Company Quick10K Filing
Quick10K
PRA Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$32.79 45 $1,488
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-08 Earnings, Regulation FD, Exhibits
8-K 2019-06-13 Shareholder Vote
8-K 2019-05-09 Earnings, Regulation FD, Exhibits
8-K 2019-03-25 Enter Agreement
8-K 2019-02-28 Earnings, Regulation FD, Exhibits
8-K 2019-01-03 Officers, Exhibits
8-K 2018-11-08 Earnings, Regulation FD, Exhibits
8-K 2018-10-04 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-10-02 Other Events, Exhibits
8-K 2018-08-07 Earnings, Regulation FD, Exhibits
8-K 2018-06-20 Shareholder Vote
8-K 2018-06-04 Officers
8-K 2018-05-09 Earnings, Regulation FD, Exhibits
8-K 2018-02-27 Earnings, Regulation FD, Exhibits
8-K 2018-01-23 Enter Agreement
8-K 2017-12-26 Officers, Exhibits
SPGI S&P Global 63,283
MCO Moodys 41,022
TREE LendingTree 3,903
BCOR Blucora 1,048
CURO Curo Group Holdings 657
ELVT Elevate Credit 194
WINS Wins Finance Holdings 155
ATLC Atlanticus 95
CPSS Consumer Portfolio Services 78
IPB Merrill Lynch 0
PRAA 2019-06-30
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 exhibit311-20190630.htm
EX-31.2 exhibit312-20190630.htm
EX-32.1 exhibit321-20190630.htm

PRA Group Earnings 2019-06-30

PRAA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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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 June 30, 2019
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number: 000-50058

PRA Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
 
 
75-3078675
(State or other jurisdiction of incorporation or organization)
 
 
 
(I.R.S. Employer Identification No.)

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ   No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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 August 6, 2019 was 45,409,110.



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
June 30, 2019 and December 31, 2018
(Amounts in thousands)
 
(unaudited)
 
 
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Cash and cash equivalents
$
105,496

 
$
98,695

Investments
85,911

 
45,173

Finance receivables, net
3,230,949

 
3,084,777

Other receivables, net
13,770

 
46,157

Income taxes receivable
11,323

 
16,809

Net deferred tax asset
66,401

 
61,453

Property and equipment, net
51,484

 
54,136

Right-of-use assets
72,817

 

Goodwill
489,293

 
464,116

Intangible assets, net
5,219

 
5,522

Other assets
32,751

 
32,721

Total assets
$
4,165,414

 
$
3,909,559

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Accounts payable
$
3,279

 
$
6,110

Accrued expenses
74,950

 
79,396

Income taxes payable
372

 
15,080

Net deferred tax liability
100,742

 
114,979

Interest-bearing deposits
107,840

 
82,666

Borrowings
2,618,382

 
2,473,656

Lease liabilities
76,750

 

Other liabilities
27,307

 
7,370

Total liabilities
3,009,622

 
2,779,257

Redeemable noncontrolling interest
4,935

 
6,333

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, 45,409 shares issued and outstanding at June 30, 2019; 100,000 shares authorized, 45,304 shares issued and outstanding at December 31, 2018
454

 
453

Additional paid-in capital
61,705

 
60,303

Retained earnings
1,310,319

 
1,276,473

Accumulated other comprehensive loss
(252,124
)
 
(242,109
)
Total stockholders' equity - PRA Group, Inc.
1,120,354

 
1,095,120

Noncontrolling interest
30,503

 
28,849

Total equity
1,150,857

 
1,123,969

Total liabilities and equity
$
4,165,414

 
$
3,909,559

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

3



PRA Group, Inc.
Consolidated Income Statements
For the three and six months ended June 30, 2019 and 2018
(unaudited)
(Amounts in thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Income recognized on finance receivables
$
249,219

