Atlanticus Holdings Corp

Previous wording

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. According to data published by Experian, 40% of Americans had FICO® scores of less than 700. We believe this equates to a population of over 100 million everyday Americans in need of access to credit. These consumers often have financial needs that are not effectively met by larger financial institutions. 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.

Current wording

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.

Previous wording

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, complements Atlanticus’ general purpose credit card, retail credit, patient financing, and dealer solutions products.

Current wording

On September 11, 2025, the Company acquired 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 added 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.

Previous wording

Currently, within our CaaS segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing $48 billion in consumer loans over more than 25 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.

Current wording

Currently, within our CaaS segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing approximately $52 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.

Previous wording

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., Walmart, Inc., and PayPal Holdings, 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.

Current wording

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.

Previous wording

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 do 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" in Part I, Item 1 of our Annual Report on Form 10-K and "We operate in a heavily regulated industry" in Part II, Item 1A, "Risk Factors" contained in this Report.

Current wording

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" in Part 1, Item 1 of our Annual Report on Form 10-K and "We operate in a heavily regulated industry" in Part II, Item 1A, "Risk Factors" contained in this Report.

Previous wording

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 $350 to $3,000, 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.

Current wording

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.

Previous wording

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 September 30, 2025, our CAR operations served over 690 dealers in 33 states and two U.S. territories. The core operations continue to achieve profitability and generate positive cash flows.

Current wording

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 March 31, 2026, our CAR operations served 700 dealers in 34 states and two U.S. territories. The core operations continue to achieve profitability and generate positive cash flows.

Previous wording

Three and Nine Months Ended September 30, 2025 Compared to Three and Nine Months Ended September 30, 2024

Current wording

** Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025**

Previous wording

Period-over-period results primarily relate to growth in private label credit and general purpose credit card products, the receivables of which increased to $6,600.1 million as of September 30, 2025, from $2,653.8 million as of September 30, 2024. Growth in these receivables includes general purpose credit card receivables associated with our acquisition of Mercury, which added $3,159.9 million in receivables as of September 30, 2025 and contributed $49.9 million to the period ending Total operating revenue and other income. Absent this acquisition, receivables were $3,440.2 million as of September 30, 2025. We experienced growth in total operating revenues for both our general purpose credit card and our private label credit receivables for the three and nine months ended September 30, 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 over 775,000 as of September 30, 2025 when compared to September 30, 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 $8.7 million and $37.8 million, for the three and nine months ended September 30, 2025, respectively, from the same periods in 2024. For our general purpose credit card receivables, we experienced strong growth in finance and fee income (increasing $73.5 million and $158.8 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024) resulting from growth in the acquisition of receivables and our acquisition of Mercury.

Current wording

Period-over-period results primarily relate to growth in private label credit and general purpose credit card products, the receivables of which increased to $6,724.9 million as of March 31, 2026, from $2,706.3 million as of March 31, 2025. Growth in these receivables includes general purpose credit card receivables associated with our acquisition of Mercury, which totaled $3,078.7 million in receivables as of March 31, 2026. Excluding the receivables acquired pursuant to this acquisition, receivables were $3,646.2 million as of March 31, 2026. 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 three months ended March 31, 2026, when compared to the same period in 2025. 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 900,000 as of March 31, 2026 when compared to March 31, 2025 (excluding those serviced accounts added as part of our acquisition of Mercury). This growth in customers served resulted in an increase in substantially all finance and fee categories from the same period in 2025. Our acquisition of Mercury contributed an additional $224.4 million to our quarter-over-quarter growth in Total Operating revenue and other income.

Previous wording

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 are currently experiencing continued period-over-period increases in private label credit and general purpose credit card receivables. Therefore, we expect net period-over-period growth in our total interest income and related fees for these operations throughout 2025. During 2024 and so far in 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 receivables typically generate lower gross yields and lower gross losses than our general purpose credit card receivables. This growth in private label credit receivables, relative to growth in general purpose credit card receivables offset some of the increased fee and finance pricing requirements discussed above. As our private label credit receivables growth is typically strongest during the second and third quarters of each year, we expect some seasonal contraction in that portfolio in the fourth quarter of 2025. Growth in our general purpose credit card receivables is expected to continue for the remainder of the year and outpace growth in our private label credit receivables as we continue to expand our marketing efforts. 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. These changes should result in meaningful additions to our Total operating revenue and other income in 2026 and beyond, although certain of the changes will take several quarters to be fully realized.

