false2020Q3000118534812/310.010.012,0002,0000.010.01100,000100,00045,57945,41645,57945,416P1YP1Y00011853482020-01-012020-09-30xbrli:shares00011853482020-11-03iso4217:USD00011853482020-09-3000011853482019-12-31iso4217:USDxbrli:shares00011853482020-07-012020-09-3000011853482019-07-012019-09-3000011853482019-01-012019-09-300001185348us-gaap:CommonStockMember2019-12-310001185348us-gaap:AdditionalPaidInCapitalMember2019-12-310001185348us-gaap:RetainedEarningsMember2019-12-310001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001185348us-gaap:NoncontrollingInterestMember2019-12-310001185348us-gaap:RetainedEarningsMember2020-01-012020-03-310001185348us-gaap:NoncontrollingInterestMember2020-01-012020-03-3100011853482020-01-012020-03-310001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001185348us-gaap:CommonStockMember2020-01-012020-03-310001185348us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001185348us-gaap:CommonStockMember2020-03-310001185348us-gaap:AdditionalPaidInCapitalMember2020-03-310001185348us-gaap:RetainedEarningsMember2020-03-310001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001185348us-gaap:NoncontrollingInterestMember2020-03-3100011853482020-03-310001185348us-gaap:RetainedEarningsMember2020-04-012020-06-300001185348us-gaap:NoncontrollingInterestMember2020-04-012020-06-3000011853482020-04-012020-06-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001185348us-gaap:CommonStockMember2020-04-012020-06-300001185348us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001185348us-gaap:CommonStockMember2020-06-300001185348us-gaap:AdditionalPaidInCapitalMember2020-06-300001185348us-gaap:RetainedEarningsMember2020-06-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001185348us-gaap:NoncontrollingInterestMember2020-06-3000011853482020-06-300001185348us-gaap:RetainedEarningsMember2020-07-012020-09-300001185348us-gaap:NoncontrollingInterestMember2020-07-012020-09-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001185348us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001185348us-gaap:CommonStockMember2020-09-300001185348us-gaap:AdditionalPaidInCapitalMember2020-09-300001185348us-gaap:RetainedEarningsMember2020-09-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001185348us-gaap:NoncontrollingInterestMember2020-09-300001185348us-gaap:CommonStockMember2018-12-310001185348us-gaap:AdditionalPaidInCapitalMember2018-12-310001185348us-gaap:RetainedEarningsMember2018-12-310001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001185348us-gaap:NoncontrollingInterestMember2018-12-3100011853482018-12-310001185348us-gaap:RetainedEarningsMember2019-01-012019-03-310001185348us-gaap:NoncontrollingInterestMember2019-01-012019-03-3100011853482019-01-012019-03-310001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310001185348us-gaap:CommonStockMember2019-01-012019-03-310001185348us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310001185348us-gaap:CommonStockMember2019-03-310001185348us-gaap:AdditionalPaidInCapitalMember2019-03-310001185348us-gaap:RetainedEarningsMember2019-03-310001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310001185348us-gaap:NoncontrollingInterestMember2019-03-3100011853482019-03-310001185348us-gaap:RetainedEarningsMember2019-04-012019-06-300001185348us-gaap:NoncontrollingInterestMember2019-04-012019-06-3000011853482019-04-012019-06-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300001185348us-gaap:CommonStockMember2019-04-012019-06-300001185348us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300001185348us-gaap:CommonStockMember2019-06-300001185348us-gaap:AdditionalPaidInCapitalMember2019-06-300001185348us-gaap:RetainedEarningsMember2019-06-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001185348us-gaap:NoncontrollingInterestMember2019-06-3000011853482019-06-300001185348us-gaap:RetainedEarningsMember2019-07-012019-09-300001185348us-gaap:NoncontrollingInterestMember2019-07-012019-09-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001185348us-gaap:CommonStockMember2019-07-012019-09-300001185348us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001185348us-gaap:CommonStockMember2019-09-300001185348us-gaap:AdditionalPaidInCapitalMember2019-09-300001185348us-gaap:RetainedEarningsMember2019-09-300001185348us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001185348us-gaap:NoncontrollingInterestMember2019-09-3000011853482019-09-30praa:segment0001185348country:US2020-07-012020-09-300001185348country:US2020-09-300001185348country:US2019-07-012019-09-300001185348country:US2019-09-300001185348country:GB2020-07-012020-09-300001185348country:GB2020-09-300001185348country:GB2019-07-012019-09-300001185348country:GB2019-09-300001185348praa:ForeignCountriesMember2020-07-012020-09-300001185348praa:ForeignCountriesMember2020-09-300001185348praa:ForeignCountriesMember2019-07-012019-09-300001185348praa:ForeignCountriesMember2019-09-300001185348country:US2020-01-012020-09-300001185348country:US2019-01-012019-09-300001185348country:GB2020-01-012020-09-300001185348country:GB2019-01-012019-09-300001185348praa:ForeignCountriesMember2020-01-012020-09-300001185348praa:ForeignCountriesMember2019-01-012019-09-300001185348srt:MinimumMember2020-01-012020-09-300001185348srt:MaximumMember2020-01-012020-09-3000011853482020-01-012020-01-0100011853482020-01-01xbrli:pure0001185348praa:CorePortfolioSegmentMember2020-06-300001185348praa:InsolvencyPortfolioSegmentMember2020-06-300001185348praa:CorePortfolioSegmentMember2020-07-012020-09-300001185348praa:InsolvencyPortfolioSegmentMember2020-07-012020-09-300001185348praa:CorePortfolioSegmentMember2020-09-300001185348praa:InsolvencyPortfolioSegmentMember2020-09-300001185348praa:CorePortfolioSegmentMember2019-12-310001185348praa:InsolvencyPortfolioSegmentMember2019-12-310001185348praa:CorePortfolioSegmentMember2020-01-012020-09-300001185348praa:InsolvencyPortfolioSegmentMember2020-01-012020-09-300001185348us-gaap:FairValueInputsLevel1Memberus-gaap:ExchangeTradedFundsMember2020-09-300001185348us-gaap:ExchangeTradedFundsMember2019-12-310001185348us-gaap:PrivateEquityFundsMember2020-09-300001185348us-gaap:PrivateEquityFundsMember2019-12-310001185348us-gaap:MutualFundMember2020-09-300001185348us-gaap