 
$
219,018

 
$
488,055

 
$
437,642

Fee income
2,707

 
2,342

 
9,081

 
7,669

Other revenue
131

 
158

 
798

 
315

Total revenues
252,057

 
221,518

 
497,934

 
445,626

 
 
 
 
 
 
 
 
Net allowance charges
(1,196
)
 
(2,834
)
 
(7,291
)
 
(3,759
)
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Compensation and employee services
79,808

 
80,690

 
159,453

 
161,927

Legal collection fees
14,297

 
10,343

 
27,356

 
21,012

Legal collection costs
33,121

 
18,695

 
68,350

 
40,938

Agency fees
13,013

 
8,138

 
27,045

 
16,416

Outside fees and services
16,293

 
14,565

 
31,541

 
28,723

Communication
10,824

 
10,782

 
24,025

 
22,339

Rent and occupancy
4,491

 
4,003

 
8,854

 
8,317

Depreciation and amortization
4,723

 
4,525

 
9,295

 
9,454

Other operating expenses
10,926

 
11,628

 
22,511

 
23,812

Total operating expenses
187,496

 
163,369

 
378,430

 
332,938

Income from operations
63,365

 
55,315

 
112,213

 
108,929

Other income and (expense):
 
 
 
 
 
 
 
Interest expense, net
(36,027
)
 
(31,124
)
 
(70,008
)
 
(56,905
)
Foreign exchange
(311
)
 
1,690

 
5,953

 
2,983

Other
248

 
(400
)
 
(104
)
 
(157
)
Income before income taxes
27,275

 
25,481

 
48,054

 
54,850

Income tax expense
5,075

 
3,857

 
8,942

 
9,994

Net income
22,200

 
21,624

 
39,112

 
44,856

Adjustment for net income attributable to noncontrolling interests
3,581

 
2,036

 
5,266

 
4,162

Net income attributable to PRA Group, Inc.
$
18,619

 
$
19,588

 
$
33,846

 
$
40,694

Net income per common share attributable to PRA Group, Inc.:
 
 
 
 
 
 
 
Basic
$
0.41

 
$
0.43

 
$
0.75

 
$
0.90

Diluted
$
0.41

 
$
0.43

 
$
0.74

 
$
0.90

Weighted average number of shares outstanding:
 
 
 
 
 
 
 
Basic
45,387

 
45,283

 
45,363

 
45,257

Diluted
45,495

 
45,449

 
45,457

 
45,410

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 six months ended June 30, 2019 and 2018
(unaudited)
(Amounts in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
22,200

 
$
21,624

 
$
39,112

 
$
44,856

Less net income attributable to noncontrolling interests
3,581

 
2,036

 
5,266

 
4,162

Net income attributable to PRA Group, Inc.
18,619

 
19,588

 
33,846

 
40,694

Other comprehensive income/(loss), net of tax:
 
 
 
 
 
 
 
Currency translation adjustments
4,740

 
(60,697
)
 
3,567

 
(30,756
)
Cash flow hedges
(8,002
)
 

 
(13,717
)
 

Debt securities available-for-sale
37

 

 
82

 

Other comprehensive (loss)
(3,225
)
 
(60,697
)
 
(10,068
)
 
(30,756
)
Less other comprehensive income/(loss) attributable to noncontrolling interests
378

 
(7,217
)
 
(53
)
 
(196
)
Other comprehensive (loss) attributable to PRA Group, Inc.
(3,603
)
 
(53,480
)
 
(10,015
)
 
(30,560
)
Comprehensive income/(loss) attributable to PRA Group, Inc.
$
15,016

 
$
(33,892
)
 
$
23,831

 
$
10,134

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

5



PRA Group, Inc.
Consolidated Statement of Changes in Equity
For the three and six months ended June 30, 2019 and 2018
(unaudited)
(Amounts in thousands)
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive (Loss)
 
Noncontrolling Interest
 
Total Equity
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2018
45,304

 
$
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 stock
80

 
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, 2019
45,384

 
$
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 stock
25

 

