8-K/A
Atlanticus Holdings Corp (ATLCP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 11, 2025
Atlanticus Holdings Corporation
(Exact name of registrant as specified in its charter)
| Georgia | 000-53717 | 58-2336689 |
|---|---|---|
| (State or other jurisdiction of<br> incorporation) | (Commission<br> File Number) | (I.R.S. Employer<br> Identification No.) |
Five Concourse Parkway, Suite 300, Atlanta, Georgia 30328
(Address of principal executive offices)
Registrant’s telephone number, including area code: 770-828-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of class | Trading Symbol | Name of exchange on which registered |
|---|---|---|
| Common stock, no par value | ATLC | Nasdaq Global Select Market |
| 7.625% Series B Cumulative Perpetual Preferred Stock, no par value | ATLCP | Nasdaq Global Select Market |
| 6.125% Senior Notes due 2026 | ATLCL | Nasdaq Global Select Market |
| 9.25% Senior Notes due 2029 | ATLCZ | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| 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. ☐
Explanatory Note
On September 17, 2025, Atlanticus Holdings Corporation (the “Company”) filed a Current Report on Form 8-K (the “Original Report”) to report the entry into a Membership Interest Purchase Agreement (the “Purchase Agreement”) by Mercury Finance Acquisition, LLC, a Georgia limited liability company and wholly-owned subsidiary of the Company (the “Purchaser”), on September 11, 2025 with Mercury Financial Intermediate LLC, a Delaware limited liability company, Mercury Financial LLC, a Delaware limited liability company (“Mercury”), and solely for purposes of Section 7.7 of the Purchase Agreement, the Company. Pursuant to the Purchase Agreement, and subject to the conditions thereof, the Purchaser acquired all of the issued and outstanding equity interests of Mercury (the “Acquisition”). The purpose of this amendment (the “Amendment No. 1”) to the Original Report is to provide the financial statements and pro forma financial information required by Item 9.01 of Form 8-K, which were not previously filed with the Original Report, but are permitted to be filed by amendment no later than 71 calendar days after the date the Original Report was required to be filed with the U.S. Securities and Exchange Commission (“SEC”), as permitted by the rules of the SEC. Except for this Explanatory Note, the filing of the financial statements and the pro forma financial information required by Item 9.01, there are no changes to the Original Report.
The pro forma financial information included as Exhibit 99.3 to this Amendment No. 1 has been presented for illustrative purposes only, as required by Form 8-K, and is not intended to, and does not purport to, represent what the combined company’s actual results or financial condition would have been if the Acquisition had occurred on the relevant date, and is not intended to project the future results or financial condition that the combined company may achieve following the Acquisition.
Item 9.01 Financial Statements and Exhibits
| (a) | Financial statements of businesses or funds acquired. |
|---|---|
| (i) | Attached to this Amendment No. 1 as Exhibit 99.1 are the audited consolidated balance sheets and the related consolidated statements of operations, changes in member’s equity, and cash flows of Mercury as of and for the fiscal years ended December 31, 2023, and December 31, 2024, and the notes to the consolidated financial statements. |
| --- | --- |
| (ii) | Attached to this Amendment No. 1 as Exhibit 99.2 are the unaudited consolidated interim balance sheets and the related unaudited consolidated interim statements of operations, change in member’s equity and cash flows of Mercury as of and for the six months ended June 30, 2025. |
| --- | --- |
| (b) | Pro forma financial information. |
| --- | --- |
Attached to this Amendment No. 1 as Exhibit 99.3 is the unaudited pro forma condensed statement of operations of the Company for the nine months ended September 30, 2025, and the fiscal year ended December 31, 2024. The unaudited pro forma condensed statement of operations of the Company should be read together with the Company’s historical condensed consolidated financial statements included in its quarterly report on Form 10-Q for the quarter ended September 30, 2025.
SIGNATURE
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 hereunto duly authorized.
| ATLANTICUS HOLDINGS CORPORATION | |||
|---|---|---|---|
| Date: | November 28, 2025 | By: | /s/ William R. McCamey |
| Name: William R. McCamey | |||
| Title: Chief Financial Officer |
HTML Editor
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated November 28, 2025, with respect to the consolidated financial statements of Mercury Financial LLC as of December 31, 2024 and 2023 and for the years then ended included in the Current Report on Form 8-K/A of Atlanticus Holdings Corporation dated November 28, 2025. We consent to the incorporation by reference of said report in the Registration Statements of Atlanticus Holdings Corporation on Form S-3 (File No. 333-279345) and Forms S-8 (File No. 333-150988; File No. 333-196041; File No. 333-211351; File No. 333-218058; File No. 333-224981; and File No. 333-231578).
/s/ GRANT THORNTON LLP
Philadelphia, Pennsylvania
November 28, 2025
ex_892900.htm
Exhibit 99.1
Mercury Financial LLC
Consolidated Financial Statements
December 31, 2024
Contents
| Page | |
|---|---|
| Report of Independent Certified Public Accountants | 1 |
| Consolidated Financial Statements | |
| Consolidated Balance Sheets | 3 |
| Consolidated Statements of Operations | 4 |
| Consolidated Statements of Changes in Member’s Equity (Deficit) | 5 |
| Consolidated Statements of Cash Flows | 6 |
| Notes to Consolidated Financial Statements | 7 |
grant thornton llp
2001 Market St., Suite 800
Philadelphia, PA 19103-7065
D +1 215 561 4200
F +1 215 561 1066
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Member
Mercury Financial LLC
Opinion
We have audited the consolidated financial statements of Mercury Financial LLC (a Delaware limited liability company) and subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2024 and 2023, and the related consolidated statements of operations, changes in member’s equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for opinion
We conducted our audits of the consolidated financial statements in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are available to be issued.
1
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with US GAAS, we:
| ● | Exercise professional judgment and maintain professional skepticism throughout the audit. |
|---|---|
| ● | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
| --- | --- |
| ● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
| --- | --- |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
| --- | --- |
| ● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
| --- | --- |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ GRANT THORNTON LLP
Philadelphia, Pennsylvania
November 28, 2025
2
| Mercury Financial LLC | ||||||
|---|---|---|---|---|---|---|
| Consolidated Balance Sheets | ||||||
| (Dollars in thousands) | ||||||
| December 31, | December 31, | |||||
| --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | |||||
| Assets | **** | **** | **** | **** | **** | **** |
| Cash and restricted cash | ||||||
| Cash and cash equivalents | $ | 66,908 | $ | 44,640 | ||
| Restricted cash | 27,650 | 50,757 | ||||
| Total Cash and restricted cash | 94,558 | 95,397 | ||||
| Loans | ||||||
| Loan receivables | 3,362,445 | 3,286,743 | ||||
| Allowance for credit losses | (388,449 | ) | (358,679 | ) | ||
| Loan receivables, net | $ | 2,973,996 | $ | 2,928,064 | ||
| Software, net | 14,320 | 12,610 | ||||
| Goodwill | 48,409 | 48,409 | ||||
| Intangibles, net | 31,120 | 35,093 | ||||
| Right of use assets | 1,326 | 2,443 | ||||
| Other assets | 13,058 | 18,127 | ||||
| Total Assets | $ | 3,176,787 | $ | 3,140,143 | ||
| Liabilities | **** | **** | **** | **** | **** | **** |
| Accounts payable and accrued liabilities | $ | 61,452 | $ | 100,533 | ||
| Accrued interest payable | 7,599 | 7,149 | ||||
| Borrowings, net | 2,887,494 | 2,809,129 | ||||
| Rewards liability | 38,420 | 39,359 | ||||
| Lease liabilities | 1,447 | 2,660 | ||||
| Other liabilities | 10,030 | 9,850 | ||||
| Total Liabilities | 3,006,442 | 2,968,680 | ||||
| Member's Equity | 170,345 | 171,463 | ||||
| Total Liabilities and Member's Equity | $ | 3,176,787 | $ | 3,140,143 |
The accompanying notes are an integral part of these consolidated financial statements.
3
| Mercury Financial LLC | ||||||
|---|---|---|---|---|---|---|
| Consolidated Statements of Operations | ||||||
| (Dollars in thousands) | ||||||
| For the Years ended | December 31, | December 31, | ||||
| --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | |||||
| Interest income | $ | 795,148 | $ | 696,256 | ||
| Interest expense | 283,984 | 207,031 | ||||
| Net interest income | 511,164 | 489,225 | ||||
| Provision for credit losses | 521,838 | 412,619 | ||||
| Net interest (loss) income after provision for loan losses | (10,674 | ) | 76,606 | |||
| Non-interest income | ||||||
| Late fees | 36,660 | 40,233 | ||||
| Interchange fees, net | 14,401 | 12,388 | ||||
| Other non-interest income | 14,199 | 12,392 | ||||
| Total non-interest income | 65,260 | 65,013 | ||||
| Non-interest expense | ||||||
| Compensation | 55,339 | 62,312 | ||||
| Marketing | 7,691 | 28,706 | ||||
| Legal and professional | 16,154 | 14,559 | ||||
| Amortization of intangibles | 3,973 | 3,973 | ||||
| General and administrative | 68,873 | 63,939 | ||||
| Other expenses | 31,560 | 34,458 | ||||
| Total non-interest expense | 183,590 | 207,947 | ||||
| Net Loss | $ | (129,004 | ) | $ | (66,328 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
4
| Mercury Financial LLC | |||
|---|---|---|---|
| Consolidated Statement of Changes in Member's Equity | |||
| (Dollars in thousands) | |||
| Balance at January 1, 2023 | $ | 183,685 | |
| --- | --- | --- | --- |
| Cumulative effect from change in accounting principle (CECL) | (31,045 | ) | |
| Investment by Mercury Financial Intermediate LLC | 97,575 | ||
| Return of capital to Mercury Financial Intermediate LLC | (12,424 | ) | |
| Net loss | (66,328 | ) | |
| Balance at December 31, 2023 | $ | 171,463 | |
| Investment by Mercury Financial Intermediate LLC | 150,370 | ||
| Return of capital to Mercury Financial Intermediate LLC | (22,484 | ) | |
| Net loss | (129,004 | ) | |
| Balance at December 31, 2024 | $ | 170,345 |
The accompanying notes are an integral part of these consolidated financial statements.
5
| Mercury Financial LLC | ||||||
|---|---|---|---|---|---|---|
| Consolidated Statements of Cash Flows | ||||||
| (Dollars in thousands) | ||||||
| For the Years ended | December 31, | December 31, | ||||
| --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | |||||
| Cash Flows from Operating Activities | **** | **** | **** | **** | **** | **** |
| Net Loss | $ | (129,004 | ) | $ | (66,328 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||
| Amortization of intangibles | 3,973 | 3,973 | ||||
| Depreciation and amortization | 45,857 | 35,100 | ||||
| Provision for credit losses | 521,838 | 412,619 | ||||
| Changes in operating assets and liabilities | ||||||
| Other assets | 4,851 | (2,937 | ) | |||
| Rewards liability | (939 | ) | 3,386 | |||
| Accounts payable and accrued liabilities | (3,084 | ) | 6,174 | |||
| Accrued interest payable | 450 | 2,698 | ||||
| Other liabilities | 86 | 1,089 | ||||
| Net cash provided by operating activities | 444,027 | 395,774 | ||||
| Cash Flows from Investing Activities | **** | **** | **** | **** | **** | **** |
| Purchase of software | (7,371 | ) | (7,088 | ) | ||
| Change in loans, net | (631,706 | ) | (971,857 | ) | ||
| Net cash used in investing activities | (639,077 | ) | (978,945 | ) | ||
| Cash Flows from Financing Activities | **** | **** | **** | **** | **** | **** |
| Proceeds from secured credit facilities | 2,064,000 | 1,699,002 | ||||
| Payments on secured credit facilities | (1,988,242 | ) | (1,170,502 | ) | ||
| Investment by Mercury Financial Intermediate LLC | 150,370 | 97,575 | ||||
| Return of capital to Mercury Financial Intermediate LLC | (22,484 | ) | (12,424 | ) | ||
| Unsecured borrowings | 1,928 | 1,990 | ||||
| Payment of financing costs | (11,360 | ) | (9,944 | ) | ||
| Net cash provided by financing activities | 194,211 | 605,697 | ||||
| Change in cash and cash equivalents | (839 | ) | 22,526 | |||
| Cash and Cash Equivalents and Restricted Cash, at beginning of year | 95,397 | 72,871 | ||||
| Cash and Cash Equivalents and Restricted Cash, at end of year | $ | 94,558 | $ | 95,397 | ||
| Supplemental Cash Flow Information | **** | **** | **** | **** | **** | **** |
| Interest paid | 283,534 | 205,778 | ||||
| Non-cash Investing and Financing Activities: | ||||||
| Change in amount due to funding partner for loan receivables | (35,997 | ) | 3,443 |
The accompanying notes are an integral part of these consolidated financial statements.
