PRA GROUP INC - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________

Commission File Number: 000-50058

PRA Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware

75-3078675

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

120 Corporate Boulevard

Norfolk, Virginia 23502

(Address of principal executive offices)

(888) 772-7326

(Registrant's Telephone No., including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	PRAA	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares of the registrant's common stock outstanding as of November 3, 2021 was 43,613,019.

Table of Contents


Part I. Financial Information

Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Income Statements	4
	Consolidated Statements of Comprehensive Income/(Loss)	5
	Consolidated Statement of Changes in Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
	1. Organization and Business	9
	2. Change in Accounting Principle	10
	3. Finance Receivables, net	10
	4. Investments	15
	5. Goodwill	16
	6. Leases	17
	7. Borrowings	18
	8. Derivatives	22
	9. Fair Value	23
	10. Accumulated Other Comprehensive Loss	26
	11. Earnings per Share	27
	12. Income Taxes	28
	13. Commitments and Contingencies	28
	14. Recently Issued Accounting Standards	29
	15. Subsequent Events	30
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55

Part II. Other Information

Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	56

Signatures		58

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

PRA Group, Inc.

Consolidated Balance Sheets

September 30, 2021 and December 31, 2020

(Amounts in thousands)


	(unaudited)
	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	56,545	$	108,613
Restricted cash	4,752		12,434
Investments	85,171		55,759
Finance receivables, net	3,449,939		3,514,788
Other receivables, net	7,065		13,194
Income taxes receivable	21,863		21,928
Deferred tax assets, net	77,213		83,205
Right-of-use assets	51,998		52,951
Property and equipment, net	53,767		58,356
Goodwill	482,479		492,989
Other assets	41,168		38,844

Total assets	$	4,331,960	$	4,453,061
Liabilities and Equity
Liabilities:
Accounts payable	$	5,379	$	5,294
Accrued expenses	100,342		97,320
Income taxes payable	20,719		29,692
Deferred tax liabilities, net	32,604		40,867
Lease liabilities	56,409		57,348
Interest-bearing deposits	132,612		132,739
Borrowings	2,520,903		2,661,289
Other liabilities	34,342		54,986

Total liabilities	2,903,310		3,079,535

Equity:
Preferred stock, $0.01 par value, 2,000 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value, 100,000 shares authorized, 44,040 shares issued and outstanding at September 30, 2021; 100,000 shares authorized, 45,585 shares issued and outstanding at December 31, 2020	440		456
Additional paid-in capital	—		75,282
Retained earnings	1,654,544		1,511,970
Accumulated other comprehensive loss	(264,781)		(245,791)
Total stockholders' equity - PRA Group, Inc.	1,390,203		1,341,917
Noncontrolling interest	38,447		31,609
Total equity	1,428,650		1,373,526
Total liabilities and equity	$	4,331,960	$	4,453,061

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Income Statements

For the three and nine months ended September 30, 2021 and 2020

(unaudited)

(Amounts in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Portfolio income	$	212,905	$	240,250	$	663,714	$	750,556
Changes in expected recoveries	43,820		25,403		157,504		32,388
Total portfolio revenue	256,725		265,653		821,218		782,944
Fee income	6,209		1,978		10,843		6,826
Other revenue	764		233		6,735		1,788
Total revenues	263,698		267,864		838,796		791,558



Operating expenses:
Compensation and employee services	74,584		71,974		228,200		217,617
Legal collection fees	10,993		13,661		36,208		41,975
Legal collection costs	21,450		26,043		61,231		79,997
Agency fees	15,646		14,900		47,145		38,619
Outside fees and services	29,434		22,719		71,167		60,796
Communication	9,782		9,379		33,039		31,702
Rent and occupancy	4,571		4,460		13,694		13,415
Depreciation and amortization	3,724		4,301		11,520		12,494
Other operating expenses	15,935		11,761		44,045		34,457

Total operating expenses	186,119		179,198		546,249		531,072

Income from operations	77,579		88,666		292,547		260,486
Other income and (expense):

Interest expense, net	(29,599)		(33,692)		(91,987)		(106,319)
Foreign exchange gain	1,232		61		127		3,027
Other	85		291		294		(1,367)
Income before income taxes	49,297		55,326		200,981		155,827
Income tax expense	12,627		7,497		41,870		24,734
Net income	36,670		47,829		159,111		131,093
Adjustment for net income attributable to noncontrolling interests	2,190		5,337		10,229		11,552
Net income attributable to PRA Group, Inc.	$	34,480	$	42,492	$	148,882	$	119,541
Net income per common share attributable to PRA Group, Inc.:
Basic	$	0.76	$	0.93	$	3.27	$	2.63
Diluted	$	0.76	$	0.92	$	3.24	$	2.60
Weighted average number of shares outstanding:
Basic	45,305		45,579		45,594		45,526
Diluted	45,656		46,140		45,920		45,971

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Comprehensive Income/(Loss)

For the three and nine months ended September 30, 2021 and 2020

(unaudited)

(Amounts in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	36,670	$	47,829	$	159,111	$	131,093
Other comprehensive income/(loss), net of tax:
Currency translation adjustments	(38,238)		30,705		(43,682)		(48,448)
Cash flow hedges	5,522		1,394		19,200		(22,927)
Debt securities available-for-sale	(50)		(30)		(192)		191
Other comprehensive (loss)/income	(32,766)		32,069		(24,674)		(71,184)
Total comprehensive income	3,904		79,898		134,437		59,909
Less comprehensive (loss)/income attributable to noncontrolling interests	(1,154)		3,753		4,544		(7,091)
Comprehensive income attributable to PRA Group, Inc.	$	5,058	$	76,145	$	129,893	$	67,000

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2021

(unaudited)

(Amounts in thousands)


	Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive		Noncontrolling		Total
	Shares	Amount		Capital		Earnings		(Loss)		Interest		Equity
Balance at December 31, 2020	45,585	$	456	$	75,282	$	1,511,970	$	(245,791)	$	31,609	$	1,373,526
Effect of change in accounting principle (1)	—	—		(26,697)		12,008		—		—		(14,689)
Balance at January 1, 2021	45,585	456		48,585		1,523,978		(245,791)		31,609		1,358,837
Components of comprehensive income, net of tax:
Net income	—	—		—		58,406		—		3,474		61,880
Currency translation adjustments	—	—		—		—		(20,108)		(4,423)		(24,531)
Cash flow hedges	—	—		—		—		12,323		—		12,323






Distributions to noncontrolling interest	—	—		—		—		—		(3,933)		(3,933)

Vesting of restricted stock	214	2		(2)		—		—		—		—

Share-based compensation expense	—	—		4,113		—		—		—		4,113

Employee stock relinquished for payment of taxes	—	—		(5,460)		—		—		—		(5,460)

Balance at March 31, 2021	45,799	$	458	$	47,236	$	1,582,384	$	(253,576)	$	26,727	$	1,403,229
Components of comprehensive income, net of tax:
Net income	—	—		—		55,996		—		4,565		60,561
Currency translation adjustments	—	—		—		—		17,004		2,083		19,087
Cash flow hedges	—	—		—		—		1,355		—		1,355
Debt securities available-for-sale	—	—		—		—		(142)		—		(142)
Distributions to noncontrolling interest	—	—		—		—		—		(13,120)		(13,120)
Vesting of restricted stock	38	—		—		—		—		—		—
Share-based compensation expense	—	—		4,040		—		—		—		4,040
Employee stock relinquished for payment of taxes	—	—		(70)		—		—		—		(70)
Balance at June 30, 2021	45,837	$	458	$	51,206	$	1,638,380	$	(235,359)	$	20,255	$	1,474,940
Components of comprehensive income, net of tax:
Net income	—	—		—		34,480		—		2,190		36,670
Currency translation adjustments	—	—		—		—		(34,894)		(3,344)		(38,238)
Cash flow hedges	—	—		—		—		5,522		—		5,522
Debt securities available-for-sale	—	—		—		—		(50)		—		(50)
Distributions to noncontrolling interest	—	—		—		—		—		(3,397)		(3,397)
Contributions from noncontrolling interest	—	—		—		—		—		22,743		22,743

Repurchase and cancellation of common stock	(1,797)	(18)		(55,513)		(18,316)		—		—		(73,847)
Share-based compensation expense	—	—		4,317		—		—		—		4,317
Employee stock relinquished for payment of taxes	—	—		(10)		—		—		—		(10)
Balance at September 30, 2021	44,040	$	440	$	—	$	1,654,544	$	(264,781)	$	38,447	$	1,428,650

(1) Refer to Note 2 for further detail.

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Changes in Equity

For the nine months ended September 30, 2020

(unaudited)

(Amounts in thousands)




































	Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive		Noncontrolling		Total
	Shares	Amount		Capital		Earnings		(Loss)		Interest		Equity
Balance at December 31, 2019	45,416	$	454	$	67,321	$	1,362,631	$	(261,018)	$	57,625	$	1,227,013
Components of comprehensive income, net of tax:
Net income	—	—		—		19,135		—		3,301		22,436
Currency translation adjustments	—	—		—		—		(94,201)		(13,875)		(108,076)
Cash flow hedges	—	—		—		—		(20,568)		—		(20,568)
Debt securities available-for-sale	—	—		—		—		170		—		170

Vesting of restricted stock	124	1		—		—		—		—		1
Share-based compensation expense	—	—		2,857		—		—		—		2,857
Employee stock relinquished for payment of taxes	—	—		(3,157)		—		—		—		(3,157)

Balance at March 31, 2020	45,540	$	455	$	67,021	$	1,381,766	$	(375,617)	$	47,051	$	1,120,676
Components of comprehensive income, net of tax:
Net income	—	—		—		57,914		—		2,914		60,828
Currency translation adjustments	—	—		—		—		32,107		(3,184)		28,923
Cash flow hedges	—	—		—		—		(3,753)		—		(3,753)
Debt securities available-for-sale	—	—		—		—		51		—		51
Distributions to noncontrolling interest	—	—		—		—		—		(14,908)		(14,908)
Vesting of restricted stock	39	1		(1)		—		—		—		—
Share-based compensation expense	—	—		3,063		—		—		—		3,063
Employee stock relinquished for payment of taxes	—	—		(18)		—		—		—		(18)
Balance at June 30, 2020	45,579	$	456	$	70,065	$	1,439,680	$	(347,212)	$	31,873	$	1,194,862
Components of comprehensive income, net of tax:
Net income	—	—		—		42,492				5,337		47,829
Currency translation adjustments	—	—		—		—		32,288		(1,583)		30,705
Cash flow hedges	—	—		—		—		1,394		—		1,394
Debt securities available-for-sale	—	—		—		—		(30)		—		(30)
Distributions to noncontrolling interest	—	—		—		—		—		(3,677)		(3,677)
Contributions from noncontrolling interest	—	—		—		—		—		1,118		1,118
Share-based compensation expense	—	—		3,097		—		—		—		3,097
Other	—	—		(3,126)		—		—		—		(3,126)
Balance at September 30, 2020	45,579	$	456	$	70,036	$	1,482,172	$	(313,560)	$	33,068	$	1,272,172

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2021 and 2020

(unaudited)

(Amounts in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	159,111	$	131,093
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense	12,470		9,017
Depreciation and amortization	11,520		12,494


Amortization of debt discount and issuance costs	7,053		16,711
Changes in expected recoveries	(157,504)		(32,388)

Deferred income taxes	(4,235)		(44,905)
Net unrealized foreign currency transactions	7,462		34,060
Fair value in earnings for equity securities	92		1,159
Other	91		(449)

Changes in operating assets and liabilities:
Other assets	1,746		1,466
Other receivables, net	6,033		(1,686)
Accounts payable	201		45
Income taxes payable, net	(9,391)		5,664
Accrued expenses	3,086		(5,315)
Other liabilities	531		4,408
Right of use asset/lease liability	17		(15)

Net cash provided by operating activities	38,283		131,359
Cash flows from investing activities:
Purchases of property and equipment, net	(6,772)		(12,906)

Purchases of finance receivables	(770,377)		(613,050)
Recoveries applied to negative allowance	934,002		784,056
Purchases of investments	(74,485)		(27,565)
Proceeds from sales and maturities of investments	42,110		41,932
Business acquisition, net of cash acquired	(647)		—


Net cash provided by investing activities	123,831		172,467
Cash flows from financing activities:
Proceeds from lines of credit	426,135		998,088
Principal payments on lines of credit	(908,215)		(1,331,303)
Payments on convertible senior notes	—		(287,442)
Proceeds from senior notes	350,000		300,000

Proceeds from long-term debt	—		55,000
Principal payments on long-term debt	(7,500)		(7,500)
Repurchases of common stock	(73,847)		—
Payments of origination cost and fees	(8,835)		(16,998)
Tax withholdings related to share-based payments	(5,540)		(3,176)
Distributions paid to noncontrolling interest	(20,450)		(18,585)
Contributions from noncontrolling interest	22,743		1,118

Net increase in interest-bearing deposits	8,847		8,115
Other financing activities	—		(3,183)

Net cash used in financing activities	(216,662)		(305,866)
Effect of exchange rate on cash	(5,202)		(16,610)
Net decrease in cash, cash equivalents and restricted cash	(59,750)		(18,650)
Cash, cash equivalents and restricted cash beginning of period	121,047		123,807
Cash, cash equivalents and restricted cash, end of period	$	61,297	$	105,157
Supplemental disclosure of cash flow information:
Cash paid for interest	$	88,676	$	88,003
Cash paid for income taxes	55,234		64,719

The accompanying notes are an integral part of these Consolidated Financial Statements.

PRA Group, Inc.

Notes to Consolidated Financial Statements

1. Organization and Business:

As used herein, the terms "PRA Group," the "Company," or similar terms refer to PRA Group, Inc. and its subsidiaries.

PRA Group, Inc., a Delaware corporation, is a global financial and business services company with operations in the Americas, Europe and Australia. The Company's primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company also provides fee-based services on class action claims recoveries and by servicing consumer bankruptcy accounts in the United States ("U.S.").

Basis of presentation: The Consolidated Financial Statements of the Company are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The accompanying interim financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all information and Notes to the Consolidated Financial Statements necessary for a complete presentation of financial position, results of operations, comprehensive income/(loss) and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the Company's Consolidated Balance Sheets as of September 30, 2021, its Consolidated Income Statements and Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2021 and 2020, and its Consolidated Statements of Changes in Equity and Statements of Cash Flows for the nine months ended September 30, 2021 and 2020, have been included. The Company's Consolidated Income Statements for the three and nine months ended September 30, 2021 may not be indicative of future results.

These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K").

Consolidation: The Consolidated Financial Statements include the accounts of PRA Group and other entities in which the Company has a controlling interest. All significant intercompany accounts and transactions have been eliminated.

Entities in which the Company has a controlling financial interest, through ownership of the majority of the entities’ voting equity interests, or through other contractual rights that give the Company control, consist of entities which purchase and collect on portfolios of nonperforming loans.

Investments in companies in which the Company has significant influence over operating and financing decisions, but does not own a majority of the voting equity interests, are accounted for in accordance with the equity method of accounting, which requires the Company to recognize its proportionate share of the entity’s net earnings. These investments are included in Other assets, with income or loss included in Other revenue.

The Company performs on-going reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with an entity cause the Company’s consolidation conclusion to change.

Segments: Under the guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") ASC Topic 280 "Segment Reporting" ("ASC 280"), the Company has determined that it has two operating segments that meet the aggregation criteria of ASC 280, and, therefore, it has one reportable segment, accounts receivable management. This conclusion is based on similarities among the operating units, including economic characteristics, the nature of the products and services, the nature of the production processes, the types or class of customer for their products and services, the methods used to distribute their products and services and the nature of the regulatory environment.

The following tables show the amount of revenue generated for the three and nine months ended September 30, 2021 and 2020, and long-lived assets held at September 30, 2021 and 2020, both for the U.S., the Company's country of domicile, and outside of the U.S. (amounts in thousands):


	As of and for the				As of and for the
	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
	Revenues (2)		Long-Lived Assets		Revenues (2)		Long-Lived Assets
United States	$	157,124	$	90,980	$	172,286	$	98,049
United Kingdom	42,388		2,040		34,387		2,578
Other (1)	64,186		12,745		61,191		8,805
Total	$	263,698	$	105,765	$	267,864	$	109,432

PRA Group, Inc.

Notes to Consolidated Financial Statements


	As of and for the				As of and for the
	Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	Revenues (2)		Long-Lived Assets		Revenues (2)		Long-Lived Assets
United States	$	503,994	$	90,980	$	517,914	$	98,049
United Kingdom	133,024		2,040		98,768		2,578
Other (1)	201,778		12,745		174,876		8,805
Total	$	838,796	$	105,765	$	791,558	$	109,432

(1) None of the countries included in "Other" comprise greater than 10% of the Company's consolidated revenues or long-lived assets.

(2) Based on the Company’s financial statement information used to produce the Company's general-purpose financial statements, it is impracticable to report further breakdowns of revenues from external customers by product or service.

