Pagaya Technologies Ltd.

NOTE 1 -BUSINESS DESCRIPTION

Pagaya Technologies Ltd. and its consolidated subsidiaries (together “we” “our” “Pagaya” or the “Company”) is a technology company that deploys sophisticated data science and proprietary AI technology to drive better results for financial services and other service providers, their customers, and asset investors. Service providers integrated with Pagaya’s network, which are referred to as “Partners,” range from high-growth financial technology companies to incumbent banks and financial institutions and auto finance providers. Partners have access to Pagaya’s network in order to assist with extending financial products to their customers, in turn helping those customers fulfill their financial needs and dreams. These assets originated by Partners with the assistance of Pagaya’s AI technology are eligible to be acquired by (i) investment funds managed or advised by Pagaya or one of its affiliates, (ii) asset backed securitization (“ABS”) vehicles sponsored or administered by Pagaya or one of its affiliates, (iii) special purpose vehicles established by third-party investors to facilitate the purchase of assets under forward flow agreements and (iv) other similar vehicles (“Financing Vehicles”).

Pagaya Technologies Ltd. was founded in 2016 and is organized under the laws of the State of Israel. Pagaya has its primary offices in the United States and Israel.

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company, its wholly-owned subsidiaries, and consolidated variable interest entities (“VIEs”) if any.

The accompanying unaudited condensed consolidated financial statements were derived from the audited consolidated financial statements, but do not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed on March 2, 2026, and as amended on April 30, 2026 and June 1, 2026 (collectively, the “2025 Annual Report on Form 10-K”).

All intercompany accounts and transactions have been eliminated. The Company’s functional and reporting currency is the U.S. Dollar. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements, except as noted below, and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2026, the Company’s consolidated results of operations and equity for the three and six months ended June 30, 2026 and 2025, and the Company’s cash flows for the six months ended June 30, 2026 and 2025. The results for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the full year ending December 31, 2026 or any other future interim or annual period.

Significant Accounting Estimates

During the first quarter of 2026, the Company completed an assessment of the useful life of its internally-developed software and adjusted the estimated useful life from an average oftwo years to an average ofthree years, effective on January 1, 2026. Refer to the Company’s accounting policies disclosed in Note 2, “Summary of Significant Accounting Policies,” in the 2025 Annual Report on Form 10-K.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40), Disaggregation of Income Statement Expenses,” which requires disclosure of disaggregated information about certain expense captions presented in the consolidated statements of income as well as disclosure about selling expense. The effective date for this update was amended by ASU 2025-01, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date,” and is now effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. It could be applied either prospectively or retrospectively. The Company is currently evaluating the impact of these amendments on its consolidated financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” to modernize the accounting guidance for the costs to develop software for internal use. The standard applies to costs incurred to develop or obtain software for internal use. ASU 2025-06 amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile programming. Under the new standard, entities will commence capitalizing eligible costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The new standard also supersedes the guidance related to costs incurred to develop a website. ASU 2025-06 guidance is effective for annual periods beginning after December 15, 2027. The guidance can be applied on a prospective basis, a modified basis for in-process projects or on a retrospective basis. The Company does not expect the adoption of these amendments to have a significant impact on its consolidated financial statements or related disclosures.

In November 2025, the FASB issued ASU 2025-08, “Financial Instruments - Credit Losses (Topic 326).” The amendments in this update expand the use of the gross-up approach to certain acquired loans beyond purchased financial assets with credit deterioration. The new guidance is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The amendments in this update must be adopted prospectively to loans that are acquired on or after the initial application date. The Company does not expect the adoption of these amendments to have a significant impact on its consolidated financial statements or related disclosures.

In December 2025, the FASB issued ASU 2025-10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities.” The update provides recognition, measurement, presentation, and disclosure requirements for government grants, including guidance for grants related to an asset and grants related to income. The amendments introduced two permitted approaches for asset-related grants: a deferred income approach or a cost accumulation approach. The guidance is effective for the Company beginning December 15, 2028, with early adoption permitted. The Company is currently evaluating the impact of these amendments on its consolidated financial statements or related disclosures.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270) Narrow-Scope Improvements,” which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company does not expect the adoption of these amendments to have a significant impact on its consolidated financial statements or related disclosures.

NOTE 3 -REVENUE

Revenue from fees is comprised of Network AI fees and Contract fees. Network AI fees can be further broken down intotwo fee streams: AI integration fees and capital markets execution fees. AI integration fees are earned for the creation and delivery of assets that comprise Network Volume. The Company utilizes multiple funding channels to enable the purchase of network assets from Partners, such as asset backed securitizations, and forward flow arrangements. Capital markets execution fees are earned from the market pricing of ABS transactions, as well as upon the execution of forward flow transactions, while contract fees are administration and management fees, performance fees, and servicing fees. These fees are the result of agreements with customers and are recognized in accordance with FASB Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC 606”).

Revenue is recognized in accordance with ASC 606 with revenue recorded on a gross basis when the Company is a principal in the transaction with customers, and recorded on a net basis when the Company is acting as an agent on behalf of another. The Company generally recognizes revenue on a gross basis because the Company is primarily responsible for integrating the various services fulfilled by Partners and is ultimately responsible to the Financing Vehicles for the fulfillment of the related services. To the extent the Company does not meet the criteria for recognizing revenue on a gross basis, the Company records revenue on a net basis.