6
Mercury Financial LLC
Notes to Consolidated Financial Statements
December 31, 2024
Note 1. Organization
Description of Business and Basis of Presentation
Mercury Financial LLC is a Delaware limited liability company established on October 11, 2017, as the main operating company for its ultimate parent company Mercury Financial Holdings LLC. Mercury Financial LLC changed its name from CreditShop LLC on October 1, 2020. Mercury Financial LLC is a wholly owned subsidiary of Mercury Financial Intermediate LLC. At December 31, 2024, its subsidiaries included:
| ● | Mercury Financial Transferor LLC |
|---|---|
| ● | Mercury Financial Credit Card Master Trust |
| --- | --- |
Mercury Financial LLC and its subsidiaries (collectively, the “Company”) operate in the consumer finance industry, providing credit card loans to customers.
The accompanying consolidated financial statements as of and for the year ended December 31, 2024 include the accounts of Mercury Financial LLC and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Note 2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying consolidated financial statements of the Company have been presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates. Actual results could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. The significant estimates include the allowance for credit losses, credit card rewards liability, purchased credit card relationships (“PCCR”), and fair value of financial instruments.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit of $250,000 per respective financial institution. Cash in excess of the FDIC limit is not insured by the FDIC. The Company believes it mitigates this risk by placing its cash with high credit quality financial institutions.
Restricted Cash
Restricted cash represents cash held at third-party banks under the terms of various secured financing agreements and is released from restriction upon making payments on the related secured financing agreements as detailed in the terms of the agreements.
7
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Loans
The accounting and measurement framework for loans differs depending on the loan classification, whether the loans are originated or purchased, and whether purchased loans were acquired at a discount due to evidence of credit deterioration since the date of origination. Upon origination or purchase, the Company classifies loans as held for investment or held for sale based on management’s intent and ability with regard to the loans, which may change over time.
Loans that the Company has the ability and intent to hold for the foreseeable future and loans associated with secured borrowings are classified as held for investment. The Company’s credit card portfolio consists of loans held for investment. All credit card loans are reported at their amortized cost, which is the outstanding principal balance, net of any unamortized deferred fees and costs, and unamortized premiums and discounts. Credit card loans also include billed finance charges and fees, net of the estimated uncollectible amount.
Interest income is recognized on loans held for investment on an accrual basis. The Company defers loan origination fees and direct loan origination costs on credit card loans and amortizes these amounts on a straight-line basis over a 12-month period.
Purchased Loans
All purchased loans, including loans transferred in a 2017 business combination, were initially recorded at fair value. In accordance with the applicable authoritative accounting guidance, to determine the fair value of loans at acquisition, the Company estimated discounted contractual cash flows due, including prepayments, using an observable market rate of interest, when available, adjusted for factors that a market participant would consider in determining fair value. At acquisition, all loans were classified as loans held for investment.
Delinquent and Nonperforming Loans
The entire balance of a loan is considered contractually delinquent if the minimum required payment is not received by the first statement cycle date equal to or following the due date specified on the customer's billing statement. Delinquency is reported on loans that are more than 30 days past due.
Charge-offs
The Company charges off loans as a reduction to the allowance for credit losses when it determines the loan is uncollectible and records subsequent recoveries of previously charged-off amounts as an increase to the allowance for credit losses.
The Company generally charges off any credit card loans, including any accrued fees and charges once the account has been classified as delinquent for 180 days. Bankrupt credit card accounts are charged off 60 days after the receipt of the bankruptcy notification, if earlier than 180 days delinquent. Accounts of deceased customers are reviewed for settlement through estates or other parties and are charged off when they are deemed uncollectible, if earlier than 180 days delinquent.
Allowance for Credit Losses
ASC 326 Financial Instruments – Credit Losses is the standard using Current Expected Credit Losses (CECL) to calculate the Allowance for Credit Losses (ACL) and was adopted by the Company on January 1, 2023. The previously incurred loss methodology is replaced with an expected loss methodology measuring financial asset losses, which does not include unbilled interest, over the expected life of the asset at amortized cost.
8
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
The Company’s CECL modeling process includes using the Probability of default/Loss given default cash flow model. The process combines a significant set of historical data across banks and thrift institutions dating back to 2005 aligning with historical loss rates by FICO bands. Once the Company has sufficient historical data of its own, then the respective set of internal data will be used. Three different scenarios are created to calculate the reserve. For each of the base, adverse, and severely adverse scenarios cash flow forecasts are developed and the expected credit losses are discounted to their present value at the applicable credit spread. A regression model is used to assist in applying a reasonable and supportable forecast for the adverse and severely adverse scenarios. Once the base reserve level is established, then more risky scenarios are calculated driven by the Federal Reserve Comprehensive Capital Analysis and Review (“CCAR”) of unemployment rates, regressed to credit card loss rates. The significant inputs or judgements used are expected life of loan, historical loss rates by FICO score, expected recovery rates, and qualitative factors that are considered in weighting the scenarios. The life of loan estimate is 8 quarters.
The qualitative factors that are used in probability weighting the scenarios are the following:
| - | The institution’s lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries |
|---|---|
| - | Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets |
| --- | --- |
| - | The nature and volume of the institution’s financial assets |
| --- | --- |
| - | The experience, ability, and depth of the institution’s lending, investment, collection, and other relevant management and staff |
| --- | --- |
| - | The volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets |
| --- | --- |
| - | The quality of the institution’s credit review function |
| --- | --- |
| - | The existence, growth, and effect of any concentrations of credit |
| --- | --- |
| - | The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters |
| --- | --- |
Software, Net
The Company capitalizes certain costs related to the development of its internal software platform. Costs incurred during the application development phase are capitalized only when the Company believes it is probable the development will result in new or additional functionality. The types of costs capitalized during the application development phase include employee compensation, as well as consulting fees for third-party developers working on these projects. Costs related to the preliminary project stage and post-implementation activities are expensed as incurred. Internal-use software is amortized on a straight-line basis over the estimated useful life of the asset. When internal-use software that was previously capitalized is abandoned, the cost less the accumulated amortization, if any, is recorded as amortization expense. Fully amortized capitalized internal-use software costs are removed from their respective accounts. The Company also purchases software which is depreciated on a straight-line basis over a five-year period.
9
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Goodwill
Goodwill is initially recorded as the excess of the cost of an acquired entity over the fair value of net assets acquired. The Company measures its goodwill for impairment on an annual basis or when events indicate that goodwill may be impaired. The Company first assesses qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Based on the results of the qualitative assessment, the Company then determines whether it needs to calculate the fair value of the reporting unit as part of the first step of the two-step goodwill impairment test. The goodwill impairment test two-step process requires management to make judgments in determining what assumptions to use in the calculation. The first step in the process is to identify potential goodwill impairment by comparing the fair value of the reporting unit to its carrying value. If the carrying value is less than fair value, the Company would complete step two in the impairment review process, which measures the amount of goodwill impairment. For 2024 and 2023, The Company stopped after the qualitative assessment as no indicators of impairment were identified.
Intangible Assets, Net
Intangible assets represents the Company’s PCCR balance. PCCR is the identifiable intangible value assigned to customer relationships arising from a business combination that occurred during 2017. The PCCR is amortized on a straight-line basis over its estimated useful life of fifteen years. The Company evaluates the PCCR annually for impairment or more frequently if facts and circumstances indicate the net book value of the asset may not be recoverable. No impairment charges were recognized on the PCCR for the years ended December 31, 2024 and 2023.
Rewards Liability
Some of the Company’s credit card accounts are associated with customer reward programs, which allow the customer to earn rewards that can be redeemed for statement credits, gift cards, cash back or applied against purchases on certain online platforms. The amount of reward that a customer earns varies based on the terms and conditions of the reward program and product. When rewards are earned by a customer, rewards expense is recorded as an offset to interchange income, which is included in interchange fees, net, within non-interest income, with a corresponding increase to the customer rewards liability. The customer rewards liability is computed based on the estimated redemption cost of rewards earned and is reduced as rewards are redeemed. In estimating the customer rewards liability, the Company considers historical redemption and spending behavior, as well as the terms and conditions of the reward programs, among other factors. The Company expects that the majority of rewards earned by customers will eventually be redeemed.
Revenue Recognition
In the ordinary course of business, the Company recognizes interest income, including finance charges, and fees on loans in interest and non-interest income in accordance with the contractual provisions of the loan arrangements.
Finance charges and fees on credit card loans, net of amounts that are considered written-off as uncollectible, are included in loan receivables and revenue when the fees are earned. Annual membership fees are deferred and amortized into income over one year on a straight-line basis. The Company continues to accrue finance charges and fees, net of amounts that are considered written-off as uncollectible, on credit card loans until the account is charged off.
10
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Interchange income represents merchant fees and network incentives for credit card transactions processed through interchange networks, net of fees retained by the interchange networks and merchant’s processing bank and is recognized at the time of the transaction. As previously noted, interchange income is also presented net of rewards expense related to customer rewards programs.
Marketing and Advertising Costs
Direct marketing costs, including print, postage, and advertising expenses, are expensed as incurred. In contrast, account acquisition costs paid to internet aggregators and cooperative marketing are considered loan origination costs and are amortized.
Income Taxes
The Company has determined that it is a pass-through entity for federal income tax purposes. As a result, the net taxable income and any related tax credits, for federal income tax purposes, are deemed to pass to its ultimate members and are included in their tax returns. Accordingly, no federal income tax provision has been made in the consolidated financial statements of the Company since the federal income tax is an obligation of the Company’s ultimate members.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, requires that the Company recognize the impact of a tax position that is more likely than not to be disallowed upon examination, including resolution of any appeals or litigation processes, based upon the technical merits of the position. Management has reviewed the tax position taken related to the Company’s tax status and federal and state filing requirements as required under ASC 740. Based on this review, management is of the opinion that the Company’s tax position would more likely than not be sustained by examination. Accordingly, the Company has not recorded an income tax liability for uncertain tax benefits. The Company’s federal and state tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examinations by various jurisdictions.
Fair Value Measurements
FASB ASC 820, Fair Value Measurement, establishes a framework for using fair value to measure assets and liabilities, and defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, as opposed to the price that would be paid to acquire the asset, or received to assume the liability. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market.
Fair value measure should reflect the assumptions that market participants would use in pricing the asset or liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, and the value based on inputs the Company uses to derive fair value measurements. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:
Level 1 inputs: Quoted market prices (unadjusted) for identical assets or liabilities traded in active markets.
Level 2 inputs: Quoted market prices for similar instruments traded 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.
11
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Level 3 inputs: Unobservable inputs for the asset or liability and rely on management’s own estimates for assumptions that market participants would use in pricing the asset or liability that include option pricing models, discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. See “Note 10. Fair Value of Financial Instruments” for the fair value of the Company’s financial instruments as of December 31, 2024 and December 31, 2023.
Lease Accounting
The Company complies with ASC 842 for lease accounting. All leases are classified as either financing or operating leases at inception date and must be capitalized when longer than 12 months. The leases reporting under the new ASC 842 are required to be recognized both as assets and liabilities. The liability is measured as the present value of lease payments, while the asset is equal to the liability adjusted for certain items such as prepaid rent and lease incentives. The operating lease asset is recorded as the right-of-use asset (ROU asset) and represents the lessee’s right to use the underlying asset while the lease liability represents the lessee’s financial obligation over the length of the lease.
When accounting for an operating lease, the lessee must recognize a single lease cost allocated over the term of the lease, normally on a straight-line basis, and classify all cash payments within operating activities on the cash flow statement. When accounting for finance leases, lessees must recognize interest on the lease liability and amortization of the right-of-use asset in separate line items on the income statement. Also, payments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability within operating activities must be classified on the cash flow statement.
Note 3. Loans
Portfolio Composition
The Company’s loan portfolio is considered to be held for investment.
| December 31, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| (Dollars in thousands) | Total | Total | ||
| Outstanding balance | $ | 3,314,177 | $ | 3,243,276 |
| Accrued Finance charges and fees | 44,274 | 43,467 | ||
| Loan Origination Costs, net | 3,994 | - | ||
| $ | 3,362,445 | $ | 3,286,743 |
12
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Credit Quality
The Company closely monitors economic conditions and loan performance trends to manage and evaluate its exposure to credit risk. Trends in delinquency rates are an indicator of credit risk within the loan portfolio. The table below presents the composition and an aging analysis of the outstanding balance of the loan portfolio as of December 31, 2024 and December 31, 2023.
| December 31, 2024 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 31-60 | 61-90 | >90 | Total | |||||||||||||||
| (Dollars in thousands) | Current | Days | Days | Days | Delinquent | Total | ||||||||||||
| Credit card loans | $ | 3,031,919 | $ | 70,215 | $ | 54,940 | $ | 157,104 | $ | 282,259 | $ | 3,314,177 | ||||||
| Total loans | $ | 3,031,919 | $ | 70,215 | $ | 54,940 | $ | 157,104 | $ | 282,259 | $ | 3,314,177 | ||||||
| % of total loans | 91 | % | 2 | % | 2 | % | 5 | % | 9 | % | 100 | % | ||||||
| December 31, 2023 | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 31-60 | 61-90 | >90 | Total | |||||||||||||||
| (Dollars in thousands) | Current | Days | Days | Days | Delinquent | Total | ||||||||||||
| Credit card loans | $ | 2,957,296 | 74,552 | 60,779 | 150,649 | 285,979 | $ | 3,243,276 | ||||||||||
| Total loans | $ | 2,957,296 | $ | 74,552 | $ | 60,779 | $ | 150,649 | $ | 285,979 | $ | 3,243,276 | ||||||
| % of total loans | 91 | % | 2 | % | 2 | % | 5 | % | 9 | % | 100 | % |
Allowance for Credit Losses
The loan portfolio is diversified across over a million accounts in the United States without significant individual exposure. As a result, the Company manages credit on an aggregate basis within each portfolio segment with common risk characteristics. The risks in the portfolio segments correlate to broad economic trends, such as unemployment rates and customer liquidity. The primary indicators the Company assesses in monitoring the credit quality and risk of the portfolio segments are FICO scores, historical delinquency and charge-off trends. With this information, the Company has a third-party run the data through a CECL model to estimate the allowance on its credit card loan portfolio with three different scenarios. The Company then incorporates qualitative factors into the calculation to weigh probabilities of each scenario which results in the allowance amount.
