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. is a specialty finance company headquartered in Norfolk, Virginia and incorporated in Delaware. The Company's primary business is the purchase, collection and management of nonperforming loan portfolios. Most of the Company's purchases are from credit originators who have chosen not to pursue, or have been unsuccessful in collecting, the full balance owed to them ("Core" accounts). To a lesser extent, it also purchases loans in situations where the customer is involved in a bankruptcy or similar proceeding ("Insolvency" accounts). The Company's principal markets are the United States (“U.S.”) and Europe, and on a significantly smaller scale, it also operates in South America, Canada and Australia. As part of an ancillary business, the Company purchases and provides fee-based services for class action claims recoveries in the 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, 2025 (the "2025 Form 10-K").

Prior period reclassifications

In the Consolidated Statements of Changes in Equity, 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 June 30, 2026 and December 31, 2025 (in thousands):

Changes in Finance receivables, net for the three and six months ended June 30, 2026 and 2025 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 six months ended June 30, 2026 and 2025 was as follows (in thousands):

The purchase price for purchases made during the three and six months ended June 30, 2026 and 2025 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 six months ended June 30, 2026 and 2025 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 June 30, 2026 and 2025 were as follows (in thousands):

Changes in expected recoveries for the three months ended June 30, 2026 were $96.9 million, which included a $74.2 million positive adjustment to changes in expected future recoveries and $22.7 million in recoveries collected in excess of forecast (cash collections overperformance). The Company updated the forecasts for a majority of the pools in its European markets as part of the June 30, 2026 quarterly assessment and calculation of expected future recoveries, which resulted in a positive adjustment to changes in expected future recoveries of approximately $105 million. These forecasts reflected sustained cash collections overperformance across multiple markets; analysis of historical collection trends and expected collection patterns; the increased depth of our data sets; and enhancements made to our analytical processes and forecasting capabilities. This increase in changes in expected future recoveries was partially offset by decreases in the collections forecasts on multiple pools within the Company's other markets and the 2022-2025 U.S. Core pools. Recoveries collected in excess of forecast were due primarily to cash collections overperformance in Europe.

Changes in expected recoveries for the three months ended June 30, 2025 were $33.3 million, which included $40.3 million in recoveries collected in excess of forecast (cash collections overperformance) and a $7.0 million negative adjustment in changes in expected future recoveries. Recoveries collected in excess of forecast were largely due to cash collections overperformance in Europe, U.S., and Brazil. Changes in expected future recoveries were primarily due to a decrease to the collections forecast on the 2023 U.S. Core pool, which was partially offset by the impact of increases to the Company's collections forecasts in Europe.

Changes in expected recoveries for the six months ended June 30, 2026 and 2025 were as follows (in thousands):

Changes in expected recoveries for the six months ended June 30, 2026 were $140.8 million, which included a $95.4 million positive adjustment to changes in expected future recoveries and $45.4 million in recoveries received in excess of forecast. As described above, the Company updated the forecasts for a majority of the pools within its European markets as of June 30, 2026, resulting in a positive adjustment to changes in expected future recoveries of approximately $105 million. This increase was partially offset by decreases in the collections forecasts on multiple pools within the Company's other markets. Recoveries collected in excess of forecast were due mainly to collections performance in Europe.

Changes in expected recoveries for the six months ended June 30, 2025 were $61.2 million, which included $56.8 million in recoveries collected in excess of forecast and $4.4 million in changes in expected future recoveries. Recoveries collected in excess of forecast were largely due to cash collections overperformance in Europe and Brazil. Changes in expected future recoveries were primarily due to the impact of increases to the Company's collections forecasts on certain European pools, which was partially offset by decreases to the Company's collections forecasts on the 2023 U.S. Core pool.

Note 3. Investments

Investments consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):

Debt securities

As of June 30, 2026, the Company's investments in debt securities consisted of Swedish treasury securities maturing within one year and Finnish corporate notes maturing in approximately two years. As of June 30, 2026 and December 31, 2025, the amortized cost and fair value of these investments were as follows (in thousands):

Note 4. Goodwill

Changes in goodwill for the three and six months ended June 30, 2026 and 2025, 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 June 30, 2026, the Company determined there were no indicators that goodwill was more-likely-than-not impaired.

Note 5. Borrowings

Borrowings consisted of the following as of June 30, 2026 and December 31, 2025 (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 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 April 30, 2031.