:MutualFundMember2019-12-310001185348praa:GovernmentBondsandFixedIncomeFundsMember2020-09-300001185348praa:GovernmentBondsandFixedIncomeFundsMember2019-12-310001185348praa:RCBInvestimentosS.A.Member2020-09-300001185348srt:MinimumMember2020-09-300001185348srt:MaximumMember2020-09-300001185348praa:AmericasRevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-09-300001185348praa:AmericasRevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2019-12-310001185348praa:EuropeRevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-09-300001185348praa:EuropeRevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2019-12-310001185348us-gaap:MediumTermNotesMember2020-09-300001185348us-gaap:MediumTermNotesMember2019-12-310001185348us-gaap:SeniorNotesMember2020-09-300001185348us-gaap:SeniorNotesMember2019-12-310001185348us-gaap:ConvertibleDebtMember2020-09-300001185348us-gaap:ConvertibleDebtMember2019-12-310001185348praa:ThirdAmendmentToNorthAmericanCreditAgreementMemberpraa:TermLoanFacilityMember2020-08-260001185348us-gaap:RevolvingCreditFacilityMemberpraa:ThirdAmendmentToNorthAmericanCreditAgreementMember2020-08-262020-08-260001185348praa:CanadianRevolvingCreditFacilityMemberpraa:ThirdAmendmentToNorthAmericanCreditAgreementMember2020-08-262020-08-260001185348praa:ThirdAmendmentToNorthAmericanCreditAgreementMember2020-08-262020-08-260001185348praa:NorthAmericanCreditAgreementMember2020-09-300001185348us-gaap:LineOfCreditMemberus-gaap:LineOfCreditMember2020-09-300001185348praa:NorthAmericanCreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2020-09-300001185348praa:CanadianRevolvingCreditFacilityMemberpraa:NorthAmericanCreditAgreementMember2020-09-300001185348praa:CreditAgreementMemberus-gaap:EurodollarMember2020-01-012020-09-300001185348praa:CreditAgreementMemberus-gaap:BaseRateMember2020-01-012020-09-300001185348praa:FederalFundsRateMember2020-01-012020-09-300001185348us-gaap:EurodollarMember2020-01-012020-09-300001185348praa:CanadianPrimeRateMember2020-01-012020-09-300001185348us-gaap:InterestRateFloorMember2020-01-012020-09-300001185348praa:CreditAgreementMember2020-01-012020-09-300001185348praa:CreditAgreementMemberpraa:EligibleCoreAssetPoolMember2020-01-012020-09-300001185348praa:CreditAgreementMemberpraa:EligibleCoreAssetPoolMember2020-07-312020-07-310001185348praa:CreditAgreementMemberpraa:EligibleInsolventAssetPoolMember2020-01-012020-09-300001185348praa:CreditAgreementMemberpraa:EligibleAccountsReceivableMember2020-01-012020-09-300001185348praa:CreditAgreementMemberpraa:EndOfJune302020Member2020-09-300001185348praa:CreditAgreementMember2020-09-300001185348praa:CreditAgreementMemberus-gaap:SecuredDebtMemberpraa:EndOfAnyFiscalQuarterUntilMarch312021Member2020-09-300001185348praa:CreditAgreementMemberus-gaap:SecuredDebtMemberpraa:March312021UntilMaturityMember2020-09-300001185348praa:CreditAgreementMemberpraa:AcquisitionSubsequentto2014Member2020-01-012020-09-300001185348us-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-03-270001185348us-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-03-272020-03-270001185348us-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMembersrt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2020-03-270001185348srt:MaximumMemberus-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-03-270001185348us-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-09-300001185348praa:InterbankOfferedRateIBORMemberus-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMembersrt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001185348srt:MaximumMemberpraa:InterbankOfferedRateIBORMemberus-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001185348us-gaap:LineOfCreditMemberpraa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001185348praa:OverdraftFacilityMemberpraa:EuropeanRevolvingFacilityandTermLoanMember2020-09-300001185348praa:OverdraftFacilityMemberpraa:EuropeanRevolvingFacilityandTermLoanMember2020-01-012020-09-300001185348praa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-09-300001185348praa:EuropeanRevolvingFacilityandTermLoanMember2020-01-012020-09-30iso4217:SEK0001185348praa:EuropeanRevolvingFacilityandTermLoanMemberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001185348praa:ColombianRevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2020-09-300001185348praa:IndicadorBancarioDeReferenciaRateIBRMemberpraa:ColombianRevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001185348praa:ColombianRevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001185348us-gaap:SeniorNotesMemberpraa:A2025NotesMember2020-08-270001185348us-gaap:SeniorNotesMemberpraa:OnOrAfterSeptember12022Memberpraa:A2025NotesMember2020-08-272020-08-270001185348us-gaap:SeniorNotesMemberpraa:September12023ToOctober312024Memberpraa:A2025NotesMember2020-08-272020-08-270001185348us-gaap:SeniorNotesMemberpraa:September12024AndThereafterMemberpraa:A2025NotesMember2020-08-272020-08-270001185348us-gaap:SeniorNotesMemberpraa:OnOrBeforeSeptember12022Memberpraa:A2025NotesMember2020-08-272020-08-270001185348us-gaap:SeniorNotesMemberpraa:ChangeOfControlEventMemberpraa:OnOrBeforeSeptember12022Memberpraa:A2025NotesMember2020-08-272020-08-270001185348us-gaap:ConvertibleDebtMemberpraa:NoteDue2020Member2013-08-130001185348us-gaap:ConvertibleDebtMemberpraa:NoteDue2023Member2017-05-260001185348us-gaap:ConvertibleDebtMemberpraa:NoteDue2023Member2017-05-262017-05-26praa:day0001185348us-gaap:ConvertibleDebtMemberpraa:NoteDue2020Member2020-09-300001185348us-gaap:ConvertibleDebtMemberpraa:NoteDue2023Member2020-09-300001185348us-gaap:ConvertibleDebtMember2020-07-012020-09-300001185348us-gaap:ConvertibleDebtMember2019-07-012019-09-300001185348us-gaap:ConvertibleDebtMember2020-01-012020-09-300001185348us-gaap:ConvertibleDebtMember2019-01-012019-09-300001185348us-gaap:OtherAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateContractMember2020-09-300001185348us-gaap:OtherAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateContractMember2019-12-310001185348us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateContractMemberus-gaap:OtherLiabilitiesMember2020-09-300001185348us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateContractMemberus-gaap:OtherLiabilitiesMember2