Current wording

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 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 have and continue to enact 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.

Previous wording

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 condensed 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 three and nine months ended September 30, 2025, when compared to the same periods in 2024. See Note 3, "Significant Accounting Policies and Condensed Consolidated Financial Statement Components" to our condensed 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.

Current wording

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 condensed 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 three months ended March 31, 2026, when compared to the same period in 2025. See Note 2, "Significant Accounting Policies and Condensed Consolidated Financial Statement Components" to our condensed 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.

Previous wording

Interest expense. Variations in interest expense are due to new borrowings and increased costs of capital associated with growth in private label credit and general purpose credit card receivables and CAR operations as evidenced within Note 10, "Notes Payable," to our condensed consolidated financial statements, 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 increased to $5,297.3 million as of September 30, 2025, from $1,976.8 million as of September 30, 2024. This growth, period over period, included notes payable associated with our Mercury acquisition of $2,813.0 million as of September 30, 2025. Interest expense increased $33.0 million and $61.2 million for the three and nine months ended September 30, 2025, respectively, when compared to the three and nine months ended September 30, 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 recent 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 coupled with higher effective interest rates on new debt compared to rates on maturing debt. As such, and when coupled with the interest expense associated with the acquired Mercury debt facilities, we expect our quarterly interest expense for these operations to increase compared to prior periods.

Current wording

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 9, "Notes Payable," to our condensed consolidated financial statements, as well as the addition of Mercury and its associated collateralized borrowings. This growth was partially 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 $5,606.7 million as of March 31, 2026, from $2,137.6 million as of March 31, 2025. This growth, period-over-period, included notes payable of $2,747.6 million associated with our Mercury acquisition as of March 31, 2026. Interest expense increased $75.2 million for the three months ended March 31, 2026, when compared to the three months ended March 31, 2025. The majority of this increase in interest expense relates to the addition of multiple credit facilities in 2025 associated with growth in our card and loan receivables, coupled with the issuance of $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 (the "2030 Senior Notes"). Increases in the effective interest rates on debt have impacted 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.

Previous wording

We have experienced a period-over-period decrease of $3.1 million and $5.3 million in our provision for credit losses (when comparing the three and nine months ended September 30, 2025 to the same periods in 2024) primarily associated with lower receivable balances and decreases in loss estimates associated with our Auto Finance segment's floorplan loans. 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. Recent stress noted at some dealer locations is incorporated into our loss estimates for floorplan and consumer loans and resulted in increased provisions for credit losses during 2024. With these increased loss rates 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 Condensed Consolidated Financial Statement Components," to our condensed consolidated financial statements for further credit quality statistics and analysis.

Current wording

We have experienced a period-over-period increase of $0.5 million in our provision for credit losses (when comparing the three months ended March 31, 2026 to the same period in 2025) as losses remained relatively modest between periods and 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. We do not expect to see significant increases or decreases in year-over-year amounts absent significant growth in the associated receivables. See Note 2, "Significant Accounting Policies and Condensed Consolidated Financial Statement Components," to our condensed consolidated financial statements for further credit quality statistics and analysis.

Previous wording

***Changes in fair value of loans.***We experienced losses in our total Changes in fair value of loans of $276.9 million and $672.0 million for the three and nine months ended September 30, 2025, respectively. This compares to losses of $203.7 million and $549.2 million for the three and nine months ended September 30, 2024, respectively. Changes in fair value of loans includes 1) current period principal and finance charge-offs of fair value receivables, 2) the normal accretion of fair value related to finance charges and fees in excess of the contractual amounts billed, which is recognized in revenue during the period, and gains typically recognized in 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 receivables and 4) the impact of changes in the assumptions underlying receivables at the end of the measurement period. The increase in losses in Changes in fair value of loans for the three and nine months ended September 30, 2025 when compared to the three and nine months ended September 30, 2024, were 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 $(45.0) million and $5.1 million for the three and nine months ended September 30, 2025, respectively, compared to $(2.3) million and $101.0 million for the three and nine months ended September 30, 2024, respectively. Results impacting the Changes in fair value of loans at fair value, included in earnings for the three and nine months ended September 30, 2025 and 2024, respectively, are as follows: 1) net gains of $37.8 million and $95.0 million for the three and nine months ended September 30, 2025, respectively, associated with the normal accretion of fair value related to finance charges and fees in excess of the contractual amounts billed, which is recognized in revenue during the period, and gains typically recognized in earnings as the fair value of finance charges and fees is greater than the contractual amounts billed during a period (compared to $20.0 million and $89.8 million of such gains for the three and nine months ended September 30, 2024, respectively), 2) net losses of $48.5 million and $134.2 million for the three and nine months ended September 30, 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 $44.1 million and $127.7 million of such losses for the three and nine months ended September 30, 2024, respectively) and 3) net (losses)/gains of $(34.3) million and $44.3 million (compared to $21.8 million and $138.9 million of such increase for the three and nine months ended September 30, 2024, respectively) related to unfavorable changes for the quarter ended Se…