European revolving credit facility

The Company amended and extended its European revolving credit facility on April 30, 2026, resulting in the extension of the maturity date from November 23, 2027 to April 30, 2031; the reduction of the maximum ERC ratio (as defined in the agreement) from 45.0% to 40.0%; and, subject to certain conditions, the ability of the borrowers to make investments in, or loans to, joint ventures up to an aggregate amount of €100 million.

For additional information about the Company's credit facilities, term loan and senior notes, refer to Note 7 to the Consolidated Financial Statements in the 2025 Form 10-K. The Company was in compliance with the covenants contained in its financing arrangements as of June 30, 2026.

Note 6. Derivatives

The Company periodically enters into interest rate swaps to reduce its exposure to fluctuations in interest rates on variable-rate debt (cash flow hedges) and foreign exchange forward contracts to reduce its exposure to foreign currency exchange rates (economic hedges).

The line-items and fair values for these instruments included in the Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 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 six months ended June 30, 2026 and 2025 were as follows (in thousands):

As of June 30, 2026 and December 31, 2025, the notional amount of outstanding interest rate swaps was$723.1 million and $883.0 million, respectively. These swaps remained highly effective as of June 30, 2026 and have remaining terms ranging from seven months to approximately four years. As of June 30, 2026, the Company estimates that approximately$0.6 million 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 forward contracts not designated as hedging instruments for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands):

As of June 30, 2026 and December 31, 2025, the notional amount of outstanding foreign exchange forward contracts was$443.7 million and$444.2 million, respectively.

Offsetting

The Company's policy is to report derivative asset and liability positions on a gross basis. As of June 30, 2026, none of the open derivative positions would have been eligible for offsetting under the terms of the Company's netting agreements.

Note 7. Fair Value

Financial instruments carried at fair value

As of June 30, 2026 and December 31, 2025, 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 June 30, 2026 and December 31, 2025, 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)The carrying amounts and fair values do not include debt issuance costs.

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

Due to the inherent uncertainty of determining the fair value of Level 3 financial instruments, the fair value of these instruments may differ significantly from the values that would have been used had a ready market or observable inputs existed for such instruments and may differ materially from the values that may ultimately be received or settled.

Note 8. Accumulated Other Comprehensive Loss

Reclassifications out of Accumulated other comprehensive loss for the three and six months ended June 30, 2026 and 2025, 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 six months ended June 30, 2026 and 2025, were as follows (in thousands):

(1)Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $0.7 million and $(2.0) million for the three months ended June 30, 2026 and 2025, respectively.

(1)Net of deferred taxes for unrealized gains from cash flow hedges of $(0.1) million and $(2.0) million for the six months ended June 30, 2026 and 2025, respectively.

9. Stockholders' Equity

In February 2022, the Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to$150.0 million of its outstanding common stock. During the three months ended June 30, 2026, the Company repurchased 587,642 shares of its common stock at an average price of $17.02 per share for a total of $10.0 million. During the six months ended June 30, 2026, the Company repurchased 1,134,323 shares of its common stock at an average price of $17.63 per share for a total of $20.0 million. Share repurchases are subject to restrictive covenants contained in the Company's credit facilities and the indentures that govern its senior notes. The Company's practice is to retire the shares it repurchases. As of June 30, 2026, there was $27.7 million remaining for share repurchases under the program. The Company's Board of Directors approved a new share repurchase program on August 3, 2026. For additional information, refer to Note 15.

Note 10. Earnings per Share

The following tables provide a reconciliation between basic earnings per share ("EPS") and diluted EPS for the three and six months ended June 30, 2026 and 2025 (in thousands, except per share amounts):

Basic EPS are computed by dividing net 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.

Note 11. Income Taxes

The Company's effective tax rate for the three and six months ended June 30, 2026 and 2025 was as follows (in thousands, except percentages):

The relationship between Income before income taxes and Income tax expense for the three and six months ended June 30, 2026 and 2025 was impacted by the Company's pretax income, mix of income from different taxing jurisdictions and the timing and amount of discrete items.

Each interim period is considered an integral part of the annual period and tax expense or benefit is measured using an estimated annual effective income tax rate. The estimated annual effective tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projections for the remainder of the year. Since the Company operates in foreign countries with varying tax rates, the Company’s quarterly effective tax rate is dependent, in part, on the level of income or loss from its international operations.

Note 12. 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 June 30, 2026, 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 15 to the Consolidated Financial Statements in the 2025 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 June 30, 2026, there were no material developments in the legal proceeding disclosed in the 2025 Form 10-K.