Network AI Fees

Network AI fees, comprised of AI integration fees and capital markets execution fees, totaled $318.4 million and $285.9 million for the three months ended June 30, 2026 and 2025, respectively, and $585.4 million and $539.3 million for the six months ended June 30, 2026 and 2025, respectively. The Company recognizes Network AI fees primarily at a point in time when the related performance obligation is satisfied and the payment term is generally 30 days. From time to time the Company may provide certain incentives to a customer. When the Company determines that an incentive is consideration payable to a customer, which is not in exchange for distinct goods or services, the incentive is recorded as a reduction of revenue. Expenses to third parties for services that are integrated with the Company’s technology are recorded in the unaudited condensed consolidated statements of income as Production Costs.

Contract Fees

Contract fees include administration and management fees, performances fees, and servicing fees. Contract fees totaled $47.2 million and $31.8 million for the three months ended June 30, 2026 and 2025, respectively, and $79.3 million and $61.1 million for the six months ended June 30, 2026 and 2025, respectively. All of these fees are recognized over the service period for the Financing Vehicles managed or administered by the Company and the payment term is monthly as a fixed percentage of the entity’s assets. The Company includes variable consideration in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur; to date, adjustments to these estimates have not resulted in a significant reversal of previously recognized revenue.

Performance fees are earned when certain Fund Financing Vehicles exceed contractual return thresholds. The Company recognizes these fees only to the extent that it is probable that a significant reversal of cumulative revenue will not occur. The Company initially estimates these fees based on a variety of factors including market conditions and expected loan performance. In the subsequent periods, the Company measures actual performance and adjusts our recognized revenue accordingly. Because of these adjustments, the Company may recognize additional revenue or reverse previously recognized revenue related to performance obligations satisfied in prior years. During the three and six months ended June 30, 2026, the Company recognized $0.1 million and $0.3 million, respectively, in performance fee revenue related to performance obligations satisfied in prior years. During the three and six months ended June 30, 2025, the Company recognized $0.2 million and $0.8 million, respectively, in performance fee revenue related to performance obligations satisfied in prior years.

Servicing fees for the Financing Vehicles, which primarily involve collecting payments and providing reporting on the loans within the securitization vehicles, are recognized over the service period and payment is received monthly from the Financing Vehicles. These duties have been considered to be agent responsibilities and do not include acting as a loan servicer. Accordingly, servicing fees are recorded on a net basis.

Total Revenue From Fees

The Company determines its contracts generally to not include a significant financing component since the Company's selling prices are not subjected to billing terms nor is its purpose to receive financing from its customers or to provide customers with financing. In addition, as a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between payment and the transfer of services is expected to be one year or less.

Once revenue is recognized, it is recorded on the unaudited condensed consolidated balance sheets in fee receivables until the payment is received from the customer. The timing of the recognition depends on the type of service as described above.

The timing of the revenue recognition may differ from the timing of payment from customers. A contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditioned on something other than the passage of time. A right that is unconditional (only the passage of time until payment remains) is presented as a receivable, not a contract asset. A contract liability is the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration from the customer. As of June 30, 2026 and December 31, 2025, contract assets from contracts with customers were $12.4 million and $13.0 million, respectively, which are included in other assets on the unaudited condensed consolidated balance sheets. Contract liabilities were $3.6 million and $8.0 million as of June 30, 2026 and December 31, 2025, respectively, which are included in accrued expenses and other liabilities on the unaudited condensed consolidated balance sheets.

Concentrations of Credit Risk and Significant Customers

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, restricted cash and cash equivalents and fees receivable. Cash and cash equivalents are principally maintained with major financial institutions, which management assesses to be of high credit quality. The Company has not experienced any losses on these deposits.

The Company’s fees receivable balances are predominantly with agreements with customers, and these are subject to normal credit risks which management believes to be not significant.

Significant customers are those which represent 10% or more of the Company’s total fee revenue for each respective period presented. Two ABS securitization trusts (which are related parties), represented greater than 10% of total fee revenue and totaled approximately 29% for three months ended June 30, 2026. No customer represented more than 10% of the Company’s total fee revenue for the six months ended June 30, 2026. Two customers, including one ABS securitization trust (which is a related party), individually represented greater than 10% of total fee revenue and collectively totaled approximately 23% for the three months ended June 30, 2025. No customer represented more than 10% of the Company’s total fee revenue for the six months ended June 30, 2025. Refer to Note 11, “Transactions with Related Parties,” for additional information regarding related party transactions.

NOTE 4 -INVESTMENTS

As of June 30, 2026 and December 31, 2025, our investments in loans and securities portfolio consisted of (i) Investments in Securities Available for Sale (“AFS securities”) under ASC 325-40 held at fair value with credit related changes recorded in earnings and non-credit related changes recorded in other comprehensive income; and (ii) investments in loans and securities held at fair value under the fair value option, with changes in fair value recorded in earnings. Below is a disaggregated presentation of our investments in loans and securities, including fair value adjustments, accrued interest income, and net of the allowance for credit losses, as applicable (in thousands):

(1) $542.1 million and $504.3 million were held by the Company for regulatory risk retention purposes as of June 30, 2026 and December 31, 2025, respectively.

