PRA Group, Inc. Annual Report 2017

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FY2017 Annual Report · PRA Group, Inc.

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Debt happens. So does recovery.

2017 ANNUAL REPORT

A CULTURE OF RESPECT AND

RESPONSIBILITY

D E B T H A P P E N S

S O D O E S R E C O V E R Y P G 1

We play a critical role in the
consumer lending industry,
which itself is a key driver
of the U.S. and world
economies. Because when
we collect, the economy
connects. We’ve recycled
billions of capital back to
banks, who in turn are
able to lend more in
cities across the Americas
and around the globe.

D E B T H A P P E N S

2 0 1 7 H I G H L I G H T S

Raised capital in anticipation

of increased supply in the U.S.

Invested record amounts in both

Americas Core and Americas

Insolvency while remaining

disciplined in Europe.

Collected more cash than

ever before in Europe Core

and Insolvency.

Launched new corporate and

customer websites to provide

enhanced functionality and

payment services.

Debuted our first-ever brand-

focused TV ad – Debt Happens –

to let our customers know

we’re here to help.

Added over 1,100 net

new collectors.

Opened two new call centers

in the U.S. to accommodate
the increased supply.

S O D O E S R E C O V E R Y 2 - 3

To Our Shareholders

KEVIN
STEVENSON
PRESIDENT
& CEO

In 1996, we founded PRA with a premise—that we could build a great company by recruiting the right people and by running the

business the right way, for the right reasons, for the long term. That concept and the moment it was posed to me by Steve

Fredrickson are forever burned into my mind. Said simply, it was the idea that success would come if we gave debt collection

a good name. As our plan evolved, we identified areas of focus that would set us apart from the competition for years:

•

Customer experience and compliance

People and talent

Data and analytics

A long-term approach to building sustainable value

Operational excellence

In preparing to write my first annual letter to shareholders, I thought about PRA’s past to clarify my vision for the future. I studied

every PRA annual shareholder letter that Steve Fredrickson wrote dating back to 2003. As I considered his words and combined

them with my everyday reality of working for this company for more than two decades, one theme was clear—PRA’s philosophy

and focus have not wavered since 1996. That is not going to change. I remain as deeply committed to PRA’s original philosophy

and ideals as I was at the founding of this company.

Customer Experience and Compliance

Focusing on customer experience and compliance has always been a priority for me. Today, it is in vogue to talk about the

customer journey, but my fascination with it began in October of 1987 when I worked at Household Bank. As a young analyst,

I received a memo from the bank president titled “Moments of Truth.” That memo described the importance of each customer

interaction and how it could propel your business forward or drag it backward. It explained that for every event of poor service,

the customer would tell an average of 11 people, and each of them would tell an average of five more. In other words, in the

analog world of 1987, long before the Internet and social media, one interaction could impact more than 60 people. The memo

was so influential in my early understanding of the customer experience that I kept it, and a copy is on display in my office.

At PRA, customer interactions, or moments of truth, occur millions of times a year through phone calls, letters, and digital

channels. In each of these moments, our goal is to understand the customer’s unique situation and to be respectful, ethical, and

collaborative in the process. I believe moments of truth are more important in our business than in many others because no one

chooses to be a PRA customer, and that circumstance amplifies the importance of a positive experience. We believe partnering

with our customers can make the process of repaying debt an affirmative moment of truth, and can continue to improve the

perception of our industry held by customers, debt sellers, regulators, and the public.

Early in PRA’s existence, we chose to restrict the resale of accounts and the use of third-party collection agencies throughout the

U.S., since these activities can create a poor customer experience. Multiple account movements may leave customers confused

and create a risk to data integrity as accounts are transferred from one company to the next and then the next one after that.

Likewise, we adopted the customer-friendly policy of refusing to charge late fees, payment-related fees, or interest on most

accounts purchased. This long-standing emphasis on positive moments of truth has helped make us an industry leader in

compliance and customer satisfaction.

D E B T H A P P E N S

People and Talent

Leading the charge in support of employee engagement and communication is my most important job. I want our employees to

hear our mission, vision, and values directly from me, and I need them to know beyond a shadow of a doubt that I listen to their

ideas in return. In each of my employee interactions—from site visits to brown-bag lunch meetings and departmental fireside

chats, or even during a simple walk down the hallway to grab coffee—my goal is to promote a positive corporate culture, one that

is collaborative, respectful, and motivational. It is obvious to me that such a culture is key to exceptional employee engagement

and retention. We need to recruit, train, motivate, and retain high-performing employees, and we must offer them an environment

where they can thrive. Long, fulfilling careers are good for PRA, good for the employee—and good for the customer.

My conversations with employees allow me not only to carry the message to our workforce, but also to gain valuable insights into

our customers, processes, and leadership. They are well worth the time I spend visiting the various PRA locations. My desire to

sustain a positive culture at PRA is what drives my commitment to maintain a robust communication loop to and from the CEO’s

office. PRA will continue to be a company where our employees are valued and respected and can carry our culture through

to our customers.

Data and Analytics

In nearly every interaction with investors, I reiterate the importance of our ability to drive better results and customer experience

through data and analytics. For more than 20 years, we have gathered data and used it to uncover patterns in our business and

gain insights that make us more productive and efficient. Buying and collecting on nonperforming loans is not an easy business

anywhere in the world, and data and analytics are needed to do it well.

Notice I say “buying and collecting.” We’ve integrated analytics throughout our collection processes to unlock every profitable

dollar in each portfolio and to reveal changes needed in our operations to better serve our customers. Our analytics have

enabled us to understand multichannel customer relationships better and are helping us to meet customers where and how

they want to be met. In 2017, we expanded our online presence, but we did not need big data to tell us that our newest

generation of customers prefers less direct interaction and more self-service. We intend to deliver that convenience, and our

data will tell us how to do it best, thereby creating positive moments of truth.

The use of data and analytics to value and service each portfolio is part of our DNA. This trait has enabled us to remain

competitive, profitable, and disciplined in varying economic cycles, including the worst recession since the Great Depression.

The ability to use data is so fundamental to our success that in 2017, we invested even more in our business intelligence function

and centralized our seasoned analytics team under a new leader who brings deep expertise to PRA. I have challenged this group

to expand our capabilities further and to question historical assumptions to improve our business.

CASH COLLECTIONS
(in millions)

FROM PORTFOLIOS ACQUIRED IN:

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

1996–2007

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

$200

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

S O D O E S R E C O V E R Y 4 - 5

To Our Shareholders

Long-Term Value

In every decision we make, we focus on the long term since it is critical to value creation. We acknowledge that striking the right

balance between today and tomorrow is both necessary and difficult. Throughout our history, we have made decisions to invest

in current periods to create value in the future. That said, we do not use our focus on the long term as an excuse for disappointing

short-term results or mistakes. We are a transparent company that is constantly learning and gaining experience. When we make

mistakes, we own them, we learn from them, and, if they are material, we discuss them with our investors.

At PRA, we believe value is achieved when you have a strong senior leadership team with a clear vision and strategy coupled with

an understanding of the role culture plays in achieving strategic goals. Over the past year, I have spent significant time forming

and developing my team. I work with them daily to clarify our goals and ensure everyone is aligned. Perhaps most importantly,

their incentive and performance measures are aligned with these shared goals.

Operational Excellence

We can have the best data, the best strategy, and the best people—but if we don’t execute well, we will not be successful.

Therefore, from our very first day, we have made operational excellence a primary area of focus. We strive to execute our

strategy better than anyone else to lower our risk and costs while increasing revenues and creating positive moments of truth.

Executives often spend time and money creating a plan but fail to communicate that plan to those who must carry it out. I am

not that kind of executive. That is another reason for my site visits and employee engagement meetings. These forums allow me

to personally ensure that our employees hear PRA’s strategy and my expectations for behavior and delivery without any filter or

distortion in message. I reinforce the need for collaboration and motivation and emphasize our global core values, which are

represented in our corporate motto “PRA CARES.” We are one company, one team, worldwide, and we are not satisfied with the

status quo. We can always improve—together.

With my leadership team, I emphasize the need to pursue only those endeavors that will help us achieve our strategic objectives,

and to flawlessly execute the tasks necessary to accomplish those objectives. We have challenged ourselves to identify and

prioritize those pursuits that best advance our strategy and to defer or abandon the remainder. I am committed to learning from

both our successes and our failures, and I hold myself and my team accountable for the execution of our strategy.

Going Forward

As I write this letter, PRA finds itself in an excellent position. We are one of the leading nonperforming-loan buyers and collectors

in the world, with diversified capabilities and geographic markets. We are very well capitalized and are prepared to handle what

we see as a significant growing supply of nonperforming loans. The U.S. market, in particular, has seen total outstanding

consumer credit card debt reach an all-time high, while at the same time delinquency rates have continued to rise.

Domestically, we have expanded significantly. In 2017, we invested more than $820 million in the Americas, which was a record

amount. We established two new call centers, one in Henderson, Nevada, and the other in Burlington, North Carolina. Together,

these two facilities added 800 seats to our domestic footprint. The new centers, combined with the expansion of existing centers,

enabled us to add more than 1,100 net new collection employees during the year. This represented a more than 70 percent

increase in staffing. We coupled the growth in buying and capacity with an increase in our financing sources in 2017.

We expanded our bank credit line and issued convertible debt. We stand ready to seize opportunities in 2018 and beyond

by being a compliant and able partner for the selling banks with which we associate.

In Europe, the purchase environment remains competitive, and we continue to employ the same patience and efficiency that

have led us to success in the U.S. for many years. We had a solid year investing in portfolios and ended the year very well, with a

Q4 investment of more than $170 million. For the full year, we invested nearly $288 million. We made these purchases in areas

where we have significant data and operational experience.

D E B T H A P P E N S

S H A R E H O L D E R L E T T E R

My desire to sustain
a positive culture
at PRA is what drives
my commitment

Going forward, I intend to hold to the fundamental areas of focus described in this letter. It should not be surprising that

I reaffirm these philosophies since they were foundational to PRA. Steve and I started this company 22 years ago and that kind

of longevity requires a deep belief in the principles on which the company was founded. However, this is not to say that I won’t

be challenging those historical beliefs and the status quo to ensure we are always improving and moving forward.

It is important for our shareholders and other investors to understand that while we focus on the long term, we measure

ourselves by the minute, hour, day, and month, continually monitoring our performance to drive results. Cash flow is the essential

measuring stick at PRA. Ironically, in the nonperforming-loan industry, the GAAP accounting that we are required to use is a yield-

based methodology. Sometimes it aligns well with our focus on cash flow, and at other times it does not. Regardless, I know that

GAAP and cash ultimately converge over time, and I am confident in our approach and focus.

We will continue to be disciplined purchasers of nonperforming loans based on net (after-expense) internal rates of return:

buying when the return is right for the given environment and passing if it is not. We do not measure ourselves on gross

purchase price multiples that can fluctuate as the mix of our portfolio shifts along with the corresponding cost to collect.

Lastly, we completed a successful CEO transition during 2017, and this letter would not be complete without thanking

Steve Fredrickson for his vision and his more than two decades of service. It was his vision that created this company, and it was

his leadership that drove us from start-up to our current position as a world leader in the purchase and collection of

nonperforming loans. We conduct our operations in 16 countries, 13 languages, and 11 currencies, and we have over 5,100

employees and more than $5.7 billion in estimated remaining collections. Steve will continue with PRA as the Executive Chairman

of the Board of Directors, and I look forward to working with him for many more years to come.

Thank you, Steve, and thanks to all our employees who made 2017 a year of successful expansion, building and growth.

I look forward to seeing us make 2018 a year of seizing opportunities and delivering results.

KEVIN STEVENSON

President and Chief Executive Officer

March 2018

S O D O E S R E C O V E R Y 6 - 7

Financial Highlights

NET INCOME

(in millions)

ATTRIBUTABLE TO PRA

2017

2016

2015

2014

2013

REVENUE

(in millions)

2017

2016

2015

2014

2013

CASH RECEIPTS

(in millions)

CASH COLLECTIONS PLUS FEE INCOME

2017

2016

2015

2014

2013

$1,538

$1,569

$1,604

$1,444

$1,214

ESTIMATED REMAINING COLLECTIONS

(in millions)

BY GEOGRAPHICAL REGION AT DECEMBER 31, 2017

UNITED STATES

UNITED KINGDOM

CENTRAL EUROPE

NORTHERN EUROPE

SOUTHERN EUROPE

OTHER AMERICAS

$3,137

$981

$587

$566

$255

$178

$162

$85

$168

$177

$175

$814

$831

$942

$881

$735

D E B T H A P P E N S

10–K
Financial Report

2017 ANNUAL REPORT

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017

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

(State or other jurisdiction of incorporation or organization)

75-3078675

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

120 Corporate Boulevard, Norfolk, Virginia

(Address of principal executive offices)

23502

(Zip Code)

(888) 772-7326

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

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

Common Stock, $0.01 par value per share

(Title of Class)

NASDAQ Global Select Market

(Name of Exchange on which registered)

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

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. YES

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). YES

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company
or 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
Non-accelerated
filer

(Do not check if a smaller reporting company) Smaller reporting company

Emerging growth company

Accelerated filer

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

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2017 was $1,657,180,835 based on the
$37.90 closing price as reported on the NASDAQ Global Select Market.

The number of shares of the registrant's Common Stock outstanding as of February 23, 2018 was 45,225,425.

Documents incorporated by reference: Portions of the Registrant's definitive Proxy Statement for its 2018 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Form 10-K.

Part I

Item 1.

Item 1A.

Item 1B.

Item 2.

Item 3.

Item 4.

Part II

Item 5.

Item 6.

Item 7.

Item 7A.

Item 8.

Table of Contents

Business

Risk Factors

Unresolved Staff Comments

Properties

Legal Proceedings

Mine Safety Disclosure

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Quantitative and Qualitative Disclosures about Market Risk

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Income Statements

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

1 – General and Summary of Significant Accounting Policies

2 – Finance Receivables, net

3 – Investments

4 – Operating Leases

5 – Goodwill and Intangible Assets, net

6 – Borrowings

7 – Property and Equipment, net

8 – Fair Value

9 – Share-Based Compensation

10 – Earnings Per Share

11 – Derivatives

12 – Stockholders' Equity

13 – Income Taxes

14 – Commitments and Contingencies

15 – Retirement Plans

16 – Redeemable Noncontrolling Interest

17 – Sale of Subsidiaries

Item 9.

Item 9A.

Item 9B.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Controls and Procedures

Other Information

Table of Contents

continued

Directors, Executive Officers and Corporate Governance

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accountant Fees and Services

Exhibits and Financial Statement Schedules

Form 10-K Summary

Part III

Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

Part IV

Item 15.

Item 16.

Signatures

Cautionary Statements Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995:

This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking
statements involve risks, uncertainties and assumptions that could cause our results to differ materially from those expressed or
implied by such forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements,
including statements regarding overall cash collection trends, gross margin trends, operating cost trends, liquidity and capital needs
and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions
concerning matters that are not historical facts. The risks, uncertainties and assumptions referred to above may include the following:

•

•
•
•
•

•
•
•

•
•
•
•
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•
•
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a prolonged economic recovery or a deterioration in the economic or inflationary environment in the Americas or Europe,
including the interest rate environment;
changes in the credit or capital markets, which affect our ability to borrow money or raise capital;
our ability to replace our nonperforming loans with additional portfolios;
our ability to purchase nonperforming loans at appropriate prices;
changes in, or interpretations of, federal, state, local, or foreign laws or the administrative practices of various bankruptcy
courts, which may impact our ability to collect on our nonperforming loans;
our ability to collect sufficient amounts on our nonperforming loans;
the possibility that we could incur significant allowance charges on our finance receivables;
changes in, or interpretations of, bankruptcy or collection laws that could negatively affect our business, including by
causing an increase in certain types of bankruptcy filings involving liquidations, which may cause our collections to
decrease;
our ability to manage risks associated with our international operations;
changes in tax laws regarding earnings of our subsidiaries located outside of the United States ("U.S.");
the impact of the Tax Cuts and Jobs Act (the "Tax Act") including interpretations and determinations by tax authorities;
the possibility that we could incur goodwill or other intangible asset impairment charges;
adverse effects from the vote by the United Kingdom ("UK") to leave the European Union ("EU");
adverse outcomes in pending litigations or administrative proceedings;
our loss contingency accruals may not be adequate to cover actual losses;
the possibility that class action suits and other litigation could divert our management's attention and increase our expenses;
the possibility that we could incur business or technology disruptions or cyber incidents;
our ability to collect and enforce our nonperforming loans may be limited under federal, state, local and foreign laws;
our ability to comply with existing and new regulations of the collection industry, the failure of which could result in
penalties, fines, litigation, damage to our reputation, or the suspension or termination of or required modification to our
ability to conduct our business;
investigations or enforcement actions by governmental authorities, including the Consumer Financial Protection Bureau
("CFPB"), which could result in changes to our business practices, negatively impact our portfolio purchasing volume,
make collection of account balances more difficult or expose us to the risk of fines, penalties, restitution payments, and
litigation;
the possibility that compliance with foreign and U.S. laws and regulations that apply to our international operations could
increase our cost of doing business in international jurisdictions;
our ability to raise the funds necessary to repurchase the convertible senior notes or to settle conversions in cash;
our ability to maintain, renegotiate or replace our credit facilities;
changes in interest or exchange rates, which could reduce our net income, and the possibility that future hedging strategies
may not be successful, which could adversely affect our results of operations and financial condition, as could our failure
to comply with hedge accounting principles and interpretations; and
the risk factors discussed herin and in our other filings with the Securities and Exchange Commission (the "SEC").

You should assume that the information appearing in this Annual Report on Form 10-K (this "Form 10-K") is accurate only
as of the date it was issued. Our business, financial condition, results of operations and prospects may have changed since that
date.

You should carefully consider the factors listed above and review the "Risk Factors" section beginning on page 9, as well
as the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section beginning on page 23
and the "Business" section beginning on page 5.

Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future
events, developments or results described in, or implied by, this Form 10-K could turn out to be materially different. Except as
required by law, we assume no obligation to publicly update or revise our forward-looking statements after the date of this Form
10-K and you should not expect us to do so.

Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do
not selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly,
stockholders should not assume that we agree with any statement or report issued by any analyst regardless of the content of the
statement or report. We do not, by policy, confirm forecasts or projections issued by others. Thus, to the extent that reports issued
by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

Item 1. Business.

General

PART I

Headquartered in Norfolk, Virginia and incorporated in Delaware, we are a global financial and business services company

with operations in the Americas and Europe.

Our primary business is the purchase, collection and management of portfolios of nonperforming loans. The accounts we
acquire are primarily the unpaid obligations of individuals owed to credit grantors, which include banks and other types of consumer,
retail, and auto finance companies. We acquire portfolios of nonperforming loans in two broad categories: Core and Insolvency.
Our Core operation specializes in purchasing and collecting nonperforming loan accounts, which we purchased at a substantial
discount to face value since either the credit grantor and/or other third-party collection agencies have been unsuccessful in collecting
the full balance owed. Our Insolvency operation consists primarily of purchasing and collecting on nonperforming loan accounts
where the customer is involved in a bankruptcy proceeding.