13
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
The Company’s allowance for credit losses represents management’s best estimate of losses inherent in the loan portfolio as of the consolidated balance sheet date. The table below summarizes changes in the allowance for credit losses for the year ended December 31, 2024 and December 31, 2023:
| (Dollars in thousands) | December 31, 2024 | December 31, 2023 | ||||
|---|---|---|---|---|---|---|
| Loan receivables | $ | 3,362,445 | $ | 3,286,743 | ||
| Allowance for credit losses | ||||||
| Balance, beginning of year respectively | 358,679 | 266,073 | ||||
| Provision for credit losses | 521,838 | 412,619 | ||||
| Cumulative effect from change in accounting principle (CECL) | - | 31,045 | ||||
| Charge-offs | (541,862 | ) | (405,558 | ) | ||
| Recoveries | 49,794 | 54,500 | ||||
| Balance, end of year | 388,449 | 358,679 | ||||
| Loan receivables, net | $ | 2,973,996 | $ | 2,928,064 |
Net charge-offs of principal are recorded against the allowance for credit losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee income on credit card loans for the years ended December 31, 2024 and December 31, 2023 are as follows:
| (Dollars in thousands) | December 31, 2024 | December 31, 2023 | ||
|---|---|---|---|---|
| Interest recognized into income but subsequently charged off, net of recoveries (recorded as a reduction of interest income) | ||||
| $ | 94,902 | $ | 76,945 | |
| Fees recognized into income but subsequently charged-off, net of recoveries (recorded as a reduction of non-interest income) | ||||
| $ | 60,721 | $ | 53,572 |
Loans Modified in TDRs
As part of the Company’s loss mitigation efforts to borrowers experiencing financial difficulty, it may provide concessions to minimize its economic loss and improve collectability. Modifications typically involve placing the respective borrower on a fixed payment plan, at a reduced interest rate. The Company offers multiple plans that are considered loans modified:
Plan 1: A 60-month fixed payment plan at an annual interest rate of 0.00%. During the duration of the plan, late and returned payment fees are waived and available credit on the account is revoked.
Plan 2: A 60-month fixed plan at an annual interest rate of 5.90%. During the duration of the plan, late and returned payment fees are waived and available credit on the account is revoked.
Plan 3: A fixed plan with a duration of 6 or 12 months, based on the length of the customers hardship, at an annual interest rate of 8.90%. During the duration of the plan late and returned payment fees are waived and available credit on the account is suspended. Upon successful completion of the plan customers are eligible to have their available credit reinstated.
14
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
The following table presents the amortized cost basis of loans that were modified subsequent to origination during the years ending December 31, 2024 and December 31, 2023:
| Amortized cost basis of loans modified | **** | **** | **** | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | ||||||||
| Year ended | December 31, 2024 | December 31, 2023 | ||||||
| Pre-modification<br><br> <br>amortized cost basis | Post-modification<br><br> <br>amortized cost basis | Pre-modification<br><br> <br>amortized cost basis | Post-modification<br><br> <br>amortized cost basis | |||||
| Interest Rate Reductions | $ | 5,130 | $ | 4,070 | $ | 3,101 | $ | 2,462 |
The following table presents the Company’s financial effect of loan modifications that occurred during the years ending December 31, 2024 and December 31, 2023.
| Financial Effect of loans modified during the 12 month period | **** | **** | |||
|---|---|---|---|---|---|
| Year ended | December 31, 2024 | December 31, 2023 | |||
| a | Interest Rate Reductions | ||||
| Initial Rate | 31.42 | 31.65 | |||
| Revised Rate | 6.17 | 6.38 | |||
| a | Weighted average used |
The following table presents the Company’s loans that were modified and had a payment default during the years ending December 31, 2024 and December 31, 2023.
| Defaulted TDRs | **** | **** | **** | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | ||||||||
| Year ended | December 31, 2024 | December 31, 2023 | ||||||
| Amortized Cost | Charge-off amount | Amortized Cost | Charge-off amount | |||||
| Interest Rate Reductions | $ | 15 | $ | 13 | $ | 13 | $ | 12 |
15
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Note 4. Borrowings
The following table summarizes the Company’s outstanding borrowings as of December 31, 2024 and December 31, 2023:
| The following table summarizes the Company's total outstanding debt as of December 31, 2024: | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | Stated Interest<br><br> <br>Rates | Weighted Average<br><br> <br>Interest Rate | Credit Card<br><br> <br>Collateral Amount | Principal | |||||||
| Borrowings | |||||||||||
| Term notes | 1.54% | - | 17.76% | 8.31 | % | $ | 3,266,483 | $ | 2,675,000 | ||
| Variable funding notes | 1.75% | - | 14.44% | 9.46 | % | 247,914 | 226,000 | ||||
| Unsecured Debt | 2.14% | 2.14 | % | - | 917.45 | ||||||
| Total borrowings, gross | 3,514,397 | 2,901,917 | |||||||||
| Unamortized debt discount | (94 | ) | |||||||||
| Unamortized debt issuance costs | (14,329 | ) | |||||||||
| Total borrowings, net | $ | 2,887,494 |
The following table summarizes the Company's total outstanding debt as of December 31, 2023:
| (Dollars in thousands) | Stated Interest<br><br> <br>Rates | Weighted Average<br><br> <br>Interest Rate | Credit Card<br><br> <br>Collateral Amount | Principal | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Borrowings | |||||||||||
| Term notes | 1.54% | - | 17.76% | 7.40 | % | $ | 3,266,483 | $ | 2,114,580 | ||
| Variable funding notes | 1.75% | - | 14.44% | 8.96 | % | 247,914 | 710,662 | ||||
| Unsecured Debt | 2.14% | 2.14 | % | - | 1,010 | ||||||
| Total borrowings, gross | 3,514,397 | 2,826,252 | |||||||||
| Unamortized debt discount | (1,234 | ) | |||||||||
| Unamortized debt issuance costs | (15,889 | ) | |||||||||
| Total borrowings, net | $ | 2,809,129 |
During 2023 and 2024, the Company executed multiple financing transactions as part of its ongoing debt management strategy. In February of 2023, the Company paid off its 2021-1 master trust series and closed a term series master trust transaction in the amount of $975m. The Company also refinanced its 2021 VFN-1 note in the same month in the amount of $375m. On January 31, 2024, the Company entered into a new 2024 term loan series (MFCCMT 2024-1) for $750m and a second 2024 term loan (MFCCMT 2024-2) on June 21, 2024 for $700 million. Subsequently, on October 7, 2024, the Company closed on a Variable Funding Note (VFN) under the 2024 series for $120 million, and on October 31, 2024, added a third 2024 term loan for $250 million. These transactions reflect the Company’s proactive approach to managing its debt obligations by refinancing and reducing outstanding balances under various MFCCMT series.
16
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Term notes include the MFCCMT 2023-1 series (February 2023), MFCCMT 2024-1 series (January 2024), MFCCMT 2024-2 (June 2024), and MFCCMT 2024-A (October 2024). Variable Funding Notes include the MFCCMT 2021-VFN1 Series (March 2021), MFCCMT 2021-VFN2 Series (September 2021), MFCCMT 2022-VFN1 Series (October 2022), and MFCCMT 2024-1 Series (October 2024). The MFCCMT 2022-1 Series (March 2021), MFCCMT 2022-1 Series (August 2022), MFCCMT 2022-3 Series (November 2022) and the MFCCMT 2022-VFN 1 Series were redeemed in 2024. The borrowings are included in the table above. The MFCCMT notes are secured via $3.1 billion of credit card loan collateral as of December 31, 2024 and $3.5 billion of credit card collateral as of December 31, 2023.
The Company pays unused commitment fees on its VFNs for each interest period occurring during the revolving period calculated using the average utilization for each interest period. The Company paid commitment fees of $7.54 million during 2024 and $6.06 million during 2023, which is recorded as an interest expense on the Statements of Operations.
As of December 31, 2024, certain borrowings are due in subsequent fiscal years as follows:
| Year Ending | Principal | |
|---|---|---|
| December 31, | (In thousands) | |
| 2025 | $ | 719,667 |
| 2026 | 1,403,083 | |
| 2027 | 775,000 | |
| 2028 | 4,167 | |
| 2029 | - | |
| 2030 and thereafter | - | |
| Total | $ | 2,901,917 |
The repayments in the maturity date table above are based on minimum required contractual payments that begin when the controlled amortization period commences for the respective classes of MFCCMT 2023-1, MFCCMT 2024-1, MFCCMT 2024-2, and MFCCMT 2024-A to the extent that such debt is not refinanced. The Company intends to refinance or repay the borrowings prior to fully amortizing. These figures do not include payments on excess collateral collected and assume there is no change to drawn amounts on the 2021 VFN1 and VFN2, 2022 VFN1, and the 2024 VFN1.
Restrictive Covenants
The Company's borrowings contain customary representations and warranties relating to certain of its subsidiaries. The borrowings also contain certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of business, transactions with affiliates, and other matters customarily restricted in such agreements. The borrowing also contains certain financial covenants primarily focused on liquidity and tangible equity. The Company was in compliance with its contractual covenants as of December 31, 2024 and December 31, 2023.
17
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Note 5. Software, Net
Software, net, consisted of the following at December 31, 2024 and December 31, 2023:
| (Dollars in thousands) | December 31, 2024 | December 31, 2023 | ||||
|---|---|---|---|---|---|---|
| Software development costs | $ | 22,675 | $ | 20,670 | ||
| Less: Accumulated depreciation and amortization | (8,355 | ) | (8,060 | ) | ||
| Total software, net | $ | 14,320 | $ | 12,610 |
Depreciation and amortization expense totaled $5.66 million for the year ended December 31, 2024 and $5.68 million for the year ended December 31, 2023, which is recorded as an other expense on the Statements of Operations.
Note 6. Intangible Assets, Net
Intangible assets, net consisted of the following at December 31, 2024 and December 31, 2023.
| (Dollars in thousands) | December 31, 2024 | December 31, 2023 | ||||
|---|---|---|---|---|---|---|
| PCCR, gross | $ | 59,592 | $ | 59,592 | ||
| Less: Accumulated amortization | (28,472 | ) | (24,499 | ) | ||
| Intangibles, Net | $ | 31,120 | $ | 35,093 |
Amortization expense on PCCR for the years ended December 31, 2024 and December 31, 2023 each was $4.0 million.
The following table summarizes the estimated future amortization expense on the Company’s intangible assets as of December 31, 2024:
| Year Ending | ||
|---|---|---|
| December 31, (In thousands) | PCCR | |
| 2025 | 3,973 | |
| 2026 | 3,973 | |
| 2027 | 3,973 | |
| 2028 | 3,973 | |
| 2029 | 3,973 | |
| Thereafter | 11,256 | |
| Total | $ | 31,120 |
18
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Note 7. Defined Contribution and Incentive Plans
The Company has a 401(k) retirement plan (the “Plan”) covering all employees meeting certain eligibility requirements. Participants in the Plan may contribute up to the maximum amount, as defined by law, of their compensation. The Company makes certain matching contributions on an annual basis to the Plan. The Company’s contribution to the Plan was $1,510,000 for the year ended December 31, 2024 and $1,430,000 for the year ended December 31, 2023, presented as part of compensation expense on the Consolidated Statements of Operations.
Note 8. Members’ Equity
As of December 31, 2024 and December 31, 2023, the Company had 1,000 common units issued and outstanding. All units are owned by the Company’s direct parent, Mercury Financial Intermediate LLC.
Note 9. Fair Value of Financial Instruments
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of the Company's short-term financial instruments such as cash and cash equivalents, restricted cash, and accrued interest payable approximate their carrying value on the Consolidated Balance Sheets.
Loan receivables, net
The Company determined the fair value of its loans receivables, net by discounting both principal and interest cash flows expected to be collected using a discount rate commensurate with the risk that the Company believes a market participant would consider in determining fair value.
Rewards liability
The Company determined the fair value of its rewards liability by discounting the liability using a discount rate commensurate with the risk that the Company believes a market participant would consider in determining fair value. The Company estimated future redemptions on the existing liability based on historical loan attrition.