Investments in Securities, Available for Sale

The Company has determined that it is the primary beneficiary of certain VIEs that were established to purchase its investments in Pagaya sponsored ABS notes and certificates. The portion of these consolidated VIEs that the Company does not own is accounted for as a noncontrolling interest in the consolidated financial statements. Refer to Note 5, “Consolidation and Variable Interest Entities,” for additional information.

The amortized cost, gross unrealized gains and losses, and fair value of AFS securities as of June 30, 2026 and December 31, 2025 were as follows (in thousands):

(1) The difference between accumulated other comprehensive income (“AOCI”) and gross unrealized gains and losses represents capitalized transaction costs which have been reclassified to OCI and are amortized to interest income over the average life of the investments.

(2) Includes accrued interest receivables of $41.1 million and $25.8 million as of June 30, 2026 and December 31, 2025, respectively.

The following tables set forth the fair value and gross unrealized losses on investments in AFS securities without an allowance for credit losses aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, as of the dates indicated (in thousands):

The following tables set forth the amortized cost and fair value of investments in AFS securities by contractual maturities, as of the date indicated (in thousands):

(1) Based on expected maturity date cash flows.

The following table sets forth gross proceeds and related investment gains and losses, as well as the allowance for credit losses of AFS securities, for the periods indicated (in thousands):

The following table sets forth the activity in the allowance for credit losses for investments in AFS securitization certificates, as of the dates indicated (in thousands):

Refer to Note 7, “Fair Value Measurement,” for additional information regarding the allowance for credit losses for investments.

Investments in loans and securities, under the fair value option

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We elected the fair value option to measure certain securities and all loans held by the company, as we believe that fair value best reflects the economic transaction of investing in certain securities and all loans. We determined the fair value of these securities and loans using a discounted cash flow methodology, while also considering market data as it became available. We record the initial fair value measurement and subsequent measurement changes in fair value in the period in which the changes occur within the gains and (losses) on investments in loans and securities in the unaudited condensed consolidated statements of income. We report the changes in fair value within (gains) and losses on investments in loans and securities in the unaudited condensed consolidated statements of cash flow.

The following table presents activities of investments in loans and securities for which we elected the fair value option (in thousands):

Refer to Note 7, “Fair Value Measurement,” regarding the discounted cash methodology and the assumptions used for investments in loans and securities for which we elected the fair value option.

Equity Method and Other Investments

The following investments, including those accounted for under the equity method, are included within equity method and other investments in the unaudited condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025 (in thousands):

(1) The Company owns approximately 5.4% and is the general partner of Pagaya SmartResi F1 Fund LP.

(2) Represents the Company’s proprietary investments.

(3) Income (loss) from these investments is included in investment (loss) income, net in the unaudited condensed consolidated statements of income.

NOTE 5 -CONSOLIDATION AND VARIABLE INTEREST ENTITIES

The Company has variable interests in asset-backed securitization vehicles that it sponsors. The Company consolidates VIEs when it is deemed to be the primary beneficiary. In order to be primary beneficiary, the Company must have a controlling financial interest in the VIE. This is determined by evaluating if the Company has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant.

Consolidated VIEs

As of June 30, 2026 and December 31, 2025, the Company has determined that it is the primary beneficiary of Pagaya Structured Holdings LLC, Pagaya Structured Holdings II LLC, and Pagaya Structured Holding III LLC (collectively, the “Risk Retention Entities”). These entities were established by Pagaya to purchase investments in ABS notes and certificates issued by Pagaya-sponsored ABS entities. Pagaya owns a 20% interest in these entities, and the remaining 80% ownership shares are held by affiliate entities. As these entities are consolidated, we present 100% of the assets and liabilities on our consolidated balance sheets. The 80% ownership interest not owned by the Company in each of these consolidated VIEs is accounted for as a noncontrolling interest on the consolidated balance sheets. Any income or loss associated with the consolidated VIEs’ activities is reported within the corresponding line items of the consolidated statements of income, with the results of the 80% ownership interest not owned by the Company presented as net income (loss) attributable to noncontrolling interests.

As the sponsor of securitization transactions, the Company is subject to risk retention requirements and established the Risk Retention Entities to meet these requirements.

Below is a summary of assets and liabilities from the Company’s involvement with consolidated VIEs (i.e., the Risk Retention Entities) (in thousands):

(1) Assets comprised of securitization notes and residual certificates to comply with risk retention requirements.

Unconsolidated VIEs

The Company determined that it is not the primary beneficiary of the trusts which hold the loans and issue securities associated with the securitization transactions the Company sponsors. These trusts include Pagaya AI Debt Trust (PAID) for personal loans, Research-Driven Pagaya Motor Asset Trust (RPM) for auto loans and Pagaya Point of Sale Holdings Trust (POSH) for point-of-sale loans. The Company does not have the power to direct or control the activities that most significantly affect the performance of the trusts, which were determined to be servicing loans in the ABS securitization trusts. Once the loans are purchased by the ABS securitization trusts, only the third-party loan servicers have direct engagement with the underlying borrowers and are responsible for loan collections, prepayments, disputes, modifications and settlements which are the activities that most significantly impact the VIEs’ economic performance.