We also provide the following fee-based services:

• Class action claims recovery services and purchases;

•

Servicing of consumer bankruptcy accounts in the U.S.; and

• To a lesser extent, contingent collections of nonperforming loans in Europe and South America.

We sold our government services business in January 2017 and PRA Location Services, LLC ("PLS") in June 2017.

We have one reportable segment, accounts receivable management, based on similarities among the operating units, including
the nature of the products and services, the nature of the production processes, the types or classes of customers for our products
and services, the methods used to distribute our products and services, and the nature of the regulatory environment.

We were initially formed as Portfolio Recovery Associates, L.L.C., a Delaware limited liability company, on March 20, 1996.
We formed Portfolio Recovery Associates, Inc. in August 2002 in order to become a publicly traded company and our common
stock began trading on the NASDAQ Global Select Market ("NASDAQ") on November 8, 2002. We continued to diversify our
business by acquiring Aktiv Kapital AS ("Aktiv"), a Norway-based company specializing in the acquisition and servicing of
nonperforming loans throughout Europe and Canada, on July 16, 2014, and subsequently changed our legal name on October 23,
2014 from Portfolio Recovery Associates, Inc. to PRA Group, Inc. We expanded into South America on August 3, 2015 by acquiring
55% of the equity interest in RCB Investimentos S.A. ("RCB"), a servicing platform of nonperforming loans in Brazil, with the
remaining 45% of the equity interest owned by the executive team and previous owners of RCB. On April 26, 2016, we completed
our public tender offer to purchase 100% of the shares of DTP S.A. ("DTP"), a Polish-based debt collection company, further
building our in-house collection efforts in Poland.

All references in this Form 10-K to the "PRA Group," "our," "we," "us," the "Company" or similar terms are to PRA Group,

Inc. and its subsidiaries.

Nonperforming Loan Portfolio Purchases

To identify buying opportunities, we maintain an extensive marketing effort with our senior officers contacting known and
prospective sellers of nonperforming loans. From these sellers, we have purchased a variety of nonperforming loans including
Visa® and MasterCard® credit cards, private label and other credit cards, installment loans, lines of credit, deficiency balances of
various types, legal judgments, and trade payables. Sellers of nonperforming loans include major banks, credit unions, consumer
finance companies, telecommunication providers, retailers, utilities, automobile finance companies, student loan companies, and
other debt owners. The price at which we acquire portfolios depends on the age of the portfolio, whether it is a Core or Insolvency
portfolio, geographic distribution, our historical experience with a certain asset type or credit grantor and other similar factors.

Nonperforming Loan Portfolio Purchasing Process

We acquire portfolios of nonperforming loans from credit grantors through auctions and negotiated sales. In an auction
process, the seller will assemble a portfolio of nonperforming loans and will seek purchase prices from specifically invited potential
purchasers. In a privately negotiated sale process, the credit grantor will contact one or more purchasers directly, receive a bid,
and negotiate the terms of sale. In either case, typically, invited purchasers will have already successfully completed a qualification
process that can include the seller's review of any or all of the following: the purchaser's experience, reputation, financial standing,
operating procedures, business practices, and compliance oversight.

We acquire portfolios of nonperforming loans through either single portfolio transactions, referred to as spot sales, or through
the pre-arranged purchase of multiple portfolios over time, referred to as forward flow sales. Under a forward flow contract, we
agree to purchase nonperforming loans from credit grantors on a periodic basis, at a price equal to a set percentage of face value
of the nonperforming loans over a specified time period, generally from three to twelve months.

Nonperforming Loan Portfolio Collection Operations

Call Center Operations

In higher volume markets, our collection efforts leverage internally staffed call centers. In some newer markets or in markets
that have less consistent debt purchasing patterns, most notably outside the U.S., we may utilize external vendors to do some of
this work. Whether the accounts are being worked internally or externally, we utilize our proprietary analysis to proportionally
direct work efforts to those customers most likely to pay. The analysis driving those decisions relies on various models and variables
that have the highest correlation to profitable collections from call activity.

Legal Recovery - Core Portfolios

An important component of our collections effort involves our legal recovery operations and the judicial collection of accounts
of customers who we believe have the ability, but not the willingness, to resolve their obligations. There are some markets in which
the collection process follows a prescribed time-sensitive and sequential set of legal actions, but in the majority of instances, we
use models and analysis and select those accounts reflecting a high propensity to pay in a legal environment. Depending on the
balance of the receivable and the applicable local collection laws, we determine whether to commence legal action to judicially
collect on the receivable. The legal process can take an extended period of time and can be costly, but when accounts are selected
properly it also usually generates net cash collections that likely would not have been realized otherwise. We use a combination
of internal staff (attorney and support), and external staff to pursue legal collections under certain circumstances.

Insolvency Operations

Insolvency Operations in the U.S. manages customer filings under the U.S. Bankruptcy Code on debtor accounts derived
from two sources: (1) our purchased pools of bankrupt accounts and (2) our Core purchased pools of nonperforming loans that
have filed for bankruptcy or insolvency protection after being acquired by us. We file proofs of claim ("POCs") or claim transfers
and actively manage these accounts through the entire life cycle of the insolvency proceeding in order to substantiate our claims
and ensure that we participate in any distributions to creditors. Outside of the U.S., this work is primarily outsourced to third
parties.

Insolvency accounts in the U.S. are typically those filed under Chapter 13 of the U.S. Bankruptcy Code, have an associated
payment plan that generally ranges from three to five years in duration and can be acquired at any stage in the bankruptcy plan
life cycle. Portfolios sold close to the filing of the bankruptcy plan will generally take months to generate cash flow; however,
aged portfolios sold years after the filing of the bankruptcy plan will typically generate cash flows immediately. Non-U.S. insolvency
accounts may have some slight differences, but generally operate in a similar manner. In Canada, we purchase Consumer Proposal,
Consumer Credit Counseling and Bankrupt Accounts. In the UK, we purchase Individual Voluntary Arrangements, Company
Voluntary Arrangements, Trust Deeds and Bankrupt Accounts. In Germany, we acquire consumer bankruptcies, which may also
consist of small business loans with a personal guarantee.

Fee-Based Services

In addition to the purchase, collection and management of portfolios of nonperforming loans, we provide fee-based services
including class action claims recovery purchasing and servicing through Claims Compensation Bureau, LLC ("CCB"); contingent
collection of nonperforming loans through PRA Group Europe and RCB; and third-party servicing of bankruptcy accounts in the
U.S.

Seasonality

Although our business is not impacted significantly by seasonality, cash collections in the Americas tend to be higher in the
first and second quarters of the year and lower in the third and fourth quarters of the year; by contrast, cash collections in Europe
tend to be higher in the third and fourth quarters of the year. Customer payment patterns are affected by seasonal employment
trends, income tax refunds and holiday spending habits geographically.

Competition

Purchased portfolio competition comes from both third-party contingent fee collection agencies and other purchasers of debt
that manage their own nonperforming loans or outsource such servicing. Our primary competitors in our fee-for-service business
are providers of outsourced receivables management services. Regulatory complexity and burdens, combined with seller preference
for experienced portfolio purchasers create significant barriers to successful entry for new competitors. While both markets remain
competitive, the contingent fee industry is more fragmented than the purchased portfolio industry.

We face bidding competition in our acquisition of nonperforming loans and in obtaining placements for our fee-for-service
businesses. We also compete on the basis of reputation, industry experience and performance. We believe that our competitive
strengths include our disciplined and proprietary underwriting process, the extensive data set we have developed as a result of
reselling substantially no portfolios since 2002 and inhouse collections, our ability to bid on portfolios at appropriate prices, our
reputation from previous portfolio purchase transactions, our ability to close transactions in a timely fashion, our strong relationships
with grantors of receivables, our team of well-trained collectors who provide quality customer service while complying with
applicable collection laws, and our ability to efficiently and effectively collect on various asset types.

Compliance

Our approach to compliance is multifaceted and comprehensive, and includes the following:

•

our Code of Conduct, which applies to all directors, officers and employees, is available at the Investor Relations page
of our website at www.pragroup.com;

compliance and ethics training for our directors, officers and employees;

a confidential telephone and email hotline and web-based portals to report suspected compliance violations, fraud, financial
reporting, accounting, and auditing matters and other acts that may be illegal and/or unethical;

regular and annual testing by our compliance and internal audit departments of controls embedded in business processes
designed to foster compliance with laws, regulations and internal policy; and

regular evaluation of the legislative and regulatory environment, monitoring of statutory and regulatory changes and
relevant case law, so that operations personnel are aware of and in compliance with the laws and judicial decisions that
may impact their job duties.

Regulation

We are subject to a variety of federal, state, local, and foreign laws that establish specific guidelines and procedures that debt
collectors must follow when collecting customer accounts, including laws relating to the collection, use, retention, security and
transfer of personal information. It is our policy to comply with the provisions of all applicable federal, state, local and foreign
laws in all of our activities even though there are frequent changes in these laws and regulations, in their interpretation and
application and inconsistencies from jurisdiction to jurisdiction. Our failure to comply with these laws could result in enforcement
action against us, the payment of significant fines and penalties, restrictions upon our operations or our inability to recover amounts
owed to us. Significant laws and regulations applicable to our business include the following:

• Fair Debt Collection Practices Act ("FDCPA"), which imposes certain obligations and restrictions on the practices of

debt collectors, including specific restrictions regarding the time, place and manner of the communications.

• Fair Credit Reporting Act ("FCRA"), which obligates credit information providers to verify the accuracy of information

provided to credit reporting agencies and investigate consumer disputes concerning the accuracy of such information.

• Gramm-Leach-Bliley Act, which requires that certain financial institutions, including collection agencies, develop policies
to protect the privacy of consumers' private financial information and provide notices to consumers advising them of their
privacy policies.

• Electronic Funds Transfer Act, which regulates electronic fund transfer transactions, including a consumer’s right to stop

payments on a pre-approved fund transfer and right to receive certain documentation of the transaction.

•

Telephone Consumer Protection Act ("TCPA"), which, along with similar state laws, places certain restrictions on users
of certain automated dialing equipment and pre-recorded messages that place telephone calls to consumers.

Servicemembers Civil Relief Act ("SCRA"), which gives U.S. military service personnel relief from credit obligations they
may have incurred prior to entering military service, and may also apply in certain circumstances to obligations and
liabilities incurred by a servicemember while serving on active duty.

• Health Insurance Portability and Accountability Act, which provides standards to protect the confidentiality of patients'

personal healthcare and financial information in the U.S.

• U.S. Bankruptcy Code, which prohibits certain contacts with consumers after the filing of bankruptcy petitions and dictates
what types of claims will or will not be allowed in a bankruptcy proceeding and how such claims may be discharged.

• Americans with Disabilities Act, which requires that telecommunications companies operating in the U.S. take steps to
ensure functionally equivalent services are available for their consumers with disabilities, and requires accommodation
of consumers with disabilities, such as the implementation of telecommunications relay services.

• U.S. Foreign Corrupt Practices Act ("FCPA"), United Kingdom Bribery Act ("UK Bribery Act") and Other Applicable
Legislation. Our operations outside the U.S. are subject to the FCPA, which prohibits U.S. companies and their agents
and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision
of these individuals in order to obtain an unfair advantage or help obtain or retain business. Although similar to the FCPA,
the UK Bribery Act is broader in scope and covers bribes given to or received by any person with improper intent.

• Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which restructured the regulation
and supervision of the financial services industry in the U.S. and created the CFPB. The CFPB has rulemaking, supervisory,
and enforcement authority over larger consumer debt collectors. The Dodd-Frank Act, along with the Unfair, Deceptive,
or Abusive Acts or Practices ("UDAAP") provisions included therein, and the Federal Trade Commission Act, prohibit
unfair, deceptive, and/or abusive acts and practices.

• Foreign data protection and privacy laws, which include relevant country specific legislation in the United Kingdom and
other European countries where we operate that regulate the processing of information relating to individuals, including
the obtaining, holding, use or disclosure of such information; the Personal Information Protection and Electronic
Documents Act, which aims to protect personal information that is collected, used or disclosed in certain circumstances
for purposes of electronic commerce in Canada; and the EU Data Protection Directive, which will be replaced by the
General Data Protection Regulation, effective as of May 25, 2018, which regulates the processing and free movement of
personal data within the EU and transfer of such data outside the EU.

• Consumer Credit Act 1974 (and its related regulations), Unfair Terms in Consumer Contracts Regulations of 1999 and
the Financial Conduct Authority's consumer credit conduct of business rules, which apply to our international operations
and govern consumer credit agreements.

In addition, certain of our EU subsidiaries are subject to capital adequacy and liquidity requirements as prescribed by the

Swedish Financial Supervisory Authority ("SFSA").

On September 9, 2015, Portfolio Recovery Associates, LLC ("PRA"), our wholly owned subsidiary, entered into a consent
order with the CFPB, settling a previously disclosed investigation of certain debt collection practices of PRA (the "Consent Order").
PRA entered into the Consent Order for settlement purposes, without admitting the truth of the allegations, other than the
jurisdictional facts. Among other things, the Consent Order required PRA to: (i) vacate 837 judgments obtained after the applicable
statute of limitations, refund $860,607 in payments received on account of such judgments and waive the remaining $3.4 million
in judgment balances; (ii) refund $18.2 million in Litigation Department Calls Restitution, as defined in the Consent Order; and
(iii) pay an $8.0 million civil money penalty to the CFPB.

Employees

As of December 31, 2017, we employed 5,154 full-time equivalents globally. We believe that our relations with our employees
are generally satisfactory. While none of our North American employees are represented by a union or covered by a collective
bargaining agreement, in Europe we work closely with a number of Works Councils, and in countries where it is the customary
local practice, such as Finland and Spain, we have collective bargaining agreements.

Available Information

We make available on or through our website, www.pragroup.com, certain reports that we file with or furnish to the SEC in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These include our Annual Reports on
Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC Filings"). We make this information available on our
website free of charge as soon as reasonably practicable after we electronically file the information with or furnish it to the SEC.
The information that is filed with the SEC may be read or copied at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549. In addition, information on the operation of the Public Reference Room may be obtained by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC at: www.sec.gov.

The information contained on, or that can be accessed through our website, is not, and shall not be deemed to be, a part of

this Form 10-K or incorporated into any other filings we make with the SEC.

Reports filed with, or furnished to, the SEC are also available free of charge upon request by contacting our corporate office

at:

PRA Group, Inc.
Attn: Investor Relations
120 Corporate Boulevard, Suite 100
Norfolk, Virginia 23502

Item 1A. Risk Factors.

An investment in our Company involves risk, including the possibility that the value of the investment could fall substantially.
The following are risks that could materially affect our business, results of operations, financial condition, liquidity, cash flows,
and the value of, and return on, an investment in our Company.

Risks related to our operations and industry

A prolonged economic recovery or deterioration in the economic or inflationary environment in the Americas or Europe could
have an adverse effect on our business and results of operations.

Our performance may be adversely affected by economic, political or inflationary conditions in any market in which we
operate. These conditions could include regulatory developments, changes in global or domestic economic policy, legislative
changes, the sovereign debt crises experienced in several European countries and the uncertainty on the future of the EU as a result
of the United Kingdom's departure from the EU. Deterioration in economic conditions, a prolonged economic recovery, or a
significant rise in inflation could cause personal bankruptcy and insolvency filings to increase, and the ability of consumers to pay
their debts could be adversely affected. This may in turn adversely impact our business and financial results. Deteriorating economic
conditions or a prolonged recovery could also adversely impact the businesses to which we provide fee-based services, which
could reduce our fee income and cash flow.

If global credit market conditions and the stability of global banks deteriorate, it could negatively impact the generation of
comprehensive receivable buying opportunities and our business, financial results and ability to succeed in foreign markets could
be adversely affected. If conditions in major credit markets deteriorate, the amount of consumer or commercial lending and financing
could be reduced, thus decreasing the volume of nonperforming loans available for our purchase.

Other factors associated with the economy that could influence our performance include the financial stability of the lenders
on our bank loans and credit facilities and our access to capital and credit. The financial turmoil that adversely affected the banking
system and financial markets in recent years resulted in the tightening of credit markets. Although there has been some improvement,
a worsening of current conditions could have a negative impact on our business, including a decrease in the value of our financial
investments and the insolvency of lending institutions, including the lenders on our bank loans and credit facilities, resulting in
our difficulty in or inability to obtain credit. These and other economic factors could have an adverse effect on our financial
condition and results of operations.

We may not be able to continually replace our nonperforming loans with additional portfolios sufficient to operate efficiently and
profitably, and/or we may not be able to purchase nonperforming loans at appropriate prices.

To operate profitably, we must acquire and service a sufficient amount of nonperforming loans to generate revenue that
exceeds our expenses. Fixed costs such as salaries and other compensation expense constitute a significant portion of our overhead
and, if we do not replace the nonperforming loan portfolios we service with additional portfolios, we may have to reduce the
number of our collection personnel. We would then have to rehire collection staff if we subsequently obtain additional portfolios.
These practices could lead to:

•

low employee morale;

fewer experienced employees;

higher training costs;

disruptions in our operations;

loss of efficiency; and

excess costs associated with unused space in our facilities.

The availability of nonperforming loan portfolios at prices that generate an appropriate return on our investment depends on

a number of factors both within and outside of our control, including the following:

•

the continuation of high levels of consumer debt obligations;

sales of nonperforming loan portfolios by debt owners; and

competitive factors affecting potential purchasers and credit grantors of receivables.

Furthermore, heightened regulation of the credit card and consumer lending industry or changing credit origination strategies
may result in decreased availability of credit to consumers, potentially leading to a future reduction in nonperforming loans available
for purchase from debt owners. Conversely, lower regulatory barriers with respect to debt buyers could lead to increased participants
in the debt collection industry, which could, in turn, impact the supply of nonperforming loans available for purchase. We cannot
predict how our ability to identify and purchase nonperforming loans and the quality of those nonperforming loans would be
affected if there were a shift in lending practices, whether caused by changes in the regulations or accounting practices applicable
to debt owners or debt buyers, a sustained economic downturn or otherwise.

Moreover, there can be no assurance that debt owners will continue to sell their nonperforming loans consistent with recent
levels or at all, or that we will be able to bid competitively for those portfolios. Because of the length of time involved in collecting
on acquired portfolios and the variability in the timing of our collections, we may not be able to identify trends and make changes
in our purchasing strategies in a timely manner. If we are unable to maintain our business or adapt to changing market needs as
well as our current or future competitors, we may experience reduced access to nonperforming loan portfolios at appropriate prices
and, therefore, reduced profitability.

Currently, a number of large banks that historically sold nonperforming loans in the U.S. are not selling such debt. This
includes sellers of bankrupt accounts, some of whom have elected to stop selling such accounts because they believe that regulatory
guidance concerning sales of bankruptcy accounts is ambiguous. Should these conditions worsen, it could negatively impact our
ability to replace our nonperforming loans with additional portfolios sufficient to operate profitably.

We may not be able to collect sufficient amounts on our nonperforming loans to fund our operations.