The following table presents (in thousands) the carrying value and estimated fair value, including the level within the fair value hierarchy, of the Company's remaining financial instruments that are not measured at fair value on a recurring basis in the Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023.
| December 31, 2024 | Estimated Fair Value | |||||||
|---|---|---|---|---|---|---|---|---|
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||
| Financial assets: | ||||||||
| Loan receivables, Gross | $ | 3,330,319 | $ | - | $ | - | $ | 3,318,823 |
| Financial liabilities: | ||||||||
| Rewards liability | 38,420 | - | - | 32,632 |
19
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
| December 31, 2023 | Estimated Fair Value | |||||||
|---|---|---|---|---|---|---|---|---|
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||
| Financial assets: | ||||||||
| Loan receivables, Gross | $ | 3,245,212 | $ | - | $ | - | $ | 3,318,823 |
| Financial liabilities: | ||||||||
| Rewards liability | 39,359 | - | - | 32,632 |
The carrying value of the financial assets represents gross loan receivables less accrued finance charges and fees and customer report fraud.
Note 10. Commitments and Contingencies
Commitments to Lend
As of December 31, 2024 and December 31, 2023, the Company’s had open credit card loan commitments of $4,038,055,065 and $3,043,970,120, respectively. These commitments are not legally binding, and the Company does not anticipate that all of its credit card customers will access their entire available line at any point in time. According, no allowance for credit losses has been accrued for unfunded loan commitments.
Operating Leases
The Company leases certain office space and equipment under non-cancellable operating leases, with expirations through November 2028. The Company is currently entered into two lease agreements, one in Wilmington, DE, and the second in Austin, TX. The lease agreement in Wilmington commenced on April 1, 2020 and ends January 31, 2025, with a renewed lease beginning on February 1, 2025 and ending January 31, 2028. The agreement in Austin commenced on February 1, 2021 and ends on November 30, 2026. Lease expenses for the years ended December 31, 2024 and December 31, 2023 totaled $1,117,583 and $1,183,967, respectively.
| Year ended | December 31, 2024 | December 31, 2024 | ||
|---|---|---|---|---|
| Amortization of ROU Assets | $ | 1,117,583 | $ | 1,117,583 |
| Short-term Lease Cost | - | 66,384 | ||
| Total Lease Cost | $ | 1,117,583 | $ | 1,183,967 |
20
Mercury Financial LLC
Notes to Consolidated Financial Statements – Continued
December 31, 2024
Future minimum rental commitments as of December 31, 2024 for all non-cancellable operating leases with initial or remaining terms of one year or more are:
| Year Ending December 31, | Estimated Future<br><br> <br>Minimum Rental<br><br> <br>Commitments | |
|---|---|---|
| 2025 | $ | 1,197,302 |
| 2026 | $ | 1,148,519 |
| 2027 | $ | 532,193 |
| 2028 | $ | 44,349 |
| Total | $ | 2,922,363 |
General Litigation
The Company is subject to legal proceedings and claims in the ordinary course of business. Management of the Company believes that final disposition of such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, cash flows or liquidity.
Note 11. Subsequent Events
The Company evaluated, for recognition and disclosure, all events or transactions that occurred after December 31, 2024, through November 28, 2025, which is the date these consolidated financial statements were available to be issued, and determined that there have not been any events that have occurred that would require adjustments to, or disclosures in, the consolidated financial statements, except the following:
On February 7, 2025, the Company closed its fifth Term Series master trust transaction, issuing $500 million in Class A and Class B notes priced at a monthly floating rate. The new Term Series has a stated maturity date of May 2026. In connection with this transaction, the MFCCMT 2023-1 series was paid down and redeemed in full at $979.2 million, utilizing proceeds from the new Term Series and $448 million of variable funding note (VFN) advances from the 2021, 2022, and 2024 series.
On March 29, 2025, the Company completed a $34.6 million portfolio acquisition of Best Western branded credit card receivables and accounts.
In 2025, the Company received an additional $5.0 million (February 29^th^), $12.5 million (March 31^st^) and $25 million (April 10^th^) of capital from Mercury Financial Intermediate LLC, its parent. In July 2025, there was $14 million of draws on MFCCMT 2022-VFN1 and $13.6 million of draws on MFCCMT 2024-VFN1.
In June 2025, the Company paid $5.75 million as the gross settlement amount to settle a lawsuit in the U.S. District Court for the District of Maryland upon which the Company recognized the related loss on settlement.
On September 11, 2025, Mercury Financial LLC was acquired by Atlanticus Holding Corporation (“Atlanticus”). The transaction represents a change in ownership and control of the Company.
On October 30, 2025, the MFCCMT 2024-A term series was paid off in full ($250 million) using $235 million from draws on the various VFNs and $15 million from operating cash.
21
ex_892901.htm
Exhibit 99.2
Mercury Financial LLC
Consolidated Interim Financial Statements
June 30, 2025
Contents
| Page | |
|---|---|
| Consolidated Financial Statements (Unaudited) | |
| Consolidated Balance Sheets | 1 |
| Consolidated Statements of Operations | 2 |
| Consolidated Statements of Changes in Member’s Equity | 3 |
| Consolidated Statements of Cash Flows | 4 |
| Notes to Consolidated Financial Statements | 5 |
| Mercury Financial LLC | ||||||
|---|---|---|---|---|---|---|
| Consolidated Balance Sheets | ||||||
| (Dollars in thousands) | ||||||
| June 30, 2025 | December 31, 2024 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| (unaudited) | ||||||
| Assets | **** | **** | **** | **** | **** | **** |
| Cash and restricted cash | ||||||
| Cash and cash equivalents | $ | 57,963 | $ | 66,908 | ||
| Restricted cash | 29,624 | 27,650 | ||||
| Total Cash and restricted cash | 87,587 | 94,558 | ||||
| Loans | ||||||
| Loan receivables | 3,251,125 | 3,362,445 | ||||
| Allowance for credit losses | (354,614 | ) | (388,449 | ) | ||
| Loan receivables, net | $ | 2,896,511 | $ | 2,973,996 | ||
| Software, net | 13,201 | 14,320 | ||||
| Goodwill | 48,409 | 48,409 | ||||
| Intangibles, net | 29,874 | 31,120 | ||||
| Right of use assets | 2,327 | 1,326 | ||||
| Other assets | 13,155 | 13,058 | ||||
| Total Assets | $ | 3,091,064 | $ | 3,176,787 | ||
| Liabilities | **** | **** | **** | **** | **** | **** |
| Accounts payable and accrued liabilities | $ | 55,335 | $ | 61,452 | ||
| Accrued interest payable | 9,521 | 7,599 | ||||
| Borrowings, net | 2,808,749 | 2,887,494 | ||||
| Rewards liability | 37,053 | 38,420 | ||||
| Lease liabilities | 2,425 | 1,447 | ||||
| Other liabilities | 8,372 | 10,030 | ||||
| Total Liabilities | 2,921,455 | 3,006,442 | ||||
| Member's Equity | $ | 169,609 | 170,345 | |||
| Total Liabilities and Member's Equity | $ | 3,091,064 | $ | 3,176,787 |
The accompanying notes are an integral part of these consolidated financial statements.
1
| Mercury Financial LLC | ||||||
|---|---|---|---|---|---|---|
| Consolidated Statements of Operations | ||||||
| (Dollars in thousands) | ||||||
| For the Six Months ended | June 30, 2025 | June 30, 2024 | ||||
| --- | --- | --- | --- | --- | --- | --- |
| (unaudited) | (unaudited) | |||||
| Interest income | $ | 379,014 | $ | 393,943 | ||
| Interest expense | 126,455 | 142,665 | ||||
| Net interest income | 252,559 | 251,278 | ||||
| Provision for credit losses | 222,941 | 259,977 | ||||
| Net interest income after provision for loan losses | 29,618 | (8,699 | ) | |||
| Non-interest income | ||||||
| Late fees | 15,356 | 18,887 | ||||
| Interchange fees, net | 8,059 | 8,774 | ||||
| Other non-interest income | 7,706 | 5,792 | ||||
| Total non-interest income | 31,121 | 33,453 | ||||
| Non-interest expense | ||||||
| Compensation | 33,530 | 29,144 | ||||
| Marketing | 2,607 | 3,768 | ||||
| Legal and professional | 17,623 | 7,272 | ||||
| Amortization of intangibles | 1,999 | 1,986 | ||||
| General and administrative | 30,186 | 35,446 | ||||
| Other expenses | 15,162 | 16,343 | ||||
| Total non-interest expense | 101,107 | 93,959 | ||||
| Net Loss | $ | (40,368 | ) | $ | (69,205 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
2
| Mercury Financial LLC | |||
|---|---|---|---|
| Consolidated Statements of Changes in Member's Equity | |||
| For the Six Months Ended June 30, 2025 and June 30, 2024 | |||
| (Dollars in thousands) | |||
| (unaudited) | |||
| --- | --- | --- | --- |
| Balance at January 1, 2025 | $ | 170,345 | |
| Investment by Mercury Financial Intermediate LLC | 53,350 | ||
| Return of capital to Mercury Financial Intermediate LLC | (13,718 | ) | |
| Net loss | (40,368 | ) | |
| Balance at June 30, 2025 | $ | 169,609 | |
| Balance at January 1, 2024 | $ | 171,463 | |
| Investment by Mercury Financial Intermediate LLC | 81,000 | ||
| Return of capital to Mercury Financial Intermediate LLC | (11,842 | ) | |
| Net loss | (69,205 | ) | |
| Balance at June 30, 2024 | $ | 171,416 |
The accompanying notes are an integral part of these consolidated financial statements.
3
| Mercury Financial LLC | ||||||
|---|---|---|---|---|---|---|
| Consolidated Statements of Cash Flows | ||||||
| (Dollars in thousands) | ||||||
| For the Six Months ended | June 30, 2025 | June 30, 2024 | ||||
| --- | --- | --- | --- | --- | --- | --- |
| (unaudited) | (unaudited) | |||||
| Cash Flows from Operating Activities | **** | **** | **** | **** | **** | **** |
| Net Loss | $ | (40,368 | ) | $ | (69,205 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||
| Amortization of intangibles | 1,999 | 1,986 | ||||
| Depreciation and amortization | 20,041 | 26,051 | ||||
| Provision for credit losses | 222,941 | 259,977 | ||||
| Changes in operating assets and liabilities | ||||||
| Other assets | (1,100 | ) | 2,140 | |||
| Rewards liability | (1,367 | ) | 36 | |||
| Accounts payable and accrued liabilities | 1,676 | (7,508 | ) | |||
| Accrued interest payable | 1,922 | 642 | ||||
| Other liabilities | (680 | ) | (1,754 | ) | ||
| Net cash provided by operating activities | 205,063 | 212,366 | ||||
| Cash Flows from Investing Activities | **** | **** | **** | **** | **** | **** |
| Purchase of software | (2,547 | ) | (3,738 | ) | ||
| Change in loans, net | (197,595 | ) | (354,692 | ) | ||
| Purchase of credit card receivables | 33,630 | - | ||||
| Net cash used in investing activities | (166,513 | ) | (358,430 | ) | ||
| Cash Flows from Financing Activities | **** | **** | **** | **** | **** | **** |
| Proceeds from secured credit facilities | 960,380 | 1,549,000 | ||||
| Payments on secured credit facilities | (1,042,380 | ) | (1,474,080 | ) | ||
| Investment by Mercury Financial Intermediate LLC | 53,350 | 81,000 | ||||
| Return of capital to Mercury Financial Intermediate LLC | (13,718 | ) | (11,842 | ) | ||
| Unsecured borrowings | (550 | ) | (606 | ) | ||
| Payment of financing costs | (2,603 | ) | (7,826 | ) | ||
| Net cash (used in) provided by financing activities | (45,522 | ) | 135,646 | |||
| Change in cash and cash equivalents | (6,972 | ) | (10,418 | ) | ||
| Cash and Cash Equivalents and Restricted Cash, at beginning of year | 94,558 | 95,397 | ||||
| Cash and Cash Equivalents and Restricted Cash, at end of year | $ | 87,587 | $ | 84,979 | ||
| Supplemental Cash Flow Information | **** | **** | **** | **** | **** | **** |
| Interest paid | 124,533 | 142,215 | ||||
| Non-cash Investing and Financing Activities: | ||||||
| Change in amount due to funding partner for loan receivables | (7,793 | ) | (25,596 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
4
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
Note 1. Organization
Description of Business and Basis of Presentation
Mercury Financial LLC is a Delaware limited liability company established on October 11, 2017, as the main operating company for its ultimate parent company Mercury Financial Holdings LLC. Mercury Financial LLC changed its name from CreditShop LLC on October 1, 2020. Mercury Financial LLC is a wholly owned subsidiary of Mercury Financial Intermediate LLC. At June 30, 2025, its subsidiaries included:
| ● | Mercury Financial Transferor LLC |
|---|---|
| ● | Mercury Financial Credit Card Master Trust |
| --- | --- |
Mercury Financial LLC and its subsidiaries (collectively, the “Company”) operate in the consumer finance industry, providing credit card loans to customers.
The accompanying consolidated financial statements include the accounts of Mercury Financial LLC and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Note 2. Summary of Significant Accounting Policies
The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2024. There have been no material changes to those policies during the six months ended June 30, 2025. These interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto.
The interim financial statements are unaudited and in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Company’s financial position and results of operations for the periods presented.