Revenues are attributed to countries based on the location of the related operations. Long-lived assets consist of net property and equipment and right-of-use assets. The Company reports revenues earned from collection activities on nonperforming loans, fee-based services and investments. For additional information on the Company's investments, see Note 4.

2. Change in Accounting Principle:

In August 2020, the FASB issued Accounting Standards Update ("ASU") 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Additionally, ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share ("EPS") calculation in certain areas.

The Company accounts for its 3.50% Convertible Notes due 2023 (the "2023 Notes" or the "Convertible Notes") in accordance with ASC 470-20, "Debt with Conversion and Other Options" ("ASC 470"). Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASC Topic 815 "Derivatives and Hedging" ("ASC 815"), or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. The Company adopted the standard using a modified retrospective method, with adjustments which increased retained earnings by $12.0 million, reduced additional paid-in capital by $26.7 million and increased the net carrying amount of the 2023 Notes by $19.8 million at January 1, 2021. Additionally, for the three and nine months ended September 30, 2021, the effect of adoption reduced interest expense by $2.1 million and $6.1 million, increased net income by $1.5 million and $4.8 million and impacted EPS by $0.03 per share and $0.11 per share, respectively. For more information on the 2023 Notes, see Note 7.

3. Finance Receivables, net:

Finance receivables, net consisted of the following at September 30, 2021 and December 31, 2020 (amounts in thousands):


	September 30, 2021		December 31, 2020
Amortized cost	$	—	$	—
Negative allowance for expected recoveries (1)	3,449,939		3,514,788
Balance at end of period	$	3,449,939	$	3,514,788

(1) The negative allowance balance includes certain portfolios of nonperforming loans for which the Company holds a beneficial interest representing approximately 1% of the balance.

PRA Group, Inc.

Notes to Consolidated Financial Statements

Three Months Ended September 30, 2021 and 2020

Changes in the negative allowance for expected recoveries by portfolio segment for the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	Three Months Ended September 30, 2021
	Core		Insolvency		Total
Balance at beginning of period	$	2,894,963	$	454,075	$	3,349,038
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	374,645		17,302		391,947
Foreign currency translation adjustment	(52,650)		(5,558)		(58,208)
Recoveries applied to negative allowance (2)	(230,237)		(46,421)		(276,658)
Changes in expected recoveries (3)	40,583		3,237		43,820
Balance at end of period	$	3,027,304	$	422,635	$	3,449,939


	Three Months Ended September 30, 2020
	Core		Insolvency		Total
Balance at beginning of period	$	2,908,136	$	443,396	$	3,351,532
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	159,069		18,531		177,600
Foreign currency translation adjustment	53,934		6,752		60,686
Recoveries applied to negative allowance (2)	(246,738)		(35,735)		(282,473)
Changes in expected recoveries (3)	23,744		1,659		25,403
Balance at end of period	$	2,898,145	$	434,603	$	3,332,748

(1) Initial negative allowance for expected recoveries - portfolio acquisitions

Portfolio acquisitions for the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	Three Months Ended September 30, 2021
	Core		Insolvency		Total
Face value	$	2,499,453	$	82,704	$	2,582,157
Noncredit discount	(280,213)		(6,355)		(286,568)
Allowance for credit losses at acquisition	(1,844,595)		(59,047)		(1,903,642)
Purchase price	$	374,645	$	17,302	$	391,947


	Three Months Ended September 30, 2020
	Core		Insolvency		Total
Face value	$	1,106,910	$	91,793	$	1,198,703
Noncredit discount	(159,766)		(8,522)		(168,288)
Allowance for credit losses at acquisition	(788,075)		(64,740)		(852,815)
Purchase price	$	159,069	$	18,531	$	177,600

PRA Group, Inc.

Notes to Consolidated Financial Statements

The initial negative allowance recorded on portfolio acquisitions for the three months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	Three Months Ended September 30, 2021
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(1,844,595)	$	(59,047)	$	(1,903,642)
Writeoffs, net	1,844,595		59,047		1,903,642
Expected recoveries	374,645		17,302		391,947
Initial negative allowance for expected recoveries	$	374,645	$	17,302	$	391,947


	Three Months Ended September 30, 2020
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(788,075)	$	(64,740)	$	(852,815)
Writeoffs, net	788,075		64,740		852,815
Expected recoveries	159,069		18,531		177,600
Initial negative allowance for expected recoveries	$	159,069	$	18,531	$	177,600

(2) Recoveries applied to negative allowance

Recoveries applied to the negative allowance were calculated as follows for the three months ended September 30, 2021 and 2020 (amounts in thousands):


	Three Months Ended September 30, 2021
	Core		Insolvency		Total
Recoveries (a)	$	429,166	$	60,397	$	489,563
Less - amounts reclassified to portfolio income	198,929		13,976		212,905
Recoveries applied to negative allowance	$	230,237	$	46,421	$	276,658


	Three Months Ended September 30, 2020
	Core		Insolvency		Total
Recoveries (a)	$	470,056	$	52,667	$	522,723
Less - amounts reclassified to portfolio income	223,318		16,932		240,250
Recoveries applied to negative allowance	$	246,738	$	35,735	$	282,473

(a) Recoveries includes cash collections, buybacks and other cash-based adjustments.

(3) Changes in expected recoveries

Changes in expected recoveries consisted of the following for the three months ended September 30, 2021 and 2020 (amounts in thousands):


	Three Months Ended September 30, 2021
	Core		Insolvency		Total
Changes in expected future recoveries	$	4,114	$	(6,026)	$	(1,912)
Recoveries received in excess of forecast	36,469		9,263		45,732
Changes in expected recoveries	$	40,583	$	3,237	$	43,820


	Three Months Ended September 30, 2020
	Core		Insolvency		Total
Changes in expected future recoveries	$	(62,999)	$	(588)	$	(63,587)
Recoveries received in excess of forecast	86,743		2,247		88,990
Changes in expected recoveries	$	23,744	$	1,659	$	25,403

PRA Group, Inc.

Notes to Consolidated Financial Statements

In order to make estimates of future cash collections, the Company considered historical performance, current economic forecasts, short-term and long-term growth in the various geographies in which the Company operates and consumer habits. The Company considered recent collection activity in its determination to adjust assumptions related to near-term estimated remaining collections ("ERC") for certain pools. Based on these considerations, the Company’s estimates incorporate changes in both amounts and in the timing of expected cash collections over the forecast period.

Changes in expected recoveries for the three months ended September 30, 2021 were a net positive $43.8 million. This reflects $45.7 million in recoveries received in excess of forecast, which was largely due to cash collections overperformance in the quarter partially offset by a $1.9 million adjustment to changes in expected future recoveries. The changes in expected future recoveries includes the Company's assumption that the majority of the current period overperformance was due to acceleration of future collections. The Company made adjustments in some geographies to increase near-term expected collections, bringing them in line with recent performance trends in collections, with corresponding reductions made later in the forecast period.

Changes in expected recoveries for the three months ended September 30, 2020 were a net positive $25.4 million. This reflected $89.0 million in recoveries received during the third quarter of 2020 in excess of forecast, partially offset by a $63.6 million decrease to the present value of expected future recoveries. The majority of the decrease reflected the Company's assumption that the overperformance was acceleration in cash collections rather than an increase to total expected collections. Additionally, the Company made forecast adjustments in the quarter that it deemed appropriate given the environment in which the Company was operating.

Nine Months Ended September 30, 2021 and 2020

Changes in the negative allowance for expected recoveries by portfolio segment for the nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2021
	Core		Insolvency		Total
Balance at beginning of period	$	3,019,477	$	495,311	$	3,514,788
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	712,687		57,898		770,585
Foreign currency translation adjustment	(56,387)		(2,549)		(58,936)
Recoveries applied to negative allowance (2)	(797,648)		(136,354)		(934,002)
Changes in expected recoveries (3)	149,175		8,329		157,504
Balance at end of period	$	3,027,304	$	422,635	$	3,449,939


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Balance at beginning of period	$	3,051,426	$	462,739	$	3,514,165
Initial negative allowance for expected recoveries - portfolio acquisitions (1)	537,477		77,859		615,336
Foreign currency translation adjustment	(42,065)		(3,020)		(45,085)
Recoveries applied to negative allowance (2)	(677,211)		(106,845)		(784,056)
Changes in expected recoveries (3)	28,518		3,870		32,388
Balance at end of period	$	2,898,145	$	434,603	$	3,332,748

PRA Group, Inc.

Notes to Consolidated Financial Statements

(1) Initial negative allowance for expected recoveries - portfolio acquisitions

Portfolio acquisitions for the nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2021
	Core		Insolvency		Total
Face value	$	4,863,736	$	277,831	$	5,141,567
Noncredit discount	(585,400)		(19,368)		(604,768)
Allowance for credit losses at acquisition	(3,565,649)		(200,565)		(3,766,214)
Purchase price	$	712,687	$	57,898	$	770,585


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Face value	$	4,286,296	$	366,211	$	4,652,507
Noncredit discount	(533,465)		(29,533)		(562,998)
Allowance for credit losses at acquisition	(3,215,354)		(258,819)		(3,474,173)
Purchase price	$	537,477	$	77,859	$	615,336

The initial negative allowance recorded on portfolio acquisitions for the nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	For the Nine Months Ended September 30, 2021
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(3,565,649)	$	(200,565)	$	(3,766,214)
Writeoffs, net	3,565,649		200,565		3,766,214
Expected recoveries	712,687		57,898		770,585
Initial negative allowance for expected recoveries	$	712,687	$	57,898	$	770,585


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Allowance for credit losses at acquisition	$	(3,215,354)	$	(258,819)	$	(3,474,173)
Writeoffs, net	3,215,354		258,819		3,474,173
Expected recoveries	537,477		77,859		615,336
Initial negative allowance for expected recoveries	$	537,477	$	77,859	$	615,336

(2) Recoveries applied to negative allowance

Recoveries applied to the negative allowance were calculated as follows for the nine months ended September 30, 2021 and 2020 (amounts in thousands):


	For the Nine Months Ended September 30, 2021
	Core		Insolvency		Total
Recoveries (a)	$	1,415,619	$	182,097	$	1,597,716
Less - amounts reclassified to portfolio income	617,971		45,743		663,714
Recoveries applied to negative allowance	$	797,648	$	136,354	$	934,002

PRA Group, Inc.

Notes to Consolidated Financial Statements


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Recoveries (a)	$	1,371,988	$	162,624	$	1,534,612
Less - amounts reclassified to portfolio income	694,777		55,779		750,556
Recoveries applied to negative allowance	$	677,211	$	106,845	$	784,056

(a) Recoveries includes cash collections, buybacks and other cash-based adjustments.

(3) Changes in expected recoveries

Changes in expected recoveries consisted of the following for the nine months ended September 30, 2021 and 2020 (amounts in thousands):


	For the Nine Months Ended September 30, 2021
	Core		Insolvency		Total
Changes in expected future recoveries	$	(47,738)	$	(18,871)	$	(66,609)
Recoveries received in excess of forecast	196,913		27,200		224,113
Changes in expected recoveries	$	149,175	$	8,329	$	157,504


	For the Nine Months Ended September 30, 2020
	Core		Insolvency		Total
Changes in expected future recoveries	$	(181,433)	$	(2,478)	$	(183,911)
Recoveries received in excess of forecast	209,951		6,348		216,299
Changes in expected recoveries	$	28,518	$	3,870	$	32,388

Changes in expected recoveries for the nine months ended September 30, 2021 were a net positive $157.5 million. The changes were the net result of recoveries in excess of forecast of $224.1 million from significant cash collections overperformance in the current period reduced by a $66.6 million negative adjustment to changes in expected future recoveries. The changes in expected future recoveries includes the Company's assumption that the majority of the current period overperformance was due to acceleration of future collections. The Company made adjustments in some geographies to increase near-term expected collections, bringing them in line with recent performance trends in collections, with corresponding reductions made later in the forecast period.

Changes in expected recoveries for the nine months ended September 30, 2020 were a net positive $32.4 million. This reflected $216.3 million in recoveries in excess of forecast, which was largely due to significant cash collections overperformance during the second and third quarters of 2020. This was mostly offset by a $183.9 million decrease in the present value of expected future recoveries. The majority of the decrease reflected the Company's assumption that the second and third quarter of 2020 overperformance was primarily due to acceleration in the timing of cash collections rather than an increase to total expected collections. Additionally, the Company made forecast adjustments deemed appropriate given the environment in which the Company was operating.

4. Investments:

Investments consisted of the following at September 30, 2021 and December 31, 2020 (amounts in thousands):


	September 30, 2021		December 31, 2020


Debt securities



Available-for-sale	$	69,406	$	5,368


Equity securities
Exchange traded funds	—		34,847
Private equity funds	5,150		6,123
Mutual funds	2,670		1,023
Equity method investments	7,945		8,398

Total investments	$	85,171	$	55,759

PRA Group, Inc.

Notes to Consolidated Financial Statements

Debt Securities

Available-for-sale

Government securities: The Company's investments in government instruments, including bonds and treasury securities, are classified as available-for-sale and are stated at fair value.

The amortized cost and estimated fair value of investments in debt securities at September 30, 2021 and December 31, 2020 were as follows (amounts in thousands):


	September 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Aggregate Fair Value
Available-for-sale


Government securities	$	69,469	$	—	$	63	$	69,406






	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Aggregate Fair Value
Available-for-sale

Government securities	$	5,239	$	129	$	—	$	5,368

Equity Securities

Exchange traded funds: The Company invested in certain treasury bill exchange traded funds, which were accounted for as equity securities and carried at fair value. In August 2021, the Company sold these funds. Gains and losses from these investments are included within Other income and (expense) in the Company's Consolidated Income Statements.

Private equity funds: Investments in private equity funds represent limited partnerships in which the Company has less than a 1% interest.

Mutual funds: Mutual funds represent funds held in Brazil in a Brazilian real denominated mutual fund benchmarked to the U.S. dollar that invests principally in Brazilian fixed income securities. The investments are carried at fair value based on quoted market prices. Gains and losses from these investments are included as a foreign exchange component of Other income and (expense) in the Company's Consolidated Income Statements.

Equity Method Investments

The Company has an 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing platform for nonperforming loans in Brazil. This investment is accounted for on the equity method because the Company exercises significant influence over RCB’s operating and financial activities. Accordingly, the Company’s investment in RCB is adjusted for the Company’s proportionate share of RCB’s earnings or losses, capital contributions made and distributions received.

5. Goodwill:

The Company performs an annual review of goodwill as of October 1 of each year or more frequently if indicators of impairment exist. The Company performed its most recent annual review as of October 1, 2020 and concluded that no goodwill impairment was necessary. The Company performed its quarterly assessment by evaluating whether any triggering events had occurred as of September 30, 2021, which included considering current market conditions. The Company concluded that no triggering event had occurred as of September 30, 2021 and will continue to monitor the market for any adverse conditions.

The changes in goodwill for the three and nine months ended September 30, 2021 and 2020, were as follows (amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance at beginning of period	$	492,843	$	444,507	$	492,989	$	480,794






Change in foreign currency translation adjustment	(10,364)		11,801		(10,510)		(24,486)




Balance at end of period	$	482,479	$	456,308	$	482,479	$	456,308

PRA Group, Inc.

Notes to Consolidated Financial Statements

6. Leases:

The Company's operating lease portfolio primarily includes corporate offices and call centers. The majority of its leases have remaining lease terms of one year to 15 years, some of which include options to extend the leases for up to five years, and others include options to terminate the leases within one year. Exercises of lease renewal options are typically at the Company's sole discretion and are included in its right-of-use ("ROU") assets and lease liabilities based upon whether the Company is reasonably certain of exercising the renewal options. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The components of lease expense for the three and nine months ended September 30, 2021 and 2020, were as follows (amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease expense	$	3,072	$	3,035	$	9,096	$	9,072
Short-term lease expense	695		661		2,118		2,030







Sublease income	(81)		—		(81)		—
Total lease expense	$	3,686	$	3,696	$	11,133	$	11,102

Supplemental cash flow information and non-cash activity related to leases for the nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):


	Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of operating lease liabilities	$	8,946	$	9,179

ROU assets obtained in exchange for operating lease obligations	6,436		(10,465)

Lease term and discount rate information related to operating leases were as follows as of the dates indicated:


	Nine Months Ended September 30,
	2021		2020
Weighted-average remaining lease term (years)	8.6		9.5


Weighted-average discount rate	4.64	%	4.82	%

Maturities of lease liabilities at September 30, 2021 are as follows for the following periods (amounts in thousands):


	Operating Leases
For the three months ending December 31, 2021	$	3,068
For the year ending December 31, 2022	10,649
For the year ending December 31, 2023	8,245
For the year ending December 31, 2024	7,791
For the year ending December 31, 2025	7,600
Thereafter	31,569
Total lease payments	$	68,922
Less: imputed interest	12,513
Total present value of lease liabilities	$	56,409

PRA Group, Inc.