Our principal business consists of acquiring and liquidating nonperforming loans that consumers or others have failed to
pay. The debt owners have typically made numerous attempts to recover on their receivables, often using a combination of in-
house recovery efforts and third-party collection agencies. These nonperforming loans are difficult to collect, and we may not
collect a sufficient amount to cover our investment and the costs of running our business.

For financial reporting purposes, we utilize the interest method of revenue recognition for determining our income recognized on
finance receivables, which is based on an analysis of projected cash flows that may prove to be less than anticipated and could
lead to the incurrence of allowance charges which would reduce our net finance receivables income.

We utilize the interest method to determine income recognized on finance receivables under the guidance of Financial
Accounting Standards Board ("FASB") Accounting Standards Codification 310-30, "Loans and Debt Securities Acquired with
Deteriorated Credit Quality" ("ASC 310-30"). Under this method, pools of receivables we acquire are modeled upon their projected
cash flows. A yield is then established which, when applied to the unamortized purchase price of the receivables, results in the
recognition of income at a constant yield relative to the remaining balance in the pool. Each pool is analyzed regularly to assess
the actual performance compared to that derived from our models. Under ASC 310-30, rather than lowering the estimated yield
if the collection estimates are not received or projected to be received, the carrying value of a pool would be written down to
maintain the then current yield and is shown as a reduction in revenue in the consolidated income statements with a corresponding
valuation allowance offsetting finance receivables, net, on the consolidated balance sheets. As a result, if the accuracy of the
modeling process deteriorates or there is a significant decline in anticipated future cash flows, we could incur reductions in future
revenues resulting from additional allowance charges, which could reduce our profitability in a given period.

Our collections may decrease if certain types of insolvency proceedings and bankruptcy filings involving liquidations increase.

Various economic trends and potential changes to existing legislation may contribute to an increase in the amount of personal
bankruptcy and insolvency filings. Under certain of these filings, a debtor's assets may be sold to repay creditors, but because most
of the receivables we collect through our collections operations are unsecured, we typically would not be able to collect on those
receivables. Although our insolvency collections business could benefit from an increase in personal bankruptcies and insolvencies,
we cannot ensure that our collections operations business would not decline with an increase in personal insolvencies or bankruptcy
filings or changes in related regulations or practices. If our actual collection experience with respect to a nonperforming or insolvent
bankrupt receivables portfolio is significantly lower than the total amount we projected when we purchased the portfolio, our
financial condition and results of operations could be adversely impacted.

Our international operations expose us to risks which could harm our business, results of operations and financial condition.

A significant portion of our operations is conducted outside the U.S. This could expose us to adverse economic, industry and
political conditions that may have a negative impact on our ability to manage our existing operations or pursue alternative strategic
transactions, which could have a negative effect on our business, results of operations and financial condition.

The global nature of our operations expands the risks and uncertainties described elsewhere in this section, including the

following:

•

changes in local political, economic, social and labor conditions in the markets in which we operate, including Europe,
Brazil and Canada;

foreign exchange controls on currency conversion and the transfer of funds that might prevent us from repatriating cash
earned in countries outside the U.S. in a tax-efficient manner;

currency exchange rate fluctuations, currency restructurings, inflation or deflation, and our ability to manage these
fluctuations through a foreign exchange risk management program;

different employee/employer relationships, laws and regulations and existence of employment tribunals and Works
Councils;

laws and regulations imposed by foreign governments, including those governing data security, sharing and transfer;

potentially adverse tax consequences resulting from changes in tax laws in the foreign jurisdictions in which we operate
or challenges to our interpretations and application of complex international tax laws;

logistical, communications and other challenges caused by distance and cultural and language differences, each making
it harder to do business in certain jurisdictions;

risks related to crimes, strikes, riots, civil disturbances, terrorist attacks, wars and natural disasters;

volatility of global credit markets and the availability of consumer credit and financing in our international markets;

uncertainty as to the enforceability of contract and intellectual property rights under local laws;

•

the potential of forced nationalization of certain industries, or the impact on creditors' rights, consumer disposable income
levels, flexibility and availability of consumer credit, and the ability to enforce and collect aged or charged-off debts
stemming from foreign governmental actions, whether through austerity or stimulus measures or initiative, intended to
control or influence macroeconomic factors such as wages, unemployment, national output or consumption, inflation,
investment, credit, finance, taxation or other economic drivers;

the presence of varying levels of business corruption in international markets and the effect of various anti-corruption
and other laws on our foreign operations;

the impact on our day-to-day operations and our ability to staff our international operations given our high employee
turnover rates, changing labor conditions and long-term trends towards higher wages in developed and emerging
international markets as well as the potential impact of union organizing efforts;

potential damage to our reputation due to non-compliance with foreign and local laws; and

the complexity and necessity of using non-U.S. representatives, consultants and other third-party vendors.

Furthermore, our future tax expense could be affected by changes in the mix of earnings in countries with differing statutory
tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. The
determination of the provision for income taxes and other tax liabilities regarding our global operations requires significant
judgment. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in
our financial statements and may adversely affect our financial results in the period(s) for which such determination is made.

Our tax filings are subject to audit by domestic and foreign tax authorities. These audits may result in assessments of additional

taxes, adjustments to the timing of taxable income or deductions, or re-allocations of income among tax jurisdictions.

Any one of these factors could adversely affect our business, results of operations and financial condition.

The impact of the Tax Act, including interpretations and determinations by taxing authorities, could have an adverse effect on our
financial condition and results of operations.

On December 22, 2017, the President of the United States of America signed the Tax Act, which includes a broad range of
tax reform provisions affecting businesses, including a reduction in the U.S. federal corporate tax rate from 35% to 21%; a one-
time transition tax on certain unrepatriated earnings of foreign subsidiaries; generally eliminating U.S. federal income taxes on
dividends from foreign subsidiaries; requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled
foreign corporations referred to as Global Intangible Low-Taxed Income; creating the base erosion anti-abuse tax, a new minimum
tax; creating a new limitation on deductible interest expense; and increased limitations on the deductibility of executive
compensation. The Tax Act will impact our effective tax rate for fiscal years 2018 and beyond. The new law makes broad and
complex changes to the U.S. tax code and we expect to see future regulatory, administrative or legislative guidance. While we
expect that the lowering of the U.S. federal tax rate will have a positive impact on our worldwide effective tax rate, we are analyzing
the Tax Act to determine the full impact of the new tax law. To the extent any future guidance differs from our preliminary
interpretation of the law, it could have a material effect on our financial position and results of operations.

In addition, many countries in the EU and around the world have adopted and/or proposed changes to current tax laws.
Further, organizations such as the Organization for Economic Cooperation and Development have published actions that, if adopted
by countries where we do business, could increase our tax obligations in those countries. Due to the scale of our U.S. and international
business activities, many of these enacted and proposed changes to the taxation of our activities could increase our worldwide
effective tax rate and harm our financial position and results of operations.

Goodwill or other intangible asset impairment charges could negatively impact our net income and stockholders' equity.

We have recorded a significant amount of goodwill as a result of our acquisitions. Goodwill is not amortized, but is tested
for impairment at the reporting unit level. Goodwill is required to be tested for impairment annually and between annual tests if
events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
There are numerous risks that may cause the fair value of a reporting unit to fall below its carrying amount, which could lead to
the recognition of goodwill impairment. These risks include, but are not limited to, adverse changes in macroeconomic conditions,
the business climate, or the market for the entity's products or services; significant variances between actual and expected financial
results; negative or declining cash flows; lowered expectations of future results; failure to realize anticipated synergies from
acquisitions; significant expense increases; a more likely-than-not expectation of selling or disposing all or a portion of a reporting
unit; the loss of key personnel; an adverse action or assessment by a regulator; and a sustained decrease in the Company's share
price.

Our goodwill impairment testing involves the use of estimates and the exercise of judgment, including judgments regarding
expected future business performance and market conditions. Significant changes in our assessment of such factors, including the
deterioration of market conditions, could affect our assessment of the fair value of one or more of our reporting units and could
result in a goodwill impairment charge in a future period.

Other intangible assets, such as client and customer relationships, non-compete agreements and trademarks, are amortized.
Risks such as those that could lead to the recognition of goodwill impairment, could also lead to the recognition of other intangible
asset impairment.

The vote by the UK to leave the EU, and the ultimate exit of the UK from the EU, could adversely impact our business, results of
operations and financial condition.

On June 23, 2016, the UK voted to leave the EU. Although the vote had no binding legal effect, it adversely impacted global
markets and resulted in a decline in the value of the British pound as compared to the U.S. dollar and other currencies. The UK's
exit negotiations with the EU officially began in June 2017. It is expected that the UK's actual exit from the EU, or Brexit, will
take place in March 2019. However, perceptions concerning the impact of the UK's withdrawal from the EU may adversely affect
business activity, political stability and economic conditions in the UK, the EU and globally, which could in turn adversely affect
European or worldwide political, regulatory, economic and financial market conditions.

As of December 31, 2017, the total estimated remaining collections ("ERC") of our UK portfolios constituted approximately
17% of our consolidated ERC. We expect volatility in exchange rates in the short term as the UK negotiates its exit from the EU.
A weaker British pound compared to the U.S. dollar during a reporting period could cause local currency results of our UK
operations to be translated into fewer U.S. dollars. In the longer term, any impact from Brexit on our business, results of operations
and financial condition will depend on the final terms negotiated by the UK and the EU, including arrangements concerning taxes
and financial services regulation.

Our loss contingency accruals may not be adequate to cover actual losses.

We are involved in judicial, regulatory, and arbitration proceedings or investigations concerning matters arising from our
business activities. We believe that we have adopted reasonable compliance policies and procedures and believe we have meritorious
defenses in all material litigation pending against us. However, there can be no assurance as to the ultimate outcome. We establish
accruals for potential liability arising from legal proceedings when it is probable that such liability has been incurred and the
amount of the loss can be reasonably estimated. We may still incur legal costs for a matter even if we have not accrued a liability.
In addition, actual losses may be higher than the amount accrued for a certain matter, or in the aggregate. An unfavorable resolution
of a legal proceeding or claim could adversely impact our business, financial condition, results of operations, or liquidity. For more
information, refer to the "Litigation and Regulatory Matters" section of Note 14 to our Consolidated Financial Statements included
in Item 8 of this Form 10-K ("Note 14").

Class action suits and other litigation could divert our management's attention from operating our business and increase our
expenses.

Grantors, nonperforming loan purchasers and third-party collection agencies and attorneys in the consumer credit industry
are frequently subject to putative class action lawsuits and other litigation. Claims include failure to comply with applicable laws
and regulations and improper or deceptive origination and servicing practices. An unfavorable outcome in a class action suit or
other litigation could adversely affect our results of operations, financial condition, cash flows and liquidity. Even when we prevail
or the basis for the litigation is groundless, considerable time, energy and resources may be needed to respond, and such class
action lawsuits or other litigation could adversely affect our results of operations, financial condition and cash flows.

The occurrence of cyber incidents, or a deficiency in our cyber-security, could negatively impact our business by disrupting our
operations, compromising or corrupting our confidential information or damaging our image, all of which could negatively impact
our business and financial results.

Our business is highly dependent on our ability to process and monitor a large number of transactions across markets and in
multiple currencies. As our geographical reach expands, maintaining the security of our systems and infrastructure becomes more
significant. Privacy laws in the U.S., Europe and elsewhere govern the collection and transmission of personal data. As our reliance
on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Our three primary
risks that could directly result from the occurrence of a cyber incident are operational interruption, damage to our image, and
private data exposure. Private data may include customer information, our employees' personally identifiable information, or
proprietary business information such as underwriting and collections methodologies. We have implemented solutions, processes,
and procedures to help mitigate these risks, but these measures, as well as our organization's increased awareness of our risk of a
cyber incident do not guarantee that our business, reputation or financial results will not be negatively impacted by such an incident.
13

However, should such a cyber incident occur, we may be required to expend significant additional resources to notify affected
consumers, modify our protective measures or to investigate and remediate vulnerabilities or other exposures. Additionally, we
may be subject to fines, penalties, litigation costs and settlements and financial losses that may not be fully covered by our cyber
insurance.

Risks associated with governmental regulation and laws

Our ability to collect and enforce our nonperforming loans may be limited under federal, state and foreign laws, regulations and
policies.

The businesses conducted by our operating subsidiaries are subject to licensing and regulation by governmental and regulatory
bodies in the many jurisdictions in which we operate. Federal and state laws and the laws and regulations of the foreign countries
in which we operate may limit our ability to collect on and enforce our rights with respect to our nonperforming loans regardless
of any act or omission on our part. Some laws and regulations applicable to credit issuers may preclude us from collecting on
nonperforming loans we purchase if the credit issuer previously failed to comply with applicable laws in generating or servicing
those receivables. Collection laws and regulations also directly apply to our business. Such laws and regulations are extensive and
subject to change. A variety of state, federal and international laws and regulations govern the collection, use, retention, transmission,
sharing and security of consumer data. Consumer protection and privacy protection laws, changes in the ways that existing rules
or laws are interpreted or enforced and any procedures that may be implemented as a result of regulatory consent orders may
adversely affect our ability to collect on our nonperforming loans and may harm our business. Our failure to comply with laws or
regulations applicable to us could limit our ability to collect on our receivables, which could reduce our profitability and harm our
business.

Failure to comply with government regulation of the collections industry could result in penalties, fines, litigation, damage to our
reputation or the suspension or termination of our ability to conduct our business.

The collections industry throughout the markets in which we operate is governed by various laws and regulations, many of
which require us to be a licensed debt collector. Our industry is also at times investigated by regulators and offices of state attorneys
general, and subpoenas and other requests or demands for information may be issued by governmental authorities who are
investigating debt collection activities. These investigations may result in enforcement actions, fines and penalties, or the assertion
of private claims and lawsuits. If any such investigations result in findings that we or our vendors have failed to comply with
applicable laws and regulations, we could be subject to penalties, litigation losses and expenses, damage to our reputation, or the
suspension or termination of, or required modification to, our ability to conduct collections, which would adversely affect our
business, results of operations and financial condition.

In a number of jurisdictions, we must maintain licenses to perform debt recovery services and must satisfy related bonding
requirements. Our failure to comply with existing licensing requirements, changing interpretations of existing requirements, or
adoption of new licensing requirements, could restrict our ability to collect in certain jurisdictions, subject us to increased regulation,
increase our costs, or adversely affect our ability to collect our receivables.

Some laws, among other things, also may limit the interest rate and the fees that a credit grantor may impose on our consumers,
limit the time in which we may file legal actions to enforce consumer accounts, and require specific account information for certain
collection activities. In addition, local requirements and court rulings in various jurisdictions also may affect our ability to collect.

Regulations and statutes applicable to our industry further provide that, in some cases, consumers cannot be held liable for,
or their liability may be limited with respect to, charges to their debt or credit card accounts that resulted from unauthorized use
of their credit. These laws, among others, may limit our ability to recover amounts owing with respect to the receivables, whether
or not we committed any wrongful act or omission in connection with the account.

If we fail to comply with any applicable laws and regulations discussed above, such failure could result in penalties, litigation
losses and expenses, damage to our reputation, or otherwise impact our ability to conduct collections efforts, which could adversely
affect our business, results of operations and financial condition.

Investigations or enforcement actions by governmental authorities may result in changes to our business practices; negatively
impact our receivables portfolio purchasing volume; make collection of receivables more difficult; or expose us to the risk of fines,
penalties, restitution payments and litigation.

Our debt collection activities and business practices are subject to review from time to time by various governmental authorities
and regulators, including the CFPB, which may commence investigations or enforcement actions or reviews targeted at businesses
in the financial services industry. These reviews may involve governmental authority consideration of individual consumer
complaints, or could involve a broader review of our debt collection policies and practices. Such investigations could lead to

assertions by governmental authorities that we are not complying with applicable laws or regulations. In such circumstances,
authorities may request or seek to impose a range of remedies that could involve potential compensatory or punitive damage claims,
fines, restitution payments, sanctions or injunctive relief, that if agreed to or granted, could require us to make payments or incur
other expenditures that could have an adverse effect on our financial position. The CFPB has the authority to obtain cease and
desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief), recover
costs, and impose monetary penalties (ranging from $5,000 per day to over $1 million per day, depending on the nature and gravity
of the violation). In addition, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations implemented
thereunder, the Dodd-Frank Act empowers state attorneys general and other state regulators to bring civil actions to remedy
violations under state law. Government authorities could also request or seek to require us to cease certain of our practices or
institute new practices. Negative publicity relating to investigations or proceedings brought by governmental authorities could
have an adverse impact on our reputation, could harm our ability to conduct business with industry participants, and could result
in financial institutions reducing or eliminating sales of receivables portfolios to us which would harm our business and negatively
impact our results of operations. Moreover, changing or modifying our internal policies or procedures, responding to governmental
inquiries and investigations and defending lawsuits or other proceedings could require significant efforts on the part of management
and result in increased costs to our business. In addition, such efforts could divert management's full attention from our business
operations. All of these factors could have an adverse effect on our business, results of operations, and financial condition.

The CFPB has issued civil investigative demands to many companies that it regulates, and is currently examining practices
regarding the collection of consumer debt. In September 2015, we entered into the Consent Order with the CFPB settling a
previously disclosed investigation of certain debt collection practices of PRA. The Consent Order resulted in the payment of
$19 million in consumer refunds and an $8 million penalty. In addition, we were required to cease collection of approximately
$3 million of consumer debt and modify some of our collections practices. Although we have implemented the requirements of
the Consent Order, there can be no assurance that additional litigation or new industry regulations currently under consideration
by the CFPB would not have an adverse effect on our business, results of operations, and financial condition. In addition, the
CFPB monitors our compliance with the Consent Order and could make a determination that we have failed to adhere to our
obligations. Such a determination could result in additional inquiries, penalties or liabilities, which could have an adverse effect
on our business, results of operations, and financial condition.

Compliance with complex and evolving foreign and U.S. laws and regulations that apply to our international operations could
increase our cost of doing business in international jurisdictions.

We operate on a global basis with offices and activities in a number of jurisdictions throughout the Americas and Europe.
We face increased exposure to risks inherent in conducting business internationally, including compliance with complex foreign
and U.S. laws and regulations that apply to our international operations, which could increase our cost of doing business in
international jurisdictions. These laws and regulations include those related to taxation and anti-corruption laws such as the FCPA,
the UK Bribery Act and other local laws prohibiting corrupt payments to governmental officials. Given the complexity of these
laws, there is a risk that we may inadvertently breach certain provisions of these laws, such as through the negligent behavior of
an employee or our failure to comply with certain formal documentation requirements. Violations of these laws and regulations
by us, any of our employees or our third-party vendors, either inadvertently or intentionally, could result in fines and penalties,
criminal sanctions, restrictions on our operations and limits on our ability to offer our products and services in one or more countries.
Violations of these laws could also adversely affect our business, brand, international expansion efforts, ability to attract and retain
employees and results of operations.

Risks associated with indebtedness

We utilize bank loans, credit facilities and convertible notes to finance our business activities, which could negatively impact our
liquidity and business operations if we are unable to retain, renegotiate, expand or replace our bank loans and credit facilities or
raise the necessary funds to repurchase the convertible notes.