 

 

 

 

 

Share-based compensation expense

 

 
2,620

 

 

 

 
2,620

Employee stock relinquished for payment of taxes

 

 
(6
)
 

 

 

 
(6
)
Balance at June 30, 2019
45,409

 
$
454

 
$
61,705

 
$
1,310,319

 
$
(252,124
)
 
$
30,503

 
$
1,150,857

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
45,189

 
$
452

 
$
53,870

 
$
1,214,840

 
$
(178,607
)
 
$
50,162

 
$
1,140,717

Cumulative effect of change in accounting principle - equity securities (1)

 

 

 
(3,930
)
 

 

 
(3,930
)
Balance at January 1, 2018
45,189

 
452

 
53,870

 
1,210,910

 
(178,607
)
 
50,162

 
1,136,787

Components of comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
21,106

 

 
2,126

 
23,232

Currency translation adjustments

 

 

 

 
22,920

 
7,021

 
29,941

Distributions to noncontrolling interest

 

 

 

 

 
(11,807
)
 
(11,807
)
Vesting of restricted stock
86

 
1

 
(1
)
 

 

 

 

Share-based compensation expense

 

 
2,415

 

 

 

 
2,415

Employee stock relinquished for payment of taxes

 

 
(2,013
)
 

 

 

 
(2,013
)
Balance at March 31, 2018
45,275

 
$
453

 
$
54,271

 
$
1,232,016

 
$
(155,687
)
 
$
47,502

 
$
1,178,555

Components of comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
19,588

 

 
2,036

 
21,624

Currency translation adjustments

 

 

 

 
(53,480
)
 
(7,217
)
 
(60,697
)
Distributions to noncontrolling interest

 

 

 

 

 
(928
)
 
(928
)
Vesting of restricted stock
25

 

 

 

 

 
 
 

Share-based compensation expense
 
 
 
 
2,146

 

 

 
 
 
2,146

Employee stock relinquished for payment of taxes
 
 
 
 
(7
)
 

 

 
 
 
(7
)
Balance at June 30, 2018
45,300

 
$
453

 
$
56,410

 
$
1,251,604

 
$
(209,167
)
 
$
41,393

 
$
1,140,693

(1) Relates to the adoption of FASB ASU 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). Refer to Note 3 for further detail.
The accompanying notes are an integral part of these consolidated financial statements.

6



PRA Group, Inc.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2019 and 2018
(unaudited)
(Amounts in thousands)
 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
39,112

 
$
44,856

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
 
 
 
Share-based compensation expense
4,934

 
4,561

Depreciation and amortization
9,295

 
9,454

Amortization of debt discount and issuance costs
11,403

 
10,866

Deferred income taxes
(25,287
)
 
(32,805
)
Net unrealized foreign currency transactions
(7,437
)
 
455

Fair value in earnings for equity securities
(1,448
)
 
(2,781
)
Net allowance charges
7,291

 
3,759

Changes in operating assets and liabilities:
 
 
 
Other assets
1,863

 
(1,685
)
Other receivables, net
2,978

 
1,073

Accounts payable
(2,956
)
 
145

Income taxes payable, net
(8,766
)
 
(857
)
Accrued expenses
(1,979
)
 
(5,767
)
Other liabilities
1,799

 
(438
)
Other, net
146

 

Net cash provided by operating activities
30,948

 
30,836

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(5,646
)
 
(11,303
)
Acquisition of finance receivables
(549,377
)
 
(385,823
)
Collections applied to principal on finance receivables
443,390

 
395,572

Business acquisition, net of cash acquired
(57,610
)
 

Proceeds from sale of subsidiaries, net
31,177

 

Purchase of investments
(82,648
)
 
(15,171
)
Proceeds from sales and maturities of investments
43,011

 
3,519

Net cash used in investing activities
(177,703
)
 