019-12-310001185348us-gaap:OtherAssetsMemberus-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2020-09-300001185348us-gaap:OtherAssetsMemberus-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2019-12-310001185348us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherLiabilitiesMember2020-09-300001185348us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherLiabilitiesMember2019-12-310001185348us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateContractMember2020-09-300001185348us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateContractMember2019-12-310001185348us-gaap:InterestRateContractMember2020-07-012020-09-300001185348us-gaap:InterestRateContractMember2019-07-012019-09-300001185348us-gaap:InterestRateContractMember2020-01-012020-09-300001185348us-gaap:InterestRateContractMember2019-01-012019-09-300001185348us-gaap:InterestRateContractMemberus-gaap:InterestExpenseMember2020-07-012020-09-300001185348us-gaap:InterestRateContractMemberus-gaap:InterestExpenseMember2019-07-012019-09-300001185348us-gaap:InterestRateContractMemberus-gaap:InterestExpenseMember2020-01-012020-09-300001185348us-gaap:InterestRateContractMemberus-gaap:InterestExpenseMember2019-01-012019-09-300001185348us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2020-09-300001185348us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2019-12-310001185348us-gaap:ForeignCurrencyGainLossMemberus-gaap:ForeignExchangeContractMember2020-07-012020-09-300001185348us-gaap:ForeignCurrencyGainLossMemberus-gaap:ForeignExchangeContractMember2019-07-012019-09-300001185348us-gaap:ForeignExchangeContractMemberus-gaap:InterestExpenseMember2020-07-012020-09-300001185348us-gaap:ForeignExchangeContractMemberus-gaap:InterestExpenseMember2019-07-012019-09-300001185348us-gaap:ForeignCurrencyGainLossMemberus-gaap:ForeignExchangeContractMember2020-01-012020-09-300001185348us-gaap:ForeignCurrencyGainLossMemberus-gaap:ForeignExchangeContractMember2019-01-012019-09-300001185348us-gaap:ForeignExchangeContractMemberus-gaap:InterestExpenseMember2020-01-012020-09-300001185348us-gaap:ForeignExchangeContractMemberus-gaap:InterestExpenseMember2019-01-012019-09-300001185348us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300001185348us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300001185348us-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310001185348us-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310001185348us-gaap:FairValueInputsLevel1Memberpraa:GovernmentBondsMember2020-09-300001185348praa:GovernmentBondsMemberus-gaap:FairValueInputsLevel2Member2020-09-300001185348praa:GovernmentBondsMemberus-gaap:FairValueInputsLevel3Member2020-09-300001185348praa:GovernmentBondsMember2020-09-300001185348us-gaap:ExchangeTradedFundsMember2020-09-300001185348us-gaap:ExchangeTradedFundsMemberus-gaap:FairValueInputsLevel2Member2020-09-300001185348us-gaap:ExchangeTradedFundsMemberus-gaap:FairValueInputsLevel3Member2020-09-300001185348us-gaap:FairValueInputsLevel1Memberus-gaap:MutualFundMember2020-09-300001185348us-gaap:FairValueInputsLevel2Memberus-gaap:MutualFundMember2020-09-300001185348us-gaap:MutualFundMemberus-gaap:FairValueInputsLevel3Member2020-09-300001185348us-gaap:FairValueInputsLevel1Member2020-09-300001185348us-gaap:FairValueInputsLevel2Member2020-09-300001185348us-gaap:FairValueInputsLevel3Member2020-09-300001185348us-gaap:FairValueInputsLevel1Memberpraa:GovernmentBondsMember2019-12-310001185348praa:GovernmentBondsMemberus-gaap:FairValueInputsLevel2Member2019-12-310001185348praa:GovernmentBondsMemberus-gaap:FairValueInputsLevel3Member2019-12-310001185348praa:GovernmentBondsMember2019-12-310001185348us-gaap:FairValueInputsLevel1Memberus-gaap:MutualFundMember2019-12-310001185348us-gaap:FairValueInputsLevel2Memberus-gaap:MutualFundMember2019-12-310001185348us-gaap:MutualFundMemberus-gaap:FairValueInputsLevel3Member2019-12-310001185348us-gaap:FairValueInputsLevel1Member2019-12-310001185348us-gaap:FairValueInputsLevel2Member2019-12-310001185348us-gaap:FairValueInputsLevel3Member2019-12-310001185348us-gaap:PrivateEquityFundsMembersrt:MinimumMember2020-01-012020-09-300001185348srt:MaximumMemberus-gaap:PrivateEquityFundsMember2020-01-012020-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2020-06-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2020-06-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2020-06-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2020-07-012020-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2020-07-012020-09-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2020-07-012020-09-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2020-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2020-09-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2020-09-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2019-06-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2019-06-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2019-06-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2019-07-012019-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2019-07-012019-09-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2019-07-012019-09-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2019-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2019-09-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2019-09-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2019-12-310001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2019-12-310001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2019-12-310001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2020-01-012020-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2020-01-012020-09-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2020-01-012020-09-300001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2018-12-310001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2018-12-310001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2018-12-310001185348us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember2019-01-012019-09-300001185348us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2019-01-012019-09-300001185348us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2019-01-012019-09-30