As described in Note 6 to our Consolidated Financial Statements included in Item 8 of this Form 10-K, our sources of
financing include a North American credit facility, a European multicurrency revolving credit facility and convertible senior notes.
The credit facilities contain financial and other restrictive covenants, including restrictions on how we operate our business and
our ability to pay dividends to our stockholders. Failure to satisfy any one of these covenants could result in negative consequences
including the following:

•

acceleration of outstanding indebtedness;

exercise by our lenders of rights with respect to the collateral pledged under certain of our outstanding indebtedness;

our inability to continue to purchase nonperforming loans needed to operate our business; or

•

our inability to secure alternative financing on favorable terms, if at all.

If we are unable to retain, renegotiate, expand or replace our credit facilities, including as a result of failure to satisfy the

restrictive covenants contained in them, our liquidity and business operations could be impacted negatively.

We have additional indebtedness in the form of Convertible Senior Notes due 2020 and 2023 (collectively the "Notes") and
may not have the ability to raise the funds necessary to repurchase the Notes upon a fundamental change or to settle conversions
in cash. Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including
the Notes, or to make cash payments in connection with any conversion of the Notes depends on our future performance, which
is subject to economic, financial, competitive and other factors beyond our control. Our ability to refinance our indebtedness will
depend on the capital markets and our financial condition at that time. We may not be able to engage in any of these activities or
engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, in the event the
conditional conversion features of the Notes are triggered, holders of the Notes are entitled to convert the Notes into shares of our
common stock at any time during specified periods at their option, subject to the terms of the indenture governing the Notes. Upon
conversion, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu
of delivering any fractional shares of our common stock), we will be required to make cash payments in respect of the Notes.
However, we may not have enough available cash or be able to obtain financing at the time we are required to repurchase Notes
surrendered to settle conversions in cash, and our ability to repurchase the Notes or pay cash upon conversion may be limited by
law. Any issuance of shares of our common stock upon conversion of the Notes would dilute the ownership interest of our
stockholders.

We may be restricted from paying cash upon conversion of the Notes, repurchasing the Notes for cash when required and repaying
the Notes at maturity or upon acceleration following an event of default under the Notes unless we repay all amounts outstanding
under, and terminate, our North American Credit Agreement, and our future indebtedness may contain limitations on our ability
to pay cash upon conversion of the Notes and on our ability to repurchase the Notes.

The terms of our North American Credit Agreement prohibit us from paying cash upon conversion of the Notes, repurchasing
the Notes for cash when required upon the occurrence of a fundamental change and repaying the Notes at maturity or upon
acceleration following an event of default under the indenture governing the Notes if a default or an event of default exists on the
date of such required payment, repurchase or repayment, as applicable, or certain other conditions are not met, including pro forma
compliance with the financial covenants and having “Sufficient Liquidity” (described below). As a result, we will be restricted
from making such payments unless the default or event of default under our North American Credit Agreement is cured or waived,
such conditions are met and/or we repay all amounts then outstanding under, and terminate, our North American Credit Agreement.

In addition, under our North American Credit Agreement our ability to settle conversions of the Notes in cash requires that
immediately prior to any such conversion, our cash and cash equivalents (including our availability under our domestic and multi-
currency revolving facilities under our North American Credit Agreement) be at least 115% of the sum of the principal amount of
the Notes to be paid in cash (“Sufficient Liquidity”). The terms of any additional indebtedness incurred as permitted by our North
American Credit Agreement may contain similar or more onerous restrictions than the foregoing.

Our failure to repurchase Notes, to pay, when due, cash upon conversion of the Notes or repay the Notes at maturity or upon
acceleration following an event of default under the indenture governing the Notes would constitute a default under the indenture
governing the Notes. A default under the indenture may constitute a default under our North American Credit Agreement.

Changes in interest rates could increase our interest expense and reduce our net income.

Our revolving credit facilities bear interest at variable rates. Increases in interest rates could increase our interest expense
which would, in turn, lower our earnings. From time to time, we may enter into hedging transactions to mitigate our interest rate
risk on all or a portion of our debt. Hedging strategies rely on assumptions and projections. If these assumptions and projections
prove to be incorrect or our hedges do not adequately mitigate the impact of changes in interest rates, we may experience volatility
in our earnings that could adversely affect our results of operations and financial condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate headquarters and primary domestic operations facility are located in Norfolk, Virginia. In addition, we have
operational centers, all of which are leased except the facilities in Kansas and Tennessee, in the following locations in the Americas
and Europe:

- Birmingham, Alabama

- Burlington, North Carolina

- Hampton, Virginia

- Henderson, Nevada

- Hutchinson, Kansas

- Bromley, United Kingdom

- Duisburg, Germany

- Eisenstadt, Austria

- Helsinki, Finland

- Kilmarnock, United Kingdom

- Luxembourg, Luxembourg

Americas

Europe

- Jackson, Tennessee

- London, Ontario, Canada

- North Richland Hills, Texas

- San Diego, California

- São Paulo, Brazil

- Madrid, Spain

- Oslo, Norway

- Padova, Italy

- Uppsala, Sweden

- Warsaw, Poland

- Zug, Switzerland

We also lease several less significant facilities in various locations throughout the Americas and Europe, which are not listed
above. We do not consider any specific leased or owned facility to be material to our operations. We believe that equally suitable
alternative facilities are available throughout our geographic market areas.

Item 3. Legal Proceedings.

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

Refer to Note 14 for information regarding legal proceedings in which we are involved.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.

Price Range of Common Stock

Our common stock is traded on NASDAQ under the symbol "PRAA." The following table sets forth the high and low sales

price for our common stock, as reported by NASDAQ, for the periods indicated.

Quarter ended March 31,

Quarter ended June 30,

Quarter ended September 30,

Quarter ended December 31,

2017

2016

High

$42.70

$38.45

$40.15

$36.00

Low

$31.75

$30.95

$25.72

$26.85

High

$35.98

$34.15

$34.99

$39.70

Low

$20.00

$22.51

$21.93

$23.15

Based on information provided by our transfer agent and registrar, as of February 16, 2018, there were 54 holders of record

and 38,830 beneficial owners of our common stock.

Stock Performance

The following graph and subsequent table compares from December 31, 2012 to December 31, 2017, the cumulative
stockholder returns assuming an initial investment of $100 in our common stock (PRAA), the stocks comprising the NASDAQ
Financial 100 (IXF) and the stocks comprising the NASDAQ Global Market Composite Index (NQGM) at the beginning of the
period. Any dividends paid during the five year period are assumed to be reinvested.

Ticker

2012

2013

2014

2015

2016

2017

PRA Group, Inc.

PRAA $

NASDAQ Financial 100
$
NASDAQ Global Market Composite Index NQGM $

IXF

100

148

142

167

163

149

177

159

176

110

201

170

232

212

The comparisons of stock performance shown above are not intended to forecast or be indicative of possible future performance

of our common stock. We do not make or endorse any predictions as to our future stock performance.

Dividend Policy

Our board of directors sets our dividend policy. We do not currently pay regular dividends on our common stock and did
not pay dividends in the three years ended December 31, 2017; however, our board of directors may determine in the future to
declare or pay dividends on our common stock. Under the terms of our credit facilities, cash dividends may not exceed $20 million
in any fiscal year without the consent of our lenders. Any future determination as to the declaration and payment of dividends will
be at the discretion of our board of directors and will depend on then existing conditions, including our results of operations,
financial condition, contractual restrictions, capital requirements, business prospects and other factors that our board of directors
may consider relevant.

Recent Sales of Unregistered Securities

None.

Securities Authorized for Issuance Under Equity Compensation Plans

For information regarding securities authorized for issuance under equity compensation plans see Note 9 to our Consolidated

Financial Statements included in Item 8 of this Form 10-K.

Share Repurchase Programs

On October 22, 2015, our board of directors authorized a share repurchase program to purchase up to $125 million of our

outstanding shares of common stock.

During the second quarter of 2017, we repurchased approximately $44.9 million of our outstanding shares of common stock

which concluded the program.

Item 6. Selected Financial Data.

The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in Item 7 of this Form 10-K and our Consolidated Financial Statements and the
related notes thereto included in Item 8 of this Form 10-K . Certain prior year amounts have been reclassified for consistency with
the current period presentation.

Consolidated Income Statement, Operating and Other Financial Data
Amounts in thousands, except per share amounts

2017

2016

2015

2014

2013

Years Ended December 31,

Income Statement Data:

Revenues:

Income recognized on finance receivables, net

780,803

745,119

865,122

807,474

663,546

Fee income

Other revenue

Total revenues

Operating expenses:

Compensation and employee services

Legal collection expenses

Agency fees

Outside fees and services

Communication

Rent and occupancy

Depreciation and amortization

Other operating expenses

Impairment of goodwill

Total operating expenses

Income from operations

Other income and (expense):

Gain on sale of subsidiaries

Interest expense, net

Foreign exchange gain/(loss)

Other

Income before income taxes

Income tax (benefit)/expense

Net income

Adjustment for net income attributable to
noncontrolling interest

Net income attributable to PRA Group, Inc.

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

Basic

Diluted

Weighted average number of shares outstanding:

Basic

Diluted

Operating and Other Financial Data:

Cash receipts

Operating expenses to cash receipts
Return on equity (1)
Acquisitions of finance receivables, at cost (2)
Full-time equivalents at period end

24,916

7,855

813,574

273,033

119,398

35,530

62,792

33,132

14,823

19,763

44,103

—

602,574

211,000

48,474

(98,041)

(1,104)

(2,790)

157,539

(11,536)

169,075

77,381

8,080

830,580

258,846

132,202

44,922

63,098

33,771

15,710

24,359

39,466

—

612,374

218,206

—

(80,864)

2,564

(5,823)

134,083

43,191

90,892

64,383

12,513

942,018

268,345

129,456

32,188

65,155

33,113

14,714

19,874

68,829

—

631,674

310,344

—

(60,336)

7,514

—

257,522

89,391

168,131

65,675

7,820

880,969

234,531

139,161

16,399

55,821

33,085

11,509

18,414

29,981

—

538,901

342,068

—

(35,226)

(5,829)

—

301,013

124,508

176,505

6,810

5,795

205

—

71,532

735,135

192,474

124,551

5,901

31,615

28,161

8,311

14,417

25,781

6,397

437,608

297,527

—

(14,466)

—

283,065

106,146

176,919

1,605

162,265

85,097

167,926

176,505

175,314

$3.55

$3.54

45,671

45,823

$1.84

$1.83

46,316

46,388

$3.49

$3.47

48,128

48,405

$3.53

$3.50

49,990

50,421

$3.48

$3.45

50,366

50,873

1,537,521

1,569,367

1,603,878

1,444,487

1,213,969

39%

17%

39%

10%

39%

20%

37%

19%

36%

22%

1,108,959

947,331

963,811

1,432,764

656,785

5,154

4,019

3,799

3,880

3,543

(1) Calculated by dividing net income attributable to PRA Group, Inc. for each year by average monthly stockholders' equity -

PRA Group, Inc. for the same year.

(2) Represents cash paid for finance receivables through the ordinary course of business as well as the acquisition date finance

receivable portfolios that were acquired through our various business acquisitions.

Key Balance Sheet Data
Amounts in thousands

As of December 31,

2017

2016

2015

2014

2013

120,516

94,287

71,372

39,661

162,004

2,771,921

3,697,764

2,170,182

1,137,509

2,307,969

3,163,999

1,784,101

917,163

2,202,113

2,990,567

1,717,129

839,747

2,001,790

2,778,751

1,482,456

902,215

1,239,191

1,601,232

451,780

869,476

Quarterly Income Statement Data
Amounts in thousands, except per share amounts

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sep 30,
2016

Jun 30,
2016

Mar 31,
2016

198,177

197,248

190,843

194,535

131,965

202,639

204,008

206,507

6,043

1,454

2,671

1,091

6,344

3,145

9,858

2,165

21,171

2,122

17,597

1,748

22,347

2,101

16,266

2,109

205,674

201,010

200,332

206,558

155,258

221,984

228,456

224,882

69,253

28,842

7,877

15,815

8,028

3,985

4,666

12,032

150,498

55,176

—

(28,379)

317

(2,790)

24,324

(64,393)

88,717

68,541

27,626

7,599

15,631

8,713

3,668

4,841

10,140

146,759

54,251

307

(25,899)

(1,084)

—

27,575

10,682

16,893

66,771

31,202

9,254

18,061

7,254

3,387

5,041

11,046

152,016

48,316

1,322

(22,506)

(2,516)

—

24,616

10,766

13,850

68,468

31,728

10,800

13,285

9,137

3,783

5,215

10,885

153,301

53,257

46,845

(21,257)

2,179

—

81,024

31,409

49,615

61,390

34,726

10,695

16,683

7,652

4,001

6,020

7,023

148,190

7,068

65,898

33,447

12,034

14,731

7,814

3,875

6,184

10,513

154,496

67,488

64,793

33,897

11,309

15,876

8,423

4,038

6,085

11,279

155,700

72,756

—

(21,026)

(19,310)

(20,569)

(2,619)

(5,823)

(22,400)

(7,053)

(15,347)

5,004

—

53,182

16,664

36,518

2,029

—

54,216

17,348

36,868

66,765

30,132

10,884

15,808

9,882

3,796

6,070

10,651

153,988

70,894

—

(19,959)

(1,850)

—

49,085

16,232

32,853

1,847

1,338

2,177

1,448

2,301

2,212

412

870

86,870

15,555

11,673

48,167

(17,648) $

34,306

36,456

31,983

1.92

0.34

0.25

1.04

1.03

(0.38) $

0.74

0.79

0.69

Cash and cash equivalents

Finance receivables, net

Total assets

Borrowings

Total equity

Revenues:

Income recognized on finance
receivables, net

Fee income

Other revenue

Total revenues

Operating expenses:

Compensation and employee
services

Legal collection expenses

Agency fees

Outside fees and services

Communication

Rent and occupancy

Depreciation and amortization

Other operating expenses

Total operating expenses

Income from operations

Other income and (expense):

Gain on sale of subsidiaries

Interest expense, net

Foreign exchange gain/(loss)

Other

Income/(loss) before income taxes

Income tax expense/(benefit)

Net income/(loss)

Adjustment for net income
attributable to noncontrolling
interests

Net income/(loss) attributable to
PRA Group, Inc.

Net income/(loss) per common share
attributable to PRA Group, Inc.:

Basic

Diluted

Weighted average number of shares
outstanding:

Basic

Diluted

45,170

45,318

45,168

45,286

45,941

46,060

46,406

46,627

46,346

46,343

46,434

46,333

46,402

46,243

46,372

Quarterly Balance Sheet Data
Amounts in thousands

Dec 31,
2017

Sep 30,
2017

Jun 30,
2017

Mar 31,
2017

Dec 31,
2016

Sep 30,
2016

Jun 30,
2016

Mar 31,
2016

Assets

Cash and cash equivalents

120,516

113,754

92,756

82,110

94,287

91,791

117,071

79,442

Investments

Finance receivables, net

Other receivables, net

Income taxes receivable

Net deferred tax asset

Property and equipment, net

Goodwill

Intangible assets, net

Other assets

Assets held for sale

Total assets

Liabilities and Equity

Liabilities:

Accounts payable

Accrued expenses

Income taxes payable

Net deferred tax liability

Interest-bearing deposits

Borrowings

Other liabilities

Liabilities held for sale

Total liabilities

78,290

75,512

76,438

74,055

68,543

67,050

66,560

71,413

2,771,921

2,577,831

2,520,883

2,366,880

2,307,969

2,392,408

2,399,949

2,377,077

15,770

21,686

57,529

49,311

10,919

3,877

41,183

36,428

11,306

2,865

37,299

36,532

17,684

—

29,090

38,024

11,650

9,427

28,482

38,744

24,299

10,673

19,453

44,354

30,079

13,871

15,713

46,852

33,555

—

15,571

47,785

526,513

538,337

516,165

506,240

499,911

560,505

544,337

524,870

23,572

32,656

—

25,527

37,409

—

25,878

40,489

—

27,393

32,373

—

27,935

33,808

43,243

31,539

37,275

—

32,655

38,509

—

32,154

86,966

—

$ 3,697,764

$ 3,460,777

$ 3,360,611

$ 3,173,849

$ 3,163,999

$ 3,279,347

$ 3,305,596

$ 3,268,833

4,992

3,605

3,694

3,924

2,459

2,808

3,719

2,377

85,993

10,771

171,185

98,580

82,445

4,069

237,044

96,395

77,869

19,793

250,821

92,479

82,594

37,960

259,330

78,792

82,699

19,631

258,344

76,113

86,531

20,242

271,152

88,719

79,202

20,888

276,360

58,041

95,049

28,114

269,201

55,349

2,170,182

1,963,504

1,899,148

1,708,687

1,784,101

1,816,600

1,912,283

1,896,424

9,018

—

1,213

—

3,094

—

13,344

—

10,821

4,220

5,317

—

19,922

13,577

—

2,550,721

2,388,275

2,346,898

2,184,631

2,238,388

2,291,369

2,370,415

2,360,091

Redeemable noncontrolling interest

9,534

8,620

8,860

8,515

8,448

Equity:

Preferred stock

Common stock

—

452

—

452

—

452

—

464

—

464

—

463

—

463

Additional paid-in capital

53,870

52,049

49,928

66,293

66,414

70,112

66,838

1,211,632

1,124,762

1,109,207

1,097,534

1,049,367

1,067,015

1,032,709

—

463

64,287

996,253

Retained earnings

Accumulated other
comprehensive loss

(178,607)

(166,397)

(204,213)

(233,476)

(251,944)

(199,888)

(213,933)

(196,135)

Total stockholders' equity -
PRA Group, Inc.

1,087,347

1,010,866

Noncontrolling interest

50,162

53,016

955,374

49,479

Total equity

1,137,509

1,063,882

1,004,853

930,815

49,888

980,703

864,301

52,862

917,163

937,702

50,276

987,978

886,077

49,104

935,181

864,868

43,874

908,742

Total liabilities
and equity

$ 3,697,764

$ 3,460,777

$ 3,360,611

$ 3,173,849

$ 3,163,999

$ 3,279,347

$ 3,305,596

$ 3,268,833

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are a global financial and business services company with operations in the Americas and Europe. Our primary business
is the purchase, collection and management of portfolios of nonperforming loans. As discussed in Note 17 to our Consolidated
Financial Statements included in Item 8 of this Form 10-K ("Note 17"), we sold our government services businesses in January
2017 and Portfolio Location Services, LLC ("PLS") in June 2017.

On April 26, 2016, we completed our public tender offer to purchase 100% of the shares of DTP, a Polish-based debt collection

company, for approximately $44.9 million.

On August 3, 2015, we acquired 55% of the equity interest in RCB. The remaining 45% of the equity interest in RCB is
owned by the executive team and previous owners of RCB. RCB is a leading master servicing platform for nonperforming loans
in Brazil. Our investment for the 55% ownership of RCB was approximately $55.2 million. As part of the investment and call
option agreements, we have the right to purchase the remaining 45% of RCB at certain multiples of earnings before interest, taxes,
depreciation and amortization ("EBITDA") beginning August 3, 2019 and ending August 3, 2021.