The Company’s maximum exposure to loss from its involvement with unconsolidated VIEs represents the estimated loss that would be incurred under severe, hypothetical circumstances, for which the Company believes the possibility is remote, such as where the value of securitization notes and residual certificates the Company holds to comply with risk retention requirements declines to zero.

Below is a summary of the Company’s direct interest in (i.e., not held through the Risk Retention Entities) variable interests in nonconsolidated VIEs (in thousands):

From time to time, the Company may, but is not obligated to, purchase assets from the Financing Vehicles. Such repurchases occur at the Company’s discretion, subject to contractual requirements and limitations. Refer to Note 11, “Transactions with Related Parties,” for additional information.

NOTE 6 -BORROWINGS

The following table sets forth the Company’s outstanding borrowings as of the date indicated (in thousands):

The Company was in compliance with all covenants as of June 30, 2026 and December 31, 2025.

Secured Borrowing

Secured borrowings are comprised of borrowings under risk retention master repurchase agreements and the Company’s receivable facilities. Interest expenses related to secured borrowings was $3.8 million and $6.2 million for the three months ended June 30, 2026 and 2025, respectively, and $7.2 million and $12.1 million for the six months ended June 30, 2026 and 2025, respectively.

Risk Retention Master Repurchase

In the normal course of business, the Company, through consolidated VIEs, enters into repurchase agreements to finance the Company’s risk retention balance in securitization notes and residual certificates retained from securitization transactions. Under these agreements, the Company sells its investment securities with an obligation to repurchase them in the future. These agreements generally contain contractual provisions allowing the counterparty the right to sell or repledge the collateral. As these agreements contain repurchase obligations, they are accounted for as secured borrowings with the sold investment retained on the unaudited condensed consolidated balance sheets. As of June 30, 2026 and December 31, 2025, the outstanding principal balance under the repurchase agreements was $160.8 million and $107.8 million, respectively, which is recorded within secured borrowing on the unaudited condensed consolidated balance sheets, with a weighted average interest rate of approximately 9% percent and 10% percent, respectively. The average remaining contractual maturities of the repurchase agreements were greater than 90 days as of both June 30, 2026 and December 31, 2025.

Receivables Facility

In April 2025, Pagaya Structured Products LLC, a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (the “LSA Agreement”) with a certain lender. This agreement established a 24-month Capitalized Interest Amounts Facility (the “CIA Facility”) with a maximum principal amount of $24 million to finance eligible capitalized interest amounts related to sponsored securitization transactions. In March 2026, the maximum principal amount under the CIA Facility was increased to $30 million.

Additionally, in June 2025, Pagaya Structured Products LLC entered into a 30-month Accrued Loan Purchasing Fee Receivables Facility (the “ALPF Facility”) with a maximum principal amount of $65 million, to finance certain eligible fee receivables from sponsored securitization transactions. Borrowings under the CIA Facility bear interest at a rate per annum equal to the adjusted term SOFR (subject to a 1.00% floor) plus a margin of 4.00%, while borrowings under the ALPF Facility bear interest at a rate per annum equal to the adjusted term SOFR (subject to a 1.00% floor) plus a margin of 1.9%. As of June 30, 2026 and December 31, 2025, the combined outstanding principal balance under the CIA Facility and ALPF Facility was $93.5 million and $87.0 million, respectively, which is recorded within secured borrowing on the unaudited condensed consolidated balance sheets.

Exchangeable Notes

On October 1, 2024, the Company, through a wholly owned subsidiary of the Company, issued $160 million aggregate principal amount of its 6.125% Exchangeable Notes due 2029 (the “2029 Notes”). The issuance was in connection with a purchase agreement dated September 26, 2024, with certain initial purchasers. The 2029 Notes bear interest at a rate of 6.125% per annum, payable semiannually in arrears on April 1 and October 1 of each year, beginning April 1, 2025. The 2029 Notes will mature on October 1, 2029, unless they are repurchased, redeemed or exchanged prior to that date.

During the first quarter of 2026, the Sales Price Contingent Exchange Condition was met as the closing sale price of the Company’s Class A Ordinary Shares exceeded $18.19 (130% of the exchange price, $13.99) for the required period and, as a result, noteholders were entitled to exchange their 2029 Notes during the second quarter of 2026. During the second quarter of 2026, the Sales Price Contingent Exchange Condition was not met and, as a result, noteholders are not entitled to exchange their 2029 Notes during the third quarter of 2026. As of June 30, 2026, no holders had elected to exchange their 2029 Notes.