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Current wording

***Changes in fair value of loans.***We experienced losses in our total Changes in fair value of loans of $365.5 million for the three months ended March 31, 2026. This compares to losses of $178.3 million for the three months ended March 31, 2025. 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, 4) the impact of changes in the fair value assumptions underlying receivables at the end of the measurement period and 5) the impact of changes in the fair value of Contingent consideration on our acquired portfolio of receivables from our acquisition of Mercury. The increase in losses in Changes in fair value of loans for the three months ended March 31, 2026 when compared to the three months ended March 31, 2025, was largely due to increases in charge-offs on our underlying receivables. Additionally we experienced a slight 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 $40.9 million for the three months ended March 31, 2026, compared to $55.2 million for the three months ended March 31, 2025. Results impacting the $40.9 million and $55.2 million in Changes in fair value of loans at fair value, included in earnings for the three months ended March 31, 2026 and 2025, respectively, are as follows: 1) net gains of $24.6 million for the three months ended March 31, 2026, 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 $31.4 million of such gains for the three months ended March 31, 2025), 2) net losses of $25.8 million for the three months ended March 31, 2026, 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 $37.7 million of such losses for the three months ended March 31, 2025), 3) net gains of $29.1 million for the three months ended March 31, 2026 (compared to $61.5 million of such gains for the three months ended March 31, 2025) related to favorable changes for the quarter ended March 31, 2026 and 2025 in fair value assumptions. These favorable assumption changes for the first quarter of 2026 were…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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, implementation of product, policy, and pricing changes and an improved inflation environment. See Note 7 "Fair Values of Assets and Liabilities" to our condensed 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. Tightened underwriting standards shifted new receivable acquisitions to consumers at the higher end of the FICO bands in which our bank partners participate, presumably resulting in improved overall credit performance of our acquired receivables. When coupled with those existing assets negatively impacted by inflation gradually becoming a smaller percentage of the outstanding portfolio, 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 improvement. 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:

Current wording

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, implementation of product, policy, and pricing changes and an improved inflation environment. See Note 6 "Fair Values of Assets and Liabilities" to our condensed consolidated financial statements included herein for further discussion of this 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. When coupled with those existing assets negatively impacted by inflation gradually becoming a smaller percentage of the outstanding portfolio, we expect to see overall improvements in the measured fair value of our portfolios of acquired receivables. 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. Qualitative discussion of these factors is as follows:

Previous wording

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 September 30, 2025, when compared to rates used as of September 30, 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 the aforementioned product, policy, and pricing changes which partially offset the net $(44.8) million and $5.3 million of net (loss)/gains noted above for the three and nine months ended September 30, 2025, respectively. As these product, policy and pricing changes continue to further positively impact both newly acquired and existing private label credit receivables and general purpose credit card receivables. 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 product, policy, and pricing changes on our existing receivables (and all newly acquired receivables), some of these changes will take several quarters to be fully realized.

Current wording

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 March 31, 2026, when compared to rates used as of March 31, 2025 largely due to increased acquisitions of receivables associated with 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 in yield, 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 contributed to the net $40.9 million of net gains noted above for the three months ended March 31, 2026. This change in 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

Previous wording

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. These 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.

Current wording

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 2026, 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 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 2026.