Frequently Used Terms

We use the following terminology throughout this document:

•

•
•
•
•

•

•
•

•

"Amortization rate" refers to cash collections applied to principal on finance receivables as a percentage of total cash
collections.
"Buybacks" refers to purchase price refunded by the seller due to the return of ineligible accounts.
"Cash collections" refers to collections on our owned finance receivables portfolios.
"Cash receipts" refers to collections on our owned finance receivables portfolios plus fee income.
"Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status
upon purchase. These accounts are aggregated separately from insolvency accounts.
"Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our owned finance
receivables portfolios.
"Insolvency" accounts or portfolios refer to accounts or portfolios of receivables that are in an insolvent status when we
purchase them and as such are purchased as a pool of insolvent accounts. These include Individual Voluntary Arrangements
("IVAs"), Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany
and the UK.
"Principal amortization" refers to cash collections applied to principal on finance receivables.
"Purchase price" refers to the cash paid to a seller to acquire nonperforming loans, plus certain capitalized costs, less
buybacks.
"Purchase price multiple" refers to the total estimated collections (as defined below) on owned finance receivables
portfolios divided by purchase price.
"Total estimated collections" or "TEC" refers to actual cash collections, including cash sales, plus estimated remaining
collections on our finance receivables portfolios.

Unless otherwise specified, references to 2017, 2016 and 2015 are to the years ended December 31, 2017, December 31,

2016 and December 31, 2015, respectively.

Results of Operations

The results of operations include the financial results of PRA Group and all of our subsidiaries, which are in the receivables
management business. Under the guidance of the FASB ASC Topic 280 "Segment Reporting" ("ASC 280"), we have determined
that we have several operating segments that meet the aggregation criteria of ASC 280, and therefore, we have one reportable
segment, accounts receivables management, 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 sets forth certain operating data as a percentage of total revenues for the years indicated (dollars in

thousands):

Revenues:

2017

2016

2015

Income recognized on finance
receivables, net

780,803

96.0% $

745,119

89.7% $

865,122

91.8%

Fee income

Other revenue

Total revenues

Operating expenses:

Compensation and employee services

Legal collection expenses

Agency fees

Outside fees and services

Communication

Rent and occupancy

Depreciation and amortization

Other operating expenses

Total operating expenses

Income from operations

Other income and (expense):

Interest expense, net

Gain on sale of subsidiaries

Foreign exchange gain/(loss)

Other

Income before income taxes

Income tax expense/(benefit)

Net income

Adjustment for net income attributable to
noncontrolling interests

24,916

7,855

813,574

273,033

119,398

35,530

62,792

33,132

14,823

19,763

44,103

602,574

211,000

3.1

0.9

100.0

33.6

14.7

4.4

7.7

4.1

1.8

2.4

5.4

74.1

25.9

77,381

8,080

830,580

258,846

132,202

44,922

63,098

33,771

15,710

24,359

39,466

612,374

218,206

(98,041)

(12.1)

(80,864)

48,474

(1,104)

(2,790)

157,539

(11,536)

169,075

6,810

6.0

(0.1)

(0.3)

19.4

(1.4)

20.8

0.9

—

2,564

(5,823)

134,083

43,191

90,892

5,795

9.3

1.0

100.0

31.2

15.9

5.4

7.6

4.1

1.9

2.9

4.8

73.8

26.2

(9.7)

—

0.3

(0.7)

16.1

5.2

10.9

0.7

64,383

12,513

942,018

268,345

129,456

32,188

65,155

33,113

14,714

19,874

68,829

631,674

310,344

6.8

1.4

100.0

28.5

13.8

3.4

6.9

3.5

1.6

2.1

7.3

67.1

32.9

(60,336)

(6.4)

—

7,514

—

257,522

89,391

168,131

205

—

0.8

—

27.3

9.5

17.8

—

17.8%

Net income attributable to PRA Group, Inc.

162,265

19.9% $

85,097

10.2% $

167,926

Revenues

Total revenues were $813.6 million in 2017, $830.6 million in 2016, and $942.0 million in 2015.

A summary of how our revenues were generated during the years indicated is as follows (amounts in thousands):

Cash collections

Amortization of investment

Net allowance charges

Income recognized on finance receivables, net

Fee income

Other revenue

Total revenues

Income Recognized on Finance Receivables, net

2017

1,512,605
(719,904)
(11,898)
780,803

24,916

7,855

2016

1,491,986
(648,388)
(98,479)
745,119

77,381

8,080

2015

1,539,495
(645,004)
(29,369)
865,122

64,383

12,513

813,574

830,580

942,018

Income recognized on finance receivables, net, was $780.8 million in 2017, an increase of $35.7 million or 4.8% compared
to income recognized on finance receivables, net, of $745.1 million in 2016. The increase was primarily due to a decrease in net
allowance charges on our finance receivables to $11.9 million in 2017 compared to $98.5 million in 2016, a decrease of $86.6
million or 87.9%. This was partially offset by a decrease in income generated by our Americas Core portfolios, excluding net
allowances, and our Americas Insolvency portfolios. Elevated allowance charges incurred during 2016, mainly on pools acquired
during 2012 to 2014, reduced the income-earning principal balances of our Americas Core portfolios. Income generated by our
Americas Insolvency portfolios declined due primarily to lower volumes of purchasing during 2014 to 2016.

Income recognized on finance receivables, net, was $745.1 million in 2016, a decrease of $120.0 million or 13.9% compared
to income recognized on finance receivables, net, of $865.1 million in 2015. The decrease was primarily due to an increase in net
allowance charges on our finance receivables to $98.5 million in 2016 compared to $29.4 million in 2015, an increase of $69.1
million or 235.0%. Additionally, income generated by our Americas Insolvency portfolios declined due primarily to lower volumes
of purchasing during 2014 to 2016.

Accretable yield represents the amount of income recognized on finance receivables we can expect to generate over the
remaining life of our existing portfolios based on estimated future cash flows as of the balance sheet date. Additions from portfolio
purchases represent the original expected accretable yield to be earned by us, on portfolios purchased during the period. Net
reclassifications from nonaccretable difference to accretable yield primarily result from an increase in our estimate of future cash
flows. Increases in future cash flows may occur as portfolios age and actual cash collections exceed those originally expected. If
those cash flows are determined to be incremental to the portfolio's original forecast, future projections of cash flows are generally
increased resulting in higher expected revenue and hence increases in accretable yield. During 2017 we reclassified $149.5 million
from nonaccretable difference to accretable yield due primarily to increased cash collection forecasts relating mainly to certain
Americas Core pools, Americas Insolvency pools and European Core pools. During 2016 we reclassified $41.1 million from
nonaccretable difference to accretable yield due primarily to increased cash collection forecasts related to portfolios in Europe
partially offset by reductions in cash collection forecasts on our domestic portfolios. During 2015, we reclassified $502.7 million
from nonaccretable difference to accretable yield due primarily to increased cash collection forecasts related to domestic portfolios
primarily acquired from 2011-2014. When applicable, net reclassifications to nonaccretable difference from accretable yield result
from a decrease in our estimates of future cash flows and allowance charges that together exceed the increase in our estimate of
future cash flows.

Income recognized on finance receivables, net, is shown net of changes in valuation allowances which are recorded for
significant decreases in expected cash flows or a change in timing of cash flows which would otherwise require a reduction in the
stated yield on a pool of accounts. In 2017, we recorded net allowance charges of $11.9 million consisting of $7.4 million on our
Americas Core portfolios, $1.5 million on our Americas Insolvency portfolios, and $3.0 million on our European portfolios. In
2016 we recorded net allowance charges of $98.5 million consisting of $89.1 million on our Americas Core portfolios, $0.4 million
on our Americas Insolvency portfolios, and $9.0 million on our European portfolios. During 2016, we made downward adjustments
to projections of future cash collections and we adjusted amortization periods for many of our Americas Core portfolios. This was
done in response to recent trends of cash collections being lower than expected. We attributed this under-performance to a variety
of regulatory and operational factors that we believe adversely impacted our collection efforts and therefore cash collected. In
2015, we recorded net allowance charges of $29.4 million. On our Americas Core portfolios, we recorded net allowance charges
of $21.9 million and net allowance reversals of $1.5 million on our Americas Insolvency portfolios. We also recorded a net
allowance charge of $7.6 million on our Europe Core portfolios.

Fee Income

Fee income was $24.9 million in 2017, a decrease of $52.5 million or 67.8% compared to fee income of $77.4 million in
2016. This was primarily due to a decrease in fee income resulting from the sale of our government services businesses in January
2017 and the sale of PLS in June 2017.

Fee income was $77.4 million in 2016, an increase of $13.0 million or 20.2% compared to fee income of $64.4 million in
2015. Fee income increased primarily due to an increase in revenues generated by PLS, PRA Government Services, LLC ("PGS"),
Claims Compensation Bureau, LLC ("CCB"), Recovery Management Systems Corporation ("RMSC") and RCB. This was offset
by a decrease in fee income from PRA Europe, due primarily to a decline in the amount of contingent fee services provided by us
for external parties.

Other Revenue

Other revenue was $7.9 million in 2017, $8.1 million in 2016, and $12.5 million in 2015. The decrease is primarily due to

a decrease in revenue earned on our investments.

Operating Expenses

Total operating expenses were $602.6 million in 2017, $612.4 million in 2016, and $631.7 million in 2015.

Compensation and Employee Services

Compensation and employee service expenses were $273.0 million in 2017, an increase of $14.2 million or 5.5% compared
to compensation and employee service expenses of $258.8 million in 2016. Compensation expense increased primarily as a result
of larger average staff sizes, partially offset by a decrease resulting from the sale of our government services businesses in January
2017 and the sale of PLS in June 2017. In the U.S., we have hired approximately 1,100 net new collectors since December 31,
2016. Total full-time equivalents increased 28.2% to 5,154 as of December 31, 2017 from 4,019 as of December 31, 2016.

Compensation and employee service expenses were $258.8 million in 2016, a decrease of $9.5 million or 3.5% compared
to compensation and employee service expenses of $268.3 million in 2015. Compensation and employee services expenses
decreased primarily due to a decrease in discretionary bonus and other incentive compensation expenses, including share-based
compensation expenses, offset by increases in normal salary expenses caused by an increase in employee headcount. Total full-
time equivalents increased 5.8% to 4,019 as of December 31, 2016 from 3,799 as of December 31, 2015.

Legal Collection Expenses

Legal collection expenses represent costs paid to courts where a lawsuit is filed, contingent fees incurred for the cash
collections generated by our independent third-party attorney network, and the cost of documents paid to sellers of nonperforming
loans. Legal collection expenses were $119.4 million in 2017, a decrease of $12.8 million or 9.7% compared to $132.2 million in
2016. The decrease was primarily due to a decrease in costs paid to courts where a lawsuit is filed, mainly due to a decrease in the
number of accounts brought into the legal collection process in the Americas. Our costs paid to courts were $74.7 million in 2017,
a decrease of $5.1 million or 6.4% compared to $79.8 million in 2016. Additionally, our costs paid to third-party attorneys were
$43.4 million in 2017, a decrease of $4.3 million or 9.0% compared to $47.7 million in 2016. The decrease was primarily due to
a decrease in domestic external legal collections as a result of fewer accounts brought into the legal collection process in the
Americas. Furthermore, our costs paid to sellers of nonperforming loans for documents were $1.3 million in 2017, a decrease of
$3.4 million or 72.3% compared to $4.7 million in 2016. The decrease was primarily the result of sellers providing more account
documents to us when we purchase portfolios, mainly as a result of regulatory requirements.

Legal collection expenses were $132.2 million in 2016, an increase of $2.7 million or 2.1% compared to $129.5 million in
2015. The increase was primarily due to additional court costs related to the expansion of the number of accounts brought into the
legal channel in Europe in 2016. Our costs paid to courts were $79.8 million in 2016, an increase of $9.0 million or 12.7%
compared to $70.8 million in 2015. This was partially offset by a decrease in legal collection expenses paid to third-party attorneys,
primarily as a result of a decrease in domestic external legal collections. Our costs paid to third-party attorneys were $47.7 million
in 2016, a decrease of $5.7 million or 10.7% compared to $53.4 million in 2015. Our costs paid to sellers of nonperforming loans
for documents were $4.7 million in 2016, a decrease of $0.5 million or 9.6% compared to $5.2 million in 2015.

Agency Fees

Agency fees primarily represent third-party collection fees. Prior to the sale of PLS in June of 2017, agency fees also included
costs paid to repossession agents to repossess vehicles. Agency fees were $35.5 million in 2017, compared to $44.9 million in

2016, a decrease of $9.4 million or 20.9%. The decrease was primarily due to the impact of the sale of PLS in addition to a decrease
in third-party collection fees incurred by our foreign operations.

Agency fees were $44.9 million in 2016, compared to $32.2 million in 2015, an increase of $12.7 million or 39.4%. This
increase was mainly attributable to third-party collection fees incurred by our international operations where we utilize third-party
agencies.

Outside Fees and Services

Outside fees and services expenses were $62.8 million in 2017, a decrease of $0.3 million or 0.5% compared to outside fees
and services expenses of $63.1 million in 2016. The decrease was primarily the result of a $2.3 million decrease in corporate legal
expenses and a $0.5 million decrease in accounting and audit related expenses. This was partially offset by a $1.2 million increase
in payment processing and database fees, a $1.1 million increase in consulting fees and a $0.6 million increase in credit bureau
expenses. None of the remaining variance was attributable to any significant identifiable items.

Outside fees and services expenses were $63.1 million in 2016, a decrease of $2.1 million or 3.2% compared to outside fees
and services expenses of $65.2 million in 2015. The decrease was primarily due to a $6.6 million decrease in corporate legal
expenses during 2016, mainly as a result of increased corporate legal expenses incurred in 2015 as a result of outstanding litigation
and regulatory matters. This was partially offset by an increase of $4.1 million in consulting fees during 2016, as compared to the
prior year period.

Communication

Communication expenses were $33.1 million in 2017, a decrease of $0.7 million or 2.1% compared to communication
expenses of $33.8 million in 2016. Communication expenses were $33.8 million in 2016, an increase of $0.7 million or 2.1%
compared to communication expenses of $33.1 million in 2015. None of the changes were attributable to any significant identifiable
items.

Rent and Occupancy

Rent and occupancy expenses were $14.8 million in 2017, a decrease of $0.9 million or 5.7% compared to rent and occupancy
expenses of $15.7 million in 2016. The decrease was primarily due to the impact of the sale of our government services businesses
in January 2017 and the sale of PLS in June 2017.

Rent and occupancy expenses were $15.7 million in 2016, an increase of $1.0 million or 6.8% compared to rent and occupancy
expenses of $14.7 million in 2015. The increase was primarily due to additional rental expenses incurred as a result of our
acquisitions of RCB, RMSC and DTP as well as the additional rent expense associated with the expansion of our headquarters in
Norfolk, Virginia.

Depreciation and Amortization

Depreciation and amortization expense was $19.8 million in 2017, a decrease of $4.6 million or 18.9% compared to
depreciation and amortization expenses of $24.4 million in 2016. The decrease was primarily due to the impact of the sale of our
government services businesses in January 2017.

Depreciation and amortization expense was $24.4 million in 2016, an increase of $4.5 million or 22.6% compared to
depreciation and amortization expenses of $19.9 million in 2015. The increase was primarily due to the amortization expense
incurred on intangible assets acquired in connection with the acquisitions of RCB and RMSC.

Other Operating Expenses

Other operating expenses were $44.1 million in 2017, an increase of $4.6 million or 11.6% compared to other operating
expenses of $39.5 million in 2016. The increase was primarily due to an increase of $2.9 million in taxes, fee and licenses, a $1.2
million increase in doubtful account expense, a $0.9 million increase in hiring expenses and an $0.8 million increase in general
office expenses. This was offset by a $0.9 million decrease in travel-related expenses and a $0.7 million decrease in dues and
subscriptions. None of the remaining variance was attributable to any significant identifiable items.

Other operating expenses were $39.5 million in 2016, a decrease of $29.3 million or 42.6% compared to other operating
expenses of $68.8 million in 2015. The decrease was primarily due to $28.8 million in expenses incurred during 2015 relating to
the Consent Order entered into with the CFPB.

Interest Expense, Net

Interest expense, net was $98.0 million in 2017, an increase of $17.1 million or 21.1% compared to interest expense, net of
$80.9 million in 2016. The increase was primarily due to higher levels of average borrowings outstanding, increases in interest
rates, and increases in unused line fees and deferred financing costs related to our financing activities in 2017. This was partially
offset by changes in interest expense (income) incurred on our interest rate swaps and an increase in interest income.

Interest expense, net was $80.9 million in 2016, an increase of $20.6 million or 34.2% compared to interest expense, net of
$60.3 million in 2015. The increase was primarily the result of higher average borrowings outstanding during 2016 compared to
2015, as well as an increase in the interest rates charged on our variable rate borrowings.

Interest expense, net consisted of the following in 2017, 2016 and 2015 (amounts in thousands):

Stated interest on debt obligations and unused line
fees

Coupon interest on convertible debt

Amortization of convertible debt discount

Amortization of loan fees and other loan costs

Change in fair value on interest rate swap agreements

Interest income

Interest expense, net

Net Foreign Currency Transaction Gain/(Loss)

Twelve Months Ended December 31,

Variances

2017

2016

2015

2017 vs. 2016

2016 vs. 2015

71,656

63,475

46,661

8,181

16,814

15,870

8,583

9,569
(2,025)
(5,612)
98,041

8,625

4,472

8,116

8,625

4,260

2,328

1,223
(5,047)
80,864

538
(2,076)
60,336

7,245

4,111

1,453
(3,248)
(565)
17,177

—

212

5,788

685
(2,971)
20,528

Net foreign currency transaction gain/(loss) were $(1.1) million, $2.6 million, and $7.5 million in 2017, 2016, and 2015,
respectively. In any given period, we may incur foreign currency transactions gains or losses from transactions in currencies other
than the functional currency.

Other Expense

Other expense was $2.8 million in 2017, compared to $5.8 million in 2016 and $0 in 2015. During 2017, one of our investments
in private equity funds experienced an other-than-temporary impairment which resulted in an impairment charge of $1.7 million.
Additionally, we incurred a $1.0 million expense related to a performance guarantee on a Polish investment fund. During 2016,
the net portfolio collections on our investments in a closed-end Polish securitization fund significantly underperformed expectations.
As a result, in 2016 we recorded an other-than-temporary impairment charge of $5.8 million. For more information, refer to Note
3 to our Consolidated Financial Statements included in Item 8 of this Form 10-K ("Note 3").

Income Tax Expense/(Benefit)

On December 22, 2017, the Tax Act was signed into law by President Trump. The Tax Act makes broad and complex changes
to the U.S. tax code, including, but not limited to the following provisions which are most relevant to us: (1) reducing the U.S.
federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain
unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign
subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations
referred to as Global Intangible Low-Taxed Income (“GILTI”); (5) creating the base erosion anti-abuse tax, a new minimum tax;
(6) creating a new limitation on deductible interest expense; and (7) increased limitations on the deductibility of executive
compensation.