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number: 000-50058
PRA Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware75-3078675
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

120 Corporate Boulevard
Norfolk, Virginia 23502
(Address of principal executive offices)

(888) 772-7326
(Registrant's Telephone No., including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per sharePRAANASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ   No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ   Accelerated filer  ¨   Non-accelerated filer  ¨   Smaller reporting company   Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  þ

The number of shares of the registrant's common stock outstanding as of November 3, 2020 was 45,579,983.



Table of Contents

Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Signatures
2


Part I. Financial Information
Item 1. Financial Statements (Unaudited)
PRA Group, Inc.
Consolidated Balance Sheets
September 30, 2020 and December 31, 2019
(Amounts in thousands)
(unaudited)
September 30,
2020
December 31,
2019
Assets
Cash and cash equivalents$92,779 $119,774 
Investments37,821 56,176 
Finance receivables, net3,332,748 3,514,165 
Other receivables, net12,575 10,606 
Income taxes receivable27,554 17,918 
Deferred tax assets, net79,121 63,225 
Property and equipment, net57,826 56,501 
Right-of-use assets51,606 68,972 
Goodwill456,308 480,794 
Intangible assets, net3,392 4,497 
Other assets45,519 31,263 
Total assets$4,197,249 $4,423,891 
Liabilities and Equity
Liabilities:
Accounts payable$4,285 $4,258 
Accrued expenses81,913 88,925 
Income taxes payable18,885 4,046 
Deferred tax liabilities, net48,144 85,390 
Lease liabilities55,987 73,377 
Interest-bearing deposits119,834 106,246 
Borrowings2,524,429 2,808,425 
Other liabilities71,600 26,211 
Total liabilities2,925,077 3,196,878 
Equity:
Preferred stock, $0.01 par value, 2,000 shares authorized, no shares issued and outstanding  
Common stock, $0.01 par value, 100,000 shares authorized, 45,579 shares issued and outstanding at September 30, 2020; 100,000 shares authorized, 45,416 shares issued and outstanding at December 31, 2019456 454 
Additional paid-in capital70,036 67,321 
Retained earnings1,482,172 1,362,631 
Accumulated other comprehensive loss(313,560)(261,018)
Total stockholders' equity - PRA Group, Inc.1,239,104 1,169,388 
Noncontrolling interest33,068 57,625 
Total equity1,272,172 1,227,013 
Total liabilities and equity$4,197,249 $4,423,891 
The accompanying notes are an integral part of these consolidated financial statements.
3


PRA Group, Inc.
Consolidated Income Statements
For the three and nine months ended September 30, 2020 and 2019
(unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues:
Portfolio income$240,250 $ $750,556 $ 
Changes in expected recoveries25,403  32,388  
Income recognized on finance receivables 247,471  735,526 
Fee income1,978 2,391 6,826 11,472 
Other revenue233 152 1,788 950 
Total revenues267,864 250,014 791,558 747,948 
Net allowance charges (4,136) (11,427)
Operating expenses:
Compensation and employee services71,974 75,317 217,617 234,770 
Legal collection fees13,661 14,083 41,975 41,439 
Legal collection costs26,043 31,395 79,997 99,745 
Agency fees14,900 12,788 38,619 39,833 
Outside fees and services22,719 16,733 60,796 48,274 
Communication9,379 10,310 31,702 34,335 
Rent and occupancy4,460 4,414 13,415 13,268 
Depreciation and amortization4,301 4,046 12,494 13,341 
Other operating expenses11,761 12,102 34,457 34,613 
Total operating expenses179,198 181,188 531,072 559,618 
  Income from operations88,666 64,690 260,486 176,903 
Other income and (expense):
Interest expense, net(33,692)(35,864)(106,319)(105,872)
Foreign exchange gains61 5,406 3,027 11,359 
Other291 (19)(1,367)(123)
Income before income taxes55,326 34,213 155,827 82,267 
Income tax expense7,497 6,665 24,734 15,607 
Net income47,829 27,548 131,093 66,660 
Adjustment for net income attributable to noncontrolling interests5,337 2,577 11,552 7,843 
Net income attributable to PRA Group, Inc.$42,492 $24,971 $119,541 $58,817 
Net income per common share attributable to PRA Group, Inc.:
Basic$0.93 $0.55 $2.63 $1.30 
Diluted$0.92 $0.55 $2.60 $1.29 
Weighted average number of shares outstanding:
Basic45,579 45,410 45,526 45,378 
Diluted46,140 45,645 45,971 45,520 
The accompanying notes are an integral part of these consolidated financial statements.
4