Previous wording

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. Additionally, we have noted reductions in the Expected net principal credit loss rate associated with our general purpose credit card receivables, which have shown continued overall improvements in delinquency rates. With growth in the acquisition of our private label credit receivables, particularly those noted above with limited loss exposure, and growth in better performing general purpose credit card receivables, we expect this weighted average rate to decrease over the next several quarters (when compared to similar periods in prior years) before stabilizing. As changes in expected losses for receivables at the individual pool level did not change meaningfully, the overall impact on our fair value calculation was not meaningful although the positive impact of the improvement noted in delinquencies is included as a component of the net $(45.0) million and $5.1 million of net (loss)/gains noted above for the three and nine months ended September 30, 2025, respectively.

Current wording

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 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 continue to season and 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 $40.9 million gains in Changes in fair value of loans at fair value noted above.

Previous wording

Discount Rate – Our weighted average discount rate has remained relatively consistent over the past several quarters (and is expected to continue to remain consistent or go down). 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, our weighted average discount rate has decreased marginally as these receivables have appropriately lower 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 have assigned a lower discount rate when assessing the fair value of these receivables to reflect the significantly lower risk and return characteristics. As a result, our weighted average discount rate has decreased marginally. 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 decrease in return requirements used by third-party market participants, we may further reduce our weighted average discount rate.

Current wording

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 changes in the types and volumes 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.

Previous wording

Total operating expenses. Total operating expenses variances for the three and nine months ended September 30, 2025, relative to the three and nine months ended September 30, 2024, reflect the following:

Current wording

Total operating expenses. Total operating expenses variances for the three months ended March 31, 2026, relative to the three months ended March 31, 2025, reflect the following:

Previous wording

As many of our 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 2025 and 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 the aforementioned 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.

Current wording

These expenses will primarily relate to the variable costs of marketing efforts and card and loan servicing expenses associated with new receivable acquisitions. Unknown 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.

Previous wording

Noncontrolling interests. We reflect the ownership interests of noncontrolling holders of equity in our majority-owned subsidiaries as noncontrolling interests in our condensed 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 condensed consolidated balance sheets and the associated dividends are included as a reduction of our net income attributable to common shareholders on the condensed consolidated statements of income.

Current wording

Noncontrolling interests. We reflect the ownership interests of noncontrolling holders of equity in our majority-owned subsidiaries as noncontrolling interests in our condensed 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. 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 condensed consolidated balance sheets and the associated dividends are included as a reduction of our net income attributable to common shareholders on the condensed consolidated statements of income.

Previous wording

***Income Taxes.***We experienced effective tax rates of 24.0% and 24.0% for the three and nine months ended September 30, 2025, respectively, compared to 21.5% and 19.7% for the three and nine months ended September 30, 2024, respectively.

Current wording

***Income Taxes.***We experienced effective tax rates of 24.4% and 23.6% for the three months ended March 31, 2026, and 2025, respectively.

Previous wording

Our effective tax rates for the three and nine months ended September 30, 2025, are above the statutory rate principally due to our (1) state and foreign income tax expense, including the effects of law changes enacted in the nine months ended September 30, 2025, in certain states in which we operate, (2) the tax effects of deduction disallowance under Section 162(m) of the Internal Revenue Code of 1986 as amended (the “Code”) with respect to compensation paid to our covered employees, and (3) taxes on global intangible low-taxed income. Offsetting the foregoing items were the tax effects of deductions (1) associated with the exercises of stock options and the vesting of restricted stock at the times when the fair value of our stock exceeded such share-based awards’ grant date values, and (2) of 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.

Current wording

These effective tax expense rates were above the statutory rate principally due to (1) state and foreign income tax expense, (2) deduction disallowance under Section 162(m) of the Internal Revenue Code of 1986, as amended, with respect to compensation paid to our covered employees, and (3) taxes on global intangible low-taxed income. Offsetting the foregoing items were deductions associated with the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’ grant date values. Another offsetting item in only the three months ended March 31, 2025, was our deduction of interest expense on a financial instrument classified as debt for tax purposes that was repaid in the three months ended March 31, 2025—such financial instrument which was characterized in our consolidated financial statements as dividend-paying preferred stock.

Previous wording

We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our condensed consolidated statements of income. We likewise report within such line item the reversal of interest expense associated with our accrued liabilities for uncertain tax positions to the extent we resolve such liabilities in a manner favorable to our accruals therefor. Such interest expense was $135 thousand for the nine months ended September 30, 2025, and $140 thousand for the nine months ended September 30, 2024.

Current wording

We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions to the extent such liabilities have not been favorably resolved thereby resulting in interest expense reversals) within our income tax line item on our consolidated statements of income. Such interest expense was de minimis in both the three months ended March 31, 2026, and 2025.