Notes to Consolidated Financial Statements

7. Borrowings:

The Company's borrowings consisted of the following as of September 30, 2021 and December 31, 2020 (amounts in thousands):


	September 30, 2021		December 31, 2020
Americas revolving credit (1)	$	120,850	$	405,706
Europe revolving credit	957,554		1,171,890

Term loan	462,500		470,000


Senior Notes	650,000		300,000
Convertible Notes	345,000		345,000
	2,535,904		2,692,596
Less: Debt discount and issuance costs	(15,001)		(31,307)
Total	$	2,520,903	$	2,661,289

(1) Includes North American revolving credit facility and Colombian revolving credit facility.

The following principal payments are due on the Company's borrowings as of September 30, 2021 for the 12-month periods ending September 30, (amounts in thousands):


2022	$	10,949
2023	1,312,728
2024	10,000
2025	310,000
2026	542,227
Thereafter	350,000
Total	$	2,535,904

The Company determined that it was in compliance with the covenants of its financing arrangements as of September 30, 2021.

North American Revolving Credit and Term Loan

The Company has a credit agreement with Bank of America, N.A., as administrative agent, Bank of America, National Association, acting through its Canada branch, as the Canadian Administrative Agent, and a syndicate of lenders named therein ("North American Credit Agreement"). On July 30, 2021, the Company entered into the Fourth Amendment to the North American Credit Agreement, which extended the maturity date to July 30, 2026 and, among other things, decreased the revolving loans base rate floors, increased the limit of stock repurchases and redemption of convertible notes, lowered both the margin and unused line fee and added London Interbank Offered Rate ("LIBOR") replacement provisions to reflect the current market approach.

The total credit facility under the North American Credit Agreement includes an aggregate principal amount of $1.5 billion (subject to compliance with a borrowing base and applicable debt covenants), which consists of (i) a fully-funded $462.5 million term loan, (ii) a $1.0 billion domestic revolving credit facility, and (iii) a $75.0 million Canadian revolving credit facility. The facility includes an accordion feature for up to $500.0 million in additional commitments (at the option of the lender) and also provides for up to $25.0 million of letters of credit and a $25.0 million swingline loan sub-limit that would reduce amounts available for borrowing. The term and revolving loans accrue interest, at the option of the Company, at either the base rate, Canadian Dollar Offered Rate ("CDOR"), or the Eurodollar rate (as defined in the North American Credit Agreement), for the applicable term plus 2.25% per annum, or 2.00% if the consolidated senior secured leverage ratio is less than or equal to 1.60 to 1.0. The revolving loans within the credit facility are subject to a 0.0% floor. The revolving credit facilities also bear an unused line fee of 0.35% per annum, or 0.30% if the consolidated senior secured leverage ratio (as defined in the North American Credit Agreement) is less than or equal to 1.60 to 1.0, payable quarterly in arrears. As of September 30, 2021, the unused portion of the North American Credit Agreement was $955.3 million. Considering borrowing base restrictions, as of September 30, 2021, the amount available to be drawn was $410.3 million.

PRA Group, Inc.

Notes to Consolidated Financial Statements

The North American Credit Agreement is secured by a first priority lien on substantially all of the Company's North American assets. The North American Credit Agreement contains restrictive covenants and events of default, including the following:

•the ERC borrowing base is 35% for all eligible core asset pools and 55% for all insolvency eligible asset pools;

•the consolidated total leverage ratio (as defined in the North American Credit Agreement) cannot exceed 3.50 to 1.0 as of the end of any fiscal quarter;

•the consolidated senior secured leverage ratio cannot exceed 2.25 to 1.0 as of the end of any fiscal quarter;

•subject to no default or event of default, cash dividends and distributions during any fiscal year cannot exceed $20.0 million; and

•the Company must maintain positive consolidated income from operations during any fiscal quarter.

European Revolving Credit Facility

European subsidiaries of the Company ("PRA Europe") are parties to a credit agreement with DNB Bank ASA and a syndicate of lenders named therein, for a Multicurrency Revolving Credit Facility (the "European Credit Agreement"). On March 12, 2021, the Company entered into the Seventh Amendment and Restatement to its European Credit Agreement that, among other things, increased borrowings by $50.0 million through the accordion feature.

The European Credit Agreement provides borrowings for an aggregate amount of approximately $1.35 billion (subject to the borrowing base), accrues interest at the Interbank Offered Rate plus 2.70% - 3.80% (as determined by the estimated remaining collections ratio ("ERC Ratio") as defined in the European Credit Agreement), bears an unused line fee, currently 1.23% per annum, or 35% of the margin, is payable monthly in arrears and matures February 19, 2023. The European Credit Agreement also includes an overdraft facility in the aggregate amount of $40.0 million (subject to the borrowing base), which accrues interest (per currency) at the daily rates as published by the facility agent, bears a facility line fee of 0.125% per quarter, payable quarterly in arrears and matures February 19, 2023. As of September 30, 2021, the unused portion of the European Credit Agreement (including the overdraft facility) was $432.4 million. Considering borrowing base restrictions and other covenants as of September 30, 2021, the amount available to be drawn under the European Credit Agreement (including the overdraft facility) was $349.4 million.

The European Credit Agreement is secured by the shares of most of the Company's European subsidiaries and all intercompany loans receivable in Europe. The European Credit Agreement contains restrictive covenants and events of default, including the following:

•the ERC Ratio cannot exceed 45%;

•the gross interest-bearing debt ratio in Europe cannot exceed 3.25 to 1.0 as of the end of any fiscal quarter;

•interest bearing deposits in AK Nordic AB cannot exceed SEK 1.2 billion; and

•PRA Europe's cash collections must meet certain thresholds, measured on a quarterly basis.

Colombian Revolving Credit Facility

PRA Group Colombia Holding SAS, is party to a credit agreement with Bancolombia in an aggregate amount of approximately $5.2 million. As of September 30, 2021, the outstanding balance under the credit agreement was approximately $1.1 million, with a weighted average interest rate of 7.13%. The outstanding balance accrues interest at the Indicador Bancario de Referencia rate plus a weighted average spread of 2.74%, is payable quarterly in arrears, amortizes quarterly and matures on October 17, 2022 (per the credit agreement, maturity represents three years from the last draw). This credit facility is fully collateralized using time deposits with the lender. As of September 30, 2021, the unused portion of the credit agreement was approximately $4.1 million.

Senior Notes due 2029

On September 22, 2021, the Company completed the private offering of $350.0 million in aggregate principal amount of its 5.00% Senior Notes due October 1, 2029 (the "2029 Notes"). The 2029 Notes were issued pursuant to an Indenture dated September 22, 2021 (the "2021 Indenture"), between the Company and Regions Bank, as trustee. The 2021 Indenture contains customary terms and covenants, including certain events of default after which the 2029 Notes may be due and payable immediately. The 2029 Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American Credit Agreement, subject to certain exceptions. Interest on the Notes is payable semi-annually, in arrears, on October 1 and April 1 of each year.

PRA Group, Inc.

Notes to Consolidated Financial Statements

On or after October 1, 2024, the Notes may be redeemed, at the Company's option in whole or in part at a price equal to 102.50% of the aggregate principal amount of the 2029 Notes being redeemed. The applicable redemption price changes if redeemed during the 12-months beginning October 1 of each year to 101.25% for 2025 and then 100% for 2026 and thereafter.

In addition, on or before October 1, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2029 Notes at a redemption price of 105.00% plus accrued and unpaid interest subject to the rights of holders of the 2029 Notes with the net cash proceeds of a public offering of common stock of the Company provided, that at least 60% in aggregate principal amount of the 2029 Notes remains outstanding immediately after the occurrence of such redemption and that such redemption will occur within 90 days of the date of the closing of such public offering.

In the event of a Change of Control (as defined in the 2021 Indenture), each holder will have the right to require the Company to repurchase all or any part of such holder's 2029 Notes at an offer price equal to 101% of the aggregate principal amount plus accrued and unpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the 2029 Notes at 100% of their principal amount.

Senior Notes due 2025

On August 27, 2020, the Company completed the private offering of $300.0 million in aggregate principal amount of its 7.375% Senior Notes due September 1, 2025 (the "2025 Notes" and, together with the 2029 Notes, the "Senior Notes"). The 2025 Notes were issued pursuant to an Indenture dated August 27, 2020 (the "2020 Indenture"), between the Company and Regions Bank, as a trustee. The 2020 Indenture contains customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately. The 2025 Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American Credit Agreement, subject to certain exceptions. Interest on the 2025 Notes is payable semi-annually, in arrears, on March 1 and September 1 of each year.

On or after September 1, 2022, the 2025 Notes may be redeemed, in whole or in part, at a price equal to 103.688% of the aggregate principal amount of the 2025 Notes being redeemed. The applicable redemption price changes if redeemed during the 12-months beginning September 1 of each year to, 101.844% for 2023 and then 100% for 2024 and thereafter.

In addition, on or before September 1, 2022, the Company may redeem up to 40% of the aggregate principal amount of the 2025 Notes at a redemption price of 107.375% plus accrued and unpaid interest subject to the rights of holders of the 2025 Notes with the net cash proceeds of a public offering of common stock of the Company provided, that at least 60% in aggregate principal amount of the 2025 Notes remains outstanding immediately after the occurrence of such redemption and that such redemption will occur within 90 days of the date of the closing of such public offering.

In the event of a Change of Control (as defined in the 2020 Indenture), each holder will have the right to require the Company to repurchase all or any part of such holder's 2025 Notes at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the 2025 Notes at 100% of their principal amount.

Convertible Senior Notes due 2023

On May 26, 2017, the Company completed the private offering of $345.0 million in aggregate principal amount of its 3.50% Convertible Senior Notes due June 1, 2023. The 2023 Notes were issued pursuant to an Indenture, dated May 26, 2017 (the "2017 Indenture"), between the Company and Regions Bank, as trustee. The 2017 Indenture contains customary terms and covenants, including certain events of default after which the 2023 Notes may be due and payable immediately. The 2023 Notes are senior unsecured obligations of the Company. Interest on the 2023 Notes is payable semi-annually, in arrears, on June 1 and December 1 of each year.

The holders of the 2023 Notes have the right to convert all, or a portion of, the 2023 Notes upon occurrence of specific events prior to the close of business on the business day immediately preceding prior to March 1, 2023, including:

•if during any calendar quarter, the last reported sales price of the Company's common stock is greater than 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days;

•if the trading price of the 2023 Notes is less than 98% of the product of the last reported sales price of the Company's common stock and the conversion rate for a 10 consecutive trading day period;

PRA Group, Inc.

Notes to Consolidated Financial Statements

•the Company elects to issue to all, or substantially all, holders of its common stock any rights, options or warrants entitling them, for a period of more than 45 calendar days, to subscribe for or purchase shares at a price per share that is less than the average of the last reported sales price (as defined in the 2017 Indenture) for the 10 consecutive trading day-period ending on the trading day immediately preceding the date of announcement of such issuance;

•the Company elects to distribute to all, or substantially all, holders of its common stock the Company’s assets, debt securities or rights to purchase securities of the Company, which distribution has a share value exceeding 10% of the last reported sale price (as defined in the 2017 Indenture) on the trading day preceding the announcement of such distribution; or

•a transaction occurs that constitutes a fundamental change (as defined in the 2017 Indenture) or, the Company is party to a consolidation, merger, binding share exchange, or transfer or lease of all, or substantially all, of the Company’s assets.

On or after March 1, 2023, the 2023 Notes will be convertible at any time. As of September 30, 2021, the Company does not believe that any of the conditions allowing holders of the 2023 Notes to convert their notes has occurred.

Furthermore, the Company has the right, at its election, to redeem all or any part of the outstanding 2023 Notes at any time on or after June 1, 2021 for cash, but only if the last reported sale price (as defined in the 2017 Indenture) of the Company's common stock exceeds 130% of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on and including the trading day immediately before the date the Company sends the related redemption notice.

The conversion rate for the 2023 Notes is 21.6275 shares per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $46.24 per share of the Company's common stock, and is subject to adjustment in certain circumstances pursuant to the 2017 Indenture. Upon conversion, holders of the 2023 Notes will receive cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election. The Company has made an irrevocable election to settle conversions by paying holders of the 2023 Notes cash up to the aggregate principal amount of the 2023 Notes and shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election, for the remaining amounts owed, if any.

In accordance with authoritative guidance related to derivatives and hedging and EPS, only the conversion spread is included in the diluted EPS calculation, if dilutive. Under such method, the settlement of the conversion spread has a dilutive effect when the market conversion criteria is met.

The Company determined that the fair value of the 2023 Notes at the date of issuance was approximately $298.8 million, and designated the residual value of approximately $46.2 million as the equity component. Additionally, the Company allocated approximately $8.3 million of the $9.6 million 2023 Notes issuance cost as debt issuance cost and the remaining $1.3 million as equity issuance cost. Upon adoption of ASU 2020-06, the equity classification model was eliminated, resulting in an adjustment to retained earnings and an increase to the 2023 Notes. Refer to Note 2, Change in Accounting Principle, for further information.

The balances of the liability and equity components of the Company's convertible notes outstanding as of September 30, 2021 and December 31, 2020, were as follows (amounts in thousands):


	September 30, 2021		December 31, 2020
Liability component - principal amount	$	345,000	$	345,000
Unamortized debt discount	—		(20,603)
Unamortized debt issuance costs	(2,902)		(3,335)
Liability component - net carrying amount	$	342,098	$	321,062
Equity component	$	—	$	44,910

The Company amortizes debt issuance costs over the life of the debt using the effective interest method. Upon adoption of ASU 2020-06 the debt discount was eliminated and the debt issuance costs were remeasured, resulting in an effective interest rate of 4.00%.

PRA Group, Inc.

Notes to Consolidated Financial Statements

Interest expense related to the Company's convertible notes for the three and nine months ended September 30, 2021 and 2020, were as follows (amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020 (1)
Interest expense - stated coupon rate	$	3,019	$	3,695	$	9,057	$	14,045
Interest expense - amortization of debt discount	—		2,388		—		8,852
Interest expense - amortization of debt issuance costs	412		432		1,234		1,644
Total interest expense - convertible notes	$	3,431	$	6,515	$	10,291	$	24,541

(1) 2020 amounts include interest expense related to the 3.00% Convertible Senior Notes due August 1, 2020, which were repaid in the third quarter of 2020. Refer to Note 7 of the Company's Consolidated Financial Statements included in Item 8 of the 2020 Form 10-K.

8. Derivatives:

The Company periodically enters into derivative financial instruments, typically interest rate swap agreements, interest rate caps and foreign currency contracts to reduce its exposure to fluctuations in interest rates on variable-rate debt and foreign currency exchange rates. The Company does not utilize derivative financial instruments with a level of complexity or with a risk greater than the exposure to be managed nor does it enter into or hold derivatives for trading or speculative purposes. The Company periodically reviews the creditworthiness of the counterparty to assess the counterparty’s ability to honor its obligation. Counterparty default would expose the Company to fluctuations in interest and currency rates. Derivative financial instruments are recognized at fair value in the Consolidated Balance Sheets, in accordance with the guidance of ASC 815. In 2020, the Company adopted ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effect of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). ASU 2020-04 allows the Company to elect certain expedients to continue accounting for its interest rate swap contracts designated as cash flow hedges.

The following tables summarize the fair value of derivative instruments in the Company's Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (amounts in thousands):

September 30, 2021

December 31, 2020

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate contracts

Other assets

2,815

Other assets

—

Interest rate contracts

Other liabilities

22,181

Other liabilities

43,017

Derivatives not designated as hedging instruments:

Foreign currency contracts

Other assets

5,521

Other assets

3,512

Foreign currency contracts

Other liabilities

1,944

Other liabilities

2,415

Derivatives Designated as Hedging Instruments:

Changes in fair value of derivative contracts designated as cash flow hedging instruments are recognized in other comprehensive income ("OCI"). As of September 30, 2021 and December 31, 2020, the notional amount of interest rate contracts designated as cash flow hedging instruments was $867.6 million and $967.2 million, respectively. Derivatives designated as cash flow hedging instruments were evaluated and remain highly effective at September 30, 2021 and have terms of one to four years. The Company estimates that approximately $7.1 million of net derivative loss included in OCI will be reclassified into earnings within the next 12 months.

PRA Group, Inc.

Notes to Consolidated Financial Statements

The following tables summarize the effects of derivatives designated as cash flow hedging instruments on the Consolidated Financial Statements for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):


	Gain or (loss) recognized in OCI, net of tax
	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives designated as cash flow hedging instruments	2021		2020		2021		2020
Interest rate contracts	$	3,036	$	(1,089)	$	11,588	$	(27,953)
	Gain or (loss) reclassified from OCI into income
	Three Months Ended September 30,				Nine Months Ended September 30,
Location of gain or (loss) reclassified from OCI into income	2021		2020		2021		2020
Interest expense, net	$	(3,165)	$	(3,175)	$	(9,644)	$	(6,488)

Derivatives Not Designated as Hedging Instruments:

Changes in fair value of derivative contracts not designated as hedging instruments are recognized in earnings. The Company also enters into foreign currency contracts to economically hedge the foreign currency re-measurement exposure related to certain balances that are denominated in currencies other than the functional currency of the entity. As of September 30, 2021 and December 31, 2020, the notional amount of foreign currency contracts that are not designated as hedging instruments was $799.4 million and $500.8 million, respectively.