(13,206
)
Cash flows from financing activities:
 
 
 
Proceeds from lines of credit
769,021

 
236,015

Principal payments on lines of credit
(324,103
)
 
(258,857
)
Tax withholdings related to share-based payments
(1,443
)
 
(2,020
)
Distributions paid to noncontrolling interest
(6,877
)
 
(13,392
)
Purchase of noncontrolling interest
(1,166
)
 

Principal payments on notes payable and long-term debt
(308,165
)
 
(5,000
)
Payments of origination costs and fees

 
(404
)
Net increase/(decrease) in interest-bearing deposits
28,429

 
(8,314
)
Other
1,141

 

Net cash provided by/(used in) financing activities
156,837

 
(51,972
)
Effect of exchange rate on cash
(3,281
)
 
(14,604
)
Net increase/(decrease) in cash and cash equivalents
6,801

 
(48,946
)
Cash and cash equivalents, beginning of period
98,695

 
120,516

Cash and cash equivalents, end of period
$
105,496

 
$
71,570

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
54,973

 
$
46,897

Cash paid for income taxes
42,172

 
48,522

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

7


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 and Europe. 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.").
The consolidated financial statements of the Company are prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and include the accounts of all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Under the guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("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.
The following table shows the amount of revenue generated for the three and six months ended June 30, 2019 and 2018, respectively, and long-lived assets held at June 30, 2019 and 2018, respectively, both for the U.S., the Company's country of domicile, and outside of the U.S. (amounts in thousands):
 
As of and for the
 
As of and for the
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
Revenues
 
Long-Lived Assets
 
Revenues
 
Long-Lived Assets
United States
$
167,923

 
$
110,323

 
$
150,937

 
$
46,757

United Kingdom
28,292

 
3,917

 
24,829

 
1,817

Other (1)
55,842

 
10,061

 
45,752

 
4,790

Total
$
252,057

 
$
124,301

 
$
221,518

 
$
53,364

 
 
 
 
 
 
 
 
 
As of and for the
 
As of and for the
 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
 
Revenues
 
Long-Lived Assets
 
Revenues
 
Long-Lived Assets
United States
$
335,499

 
$
110,323

 
$
304,339

 
$
46,757

United Kingdom
58,048

 
3,917

 
49,555

 
1,817

Other (1)
104,387

 
10,061

 
91,732

 
4,790

Total
$
497,934

 
$
124,301

 
$
445,626

 
$
53,364

(1) None of the countries included in "Other" comprise greater than 10% of the Company's consolidated revenues or long-lived assets.
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 nonperforming loan purchasing and collection activities, fee-based services and its investments. For additional information on the Company's investments see Note 3. It is impracticable for the Company to report further breakdowns of revenues from external customers by product or service.
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 sheet as of June 30, 2019, its consolidated income statements and statements of comprehensive income/(loss) for the three and six months ended June 30, 2019 and 2018, its consolidated statement of changes in equity for the three and six months ended June 30, 2019 and 2018, and its consolidated statements of cash flows for the six months ended June 30, 2019 and 2018, have been included. The consolidated income statements of the Company for the three and six months ended June 30, 2019 may not be indicative of future results. Certain prior period amounts have been reclassified for consistency with the current period presentation.

8


PRA Group, Inc.
Notes to Consolidated Financial Statements


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, 2018 (the "2018 Form 10-K").
2. Finance Receivables, net:
Changes in finance receivables, net for the three and six months ended June 30, 2019 and 2018 were as follows (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Balance at beginning of period
$
3,177,229

 
$
2,771,408

 
$
3,084,777

 
$
2,776,199

Acquisitions of finance receivables (1)
284,448

 
219,631

 
597,894

 
384,651

Foreign currency translation adjustment
(8,477
)
 
(65,916
)
 
(1,041
)
 
(26,846
)
Cash collections
(470,274
)
 
(406,634
)
 
(931,445
)
 