Note 13. Business Segments

The Company has determined that its U.S. and European businesses are reportable segments. The U.S. reportable segment includes the operating results of the Company's class action claims recoveries business, which are not material to the segment as a whole.

The chief operating decision maker ("CODM") is the Company’s chief executive officer ("CEO"). The primary profitability measure used by the CEO to evaluate performance and allocate resources is Income from operations excluding goodwill impairment, when applicable, and certain unallocated corporate expenses ("Adjusted segment operating income"). The Company does not report a measure of segment assets as that information is not regularly provided to the CEO. Intersegment and other intercompany transactions are executed on an arms-length basis. All prior period disclosures have been recast to reflect the reportable segment reorganization that occurred as of December 31, 2025.

Segment financial information

Segment operating results and reconciliations to the consolidated totals for the three and six months ended June 30, 2026 and 2025 were as follows(in thousands):

(1)Reflects revenues from external customers in South America, Canada and Australia.

(2)Amounts include intersegment and intercompany expenses, which are not material.

(3)Primarily reflects Communication expenses, Agency fees and Other operating expenses.

(4)Includes operating income in South America, Canada and Australia and certain unallocated corporate personnel, administrative and other overhead expenses.

Other segment balances and reconciliations to the consolidated totals for the three and six months ended June 30, 2026 and 2025 were as follows(in thousands):

(1)Reflects activity in South America, Canada and Australia. Interest expense, net also includes elimination of intersegment and intercompany interest.

Note 14. Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In November 2025, the FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements" ("ASU 2025-09"), which enables entities to apply hedge accounting to a greater number of highly effective economic hedges in the following five areas: (1) similar risk assessment for cash flow hedges; (2) hedging forecasted interest payments on choose-your-rate debt instruments; (3) cash flow hedges of nonfinancial forecasted transactions; (4) net written options as hedging instruments; and (5) foreign currency denominated debt instrument as hedging instrument and hedged item (dual hedge). This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. The Company early adopted this ASU during the three months ended June 30, 2026, by applying the guidance prospectively without cumulative effect adjustment and amending existing hedge documentation to allow for selection among the different interest rates and tenors available under the Company's cash flow hedges of its variable-rate debt.

Recently issued accounting pronouncements not yet adopted

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. The standard provides guidance to expand disclosures related to the disaggregation of income statement expenses. The guidance 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 of this ASU on its Consolidated Financial Statements and the related disclosures; however, it does not expect there will be a material impact upon adoption.

In November 2025, the FASB issued ASU 2025-08, "Financial Instruments – Credit Losses (Topic 326): Purchased Loans” ("ASU 2025-08"), under which loans (excluding credit cards) acquired without credit deterioration and deemed “seasoned” will be considered purchased seasoned loans and accounted for using the gross-up approach at acquisition. This ASU is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company currently applies the PCD accounting model to the loans it acquires and is evaluating the impact this ASU could have on its Consolidated Financial Statements; however, it does not expect there will be a material impact upon adoption.

In December 2025, the FASB issued ASU 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements" (“ASU 2025-11"), which improves the guidance of Topic 270, Interim Reporting, by providing clarity on the current interim reporting requirements. This ASU provides additional guidance on what disclosures should be provided in interim reporting periods and adds a principle to Topic 270 requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the reporting entity. This ASU is effective for interim reporting periods within annual reporting periods beginning after December 31, 2027. Early adoption is permitted, and this ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of this ASU on its Consolidated Financial Statements and the related disclosures.

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

Note 15. Subsequent Event

On August 3, 2026, the Company's Board of Directors approved a new share repurchase program under which the Company is authorized to repurchase up to $150 million of its outstanding common stock. Repurchases may be made from time-to-time in open market transactions, through privately negotiated transactions, in block transactions, through purchases made in accordance with trading plans adopted under Rule 10b5-1 of the Securities Exchange Act of 1934 or other methods, subject to market and/or other conditions, applicable regulatory requirements and the restrictive covenants contained in the Company's credit facilities and the indentures that govern its senior notes. The new share repurchase program does not obligate the Company to repurchase any specified amount of shares, remains subject to the discretion of the Board of Directors and may be modified, suspended or discontinued at any time.

The amount and timing of any share repurchases under the new share repurchase program also depend on several other factors, including the Company's capital allocation priorities; financial performance; leverage and liquidity levels; the price of the Company's common stock; and market conditions.