PRA Group, Inc.
Consolidated Statements of Comprehensive Income/(Loss)
For the three and nine months ended September 30, 2020 and 2019
(unaudited)
(Amounts in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income$47,829 $27,548 $131,093 $66,660 
Other comprehensive income/(loss), net of tax:
Currency translation adjustments30,705 (50,542)(48,448)(46,975)
Cash flow hedges1,394 (5,832)(22,927)(19,549)
Debt securities available-for-sale(30)(1)191 81 
Other comprehensive income/(loss)32,069 (56,375)(71,184)(66,443)
Total comprehensive income/(loss)79,898 (28,827)59,909 217 
Less comprehensive income/(loss) attributable to noncontrolling interests3,753 34 (7,091)5,247 
Comprehensive income/(loss) attributable to PRA Group, Inc.$76,145 $(28,861)$67,000 $(5,030)
The accompanying notes are an integral part of these consolidated financial statements.
5


PRA Group, Inc.
Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2020
(unaudited)
(Amounts in thousands)

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Noncontrolling InterestTotal Equity
SharesAmount
Balance at December 31, 201945,416 $454 $67,321 $1,362,631 $(261,018)$57,625 $1,227,013 
Components of comprehensive income, net of tax:
Net income— — — 19,135 — 3,301 22,436 
Currency translation adjustments— — — — (94,201)(13,875)(108,076)
Cash flow hedges— — — — (20,568)— (20,568)
Debt securities available-for-sale— — — — 170 — 170 
Vesting of restricted stock124 1 — — — — 1 
Share-based compensation expense— — 2,857 — — — 2,857 
Employee stock relinquished for payment of taxes— — (3,157)— — — (3,157)
Balance at March 31, 202045,540 $455 $67,021 $1,381,766 $(375,617)$47,051 $1,120,676 
Components of comprehensive income, net of tax:
Net income— — — 57,914 — 2,914 60,828 
Currency translation adjustments— — — — 32,107 (3,184)28,923 
Cash flow hedges— — — — (3,753)— (3,753)
Debt securities available-for-sale— — — — 51 — 51 
Distributions to noncontrolling interest— — — — — (14,908)(14,908)
Vesting of restricted stock39 1 (1)— — —  
Share-based compensation expense— — 3,063 — — — 3,063 
Employee stock relinquished for payment of taxes— — (18)— — — (18)
Balance at June 30, 202045,579 $456 $70,065 $1,439,680 $(347,212)$31,873 $1,194,862 
Components of comprehensive income, net of tax:
Net income— — — 42,492 — 5,337 47,829 
Currency translation adjustments— — — — 32,288 (1,583)30,705 
Cash flow hedges— — — — 1,394 — 1,394 
Debt securities available-for-sale— — — — (30)— (30)
Distributions to noncontrolling interest— — — — — (3,677)(3,677)
Contributions from noncontrolling interest— — — — — 1,118 1,118 
Share-based compensation expense— — 3,097 — — — 3,097 
Other— — (3,126)— — — (3,126)
Balance at September 30, 202045,579 $456 $70,036 $1,482,172 $(313,560)$33,068 $1,272,172 

The accompanying notes are an integral part of these consolidated financial statements.

6


PRA Group, Inc.
Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2019
(unaudited)
(Amounts in thousands)

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Noncontrolling InterestTotal Equity
SharesAmount
Balance at December 31, 201845,304 $453 $60,303 $1,276,473 $(242,109)$28,849 $1,123,969 
Components of comprehensive income, net of tax:
Net income— — — 15,227 — 1,685 16,912 
Currency translation adjustments— — — — (742)(431)(1,173)
Cash flow hedges— — — — (5,715)— (5,715)
Debt securities available-for-sale— — — — 45 — 45 
Distributions to noncontrolling interest— — — — — (6,877)(6,877)
Contributions from noncontrolling interest— — — — — 89 89 
Vesting of restricted stock80 1 (1)— — —  
Share-based compensation expense— — 2,314 — — — 2,314 
Employee stock relinquished for payment of taxes— — (1,437)— — — (1,437)
Other— — (2,088)— — — (2,088)
Balance at March 31, 201945,384 $454 $59,091 $1,291,700 $(248,521)$23,315 $1,126,039 
Components of comprehensive income, net of tax:
Net income— — — 18,619 — 3,581 22,200 
Currency translation adjustments— — — — 4,362 378 4,740 
Cash flow hedges— — — — (8,002)— (8,002)
Debt securities available-for-sale— — — — 37 — 37 
Contributions from noncontrolling interest— — — — — 3,229 3,229 
Vesting of restricted stock25 — — — — —  
Share-based compensation expense— — 2,620 — — — 2,620 
Employee stock relinquished for payment of taxes— — (6)— — — (6)
Balance at June 30, 201945,409 $454 $61,705 $1,310,319 $(252,124)$30,503 $1,150,857 
Components of comprehensive income, net of tax:
Net income— — — 24,971 — 2,577 27,548 
Currency translation adjustments— — — — (47,999)(2,543)(50,542)
Cash flow hedges— — — — (5,832)— (5,832)
Debt securities available-for-sale— — — — (1)— (1)
Distributions to noncontrolling interest— — — — — —  
Contributions from noncontrolling interest— — — — — 21,357 21,357 
Vesting of restricted stock2 — — — — —  
Share-based compensation expense— — 2,974 — — — 2,974 
Employee stock relinquished for payment of taxes— — (48)— — — (48)
Balance at September 30, 201945,411 $454 $64,631 $1,335,290 $(305,956)$51,894 $1,146,313 

The accompanying notes are an integral part of these consolidated financial statements.