Upon our initial analysis of the impact of the Tax Act, we have provisionally recorded a one-time net tax benefit of $73.8
million in the year ended December 31, 2017 for the corporate rate reduction. We have provisionally determined that we do not
owe a transition tax, due to no accumulated taxable income from foreign operations calculated under U.S. tax accounting methods.

We are still evaluating the impact of the Tax Act on our future U.S. tax expense, but we expect that the overall impact of the
Tax Act on our effective tax rate will be a decrease as compared with the application of prior U.S. tax laws. The decrease is
expected due to the reduction of the federal tax rate provision that was included in the Tax Act which we expect will outweigh
any increases to tax expense with respect to the aforementioned other provisions. For more information, refer to Note 13 to our
Consolidated Financial Statements included in Item 8 of this Form 10-K ("Note 13").

Income tax benefit was $11.5 million in 2017, compared to income tax expense of $43.2 million in 2016. The change was
primarily attributable to a revaluation of our net deferred tax liability due to a reduction of future domestic federal tax rates per
the Tax Act. This was partially offset with a 17.5% increase in income before taxes. The effective tax rate decreased to (7.3)% in
2017 compared to 32.2% in 2016. The decrease was primarily attributable to the aforementioned revaluation of our net deferred
tax liability and provision-to-return adjustments. Excluding the impact of the Tax Act, our effective tax rate would have been
39.5% in 2017. The increase in 2017 as compared to 2016 is primarily due to changes in the mix of taxable income between tax
jurisdictions caused by gains on sales of subsidiaries and other factors; increases in the estimated blended rate for U.S state taxes
which was caused by changes in the mix of earnings, dispositions of subsidiaries, and other factors; and an increase in non-
deductible executive compensation including stock compensation. Our effective tax rate will vary from period to period due to
these types of items.

Income tax expense was $43.2 million in 2016, a decrease of $46.2 million or 51.7% compared to income tax expense of
$89.4 million in 2015. The decrease was due to a decrease of 47.9% in income before taxes. The effective tax rate decreased to
32.2% in 2016 compared to 34.7% in 2015. The decrease was caused by a variety of factors, including changes in the mix of
earnings, provision-to-return adjustments, and non-deductible penalties incurred during 2016, all of which caused the rate to
decrease. The impact of these factors was partially offset by tax rate changes in Europe and tax expense on a one-time intercompany
transaction in 2016.

Supplemental Performance Data

Finance Receivables Portfolio Performance

The following tables show certain data related to our finance receivables portfolio. Certain adjustments, as noted in the
footnotes to these tables, have been made to reduce the impact of foreign currency fluctuations on ERC and purchase price multiples.

These tables disclose our Americas and European Core and Insolvency portfolios. The accounts represented in the Insolvency
tables are those portfolios of accounts that were in an insolvency status at the time of purchase. This contrasts with accounts in
our Core portfolios that file for bankruptcy/insolvency protection after we purchase them, which continue to be tracked in their
corresponding Core portfolio. Core customers sometimes file for bankruptcy/insolvency protection subsequent to our purchase of
the related Core portfolio. When this occurs, we adjust our collection practices accordingly to comply with bankruptcy/insolvency
rules and procedures; however, for accounting purposes, these accounts remain in the related Core portfolio. Conversely, Insolvency
accounts may be dismissed voluntarily or involuntarily subsequent to our purchase of the related Insolvency portfolio. Dismissal
occurs when the terms of the bankruptcy are not met by the petitioner. When this occurs, we are typically free to pursue collection
outside of bankruptcy procedures; however, for accounting purposes, these accounts remain in the related Insolvency pool.

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

When competition increases and/or supply decreases, pricing often becomes negatively impacted relative to expected

collections, and yields tend to trend lower. The opposite tends to occur when competition decreases and/or supply increases.

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

Revenue recognition under Financial Accounting Standards Board ("FASB") Accounting Standards Codification 310-30,
"Loans and Debt Securities Acquired with Deteriorated Credit Quality" ("ASC 310-30") is driven by estimates of total collections
as well as the timing of those collections. We record new portfolio purchases based on our best estimate of the cash flows expected
at acquisition, which reflects the uncertainties inherent in the purchase of nonperforming loans and the results of our underwriting
process. Subsequent to the initial booking, as we gain collection experience and confidence with a pool of accounts, we regularly
update ERC. As a result, our estimate of total collections has often increased as pools have aged. These processes have tended to
cause the ratio of ERC to purchase price for any given year of buying to gradually increase over time. Thus, all factors being equal
in terms of pricing, one would typically tend to see a higher collection to purchase price ratio from a pool of accounts that was six
years from purchase than a pool that was just two years from purchase.

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

We hold a majority interest in a closed-end Polish investment fund that purchases and services nonperforming loans. Our
investment in this fund is classified in our Consolidated Balance Sheets as "Investments" and as such is not included in the following
tables. The equivalent of the estimated remaining collections of the portfolios held by the closed-end Polish investment fund,
expected to be received by us, is $80.2 million at December 31, 2017.

Purchase Price Multiples
as of December 31, 2017
Amounts in thousands

Purchase Period

Purchase Price (1)(2)

Net Finance
Receivables
Balance (3)

ERC-Historical
Period Exchange
Rates (4)

Total Estimated
Collections (5)

ERC-Current
Period Exchange
Rates (6)

Current
Estimated
Purchase Price
Multiple

Original
Estimated
Purchase Price
Multiple (7)

240%
220%
252%
247%
245%
226%
211%
204%
205%
201%
193%

321%
225%
368%
363%
345%
267%
248%
242%
214%
217%
193%

33,725
15,250
31,648
51,797
71,734
104,895
228,470
340,320
424,503
604,147
930,246
2,836,735

132,917
108,550
155,996
208,962
180,477
251,459
227,909
148,727
63,214
92,381
278,066
1,848,658
5,625,406

638,461 $
166,443
125,155
148,205
209,641
254,321
391,380
405,672
444,699
455,882
536,889
3,776,748

2,047,118 $
374,591
460,268
538,470
724,082
678,874
971,627
980,416
951,477
987,174
1,038,636
9,752,733

33,725 $
15,250
31,648
51,797
71,734
104,895
228,470
343,236
422,657
599,155
931,168
2,833,735

7,219 $
4,388
1,061
3,511
13,204
25,362
77,559
128,029
192,170
283,245
498,896
1,234,644

Americas-Core
1996-2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Subtotal
Americas-Insolvency
2004-2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Subtotal
Total Americas
Europe-Core
2012
2013
2014
2015
2016
2017
Subtotal
Europe-Insolvency
2014
2015
2016
2017
Subtotal
Total Europe
Total PRA Group
(1) The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired

197,234
168,656
470,951
547,318
368,130
388,242
353,478
210,136
82,251
111,592
346,861
3,244,849
12,997,582

—
—
—
—
—
—
7,700
26,834
32,239
52,221
238,178
357,172
1,591,816

669
582
2,305
3,642
1,328
2,971
25,508
40,249
40,821
62,530
297,770
478,375
3,315,110

669
582
2,305
3,642
1,328
2,971
25,508
40,295
40,821
62,163
297,770
478,054
3,311,789

18,291
28,808
57,666
49,716
154,481
3,987,674
16,985,256 $

5,716
15,323
38,516
48,496
108,051
2,481,180
5,792,969 $

2,149
8,219
28,163
39,057
77,588
1,180,105
2,771,921 $

10,876
19,409
42,216
38,841
111,342
1,971,874
7,597,280 $

2,762
1,810
1,072,708
485,692
467,051
343,106
2,373,129

—
558
328,018
244,024
287,117
242,800
1,102,517

38,159
23,557
2,094,303
731,464
585,199
360,511
3,833,193

2,291
1,473
971,396
461,521
492,745
350,842
2,280,268

5,444
13,950
39,948
49,530
108,872
2,389,140
5,704,250

20,428
20,362
797,672
422,610
348,864
250,596
1,860,532

148%
155%
302%
262%
204%
154%
155%
141%
130%
121%
125%

148%
163%
214%
184%
155%
136%
133%
124%
125%
123%
125%

187%
119%
208%
160%
167%
144%

187%
116%
263%
173%
168%
144%

129%
139%
130%
128%

168%
148%
137%
128%

through our various business acquisitions.

(2) For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the pool was
purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period-
end exchange rate for the respective quarter of purchase.

(3) For our international amounts, Net Finance Receivables are presented at the December 31, 2017 exchange rate.
(4) For our international amounts, ERC-Historical Period Exchange Rates is presented at the period-end exchange rate for the

respective quarter of purchase.

(5) For our international amounts, TEC is presented at the period-end exchange rate for the respective quarter of purchase.
(6) For our international amounts, ERC-Current Period Exchange Rates is presented at the December 31, 2017 exchange rate.
(7) The Original Purchase Price Multiple represents the purchase price multiple at the end of the year of acquisition.

Portfolio Financial Information
For the Year Ended December 31, 2017
Amounts in thousands

Purchase Period

Purchase Price (1)(2)

Cash
Collections (3)

Gross Revenue (3) Amortization (3)

Allowance (3)

Net Revenue (3)

Americas-Core

1996-2007

638,461 $

13,427 $

9,788 $

3,639 $

332 $

9,456 $

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Subtotal
Americas-Insolvency

2004-2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Subtotal

Total Americas
Europe-Core

2012

2013

2014

2015

2016

2017

Subtotal
Europe-Insolvency

2014

2015

2016

2017

Subtotal

Total Europe

166,443

125,155

148,205

209,641

254,321

391,380

405,672

444,699

455,882

536,889

3,776,748

132,917

108,550

155,996

208,962

180,477

251,459

227,909

148,727

63,214

92,381

278,066

1,848,658

5,625,406

20,428

20,362

797,672

422,610

348,864

250,596

1,860,532

10,876

19,409

42,216

38,841

111,342

1,971,874

6,031

10,994

15,587

31,991

40,042

78,880

114,219

185,898

256,531

107,327

860,927

321

332

1,581

2,425

3,726

29,337

47,781

37,350

20,143

30,426

49,093

222,515

1,083,442

2,038

1,239

220,765

86,156

78,915

17,894

407,007

3,207

5,013

12,703

1,233

22,156

3,330

9,242

10,650

25,700

25,577

56,589

80,097

94,430

138,663

69,743

523,809

235

119

1,581

2,373

3,726

20,126

14,315

9,650

4,061

5,955

9,204

71,345

595,154

2,058

844

122,904

33,022

27,325

5,177

191,330

1,459

1,331

2,800

627

6,217

429,163

197,547

2,701

1,752

4,937

6,291

14,465

22,291

34,122

91,468

117,868

37,584

337,118

213

—

9,211

33,466

27,700

16,082

24,471

39,889

151,170

488,288

(20)

395

97,861

53,134

51,590

12,717

215,677

1,748

3,682

9,903

606

15,939

231,616

252

200

—

510

100

2,620

1,464

1,451

447

—

7,376

472

—

(125)

—

1,030

—

1,457

8,833

—

(141)

1,280

1,589

141

2,931

—

134

—

134

3,065

3,078

9,042

10,650

25,190

25,477

53,969

78,633

92,979

138,216

69,743

516,433

175

(353)

1,581

2,353

3,726

20,126

14,315

9,775

4,061

4,925

9,204

69,888

586,321

2,058

782

123,045

31,742

25,736

5,036

188,399

1,459

1,197

2,800

627

6,083

194,482

Total PRA Group

7,597,280 $

1,512,605 $

792,701 $

719,904 $

11,898 $

780,803 $

Net Finance
Receivables
Balance as of
December 31,
2017(4)

7,219

4,388

1,061

3,511

13,204

25,362

77,559

128,029

192,170

283,245

498,896

1,234,644

—

7,700

26,834

32,239

52,221

238,178

357,172

1,591,816

—

558

328,018

244,024

287,117

242,800

1,102,517

2,149

8,219

28,163

39,057

77,588

1,180,105

2,771,921

(1) The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired

through our various business acquisitions.

(3) For our international amounts, amounts are presented using the average exchange rates during the current reporting period.
(4) For our international amounts, net finance receivables are presented at the December 31, 2017 exchange rate.

The following tables illustrate historical cash collections, by year, on our portfolios.

Cash Collections by Year, By Year of Purchase (1)
as of December 31, 2017
Amounts in thousands

Cash Collections

Purchase
Period

Purchase
Price (2)(3)

1996-
2007

Americas-Core

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Total

1996-2007 $ 638,461 $1,096,153 $222,628 $168,849 $ 137,689 $ 115,551 $ 89,405 $

63,955 $

45,247 $

32,491 $

20,745 $

13,427 $ 2,006,140

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

166,443

125,155

148,205

209,641

254,321

391,380

405,672

444,699

455,882

536,889

— 47,253

72,080

—

— 40,703

—

62,363

95,627

47,076

—

53,654

84,339

42,850

69,385

113,554

109,873

61,971

174,461

—

56,901

—

31,307

51,121

82,014

152,908

173,589

101,614

—

21,027

35,555

55,946

108,513

146,198

247,849

92,660

—

13,786

24,896

38,110

73,793

97,267

194,026

253,448

116,951

—

8,989

16,000

24,515

48,711

59,981

120,789

170,311

228,432

138,723

—

6,031

10,994

15,587

31,991

40,042

78,880

114,219

185,898

256,531

107,327

359,340

428,620

486,675

652,348

573,978

743,158

630,638

531,281

395,254

107,327

Subtotal

3,776,748

1,096,153

269,881

281,632

342,755

429,069

542,875

656,508

752,995

844,768

837,196

860,927

6,914,759

Americas-Insolvency

2004-2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

132,917

108,550

155,996

208,962

180,477

251,459

227,909

148,727

63,214

92,381

278,066

61,154

42,794

— 14,024

33,842

35,894

—

— 16,635

—

27,347

37,974

81,780

39,486

18,234

35,690

8,574

28,956

102,780

107,888

1,884

11,650

95,725

1,151

1,884

53,945

104,499

125,020

121,717

101,873

—

15,218

—

66,379

17,388

—

82,752

103,610

52,528

—

85,816

94,141

82,596

37,045

—

802

1,034

5,781

43,649

76,915

80,079

81,679

50,880

3,395

—

463

635

2,531

5,008

35,996

60,715

63,386

44,313

17,892

18,869

—

321

332

1,581

2,425

3,726

29,337

47,781

37,350

20,143

30,426

49,093

196,566

168,073

468,646

543,677

366,802

385,270

327,970

169,588

41,430

49,295

49,093

Subtotal

1,848,658

61,154

56,818

86,371

186,587

276,421

354,205

469,866

458,451

344,214

249,808

222,515

2,766,410

Total
Americas

Europe-Core

5,625,406

1,157,307

326,699

368,003

529,342

705,490

897,080

1,126,374

1,211,446

1,188,982

1,087,004

1,083,442

9,681,169

2012

2013

2014

2015

2016

2017

20,428

20,362

797,672

422,610

348,864

250,596

Subtotal

1,860,532

Europe-Insolvency

10,876

19,409

42,216

38,841

111,342

1,971,874

2014

2015

2016

2017

Subtotal

Total
Europe

Total PRA
Group

—

11,604

—

8,995

7,068

—

5,641

8,540

3,175

2,347

153,180

291,980

—

45,760

—

2,198

1,326

246,365

100,263

40,368

—

2,038

1,239

220,765

86,156

78,915

17,894

33,651

20,520

912,290

232,179

119,283

17,894

11,604

16,063

167,361

343,262

390,520

407,007

1,335,817

—

4,297

2,954

—

3,921

4,366

6,175

—

7,251

14,462

3,207

5,013

12,703

1,233

22,156

11,430

12,333

18,878

1,233

43,874

11,604

16,063

167,366

350,513

404,982

429,163

1,379,691

$7,597,280 $1,157,307 $326,699 $368,003 $ 529,342 $ 705,490 $ 908,684 $1,142,437 $ 1,378,812 $ 1,539,495 $ 1,491,986 $ 1,512,605 $11,060,860

(1) For our international amounts, cash collections are presented using the average exchange rates during the cash collection

period.

(2) The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired

through our various business acquisitions.

(3) For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the portfolio
was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the
period end exchange rate for the respective quarter of purchase.

Estimated Remaining Collections

The following chart shows our ERC by geographical region at December 31, 2017 (amounts in millions).

Seasonality

Cash collections in the Americas tend to be higher in the first and second quarters of the year and lower in the third and
fourth quarters of the year; by contrast, cash collections in Europe tend to be higher in the third and fourth quarters of the year.
Customer payment patterns are affected by seasonal employment trends, income tax refunds and holiday spending habits
geographically.

The following table displays our quarterly cash collections by geography and portfolio type, for the periods indicated.

Cash Collections by Geography and Type
Amounts in thousands

2017

2016

Americas-Core

$ 204,245

$ 212,756

$ 217,020

$ 226,906

$ 193,360

$ 210,524

$ 213,741

$ 219,571

Americas-Insolvency

59,103

60,436

Europe-Core

107,124

102,681

53,163

99,121

49,813

98,081

52,988

97,429

60,429

96,028

67,745

102,972

68,646

94,091

Europe-Insolvency
5,794
Total Cash Collections $ 376,266

5,961
$ 381,834

5,371
$ 374,675

5,030
$ 379,830

4,974
$ 348,751

4,719
$ 371,700

2,744
$ 387,202

2,025
$ 384,333

The following table provides additional details on the composition of our U.S. Core cash collections for the periods indicated.

Domestic Portfolio Core Cash Collections by Source
Amounts in thousands

2017

2016

Call Center and Other
Collections

External Legal
Collections

Internal Legal
Collections

Total Domestic Core
Cash Collections

$ 120,349

$ 123,009

$ 122,780

$ 127,368

$ 103,595

$ 115,454

$ 119,568

$ 127,851

31,960

35,042

37,863

40,267

35,231

36,415

40,369

43,203

31,154

31,761

32,511

34,937

31,458

33,206

34,505

39,080

$ 183,463

$ 189,812

$ 193,154

$ 202,572

$ 170,284

$ 185,075

$ 194,442

$ 210,134

Collections Productivity (Domestic Portfolio)

The following tables display certain collections productivity measures.

Cash Collections per Collector Hour Paid
Domestic Portfolio

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter

Second Quarter

Third Quarter
Fourth Quarter

Total domestic core cash collections (1)

2017

2016

2015

2014

2013

254

202

191

170

274

269

281

248

247

245

250

239

223

220

217

203

Call center and other cash collections (2)

2017

2016

2015

2014

2013

161

129

125
112

168

167

177
153

143

141

145
139

119

107

112
110

193

190

191

190

107

104

104
100

(1) Represents total cash collections less Insolvency cash collections from trustee-administered accounts. This metric includes
cash collections from Insolvency accounts administered by the Core call center as well as cash collections generated by our
internal staff of legal collectors. This calculation does not include hours paid to our internal staff of legal collectors or to
employees processing the required notifications to trustees on Insolvency accounts.

(2) Represents total cash collections less internal legal cash collections, external legal cash collections and Insolvency cash

collections from trustee-administered accounts.

Portfolio Purchasing

The following graph shows the purchase price of our portfolios by year since 2008. It also includes the acquisition date

finance receivable portfolios that were acquired through our various business acquisitions.