Previous wording

The following discussion of our managed receivables includes the aforementioned acquisition of Mercury and its portfolio of approximately $3,159.9 million in general purpose credit card receivables. As we acquired the receivables on September 11, 2025, the financial impact of the acquisition on the quarter was limited to fees, billings and expenses subsequent to that date, however the receivables acquired are included in the denominator of the ratios calculated below.

Current wording

The following discussion of our managed receivables includes the aforementioned acquisition of Mercury and its portfolio of approximately $3,078.7 million (as of March 31, 2026) in general purpose credit card receivables. As we acquired the receivables on September 11, 2025, the financial impact of the acquisition on the quarter was limited to fees, billings and expenses subsequent to that date, however the receivables acquired are included in the denominator of the ratios calculated below for all periods subsequent to acquisition.

Previous wording

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. Managed receivables data are also based on actual charge-offs as they occur and without regard to any merchant fees*,* changes in fair value of loans or changes in our allowances for credit losses (in periods where applicable). Second, 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.

Current wording

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.

Previous wording

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:

Current wording

The following table presents additional trends and data with respect to our private label credit and general purpose credit card receivables (dollars in thousands):

Previous wording

Managed receivables levels. We continue to experience overall period-over-period quarterly receivables growth with over $3,451.5 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners between September 30, 2025 and September 30, 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 $520.0 million in the twelve months ended September 30, 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 and declines in the fourth quarter of each year. Our general purpose credit card receivables grew by $3,426.4 million during the twelve months ended September 30, 2025. This increase included receivables added as part of the Mercury acquisition which totaled $3,159.9 million as of September 30, 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. We currently expect continued period-over-period quarterly receivables growth in our general purpose credit card and private label credit 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 over 85% of our private label receivables outstanding as of September 30, 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 11, "Commitments and Contingencies," to our condensed consolidated financial statements included herein for further discussion of these concentrations.

Current wording

Managed receivables levels. Managed receivables declined from December 31, 2025 due to seasonal paydowns associated with seasonally strong payment patterns associated with tax refunds for many consumers. We continue to experience overall period-over-period quarterly receivables growth with over $4,018.6 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners between March 31, 2026 and March 31, 2025. 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 $533.8 million in the twelve months ended March 31, 2026 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 $3,484.8 million during the twelve months ended March 31, 2026. This increase included receivables added as part of the Mercury acquisition which totaled $3,078.7 million as of March 31, 2026. 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 83.6% of our private label credit receivables outstanding as of March 31, 2026. 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 10, "Commitments and Contingencies," to our condensed consolidated financial statements included herein for further discussion of these concentrations.

Previous wording

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 but correspondingly higher 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 the first and second quarters of 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 correspondingly lower yields) than those of our existing portfolios. The addition of these receivables resulted in a lower combined delinquency rate as of September 30, 2025. Increased acquisitions of private label credit receivables with limited loss exposures, the noted improvements in general purpose credit card receivables and our receivables added as part of the Mercury transaction will continue to result in lower overall delinquency and charge-off rates in the fourth quarter of 2025 and early 2026 when compared to corresponding rates in the fourth quarter of 2024 and first quarter of 2025.

Current wording

We have acquired certain 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. For 2025 we 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 and the first quarter of 2026.

Previous wording

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 offset somewhat by using more restrictive product, policy, and pricing changes 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, 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. Offsetting this expected increase in delinquencies is continued growth in the portfolio which will mute delinquency metrics. Our beliefs for future delinquency rates are predicated on the assumption that the slowing rate of inflation will continue and our recent tightened underwriting standards will prove effective at reducing account delinquencies.

Current wording

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, a trend which continued in the first quarter of 2026. 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.

Previous wording

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 corresponding higher 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 correspondingly lower delinquency and charge off rates). The addition of these receivables 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 until planned product, policy, and pricing changes for this new portfolio have taken effect. We currently expect increases in the rates of acquisition of our general purpose credit card receivables relative to private label credit receivables and correspondingly higher period-over-period operating revenue and other income for the remainder of 2025 (and a correspondingly higher Total managed yield ratio) 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 2025 and 2026 to corresponding quarterly periods in 2024 and 2025. Our managed yield ratios, however, may be marginally lower due to an expected seasonal shift in our mix of acquired private label receivables to higher FICO receivables that have lower gross yields (and correspondingly lower charge-off expectations) in the third quarter of each year.