7


PRA Group, Inc.
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2020 and 2019
(unaudited)
(Amounts in thousands)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net income$131,093 $66,660 
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense9,017 7,908 
Depreciation and amortization12,494 13,341 
Amortization of debt discount and issuance costs16,711 17,180 
Changes in expected recoveries(32,388) 
Deferred income taxes(44,905)(24,900)
Net unrealized foreign currency transactions34,060 (3,622)
Fair value in earnings for equity securities1,159 (6,921)
Net allowance charges 11,427 
Other(449) 
Changes in operating assets and liabilities:
Other assets1,466 2,651 
Other receivables, net(1,686)1,019 
Accounts payable45 (2,888)
Income taxes payable, net5,664 (21,823)
Accrued expenses(5,315)13,888 
Other liabilities4,408 (3,484)
Right of use asset/lease liability(15) 
Other, net 257 
Net cash provided by operating activities131,359 70,693 
Cash flows from investing activities:
Net, purchases of property and equipment(12,906)(14,890)
Purchases of finance receivables(613,050)(832,995)
Recoveries applied to negative allowance784,056  
Collections applied to principal on finance receivables 649,136 
Purchase of investments(27,565)(82,670)
Proceeds from sales and maturities of investments41,932 74,771 
Business acquisition, net of cash acquired (57,610)
Proceeds from sale of subsidiaries, net 31,177 
Net cash provided by/(used in) investing activities172,467 (233,081)
Cash flows from financing activities:
Proceeds from lines of credit998,088 885,318 
Principal payments on lines of credit(1,331,303)(458,566)
Payments on convertible senior notes(287,442) 
Proceeds from senior notes300,000  
Proceeds from long-term debt55,000  
Principal payments on long-term debt(7,500)(310,665)
Payments of origination cost and fees(16,998) 
Tax withholdings related to share-based payments(3,176)(1,492)
Distributions paid to noncontrolling interest(18,585)(6,877)
Contributions from noncontrolling interest1,118 24,675 
Purchase of noncontrolling interest (1,255)
Net increase in interest-bearing deposits8,115 38,581 
Other financing activities(3,183)(2,088)
Net cash (used in)/provided by financing activities(305,866)167,631 
Effect of exchange rate on cash(16,610)(7,043)
Net decrease in cash and cash equivalents(18,650)(1,800)
Cash and cash equivalents, beginning of period123,807 98,695 
Cash and cash equivalents, end of period$105,157 $96,895 
Supplemental disclosure of cash flow information:
Cash paid for interest$88,003 $89,100 
Cash paid for income taxes64,719 61,942 
Cash, cash equivalents and restricted cash reconciliation:
Cash and cash equivalents per Consolidated Balance Sheets$92,779 $90,000 
Restricted cash included in Other assets per Consolidated Balance Sheets12,378 6,895 
Total cash, cash equivalents and restricted cash$105,157 $96,895 
The accompanying notes are an integral part of these consolidated financial statements.
8

PRA Group, Inc.
Notes to Consolidated Financial Statements

1. Organization and Business:
As used herein, the terms "PRA Group," the "Company," or similar terms refer to PRA Group, Inc. and its subsidiaries.
PRA Group, Inc., a Delaware corporation, is a global financial and business services company with operations in the Americas, Europe and Australia. The Company's primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company also provides fee-based services on class action claims recoveries and by servicing consumer bankruptcy accounts in the United States ("U.S.").
On March 11, 2020, due to the global outbreak of the novel coronavirus ("COVID-19"), the World Health Organization declared a global pandemic. Since the initial outbreak was reported, COVID-19 has continued to adversely impact all countries in which the Company operates. As a result, the Company continues to operate in business continuity mode globally. The Company's business continuity plans have allowed the Company to operate its business while minimizing disruption and complying with country-specific, federal, state and local laws, regulations and governmental actions related to the pandemic.
Basis of presentation: The consolidated financial statements of the Company are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The accompanying interim financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all information and Notes to the Consolidated Financial Statements necessary for a complete presentation of financial position, results of operations, comprehensive income/(loss) and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the Company's Consolidated Balance Sheets as of September 30, 2020, its Consolidated Income Statements, and its Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2020 and 2019, and its Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019, have been included. The Consolidated Income Statements of the Company for the three and nine months ended September 30, 2020 may not be indicative of future results.
These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K").
Consolidation: The consolidated financial statements include the accounts of PRA Group and other entities in which the Company has a controlling interest. All significant intercompany accounts and transactions have been eliminated.
Entities in which the Company has a controlling financial interest, through ownership of the majority of the entities’ voting equity interests, or through other contractual rights that give the Company control, consist of entities which purchase and collect on portfolios of nonperforming loans.
Investments in companies in which the Company has significant influence over operating and financing decisions, but does not own a majority of the voting equity interests, are accounted for in accordance with the equity method of accounting, which requires the Company to recognize its proportionate share of the entity’s net earnings. These investments are included in other assets, with income or loss included in other revenue.
The Company performs on-going reassessments whether changes in the facts and circumstances regarding the Company’s involvement with an entity cause the Company’s consolidation conclusion to change.
Restricted cash: Cash that is subject to legal restrictions or is unavailable for general operating purposes is classified as restricted cash and is included within other assets on the Company's Consolidated Balance Sheets.
Segments: Under the guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") ASC Topic 280 "Segment Reporting" ("ASC 280"), the Company has determined that it has several operating segments that meet the aggregation criteria of ASC 280, and, therefore, it has one reportable segment, accounts receivable management. This conclusion is based on similarities among the operating units, including economic characteristics, the nature of the products and services, the nature of the production processes, the types or class of customer for their products and services, the methods used to distribute their products and services and the nature of the regulatory environment.
9