(833,214
)
Income recognized on finance receivables
249,219

 
219,018

 
488,055

 
437,642

Net allowance charges
(1,196
)
 
(2,834
)
 
(7,291
)
 
(3,759
)
Balance at end of period
$
3,230,949

 
$
2,734,673

 
$
3,230,949

 
$
2,734,673


(1)
Acquisitions of finance receivables are portfolio purchases that are net of buybacks and include certain capitalized acquisition related costs. They also include the finance receivable portfolios that are acquired in connection with certain business acquisitions. The buybacks and capitalized acquisition costs are netted against the acquisition of finance receivables when paid and may relate to portfolios purchased in prior periods.
During the three months ended June 30, 2019, the Company acquired finance receivables portfolios with a face value of $1.8 billion for $289.2 million. During the three months ended June 30, 2018, the Company acquired finance receivables portfolios with a face value of $2.2 billion for $221.4 million. During the six months ended June 30, 2019, the Company acquired finance receivables portfolios with a face value of $6.6 billion for $608.0 million. During the six months ended June 30, 2018, the Company acquired finance receivables portfolios with a face value of $3.7 billion for $389.7 million. At June 30, 2019, the estimated remaining collections ("ERC") on the receivables acquired during the three months ended June 30, 2019 and 2018 were $513.0 million and $311.3 million, respectively. At June 30, 2019, the ERC on the receivables acquired during the six months ended June 30, 2019 and 2018 were $1.02 billion and $523.2 million, respectively.
At the time of acquisition and each quarter thereafter, the life of each quarterly accounting pool is estimated based on projected amounts and timing of future cash collections using the proprietary models of the Company. Based upon current projections, cash collections expected to be applied to principal are estimated to be as follows for the twelve-month periods ending June 30, (amounts in thousands):
2020
$
845,437

2021
694,169

2022
531,004

2023
393,087

2024
281,166

2025
173,283

2026
101,570

2027
77,943

2028
51,868

2029
35,070

Thereafter
46,352

Total ERC expected to be applied to principal
$
3,230,949


At June 30, 2019, the Company had aggregate net finance receivables balances in pools accounted for under the cost recovery method of $39.4 million; at December 31, 2018, the amount was $48.0 million.
Accretable yield represents the amount of income on finance receivables the Company can expect to recognize over the remaining life of its existing portfolios based on estimated future cash flows as of the balance sheet date. Additions represent the original expected accretable yield on portfolios purchased during the period to be earned by the Company based on its proprietary

9


PRA Group, Inc.
Notes to Consolidated Financial Statements


analytical models. Net reclassifications from nonaccretable difference to accretable yield primarily result from the increase in the Company's estimate of future cash flows. When applicable, net reclassifications to nonaccretable difference from accretable yield result from the decrease in the Company's estimates of future cash flows and allowance charges that together exceed the increase in the Company's estimate of future cash flows.
Changes in accretable yield for the three and six months ended June 30, 2019 and 2018 were as follows (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Balance at beginning of period
$
3,080,168

 
$
3,006,268

 
$
3,058,445

 
$
2,927,866

Income recognized on finance receivables
(249,219
)
 
(219,018
)
 
(488,055
)
 
(437,642
)
Net allowance charges
1,196

 
2,834

 
7,291

 
3,759

Additions from portfolio purchases (1)
228,796

 
197,453

 
464,610

 
344,285

Reclassifications from nonaccretable difference
112,901

 
90,046

 
132,062

 
202,074

Foreign currency translation adjustment
(829
)
 
(83,262
)
 
(1,340
)
 
(46,021
)
Balance at end of period
$
3,173,013

 
$
2,994,321

 
$
3,173,013

 
$
2,994,321


(1) Also includes accretable yield additions resulting from certain business acquisitions.
The following is a summary of activity within the Company's valuation allowance account, all of which relates to acquired nonperforming loans, for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Beginning balance
$
263,324