The Company accounted for the issuance of the 2029 Notes as a single liability at par as the conversion feature does not require bifurcation as a derivative under ASC 815 and the 2029 Notes were not issued at a substantial premium. Debt issuance costs consisting of underwriting fees and third-party offering costs, totaled $6.2 million. Original Issue Discount (“OID”) totaled $8.0 million. Both issuance costs and OID are amortized to interest expense using the effective interest method over the contractual term of the 2029 Notes. The Company recorded interest expense of $3.1 million and $6.2 million for the three and six months ended June 30, 2026, respectively, compared to $3.1 million and $6.1 million for the three and six months ended June 30, 2025, respectively. Interest expense included amortization of debt issuance costs of $0.7 million and $1.3 million for the three and six months ended June 30, 2026, respectively, and $0.6 million and $1.2 million for the three and six months ended June 30, 2025, respectively. The effective interest rate of the 2029 Notes is 8.5%.

Long-Term Debt

Senior Notes

On July 28, 2025, the Company, through Pagaya US Holding Company LLC (“Pagaya US”), a wholly-owned subsidiary of the Company, completed the issuance of $500 million aggregate principal amount of Senior Unsecured Notes due 2030 (the “2030 Notes”). The 2030 Notes bear interest at a rate of 8.875% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2026. The 2030 Notes will mature on August 1, 2030, unless earlier repurchased or redeemed.

At any time prior to August 1, 2027, Pagaya US may redeem the 2030 Notes, in whole or in part, at its option at a redemption price equal to 100% of the principal amount of the 2030 Notes plus a make-whole premium described in the indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. On and after August 1, 2027, Pagaya US may redeem the 2030 Notes, in whole or in part, at the redemption prices set forth in the indenture.

The following table details the 2030 Notes as of June 30, 2026 and December 31, 2025 (in thousands):

The Company recorded interest expense of $11.4 million and $22.6 million, including $0.6 million and $1.2 million of amortization of debt issuance costs, for the three and six months ended June 30, 2026, respectively.

In February 2026, the Company repurchased $7.4 million of the outstanding 2030 Notes at a price equal to 87.3% of the principal amount. The Company paid total consideration of $6.5 million, excluding accrued interest, resulting in a $0.8 million gain on extinguishment of debt. This gain is net of the unamortized issuance costs and is recognized within gains and (losses) from extinguishment of debt on the unaudited condensed consolidated statements of income.

In May 2026, the Company repurchased $3.8 million of the outstanding 2030 Notes at a price equal to 78.5% of the principal amount. The Company paid total consideration of $3.0 million, excluding accrued interest, resulting in a $0.7 million gain on extinguishment of debt. This gain is net of the unamortized issuance costs and is recognized within gains and (losses) from extinguishment of debt on the unaudited condensed consolidated statements of income.

2025 Revolving Credit Facility

On October 1, 2025, the Company refinanced its revolving credit facility by way of terminating its prior credit agreement and entering into a newthree-year revolving credit facility (the “2025 Revolving Credit Facility”) with a syndicate of financial institutions. The 2025 Revolving Credit Facility provides a committed borrowing capacity of $132 million. Borrowings under the 2025 Revolving Credit Facility bear interest at a rate per annum equal to, at the Company’s option, (i) a base rate (determined based on the prime rate and subject to 1.00% floor) plus a margin of 2.50% and (ii) an adjusted term SOFR (subject to 1.00% floor) plus a margin of 3.50%. A commitment fee accrues on any unused portion of the commitments under the 2025 Revolving Credit Facility at a rate per annum of 0.25% and is payable quarterly in arrears. The terms and conditions of the 2025 Revolving Credit Facility include customary covenants and restrictions.

As of June 30, 2026, the Company hadno borrowings outstanding, following the full repayment of the outstanding balance during the second quarter of 2026, with $17.0 million in letters of credit issued. As a result, $115.0 million of borrowing capacity remained available under the 2025 Revolving Credit Facility as of June 30, 2026.

As of December 31, 2025, the Company hadno borrowings outstanding, with $16.1 million in letters of credit issued. As a result, $115.9 million of borrowing capacity remained available under the 2025 Revolving Credit Facility as of December 31, 2025.

NOTE 7 -FAIR VALUE MEASUREMENT

FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, when available. If such quoted market prices are not available, fair value is based upon a discounted cash flow model that uses, as inputs, observable market-based parameters to the greatest extent possible.

The Company determines the fair value of its financial instruments and conducts an ongoing assessment of the techniques used to ensure their appropriateness, consistent application and the reasonableness of the assumptions. In determining the fair value of each investment security and loan, the Company reviews performance characteristics of the underlying loan pool including origination vintage, borrower credit quality, and macroeconomic environment, among other factors. The Company determines the fair value for each investment security and loan by then estimating significant assumptions including discount rates, cumulative net loss rates, expected prepayment rates and consideration of any optional redemption features which are reviewed and approved by management.

The Company also engages a third-party valuation service provider to estimate a range of fair values for all significant investments in loans and securities. The Company reviews and validates its significant assumptions with reference to historical performance and expectations of future performance including: discount rate, cumulative net loss rates and prepayment rates. Finally, the Company reviews and validates that the fair value used for financial reporting falls within the range of fair value estimates by the third-party service provider for its significant investment in loans and securities.

Financial instruments are categorized in the fair value hierarchy based on the significance of unobservable inputs and assumptions in the overall fair value measurement. Financial instruments classified as Level 3 within the fair value hierarchy do not trade in an active market with readily observable prices. Accordingly, the Company uses significant unobservable inputs to measure the fair value of these assets. The Company has determined that its certificates, loans and certain subordinated notes meet the definition of Level 3 assets, as their fair value measurements are characterized by a lack of observable market data and a reliance on management's assumptions.