PRA Group, Inc.
Notes to Consolidated Financial Statements
The following table shows the amount of revenue generated for the three and nine months ended September 30, 2020 and 2019, and long-lived assets held at September 30, 2020 and 2019, both for the U.S., the Company's country of domicile, and outside of the U.S. (amounts in thousands):
As of and for theAs of and for the
Three Months Ended September 30, 2020Three Months Ended September 30, 2019
Revenues (2)
Long-Lived Assets
Revenues (2)
Long-Lived Assets
United States$172,286 $98,049 $166,284 $114,595 
United Kingdom34,387 2,578 28,446 3,586 
Other (1)
61,191 8,805 55,284 9,389 
Total$267,864 $109,432 $250,014 $127,570 
As of and for theAs of and for the
Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Revenues (2)
Long-Lived Assets
Revenues (2)
Long-Lived Assets
United States$517,914 $98,049 $501,783 $114,595 
United Kingdom98,768 2,578 86,494 3,586 
Other (1)
174,876 8,805 159,671 9,389 
Total$791,558 $109,432 $747,948 $127,570 
(1) None of the countries included in "Other" comprise greater than 10% of the Company's consolidated revenues or long-lived assets.
(2) Based on the Company’s financial statement information used to produce the Company's general-purpose financial statements, it is impracticable to report further breakdowns of revenues from external customers by product or service.
Revenues are attributed to countries based on the location of the related operations. Long-lived assets consist of net property and equipment and right-of-use assets. The Company reports revenues earned from collection activities on nonperforming loans, fee-based services and investments. For additional information on the Company's investments, see Note 4.
Beginning January 1, 2020, the Company implemented Accounting Standards Update ("ASU") ASU 2016-13, "Financial Instruments - Credit Losses" ("Topic 326") ("ASU 2016-13") and ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (“ASU 2019-11”), collectively referred to as "ASC 326", on a prospective basis. Prior to January 1, 2020, the vast majority of the Company's investment in finance receivables were accounted for under ASC 310-30 "Loans and Debt Securities Acquired with Deteriorated Credit Quality" ("ASC 310-30"). Refer to Note 2.
Finance receivables and income recognition: The Company accounts for its investment in finance receivables at amortized cost under the guidance of ASC Topic 310 “Receivables” (“ASC 310”) and ASC Topic 326-20 “Financial Instruments - Credit Losses - Measured at Amortized Cost” (“ASC 326-20”). ASC 326-20 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.
Credit quality information: The Company acquires portfolios of accounts that have experienced deterioration of credit quality between origination and the Company's acquisition of the accounts. The amount paid for a portfolio reflects the Company's determination that it is probable the Company will be unable to collect all amounts due according to an account's contractual terms. The Company accounts for the portfolios in accordance with the guidance for purchased credit deteriorated ("PCD") assets. The initial allowance for credit losses is added to the purchase price rather than recorded as a credit loss expense. The Company has established a policy to write off the amortized cost of individual assets when it deems probable that it will not collect on an individual asset. Due to the deteriorated credit quality of the individual accounts, the Company may write off the unpaid principal balance of all accounts in a portfolio at the time of acquisition. However, when the Company has an expectation of collecting cash flows at the portfolio level, a negative allowance is established for expected recoveries at an amount not to exceed the amount paid for the financial portfolios.
Portfolio segments: The Company develops systematic methodologies to determine its allowance for credit losses at the portfolio segment level. The Company’s nonperforming loan portfolio segments consist of two broad categories: Core and Insolvency. The Company’s Core portfolios contain loan accounts that are in default, which were purchased at a substantial discount to face value because either the credit grantor and/or other third-party collection agencies have been unsuccessful in collecting the full balance owed. The Company’s Insolvency portfolios contain loan accounts that are in default where the customer is involved in a bankruptcy or insolvency proceeding and were purchased at a substantial discount to face value. Each of the two broad portfolio segments of purchased nonperforming loan portfolios consist of large numbers of homogeneous receivables with similar risk characteristics.
10

PRA Group, Inc.
Notes to Consolidated Financial Statements
Effective interest rate and accounting pools: Within each portfolio segment, the Company pools accounts with similar risk characteristics that are acquired in the same year. Similar risk characteristics generally include portfolio segment and geographic region. The initial effective interest rate of the pool is established based on the purchase price and expected recoveries of each individual purchase at the purchase date. During the year of acquisition, the annual pool is aggregated, and the blended effective interest rate will change to reflect new acquisitions and new cash flow estimates until the end of the year. The effective interest rate for a pool is fixed for the remaining life of the pool once the year has ended.

Methodology: The Company develops its estimates of expected recoveries in the Consolidated Balance Sheets by applying discounted cash flow methodologies to its estimated remaining collections (“ERC”) and recognizes income over the estimated life of the pool at the constant effective interest rate of the pool. Subsequent changes (favorable and unfavorable) in expected cash flows are recognized within changes in expected recoveries in the Consolidated Income Statements by adjusting the present value of increases or decreases in ERC at a constant effective interest rate. Amounts included in the estimate of recoveries do not exceed the aggregate amount of the amortized cost basis previously written off or expected to be written off.

