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Fair Value Measurements

6 Months Ended

Jun. 30, 2025

(9) Fair Value Measurements

ASC 820, “Fair Value Measurements” clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.

ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The three levels are defined as follows: level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Effective January 2018 we have elected to use the fair value method to value our portfolio of finance receivables acquired in January 2018 and thereafter.

Our valuation policies and procedures have been developed by our Accounting department in conjunction with our Risk department and with consultation with outside valuation experts. Our policies and procedures have been approved by our Chief Executive and our Board of Directors and include methodologies for valuation, internal reporting, calibration and back testing. Our periodic review of valuations includes an analysis of changes in fair value measurements and documentation of the reasons for such changes. There is little available third-party information such as broker quotes or pricing services available to assist us in our valuation process.

Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement.

For the quarter ended June 30, 2025, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses on the portfolio of finance receivables carried at fair value and did not record a mark down to that portfolio.

The table below presents a reconciliation of the finance receivables measured at fair value on a recurring basis using significant unobservable inputs:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2025			2024			2025			2024
	(In thousands)						(In thousands)
Balance at beginning of period	$	3,449,106		$	2,791,373		$	3,313,767		$	2,722,662
Finance receivables at fair value acquired during period		433,277			424,867			882,879			753,760
Payments received on finance receivables at fair value		(264,713	)		(208,964	)		(517,569	)		(419,899	)
Net interest income accretion on fair value receivables		(61,641	)		(52,401	)		(126,548	)		(106,648	)
Mark to fair value		3,000			5,500			6,500			10,500
Balance at end of period	$	3,559,029		$	2,960,375		$	3,559,029		$	2,960,375

The table below compares the fair values of these finance receivables to their contractual balances for the periods shown:


	June 30, 2025				December 31, 2024
	Contractual		Fair		Contractual		Fair
	Balance		Value		Balance		Value
	(In thousands)

Finance receivables measured at fair value	$	3,706,565	$	3,559,029	$	3,485,540	$	3,313,767

The following table provides certain qualitative information about our level 3 fair value measurements:


Financial Instrument	Fair Values as of					Weight Avg. Inputs as of
	June 30,		December 31,			June 30,		December 31,
	2025		2024		Unobservable	2025		2024
	(In thousands)
Assets:
					Discount rate		11.33%		11.37%
Finance receivables measured at fair value	$	3,559,029	$	3,313,767	Cumulative net losses		15.84%		15.47%

The following table summarizes the delinquency status of these finance receivables measured at fair value as of June 30, 2025, and December 31, 2024:


	June 30,		December 31,
	2025		2024
	(In thousands)
Delinquency Status
Current	$	3,220,543	$	2,969,864
31 - 60 days		228,139		241,883
61 - 90 days		103,588		113,662
91 + days		56,671		64,810
Repo		97,624		95,321
	$	3,706,565	$	3,485,540

There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended June 30, 2025, and 2024.

The estimated fair values of financial assets and liabilities at June 30, 2025, and December 31, 2024, were as follows:


	As of June 30, 2025
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	15,772	$	15,772	$	–	$	–	$	15,772
Restricted cash and equivalents		144,396		144,396		–		–		144,396
Finance receivables, net		1,671		–		–		1,425		1,425
Accrued interest receivable		24		–		–		24		24
Liabilities:
Warehouse lines of credit	$	395,596	$	–	$	–	$	395,596	$	395,596
Residual interest financing		155,103						155,103		155,103
Accrued interest payable		11,491		–		–		11,491		11,491
Securitization trust debt		2,813,234		–		–		2,802,071		2,802,071
Subordinated renewable notes		28,828		–		–		28,828		28,828


	As of December 31, 2024
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	11,713	$	11,713	$	–	$	–	$	11,713
Restricted cash and equivalents		125,684		125,684		–		–		125,684
Finance receivables, net		4,987		–		–		3,996		3,996
Accrued interest receivable		65		–		–		65		65
Liabilities:
Warehouse lines of credit	$	410,898	$	–	$	–	$	410,898	$	410,898
Accrued interest payable		10,663		–		–		10,663		10,663
Securitization trust debt		2,594,384		–		–		2,614,352		2,614,352
Subordinated renewable notes		26,489		–		–		26,489		26,489