The following table summarizes the effects of derivatives not designated as hedging instruments on the Company’s Consolidated Income Statements for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):


		Amount of gain or (loss) recognized in income

		Three Months Ended September 30,
Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income	2021		2020
Foreign currency contracts	Foreign exchange gain	$	8,197	$	2,280
Foreign currency contracts	Interest expense, net	130		(322)


		Amount of gain or (loss) recognized in income
		Nine Months Ended September 30,
Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income	2021		2020
Foreign currency contracts	Foreign exchange gain	$	10,741	$	27,437
Foreign currency contracts	Interest expense, net	475		(2,135)

9. Fair Value:

As defined by ASC Topic 820, "Fair Value Measurement and Disclosures" ("ASC 820"), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires the consideration of differing levels of inputs in the determination of fair values.

Those levels of input are summarized as follows:

•Level 1: Quoted prices in active markets for identical assets and liabilities.

•Level 2: Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3: Unobservable inputs that are supported by little or no market activity. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques as well as instruments for which the determination of fair value requires significant management judgment or estimation.

PRA Group, Inc.

Notes to Consolidated Financial Statements

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Financial Instruments Not Required To Be Carried at Fair Value

In accordance with the disclosure requirements of ASC Topic 825, "Financial Instruments" ("ASC 825"), the table below summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

The carrying amounts in the table are recorded in the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020 (amounts in thousands):


	September 30, 2021				December 31, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	56,545	$	56,545	$	108,613	$	108,613


Restricted cash	4,752		4,752		12,434		12,434
Finance receivables, net	3,449,939		3,354,634		3,514,788		3,541,159
Financial liabilities:
Interest-bearing deposits	132,612		132,612		132,739		132,739
Revolving lines of credit	1,078,404		1,078,404		1,577,596		1,577,596
Term loan	462,500		462,500		470,000		470,000
Senior Notes	650,000		671,989		300,000		324,408
Convertible Notes	345,000		382,484		324,397		376,012

Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The carrying amount and estimates of the fair value of the Company's debt obligations outlined above do not include any related debt issuance costs associated with the debt obligations. The Company uses the following methods and assumptions to estimate the fair value of financial instruments:

Cash and cash equivalents and restricted cash: The carrying amount approximates fair value and quoted prices for identical assets that can be found in active markets. Accordingly, the Company estimates the fair value of cash, cash equivalents and restricted cash using Level 1 inputs.

Finance receivables, net: The Company estimates the fair value of these receivables using proprietary pricing models that the Company utilizes to make portfolio acquisition decisions. Accordingly, the Company's fair value estimates use Level 3 inputs as there is little observable market data available and management is required to use significant judgment in its estimates.

Interest-bearing deposits: The carrying amount approximates fair value due to the short-term nature of the deposits and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.

Revolving lines of credit: The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.

Term loan: The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimate.

Senior Notes and Convertible Notes: The fair value estimates for the Senior Notes and the Convertible Notes incorporate quoted market prices, which were obtained from secondary market broker quotes, which were derived from a variety of inputs including client orders, information from their pricing vendors, modeling software and actual trading prices when they occur. Accordingly, the Company uses Level 2 inputs for its fair value estimates. Furthermore, in the table above, the carrying amount of December 31, 2020 represents the Convertible Notes net of the debt discount. Upon adoption of ASU 2020-06, the carrying amount of the Convertible Notes reflects face value as the debt discount was eliminated.

PRA Group, Inc.

Notes to Consolidated Financial Statements

Financial Instruments Required To Be Carried At Fair Value

The carrying amounts in the following tables are measured at fair value on a recurring basis in the accompanying Consolidated Balance Sheets at September 30, 2021 and December 31, 2020 (amounts in thousands):


	Fair Value Measurements as of September 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale investments
Government securities	$	69,406	$	—	$	—	$	69,406
Fair value through net income

Mutual funds	2,670		—		—		2,670
Derivative contracts (recorded in Other assets)	—		8,336		—		8,336
Liabilities:
Derivative contracts (recorded in Other liabilities)	—		24,125		—		24,125

	Fair Value Measurements as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale investments
Government securities	$	5,368	$	—	$	—	$	5,368
Fair value through net income
Exchange traded funds	34,847		—		—		34,847
Mutual funds	1,023		—		—		1,023
Derivative contracts (recorded in Other assets)	—		3,512		—		3,512
Liabilities:
Derivative contracts (recorded in Other liabilities)	—		45,432		—		45,432

Available-for-sale investments

Government securities: Fair value of the Company's investment in government instruments are estimated using quoted market prices. Accordingly, the Company uses Level 1 inputs.

Fair value through net income investments

Mutual funds: Fair value of the Company's investment in mutual funds is estimated using quoted market prices. Accordingly, the Company uses Level 1 inputs.

Derivative contracts: The estimated fair value of the derivative contracts is determined using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves and other factors. Accordingly, the Company uses Level 2 inputs for its fair value estimates.

Investments measured using net asset value ("NAV")

Private equity funds: This class of investments consists of private equity funds that invest primarily in loans and securities, including single-family residential debt; corporate debt products; and financially-oriented, real-estate-rich and other operating companies in the Americas, Western Europe and Japan. These investments are subject to certain restrictions regarding transfers and withdrawals. The investments cannot be redeemed with the funds. Instead, the nature of the investments in this class is that distributions are received through the liquidation of the underlying assets of the fund. The investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over one to five years. The fair value of these private equity funds following the application of the NAV practical expedient was $5.2 million and $6.1 million as of September 30, 2021 and December 31, 2020, respectively.

PRA Group, Inc.

Notes to Consolidated Financial Statements

10. Accumulated Other Comprehensive Loss:

The following tables provide details about the reclassifications from accumulated other comprehensive loss for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):


	Three Months Ended September 30,
Gains and losses on cash flow hedges	2021		2020		Affected line in the Consolidated Income Statement
Interest rate swaps	$	(3,165)	$	(3,175)	Interest expense, net
Income tax effect of item above	679		692		Income tax expense
Total losses on cash flow hedges	$	(2,486)	$	(2,483)	Net of tax


	Nine Months Ended September 30,
Gains and losses on cash flow hedges	2021		2020		Affected line in the Consolidated Income Statement
Interest rate swaps	$	(9,644)	$	(6,488)	Interest expense, net
Income tax effect of item above	2,032		1,461		Income tax expense
Total losses on cash flow hedges	$	(7,612)	$	(5,027)	Net of tax

The following table represents the changes in accumulated other comprehensive loss by component, after tax, for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):


	Three Months Ended September 30, 2021
	Debt Securities		Cash Flow		Currency Translation		Accumulated Other
	Available-for-sale		Hedges		Adjustments		Comprehensive Loss (1)
Balance at beginning of period	$	(15)	$	(19,671)	$	(215,673)	$	(235,359)
Other comprehensive (loss)/gain before reclassifications	(50)		3,036		(34,894)		(31,908)
Reclassifications, net	—		2,486		—		2,486
Net current period other comprehensive (loss)/gain	(50)		5,522		(34,894)		(29,422)
Balance at end of period	$	(65)	$	(14,149)	$	(250,567)	$	(264,781)

	Three Months Ended September 30, 2020
	Debt Securities		Cash Flow		Currency Translation		Accumulated Other
	Available-for-sale		Hedges		Adjustments		Comprehensive Loss (1)
Balance at beginning of period	$	177	$	(37,409)	$	(309,980)	$	(347,212)
Other comprehensive (loss)/gain before reclassifications	(30)		(1,089)		32,288		31,169
Reclassifications, net	—		2,483		—		2,483
Net current period other comprehensive (loss)/gain	(30)		1,394		32,288		33,652
Balance at end of period	$	147	$	(36,015)	$	(277,692)	$	(313,560)

(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(1.0) million and $0.5 million for the three months ended September 30, 2021 and 2020, respectively.

PRA Group, Inc.

Notes to Consolidated Financial Statements


	Nine Months Ended September 30, 2021
	Debt Securities		Cash Flow		Currency Translation		Accumulated Other
	Available-for-sale		Hedges		Adjustments		Comprehensive Loss (2)
Balance at beginning of period	$	127	$	(33,349)	$	(212,569)	$	(245,791)
Other comprehensive (loss)/gain before reclassifications	(192)		11,588		(37,998)		(26,602)
Reclassifications, net	—		7,612		—		7,612
Net current period other comprehensive (loss)/gain	(192)		19,200		(37,998)		(18,990)
Balance at end of period	$	(65)	$	(14,149)	$	(250,567)	$	(264,781)

	Nine Months Ended September 30, 2020
	Debt Securities		Cash Flow		Currency Translation		Accumulated Other
	Available-for-sale		Hedges		Adjustments		Comprehensive Loss (2)
Balance at beginning of period	$	(44)	$	(13,088)	$	(247,886)	$	(261,018)
Other comprehensive gain/(loss) before reclassifications	191		(27,954)		(29,806)		(57,569)
Reclassifications, net	—		5,027		—		5,027
Net current period other comprehensive gain/(loss)	191		(22,927)		(29,806)		(52,542)
Balance at end of period	$	147	$	(36,015)	$	(277,692)	$	(313,560)

(2) Net of deferred taxes for unrealized losses from cash flow hedges of $5.0 million and $10.2 million for the nine months ended September 30, 2021 and 2020, respectively.

11. Earnings per Share:

Basic EPS are computed by dividing net income available to common stockholders of PRA Group, Inc. by weighted average common shares outstanding. Diluted EPS are computed using the same components as basic EPS with the denominator adjusted for the dilutive effect of the Convertible Notes and nonvested share awards, if dilutive. There has been no dilutive effect of the Convertible Notes since issuance through September 30, 2021. Share-based awards that are contingent upon the attainment of performance goals are included in the computation of diluted EPS if the effect is dilutive. The dilutive effect of nonvested shares is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the vesting of nonvested shares would be used to purchase common shares at the average market price for the period.

On July 29, 2021, the Board of Directors of the Company ("Board of Directors") approved a share repurchase program to purchase up to $150.0 million of the Company's outstanding shares of common stock. During the three months ended September 30, 2021, the Company repurchased 1,796,874 shares of it's common stock for approximately $73.8 million, at an average price of $41.10 per share. The Company's practice is to retire the shares it repurchases. On October 28, 2021, the Board of Directors authorized an increase to the existing program. Refer to Note 15.

The following tables provide a reconciliation between the computation of basic EPS and diluted EPS for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands, except per share amounts):


	Three Months Ended September 30,
	2021					2020
	Net Income Attributable to PRA Group, Inc.		Weighted Average Common Shares	EPS		Net Income Attributable to PRA Group, Inc.		Weighted Average Common Shares	EPS
Basic EPS	$	34,480	45,305	$	0.76	$	42,492	45,579	$	0.93
Dilutive effect of nonvested share awards			351	—				561	(0.01)

Diluted EPS	$	34,480	45,656	$	0.76	$	42,492	46,140	$	0.92

PRA Group, Inc.

Notes to Consolidated Financial Statements


	Nine Months Ended September 30,
	2021					2020
	Net Income Attributable to PRA Group, Inc.		Weighted Average Common Shares	EPS		Net Income Attributable to PRA Group, Inc.		Weighted Average Common Shares	EPS
Basic EPS	$	148,882	45,594	$	3.27	$	119,541	45,526	$	2.63
Dilutive effect of nonvested share awards			326	(0.03)				445	(0.03)

Diluted EPS	$	148,882	45,920	$	3.24	$	119,541	45,971	$	2.60

There were no options outstanding, antidilutive or otherwise, as of September 30, 2021 and 2020.

12. Income Taxes:

The Company accounts for income taxes in accordance with FASB ASC Topic 740 "Income Taxes" ("ASC 740") as it relates to the provision for income taxes and uncertainty in income taxes. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

At September 30, 2021, the tax years subject to examination by the major federal, state and international taxing jurisdictions are 2013 and subsequent years.

The Company intends for predominantly all international earnings to be indefinitely reinvested in its international operations; therefore, the recording of deferred tax liabilities for such unremitted earnings is not required. If international earnings were repatriated, the Company may need to accrue and pay taxes, although foreign tax credits may be available to partially reduce U.S. income taxes. The amount of cash on hand related to international operations with indefinitely reinvested earnings was $46.0 million and $97.0 million as of September 30, 2021 and December 31, 2020, respectively.

13. Commitments and Contingencies:

Employment Agreements:

The Company has entered into employment agreements with each of its U.S. executive officers, which expire on December 31, 2023. Such agreements provide for base salary payments as well as potential discretionary bonuses that consider the Company’s overall performance against its short and long-term financial and strategic objectives. The agreements also contain customary confidentiality and non-compete provisions. At September 30, 2021, estimated future compensation under these agreements was approximately $14.6 million. Outside the U.S., the Company has entered into employment agreements with certain employees pursuant to local country regulations. Generally, these agreements do not have expiration dates. As a result it is impractical to estimate the amount of future compensation under these agreements. Accordingly, the future compensation under these agreements is not included in the $14.6 million total above.

Forward Flow Agreements:

The Company is party to several forward flow agreements that allow for the purchase of nonperforming loans at pre-established prices. The maximum remaining amount to be purchased under forward flow agreements at September 30, 2021, was $873.7 million.

Finance Receivables:

Certain agreements for the purchase of finance receivables portfolios contain provisions that may, in limited circumstances, require the Company to refund a portion or all of the collections subsequently received by the Company on particular accounts. The potential refunds as of the balance sheet date are not considered to be significant.

Litigation and Regulatory Matters:

The Company and its subsidiaries are from time to time subject to a variety of routine legal and regulatory claims, inquiries and proceedings and regulatory matters, most of which are incidental to the ordinary course of its business. The Company initiates lawsuits against customers and is occasionally countersued by them in such actions. Also, customers, either individually, as members of a class action, or through a governmental entity on behalf of customers, may initiate litigation against the Company in which they allege that the Company has violated a state or federal law in the process of collecting on an account. From time to time, other types of lawsuits are brought against the Company. Additionally, the Company receives

PRA Group, Inc.

Notes to Consolidated Financial Statements

subpoenas and other requests or demands for information from regulators or governmental authorities who are investigating the Company's debt collection activities.

The Company accrues for potential liability arising from legal proceedings and regulatory matters when it is probable that such liability has been incurred and the amount of the loss can be reasonably estimated. This determination is based upon currently available information for those proceedings in which the Company is involved, taking into account the Company's best estimate of such losses for those cases for which such estimates can be made. The Company's estimate involves significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the number of unresolved issues in many of the proceedings (including issues regarding class certification and the scope of many of the claims), and the related uncertainty of the potential outcomes of these proceedings. In making determinations of the likely outcome of pending litigation, the Company considers many factors, including, but not limited to, the nature of the claims, the Company's experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative mechanisms, the matter's current status and the damages sought or demands made. Accordingly, the Company's estimate will change from time to time, and actual losses could be more than the current estimate.

The Company believes that the estimate of the aggregate range of reasonably possible losses in excess of the amount accrued for its legal proceedings outstanding at September 30, 2021, where the range of loss can be estimated, was not material.

In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. Loss estimates and accruals for potential liability related to legal proceedings are typically exclusive of potential recoveries, if any, under the Company's insurance policies or third-party indemnities.

The matter below, in addition to the matters disclosed in Note 15 of the Company's Consolidated Financial Statements included in Item 8 of the 2020 Form 10-K, fall outside of the normal parameters of the Company's routine legal proceedings.

Consumer Financial Protection Bureau (“CFPB”) Investigation

As previously disclosed in our 2020 Form 10-K, the Company has responded to certain civil investigative demands from the CFPB regarding its debt collection practices, including compliance with the Company’s 2015 Consent Order. The Company believes that it has fully cooperated with the investigation and has discussed with the CFPB the possible resolution of the investigation. During those discussions, the CFPB has taken positions with which the Company disagrees, including positions related to penalties, restitution and/or the adoption of new practices in the conduct of the Company’s business. At this time, the Company is unable to predict the outcome of the investigation.

14. Recently Issued Accounting Standards:

Recently issued accounting standards adopted:

Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments and calculating income taxes in interim periods. Additionally, the standard adds guidance to reduce complexity in certain areas, including recognizing taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020 on a prospective basis. The Company adopted ASU 2019-12 on January 1, 2021 with no material impact to its financial statements upon adoption.

Investments-Equity Securities

In January 2020, the FASB issued ASU 2020-01 “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815” ("ASU 2020-01"). ASU 2020-01 clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments-Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. Additionally, it clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The Company adopted ASU 2020-01 on January 1, 2021 with no impact to its financial statements upon adoption.