Our ability to profitably purchase and liquidate pools of Insolvency accounts provides diversity to our nonperforming loan
purchasing business. Although we generally purchase Insolvency portfolios from many of the same consumer lenders from whom
we acquire Core customer portfolios, the volumes and pricing characteristics as well as the competitors are different. Based upon
market dynamics, the profitability of portfolios purchased in the Insolvency and Core markets may differ over time. We have found
periods when Insolvency accounts were more profitable and other times when Core accounts were more profitable. When pricing
becomes more competitive due to reduced portfolios available for purchase or increased demand from competitors entering or
increasing their presence in the market, prices tend to go up, driving down the purchase price multiples and lowering the overall

expected returns. When pricing relaxes due to market dynamics, purchase price multiples tend to increase, thereby increasing the
expected returns.

To collect our Core portfolios, we generally need to employ relatively higher amounts of labor and incur additional collection
costs to generate each dollar of cash collections as compared with Insolvency portfolios. In order to achieve acceptable levels of
net return on investment (after direct expenses), we are generally targeting a higher total estimated collections to purchase price
multiple for Core portfolios. On the other hand, Insolvency accounts generate the majority of their cash collections through the
efforts of insolvency courts and trustees. In this process, cash is remitted to our Company with no corresponding cost other than
the cost of filing claims at the time of purchase, court fees associated with the filing of ownership claim transfers and general
administrative costs for monitoring the progress of each account through the insolvency process. As a result, collection costs are
much lower for us when liquidating a pool of Insolvency accounts as compared to a pool of Core accounts, but conversely the
price we pay for Insolvency accounts is generally higher than Core accounts. We generally target similar net income margins for
Insolvency and Core portfolios at any given point in the market cycles. However, because of the lower related collection costs,
we can pay more for Insolvency portfolios, which causes the total estimated collections to purchase price multiples of Insolvency
pools generally to be lower. In summary, compared to a similar investment in a pool of Core accounts, to the extent both pools
had identical targeted net income margins, the Insolvency pool would be expected to generate less revenue, less direct expenses,
similar operating income and a higher operating margin. From time to time, especially in Europe, we purchase Core portfolios
which consist of a majority of previously charged-off accounts which have made a payment within six months prior to acquisition.
These portfolios have some of the same financial dynamics as Insolvency accounts, with lower collection costs and lower purchase
price multiples.

As a result of these purchase price and collection cost dynamics, the mix of our portfolios impacts the relative profitability
we realize in a given year. We minimize the impact of higher pricing, to the degree possible, with increased analytics used to score
Core accounts and determine on which of those accounts to focus our collection efforts.

We utilize a long-term approach to collecting our receivables. This approach has historically caused us to realize significant
cash collections and revenues from purchased portfolios of nonperforming loans years after they are originally acquired. As a
result, we have in the past been able to temporarily reduce our level of current period acquisitions without a significant negative
current period impact on cash collections and revenue.

The following table displays our quarterly portfolio purchases for the periods indicated.

Portfolio Purchases by Geography and Type
Amounts in thousands

2017

2016

Americas-Core

$ 160,278

$ 115,572

$ 144,871

$ 115,166

$ 91,800

$ 95,452

$ 130,529

$ 136,057

Americas-Insolvency

Europe-Core

Europe-Insolvency

44,195

152,417

17,698

73,497

14,695

7,146

100,040

42,876

7,860

67,123

39,505

6,020

20,929

80,129

6,943

16,760

34,240

14,803

33,723

68,835

16,410

22,952

171,038

6,731

Total Portfolio
Purchasing

$ 374,588

$ 210,910

$ 295,647

$ 227,814

$ 199,801

$ 161,255

$ 249,497

$ 336,778

Portfolio Purchases by Stratifications (Domestic Only)

The following table categorizes our quarterly domestic portfolio purchases for the periods indicated into major asset type

and delinquency category. Over the past 20 years, we have acquired more than 47 million customer accounts in the U.S. alone.

Domestic Portfolio Purchases by Stratification (Major Asset Type)
Amounts in thousands

2017

2016

Major Credit Cards

$ 87,414

$ 54,892

$ 65,177

$ 57,615

$ 35,306

$ 38,858

$ 48,471

$ 68,072

Consumer Finance
Private Label Credit
Cards
Auto Related
Total

2,360

3,308

7,354

7,987

5,678

1,309

1,616

2,533

90,813

78,609

101,162

73,473

56,681

54,969

86,331

62,104

21,219
$ 201,806

49,741
$ 186,550

67,701
$ 241,394

30,191
$ 169,266

6,104
$ 103,769

—
$ 95,136

831
$ 137,249

411
$ 133,120

Domestic Portfolio Purchases by Stratification (Delinquency Category)
Amounts in thousands

2017

2016

$ 76,910

$ 67,540

$ 73,813

$ 43,786

$ 30,919

$ 30,114

$ 42,048

$ 37,036

23,100

48,865

8,736

44,195

—

1,623

43,366

524

4,314

52,217

—

73,497

100,040

—

11,010

726

49,794

1,111

67,123

6,726

2,672

48,005

557

1,568

51,630

—

29,990

51,019

—

20,930

11,145

13,702

686

679

490

26,240

43,841

1,843

22,952

1,208

$ 201,806

$ 186,550

$ 241,394

$ 169,266

$ 103,769

$ 95,136

$ 137,249

$ 133,120

Fresh (1)
Primary (2)
Secondary (3)
Tertiary (3)
Insolvency
Other (4)
Total

(1) Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and are either being sold prior to

any post-charge-off collection activity or placement with a third-party for the first time.

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

fee servicer.

(3) Secondary and tertiary accounts are typically more than 660 days past due and charged-off and have been placed with two or

three contingent fee servicers.

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

or more contingent fee servicers.

Liquidity and Capital Resources

We manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations.
As of December 31, 2017, cash and cash equivalents totaled $120.5 million. Of the cash and cash equivalent balance as of
December 31, 2017, $106.0 million consisted of cash on hand related to foreign operations with indefinitely reinvested earnings.
See the "Undistributed Earnings of Foreign Subsidiaries" section below for more information.

At December 31, 2017, we had approximately $2.2 billion in borrowings outstanding with $845.2 million of availability
under all of our credit facilities (subject to the borrowing base and applicable debt covenants). Considering borrowing base
restrictions, as of December 31, 2017, the amount available to be drawn was $510.2 million. Of the $845.2 million of borrowing
availability, $463.4 million was available under our European credit facility and $381.8 million was available under our North
American credit facility. Of the $510.2 million available considering borrowing base restrictions, $157.0 million was available
under our European credit facility and $353.1 million was available under our North American credit facility. The primary borrowing
base under both credit facilities is ERC of the respective finance receivables portfolios. For more information, see Note 6.

An additional funding source is interest-bearing deposits generated in Europe. Per the terms of our European credit facility,
we are permitted to obtain interest-bearing deposit funding of up to SEK 1.5 billion (approximately $182.5 million as of
December 31, 2017). We amended our European credit facility during the first quarter of 2018 which lowered this limit from SEK
1.5 billion to SEK 1.2 billion (approximately $146.0 million). See Note 6 for more information. Interest-bearing deposits as of
December 31, 2017 were $98.6 million.

Following the receipt of the covenant waiver during the fourth quarter of 2017 as discussed in Note 6, we believe we were

in compliance with the covenants of our financing arrangements as of December 31, 2017.

As discussed in Note 17, we sold our government services business in January 2017 for $91.5 million and our vehicle location,

skip tracing and collateral recovery business in June 2017 for approximately $4.5 million.

We have the ability to slow the purchasing of nonperforming loans if necessary, with low impact to current year cash
collections. For example, we invested $1,109.0 million in portfolio purchases in 2017. The portfolios purchased in 2017 generated
$175.5 million of cash collections, representing only 11.6% of 2017 cash collections.

Contractual obligations over the next year are primarily related to debt maturities and purchase commitments. Our North
American credit facility expires in May 2022. Our European credit facility expires in February 2021. Of our $764.8 million in
long-term debt outstanding at December 31, 2017, $10.0 million is due within one year.

We have in place forward flow commitments for the purchase of nonperforming loans over the next 12 months with a
maximum purchase price of $203.2 million as of December 31, 2017. We may also enter into new or renewed flow commitments
and close on spot transactions in addition to the aforementioned flow agreements.

For tax purposes, we utilized the cost recovery method of accounting for our finance receivable income through December
31, 2016. The Internal Revenue Service ("IRS") examined our 2005 through 2012 tax returns and asserted that tax revenue
recognition using the cost recovery method did not clearly reflect taxable income and therefore issued Notices of Deficiency to
us for tax years ended December 31, 2005 through 2012 (the "Notices"). In response to the Notices, we filed petitions in the U.S.
Tax Court (the "Tax Court") challenging the deficiencies and the Tax Court set the trial to begin on May 15, 2017. On May 10,
2017, we reached a settlement with the IRS in regards to the Notices. Under the settlement, both parties agreed that no amounts
were due for years 2005 through 2012 and the Tax Court entered decisions to that effect on June 22, 2017. Also, under the
settlement, we agreed to utilize a new tax accounting method to recognize net finance receivables revenue effective with tax year
2017. Under the new method, a portion of the annual collections will amortize principal and the remaining portion will be considered
taxable income. We will not be required to pay any interest or penalties related to the prior periods. The deferred tax liability related
to the difference in timing between the new method and the prior method will be incorporated evenly into our tax filings over four
years. We estimate the related tax payments for future years to be approximately $9.8 million per quarter.

On October 22, 2015, our board of directors authorized a share repurchase program to purchase up to $125.0 million of our
outstanding shares of common stock. Repurchases depend on prevailing market conditions and other factors. In 2017, in conjunction
with the issuance of the 2023 Notes, we used a portion of the proceeds to repurchase approximately $44.9 million of our outstanding
shares of common stock which represented the remaining share repurchasing authority under the program.

We believe that funds generated from operations and from cash collections on finance receivables, together with existing
cash and available borrowings under our revolving credit facilities will be sufficient to finance our operations, planned capital
expenditures, forward flow purchase commitments, and additional portfolio purchasing during the next twelve months. Business
acquisitions, adverse outcomes in pending litigation or higher than expected levels of portfolio purchasing could require additional
financing from other sources.

Cash Flows Analysis

Our operating activities provided cash of $0.8 million, $105.9 million, and $203.0 million 2017, 2016, and 2015, respectively.
Key drivers of the changes included cash collections recognized as revenue, fee income, income tax payments, and interest
payments. In addition, changes in other accounts related to our operating activities impacted our cash from operations. Cash
collections recognized as revenue were $780.8 million, $745.1 million and $865.1 million in 2017, 2016 and 2015, respectively,
as previously described in the revenues discussion and analysis. Fee income was $24.9 million, $77.4 million and $64.4 million
in 2017, 2016 and 2015, respectively. The decline in 2017 was primarily the result of the sale of our government services business
in January 2017 and our vehicle location, skip tracing and collateral recovery business in June 2017. Cash paid for income taxes
was $144.3 million, $78.8 million and $86.3 million in 2017, 2016 and 2015, respectively. The 2017 total included $23.4 million
related to the sale of our government services business and $58.3 million related to payment of the deferred tax liability discussed
earlier in this section. Interest payments were $79.8 million, $68.0 million and $49.8 million in 2017, 2016 and 2015, respectively.
The increases were due primarily to increased borrowings, and increases in interest rates and unused line fees.

Our investing activities used cash of $280.3 million, $217.5 million, and $282.3 million in 2017, 2016, and 2015, respectively.
Cash used in investing activities was primarily driven by acquisitions of nonperforming loans and business acquisitions. Cash
provided by investing activities was primarily driven by cash collections applied to principal on finance receivables and proceeds
from sale of subsidiaries. The change in net cash used in investing activities was primarily due to changes in the amounts of
acquisitions of finance receivables, which totaled $1,086.0 million in 2017, compared to $890.8 million and $955.0 million in
2016 and 2015, respectively. Additionally, net cash payments for corporate acquisitions totaled $0.0 million in 2017, compared to
$60.2 million, and $1.4 million in 2016, and 2015, respectively. The change was also due to changes in the amount of collections
applied to principal on finance receivables which totaled $731.8 million in 2017, compared to $746.9 million, and $674.4 million
in 2016, and 2015, respectively. These items were offset by an increase of $93.3 million in cash provided by investing activities
related to the sale certain of our subsidiaries in 2017. No subsidiaries were sold in 2016 or 2015.

Our financing activities provided cash of $295.7 million, $94.4 million and $120.1 million in 2017, 2016, and 2015,
respectively. The change in cash provided by financing activities in 2017 compared to 2016 and 2015, was primarily due to an
increase in our borrowings, offset partially by changes in amounts of repurchases of our common stock. In 2017, net proceeds
from borrowing activities was $350.3 million compared to $82.8 million and $279.9 million in 2016 and 2015, respectively. Cash
flow related to financing activities was impacted by stock repurchases of $44.9 million, $0.0 million, and $165.5 million in 2017,
2016, and 2015, respectively.

Undistributed Earnings of Foreign Subsidiaries

We intend to use predominantly all of our accumulated and future undistributed earnings of foreign subsidiaries to expand
operations outside the U.S.; therefore, such undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested

outside the U.S. Accordingly, no provision for income tax or withholding tax has been provided thereon. If management's intentions
change and eligible undistributed earnings of foreign subsidiaries are repatriated, we could be subject to additional income taxes
and withholding taxes. This could result in a higher effective tax rate in the period in which such a decision is made to repatriate
accumulated or future undistributed foreign earnings. The amount of cash on hand related to foreign operations with indefinitely
reinvested earnings was $106.0 million and $73.6 million as of December 31, 2017 and 2016, respectively. Refer to the Note 13
to our Consolidated Financial Statements included in Item 8 of this Form 10-K for further information related to our income taxes
and undistributed foreign earnings.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements as of December 31, 2017 as defined by Item 303(a)(4) of Regulation S-

K promulgated under the Exchange Act.

Contractual Obligations

Our contractual obligations as of December 31, 2017 were as follows (amounts in thousands):

Contractual Obligations

Total

Less than 1
year

1 - 3 years

3 - 5 years

More than 5
years

Payments due by period

Operating leases
Revolving credit facilities (1)
Long-term debt (2)
Purchase commitments (3)
Employment agreements

Total

51,441

11,837

17,872

12,152

1,016,857

1,711,017

203,167

21,917

45,782

62,937

203,167

7,963

90,660

412,154

—

13,954

879,559

884,888

—

9,580

856

351,038

—

$ 3,004,399

331,686

534,640

$ 1,776,599

361,474

(1) This amount includes estimated interest and unused line fees due on our revolving credit facilities and assumes that the
outstanding balances on the revolving credit facilities remain constant from the December 31, 2017 balances to maturity.

(2) This amount includes scheduled interest and principal payments on our term loans and convertible senior notes.
(3) This amount includes the maximum remaining amount to be purchased under forward flow and other contracts for the purchase

of nonperforming loans in the amount of approximately $203.2 million.

In 2017, we opened two new call centers in Henderson, NV and Burlington, NC. We lease these call centers and have included
the future minimum lease payments in the table above. With the addition of these, as well as expansions at existing sites, we have
added capacity for an additional 1,000 full time collectors. Both sites were fully operational during the first quarter of 2018.

Critical Accounting Policies and Estimates

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

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

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

Management has reviewed these critical accounting policies with the Audit Committee of our board of directors.

Revenue Recognition - Finance Receivables

We account for our investment in finance receivables under the guidance of ASC 310-30. Revenue recognition for finance
receivables accounted for under ASC 310-30 involves the use of estimates and the exercise of judgment on the part of management.
These estimates include projections of the quantity and timing of future cash flows and economic lives of our pools of finance

receivables. Significant changes in such estimates could result in increased revenue via yield increases which are recognized
prospectively or decreased revenue through the incurrence of allowance charges which are recognized immediately.

We implement the accounting for income recognized on finance receivables under ASC 310-30 as follows:

We create each accounting pool using our projections of estimated cash flows and expected economic life. We then compute
the effective yield that fully amortizes the pool over a reasonable expectation of its economic life based on the current projections
of estimated cash flows. As actual cash flow results are recorded, we review each pool watching for trends, actual performance
versus projections and curve shape (a graphical depiction of the timing of cash flows). We then re-forecast future cash flows
utilizing our proprietary analytical models.

Significant judgment is used in evaluating whether variances in actual performance are due to changes in the total amount
or changes in the timing of expected cash flows. Significant changes in either may result in yield increases or allowance charges
if necessary for the pool's amortization period to fall within a reasonable expectation of its economic life.

Valuation of Acquired Intangibles and Goodwill

In accordance with FASB ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), we amortize intangible assets
over their estimated useful lives. Goodwill, pursuant to ASC 350, is not amortized but rather evaluated for impairment annually
and more frequently if indicators of potential impairment exist. Goodwill is reviewed for potential impairment at the reporting
unit level. A reporting unit is an operating segment or one level below an operating segment.

Goodwill is evaluated for impairment either under the qualitative assessment option or the two-step test approach depending
on facts and circumstances of a reporting unit, including the excess of fair value over carrying amount in the last valuation or
changes in business environment. If we qualitatively determine it is more likely than not that the fair value of a reporting unit is
greater than its carrying amount, the two-step impairment test is unnecessary. Otherwise, goodwill is evaluated for impairment
using the two-step test, where the carrying amount of a reporting unit is compared to its fair value in Step 1; if the fair value exceeds
the carrying amount, Step 2 is unnecessary. If the carrying amount exceeds the reporting unit’s fair value, this could indicate
potential impairment and Step 2 of the goodwill evaluation process is required to determine if goodwill is impaired and to measure
the amount of impairment loss to recognize, if any. When Step 2 is necessary, the fair value of individual assets and liabilities is
determined using valuations (which in some cases may be based in part on third-party valuation reports), or other observable
sources of fair value, as appropriate. If the carrying amount of goodwill exceeds its implied fair value, the excess is recognized as
an impairment loss.

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

Income Taxes

We are subject to the income tax laws of the various jurisdictions in which we operate, including U.S. federal, state, local,
and international jurisdictions. These tax laws are complex and are subject to different interpretations by the taxpayer and the
relevant government taxing authorities. When determining our domestic and foreign income tax expense, we must make judgments
about the application of these inherently complex laws.

We follow the guidance of FASB ASC Topic 740 "Income Taxes" ("ASC 740") as it relates to the provision for income taxes
and uncertainty in income taxes. Accordingly, we record a tax provision for the anticipated tax consequences of the reported results
of operations. In accordance with ASC 740, the provision for income taxes is computed using the asset and liability method, under
which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between
the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax
assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which
those tax assets are expected to be realized or settled. The evaluation of a tax position in accordance with the guidance is a two-
step process. The first step is recognition: the enterprise determines whether it is more-likely-than-not that a tax position will be
sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of

the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the enterprise should
presume that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant
information. The second step is measurement: a tax position that meets the more-likely-than-not recognition threshold is measured
to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of
benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to
meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in
which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold
should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. We record interest
and penalties related to unrecognized tax benefits as a component of income tax expense.

