principal amount of the notes remains outstanding immediately after the occurrence of such redemption and that such redemption will occur within 90 days of the date of the closing of such public offering.

In addition, on or after September 30, 2028, the Issuer may redeem the notes, in whole or in part, at a price equal to 103.1250% of the aggregate principal amount of the notes being redeemed. The applicable redemption price changes if redeemed during the 12 months beginning September 30 of each year to 101.5625% for 2029 and then 100% for 2030 and thereafter.

In the event of a change of control, each holder will have the right to require the Issuer to repurchase all or any part of such holder's notes at an offer price equal to 101% of the aggregate principal amount plus accrued and unpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the notes at 100% of their principal amount plus accrued and unpaid interest.

The related indenture contains customary terms and covenants, including certain events of default after which the notes may be due and payable immediately.

Note 6. Derivatives

The Company periodically enters into interest rate swaps and foreign exchange contracts to reduce its exposure to fluctuations in interest rates on variable-rate debt and foreign currency exchange rates. The fair value of these instruments as of September 30, 2025 and December 31, 2024 was as follows (in thousands):

Derivatives designated as hedging instruments

The effects of interest rate swaps designated as cash flow hedging instruments for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):

As of September 30, 2025 and December 31, 2024, the notional amount of outstanding interest rate swaps was$886.7 million and $800.7 million, respectively. These swaps remained highly effective as of September 30, 2025 and have remaining terms ranging from four months tofive years. As of September 30, 2025, the Company estimates that$0.7 millionof net derivative losses included in other comprehensive income ("OCI") will be reclassified into earnings within the next 12 months.

Derivatives not designated as hedging instruments

The effects of foreign exchange contracts not designated as hedging instruments for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):

As of September 30, 2025 and December 31, 2024, the notional amount of outstanding foreign exchange contracts was$423.1 million and$376.4 million, respectively.

Note 7. Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Financial instruments carried at fair value

As of September 30, 2025 and December 31, 2024, financial instruments measured at fair value on a recurring basis were as follows (in thousands):

(1)Fair value of derivatives is estimated using industry standard valuation models, which project future cash flows and discount the future amounts to present value using market-based observable inputs, including interest rate curves and other factors.

Financial instruments not carried at fair value

As of September 30, 2025 and December 31, 2024, the estimated fair value and carrying amount of financial instruments not carried at fair value were as follows (in thousands):

(1)Fair value is estimated using the proprietary pricing models the Company utilizes to make portfolio acquisition decisions.

(2)Fair value is based on quoted prices for similar instruments in active markets and approximates carrying value due to the short-term deposit periods.

(3)Fair value is based on quoted prices for similar instruments in active markets and approximates carrying value due to the short-term interest rate periods.

(4)Fair value is based on quoted market prices obtained from secondary market broker quotes.

(5)The carrying amounts and fair values do not include debt issuance costs.

During the three months ended September 30, 2025, the Company assessed the goodwill in its DBC reporting unit for impairment and determined that the goodwill was fully impaired. The estimated fair value of the DBC reporting unit represents a Level 3 nonrecurring fair value measurement. Refer to Note 4 in these Consolidated Financial Statements for additional information.

Note 8. Accumulated Other Comprehensive Income/Loss

Reclassifications out of Accumulated other comprehensive loss for the three and nine months ended September 30, 2025 and 2024, were as follows (in thousands):

(1)Income tax effects are released from Accumulated other comprehensive loss contemporaneously with the related gross pretax amount.

Changes in Accumulated other comprehensive loss for the three and nine months ended September 30, 2025 and 2024, were as follows (in thousands):

(1)Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(0.9) million and $2.8 million for the three months ended September 30, 2025 and 2024, respectively.

(1)Net of deferred taxes for unrealized (gains)/losses from cash flow hedges $1.1 million and $0.1 million for the nine months ended September 30, 2025 and 2024, respectively.

Note 9. Earnings per Share

The following tables provide a reconciliation between basic earnings per share ("EPS") and diluted EPS for the three and nine months ended September 30, 2025 and 2024 (in thousands, except per share amounts):

Basic EPS are computed by dividing net (loss)/income available to common stockholders of PRA Group, Inc. by weighted average common shares outstanding. Diluted EPS are computed using the same components as basic EPS, with the denominator adjusted for nonvested share awards, if dilutive. Share-based awards that are contingent upon the attainment ofperformance goals are included in the computation of diluted EPS if the effect is dilutive. For thethree and nine months ended September 30, 2025, approximately 0.1 million and 0.2 million antidilutive shares were excluded from the computation of diluted EPS, respectively.