Financial Assets and Liabilities Recorded at Fair Value

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair values (in thousands):

(1) Included in “accrued expenses and other liabilities” on the unaudited condensed consolidated balance sheets. Refer to Note 9, “Commitment and Contingencies," for additional information.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 1)

Warrant Liability (Level 1)

The following tables summarize the warrant liability activity for the three and six months ended June 30, 2026 and 2025 (in thousands):

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 3)

Investments in Loans and Securities (Level 3)

As of June 30, 2026, investments in loans and securities categorized as Level 3 investments include loans and securities under the fair value option and securities classified as available for sale which are measured at fair value on a recurring basis. These assets are measured at fair value using a discounted cash flow model, and presented within investments in loans and securities on the unaudited condensed consolidated balance sheets.

AFS securities under ASC 325-40 are held at fair value. Credit related changes in fair value are recognized in earnings, while non-credit related changes are recorded in other comprehensive income. Separately, investments in loans and securities held at fair value under the fair value option are measured at fair value, with all changes in fair value recognized in earnings.

The following tables summarize the activity related to the fair value of the investments in loans and securities available for sale (Level 3 only) for the three and six months ended June 30, 2026 and 2025 (in thousands):

(1) Exclude capitalized transaction costs which have been reclassified to OCI and are amortized to interest income over the average life of the investments.

Significant unobservable inputs used for our Level 3 fair value measurement of the securities are the discount rate, net credit loss rate, prepayment rate and consideration of any optional redemption features in our investment securities. The discount rate reflects management’s estimate of the market-required return for similar financial instruments, to convert estimated future cash flows to a present value. The net credit loss rate is management’s estimate of potential loan losses, net of recoveries, from borrower defaults. The prepayment rate estimate is the proportion of principal received in advance of the contractual terms of the loan, which can impact the future interest cash flows of the investments and the investments expected duration. Because these inputs represent increased risk or accelerated capital return, they maintain an inverse relationship with valuation. Accordingly, an increase in the discount, credit risk, or prepayment rates, in isolation, would result in a lower fair value measurement.

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the securities as of June 30, 2026 and December 31, 2025:

Credit Support Liabilities (Level 3)

The Company entered into credit support agreements with certain strategic investors, which are accounted for as credit derivative liabilities at fair value under ASC 815, “Derivatives and Hedging.” These agreements, which are not designated as accounting hedges, obligate the Company to make payments to a limited number of investors if credit losses exceed predetermined thresholds, up to a specified maximum exposure. As of June 30, 2026 and December 31, 2025, the credit derivative liability amounted to $20.9 million and $12.9 million, which are recorded within accrued expenses and other liabilities on the unaudited condensed consolidated balance sheets.

The significant unobservable inputs used to estimate the fair value of the credit derivatives include probability weighted discount rates, which averaged 9.3% and 9.3%, loss rates, which averaged 19.6% and 19.1%, and prepayment rates, which averaged 13.3% and 12.8% as of June 30, 2026 and December 31, 2025, respectively. Refer to Note 9, “Commitment and Contingencies,” for additional information.

Financial Assets and Liabilities Not Recorded at Fair Value

The Company believes that the carrying amount of cash, cash equivalents and restricted cash, fee receivables, accounts payable and other current liabilities approximate their fair value due to the short-term maturities of these instruments.

The below tables contain information about assets that are not measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 (in thousands):

NOTE 8 -SHARE BASED COMPENSATION

Share Options

Granted share options generally expire at the earlier of termination of employment orten years from the date of grant. Share options generally vest over four years of the employment commencement date or with 25% vesting on thetwelve-month anniversary of the employment commencement date, and the remaining on a pro-rata basis each quarter over the next three years. Any options, which are forfeited or not exercised before expiration, become available for future grants.

The following table summarizes the Company’s share option activity during the six months ended June 30, 2026:

The aggregate intrinsic value of options exercised, and fair value of share options vested for the six months ended June 30, 2026 was $0.4 million and $1.4 million, respectively.

As of June 30, 2026, unrecognized compensation expense related to unvested share options was approximately $3.6 million, which is expected to be recognized over a remaining weighted-average vesting period of 1.3 years.

Restricted Stock Units (RSUs)

RSUs for new employees generally vest overtwo years of the employment commencement date with 50% vesting on thetwelve-month anniversary of the employment commencement date, and the remaining on a pro-rata basis each quarter over the remaining twelve months. RSUs for existing employees are granted periodically and generally vest quarterly over 2 years. Unvested RSUs are forfeited at termination of employment. Any RSUs that are forfeited become available for future grants.

The following table summarizes the Company’s RSU activity during the six months ended June 30, 2026:

As of June 30, 2026, unrecognized compensation expense related to RSUs was approximately $37.7 million, which is expected to be recognized over a remaining weighted-average period of 0.9 years.

Options to Restricted Shares

Options to restricted shares were granted to certain employees and directors during 2021.