Note 3. Loans
Portfolio Composition
The Company’s loan portfolio is considered to be held for investment.
| June 30, 2025 | December 31, 2024 | ||||
|---|---|---|---|---|---|
| (Dollars in thousands) | Total | Total | |||
| Outstanding balance | $ | 3,205,039 | $ | 3,314,177 | |
| Accrued Finance charges and fees | 40,304 | 44,274 | |||
| Amortizable discount, net | (248 | ) | - | ||
| Loan Origination Costs, net | 6,030 | 3,994 | |||
| $ | 3,251,125 | $ | 3,362,445 |
5
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
Credit Quality
The Company closely monitors economic conditions and loan performance trends to manage and evaluate its exposure to credit risk. Trends in delinquency rates are an indicator of credit risk within the loan portfolio. The table below presents the composition and an aging analysis of the outstanding balance of the loan portfolio as of June 30, 2025 and December 31, 2024.
| June 30, 2025 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 31-60 | 61-90 | >90 | Total | |||||||||||||||
| (Dollars in thousands) | Current | Days | Days | Days | Delinquent | Total | ||||||||||||
| Credit card loans | $ | 2,938,567 | $ | 62,707 | $ | 50,688 | $ | 159,107 | $ | 272,502 | $ | 3,211,069 | ||||||
| Total loans | $ | 2,938,567 | $ | 62,707 | $ | 50,688 | $ | 159,107 | $ | 272,502 | $ | 3,211,069 | ||||||
| % of total loans | 92 | % | 2 | % | 2 | % | 5 | % | 8 | % | 100 | % | ||||||
| December 31, 2024 | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 31-60 | 61-90 | >90 | Total | |||||||||||||||
| (Dollars in thousands) | Current | Days | Days | Days | Delinquent | Total | ||||||||||||
| Credit card loans | $ | 3,035,912 | $ | 70,215 | $ | 54,940 | $ | 157,104 | $ | 282,259 | $ | 3,318,171 | ||||||
| Total loans | $ | 3,035,912 | $ | 70,215 | $ | 54,940 | $ | 157,104 | $ | 282,259 | $ | 3,318,171 | ||||||
| % of total loans | 91 | % | 2 | % | 2 | % | 5 | % | 9 | % | 100 | % |
Allowance for Credit Losses
The loan portfolio is diversified across over a million accounts in the United States without significant individual exposure. As a result, the Company manages credit on an aggregate basis within each portfolio segment with common risk characteristics. The risks in the portfolio segments correlate to broad economic trends, such as unemployment rates and customer liquidity. The primary indicators the Company assesses in monitoring the credit quality and risk of the portfolio segments are FICO scores, historical delinquency and charge-off trends. With this information, the Company has a third-party run the data through a CECL model to estimate the allowance on its credit card loan portfolio with three different scenarios. The Company then incorporates qualitative factors into the calculation to weigh probabilities of each scenario which results in the allowance amount.
6
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
The Company’s allowance for credit losses represents management’s best estimate of losses inherent in the loan portfolio as of the consolidated balance sheet date. The table below summarizes changes in the allowance for credit losses for the six months ended June 30, 2025 and the six months ended June 30, 2024:
| June 30, 2025 | December 31, 2024 | |||||
|---|---|---|---|---|---|---|
| (Dollars in thousands) | Total | Total | ||||
| Loan receivables, gross | $ | 3,251,125 | $ | 3,362,445 | ||
| Allowance for loan losses | ||||||
| Balance, January 1, 2025 & 2024 | 388,449 | 358,679 | ||||
| respectively | ||||||
| Provision for credit losses | 222,941 | 521,838 | ||||
| Charge-offs | (280,612 | ) | (541,862 | ) | ||
| Recoveries | 23,836 | 49,794 | ||||
| Balance as of Jun 2025 & Dec 2024 | 354,614 | 388,449 | ||||
| respectively | ||||||
| Loan receivables, net | $ | 2,896,511 | $ | 2,973,996 |
Net charge-offs of principal are recorded against the allowance for credit losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee income on credit card loans for the six months ended June 30, 2025 and the six months ended June 30, 2024 are as follows:
| June 30, 2025 | December 31, 2024 | |||
|---|---|---|---|---|
| (Dollars in thousands) | Credit Card | Credit Card | ||
| Interest recognized into income but subsequently charged off, net of recoveries (recorded as a reduction of interest income) | ||||
| $ | 47,056 | $ | 94,902 | |
| Fees recognized into income but subsequently charged-off, net of recoveries (recorded as a reduction of non-interest income) | ||||
| $ | 28,084 | $ | 60,721 |
Loans Modified in TDRs
As part of the Company’s loss mitigation efforts to borrowers experiencing financial difficulty, it may provide concessions to minimize its economic loss and improve collectability. Modifications typically involve placing the respective borrower on a fixed payment plan, at a reduced interest rate. The Company offers multiple plans that are considered loans modified:
Plan 1: A 60-month fixed payment plan at an annual interest rate of 0.00%. During the duration of the plan, late and returned payment fees are waived and available credit on the account is revoked.
Plan 2: A 60-month fixed plan at an annual interest rate of 5.90%. During the duration of the plan, late and returned payment fees are waived and available credit on the account is revoked.
7
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
Plan 3: A fixed plan with a duration of 6 or 12 months, based on the length of the customers hardship, at an annual interest rate of 8.90%. During the duration of the plan late and returned payment fees are waived and available credit on the account is suspended. Upon successful completion of the plan customers are eligible to have their available credit reinstated.
The following table presents the amortized cost basis of loans that were modified subsequent to origination during the six months ended June 30, 2025 and the six months ended June 30, 2024:
| Amortized cost basis of loans modified | **** | **** | **** | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | ||||||
| Pre-modification<br><br> <br>amortized cost basis | Post-modification<br><br> <br>amortized cost basis | Pre-modification<br><br> <br>amortized cost basis | Post-modification<br><br> <br>amortized cost basis | |||||
| Interest Rate Reductions | $ | 5,496 | $ | 4,096 | $ | 4,584 | $ | 3,670 |
The following table presents the Company’s financial effect of loan modifications that occurred during the six months ended June 30, 2025 and the six months ended June 30, 2024.
| Financial Effect of loans modified during the 6 periods | **** | **** | **** | **** | |
|---|---|---|---|---|---|
| June 30, 2025 (Six Months) | June 30, 2024 (Six Months) | ||||
| a | Interest Rate Reductions | ||||
| Initial Rate | 31.09 | 30.19 | |||
| Revised Rate | 6.11 | 6.38 | |||
| a | Weighted average used |
The following table presents the Company’s loans that were modified and had a payment default during the six months ended June 30, 2025 and the six months ended June 30, 2024.
| Defaulted TDRs | **** | **** | **** | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | **** | **** | **** | **** | **** | |||
| Six months ended June 30, 2025 | Six months ended June 30, 2024 | |||||||
| Amortized Cost | Charge-off amount | Amortized Cost | Charge-off amount | |||||
| Interest Rate Reductions | $ | 0 | $ | 0 | $ | 4 | $ | 4 |
8
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
Note 4. Borrowings
The following table summarizes the Company’s outstanding borrowings as of June 30, 2025:
| (Dollars in thousands) | Stated Interest<br><br> <br>Rates | Weighted Average<br><br> <br>Interest Rate | Credit Card Collateral<br><br> <br>Amount | Principal | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Borrowings | ||||||||||
| Term notes | 6.32% | - | 14.80% | 7.64% | $ | 2,350,802 | $ | 2,200,000 | ||
| Variable funding notes | 6.71% | - | 13.94% | 8.49% | 247,914 | 619,000 | ||||
| Unsecured Debt | 2.14% | 2.14% | - | 367 | ||||||
| Total borrowings, gross | 2,598,716 | 2,819,367 | ||||||||
| Unamortized debt discount | (30 | ) | ||||||||
| Unamortized debt issuance costs | (10,588 | ) | ||||||||
| Total borrowings, net | $ | 2,808,749 |
The following table summarizes the Company’s outstanding borrowings as of December 31, 2024:
| (Dollars in thousands) | Stated Interest<br><br> <br>Rates | Weighted Average<br><br> <br>Interest Rate | Credit Card Collateral<br><br> <br>Amount | Principal | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Borrowings | ||||||||||
| Term notes | 6.56% | - | 17.07% | 8.31% | $ | 3,266,483 | $ | 2,675,000 | ||
| Variable funding notes | 6.94% | - | 14.48% | 9.46% | 247,914 | 226,000 | ||||
| Unsecured Debt | 2.14% | 2.14% | - | 917 | ||||||
| Total borrowings, gross | 3,514,397 | 2,901,917 | ||||||||
| Unamortized debt discount | (94 | ) | ||||||||
| Unamortized debt issuance costs | (14,329 | ) | ||||||||
| Total borrowings, net | $ | 2,887,494 |
On January 31, 2024, the Company entered into a new 2024 term loan series (MFCCMT 2024-1) for $750m and a second 2024 term loan (MFCCMT 2024-2) on June 21, 2024 for $700 million. Subsequently, on October 7, 2024, the Company closed on a Variable Funding Note (VFN) under the 2024 series for $120 million, and on October 31, 2024, added a third 2024 term loan for $250 million. These transactions reflect the Company’s proactive approach to managing its debt obligations by refinancing and reducing outstanding balances under various MFCCMT series. On February 7, 2025, the Company closed its fifth Term Series master trust transaction, issuing $500 million in Class A and Class B notes priced at a monthly floating rate. The new Term Series has a stated maturity date of May 2026. In connection with this transaction, the MFCCMT 2023-1 series was paid down and redeemed in full at $979.2 million, utilizing proceeds from the new Term Series and $448 million of variable funding note (VFN) advances from the 2021, 2022, and 2024 series.
Term notes include the MFCCMT 2024-1 series (January 2024), MFCCMT 2024-2 (June 2024), and MFCCMT 2024-A (October 2024) and MFCCMT 2025-A (February 2025). Variable Funding Notes include the MFCCMT 2021-VFN1 Series (March 2021), MFCCMT 2021-VFN2 Series (September 2021), MFCCMT 2022-VFN1 Series (October 2022), and MFCCMT 2024-1 Series (October 2024). The borrowings are included in the table above. The MFCCMT notes are secured via $3.0 billion of credit card loan collateral as of June 30, 2025 and $3.1 billion of credit card loan collateral as of June 30, 2024.
9
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
The Company pays unused commitment fees on its VFNs for each interest period occurring during the revolving period calculated using the average utilization for each interest period. The Company paid commitment fees of $3.24 million during the six months ended June 30, 2025 and $3.16 million during the six months ended June 30, 2024, which is recorded as an interest expense on the Statements of Operations.
As of June 30, 2025, certain borrowings are due in subsequent fiscal years as follows:
| Year Ending | Principal | |
|---|---|---|
| December 31, | (In thousands) | |
| 2025 | $ | 98,534 |
| 2026 | 1,172,000 | |
| 2027 | 1,367,250 | |
| 2028 | 181,583 | |
| 2029 | - | |
| 2030 and thereafter | - | |
| Total | $ | 2,819,367 |
The repayments in the maturity date table above are based on minimum required contractual payments that begin when the controlled amortization period commences for the respective classes of MFCCMT 2024-1, MFCCMT 2024-2, MFCCMT 2024-A, and MFCCMT 2025-A to the extent that such debt is not refinanced. The Company intends to refinance or repay the borrowings prior to fully amortizing. These figures do not include payments on excess collateral collected and assume there is no change to drawn amounts on the 2021 VFN1 and VFN2, 2022 VFN1, and the 2024 VFN1.
Restrictive Covenants
The Company's borrowings contain customary representations and warranties relating to certain of its subsidiaries. The borrowings also contain certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of business, transactions with affiliates, and other matters customarily restricted in such agreements. The borrowing also contains certain financial covenants primarily focused on liquidity and tangible equity. The Company was in compliance with its contractual covenants as of June 30, 2025 and December 31, 2024.
10
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
Note 5. Software, Net
Software, net, consisted of the following at June 30, 2025 and December 31, 2024:
| (Dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||
|---|---|---|---|---|---|---|
| Software development costs | $ | 23,472 | $ | 22,675 | ||
| Less: Accumulated depreciation and amortization | (10,271 | ) | (8,355 | ) | ||
| Total software, net | $ | 13,201 | $ | 14,320 |
Depreciation and amortization expense totaled $3.64 million for the six months ended June 30, 2025 and $5.66 million for the twelve months ended December 31, 2024, which is recorded as an other expense on the Statements of Operations.
Note 6. Intangible Assets, Net
Intangible assets, net consisted of the following at June 30, 2025 and December 31, 2024:
| (Dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||
|---|---|---|---|---|---|---|
| PCCR, gross | $ | 60,345 | $ | 59,592 | ||
| Less: Accumulated amortization | (30,471 | ) | (28,472 | ) | ||
| Intangibles, Net | $ | 29,874 | $ | 31,120 |
Amortization expense on PCCR for the six months ended June 30, 2025 was 2.0 million and for the six months ended June 30, 2024 was $2.0 million.