PRA Group, Inc.

Notes to Consolidated Financial Statements

Accounting for Convertible Instruments

Effective January 1, 2021, the Company early adopted ASU 2020-06. Refer to Note 2 for details.

Reference Rate Reform

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Overall" ("ASU 2021-01"). ASU 2021-01 expands the scope of ASC 848 to include derivatives affected by the discounting transition for certain optional expedients and exceptions. ASU 2021-01 is effective immediately for a limited time through December 31, 2022. The Company is evaluating the impact of ASU 2021-01 but does not expect it to have a material impact on its financial statements.

Recently issued accounting standards not yet adopted:

The Company does not expect that any other recently issued accounting pronouncements will have a material effect on its Consolidated Financial Statements.

15. Subsequent Events:

On October 28, 2021, the Board of Directors approved an increase of $80.0 million to the Company's existing share repurchase program under which the Company was previously authorized to repurchase up to $150.0 million of its outstanding common stock. Repurchases maybe made from time-to-time in open market transactions, through privately negotiated transactions, in block transactions,through purchases made in accordance with trading plans adopted under Rule 10b5-1 of the Securities Exchange Act of 1934 or other methods, subject to market and/or other conditions and applicable regulatory requirements. The share repurchase program does not obligate the Company to repurchase any specified amount of shares, remains subject to the discretion of the Board of Directors and, subject to compliance with applicable laws, may be modified, suspended or discontinued at any time.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

All references in this Quarterly Report on Form 10-Q (this "Quarterly Report") to "PRA Group," "we," "us," "the Company" or similar terms are to PRA Group, Inc. and its subsidiaries.

Forward-Looking Statements:

This Quarterly Report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical fact are forward-looking statements, including statements regarding overall cash collection trends, operating cost trends, liquidity and capital needs and other statements of expectations, beliefs, future plans, strategies and anticipated events or trends. Our results could differ materially from those expressed or implied by such forward-looking statements, or our forward looking statements could be wrong, as a result of risks, uncertainties and assumptions, including the following:

•the impact of the novel coronavirus ("COVID-19") pandemic on the markets in which we operate, including business disruptions, unemployment, economic disruption, overall market volatility and the inability or unwillingness of consumers to pay the amounts owed to us;

•our inability to successfully manage the challenges associated with a disease outbreak, including epidemics, pandemics or similar widespread public health concerns, including the COVID-19 pandemic;

•a deterioration in the economic or inflationary environment in the markets in which we operate;

•our inability to replace our portfolios of nonperforming loans with additional portfolios sufficient to operate efficiently and profitably and/or purchase nonperforming loans at appropriate prices;

•our inability to collect sufficient amounts on our nonperforming loans to fund our operations, including as a result of restrictions imposed by federal, state and international laws and regulations;

•changes in accounting standards and their interpretations;

•the recognition of significant decreases in our estimate of future recoveries on nonperforming loans;

•the occurrence of goodwill impairment charges;

•loss contingency accruals that are inadequate to cover actual losses;

•our inability to manage risks associated with our international operations;

•adverse effects from the exit of the United Kingdom ("UK") from the European Union ("EU");

•changes in federal, state, local or international laws or the interpretation of these laws, including tax, bankruptcy and collection laws;

•changes in the administrative practices of various bankruptcy courts;

•our inability to comply with existing and new regulations of the collection industry;

•investigations, reviews, or enforcement actions by governmental authorities, including the Consumer Financial Protection Bureau ("CFPB");

•our inability to comply with data privacy regulations such as the General Data Protection Regulation ("GDPR");

•adverse outcomes in pending litigation or administrative proceedings;

•our inability to retain, expand, renegotiate or replace our credit facilities and our ability to comply with the covenants under our financing arrangements;

•our inability to manage effectively our capital and liquidity needs, including as a result of changes in credit or capital markets;

•changes in interest or exchange rates;

•default by or failure of one or more of our counterparty financial institutions;

•uncertainty about the future of the London Inter-Bank Offer Rate;

•disruptions of business operations caused by cybersecurity incidents or the underperformance or failure of information technology infrastructure, networks or communication systems; and

•the "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Form 10-K") and in other filings with the Securities and Exchange Commission.

You should assume that the information appearing in this Quarterly Report is accurate only as of the date it was issued. Our business, financial condition, results of operations and prospects may have changed since that date. Except as required by law, we assume no obligation to publicly update or revise our forward-looking statements after the date of this Quarterly Report and you should not expect us to do so.

Frequently Used Terms

We may use the following terminology throughout this Quarterly Report:

•"Buybacks" refers to purchase price refunded by the seller due to the return of ineligible accounts.

•"Cash collections" refers to collections on our owned finance receivables portfolios.

•"Cash receipts" refers to cash collections on our owned finance receivables portfolios plus fee income.

•"Change in expected recoveries" refers to the differences of actual recoveries received when compared to expected recoveries and the net present value of changes in estimated remaining collections.

•"Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status upon acquisition. These accounts are aggregated separately from insolvency accounts.

•"Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our finance receivables portfolios.

•"Insolvency" accounts or portfolios refer to accounts or portfolios of receivables that are in an insolvent status when we purchase them and as such are purchased as a pool of insolvent accounts. These accounts include Individual Voluntary Arrangements ("IVAs"), Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK.

•"Negative Allowance" refers to the present value of cash flows expected to be collected on our finance receivables, carried as an asset on the balance sheet.

•"Portfolio acquisitions" refers to all portfolios added as a result of a purchase, but also includes portfolios added as a result of a business acquisition.

•"Portfolio purchases" refers to all portfolios purchased in the normal course of business and excludes those added as a result of business acquisitions.

•"Portfolio income" reflects revenue recorded due to the passage of time using the effective interest rate calculated based on the purchase price of portfolios and estimated remaining collections.

•"Purchase price" refers to the cash paid to a seller to acquire nonperforming loans.

•"Purchase price multiple" refers to the total estimated collections (as defined below) on owned finance receivables portfolios divided by purchase price.

•"Recoveries" refers to cash collections plus buybacks and other adjustments.

•"Total estimated collections" or "TEC" refers to actual cash collections plus estimated remaining collections on our finance receivables portfolios.

Overview

We are a global financial and business services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.

We are headquartered in Norfolk, Virginia, and as of September 30, 2021, employed 3,521 full time equivalents. Our shares of common stock are traded on the NASDAQ Global Select Market under the symbol "PRAA."

COVID-19

We continue to monitor developments related to the COVID-19 pandemic, including the lifting or easing of restrictions in certain markets in which we operate and the emergence of variant strains of COVID-19. We also continue to evaluate the impact of COVID-19 on our operations by monitoring key data and information, including (1) changes in laws, regulations and governmental actions, (2) trends in the macroeconomic environment, consumer behavior and key operational metrics such as cash collections and (3) conditions in the nonperforming loan market. To date, we have been able to mitigate the effects of the COVID-19 pandemic on our overall operations. Since the start of the pandemic and the developments that accompanied it, we have continued to experience overperformance in our cash collections and incur lower legal collection costs. However, we cannot predict the full extent to which COVID-19 will impact our business, results of operations and financial condition due to numerous evolving factors associated with the pandemic. See Part I, Item 1A "Risk Factors"of our 2020 Form 10-K.

Results of Operations

The results of operations include the financial results of the Company and all of our subsidiaries. The following table sets forth Consolidated Income Statement amounts as a percentage of Total revenues for the periods indicated (dollars in thousands):


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2021				2020				2021				2020
Revenues:
Portfolio income	$	212,905	80.7	%	$	240,250	89.7	%	$	663,714	79.1	%	$	750,556	94.8	%
Changes in expected recoveries	43,820		16.6		25,403		9.5		157,504		18.8		32,388		4.1
Total portfolio revenue	256,725		97.3		265,653		99.2		821,218		97.9		782,944		98.9
Fee income	6,209		2.4		1,978		0.7		10,843		1.3		6,826		0.9
Other revenue	764		0.3		233		0.1		6,735		0.8		1,788		0.2
Total revenues	263,698		100.0		267,864		100.0		838,796		100.0		791,558		100.0

Operating expenses:
Compensation and employee services	74,584		28.3		71,974		26.9		228,200		27.2		217,617		27.5
Legal collection fees	10,993		4.2		13,661		5.1		36,208		4.3		41,975		5.3
Legal collection costs	21,450		8.1		26,043		9.7		61,231		7.3		79,997		10.1
Agency fees	15,646		5.9		14,900		5.6		47,145		5.6		38,619		4.9
Outside fees and services	29,434		11.2		22,719		8.4		71,167		8.5		60,796		7.7
Communication	9,782		3.7		9,379		3.5		33,039		3.9		31,702		4.0
Rent and occupancy	4,571		1.7		4,460		1.7		13,694		1.6		13,415		1.7
Depreciation and amortization	3,724		1.4		4,301		1.6		11,520		1.4		12,494		1.6
Other operating expenses	15,935		6.1		11,761		4.4		44,045		5.3		34,457		4.3

Total operating expenses	186,119		70.6		179,198		66.9		546,249		65.1		531,072		67.1

Income from operations	77,579		29.4		88,666		33.1		292,547		34.9		260,486		32.9
Other income and (expense):

Interest expense, net	(29,599)		(11.3)		(33,692)		(12.5)		(91,987)		(11.0)		(106,319)		(13.4)
Foreign exchange gain	1,232		0.5		61		—		127		—		3,027		0.4
Other	85		—		291		0.1		294		—		(1,367)		(0.2)
Income before income taxes	49,297		18.6		55,326		20.7		200,981		23.9		155,827		19.7
Income tax expense	12,627		4.7		7,497		2.8		41,870		5.0		24,734		3.1
Net income	36,670		13.9		47,829		17.9		159,111		18.9		131,093		16.6
Adjustment for net income attributable to noncontrolling interests	2,190		0.8		5,337		2.0		10,229		1.2		11,552		1.5
Net income attributable to PRA Group, Inc.	$	34,480	13.1	%	$	42,492	15.9	%	$	148,882	17.7	%	$	119,541	15.1	%

Three Months Ended September 30, 2021 Compared To Three Months Ended September 30, 2020

Cash Collections

Cash collections for the periods indicated were as follows (amounts in thousands):


	For the Three Months Ended September 30,
	2021		2020		Change
Americas and Australia Core	$	276,691	$	336,322	$	(59,631)
Americas Insolvency	37,464		37,344		120
Europe Core	151,625		131,702		19,923
Europe Insolvency	22,574		13,971		8,603
Total cash collections	$	488,354	$	519,339	$	(30,985)

Cash collections adjusted (1)	$	488,354	$	526,413	$	(38,059)

(1) Cash collections adjusted refers to 2020 cash collections remeasured using 2021 exchange rates.

Cash collections were $488.4 million for the three months ended September 30, 2021, a decrease of $31.0 million, or 6.0%, compared to $519.3 million for the three months ended September 30, 2020. The decrease was primarily due to lower cash collections of $35.1 million, or 17.1%, in U.S. call center and other collections, which we believe was mainly due to the impact of government programs in response to the COVID-19 pandemic in 2020 and lower purchasing. Additionally, U.S. legal collections decreased $17.5 million, or 18.6%, mainly due to a lower volume of accounts in the legal channel. Other Americas and Australia Core cash collections decreased $7.0 million, or 19.0%, reflecting the impact of expiration of certain government programs in response to the COVID-19 pandemic in 2020 and the runoff of older portfolios. These decreases were partially offset by an increase of $28.5 million, or 19.6%, in Europe cash collections reflecting the impact from significant levels of portfolio purchases in the last few years.

Revenues

A summary of our revenue generation during the three months ended September 30, 2021 and 2020 is as follows (amounts in thousands):


	For the Three Months Ended September 30,
	2021		2020		Change
Portfolio income	$	212,905	$	240,250	$	(27,345)
Changes in expected recoveries	43,820		25,403		18,417


Total portfolio revenue	256,725		265,653		(8,928)
Fee income	6,209		1,978		4,231
Other revenue	764		233		531
Total revenues	$	263,698	$	267,864	$	(4,166)

Total Portfolio Revenue

Total portfolio revenue was $256.7 million for the three months ended September 30, 2021, a decrease of $9.0 million, or 3.4%, compared to $265.7 million for the three months ended September 30, 2020. The decrease reflects reduced portfolio income due to the combination of our acceleration assumption and lower purchasing. This was offset by current quarter overperformance and the net impact of forecast adjustments. We assumed that the majority of the current quarter cash overperformance was acceleration of future collections and made adjustments in some geographies to increase near term expected collections, bringing them in line with recent performance and trends in collections, with the corresponding reductions later in the forecast period.

Fee Income

Fee income was $6.2 million for the three months ended September 30, 2021, an increase of $4.2 million, or 210.0%, compared to $2.0 million for the three months ended September 30, 2020. The increase is primarily attributable to settlement timing in our claims processing company, Claims Compensation Bureau ("CCB").

Operating Expenses

Total operating expenses were $186.1 million for the three months ended September 30, 2021, an increase of $6.9 million, or 3.9%, compared to $179.2 million for the three months ended September 30, 2020.

Compensation and Employee Services

Compensation and employee services expenses were $74.6 million for the three months ended September 30, 2021, an increase of $2.6 million, or 3.6%, compared to $72.0 million for the three months ended September 30, 2020. The increase was primarily attributable to a change in benefits, additional costs associated with higher headcount in Europe and increased stock based compensation expense. The increases were partially offset by a reduction in headcount in the U.S. call centers and the timing of performance based compensation accruals. Total full-time equivalents decreased to 3,521 as of September 30, 2021, from 3,811 as of September 30, 2020 as higher headcount in Europe was more than offset by a reduction in the U.S. call center workforce.

Legal Collection Fees

Legal collection fees represent contingent fees incurred for the cash collections generated by our independent third-party attorney network. Legal collection fees were $11.0 million for the three months ended September 30, 2021, a decrease of $2.7 million, or 19.7%, compared to $13.7 million for the three months ended September 30, 2020. The decrease was mainly due to lower external legal cash collections in the U.S.

Legal Collection Costs

Legal collection costs primarily consist of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. Legal collection costs were $21.5 million for the three months ended September 30, 2021, a decrease of $4.5 million, or 17.3%, compared to $26.0 million for the three months ended September 30, 2020. The decrease was primarily due to lower levels of accounts placed in the legal channel in the U.S. and the catch up of backlog in the third quarter of 2020 due to our voluntary decision to temporarily pause moving accounts into the legal eligible status during the first half of 2020. The decrease was offset by a return to more normalized levels of accounts placed in the legal channel in Europe compared to muted levels in 2020 from the impact of the COVID-19 pandemic.

Agency Fees

Agency fees primarily represent third-party collection fees. Agency fees were $15.6 million for the three months ended September 30, 2021, compared to $14.9 million for the three months ended September 30, 2020.

Outside Fees and Services

Outside fees and services expenses were $29.4 million for the three months ended September 30, 2021, an increase of $6.7 million, or 29.5%, compared to $22.7 million for the three months ended September 30, 2020 mainly due to higher legal expenses.

Other

Other expenses were $15.9 million for the three months ended September 30, 2021, an increase of $4.1 million, or 34.7%, compared to $11.8 million for the three months ended September 30, 2020. The increase was primarily driven by investments in digital operations and data and analytics.

Interest Expense, Net

Interest expense, net was $29.6 million during the three months ended September 30, 2021, a decrease of $4.1 million, or 12.2%, compared to $33.7 million for the three months ended September 30, 2020, primarily reflecting lower levels of average outstanding borrowings on our debt obligations and the 2021 change in accounting related to our convertible notes (see Note 2 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report for further information).

Interest expense, net consisted of the following for the three months ended September 30, 2021 and 2020 (amounts in thousands):


	For the Three Months Ended September 30,
	2021		2020		Change
Interest on debt obligations and unused line fees	$	18,541	$	25,282	$	(6,741)
Interest on senior notes	5,920		—		5,920
Coupon interest on convertible notes	3,019		3,695		(676)
Amortization of convertible notes discount	—		2,388		(2,388)
Amortization of loan fees and other loan costs	2,406		2,476		(70)
Interest income	(287)		(149)		(138)
Interest expense, net	$	29,599	$	33,692	$	(4,093)

Foreign Currency Exchange Gain

Foreign currency exchange gains were $1.2 million for the three months ended September 30, 2021, compared to foreign currency exchange gains of $0.1 million for the three months ended September 30, 2020. In any given period, we may incur foreign currency exchange gains or losses from transactions in currencies other than the functional currency.

Income Tax Expense

Income tax expense was $12.6 million for the three months ended September 30, 2021, an increase of $5.1 million, or 68.0%, compared to $7.5 million for the three months ended September 30, 2020. During the three months ended September 30, 2021, our effective tax rate was 25.6%, compared to 13.6% for the three months ended September 30, 2020. The increases in income tax expense and our effective tax rate were primarily due to changes in statutory foreign tax rates and mix of income between countries of operation partially offset by a reduction in income before taxes, which decreased $6.0 million, or 10.8%.