The following table summarizes the Company’s options to restricted shares activity during the six months ended June 30, 2026:

As of June 30, 2026, unrecognized compensation expense related to options to restricted shares was approximately $4.0 million, which is expected to be recognized over a remaining weighted-average period of 0.8 years.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase our Class A Ordinary Shares at a discounted price, normally through payroll deductions, subject to the terms of the ESPP and applicable law. During the six months ended June 30, 2026,66,814 shares were issued under the ESPP. Compensation expense related to the ESPP was $0.2 million and $0.3 million for the three and six months ended June 30, 2026, respectively.

Share-Based Compensation Expense

The following table presents the components and classification of share-based compensation for the three and six months ended June 30, 2026 and 2025 (in thousands):

NOTE 9 -COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. The results of such matters often cannot be predicted with certainty. In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal proceeding and claims when those matters present loss contingencies which are both probable and reasonably estimable. All such liabilities arising from current legal matters, to the extent such matters existed, have been recorded in accrued expenses and other liabilities on the unaudited condensed consolidated balance sheets and these matters are not expected to have a material impact on the Company’s interim consolidated financial statements for the three and six months ended June 30, 2026.

Contractual Obligations and Commitments

From time to time, the Company enters into purchase commitments with our third-party cloud computing web services providers. As of June 30, 2026, the total remaining contractual obligations from these purchase commitments are approximately $8.8 million, of which $6.4 million is for the next 12 months. The Company may pay more than the minimum purchase commitment based on usage. Additionally, the Company has contractual obligations related to its lease for corporate office space. During the normal course of business, we enter into certain lease contracts with lease terms through 2032. As of June 30, 2026, the total remaining contractual obligations are approximately $39.5 million, of which $8.0 million is for the next 12 months.

For additional information regarding outstanding letters of credit issued in the ordinary course of business, refer to Note 6, “Borrowings,” for additional information.

Guarantees and Indemnifications

In the ordinary course of business, the Company may provide indemnifications or loss guarantees of varying scope and terms to customers and other third parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap.

For our forward flow agreements, loans purchased have a contractual performance requirement which is measured periodically over the life of the underlying loans. If the loan’s performance is below the contractual requirement, the counterparty may have first loss up until a contractual agreed limit. If the loans’ performance is below the counterparty’s first loss limit or if there is no first loss limit, then Pagaya would be required to make a payment to the counterparty such that the loans purchased would have achieved the contractual performance requirement. There is a contractual maximum loss for Pagaya’s loss protection with the counterparty taking full risk of loss beyond Pagaya’s loss protection. Our guarantee of contractual loss protection for the buyer meets the accounting definition of a derivative, and therefore we recognize, at inception and each reporting period, a liability for the fair value of the estimated loss protection payments, if any.

As of June 30, 2026, there have been no known events or circumstances that have resulted in a material indemnification liability and the Company did not incur material costs to defend lawsuits or settle claims related to these indemnifications. As of June 30, 2026, the unfunded maximum potential amount of undiscounted future payments the Company could be required to make under these guarantees totaled $141.3 million. Additionally, in accordance with the guarantee contracts, the Company is required to fund segregated cash balances to provide protection in the event the Company is not able to meet its contractual commitments. As of June 30, 2026, $48.1 million has been segregated and recognized within restricted cash and cash equivalents, of which $20.9 million has been accrued within accrued expenses and other liabilities on the unaudited condensed consolidated balance sheets in accordance with these contractual requirements.

NOTE 10 -INCOME TAXES

Corporate Income Tax

Ordinary taxable income in Israel is subject to a corporate tax rate of 23%. The Company received approval from the Israeli Tax authorities on November 18, 2021 for Preferred Technological Enterprise (“PTE”) status which was implemented commencing 2020. The Company is currently in the process of obtaining a renewal of its PTE status.

Income from a PTE is generally subject to a 12% tax rate, unless a tax payer is subject to Pillar Two taxation. Following Israel’s adoption of the OECD Pillar Two framework and the introduction of a Qualified Domestic Minimum Top-Up Tax (“QDMTT”) in late 2025, the Company became subject to a minimum corporate tax rate of 15%, partially offset by a refundable R&D tax credit beginning in the first half of 2026.

Pillar Two Taxation

On October 8, 2021, the Organisation for Economic Co-operation and Development (“OECD”)/G20 inclusive framework (the “Inclusive Framework”) on Base Erosion and Profit Shifting published a statement updating and finalizing the key components of a two-pillar plan on global tax reform. The Inclusive Framework plan has now been agreed to by more than 140 OECD members. While many countries have adopted some or all aspects of these rules, some countries have not adopted any or all of them, and many interpretive questions remain that are expected to be addressed in future guidance.

Foreign Exchange Regulations in Israel

Under the Foreign Exchange Regulations, the Company calculates its tax liability in U.S. Dollars according to certain orders. The tax liability, as calculated in U.S. Dollars is translated into NIS according to the exchange rate as of December 31st of each year.

Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.

The Company’s income tax expense (benefit) (in thousands) and effective tax rates for the three and six months ended June 30, 2026 and 2025 are as follows:

The Company’s tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income the Company earns in those jurisdictions. The difference between the effective tax rate and statutory tax rate in Israel is mainly related to a change in valuation allowances, tax expenses in the United States, and a change in uncertain tax positions. The change in the effective tax rate for the three and six months ended June 30, 2026, compared to the corresponding prior-year periods, was primarily attributable to net operating losses and changes in uncertain tax positions.