Note 10. Income Taxes

The Company's effective tax rate for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):

The relationship between (Loss)/income before income taxes and Income tax expense/(benefit) for the three and nine months ended September 30, 2025 was mainly impacted by the goodwill impairment charge.

The relationship between (Loss)/income before income taxes and Income tax expense/(benefit) for the three and nine months ended September 30, 2024 was impacted by a $7.7 million reduction in tax expense due to the reversal of a valuation allowance associated with the resolution of a tax matter in Europe.

Recently enacted tax legislation

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S. The OBBBA introduced a broad range of tax reform provisions affecting businesses, including the expansion of bonus depreciation and revisions to the U.S. taxation of profits derived from international operations. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2025 and others implemented through fiscal year 2027.

The Company does not expect the relevant provisions of the OBBBA will have a material impact on its 2025 income tax expense and is currently assessing the impact on future periods, which it expects will depend, in large part, on the amount and composition of taxable income generated by the Company.

Note 11. Commitments and Contingencies

Forward flow agreements

The Company enters into forward flow agreements for the purchase of nonperforming loans. These agreements typically have terms ranging from six to 12 months, or they can be open-ended, and establish purchase prices and specific criteria for the accounts to be purchased. Some of the agreements establish a volume reference for the contract term in the form of a target or maximum, however, very few agreements establish a minimum contractual obligation, and many of the contracts contain early termination provisions allowing either party to cancel the agreements in accordance with a specified notice period. The amounts purchased are also dependent on actual delivery by the sellers, and while purchases under these agreements comprise a significant portion of the Company's overall purchases, as of September 30, 2025, the estimated minimum contractual purchase obligation under forward flow agreements was not significant.

Litigation and regulatory matters

The Company and its subsidiaries are from time-to-time subject to a variety of legal and regulatory claims, inquiries, proceedings, and other matters, including those described in Note 14 to the Consolidated Financial Statements in the 2024 Form 10-K. The Company accrues for potential liability arising from legal proceedings and regulatory matters when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These estimates involve significant judgment, and accordingly, the Company's estimates will change from time-to-time, and actual expenses could exceed the current estimates. As of September 30, 2025, there were no material developments in any of the previously disclosed legal proceedings.

Note 12. Segments

The Company has determined that it is managed on a consolidated basis under a single operating segment, Accounts Receivable Management ("ARM"), and accordingly, it hasone reportable segment. The ARM segment is comprised of the Company's primary business, DBC, which generates revenue through the purchase, collection and management of portfolios of nonperforming loans, and CCB, which generates revenue through the purchase of, and provision of fee-based services for, class action claims recoveries in the U.S. The chief operating decision maker ("CODM") is the Company’s chief executive officer, who assesses performance based on the Company's consolidated results prepared in accordance with GAAP.

Segment revenue, significant segment expenses and profit or loss

ARM segment revenue is presented in the Company's Consolidated Income Statements under Total revenues. Significant segment expenses regularly considered by the CODM are those most directly related to the Company's revenue generating activities, including Compensation and benefits, Legal collection costs, Legal collection fees, Agency fees, Professional and outside services and Communication. All other operating expenses appearing in the Consolidated Income Statements constitute other segment items. ARM segment profit or loss is presented in the Company's Consolidated Income Statements under Net (loss)/income attributable to PRA Group, Inc.

Segment assets

ARM segment assets are presented in the Company's Consolidated Balance Sheets under Total assets.

Other segment information

ARM segment profit or loss and segment assets for three and nine months ended September 30, 2025 and 2024 include the following amounts (in thousands):

Note 13. Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted:

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis, with early adoption permitted. The Company plans to adopt ASU 2023-09 on a prospective basis in its annual financial statements for the year ending December 31, 2025 and is currently evaluating the impact on its income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). Subsequently, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. ASU 2024-03 provides guidance that will expand disclosures related to the disaggregation of income statement expenses and is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company is evaluating the impact these ASUs will have on its disclosures.

All other recently issued accounting pronouncements not yet adopted have been deemed either immaterial or not applicable.