Nine Months Ended September 30, 2021 Compared To Nine Months Ended September 30, 2020

Cash Collections

Cash collections for the periods indicated were as follows (amounts in thousands):


	For the Nine Months Ended September 30,
	2021		2020		Change
Americas and Australia Core	$	949,174	$	985,371	$	(36,197)
Americas Insolvency	110,485		119,239		(8,754)
Europe Core	458,748		378,187		80,561
Europe Insolvency	69,663		41,055		28,608
Total cash collections	$	1,588,070	$	1,523,852	$	64,218

Cash collections adjusted (1)	$	1,588,070	$	1,555,240	$	32,830

(1) Cash collections adjusted refers to 2020 cash collections remeasured using 2021 exchange rates.

Cash collections were $1,588.1 million for the nine months ended September 30, 2021, an increase of $64.2 million, or 4.2%, compared to $1,523.9 million for the nine months ended September 30, 2020. The increase was largely due to increased cash collections in Europe of $109.2 million, or 26.0%, primarily reflecting the impact from significant levels of portfolio purchases in the last few years. This increase was partially offset by a decrease of $37.1 million, or 12.6%, in U.S. legal cash collections reflecting a lower volume of accounts in the legal channel. Additionally, cash collections in Americas Insolvency decreased $8.8 million, or 7.3%, primarily due to the runoff of older portfolios. Cash collections in our U.S. call center and other collections, including higher levels of collections through our digital platform, remained relatively flat as the level of cash collections began to normalize compared to elevated levels from the impact of government programs in response to the COVID-19 pandemic in 2020.

Revenues

A summary of our revenue generation during the nine months ended September 30, 2021 and 2020 is as follows (amounts in thousands):


	For the Nine Months Ended September 30,
	2021		2020		Change
Portfolio income	$	663,714	$	750,556	$	(86,842)
Changes in expected recoveries	157,504		32,388		125,116
Total portfolio revenue	821,218		782,944		38,274
Fee income	10,843		6,826		4,017
Other revenue	6,735		1,788		4,947
Total revenues	$	838,796	$	791,558	$	47,238

Total Portfolio Revenue

Total portfolio revenue was $821.2 million for nine months ended September 30, 2021, an increase of $38.3 million, or 4.9%, compared to $782.9 million for the nine months ended September 30, 2020. The increase reflects cash overperformance partially offset by the net impact of forecast adjustments. We assumed that the majority of the cash overperformance was acceleration of future collections and made adjustments in some geographies to increase near term expected collections, bringing them in line with recent performance and trends in collections, with the corresponding reductions later in the forecast period.

Fee Income

Fee income was $10.8 million for nine months ended September 30, 2021, an increase of $4.0 million, or 58.8%, compared to $6.8 million for the nine months ended September 30, 2020. The increase is primarily attributable to settlement timing in our claims processing company, CCB.

Other Revenue

Other revenue was $6.7 million for the nine months ended September 30, 2021, an increase of $4.9 million compared to $1.8 million for the nine months ended September 30, 2020 reflecting a gain on sale from certain other assets during the first quarter of 2021.

Operating Expenses

Operating expenses were $546.2 million for the nine months ended September 30, 2021, an increase of $15.1 million, or 2.8%, compared to $531.1 million for the nine months ended September 30, 2020.

Compensation and Employee Services

Compensation and employee services expenses were $228.2 million for the nine months ended September 30, 2021, an increase of $10.6 million, or 4.9%, compared to $217.6 million for the nine months ended September 30, 2020. The increase was primarily attributable to higher costs associated with additional headcount in Europe, unfavorable foreign exchange rates, higher medical benefits and increased stock based compensation expense partially offset by lower average headcount in the U.S. call center workforce.

Legal Collection Fees

Legal collection fees were $36.2 million for the nine months ended September 30, 2021, a decrease of $5.8 million or 13.8%, compared to $42.0 million for the nine months ended September 30, 2020. The decrease was mainly due to lower external legal cash collections in the U.S.

Legal Collection Costs

Legal collection costs were $61.2 million for the nine months ended September 30, 2021, a decrease of $18.8 million, or 23.5%, compared to $80.0 million for the nine months ended September 30, 2020. The decrease was primarily due to lower levels of accounts placed into the legal channel in the U.S., primarily reflecting a shift in collections from the legal channel to our call centers and digital platforms. This decrease was partially offset by a return to more normalized levels of accounts placed in the legal channel in Europe compared to muted levels in 2020 from the impact of the COVID-19 pandemic.

Agency Fees

Agency fees were $47.1 million for the nine months ended September 30, 2021, an increase of $8.5 million, or 22.0%, compared to $38.6 million for the nine months ended September 30, 2020 primarily reflecting an increase in agency fees outside of the U.S. in the first half of the year.

Outside Fees and Services

Outside fees and services expenses were $71.2 million for the nine months ended September 30, 2021, an increase of $10.4 million, or 17.1%, compared to $60.8 million for the nine months ended September 30, 2020 primarily due to higher legal expenses.

Other

Other expenses were $44.0 million for the nine months ended September 30, 2021, an increase of $9.5 million, or 27.5%, compared to $34.5 million for the nine months ended September 30, 2020. The increase was primarily driven by investments in digital operations and data and analytics.

Interest Expense, Net

Interest expense, net was $92.0 million for the nine months ended September 30, 2021, a decrease of $14.3 million, or 13.5%, compared to $106.3 million for the nine months ended September 30, 2020 primarily due to lower levels of average outstanding borrowings under our debt obligations and the 2021 change in accounting related to our convertible notes (see Note 2 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report for further information).

Interest expense, net consisted of the following for the nine months ended September 30, 2021 and 2020 (amounts in thousands):


	For the Nine Months Ended September 30,
	2021		2020		Change
Interest on debt obligations and unused line fees	$	59,645	$	76,345	$	(16,700)
Interest on senior notes	16,982		—		16,982
Coupon interest on convertible notes	9,057		14,045		(4,988)
Amortization of convertible notes discount	—		8,852		(8,852)
Amortization of loan fees and other loan costs	7,053		7,859		(806)
Interest income	(750)		(782)		32
Interest expense, net	$	91,987	$	106,319	$	(14,332)

Foreign Currency Exchange Gain

Foreign currency exchange gains were $0.1 million for the nine months ended September 30, 2021, compared to foreign currency exchange gains of $3.0 million for the nine months ended September 30, 2020. In any given period, we may incur foreign currency exchange gains or losses from transactions in currencies other than the functional currency.

Income Tax Expense

Income tax expense was $41.9 million for the nine months ended September 30, 2021, an increase of $17.2 million, or 69.6%, compared to $24.7 million for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, our effective tax rate was 20.8%, compared to 15.9% for the nine months ended September 30, 2020. The increases in income tax expense and our effective tax rate were primarily due to higher income before taxes, which increased $45.2 million, or 29.0%, and a change in the mix of income between countries of operation. These increases were partially offset by changes in statutory foreign tax rates.

Supplemental Performance Data

Finance Receivables Portfolio Performance

We purchase nonperforming loans from a variety of credit originators and segregate them into two main portfolio segments: Core or Insolvency, based on the status of the account upon acquisition. In addition, the accounts are further segregated into geographical regions based upon where the account was purchased. The accounts represented in the Insolvency tables below are those portfolios of accounts that were in an insolvency status at the time of purchase. This contrasts with accounts in our Core portfolios that file for bankruptcy/insolvency protection after we purchase them, which continue to be tracked in their corresponding Core portfolio. Core customers sometimes file for bankruptcy/insolvency protection subsequent to our purchase of the related Core portfolio. When this occurs, we adjust our collection practices to comply with bankruptcy/insolvency rules and procedures; however, for accounting purposes, these accounts remain in the original Core pool. Insolvency accounts may be dismissed voluntarily or involuntarily subsequent to our purchase of the Insolvency portfolio. Dismissal occurs when the terms of the bankruptcy are not met by the petitioner. When this occurs, we are typically free to pursue collection outside of bankruptcy procedures; however, for accounting purposes, these accounts remain in the original Insolvency pool.

Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, age of the receivables acquired, and changes in our operational efficiency. For example, increased pricing competition during the 2005 to 2008 period negatively impacted purchase price multiples of our Core portfolio compared to prior years. Conversely, during the 2009 to 2011 period, additional supply occurred as a result of the economic downturn. This created unique and advantageous purchasing opportunities, particularly within the Insolvency market, relative to the prior four years. Purchase price multiples can also vary among types of finance receivables. For example, we generally incur lower collection costs on our Insolvency portfolio compared with our Core portfolio. This allows us, in general, to pay more for an Insolvency portfolio and experience lower purchase price multiples, while generating similar net income margins when compared with a Core portfolio.

When competition increases and/or supply decreases, pricing often becomes negatively impacted relative to expected collections, and yields tend to trend lower. The opposite tends to occur when competition decreases and/or supply increases.

Within a given portfolio type, to the extent that lower purchase price multiples are the result of more competitive pricing and lower net yields, this will generally lead to lower profitability. As portfolio pricing becomes more favorable on a relative basis, our profitability will tend to increase. Profitability within given Core portfolio types may also be impacted by the age and quality of the receivables, which impact the cost to collect those accounts. Fresher accounts, for example, typically carry lower associated collection expenses, while older accounts and lower balance accounts typically carry higher costs and, as a result, require higher purchase price multiples to achieve the same net profitability as fresher paper.

Revenue recognition under Accounting Standards Codification ("ASC") Topic 326 "Financial Instruments-Credit Losses" ("ASC 326") is driven by estimates of the amount and timing of collections. We record new portfolio acquisitions at the purchase price which reflects the amount we expect to collect discounted at an effective interest rate. During the year of acquisition, the annual pool is aggregated and the blended effective interest rate will change to reflect new buying and new cash flow estimates until the end of the year. At that time, the effective interest rate is fixed at the amount we expect to collect discounted at the rate to equate purchase price to the recovery estimate. During the first year of purchase, we typically do not allow purchase price multiples to expand. Subsequent to the initial year, as we gain collection experience and confidence with a pool of accounts, we regularly update ERC. As a result, our estimate of total collections has often increased as pools have aged. These processes have tended to cause the ratio of ERC to purchase price for any given year of buying to gradually increase over time. Thus, all factors being equal in terms of pricing, one would typically tend to see a higher collection to purchase price ratio from a pool of accounts that was six years from acquisition than a pool that was just two years from acquisition.

The numbers presented in the following tables represent gross cash collections and do not reflect any costs to collect; therefore, they may not represent relative profitability. Due to all the factors described above, readers should be cautious when making comparisons of purchase price multiples among periods and between types of receivables.


Purchase Price Multiples as of September 30, 2021 Amounts in thousands
Purchase Period	Purchase Price (1)(2)		Total Estimated Collections (3)		Estimated Remaining Collections (4)		Current Purchase Price Multiple	Original Purchase Price Multiple(5)
Americas and Australia Core
1996-2010	$	1,078,219	$	3,400,695	$	20,886	315%	240%
2011	209,602		719,844		12,296		343%	245%
2012	254,076		652,359		13,851		257%	226%
2013	390,826		894,134		21,565		229%	211%
2014	404,117		859,487		34,155		213%	204%
2015	443,114		908,490		84,319		205%	205%
2016	455,767		1,112,953		174,608		244%	201%
2017	532,851		1,214,479		263,966		228%	193%
2018	653,975		1,396,690		350,509		214%	202%
2019	581,476		1,249,471		487,764		215%	206%
2020	435,668		931,651		572,004		214%	213%
2021	347,641		672,752		624,805		194%	194%
Subtotal	5,787,332		14,013,005		2,660,728
Americas Insolvency
1996-2010	606,395		1,382,652		604		228%	180%
2011	180,432		370,146		370		205%	155%
2012	251,395		392,933		94		156%	136%
2013	227,834		355,191		453		156%	133%
2014	148,420		219,081		1,760		148%	124%
2015	63,170		87,229		418		138%	125%
2016	91,442		117,105		2,878		128%	123%
2017	275,257		350,845		30,193		127%	125%
2018	97,879		131,527		42,766		134%	127%
2019	123,077		159,298		86,020		129%	128%
2020	62,130		85,128		67,104		137%	136%
2021	34,003		47,105		45,525		139%	139%
Subtotal	2,161,434		3,698,240		278,185
Total Americas and Australia	7,948,766		17,711,245		2,938,913
Europe Core
2012	20,409		42,267		—		207%	187%
2013	20,334		26,084		—		128%	119%
2014	773,811		2,240,031		502,932		289%	208%
2015	411,340		723,559		218,870		176%	160%
2016	333,090		561,613		256,468		169%	167%
2017	252,174		353,381		162,591		140%	144%
2018	341,775		527,899		304,855		154%	148%
2019	518,610		775,332		515,554		150%	152%
2020	324,119		554,041		433,847		171%	172%
2021	353,539		599,818		577,137		170%	170%
Subtotal	3,349,201		6,404,025		2,972,254
Europe Insolvency
2014	10,876		18,297		46		168%	129%
2015	18,973		29,009		1,157		153%	139%
2016	39,338		56,850		5,593		145%	130%
2017	39,235		49,180		12,650		125%	128%
2018	44,908		51,977		25,606		116%	123%
2019	77,218		102,011		58,984		132%	130%
2020	105,440		135,893		102,428		129%	129%
2021	23,485		29,676		27,003		126%	126%
Subtotal	359,473		472,893		233,467
Total Europe	3,708,674		6,876,918		3,205,721
Total PRA Group	$	11,657,440	$	24,588,163	$	6,144,634

(1)Includes the acquisition date finance receivables portfolios that were acquired through our business acquisitions.

(2)For our non-U.S. amounts, purchase price is presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the portfolio are presented at the year-end exchange rate for the respective year of purchase.

(3)For our non-U.S. amounts, TEC is presented at the year-end exchange rate for the respective year of purchase.

(4)For our non-U.S. amounts, ERC is presented at the September 30, 2021 exchange rate.

(5)The Original Purchase Price Multiple represents the purchase price multiple at the end of the year of acquisition.


Portfolio Financial Information Year-to-date as of September 30, 2021 Amounts in thousands
Purchase Period	Cash Collections (1)		Portfolio Income (1)		Changes in Expected Recoveries (1)		Total Portfolio Revenue (1)		Net Finance Receivables as of September 30, 2021 (2)
Americas and Australia Core
1996-2010	$	10,168	$	6,227	$	2,465	$	8,692	$	4,657
2011	6,086		3,717		1,223		4,940		1,995
2012	7,061		3,290		1,387		4,677		4,375
2013	12,948		6,289		(1,772)		4,517		7,857
2014	17,717		8,350		(3,773)		4,577		12,105
2015	28,449		15,707		(9,526)		6,181		33,589
2016	60,990		32,106		(115)		31,991		63,980
2017	105,643		48,701		10,228		58,929		118,667
2018	193,699		66,584		31,149		97,733		189,064
2019	232,297		92,750		26,418		119,168		265,681
2020	226,068		97,175		52,411		149,586		322,912
2021	48,048		33,002		(183)		32,819		331,622
Subtotal	949,174		413,898		109,912		523,810		1,356,504
Americas Insolvency
1996-2010	471		501		(15)		486		—
2011	162		196		(33)		163		—
2012	489		161		340		501		—
2013	647		379		268		647		—
2014	881		856		(32)		824		156
2015	1,046		471		(85)		386		238
2016	6,543		1,137		230		1,367		2,247
2017	34,514		6,501		2,351		8,852		26,108
2018	24,111		4,768		1,079		5,847		37,385
2019	28,538		6,855		(1,017)		5,838		74,558
2020	11,501		5,533		903		6,436		52,559
2021	1,582		1,448		229		1,677		33,916
Subtotal	110,485		28,806		4,218		33,024		227,167
Total Americas and Australia	1,059,659		442,704		114,130		556,834		1,583,671
Europe Core
2012	901		—		901		901		—
2013	532		—		533		533		—
2014	113,726		73,152		21,097		94,249		142,909
2015	39,404		20,653		(8,937)		11,716		112,919
2016	35,457		18,422		(1,387)		17,035		149,054
2017	27,247		9,083		(2,960)		6,123		111,143
2018	53,130		18,174		5,817		23,991		201,056
2019	93,839		28,871		9,890		38,761		347,599
2020	71,264		27,566		10,664		38,230		263,916
2021	23,248		8,152		3,645		11,797		342,204
Subtotal	458,748		204,073		39,263		243,336		1,670,800
Europe Insolvency
2014	242		97		76		173		21
2015	1,342		544		43		587		853
2016	4,783		1,388		226		1,614		4,301
2017	7,236		1,056		249		1,305		11,426
2018	8,846		1,750		(748)		1,002		22,699
2019	18,390		4,353		1,070		5,423		49,581
2020	26,073		6,845		2,045		8,890		84,688
2021	2,751		904		1,150		2,054		21,899
Subtotal	69,663		16,937		4,111		21,048		195,468
Total Europe	528,411		221,010		43,374		264,384		1,866,268
Total PRA Group	$	1,588,070	$	663,714	$	157,504	$	821,218	$	3,449,939

(1)For our non-U.S. amounts, amounts are presented using the average exchange rates during the current reporting period.