The following table summarizes the estimated future amortization expense on the Company’s intangible assets as of June 30, 2025:
| Year Ending | ||
|---|---|---|
| December 31, (In thousands) | PCCR | |
| 2025 | $ | 1,986 |
| 2026 | 3,973 | |
| 2027 | 3,973 | |
| 2028 | 3,973 | |
| 2029 | 3,973 | |
| Thereafter | 11,996 | |
| Total | $ | 29,874 |
11
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
Note 7. Defined Contribution and Incentive Plans
The Company has a 401(k) retirement plan (the “Plan”) covering all employees meeting certain eligibility requirements. Participants in the Plan may contribute up to the maximum amount, as defined by law, of their compensation. The Company makes certain matching contributions on an annual basis to the Plan. The Company’s contribution to the Plan was $677,000 for the six months ended June 30, 2025 and $724,000 for the six months ended June 30, 2024, presented as part of compensation expense on the Consolidated Statements of Operations.
Note 8. Members’ Equity
As of June 30, 2025, the Company had 1,000 common units issued and outstanding. All units are owned by the Company’s direct parent, Mercury Financial Intermediate LLC.
Note 9. Commitments and Contingencies
Commitments to Lend
As of June 30, 2025 and December 31, 2024, the Company’s had open credit card loan commitments of $4,413,708,001 and $4,038,055,065, respectively. These commitments are not legally binding, and the Company does not anticipate that all of its credit card customers will access their entire available line at any point in time. According, no allowance for credit losses has been accrued for unfunded loan commitments.
Operating Leases
The Company leases certain office space and equipment under non-cancellable operating leases, with expirations through November 2028. The Company is currently entered into two lease agreements, one in Wilmington, DE, and the second in Austin, TX. The lease agreement in Wilmington was renewed on February 1, 2025 with an ending of January 31, 2028. The agreement in Austin commenced on February 1, 2021 and ends on November 30, 2026. Lease expenses for the six months ended June 30, 2025 and June 30, 2024 were the following:
| For the Six Months ended | June 30, 2025 | June 30, 2024 | ||
|---|---|---|---|---|
| Amortization of ROU Assets | $ | 595,027 | $ | 558,791 |
| Total Lease Cost | $ | 595,027 | $ | 558,791 |
Future minimum rental commitments as of June 30, 2025 for all non-cancellable operating leases with initial or remaining terms of one year or more are:
| Year Ending December 31, | Estimated Future Minimum Rental Commitments | |
|---|---|---|
| 2025 | $ | 602,274 |
| 2026 | $ | 1,148,519 |
| 2027 | $ | 532,193 |
| 2028 | $ | 44,349 |
| Total | $ | 2,327,336 |
12
Mercury Financial LLC
Notes to Consolidated Interim Financial Statements – Continued
June 30, 2025
General Litigation
The Company is subject to legal proceedings and claims in the ordinary course of business. Management of the Company believes that final disposition of such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, cash flows or liquidity.
In June 2025, the Company paid $5.75 million as the gross settlement amount to settle a lawsuit in the U.S. District Court for the District of Maryland upon which the Company recognized the related loss on settlement.
Note 10. Subsequent Events
The Company evaluated, for recognition and disclosure, all events or transactions that occurred after June 30, 2025, through November 28, 2025, which is the date these consolidated financial statements were available to be issued, and determined that there have not been any events that have occurred that would require adjustments to, or disclosures in, the consolidated financial statements, except the following:
In July 2025, $14 million of draws on MFCCMT 2022-VFN1 and $13.6 million of draws on MFCCMT 2024-VFN1.
On September 11, 2025, Mercury Financial LLC was acquired by Atlanticus Holding Corporation (“Atlanticus”). The transaction represents a change in ownership and control of the Company.
On October 30, 2025, the MFCCMT 2024-A term series was paid off in full ($250 million) using $235 million from draws on the various VFNs and $15 million from operating cash.
13
ex_892425.htm
EXHIBIT 99.3
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
On September 11, 2025, Mercury Finance Acquisitions, LLC, a Georgia limited liability company, and wholly-owned subsidiary of Atlanticus Holdings Corporation (“Atlanticus” or the “Company”), entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Mercury Financial Intermediate LLC, a Delaware limited liability company (“Seller”) and Mercury Financial LLC, a Delaware limited liability company (“Mercury”), to acquire all of the issued and outstanding equity interests of Mercury (the “Acquisition”). Mercury is a leading data- and tech-centric credit card platform used to provide credit cards to near-prime consumers in the U.S. As a result of the Acquisition, the Company added approximately 1.3 million credit card accounts and $3.2 billion in credit card receivables.
The following Unaudited Condensed Consolidated Pro Forma Statements of Operations are presented to illustrate the estimated effects of the Acquisition based on the historical financial statements and accounting records of Atlanticus, including the Acquisition-related pro forma adjustments as described in the notes below.
The following Unaudited Condensed Consolidated Pro Forma Statements of Operations and related notes are being provided for illustrative purposes only and do not purport to represent what the consolidated company’s actual results of operations would have been had the Acquisition been completed on the dates indicated, nor are they necessarily indicative of the consolidated company’s future results of operations for any future period. Future results may vary significantly from the results reflected in the Unaudited Condensed Consolidated Pro Forma Statements of Operations. In Atlanticus’ opinion, all adjustments that are necessary to present fairly the Unaudited Condensed Consolidated Pro Forma Statements of Operations have been made.
The Unaudited Condensed Consolidated Pro Forma Statements of Operations have been prepared by the Company as an acquisition of assets rather than a business in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 805-50. As an asset acquisition, the cost to acquire the group of assets is allocated to the individual assets acquired or liabilities assumed based on their relative fair values. The relative fair values of identifiable tangible and intangible assets acquired and liabilities assumed from the Acquisition are based on fair value using assumptions described in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2025, as filed with the United States Securities and Exchange Commission ("SEC") on November 10, 2025.
The Unaudited Condensed Consolidated Pro Forma Statements of Operations are based on and should be read in conjunction with the following:
| (i) | The accompanying notes to the Unaudited Condensed Consolidated Pro Forma Statements of Operations; |
|---|---|
| (ii) | The Company’s audited historical consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 13, 2025; |
| --- | --- |
| (iii) | The Company’s unaudited historical consolidated financial statements and related notes included in its quarterly report on Form 10-Q for the nine months ended September 30, 2025, filed with the SEC on November 10, 2025; |
| --- | --- |
| (iv) | The historical audited consolidated financial statements and related notes of Mercury for the year ended December 31, 2024, included as Exhibit 99.1 to this Current Report Form 8-K; |
| --- | --- |
| (v) | The unaudited consolidated interim historical financial statements of Mercury for the six months ended June 30, 2025, included as Exhibit 99.2 to this Current Report Form 8-K; and |
| --- | --- |
| (vi) | The Purchase Agreement, included as Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on September 17, 2025. |
| --- | --- |
The Unaudited Condensed Consolidated Pro Forma Statements of Operations for the nine months ended September 30, 2025 combines the Company’s historical results for the nine months ended September 30, 2025 with Mercury’s Unaudited Condensed Consolidated Statement of Operations for the period January 1, 2025 through September 10, 2025, immediately preceding the acquisition date. The Unaudited Condensed Consolidated Pro Forma Statements of Operations for the year ended December 31, 2024 combines the Company’s historical results for the year ended December 31, 2024 with Mercury’s historical results for the year ended December 31, 2024. The Unaudited Condensed Consolidated Pro Forma Statements of Operations give effect to the Acquisition as if it had been consummated on January 1, 2024.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
| Atlanticus Holdings Corporation As Reported | Mercury Financial LLC Year to Date Period Ended September 10, 2025 as reclassified (Note 2) | Transaction Adjustments (Note 4) | Ref. | Pro Forma Consolidated | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue and other income: | |||||||||||||
| Consumer loans, including past due fees | 865,168 | 613,476 | - | 1,478,644 | |||||||||
| Fees and related income on earning assets | 296,201 | 25,715 | - | 321,916 | |||||||||
| Other revenue | 72,616 | 17,284 | - | 89,900 | |||||||||
| Total operating revenue and other income | 1,233,985 | 656,474 | - | 1,890,459 | |||||||||
| Other non-operating income | 20 | 138 | - | 158 | |||||||||
| Total revenue and other income | 1,234,005 | 656,612 | - | 1,890,617 | |||||||||
| Interest expense | (176,678 | ) | (173,219 | ) | 7,260 | (a) | (342,637 | ) | |||||
| Provision for credit losses | (3,999 | ) | (410,498 | ) | 410,498 | (b) | (3,999 | ) | |||||
| Changes in fair value of loans | (671,973 | ) | - | (396,984 | ) | (b) | (1,068,957 | ) | |||||
| Net Margin | 381,355 | 72,895 | 20,774 | 475,024 | |||||||||
| Operating expenses: | |||||||||||||
| Salaries and benefits | (47,080 | ) | (46,928 | ) | - | (94,008 | ) | ||||||
| Card and loan servicing | (105,261 | ) | (41,006 | ) | - | (146,267 | ) | ||||||
| Marketing and solicitation | (80,584 | ) | (16,584 | ) | (2,709 | ) | (c) | (99,877 | ) | ||||
| Depreciation | (3,173 | ) | (8,410 | ) | 3,706 | (d) | (7,878 | ) | |||||
| Other | (31,764 | ) | (36,624 | ) | (68,388 | ) | |||||||
| Total operating expenses | (267,862 | ) | (149,552 | ) | 996 | (416,418 | ) | ||||||
| Income before income taxes | 113,493 | (76,658 | ) | 21,771 | 58,606 | ||||||||
| Income tax expense | (27,493 | ) | - | 13,428 | (e) | (14,065 | ) | ||||||
| Net income | 86,000 | (76,658 | ) | 35,198 | 44,541 | ||||||||
| Net loss attributable to noncontrolling interests | 1,070 | - | - | 1,070 | |||||||||
| Net income attributable to controlling interests | 87,070 | (76,658 | ) | 35,198 | 45,611 | ||||||||
| Preferred stock and preferred unit dividends and discount accretion | (8,103 | ) | - | - | (8,103 | ) | |||||||
| Net income attributable to common shareholders | 78,967 | (76,658 | ) | 35,198 | 37,508 | ||||||||
| Net income attributable to common shareholders per common share-basic | 5.22 | 2.48 | |||||||||||
| Net income attributable to common shareholders per common share-diluted | 4.21 | 1.95 |
The accompanying notes are an integral part of these unaudited pro forma Consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2024
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
| Atlanticus Holdings Corporation As Reported | Mercury Financial LLC Year to Date Period Ended December 31, 2024 as reclassified (Note 2) | Transaction Adjustments (Note 4) | Ref. | Pro Forma Consolidated | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue and other income: | |||||||||||||
| Consumer loans, including past due fees | 979,814 | 992,549 | - | 1,972,363 | |||||||||
| Fees and related income on earning assets | 269,771 | 36,295 | - | 306,066 | |||||||||
| Other revenue | 60,370 | 25,667 | - | 86,037 | |||||||||
| Total operating revenue and other income | 1,309,955 | 1,054,511 | - | 2,364,466 | |||||||||
| Other non-operating income | 1,489 | 316 | - | 1,805 | |||||||||
| Total revenue and other income | 1,311,444 | 1,054,827 | - | 2,366,271 | |||||||||
| Interest expense | (160,173 | ) | (283,984 | ) | 12,040 | (a) | (432,117 | ) | |||||
| Provision for credit losses | (16,368 | ) | (688,124 | ) | 688,124 | (b) | (16,368 | ) | |||||
| Changes in fair value of loans | (733,471 | ) | - | (545,759 | ) | (b) | (1,279,230 | ) | |||||
| Net Margin | 401,432 | 82,719 | 154,406 | 638,557 | |||||||||
| Operating expenses: | |||||||||||||
| Salaries and benefits | (50,143 | ) | (57,127 | ) | - | (107,270 | ) | ||||||
| Card and loan servicing | (118,400 | ) | (72,015 | ) | - | (190,415 | ) | ||||||
| Marketing and solicitation | (56,186 | ) | (35,521 | ) | 3,217 | (c) | (88,490 | ) | |||||
| Depreciation | (2,715 | ) | (9,850 | ) | 2,845 | (d) | (9,720 | ) | |||||
| Other | (35,411 | ) | (37,209 | ) | - | (72,620 | ) | ||||||
| Total operating expenses | (262,855 | ) | (211,723 | ) | 6,062 | (468,516 | ) | ||||||
| Income before income taxes | 138,577 | (129,004 | ) | 160,468 | 170,041 | ||||||||
| Income tax expense | (28,471 | ) | - | (6,217 | ) | (e) | (34,688 | ) | |||||
| Net income | 110,106 | (129,004 | ) | 154,250 | 135,353 | ||||||||
| Net loss attributable to noncontrolling interests | 1,190 | - | - | 1,190 | |||||||||
| Net income attributable to controlling interests | 111,296 | (129,004 | ) | 154,250 | 136,543 | ||||||||
| Preferred stock and preferred unit dividends and discount accretion | (23,928 | ) | - | - | (23,928 | ) | |||||||
| Net income attributable to common shareholders | 87,368 | (129,004 | ) | 154,250 | 112,615 | ||||||||
| Net income attributable to common shareholders per common share-basic | 5.92 | 7.64 | |||||||||||
| Net income attributable to common shareholders per common share-diluted | 4.77 | 5.99 |
The accompanying notes are an integral part of these unaudited pro forma Consolidated financial statements.