The measurement of expected recoveries is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Factors that may contribute to the changes in estimated cash flows include both external and internal factors. External factors that may have an impact on the collectability, and subsequently on the overall profitability of acquired pools of nonperforming loans, would include new laws or regulations relating to collections, new interpretations of existing laws or regulations, and the overall condition of the economy. Internal factors that may have an impact on the collectability, and subsequently the overall profitability of acquired pools of nonperforming loans, would include necessary revisions to initial and post-acquisition scoring and modeling estimates, operational activities, expected impact of operational strategies and changes in productivity related to turnover and tenure of the Company's collection staff.

Portfolio income: The recognition of income on expected recoveries is based on the constant effective interest rate established for a pool.

Changes in expected recoveries: The activity consists of differences between actual recoveries compared to expected recoveries for the reporting period, as well as the net present value of increases or decreases in ERC at the constant effective interest rate.

Agreements to acquire the aforementioned receivables include general representations and warranties from the sellers covering matters such as account holder death or insolvency and accounts settled or disputed prior to sale. The representation and warranty period permitting the return of these accounts from the Company to the seller is typically 90 to 180 days, with certain international agreements extending as long as 24 months.  Any funds received from the seller as a return of purchase price are referred to as buybacks. Buyback funds are included in changes in expected recoveries when received.
Fees paid to third parties other than the seller related to the direct acquisition of a portfolio of accounts are expensed when incurred.
Goodwill and intangible assets: Goodwill, in accordance with ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), is not amortized but rather is reviewed for impairment annually or more frequently if indicators of potential impairment exist. On January 1, 2020, the Company adopted ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). The Company performs its annual assessment of goodwill as of October 1. The Company may first assess 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, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, an impairment loss is recognized. The loss will be recorded at the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the respective reporting unit.
2. Change in Accounting Principle:

Financial Instruments - Credit Losses
In June 2016, FASB issued ASU 2016-13, which introduced a new methodology requiring the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables measured at amortized cost. The
11

PRA Group, Inc.
Notes to Consolidated Financial Statements
new methodology requires an entity to present on the balance sheet the net amount expected to be collected. This methodology replaces the multiple impairment methods under prior GAAP, including for purchased credit impaired ("PCI") assets, and introduces the concept of PCD assets. The Company's PCI assets previously accounted for under ASC 310-30 are now accounted for as PCD assets upon adoption. ASU 2016-13 requires PCD assets to be recognized at their purchase price plus the allowance for credit losses expected at the time of acquisition. ASU 2016-13 also requires that financial assets should be written off when they are deemed uncollectible.
In November 2019, FASB issued ASU 2019-11, which amended the PCD asset guidance in ASU 2016-13 to clarify that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account. Additionally, they should not exceed the aggregate of amounts previously written off and expected to be written off by an entity. Further, ASU 2019-11 clarifies that a negative allowance is recognized when an entity determines, after a full or partial write off of the amortized cost basis, that it will recover all or a portion of the basis.
The Company adopted ASC 326 on January 1, 2020 on a prospective basis. In accordance with the guidance, substantially all the Company’s PCI assets were transitioned using the PCD guidance, with immediate write off of the amortized cost basis of individual accounts and establishment of a negative allowance for expected recoveries equal to the amortized cost basis written off. Accounts previously accounted for under ASC 310-30, were aggregated into annual pools based on similar risk characteristics and an effective interest rate was established based on the estimated remaining cash flows of the annual pool. The immediate write off and subsequent recognition of expected recoveries had no impact on the Company’s Consolidated Income Statements or the Consolidated Balance Sheets at the date of adoption. The Company develops its estimate of expected recoveries by applying discounted cash flow methodologies to its ERC and recognizes income over the estimated life of the pool at the constant effective interest rate of the pool. Changes (favorable and unfavorable) in expected cash flows are recognized in current period earnings by adjusting the present value of the changes in expected recoveries.
Following the transition guidance for PCD assets, the Company grossed up the amortized cost of its net finance receivables at January 1, 2020 as shown below (amounts in thousands):
Amortized cost$3,514,165 
Allowance for credit losses125,757,689 
Noncredit discount3,240,131 
Face value$132,511,985 
Allowance for credit losses$125,757,689 
Writeoffs, net(125,757,689)
Expected recoveries3,514,165 
Initial negative allowance for expected recoveries$3,514,165 
3. Finance Receivables, net:
Finance Receivables, net after the adoption of ASC 326 (refer to Note 2)
Finance receivables, net consisted of the following at September 30, 2020 (amounts in thousands):
Amortized cost$ 
Negative allowance for expected recoveries (1)
3,332,748 
Balance at end of period$3,332,748 
(1) The negative allowance balance includes certain portfolios of nonperforming loans for which the Company holds a beneficial interest representing approximately 1% of the balance.







12

PRA Group, Inc.
Notes to Consolidated Financial Statements
Three Months Ended September 30, 2020
Changes in the negative allowance for expected recoveries by portfolio segment for the three months ended September 30, 2020 were as follows (amounts in thousands):
For the Three Months Ended September 30, 2020
CoreInsolvencyTotal
Balance at beginning of period$2,908,136 $443,396 $3,351,532 
Initial negative allowance for expected recoveries - portfolio acquisitions (1)
159,069 18,531 177,600 
Foreign currency translation adjustment53,934 6,752 60,686 
Recoveries applied to negative allowance (2)
(246,738)(35,735)(