(2)For our non-U.S. amounts, Net Finance Receivables are presented at the September 30, 2021 exchange rate.

The following table, which excludes any proceeds from cash sales of finance receivables, illustrates historical cash collections, by year, on our portfolios.


Cash Collections by Year, By Year of Purchase (1) as of September 30, 2021 Amounts in millions
			Cash Collections
Purchase Period	Purchase Price (2)(3)		1996-2010		2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		Total
Americas and Australia Core
1996-2010	$	1,078.2	$	1,990.5	$	367.1	$	311.5	$	228.4	$	157.7	$	109.3	$	70.2	$	46.0	$	34.4	$	28.4	$	18.8	$	10.2	$	3,372.5
2011	209.6		—		62.0		174.5		152.9		108.5		73.8		48.7		32.0		21.6		16.6		10.9		6.1		707.6
2012	254.1		—		—		56.9		173.6		146.2		97.3		60.0		40.0		27.8		17.9		11.8		7.1		638.6
2013	390.8		—		—		—		101.6		247.8		194.0		120.8		78.9		56.4		36.9		23.2		12.9		872.5
2014	404.1		—		—		—		—		92.7		253.4		170.3		114.2		82.2		55.3		31.9		17.7		817.7
2015	443.1		—		—		—		—		—		117.0		228.4		185.9		126.6		83.6		57.2		28.4		827.1
2016	455.8		—		—		—		—		—		—		138.7		256.5		194.6		140.6		105.9		61.0		897.3
2017	532.9		—		—		—		—		—		—		—		107.3		278.7		256.5		192.5		105.6		940.6
2018	654.0		—		—		—		—		—		—		—		—		122.7		361.9		337.7		193.7		1,016.0
2019	581.5		—		—		—		—		—		—		—		—		—		143.8		349.0		232.3		725.1
2020	435.7		—		—		—		—		—		—		—		—		—		—		133.0		226.1		359.1
2021	347.6		—		—		—		—		—		—		—		—		—		—		—		48.1		48.1
Subtotal	5,787.4		1,990.5		429.1		542.9		656.5		752.9		844.8		837.1		860.8		945.0		1,141.5		1,271.9		949.2		11,222.2
Americas Insolvency
1996-2010	606.4		390.9		261.2		270.4		231.0		158.9		51.2		8.6		4.6		2.5		1.4		0.8		0.5		1,382.0
2011	180.4		—		15.2		66.4		82.8		85.8		76.9		36.0		3.7		1.6		0.7		0.5		0.2		369.8
2012	251.4		—		—		17.4		103.6		94.1		80.1		60.7		29.3		4.3		1.9		0.9		0.5		392.8
2013	227.8		—		—		—		52.5		82.6		81.7		63.4		47.8		21.9		2.9		1.3		0.6		354.7
2014	148.4		—		—		—		—		37.0		50.9		44.3		37.4		28.8		15.8		2.2		0.9		217.3
2015	63.2		—		—		—		—		—		3.4		17.9		20.1		19.8		16.7		7.9		1.0		86.8
2016	91.4		—		—		—		—		—		—		18.9		30.4		25.0		19.9		14.4		6.5		115.1
2017	275.3		—		—		—		—		—		—		—		49.1		97.3		80.9		58.8		34.5		320.6
2018	97.9		—		—		—		—		—		—		—		—		6.7		27.4		30.5		24.1		88.7
2019	123.1		—		—		—		—		—		—		—		—		—		13.3		31.4		28.5		73.2
2020	62.1		—		—		—		—		—		—		—		—		—		—		6.6		11.5		18.1
2021	34.0		—		—		—		—		—		—		—		—		—		—		—		1.7		1.7
Subtotal	2,161.4		390.9		276.4		354.2		469.9		458.4		344.2		249.8		222.4		207.9		180.9		155.3		110.5		3,420.8
Total Americas and Australia	7,948.8		2,381.4		705.5		897.1		1,126.4		1,211.3		1,189.0		1,086.9		1,083.2		1,152.9		1,322.4		1,427.2		1,059.7		14,643.0
Europe Core
2012	20.4		—		—		11.6		9.0		5.6		3.2		2.2		2.0		2.0		1.5		1.2		0.9		39.2
2013	20.3		—		—		—		7.1		8.5		2.3		1.3		1.2		1.3		0.9		0.7		0.5		23.8
2014	773.8		—		—		—		—		153.2		292.0		246.4		220.8		206.3		172.9		149.8		113.7		1,555.1
2015	411.3		—		—		—		—		—		45.8		100.3		86.2		80.9		66.1		54.3		39.4		473.0
2016	333.1		—		—		—		—		—		—		40.4		78.9		72.6		58.0		48.3		35.5		333.7
2017	252.2		—		—		—		—		—		—		—		17.9		56.0		44.1		36.1		27.2		181.3
2018	341.8		—		—		—		—		—		—		—		—		24.3		88.7		71.2		53.1		237.3
2019	518.6		—		—		—		—		—		—		—		—		—		47.9		125.7		93.8		267.4
2020	324.1		—		—		—		—		—		—		—		—		—		—		32.4		71.3		103.7
2021	353.6		—		—		—		—		—		—		—		—		—		—		—		23.3		23.3
Subtotal	3,349.2		—		—		11.6		16.1		167.3		343.3		390.6		407.0		443.4		480.1		519.7		458.7		3,237.8
Europe Insolvency
2014	10.9		—		—		—		—		—		4.3		3.9		3.2		2.6		1.5		0.8		0.2		16.5
2015	19.0		—		—		—		—		—		3.0		4.4		5.0		4.8		3.9		2.9		1.3		25.3
2016	39.3		—		—		—		—		—		—		6.2		12.7		12.9		10.7		7.9		4.8		55.2
2017	39.2		—		—		—		—		—		—		—		1.2		7.9		9.2		9.8		7.2		35.3
2018	44.9		—		—		—		—		—		—		—		—		0.6		8.4		10.3		8.8		28.1
2019	77.2		—		—		—		—		—		—		—		—		—		5.1		21.1		18.4		44.6
2020	105.4		—		—		—		—		—		—		—		—		—		—		6.1		26.1		32.2
2021	23.5		—		—		—		—		—		—		—		—		—		—		—		2.8		2.8
Subtotal	359.4		—		—		—		—		—		7.3		14.5		22.1		28.8		38.8		58.9		69.6		240.0
Total Europe	3,708.6		—		—		11.6		16.1		167.3		350.6		405.1		429.1		472.2		518.9		578.6		528.3		3,477.8
Total PRA Group	$	11,657.4	$	2,381.4	$	705.5	$	908.7	$	1,142.5	$	1,378.6	$	1,539.6	$	1,492.0	$	1,512.3	$	1,625.1	$	1,841.3	$	2,005.8	$	1,588.0	$	18,120.8

(1)For our non-U.S. amounts, cash collections are presented using the average exchange rates during the cash collection period.

(2)Includes the finance receivables portfolios that were acquired through our business acquisitions.

(3)For our non-U.S. amounts, purchase price is presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the year-end exchange rate for the respective year of purchase.

Estimated remaining collections

The following chart shows our ERC of $6,144.6 million at September 30, 2021 by geographical region (amounts in millions).

The following chart shows our ERC by year for the 12 month periods ending September 30 in each of the years represented below. The forecast amounts reflect our estimate at September 30, 2021 of how much we expect to collect on our portfolios. These estimates are translated to U.S. dollars at the September 30, 2021 exchange rate (amounts in millions).

Seasonality

Although 2021 and 2020 have deviated from usual seasonal patterns due to the impact of the COVID-19 pandemic, typically cash collections in the Americas tend to be higher in the first half of the year due to the high volume of income tax refunds received by individuals in the U.S., and trend lower as the year progresses. Customer payment patterns in all of the countries in which we operate can be affected by seasonal employment trends, income tax refunds, and holiday spending habits.

Cash Collections

The following table displays our quarterly cash collections by geography and portfolio type, for the periods indicated (amounts in thousands).


Cash Collections by Geography and Type
	2021						2020								2019
	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4
Americas and Australia Core	$	276,691	$	324,845	$	347,638	$	286,524	$	336,322	$	343,269	$	305,780	$	276,639
Americas Insolvency	37,464		37,768		35,253		36,048		37,344		38,685		43,210		40,801
Europe Core	151,625		157,637		149,486		141,471		131,702		115,145		131,340		126,649
Europe Insolvency	22,574		23,579		23,510		17,830		13,971		12,841		14,243		12,520
Total Cash Collections	$	488,354	$	543,829	$	555,887	$	481,873	$	519,339	$	509,940	$	494,573	$	456,609

The following table provides additional details on the composition of our Core cash collections for the periods indicated (amounts in thousands).


Cash Collections by Source - Core Portfolios Only
	2021						2020								2019
	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4
Call Center and Other Collections	$	298,717	$	338,022	$	355,043	$	296,865	$	325,898	$	319,236	$	288,596	$	262,570
External Legal Collections	54,445		61,836		65,613		58,481		68,861		70,310		75,699		70,867
Internal Legal Collections	75,154		82,624		76,468		72,649		73,265		68,868		72,825		69,851
Total Core Cash Collections	$	428,316	$	482,482	$	497,124	$	427,995	$	468,024	$	458,414	$	437,120	$	403,288

Collections Productivity (U.S. Portfolio)

The following tables displays a collections productivity measure for our U.S. Portfolios for the periods indicated.


Cash Collections per Collector Hour Paid U.S. Portfolio
	Call center and other cash collections (1)
	2021		2020		2019		2018		2017
First Quarter	$	279	$	172	$	139	$	121	$	161
Second Quarter	270		263		139		101		129
Third Quarter	242		246		124		107		125
Fourth Quarter	—		204		128		104		112

(1)Represents total cash collections less internal legal cash collections, external legal cash collections, and insolvency cash collections from trustee-administered accounts.

Cash Efficiency Ratio

The following table displays our cash efficiency for the periods indicated.


Cash Efficiency Ratio (1)
	2021	2020	2019
First Quarter	68.0%	61.5%	59.2%
Second Quarter	66.8	68.7	60.4
Third Quarter	62.4	65.6	60.2
Fourth Quarter	—	61.9	59.7
Full Year	—	64.5	59.9

(1) Calculated by dividing cash receipts less operating expenses by cash receipts.

Portfolio Acquisitions

The following graph shows the purchase price of our portfolios by year since 2011. It includes the acquisition date finance receivable portfolios that were acquired through our business acquisitions. The 2021 totals represent portfolio acquisitions through the nine months ended September 30, 2021 while the prior year totals are for the full year.

The following table displays our quarterly portfolio acquisitions for the periods indicated (amounts in thousands).


Portfolio Acquisitions by Geography and Type
	2021						2020								2019
	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4
Americas and Australia Core	$	162,451	$	98,901	$	88,912	$	67,460	$	84,139	$	110,474	$	172,697	$	118,153
Americas Insolvency	9,878		14,642		9,486		12,504		14,328		14,527		20,772		22,650
Europe Core	212,194		106,134		44,095		137,647		74,930		34,247		60,990		218,919
Europe Insolvency	7,424		—		16,468		72,171		4,203		5,251		18,778		42,613
Total Portfolio Acquisitions	$	391,947	$	219,677	$	158,961	$	289,782	$	177,600	$	164,499	$	273,237	$	402,335

Portfolio Acquisitions by Stratification (U.S. Only)

The following table categorizes our quarterly U.S. portfolio acquisitions for the periods indicated into major asset type and delinquency category. Since our inception in 1996, we have acquired more than 58 million customer accounts in the U.S (amounts in thousands).


U.S. Portfolio Acquisitions by Major Asset Type
	2021												2020
	Q3				Q2				Q1				Q4				Q3
Major Credit Cards	$	46,888	48.9	%	$	43,229	38.9	%	$	28,230	31.1	%	$	22,500	28.9	%	$	23,322	25.7	%
Private Label Credit Cards	42,249		44.1		52,475		47.3		50,180		55.4		48,335		62.1		60,331		66.5
Consumer Finance	6,081		6.3		12,555		11.3		11,861		13.1		5,978		7.6		6,333		7.0
Auto Related	668		0.7		2,741		2.5		381		0.4		1,081		1.4		680		0.8
Total	$	95,886	100.0	%	$	111,000	100.0	%	$	90,652	100.0	%	$	77,894	100.0	%	$	90,666	100.0	%


U.S. Portfolio Acquisitions by Delinquency Category
	2021												2020
	Q3				Q2				Q1				Q4				Q3
Fresh (1)	$	21,511	25.0	%	$	29,031	30.1	%	$	21,502	26.4	%	$	21,985	33.6	%	$	25,236	33.1	%
Primary (2)	560		0.7		431		0.4		1,360		1.7		1,002		1.5		5,187		6.8
Secondary (3)	62,382		72.5		58,459		60.7		50,546		62.1		41,164		63.0		44,534		58.3
Other (4)	1,555		1.8		8,437		8.8		8,050		9.8		1,239		1.9		1,381		1.8
Total Core	86,008		100.0	%	96,358		100.0	%	81,458		100.0	%	65,390		100.0	%	76,338		100.0	%
Insolvency	9,878		—		14,642				9,194				12,504				14,328
Total	$	95,886			$	111,000			$	90,652			$	77,894			$	90,666

(1)Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and are either being sold prior to any post-charge-off collection activity or placement with a third-party for the first time.

(2)Primary accounts are typically 360 to 450 days past due and charged-off and have been previously placed with one contingent fee servicer.

(3)Secondary accounts are typically more than 660 days past due and charged-off and have been placed with two contingent fee servicers.

(4)Other accounts are typically two to three years or more past due and charged-off and have previously been worked by three or more contingent fee servicers.

Non-GAAP Financial Measures

We report financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, management uses certain non-GAAP financial measures, including adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), to evaluate our operating and financial performance as well as to set performance goals. We present Adjusted EBITDA because we consider it an important supplemental measure of operations and financial performance. Management believes Adjusted EBITDA helps provide enhanced period-to-period comparability of operations and financial performance, as it excludes certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies.

Adjusted EBITDA is calculated starting with our GAAP financial measure, net income attributable to PRA Group, Inc. and is adjusted for:

•income tax expense (or less income tax benefit);

•foreign exchange loss (or less foreign exchange gain);

•interest expense, net (or less interest income, net);

•other expense (or less other income);

•depreciation and amortization;

•net income attributable to noncontrolling interests; and

•recoveries applied to negative allowance less changes in expected recoveries.

The following table is a reconciliation of net income, as reported in accordance with GAAP, to Adjusted EBITDA for the last 12 months ("LTM") as of September 30, 2021 and for the year ended December 31, 2020 (amounts in thousands):


Reconciliation of Non-GAAP Financial Measures
	LTM		For the Year Ended
	September 30, 2021		December 31, 2020
Net income attributable to PRA Group, Inc.	$	178,680	$	149,339
Adjustments:
Income tax expense	58,339		41,203
Foreign exchange losses/(gains)	895		(2,005)
Interest expense, net	127,380		141,712
Other expense (1)	(612)		1,049
Depreciation and amortization	17,491		18,465
Adjustment for net income attributable to noncontrolling interests	17,080		18,403

Recoveries applied to negative allowance less Changes in expected recoveries	993,192		968,362
Adjusted EBITDA	$	1,392,445	$	1,336,528

(1) Other expense reflects non-operating expenses.

Additionally, we evaluate our business using certain ratios that use Adjusted EBITDA, including Debt to Adjusted EBITDA, which is calculated by dividing borrowings by Adjusted EBITDA. The following table reflects our Debt to Adjusted EBITDA for the LTM as of September 30, 2021 and for the year ended December 31, 2020 (amounts in thousands):


Debt to Adjusted EBITDA
	LTM			For the Year Ended
	September 30, 2021			December 31, 2020
Borrowings	$	2,520,903		$	2,661,289
Adjusted EBITDA	$	1,392,445		$	1,336,528
Debt to Adjusted EBITDA	1.81		x	1.99		x

Liquidity and Capital Resources

We actively manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations. As of September 30, 2021, cash and cash equivalents totaled $56.5 million. Of the cash and cash equivalent balance as of September 30, 2021, $46.0 million consisted of cash on hand related to international operations with indefinitely reinvested earnings. See the "Undistributed Earnings of International Subsidiaries" section below for more information.

