Loans, Interest and Fees Receivable 

We maintain two categories of Loans on our condensed consolidated balance sheets: those that are carried at fair value (Loans at fair value) and those that are carried at net amortized cost (Loans at amortized cost). For our Loans at fair value (within our CaaS segment), we discontinue the recognition of interest and fees when the receivable becomes contractually 90 or more days past due. For our Loans at amortized cost (within our Auto Finance segment), we continue interest and fee billings until the time of charge-off if there is adequate value associated with the underlying asset serving as collateral for the receivable. Once a loan discontinues accruing interest and fees it is ineligible to return to accrual status. We charge off receivables underlying our Loans at fair value, against our Changes in fair value of loans, when they become contractually more than 180 days past due, or 120 days past due if they are enrolled in an installment loan product. We charge off our Loans at amortized cost receivables, against our Allowance for credit losses, when they become contractually between 120 and 180 days past due. For all of our receivables portfolios, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death. However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or estate large enough to pay the debt in full.

Loans at fair value. Loans at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables"). The Fair Value Receivables are primarily held by entities that qualify as VIEs, and are consolidated onto our condensed consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities. Loans and finance receivables include accrued and unpaid interest and fees. All receivables associated with private label credit and general purpose credit cards are included within this category of receivables.

Under the fair value option, fees such as annual fees are taken into income when billed to the consumer or upon loan acquisition and any cost associated with the loan acquisition are expensed in the period incurred. The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables. The Company reevaluates the fair value of loans receivable at the close of each measurement period. Changes in the fair value of loans are recorded as a component of "Changes in fair value of loans" in the condensed consolidated statements of income in the period of the fair value changes. Changes in the fair value of loans include the impact of current period charge-offs associated with these receivables.

Further details concerning our loans at fair value are presented within Note 6, "Fair Values of Assets and Liabilities."

Loans at amortized cost, net. Our loans at amortized cost, net, currently consist of receivables associated with our Auto Finance segment’s operations and are presented in the condensed consolidated balance sheets net of the related allowance for credit losses and deferred revenue. We purchased auto loans with outstanding principal of $44.4 million, $95.2 million, $48.2 million and $96.3 million for the three and six months ended June 30, 2026 and 2025, respectively, through our prequalified network of independent automotive dealers and automotive finance companies.

We show an allowance for credit losses for our loans at amortized cost. A considerable amount of judgment is required to assess the ultimate amount of expected losses on loans at amortized cost, and we regularly evaluate and update our methodologies to determine the most appropriate allowance necessary. Our loans at amortized cost consist of smaller-balance, homogeneous loans in our Auto Finance segment. These loans are further divided into pools based on common characteristics such as contract or acquisition channel. For each pool, we determine the necessary allowance for credit losses using reasonable and supportable forecasts that analyze some or all of the following attributes unique to each type of receivable pool: historical loss rates on similar loans; current delinquency and roll-rate trends which may indicate consumer loss rates in excess or less than those which historical trends might suggest; the effects of changes in the economy on consumers such as inflation or other macroeconomic changes; changes in underwriting criteria; unfunded commitments (to the extent they are unconditional), and estimated recoveries. The aforementioned inputs are calculated using historical trends over the most recent two year period and adjusted as needed for current trends and reasonable and supportable forecasts. We may individually evaluate a receivable or pool of receivables for credit losses if circumstances indicate that the receivable or pool of receivables may be at higher risk for non-performance than other receivables (e.g., if a particular retail or auto-finance partner has indications of nonperformance (such as a bankruptcy) that could impact the underlying pool of receivables we purchased from the partner).

Certain of our loans at amortized cost also contain components of deferred revenue related to loan discounts on the purchase of our auto finance receivables. As of June 30, 2026 and December 31, 2025, the weighted average remaining accretion period for the $18.2 million and $20.1 million of deferred revenue reflected in the condensed consolidated balance sheets was 21 and 23 months, respectively.

(1) For the three and six months ended June 30, 2026, we recorded a provision for credit losses associated with our notes receivable from consumer technology platforms that are included in Prepaid expenses and other assets on our condensed consolidated balance sheets.

Recoveries, noted above, consist of amounts received from the efforts of third-party collectors. All proceeds received, associated with charged-off accounts, are credited to the allowance for credit losses.

Delinquent loans at amortized cost reflect the principal, fee and interest components of loans we did not collect on or prior to the contractual due date and are considered "past due". Amounts we believe we will not ultimately collect are included as a component in our overall allowance for credit losses.

We consider loan delinquencies a key indicator of credit quality because this measure provides the best ongoing estimate of how a particular class of receivables is performing. An aging of our delinquent loans at amortized cost (in millions) as of June 30, 2026 and December 31, 2025 is as follows:

Loan Modifications and Restructurings

Income Taxes

We experienced effective tax rates of 24.7% and 24.6% for the three and six months ended June 30, 2026, respectively compared to 24.4% and 24.0% for the three and six months ended June 30, 2025.

These effective tax rates were above the statutory rate principally due to (1) state and foreign income tax expense, (2) the tax effects of 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 are the tax effects of our deductions associated with the exercises of stock options and 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 six months ended June 30, 2025, was our deduction of interest expense on a financial instrument classified as debt for tax purposes that was repaid in the six months ended June 30, 2025—such financial instrument which was characterized in our consolidated financial statements as dividend-paying preferred stock.

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 the six months ended June 30, 2026, and was $0.1 million for the six months ended June 30, 2025.

Recent Accounting Pronouncements

In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies existing interim disclosure requirements and establishes a principle requiring entities to disclose events that occur after the end of the most recent annual reporting period that have a material impact on the entity. The new guidance is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The amendments are applied prospectively. We are currently evaluating the potential impact of adopting this new guidance on our financial statements and disclosures but the new guidance is not expected to have a significant impact to the Company’s consolidated financial statements when adopted.

In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. The ASU requires purchased seasoned loans to be accounted for using a gross-up approach, which is intended to enhance comparability in accounting for acquired financial assets. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our financial statements and disclosures but the new guidance is not expected to have a significant impact to the Company’s consolidated financial statements when adopted.

In July 2025, the FASB issued ASU 2025-05, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets", which improves transparency to provide all entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. All entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The new guidance is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual periods. We adopted ASU 2025-05 for the period ended March 31, 2026, and elected the practical expedient. Adoption of this standard did not have a material effect on our condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures" which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement. Instead, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027 and early adoption of the amendments is permitted. We are currently evaluating the potential impact of adopting this new guidance on our financial statements and disclosures but the new guidance is not expected to have a significant impact to the Company’s consolidated financial statements when adopted.