Current wording

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 and within some product categories. 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 2025 (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 contributed to the decline in our Total managed yield ratio, annualized, since 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 experienced in the first of quarter of 2026, and expect to continue to experience for the remainder of 2026, 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.

Previous wording

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.

Current wording

Growth within our general purpose credit card receivables (as a percent of outstanding receivables) has resulted in increases in our charge-offs over time. 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 in the first quarter of 2026. We expect to see continued year-over-year improvements in our Combined principal net charge-off ratio, annualized for 2026, assisted by higher expected growth in the third and fourth quarters of 2026 in our general purpose credit cards which will improve ratios in those periods as the receivables associated with these newer consumers will not have seasoned through peak charge off periods.

Previous wording

Despite expected marginal increases in delinquency rates as discussed above, we expect our overall combined principal net charge-off ratios to continue to decrease for the remainder of 2025, when compared to the comparable prior period. 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 corresponding 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 condensed 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.

Current wording

We expect our recent overall combined principal net charge-off ratios to continue to marginally improve 2026. These charge-off rates are expected to return to historically normalized levels, adjusted for the change in mix of acquired receivables 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 certain 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, and (3) negative impacts on some consumers' ability to make payments on outstanding loans and fees receivable as a result of inflation pressures. 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.

Previous wording

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 into 2025 and we expect the Interest expense ratio to increase when compared to prior quarters for the remainder of 2025 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.

Current wording

***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 rates 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 in all periods presented and we expect the Interest expense ratio to marginally increase, relative to corresponding periods in prior periods, 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.

Previous wording

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. Recent declines in this ratio, when compared to corresponding prior periods, relate primarily to recent increases in our principal net charge-offs as noted above. This trend reversed in 2025 as we realized improvements in delinquencies and subsequent charge-offs. We currently expect continued marginal improvements in our Combined principal net charge-off ratio, annualized, relative to corresponding periods in 2024 which should continue to result in an improved net interest margin ratio. Changes in the mix shift of acquired receivables, noted above, will also lead to increases in the Net interest margin, annualized as the higher yielding receivables become a larger component of our total portfolio. As noted above, the lower yielding but also lower delinquent accounts associated with the Mercury acquisition should offset some of the improvements noted in our Net interest margin ratio, annualized until such time that product, policy and pricing changes associated with this portfolio have taken effect.

Current wording

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 reversed in 2025 as we realized improvements in delinquencies and subsequent charge-offs, noted above. 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 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.

Previous wording

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. For those receivables that did not contain fixed APRs we have seen some increases in rates charged, as the underlying rates are tied to the federal funds borrowing rate which increased in 2022 and 2023. Our average APRs for general purpose credit card receivables remained largely consistent throughout 2024 with some increases noted as new product, policy, and pricing changes were implemented which raised the APRs associated with new receivable acquisitions. 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 quarter of 2025 with increased acquisitions of these receivables. We expect this declining trend to continue into the third quarter of 2025, 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%.

Current wording

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 in 2025 due to a change 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. As the relative pace of acquisition for some lower effective yield assets has moderated, we have noted some improvement in our retail overall effective yields. 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%.

Previous wording

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 fourth quarter of 2025 and first quarter of 2026 to be consistent with those in the same period of 2024 and 2025, although the timing of the receivable acquisitions may vary based on seasonal spending patterns by consumers and our retail partners overall sales cycles. 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.

Current wording

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. 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. Private label credit receivable acquisitions in the first quarter of 2026 were similar to those in the same period of 2025. As discussed above, we 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 2026. 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.

Previous wording

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 quarter of 2025, we experienced a period over period increase in managed receivables as our receivables portfolio continues to recover from the floorplan loan losses experienced in 2024. We expect modest growth in the level of our managed receivables for the remainder of 2025 and into 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.

Current wording

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 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 above noted floorplan loan losses experienced in 2024. We noted typical seasonal declines in managed receivables in the first quarter of 2026 resulting from expected increases in payment rates associated with tax refunds for many consumers. 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.

Previous wording

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. Increases in our Combined principal net charge-off ratios throughout 2023 are indicative of our charge off levels returning to historically normalized levels (i.e., those periods prior to COVID-19 and the related government stimulus programs). 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.

Current wording

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 in 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.