At September 30, 2021, we had the following borrowings outstanding and availability under our credit facilities (amounts in thousands):


	Outstanding		Available without Restrictions		Available with Restrictions (1)
Americas revolving credit (2)	$	120,850	$	959,372	$	414,399
European revolving credit	957,554		432,446		349,400
Term loan	462,500		—		—
Senior Notes	650,000		—		—
Convertible Notes	345,000		—		—
Less: Debt discounts and issuance costs	(15,001)		—		—
Total	$	2,520,903	$	1,391,818	$	763,799

(1) Available borrowings after calculation of current borrowing base and debt covenants.

(2) Includes North American revolving credit facility and Colombian revolving credit facility.

An additional funding source for our Europe operations is interest-bearing deposits. Per the terms of our European credit facility, we are permitted to obtain interest-bearing deposit funding of up to SEK 1.2 billion (approximately $136.7 million as of September 30, 2021). Interest-bearing deposits as of September 30, 2021 were $132.6 million.

We determined that we were in compliance with the covenants of our financing arrangements as of September 30, 2021.

We have the ability to slow the purchase of finance receivables if necessary, and use the net cash flow generated from our cash collections from our existing finance receivables to temporarily service our debt and fund existing operations.

Contractual obligations over the next year are primarily related to purchase commitments. As of September 30, 2021, we have forward flow commitments in place for the purchase of nonperforming loans with a maximum purchase price of $873.7 million, of which $871.8 million is due within the next 12 months. The $873.7 million is comprised of $323.1 million for the Americas and Australia and $550.6 million for Europe. We may also enter into new or renewed forward flow commitments and close on spot transactions in addition to the aforementioned forward flow agreements.

Additionally, of our $2.5 billion borrowings at September 30, 2021, estimated interest, unused fees and principal payments for the next 12 months are approximately $107.8 million, of which, $10.9 million relates to principal. Our principal payment obligations related to debt maturities occur within two to eight years as our European credit facility expires in February 2023, our convertible notes mature in June 2023, our senior notes mature in September 2025 and October 2029 and our North American revolving credit and term loan expire in July 2026.

On July 29, 2021, our Board of Directors approved a $150.0 million share repurchase program. Repurchases may be made from time-to-time in open market transactions, through privately negotiated transactions, through block transactions, or other methods subject to market and/or other conditions and applicable regulatory regulations. We expect to make repurchases using cash on hand and to retire shares repurchased. We are not obligated to repurchase any specified amount of shares and, at our discretion and subject to compliance with applicable laws, the repurchase program may be modified suspended or discontinued at any time. During the three months ended September 30, 2021, we repurchased 1,796,874 shares of our common stock for approximately $73.8 million. For more information, see Item 2 included in Part II of this Quarterly Report.

We believe that funds generated from operations and from cash collections on finance receivables, together with existing cash, available borrowings under our revolving credit facilities, and access to the capital markets will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases during the next 12 months. We may, however, seek to access the debt or equity capital markets as we deem appropriate, market conditions permitting. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing from other sources.

For more information, see Note 7 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

Cash Flows Analysis

The following table summarizes our cash flow activity for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 (amounts in thousands):


	Nine Months Ended September 30,
	2021		2020		Change
Net cash provided by (used in):
Operating activities	$	38,283	$	131,359	$	(93,076)
Investing activities	123,831		172,467		(48,636)
Financing activities	(216,662)		(305,866)		89,204
Effect of exchange rate on cash	(5,202)		(16,610)		11,408
Net decrease in cash and cash equivalents	$	(59,750)	$	(18,650)	$	(41,100)

Operating Activities

Cash provided by operating activities mainly reflects cash collections recognized as revenue partially offset by cash paid for operating expenses, interest and income taxes. Key drivers of operating activities were adjusted for (i) non-cash items included in net income such as provisions for unrealized gains and losses, changes in expected recoveries, depreciation and amortization, deferred taxes, fair value changes in equity securities, and stock-based compensation as well as (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.

Net cash provided by operating activities decreased $93.1 million during the nine months ended September 30, 2021, mainly driven by lower cash collections recognized as portfolio income, the impact of foreign currency transactions and higher cash paid for operating expenses partially offset by lower cash paid for income taxes.

Investing Activities

Cash provided by investing activities mainly reflects recoveries applied to our negative allowance. Cash used in investing activities mainly reflects purchases of nonperforming loans.

Cash provided by investing activities decreased $48.6 million during the nine months ended September 30, 2021, primarily driven by a $46.9 million increase in purchases of investments largely due to the purchase of additional government securities during the second quarter of 2021.

Financing Activities

Cash provided by financing activities is normally provided by draws on our lines of credit and proceeds from debt offerings. Cash used in financing activities is primarily driven by principal payments on our lines of credit and long-term debt.

Cash used in financing activities decreased $89.2 million during the nine months ended September 30, 2021 primarily driven by a $287.4 million payment on convertible notes in the third quarter of 2020 and an increase of $21.6 million in contributions from noncontrolling interests partially offset by a $148.9 million increase in net principal payments on lines of credit and $73.8 million of repurchases of our common stock.

Undistributed Earnings of International Subsidiaries

We intend to use predominantly all of our accumulated and future undistributed earnings of international subsidiaries to expand operations outside the U.S.; therefore, such undistributed earnings of international subsidiaries are considered to be indefinitely reinvested outside the U.S. Accordingly, no provision for income tax and withholding tax has been provided thereon. If management's intentions change and eligible undistributed earnings of international subsidiaries are repatriated, we could be subject to additional income taxes and withholding taxes. This could result in a higher effective tax rate in the period in which such a decision is made to repatriate accumulated or future undistributed international earnings. The amount of cash on hand related to international operations with indefinitely reinvested earnings was $46.0 million and $97.0 million as of September 30, 2021 and December 31, 2020, respectively. Refer to Note 12 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report for further information related to our income taxes and undistributed international earnings.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Recent Accounting Pronouncements

For a summary of recent accounting pronouncements and the anticipated effects on our Consolidated Financial Statements see Note 14 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements have been prepared in accordance with GAAP. Our significant accounting policies are discussed in Note 1 to our Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K. Our significant accounting policies are fundamental to understanding our results of operations and financial condition because they require that we use estimates, assumptions and judgments that affect the reported amounts of revenues, expenses, assets, and liabilities.

Three of these policies are considered to be critical because they are important to the portrayal of our financial condition and results, and because they require management to make judgments and estimates that are difficult, subjective, and complex regarding matters that are inherently uncertain.

We base our estimates on historical experience, current trends and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ significantly from actual results, the impact on our Consolidated Financial Statements may be material.

Management has reviewed these critical accounting policies with the Audit Committee of our Board of Directors.

Revenue Recognition - Finance Receivables

We account for the majority of our investment in finance receivables under the guidance of ASC 326. Revenue recognition for finance receivables involves the use of estimates and the exercise of judgment on the part of management. These estimates include projections of the quantity and timing of future cash flows and economic lives of our pools of finance receivables. Significant changes in such estimates could result in increased or decreased revenue as we immediately recognize the discounted value of such changes using the constant effective interest rate of the pool.

We account for our finance receivables as follows:

We create each annual accounting pool using our projections of estimated cash flows and expected economic life. We then compute a constant effective interest rate based on the net carrying amount of the pool and reasonable projections of estimated cash flows and expectation of its economic life. As actual cash flow results are received we record the time value of the expected cash as Portfolio income and over and under performance and changes in expected future cash flows from expected cash as Changes in expected recoveries. We review each pool watching for trends, actual performance versus projections and curve shape (a graphical depiction of the timing of cash flows). We then re-forecast future cash flows by applying discounted cash flow methodologies to our ERC and recognize income over the estimated life of the pool at the constant effective interest rate of the pool.

Significant judgment is used in evaluating expected recoveries using the discounted cash flow approach and the estimated life of the pool.

Valuation of Goodwill

In accordance with ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), we evaluate Goodwill for impairment annually and more frequently if indicators of potential impairment exist. Goodwill is reviewed for potential impairment at the reporting unit level.

Goodwill is evaluated for impairment either under the qualitative assessment option or using a quantitative forecast approach depending on facts and circumstances of a reporting unit, including the excess of fair value over carrying amount in the last valuation, changes in the business environment and changes of the reporting unit or its composition. If upon evaluation of the qualitative factors, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no impairment loss to record and a quantitative assessment is not required. If the carrying amount exceeds the

reporting unit’s fair value, then we are required to determine the reporting unit’s fair value and record as an impairment loss the amount the carrying value exceeds fair value, not to exceed the total amount of goodwill allocated to the respective reporting unit.

We determine the fair value of a reporting unit by applying the approaches prescribed under ASC Topic 820 "Fair Value Measurements and Disclosures": the income approach and the market approach. Depending on the availability of public data and suitable comparables, we may or may not use the market approach or we may emphasize the results from the approach differently. Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows and a residual terminal value. Cash flow projections are based on management's estimates of revenue growth rates, operating margins, necessary working capital and capital expenditure requirements, taking into consideration industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate fair value based on prices and other relevant market transactions involving comparable publicly-traded companies with operating and investment characteristics similar to the reporting unit.

Income Taxes

We are subject to income taxes throughout the U.S. and in numerous international jurisdictions. These tax laws are complex and are subject to different interpretations by the taxpayer and the relevant government taxing authorities. When determining our domestic and international income tax expense, we make judgments about the application of these inherently complex laws.

We follow the guidance of ASC Topic 740 "Income Taxes" ("ASC 740") as it relates to the provision for income taxes and uncertainty in income taxes. Accordingly, we record a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is estimated using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.

We exercise significant judgment in estimating the potential exposure to unresolved tax matters and apply a more-likely-than-not criteria approach for recording tax benefits related to uncertain tax positions in the application of the complex tax laws. While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters. We record interest and penalties related to unresolved tax matters as a component of income tax expense when the more-likely-than-not standards are met.

In the event that all or part of the deferred tax assets are determined not to be realizable in the future, we would establish a valuation allowance and charge to earnings the impact in the period such a determination is made. If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a positive adjustment to earnings. The establishment or release of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the use of loss carryforwards or other deferred tax assets in future periods. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our activities are subject to various financial risks, including market risk, currency and interest rate risk, credit risk, liquidity risk and cash flow risk. Our financial risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance. We may periodically enter into derivative financial instruments, typically interest rate and currency derivatives, to reduce our exposure to fluctuations in interest rates on variable-rate debt, fluctuations in currency rates and their impact on earnings and cash flows. We do not utilize derivative financial instruments with a level of complexity or with a risk greater than the exposure to be managed nor do we enter into or hold derivatives for trading or speculative purposes. Derivative instruments involve, to varying degrees, elements of non-performance, or credit risk. We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties associated with these instruments, as these transactions were executed with a diversified group of major financial institutions with an investment-grade credit rating. Our intention is to spread our counterparty credit risk across a number of counterparties so that exposure to a single counterparty is minimized.

Interest Rate Risk

We are subject to interest rate risk from outstanding borrowings on our variable rate credit facilities. As such, our consolidated financial results are subject to fluctuations due to changes in the market rate of interest. We assess this interest rate risk by estimating the increase or decrease in interest expense that would occur due to a change in short-term interest rates. The borrowings on our variable rate credit facilities were approximately $1.5 billion as of September 30, 2021. Based on our debt structure at September 30, 2021, assuming a 50 basis point decrease in interest rates, for example, interest expense over the following 12 months would increase by an estimated $0.8 million. Assuming a 50 basis point increase in interest rates, interest expense over the following 12 months would increase by an estimated $4.3 million.

To reduce the exposure to changes in the market rate of interest and to be in compliance with the terms of our European credit facility, we have entered into interest rate derivative contracts for a portion of our borrowings under our floating rate financing arrangements. We apply hedge accounting to certain of our interest rate derivative contracts. By applying hedge accounting, changes in market value are reflected as adjustments in Other Comprehensive Income. All derivatives to which we have applied hedge accounting were evaluated and remained highly effective at September 30, 2021. Terms of the interest rate derivative contracts require us to receive a variable interest rate and pay a fixed interest rate. The sensitivity calculations above consider the impact of our interest rate derivative contracts.

Currency Exchange Risk

We operate internationally and enter into transactions denominated in various foreign currencies. During the three months ended September 30, 2021, we generated $106.6 million of revenues from operations outside the U.S. and used 12 functional currencies, excluding the U.S. dollar. Weakness in one particular currency might be offset by strength in other currencies over time.

As a result of our international operations, fluctuations in foreign currencies could cause us to incur foreign currency exchange gains and losses, and could adversely affect our comprehensive income and stockholders' equity. Additionally, our reported financial results could change from period to period due solely to fluctuations between currencies.

Foreign currency gains and losses are primarily the result of the re-measurement of transactions in certain other currencies into an entity's functional currency. Foreign currency gains and losses are included as a component of other income and (expense) in our Consolidated Income Statements. From time to time we may elect to enter into foreign exchange derivative contracts to reduce these variations in our Consolidated Income Statements.

When an entity's functional currency is different than the reporting currency of its parent, foreign currency translation adjustments may occur. Foreign currency translation adjustments are included as a component of other comprehensive (loss)/income in our Consolidated Statements of Comprehensive Income and as a component of equity in our Consolidated Balance Sheets.

We have taken measures to mitigate the impact of foreign currency fluctuations. We have organized our European operations so that portfolio ownership and collections generally occur within the same entity. Our European credit facility is a multi-currency facility, allowing us to better match funding and portfolio acquisitions by currency. We actively monitor the value of our finance receivables by currency. In the event adjustments are required to our liability composition by currency we may, from time to time, execute re-balancing foreign exchange contracts to more closely align funding and portfolio acquisitions by currency.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. We conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that, as of September 30, 2021, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings as of September 30, 2021, refer to Note 13 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our 2020 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Programs

On July 29, 2021, our Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $150.0 million of its outstanding common stock.

The following table provides information about the Company's common stock purchased during the third quarter of 2021.


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Remaining Purchase Price for Share Repurchases Under the Program (1)
Period
July 1, 2021 to July 31, 2021	—	$	—	—	$	150,000
August 1, 2021 to August 31, 2021	803,293	40.65		803,293	117,345
September 1, 2021 to September 30, 2021	993,581	41.46		993,581	76,153
Total	1,796,874	$	41.10	1,796,874	$	76,153

(1) Dollars in thousands.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


3.1			Fifth Amended and Restated Certificate of Incorporation of PRA Group, Inc. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed June 17, 2020 (File No. 000-50058)).
3.2			Amended and Restated By-Laws of PRA Group, Inc. (Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed June 17, 2020 (File No. 000-50058 )).
4.1			Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to the Registration Statement on Form S-1 filed October 15, 2002 (Registration No. 333-99225)).
4.2			Form of Warrant (Incorporated by reference to Exhibit 4.2 of Amendment No. 2 to the Registration Statement on Form S-1 filed October 30, 2002 (Registration No. 333-99225)).
4.3			Indenture dated May 26, 2017 between PRA Group, Inc. and Regions Bank, as trustee (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed May 26, 2017 (File No. 000-50058)).
4.4			First Supplemental Indenture dated as of March 31, 2021 between PRA Group, Inc. and Regions Bank, as trustee (Incorporated by reference to Exhibit 4.4 of the Quarterly Report on Form 10-Q filed August 05, 2021 (File No. 000-50058).
4.5			Indenture dated as of August 27, 2020 among PRA Group Inc., the domestic subsidiaries of PRA Group Inc., party thereto and Regions Bank as t rustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 1, 2020 (File No. 000-50058)).
4.6			Indenture dated as of September 22, 2021 among PRA Group Inc., the domestic subsidiaries of PRA Group Inc., party thereto and Regions Banks, as t rustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 24, 2021 (Filed No. 000-50058)).


4.7			Description of the Registrant's Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference to Exhibit 4.3 of the Annual Report on Form 10-K filed February 26, 2021 (File No. 000-50058)).
10.1			Form of Performance Stock Unit Agreement (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed May 06, 2021 (File No. 000-50058)).
10.2			Seventh Amendment and Restatement Agreement to the Multicurrency Revolving Credit Facility Agreement, dated as of March 12, 2021 by and among PRA Group Europe Holding S.à.r.l., PRA Group Europe Holding S.à.r.l., Luxembourg, Zug Branch and DNB Bank ASA. (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed May 06, 2021 (File No. 000-50058)).
10.3			Fourth Amendment to the Credit Agreement dated July 30, 2021, by and among PRA Group Inc. and PRA Group Canada Inc., the Guarantors, the Lenders party thereto,Bank of America, N.A., as Administrative Agent and Bank of America, N.A., acting through its Canada Branch, as Canadian Administrative Agent (filed herewith).
31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
31.2			Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
32.1			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith).
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkable Document
101.LAB			XBRL Taxonomy Extension Label Linkable Document
101.PRE			XBRL Taxonomy Extension Presentation Linkable Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	PRA Group, Inc.
	(Registrant)

November 8, 2021	By:	/s/ Kevin P. Stevenson
		Kevin P. Stevenson
		President and Chief Executive Officer
		(Principal Executive Officer)




November 8, 2021	By:	/s/ Peter M. Graham
		Peter M. Graham
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)