 
$
226,975

 
$
257,148

 
$
225,555

Allowance charges
5,532

 
7,395

 
13,509

 
14,228

Reversal of previously recorded allowance charges
(4,336
)
 
(4,561
)
 
(6,218
)
 
(10,469
)
Net allowance charges
1,196

 
2,834

 
7,291

 
3,759

Foreign currency translation adjustment
71

 
(1,526
)
 
152

 
(1,031
)
Ending balance
$
264,591

 
$
228,283

 
$
264,591

 
$
228,283


3. Investments:
Investments consisted of the following at June 30, 2019 and December 31, 2018 (amounts in thousands):
 
June 30, 2019
 
December 31, 2018
Debt securities
 
 
 
Available-for-sale
$
5,201

 
$
5,077

Equity securities
 
 
 
Private equity funds
7,486

 
7,973

Mutual funds
62,678

 
21,753

Equity method investments
10,546

 
10,370

Total investments
$
85,911

 
$
45,173



10


PRA Group, Inc.
Notes to Consolidated Financial Statements


Debt Securities
Available-for-sale
Government bonds: The Company's investments in government bonds are classified as available-for-sale and are stated at fair value. Fair value is determined using quoted market prices. Unrealized gains and losses are included in comprehensive income and reported in equity.
The amortized cost and estimated fair value of investments in debt securities at June 30, 2019 and December 31, 2018 were as follows (amounts in thousands):
 
June 30, 2019
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Aggregate Fair Value
Available-for-sale
 
 
 
 
 
 
 
Government bonds
$
5,202

 
$

 
$
1

 
$
5,201

 
 
 
 
 
 
 
 
 
December 31, 2018
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Aggregate Fair Value
Available-for-sale
 
 
 
 
 
 
 
Government bonds
$
5,160

 
$

 
$
83

 
$
5,077


Equity Securities
Investments in private equity funds: Investments in private equity funds represent limited partnerships in which the Company has less than a 3% interest. In the first quarter of 2018, the Company adopted ASU 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"), which requires that investments in equity securities be measured at fair value with changes in unrealized gains and losses reported in earnings. Upon adoption of ASU 2016-01, the investments are carried at the fair value reported by the Fund manager. The Company recorded a cumulative effect adjustment of $3.9 million, net of tax, to beginning retained earnings for the unrealized loss on the investments. Prior to 2018, the investments were carried at cost with income recognized in Other Revenue in the consolidated income statements when distributions, up to reported income, were received from the partnerships.
Mutual funds: The Company invests certain excess funds held in Brazil in a Brazilian real denominated mutual fund benchmarked to the US dollar that invests principally in Brazilian fixed income securities. The investments are carried at fair value based on quoted market prices.
Unrealized gains and losses: Net unrealized (losses)/gains were $(0.7) million and $1.4 million for the three and six months ended June 30, 2019, respectively, on its equity securities. Net unrealized gains were $2.4 million and $2.8 million for the three and six months ended June 30, 2018, respectively, on its equity securities.
Equity Method Investments
Effective December 20, 2018, the Company has an 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing platform for nonperforming loans in Brazil. This investment is accounted for on the equity method because the Company exercises significant influence over RCB’s operating and financial activities. Accordingly, the Company’s investment in RCB is adjusted for the Company’s proportionate share of RCB’s earnings or losses.
4. Goodwill and Intangible Assets, net:
In connection with the Company's business acquisitions, the Company acquired certain tangible and intangible assets. Intangible assets resulting from these acquisitions include client and customer relationships, non-compete agreements, trademarks and technology. The Company performs a review of goodwill as of October 1 of each year or more frequently if indicators of impairment exist.

11


PRA Group, Inc.
Notes to Consolidated Financial Statements


The following table represents the changes in goodwill for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Balance at beginning of period:
 
 
 
 
 
 
 
Goodwill
$
480,518