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
| 1. | Description of the Acquisition and Basis of Presentation |
|---|
On September 11, 2025, the Company completed its previously announced acquisition of Mercury. As consideration for the acquisition of Mercury, the Company paid total consideration of $206.5 million, $166.5 million of which was funded through cash on hand and $40.0 million attributable to the fair value of contingent consideration. See Note 3 for further discussion on the determination and allocation of purchase price.
The Unaudited Condensed Consolidated Pro Forma Statements of Operations have been prepared in accordance with Article 11 of Regulation S-X and has been compiled from the historical financial statements of the Company and Mercury. Unaudited Condensed Consolidated Pro Forma Statements of Operations have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and should be read in conjunction with the information included in the introduction. The Unaudited Condensed Consolidated Pro Forma Statements of Operations are presented for informational purposes only and are not necessarily indicative of what the Consolidated company’s results of operations actually would have been had the Acquisition been completed as of January 1, 2024. In addition, the Unaudited Condensed Consolidated Pro Forma Statements of Operations do not purport to project the future operating results of the consolidated Company.
The Unaudited Condensed Consolidated Pro Forma Statements of Operations have been prepared by the Company as an acquisition of assets rather than a business in accordance with FASB ASC Subtopic 805-50. As an asset acquisition, the cost to acquire the group of assets is allocated to the individual assets acquired or liabilities assumed based on their relative fair values. The relative fair values of identifiable tangible and intangible assets acquired and liabilities assumed from the Acquisition are based on a estimate of fair value using assumptions described in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2025, as filed with the SEC on November 10, 2025.
A pro forma balance sheet is not presented as the Company’s most recent balance sheet already reflects the Acquisition. The Unaudited Condensed Consolidated Pro Forma Statement of Operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024 were prepared as if the Acquisition had occurred on January 1, 2024.
The historical consolidated financial information has been adjusted in the Unaudited Condensed Consolidated Pro Forma Statements of Operations to give effect to the pro forma events that are directly related to the Acquisition, factually supportable and expected to have a continuing effect on the results of the Consolidated company.
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
| 2. | Reclassification Adjustments |
|---|
As part of the preparation of the Unaudited Condensed Consolidated Pro Forma Statements of Operations, certain reclassifications were made to align the Company and Mercury’s financial statement presentation. As a result, the Company has identified and recorded the following reclassification adjustments:
| Mercury Historical | **** | **** | **** | **** | **** | **** | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mercury Caption | Atlanticus Caption | Six Months<br><br> <br>Ended June<br><br> <br>30, 2025 | Period From<br><br> <br>July 1, 2025<br><br> <br>to<br><br> <br>September<br><br> <br>10, 2025 | Year to Date<br><br> <br>Period Ended September 10,<br><br> <br>2025 | Reclassification Adjustments | Ref. | Mercury As<br><br> <br>Adjusted | ||||||||||
| Interest Income | 425,764 | 165,688 | 591,452 | (591,452 | ) | (i) | - | ||||||||||
| Late fees | 15,356 | 6,669 | 22,024 | (22,024 | ) | (i) | - | ||||||||||
| Consumer loans, including past due fees | - | - | - | 613,476 | (i) | 613,476 | |||||||||||
| Interchange fees, net | (116 | ) | (116 | ) | 116 | (ii) | - | ||||||||||
| Other non-interest income | 8,742 | 3,370 | 12,112 | (12,112 | ) | (ii) | - | ||||||||||
| Interest Income | 9,805 | 3,913 | 13,718 | (13,718 | ) | (ii) | |||||||||||
| Fees and related income on earning assets | - | - | - | 25,715 | (ii) | 25,715 | |||||||||||
| Interchange fees, net | 12,815 | 4,468 | 17,284 | (17,284 | ) | (iii) | - | ||||||||||
| Other revenue | - | - | - | 17,284 | (iii) | 17,284 | |||||||||||
| Other Expenses | (60 | ) | (21 | ) | (80 | ) | 80 | (iv) (v) | - | ||||||||
| Other non-interest income | - | 57 | 57 | (57 | ) | (iv) | - | ||||||||||
| Other non-operating income | - | - | - | 138 | (iv) | 138 | |||||||||||
| Other Expenses | 6,143 | 2,018 | 8,161 | (8,161 | ) | (vi) | - | ||||||||||
| General and administrative | 3,377 | 1,291 | 4,668 | (4,668 | ) | (vi) | - | ||||||||||
| Legal and Professional | 17,623 | 4,872 | 22,495 | (22,495 | ) | (vi) | - | ||||||||||
| Compensation | 756 | 305 | 1,061 | (1,061 | ) | (vi) | - | ||||||||||
| Marketing | 107 | 49 | 156 | (156 | ) | (vi) | - | ||||||||||
| Provision for credit losses | 69 | 14 | 83 | (83 | ) | (vi) | - | ||||||||||
| Other | - | - | - | (36,624 | ) | (vi) (vii) | (36,624 | ) | |||||||||
| Compensation | 33,792 | 12,303 | 46,096 | (46,096 | ) | (viii) | - | ||||||||||
| Other Expenses | 612 | 221 | 833 | (833 | ) | (viii) | - | ||||||||||
| Salaries and Benefits | - | - | - | (46,928 | ) | (viii) (ix) | (46,928 | ) | |||||||||
| Marketing | 2,500 | 685 | 3,185 | (3,185 | ) | (x) | - | ||||||||||
| Interest Income | (9,499 | ) | (3,995 | ) | (13,495 | ) | 13,495 | (x) | - | ||||||||
| Other Expenses | 625 | 180 | 805 | (805 | ) | (x) | - | ||||||||||
| General and administrative | (689 | ) | (212 | ) | (900 | ) | 900 | (x) | - | ||||||||
| Marketing and solicitation | - | - | - | (16,584 | ) | (x) (xi) | (16,584 | ) | |||||||||
| Interest income | (47,056 | ) | (18,286 | ) | (65,342 | ) | 65,342 | (xii) | - | ||||||||
| Other non-interest incomes | (1,037 | ) | (369 | ) | (1,406 | ) | 1,406 | (xii) | - | ||||||||
| Other Expenses | 4,146 | (9,770 | ) | (5,624 | ) | 5,624 | (xii) | - | |||||||||
| Provision for credit losses | 222,806 | 115,321 | 338,128 | (338,128 | ) | (xiii) | - | ||||||||||
| Provision for credit losses | - | - | - | (410,498 | ) | (xii) (xiii) | (410,498 | ) | |||||||||
| Interchange fees, net | (4,640 | ) | (1,906 | ) | (6,547 | ) | 6,547 | (xiv) | - | ||||||||
| General and administrative | 27,498 | 8,205 | 35,703 | (35,703 | ) | (xiv) | - | ||||||||||
| Other Expenses | 30 | 43 | 72 | (72 | ) | (xiv) | - | ||||||||||
| Provision for credit losses | 65 | 9 | 74 | (74 | ) | (xiv) | - | ||||||||||
| Compensation | (1,019 | ) | (372 | ) | (1,390 | ) | 1,390 | (xiv) | - | ||||||||
| Card and loan servicing | - | - | - | (41,006 | ) | (xiv) (xv) | (41,006 | ) | |||||||||
| Other Expenses | 3,666 | 1,963 | 5,629 | (5,629 | ) | (xvi) | - | ||||||||||
| Amortization of intangible assets | 1,999 | 782 | 2,781 | (2,781 | ) | (xvi) | - | ||||||||||
| Depreciation | - | - | - | (8,410 | ) | (xvi) (xvii) | (8,410 | ) | |||||||||
| Interest Expense | Interest Expense | 126,455 | 46,764 | 173,219 | (346,439 | ) | (xviii) | (173,219 | ) |
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
| (i) | Represents a reclassification from “Interest income” and "Late fees" to “Consumer loans, including past due fees". |
|---|---|
| (ii) | Represents a reclassification from “Interchange fees, net”, "Other non-interest income" and "Interest Income" to “Fees and related income on earning assets". |
| --- | --- |
| (iii) | Represents a reclassification from “Interchange fees, net” to “Other revenue". |
| --- | --- |
| (iv) | Represents a reclassification from “Other expenses” and "Other non-interest income" to “Other non-operating income". |
| --- | --- |
| (v) | Represents the presentation of the balances in “Other expenses” into a negative value within “Other non-operating income”. |
| --- | --- |
| (vi) | Represents a reclassification from “Other expenses”, "General and administrative", "Legal and professional", "Compensation", "Marketing", and "Provision for credit losses" to “Other”. |
| --- | --- |
| (vii) | Represents the presentation of the balances in “Other expenses”, "General and administrative", "Legal and professional", "Compensation", "Marketing", and "Provision for credit losses" into a negative value within “Other”. |
| --- | --- |
| (viii) | Represents a reclassification from “Compensation” and "Other expenses" to “Salaries and benefits”. |
| --- | --- |
| (ix) | Represents the presentation of balances in “Compensation” and "Other expenses" into a negative value within "Salaries and benefits". |
| --- | --- |
| (x) | Represents a reclassification from “Marketing”, "Interest Income", "Other expenses", and "General and administrative" to “Marketing and solicitation”. |
| --- | --- |
| (xi) | Represents the presentation of balances in “Marketing”, "Interest Income", and "General and administrative" into a negative value within “Marketing and solicitation”. |
| --- | --- |
| (xii) | Represents a reclassification from “Interest income”, "Other Expenses" and "Other non-interest income" to “Provision for credit losses". |
| --- | --- |
| (xiii) | Represents the presentation of the balances in "Provision for credit losses" into a negative value within “Provision for credit losses". |
| --- | --- |
| (xiv) | Represents a reclassification from “Interchange fees, net”, "General and administrative", "Other expenses", Provision for credit losses" and "Compensation" to “Card and loan servicing". |
| --- | --- |
| (xv) | Represents the presentation of balances in "General and administrative", "Other expenses", Provision for credit losses" and "Compensation" into a negative value within “Card and loan servicing". |
| --- | --- |
| (xvi) | Represents a reclassification from “Other expenses” and "Amortization of intangible assets" to “Depreciation". |
| --- | --- |
| (xvii) | Represents the presentation of the balances in “Other expenses” and "Amortization of intangible assets" into a negative value within “Depreciation". |
| --- | --- |
| (xviii) | Represents the presentation of balances within “Interest expense” into a negative value within “Interest expense”. |
| --- | --- |
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
| Mercury Caption | Atlanticus Caption | Mercury<br><br> <br>Historical<br><br> <br>Year Ended<br><br> <br>December 31,<br><br> <br>2024 | Reclassification<br><br> <br>Adjustments | Ref. | Mercury As<br><br> <br>Adjusted | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | Consumer loans, including past due fees | 896,815 | (896,815 | ) | (i) | - | |||||
| Late fees | Consumer loans, including past due fees | 96,030 | (96,030 | ) | (i) | - | |||||
| Other non-interest income | Consumer loans, including past due fees | (296 | ) | 296 | (i) | - | |||||
| Consumer loans, including past due fees | - | 992,549 | (i) | 992,549 | |||||||
| Interchange fees, net | Fees and related income on earning assets | (410 | ) | 410 | (ii) | - | |||||
| Other non-interest income | Fees and related income on earning assets | 15,529 | (15,529 | ) | (ii) | - | |||||
| Interest income | Fees and related income on earning assets | 21,175 | (21,175 | ) | (ii) | - | |||||
| Fees and related income on earning assets | - | 36,295 | (ii) | 36,295 | |||||||
| Interchange fees, net | Other revenue | 25,740 | (25,740 | ) | (iii) | - | |||||
| Other Expenses | Other revenue | 73 | (73 | ) | (iii) | - | |||||
| Other revenue | - | 25,667 | (iii) (iv) | 25,667 | |||||||
| Other non-interest income | Other non-operating income | 316 | (316 | ) | (v) | - | |||||
| Other non-operating income | - | 316 | (v) | 316 | |||||||
| Other Expenses | Other | 11,587 | (11,587 | ) | (vi) | - | |||||
| General and administrative | Other | 7,191 | (7,191 | ) | (vi) | - | |||||
| Legal and Professional | Other | 16,154 | (16,154 | ) | (vi) | - | |||||
| Compensation | 2,049 | (2,049 | ) | (vi) | - | ||||||
| Marketing | Other | 114 | (114 | ) | (vi) | - | |||||
| Provision for credit losses | 113 | (113 | ) | (vi) | - | ||||||
| Other | - | (37,209 | ) | (vi) (vii) | (37,209 | ) | |||||
| Compensation | 55,603 | (55,603 | ) | (viii) | - | ||||||
| Other Expenses | Salaries and benefits | 1,524 | (1,524 | ) | (viii) | - | |||||
| Salaries and benefits | - | (57,127 | ) | (viii) (ix) | (57,127 | ) | |||||
| Marketing | Marketing and solicitation | 7,576 | (7,576 | ) | (x) | - | |||||
| Interest income | (27,940 | ) | 27,940 | (x) | - | ||||||
| Other Expenses | Marketing and solicitation | 1,131 | (1,131 | ) | (x) | - | |||||
| General and administrative | (1,125 | ) | 1,125 | (x) | - | ||||||
| Marketing and solicitation | - | (35,521 | ) | (x) (xi) | (35,521 | ) | |||||
| Interest income | (94,902 | ) | 94,902 | (xii) | - | ||||||
| Other non-interest income | Changes in fair value of loans | (1,351 | ) | 1,351 | (xii) | - | |||||
| Provision for credit losses | 521,188 | (521,188 | ) | (xiii) | - | ||||||
| Late fees | Changes in fair value of loans | (59,370 | ) | 59,370 | (xii) | - | |||||
| Other Expenses | 11,313 | (11,313 | ) | (xii) | - | ||||||
| Provision for credit losses | - | (688,124 | ) | (xii) (xiii) | (688,124 | ) | |||||
| Interchange fees, net | (10,929 | ) | 10,929 | (xiv) | - | ||||||
| General and administrative | Card and loan servicing | 62,808 | (62,808 | ) | (xiv) | - | |||||
| Other Expenses | 56 | (56 | ) | (xiv) | - | ||||||
| Provision for credit losses | Card and loan servicing | 536 | (536 | ) | (xiv) | - | |||||
| Compensation | (2,313 | ) | 2,313 | (xiv) | - | ||||||
