Priority Technology Holdings, Inc.

4. Settlement Assets and Obligations

Settlement assets and obligations include, 1) funds due from merchants arising from settlement of funds for sales and credits between card issuers and merchants 2) card settlement funds due from networks due to timing and its related obligations, and 3) Customer/Subscriber account balances and related obligations resulting from licensed money transmitter services.

Card settlements due from merchants, net

The Merchant Solution services of the Company include settlement of funds for sales and credits between card issuers, card networks and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until merchants are funded, these funds are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Consolidated Balance Sheets.

Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets in the Company's Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Exception items that the Company has deemed uncollectible are recorded as merchant losses, a component of cost of revenue in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss). Expenses for merchant losses net of recoveries for the years ended December 31, 2025, 2024 and 2023 were $0.4 million, $0.9 million and $1.0 million, respectively.

Card settlements due from networks and Dues to Customers’ Payees

As part of the Payables service offering:

•Priority accepts card payments for its customers and processes disbursements to their vendors (customers’ payees). The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and payables (to the vendors of customers). These receivables and payables arise from the settlement activities that the Company performs on behalf of its customers and therefore, are presented as settlement assets and related obligations.

•Priority processes payments to the customers’ payees wherein customers funds are received either in company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time that the transactions are settled with the customers’ payees. Balances in the bank-owned FBO accounts and related obligations are not considered assets and obligations of the Company. Therefore, neither is recognized in the Company's Consolidated Balance Sheets. Amounts due to customers’ payees that are held in company-owned bank accounts are included in restricted cash in the Company's Consolidated Balance Sheets and related obligations are presented as due to customers’ payees.

MTL Customer cash and cash equivalents (restricted in nature), short-term investments and MTL Customer account obligations

The Company provides treasury solutions to its customers through its money transmission licenses in 46 states, the District of Columbia, and 2 territories of the United States and through agency relationships with banks in the remaining states. These services include the acceptance and disbursement of funds. While waiting for disbursement, these funds are held in bank accounts maintained by the Company on behalf of its customers. Per the money transmission regulations, the Company is allowed to invest available balances in these accounts in certain permitted investments, and returns on such investments contribute to the Company's net cash inflows. As such, the Company recognized these balances and related obligations on its balance sheet. Considering these balances are payable on demand and are related to settlement activities, they are presented as settlement assets (as part of the current assets) and the related obligations as settlement obligations (as part of the current liabilities) in the Company's Consolidated Balance Sheets. The nature of these MTL Customer cash and cash equivalent are restricted in nature and therefore these balances are presented as restricted cash on the Company's Consolidated Statement of Cash Flows. The MTL Short-term investments are included within acquisitions of assets and other investing activities on the Company's Consolidated Statement of Cash Flows.

The Company's consolidated settlement assets and obligations were as follows:

(1)Allowance for estimated losses was $7.1 million and $7.9 million as of December 31, 2025 and 2024, respectively.

(2)Excludes merchant funds held at member banks of $103.9 million and $106.2 million on December 31, 2025 and 2024, respectively.

(3)Excludes funds held under agency arrangement with member banks (in states where the Company does not have a money transmitter license), balances remain under the control of the member banks (therefore not the assets or obligation of the Company). Agency owned accounts held $50.3 million and $22.6 million at December 31, 2025 and 2024, respectively.

(4)Includes $16.1 million and $12.3 million as of December 31, 2025 and 2024, respectively, of card settlements due from networks and the remainder is included in restricted cash on our Consolidated Balance Sheets.

(5)Excludes amounts due to customer payees that are held in bank-owned FBO accounts which are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $151.8 million and $90.3 million at December 31, 2025 and 2024, respectively.