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 September 30, 2026 and December 31, 2025 (in thousands):

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

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

Changes in expected recoveries for the three months ended September 30, 2026 were $14.3 million, which included a $7.8 million positive adjustment to changes in expected future recoveries and $6.5 million in recoveries collected in excess of forecast (cash collections overperformance). Changes in expected future recoveries were primarily due to increases and the impact of timing adjustments in the collections forecasts on the 2024 and 2025 U.S. Core pools and certain European pools, partially offset by decreases in the collections forecasts on the 2021-2023 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 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 2017-2020 U.S. Core pools. These increases were partially offset by negative changes in expected future recoveries on the 2021-2023 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, 2026 and 2025 were as follows (in thousands):

Changes in expected recoveries for the nine months ended September 30, 2026 were $155.1 million, which included a $103.2 million positive adjustment to changes in expected future recoveries and $51.9 million in recoveries collected in excess of forecast. As described in the Form 10-Q for the quarterly period ended June 30, 2026, the Company updated the forecasts for a majority of the pools in its European markets as of June 30, 2026, which resulted in a positive adjustment to changes in expected future recoveries of approximately $105 million. Recoveries collected in excess of forecast were due primarily to cash collections overperformance in Europe.

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 2021-2023 U.S. Core pools, a portion of which was driven by changes in the expected timing of the recoveries.

Note 3. Investments

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

Debt securities

As of September 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 September 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 nine months ended September 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 September 30, 2026, the Company determined there were no indicators that goodwill was more-likely-than-not impaired. As of September 30, 2025, the Company determined that the goodwill in its Debt Buying and Collection ("DBC") reporting unit was fully impaired, and as a result, recorded a pretax goodwill impairment charge of $412.6 million in the Consolidated Income Statement for the three months ended September 30, 2025.

Note 5. Borrowings

Borrowings consisted of the following as of September 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.

On October 2, 2026, the Company completed the private offering of $400.0 million in aggregate principal amount of 8.500% senior notes due October 15, 2033. Refer to Note 15 for additional information.

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 September 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 September 30, 2026 and December 31, 2025 were 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, 2026 and 2025 were as follows (in thousands):

As of September 30, 2026 and December 31, 2025, the notional amount of outstanding interest rate swaps was$717.6 million and $883.0 million, respectively. These swaps remained highly effective as of September 30, 2026 and have remaining terms ranging from four months to approximately four years. As of September 30, 2026, the Company estimates that approximately$1.4 million of net derivative gains 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 nine months ended September 30, 2026 and 2025 were as follows (in thousands):

As of September 30, 2026 and December 31, 2025, the notional amount of outstanding foreign exchange forward contracts was$433.7 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 September 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 September 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 corporate notes is based on prices obtained from a third-party pricing service. The pricing service uses a model that incorporates contributed dealer quotes and reported trades for the same security.

(2)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, 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.

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.

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 nine months ended September 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 nine months ended September 30, 2026 and 2025, were as follows (in thousands):

(1)Net of deferred taxes for unrealized gains from cash flow hedges of $(2.9) million and $(0.9) million for the three months ended September 30, 2026 and 2025, respectively.

(1)Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(3.0) million and $1.1 million for the nine months ended September 30, 2026 and 2025, respectively.

Note 9. Stockholders' Equity

On August 3, 2026, the Board of Directors approved a new share repurchase program under which the Company is authorized to repurchase up to $150.0 million of its outstanding common stock. The new share repurchase program replaces the Company's prior share repurchase program, which was terminated on August 3, 2026, and under which no additional shares can be repurchased. The Company did not repurchase any shares during thethree months ended September 30, 2026. During the nine months ended September 30, 2026, the Company repurchased 1,134,323 shares of its common stock 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 September 30, 2026, there was $150.0 million remaining for share repurchases under the new share repurchase program.

Note 10. 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, 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 nine months ended September 30, 2026 and 2025 was as follows (in thousands, except percentages):

The relationship between Income/(loss) before income taxes and Income tax expense for the three and nine months ended September 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. The effective tax rate for the three months ended September 30, 2026, reflects a decrease in the forecasted annual effective tax rate due to changes in the forecasted mix of income across jurisdictions. The effective tax rate for the prior year periods was impacted by the goodwill impairment charge recorded during the three months ended September 30, 2025.

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 September 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 September 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 nine months ended September 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 nine months ended September 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 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 15, 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

2033 senior notes

On October 2, 2026, the Company completed the private offering of $400.0 million in aggregate principal amount of its 8.500% senior notes due October 15, 2033. Interest on the notes is payable semiannually in arrears on April 15 and October 15 of each year, commencing on April 15, 2027. The Company used the net proceeds from this offering and available cash to repay approximately $400.0 million aggregate principal amount of outstanding borrowings under its North American revolving credit facility.