| Card and loan servicing | - | (72,015 | ) | (xiv) (xv) | (72,015 | ) | |||||
| Other Expenses | 5,877 | (5,877 | ) | (xvi) | - | ||||||
| Amortization of intangible assets | 3,973 | (3,973 | ) | (xvi) | - | ||||||
| Depreciation | - | (9,850 | ) | (xvi) (xvii) | (9,850 | ) | |||||
| Interest expense | Interest expense | 283,984 | (567,968 | ) | (xviii) | (283,984 | ) | ||||
| (xviii) | Represents a reclassification from “Interest income”, "Late fees", and "Other non-interest income" to “Consumer loans, including past due fees". | ||||||||||
| --- | --- | ||||||||||
| (xix) | Represents a reclassification from “Interchange fees, net”, "Other non-interest income" and "Interest Income" to “Fees and related income on earning assets". | ||||||||||
| --- | --- | ||||||||||
| (xx) | Represents a reclassification from “Interchange fees, net” and "Other expenses" to “Other revenue". | ||||||||||
| --- | --- | ||||||||||
| (xxi) | Represents the presentation of the balances in “Other expenses” into a negative value within “Other revenue”. | ||||||||||
| --- | --- | ||||||||||
| (xxii) | Represents a reclassification from "Other non-interest income" to “Other non-operating income". | ||||||||||
| --- | --- | ||||||||||
| (xxiii) | Represents a reclassification from “Other expenses”, "General and administrative", "Legal and professional", "Compensation", "Marketing", and "Provision for credit losses" to “Other”. | ||||||||||
| --- | --- | ||||||||||
| (xxiv) | Represents the presentation of the balances in “Other expenses”, "General and administrative", "Legal and professional", "Compensation", "Marketing", and "Provision for credit losses" into a negative value within “Other”. | ||||||||||
| --- | --- |
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
| (xxv) | Represents a reclassification from “Compensation” and "Other expenses" to “Salaries and benefits”. |
|---|---|
| (xxvi) | Represents the presentation of balances in “Compensation” and "Other expenses" into a negative value within "Salaries and benefits". |
| --- | --- |
| (xxvii) | Represents a reclassification from “Marketing”, "Interest Income", "Other expenses", and "General and administrative" to “Marketing and solicitation”. |
| --- | --- |
| (xxviii) | Represents the presentation of balances in “Marketing”, "Interest Income", and "General and administrative" into a negative value within “Marketing and solicitation”. |
| --- | --- |
| (xxix) | Represents a reclassification from “Interest income”, "Other non-interest income", "Late fees", and "Other expenses" to “Provision for credit losses". |
| --- | --- |
| (xxx) | Represents the presentation of the balances in "Provision for credit losses" and "Other expenses" into a negative value within “Provision for credit losses". |
| --- | --- |
| (xxxi) | Represents a reclassification from “Interchange fees, net”, "General and administrative", "Other expenses", "Provision for credit losses" and "Compensation" to “Card and loan servicing". |
| --- | --- |
| (xxxii) | Represents the presentation of balances in "General and administrative", "Other expenses", "Provision for credit losses" and "Compensation" into a negative value within “Card and loan servicing". |
| --- | --- |
| (xxxiii) | Represents a reclassification from “Other expenses” and "Amortization of intangibles" to “Depreciation". |
| --- | --- |
| (xxxiv) | Represents the presentation of the balances in “Other expenses” and "Amortization of intangibles" into a negative value within “Depreciation". |
| --- | --- |
| (xxxv) | Represents the presentation of balances within “Interest expense” into a negative value within “Interest expense”. |
| --- | --- |
| 3. | Consideration and Purchase Price Allocation |
| --- | --- |
The following table summarizes the purchase price for the Acquisition:
| (In thousands) | Purchase Price Consideration | |
|---|---|---|
| Cash consideration | $ | 159,802 |
| Direct acquisition-related costs | 6,725 | |
| Fair Value of Contingent Consideration | 40,000 | |
| Total | $ | 206,527 |
The purchase price has been allocated to the acquired assets and assumed liabilities based on estimated fair values in accordance with the requirements of ASC 805-50, Acquisition of Assets Rather than a Business. The table below provides the allocation of purchase price to the assets acquired and liabilities assumed as of the acquisition date.
| (In thousands) | Purchase Price Allocation | ||
|---|---|---|---|
| Fair value of assets acquired | **** | **** | **** |
| Unrestricted cash and cash equivalents | $ | 42,314 | |
| Restricted cash and cash equivalents | 51,351 | ||
| Loans at fair value | 3,009,018 | ||
| Property at cost, net of depreciation | 690 | ||
| Operating lease right-of-use assets | 2,093 | ||
| Prepaid expenses and other assets | 46,081 | ||
| Total assets acquired | **** | 3,151,547 | |
| Fair value of liabilities assumed | **** | **** | **** |
| Accounts payable and accrued expenses | (129,920 | ) | |
| Operating lease liabilities | (2,100 | ) | |
| Notes payable, net | (2,813,000 | ) | |
| Total liabilities assumed | **** | (2,945,020 | ) |
| Net assets acquired | $ | 206,527 |
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The allocation of the total purchase price in the Acquisition is based upon management’s estimates of, and assumptions related to, the fair value of assets acquired and liabilities assumed as of the Closing Date using currently available information and market data as of September 11, 2025. In estimating the fair value of the identifiable acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows and estimated discount rates.
| 4. | Unaudited Condensed Consolidated Pro Forma Statements of Operations Adjustments |
|---|
The pro forma transaction adjustments included in the Unaudited Condensed Consolidated Pro Forma Statement of Operations for the period ended September 30, 2025 are as follows:
| (a) | Adjustment reflects the reversal of $7.3 million of amortization expense for the nine months ended September 30, 2025, related to historically recorded amortization of debt issuance costs. Assumed debt was reset to fair value at the acquisition date and previously capitalized debt issuance costs were written off. As a result, the amortization of the debt issuance costs which was recorded in Mercury’s historical income statement is removed. |
|---|---|
| (b) | Mercury historically recorded loan receivables at amortized cost, and as such, the loan receivables were subject to the Current Expected Credit Loss (“CECL”) model under FASB ASC 326 Financial Instruments – Credit Losses. The CECL model requires an entity to recognize a provision for expected credit losses on its financial assets. In contrast, Atlanticus has elected to record the acquired loan receivables at fair value, a method that inherently reflects changes in credit risk without the need for a separate credit loss provision. Accordingly, this adjustment reflects the removal of the $410.5 million provision for credit losses and records an adjustment that approximates the change in fair value that would have been recorded by Atlanticus. |
| --- | --- |
| (c) | Atlanticus expenses marketing and other costs associated with loan acquisitions as incurred, whereas Mercury has an accounting policy to capitalize certain of these costs. Adjustment reflects reclassification of the total costs capitalized and amortized during the period of $2.7 million to expense to conform Mercury’s accounting policy to that of Atlanticus. |
| --- | --- |
| (d) | Adjustment reflects a net reduction in amortization expense of $3.7 million for the nine months ended September 30, 2025. Adjustment includes amortization of the acquired intangible assets at their fair value based on Mercury’s estimation of the remaining useful lives of these acquired assets. Amortization expense recorded for the acquired intangible assets is offset by the reversal of amortization expense related to intangible assets previously held by Mercury which were not assumed in the acquisition. |
| --- | --- |
Below is a table summarizing the preliminary fair value of the acquired intangible assets, their estimated useful lives, and the resulting amortization expense (in thousands):
| Intangible Assets | Useful Lives | Fair Value | Amortization Expense<br><br> <br>Period Ended<br><br> <br>September 10, 2025 | |||
|---|---|---|---|---|---|---|
| Developed Technology | 5 | $ | 27,025 | $ | 3,732 | |
| Assembled Workforce | 5 | $ | 5,405 | $ | 746 | |
| (e) | To record the income tax effect of the pro forma adjustments, based on a blended federal and state statutory rate of approximately 24.0%, and the related impact on the valuation allowance. The effective tax rate of the Consolidated company could be significantly different than what is presented in these unaudited pro forma consolidated financial statements depending on post-acquisition activities. | |||||
| --- | --- |
The pro forma transaction adjustments included in the Unaudited Condensed Consolidated Pro Forma Statement of Operations for the year ended December 31, 2024 are as follows:
| (a) | Adjustment reflects the reversal of $12.0 million of amortization expense for the year ended December 31, 2024, related to historically recorded amortization of debt issuance costs. Assumed debt was reset to fair value at the acquisition date and previously capitalized debt issuance costs were written off. As a result, the amortization of the debt issuance costs which was recorded in Mercury’s historical income statement is removed. |
|---|
ATLANTICUS HOLDINGS CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)
| (b) | Mercury historically recorded loan receivables at amortized cost, and as such, the loan receivables were subject to the Current Expected Credit Loss (“CECL”) model under FASB ASC 326 Financial Instruments – Credit Losses. The CECL model requires an entity to recognize a provision for expected credit losses on its financial assets. In contrast, Atlanticus has elected to record the acquired loan receivables at fair value, a method that inherently reflects changes in credit risk without the need for a separate credit loss provision. Accordingly, this adjustment reflects the removal of the $688.1 million provision for credit losses and records an adjustment that approximates the change in fair value that would have been recorded by Atlanticus. |
|---|---|
| (c) | Atlanticus expenses marketing and other costs associated with loan acquisitions as incurred, whereas Mercury has an accounting policy to capitalize certain of these costs. Adjustment reflects reclassification of the total costs capitalized and amortized during the period of $3.2 million to expense to conform Mercury’s accounting policy to that of Atlanticus. |
| --- | --- |
| (d) | Adjustment reflects a net reduction in amortization expense of $2.8 million for the year December 31, 2024. Adjustment includes amortization of the acquired intangible assets at their fair value based on Mercury’s estimation of the remaining useful lives of these acquired assets. Amortization expense recorded for the acquired intangible assets is offset by the reversal of amortization expense related to intangible assets previously held by Mercury which were not assumed in the acquisition. |
| --- | --- |
Below is a table summarizing the preliminary fair value of the acquired intangible assets, their estimated useful lives, and the resulting amortization expense (in thousands):
| Intangible Assets | Useful Lives | Fair Value | Amortization Expense<br><br> <br>Year Ended<br><br> <br>December 31, 2024 | |||
|---|---|---|---|---|---|---|
| Developed Technology | 5 | $ | 27,025 | $ | 5,405 | |
| Assembled Workforce | 5 | $ | 5,405 | $ | 1,081 | |
| (e) | To record the income tax effect of the pro forma adjustments, based on a blended federal and state statutory rate of approximately 20.4%, and the related impact on the valuation allowance. The effective tax rate of the Consolidated company could be significantly different than what is presented in these unaudited pro forma consolidated financial statements depending on post-acquisition activities. | |||||
| --- | --- | |||||
| 5. | Pro Forma Earnings Per Share | |||||
| --- | --- |
The table below represents the calculation of the weighted average shares outstanding and earnings per share included in the Unaudited Condensed Consolidated Pro Forma Statements of Operations for the nine months ended September 30, 2025 and the year ended December 31, 2024. The Unaudited Condensed Consolidated pro forma basic and diluted earnings per share calculations are based on the weighted average basic and diluted shares of Atlanticus. The following table summarizes the computation of the Unaudited Condensed Consolidated pro forma basic and diluted net income per share:
| (In thousands, except for share and per share amounts) | Nine Months Ended<br><br> <br>September 30, 2025 | Year Ended December 31,<br><br> <br>2024 | ||
|---|---|---|---|---|
| Pro Forma Net Income Attributable to Shareholders | 37,508 | 112,615 | ||
| Pro Forma Weighted Average Shares Outstanding | **** | **** | **** | **** |
| Pro Forma Weighted Average Shares Outstanding – Basic | 15,121 | 14,748 | ||
| Pro Forma Weighted Average Shares Outstanding – Diluted | 19,189 | 18,801 | ||
| Pro Forma Net Earnings Attributable to Shareholders | **** | **** | **** | **** |
| Pro Forma Net Earnings Attributable to Shareholders – Basic | 2.48 | 7.64 | ||
| Pro Forma Net Earnings Attributable to Shareholders – Diluted | 1.95 | 5.99 |