The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company provides a full valuation allowance to offset certain deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

Tax Assessments

The Company files income tax returns in various jurisdictions with varying statutes of limitation. As of June 30, 2026, the Company has received final tax assessments in Israel through 2020. As of June 30, 2026, the Company is currently subject to tax audits in Israel and federal and state tax audits in U.S. The tax audits are ongoing and to date, no material issues have been raised, and no adjustments have been proposed.

Legislative Updates

On March 31, 2026, the Law for the Encouragement and Incentivization of Research and Development (the “R&D Law”) was enacted. The R&D Law introduces a refundable tax credit regime for qualifying research and development expenditures incurred in Israel beginning in the 2026 tax year. Eligible companies may apply the credits against Israeli income taxes or the QDMTT, or alternatively receive a government grant. Refundable tax credits under the R&D Law are not within the scope of ASC 740 and are accounted for using a government‑grant accounting model. The impact of the R&D Law was immaterial to the Company’s interim consolidated financial statements for the three and six months ended June 30, 2026.

NOTE 11 -TRANSACTIONS WITH RELATED PARTIES

In the ordinary course of business, the Company earns revenues and has outstanding receivable balances from the ABS securitization trusts and to a lesser extent investment funds when these entities purchase network assets. Both the ABS securitization trusts and investment funds are primarily funded with capital from third-party investors. The ABS securitization trusts purchase loans originated by our lending partners using our proprietary technology. Despite the fact that the ABS securitization trusts are primarily funded by third-party investors, these vehicles are considered related parties because Pagaya is the sponsor and administrative agent of the trusts. The investment funds invest in ABS securities as well as whole loans originated by our lending partners using our proprietary technology. Despite the fact that the investment funds are primarily funded by third-party investors, Pagaya is the registered investment advisor of the funds.

The Company has not entered into any transactions with directors, principal officers, their immediate families, and affiliated companies in which they are principal shareholders (commonly referred to as related parties).

As of June 30, 2026, the fee receivables from related parties are $124.3 million, which consist of $110.9 million from the ABS securitization trusts and $13.4 million from investment funds for which the Company is the registered investment advisor. As of December 31, 2025, the fee receivables from related parties are $106.9 million, which consists of $85.9 million from ABS securitization trusts and $21.0 million from investment funds.

As of June 30, 2026 and December 31, 2025, other assets include revolving facilities and other amounts due from related parties of $46.9 million and $42.6 million, respectively, all of which were attributable to the ABS securitization trusts and investment funds.

For the three months ended June 30, 2026, the total revenue from related parties is $231.4 million, which consists of $227.5 million from the ABS securitization trusts and $3.9 million from investment funds. For the six months ended June 30, 2026, the total revenue from related parties is $390.3 million, which consists of $382.0 million from the ABS securitization trusts and $8.3 million from investment funds. For the three months ended June 30, 2025, the total revenue from related parties is $146.6 million, which consists of $137.9 million from the ABS securitization trusts and $8.7 million from investment funds. For the six months ended June 30, 2025, the total revenue from related parties is $314.5 million, which consists of $297.0 million from the ABS securitization trusts and $17.5 million from investment funds.

During the three and six months ended June 30, 2026, the Company purchased approximately $7.8 million and $16.0 million of loan principal from the ABS securitization trusts. These repurchases resulted in a net loss of approximately $3.1 million for both the three and six months ended June 30, 2026. During the three and six months ended June 30, 2025, the Company purchased approximately $2.0 million and $5.8 million, respectively, of loan principal from the ABS securitization trusts and included a loss of approximately $1.9 million and $5.4 million, respectively.

NOTE 12 -EARNINGS PER SHARE

The following tables set forth the calculation of basic and diluted earnings per share attributable to ordinary shareholders for the three and six months ended June 30, 2026 and 2025 (in thousands, except share and per share data):

(1) The effect of interest expense and assumed conversion from exchangeable notes on the diluted EPS calculation for the three and six months ended June 30, 2025 would have been anti-dilutive and has been removed from the calculation.

EPS for Class B ordinary shares and EPS for preferred shares are not presented separately, as under the two-class method, the EPS for Class A, Class B and preferred shares are the same.

The following potentially dilutive outstanding securities as of June 30, 2026 and 2025 were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive for the periods:

NOTE 13 -SUBSEQUENT EVENTS

Receivables Facility Amendment

In July 2026, Pagaya Structured Products LLC, a wholly-owned subsidiary of the Company, entered into an Amendment to its Accrued Loan Purchasing Fee Receivables Facility (the “ALPF Facility”) with the lender, which increased the aggregate borrowing commitment from $65 million to $100 million. Pursuant to the amendment, the revolving period end date was extended from June 11, 2027, to July 16, 2028, and the scheduled maturity date was extended from December 11, 2027, to January 16, 2029. All other terms, including the interest rate, remained the same at the adjusted term SOFR (subject to a 1.00% floor) plus a margin of 1.9%.