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

Our international operations requires the use of material estimates and interpretations of complex tax laws in multiple

jurisdictions, and increases the complexity of our accounting for income taxes.

Recent Accounting Pronouncements

For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements

see Note 1 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

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

Interest Rate Risk

We are subject to interest rate risk from outstanding borrowings on our variable rate credit facilities. As such, our consolidated
financial results are subject to fluctuations due to changes in the market rate of interest. We assess this interest rate risk by estimating
the increase or decrease in interest expense that would occur due to a change in short-term interest rates. The borrowings on our
variable rate credit facilities were approximately $1.6 billion as of December 31, 2017. Assuming a 50 basis point decrease in
interest rates, for example, interest expense over the following 12 months would decrease by an estimated $6.4 million. Assuming
a 50 basis point increase in interest rates, interest expense over the following 12 months would increase by an estimated $6.4
million.

To reduce the exposure to changes in the market rate of interest and to be in compliance with the terms of our European
credit facility, we have entered into interest rate swap agreements for a portion of our borrowings under our floating rate financing
arrangements. Terms of the interest rate swap agreements require us to receive a variable interest rate and pay a fixed interest rate.
The sensitivity calculations above consider the impact of our interest rate swap agreements.

The fair value of our interest rate swap agreements was a net liability of $1.1 million at December 31, 2017. A hypothetical
50 basis point decrease in interest rates would cause a decrease in the estimated fair value of our interest rate swap agreements
and the resulting estimated fair value would be a liability of $6.3 million at December 31, 2017. Conversely, a hypothetical 50
basis point increase in interest rates would cause an increase in the estimated fair value of our interest rate swap agreements and
the resulting estimated fair value would be an asset of $3.6 million at December 31, 2017.

Currency Exchange Risk

We operate internationally and enter into transactions denominated in various foreign currencies. In 2017, we generated
$259.6 million of revenues from operations outside the U.S. and used eleven functional currencies. Weakness in one particular
currency might be offset by strength in other currencies over time.

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

Foreign currency gains and losses are primarily the result of the re-measurement of transactions in certain other currencies
into an entity's functional currency. Foreign currency gains and losses are included as a component of other income and (expense)
in our consolidated income statements.

When an entity's functional currency is different than the reporting currency of its parent, foreign currency translation
adjustments may occur. Foreign currency translation adjustments are included as a component of other comprehensive income/
(loss) in our consolidated statements of comprehensive income and as a component of equity in our consolidated balance sheets.

We have taken measures to mitigate the impact of foreign currency fluctuations. We have restructured our European operations
so that portfolio ownership and collections generally occur within the same entity. Our European credit facility is a multi-currency
facility, allowing us to better match funding and portfolio investments by currency. We strive to maintain the distribution of our
European borrowings within defined thresholds based on the currency composition of our finance receivables portfolios. When
those thresholds are exceeded, we engage in foreign exchange spot transactions to mitigate our risk.

Item 8. Financial Statements and Supplementary Data.

See Item 6 for quarterly consolidated financial statements for 2017 and 2016.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Income Statements

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

1 – Summary of Significant Accounting Policies

2 – Finance Receivables, net

3 – Investments

4 – Operating Leases

5 – Goodwill and Intangible Assets, net
6 – Borrowings

7 – Property and Equipment, net

8 – Fair Value

9 – Share-Based Compensation

10 – Earnings Per Share

11 – Derivatives

12 – Stockholders' Equity

13 – Income Taxes

14 – Commitments and Contingencies

15 – Retirement Plans

16 – Redeemable Noncontrolling Interest

17 –Sale of Subsidiaries

60
61

Report of Independent Registered Public Accounting Firm

To the stockholders and board of directors
PRA Group, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of PRA Group, Inc. and subsidiaries (the “Company”) as of
December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, changes in equity, and
cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 27, 2018 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for
our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2007.

Norfolk, Virginia
February 27, 2018

PRA Group, Inc.
Consolidated Balance Sheets
December 31, 2017 and 2016
(Amounts in thousands, except per share amounts)

2017

2016

Assets

120,516

78,290

2,771,921

15,770

21,686

57,529

49,311

526,513

23,572

32,656
—

94,287

68,543

2,307,969

11,650

9,427

28,482

38,744

499,911

27,935

33,808
43,243

Cash and cash equivalents

Investments

Finance receivables, net

Other receivables, net

Income taxes receivable

Net deferred tax asset

Property and equipment, net

Goodwill

Intangible assets, net

Other assets

Assets held for sale

Total assets

Liabilities and Equity

Liabilities:

Accounts payable

Accrued expenses

Income taxes payable

Net deferred tax liability

Interest-bearing deposits

Borrowings

Other liabilities

Liabilities held for sale

Total liabilities

Redeemable noncontrolling interest

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, 45,189 shares
issued and outstanding at December 31, 2017; 100,000 shares authorized,
46,356 shares issued and outstanding at December 31, 2016

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total stockholders' equity - PRA Group, Inc.

Noncontrolling interest

Total equity

3,697,764

3,163,999

4,992

85,993

10,771

171,185

98,580

2,459

82,699

19,631

258,344

76,113

2,170,182

1,784,101

9,018

—

10,821

4,220

2,550,721

2,238,388

9,534

8,448

—

452

53,870

1,211,632
(178,607)
1,087,347

50,162

1,137,509

464

66,414

1,049,367
(251,944)
864,301

52,862

917,163

Total liabilities and equity

3,697,764

3,163,999

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

PRA Group, Inc.
Consolidated Income Statements
For the years ended December 31, 2017, 2016 and 2015
(Amounts in thousands, except per share amounts)

2017

2016

2015

Revenues:

Income recognized on finance receivables, net

780,803

745,119

Fee income

Other revenue

Total revenues

Operating expenses:

Compensation and employee services

Legal collection expenses

Agency fees

Outside fees and services

Communication

Rent and occupancy

Depreciation and amortization

Other operating expenses

Total operating expenses

24,916

7,855

813,574

273,033

119,398

35,530

62,792

33,132

14,823

19,763

44,103

77,381

8,080

830,580

258,846

132,202

44,922

63,098

33,771

15,710

24,359

39,466

865,122

64,383

12,513

942,018

268,345

129,456

32,188

65,155

33,113

14,714

19,874

68,829

602,574

612,374

631,674

Income from operations

211,000

218,206

310,344

Other income and (expense):

Gain on sale of subsidiaries

Interest expense, net

Foreign exchange (loss)/gain

Other

Income before income taxes

Income tax (benefit)/expense

Net income

Adjustment for net income attributable to
noncontrolling interests

Net income attributable to PRA Group, Inc.

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

Basic

Diluted

Weighted average number of shares outstanding:

Basic

Diluted

48,474
(98,041)
(1,104)
(2,790)
157,539
(11,536)
169,075

—
(80,864)
2,564
(5,823)
134,083

43,191

90,892

—
(60,336)
7,514

—

257,522

89,391

168,131

6,810

5,795

205

162,265

85,097

167,926

3.55

3.54

1.84

1.83

45,671

45,823

46,316

46,388

3.49

3.47

48,128

48,405

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

PRA Group, Inc.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2017, 2016 and 2015
(Amounts in thousands)

Net income

Other comprehensive income/(loss):

Change in foreign currency translation

Total comprehensive income

2017

2016

2015

169,075

90,892

168,131

67,858

236,933

(14,559)
76,333

(119,043)
49,088

Comprehensive income/(loss) attributable to noncontrolling interest:

Net income attributable to noncontrolling interest

Change in foreign currency translation

Comprehensive income/(loss) attributable to noncontrolling interest

6,810
(5,478)
1,332

5,795

8,490

14,285

Comprehensive income attributable to PRA Group, Inc.

235,601

62,048

205
(6,132)
(5,927)
55,015

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

PRA Group, Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2017, 2016 and 2015
(Amounts in thousands)

Common Stock

Amount

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income/(Loss)

Noncontrolling
Interest

Total Equity

Balance at December 31, 2014

49,577

496

111,659

906,010

(115,950) $

— $

902,215

Components of comprehensive income:

Net income

Foreign currency translation
adjustment

Initial noncontrolling interest related to
business acquisition

Vesting of restricted stock

Repurchase and cancellation of common
stock
Amortization of share-based
compensation
Excess income tax benefit from share-
based compensation
Employee stock relinquished for payment
of taxes

—

279

—

(3)

—

(3,683)

(37)

(55,798)

(109,666)

—

16,325

4,386

(11,947)

—

167,926

—

205

168,131

(112,911)

(6,132)

(119,043)

—

45,181

—

45,181

—

(165,501)

16,325

4,386

(11,947)

Balance at December 31, 2015

46,173

462

64,622

964,270

(228,861) $

39,254

839,747

Components of comprehensive income:

Net income

Foreign currency translation
adjustment

Distributions paid to noncontrolling
interest

Vesting of restricted stock

Amortization of share-based
compensation
Excess income tax benefit from share-
based compensation
Employee stock relinquished for payment
of taxes

—

183

—

(2)

6,138

(1,494)

(2,850)

85,097

—

(23,083)

—

6,018

8,524

(934)

—

91,115

(14,559)

(934)

—

6,138

(1,494)

(2,850)

Balance at December 31, 2016

46,356

464

66,414

1,049,367

(251,944) $

52,862

917,163

Components of comprehensive income:

Net income

Foreign currency translation
adjustment

Distributions paid to noncontrolling
interest

Vesting of restricted stock

Repurchase and cancellation of common
stock
Amortization of share-based
compensation
Employee stock relinquished for payment
of taxes
Component of convertible debt

Deferred taxes on component of
convertible debt

—

145

—

(1)

(1,312)

(13)

(44,896)

—

8,678

(3,022)

44,910

(18,213)

162,265

—

6,587

168,852

—

73,337

(7,202)

66,135

—

(2,085)

—

(2,085)

—

(44,909)

8,678

(3,022)

44,910

(18,213)

Balance at December 31, 2017

45,189

452

53,870

1,211,632

(178,607) $

50,162

1,137,509

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

PRA Group, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2017, 2016 and 2015
(Amounts in thousands)

Cash flows from operating activities:

Net income
Adjustments to reconcile net income to net cash provided by operating
activities:

2017

2016

2015

169,075

90,892

168,131

Amortization of share-based compensation
Depreciation and amortization
Gain on sale of subsidiaries
Amortization of debt discount and issuance costs
Impairment of investments
Deferred tax benefit
Net foreign currency transaction gain
Other
Changes in operating assets and liabilities:

Other assets
Other receivables, net
Accounts payable
Income taxes payable/receivable, net
Accrued expenses
Other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property and equipment
Acquisition of finance receivables, net of buybacks
Collections applied to principal on finance receivables
Business acquisitions, net of cash acquired
Proceeds from sale of subsidiaries, net
Purchase of investments
Proceeds from sales and maturities of investments

Net cash used in investing activities

Cash flows from financing activities:
Proceeds from lines of credit
Principal payments on lines of credit
Repurchases of common stock
Tax withholdings related to share-based payments
Payments of origination costs and fees
Distributions paid to noncontrolling interest
Proceeds from long-term debt
Principal payments on notes payable and long-term debt
Net increase in interest-bearing deposits
Proceeds from convertible debt

Net cash provided by financing activities
Effect of exchange rate on cash
Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

Supplemental disclosure of cash flow information:

Cash and cash equivalents, end of year

Cash paid for interest
Cash paid for income taxes

8,678
19,763
(48,474)
18,152
1,745
(130,822)
(1,098)
(4,033)

(460)
(3,461)
2,743
(22,715)
(5,752)
(2,498)
843

(22,840)
(1,086,029)
731,802
—
93,304
(6,688)
10,123
(280,328)

1,260,161
(1,549,833)
(44,909)
(3,022)
(18,240)
(1,429)
310,000
(15,021)
12,991
345,000
295,698
10,016
26,229
94,287
120,516

79,825
144,341

6,138
24,359
—
10,276
5,823
(21,700)
(2,364)
—

1,861
10,016
(2,087)
(13,663)
(9,724)
6,053
105,880

(14,160)
(890,803)
746,867
(60,241)
—
(6,052)
6,898
(217,491)

985,751
(1,007,234)
—
(2,850)
(17,539)
(934)
297,893
(193,580)
32,905
—
94,412
40,114
22,915
71,372
94,287

67,987
78,754

16,325
19,874
—
4,260
—
(8,569)
(7,514)
—

2,015
(18,124)
786
10,121
17,246
(1,553)
202,998

(14,454)
(954,954)
674,373
(1,423)
—
(48,085)
62,217
(282,326)

790,967
(463,733)
(165,501)
(11,947)
(5,000)
—
—
(47,374)
22,721
—
120,133
(9,094)
31,711
39,661
71,372

49,777
86,255

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

PRA Group, Inc.
Notes to Consolidated Financial Statements

1. General and Summary of Significant Accounting Policies:

Nature of operations: 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, and its subsidiaries, 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 the following fee-based services: class action claims recovery services and
purchases; servicing of consumer bankruptcy accounts in the United States ("U.S."); and, to a lesser extent, contingent collections
of nonperforming loans in Europe and South America. As discussed in Note 17, the Company sold its government services businesses
in January 2017 and its vehicle location, skip tracing and collateral recovery business in June 2017.

Recent acquisitions: On April 26, 2016, the Company completed its public tender offer to purchase 100% of the shares of
DTP S.A . ("DTP"), a Polish-based debt collection company, for approximately $44.9 million. The Company's consolidated income
statements and statements of comprehensive income, equity and cash flows include the results of operations of DTP for the period
from April 26, 2016 through December 31, 2017.

On August 3, 2015, the Company acquired 55% of the equity interest in RCB Investimentos S.A. ("RCB"). The remaining
45% of the equity interest in RCB is owned by the executive team and previous owners of RCB. RCB is a leading master servicing
platform for nonperforming loans in Brazil. The Company's investment for the 55% ownership of RCB was approximately $55.2
million. As part of the investment and call option agreements, the Company has the right to purchase the remaining 45% of RCB
at certain multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"), beginning on August 3, 2019
and lasting for two years. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 810, "Consolidation," the Company has consolidated all financial statement accounts of RCB in its consolidated
balance sheets and its consolidated income statements. The consolidated income statements for the years ended December 31,
2017, 2016 and 2015, include the results of operations of RCB from August 3, 2015 through December 31, 2017. The noncontrolling
interest amount is included as a separate component of equity and represents the 45% interest not controlled by the Company. In
addition, net income attributable to the noncontrolling interest is stated separately in the consolidated income statements for the
years ended December 31, 2017, 2016 and 2015.

Basis of presentation: 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. The preparation of the consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect reported amounts and disclosures. Realized results could differ from
those estimates and assumptions. Certain prior year amounts have been reclassified for consistency with the current year
presentation.

Segments: Under the guidance of 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, 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.

Foreign currency: Assets and liabilities have been translated to the reporting currency using the exchange rates in effect on
the consolidated balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings
during the year which is the result of the income statement translation process. Revenue and expense accounts are translated using
the weighted average exchange rate during the period. The cumulative translation adjustments associated with the net assets of
foreign subsidiaries are recorded in accumulated other comprehensive income/(loss) in the accompanying consolidated statements
of changes in equity.

PRA Group, Inc.
Notes to Consolidated Financial Statements

Revenues and long-lived assets by geographical location: Revenue for the years ended December 31, 2017, 2016 and

2015, and long-lived assets held at December 31, 2017 and 2016, by geographical location (amounts in thousands) were:

2017

Years Ended December 31,
2016
Revenues

As of December 31,

2015

2017

2016

29,598
United States
3,417
United Kingdom
Others (1)
5,729
38,744
Total
(1) None of the countries included in "Others" comprise greater than ten percent of the Company's consolidated revenues or long-
lived assets.

584,816
76,301
169,463
830,580

722,393
73,669
145,956
942,018

553,957
81,598
178,019
813,574

Long-Lived Assets
41,850
2,445
5,016
49,311

Revenues are attributed to countries based on the location of the related operations. Long-lived assets consist of net property
and equipment. The Company reports revenues earned from its debt purchasing and collection activities and its fee-based services.
It is impracticable for the Company to report further breakdowns of revenues from external customers by product or service.

Cash and cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. Included in cash and cash equivalents are funds held on the behalf of others arising from
the collection of accounts placed with the Company. The balance of the funds held on behalf of others was $0.2 million and
$3.8 million at December 31, 2017 and 2016, respectively; there is an offsetting liability that is included in "Other liabilities" on
the accompanying consolidated balance sheets.

Concentrations of credit risk: Financial instruments, which potentially expose the Company to concentrations of credit

risk, consist primarily of cash, investments and finance receivables.

Accumulated other comprehensive income/(loss): The Company records unrealized gains and losses on certain available-
for-sale investments and foreign currency translation adjustments in other comprehensive income. Unrealized gains and losses on
available for sale investments are reclassified to earnings as the gains or losses are realized upon sale of the securities. Translation
gains or losses on foreign currency translation adjustments are reclassified to earnings upon the substantial sale or liquidation of
investments in foreign operations.

Investments: The Company accounts for its investments under the guidance of ASC Topic 320-10, "Investments-Debt and
Equity Securities" ("ASC 320-10"). The Company determines the appropriate classification of its investments in debt and equity
securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as
held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities for which
the Company does not have the intent or ability to hold to maturity are classified as available for sale. Held-to-maturity securities
are stated at amortized cost. Available for sale securities are carried at fair market value, with the unrealized gains and losses, net
of tax, included in the determination of comprehensive income and reported in stockholders' equity. If the fair value of the investment
falls below its carrying amount and the decline is deemed to be other than temporary, the investment is written down, with a
corresponding charge to earnings.

Finance receivables and income recognition: The Company accounts for its investment in finance receivables under the
guidance of ASC Topic 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality" ("ASC 310-30"). 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. At acquisition, the Company
reviews the accounts to determine whether there is evidence of deterioration of credit quality since origination, and if it is probable
that the Company will be unable to collect all amounts due according to the loan's contractual terms. If both conditions exist, the
Company then determines whether each such account is to be accounted for individually or whether such accounts will be assembled
into pools based on common risk characteristics. The Company considers expected prepayments and estimates the amount and
timing of undiscounted expected principal, interest and other cash flows (expected at acquisition) for each acquired portfolio based
on the Company's proprietary models, and the Company subsequently aggregates portfolios of accounts into pools. The Company
determines the excess of the pool's scheduled contractual principal and contractual interest payments over all cash flows expected
at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess
of the pool's cash flows expected to be collected over the amount paid, is accreted into income recognized on finance receivables
over the remaining estimated life of the pool (accretable yield). ASC 310-30 requires that the excess of the contractual cash flows

PRA Group, Inc.
Notes to Consolidated Financial Statements

over expected cash flows, based on the Company's estimates derived from proprietary collection models, not be recognized as an
adjustment of revenue or expense or on the balance sheet.

Each pool is recorded at cost and is accounted for as a single unit for the recognition of income, payments applied to principal
and loss provision. Once a pool is established for a calendar quarter, individual receivable accounts are not added to the pool
(unless replaced by the seller) or removed from the pool (unless sold or returned to the seller). The yield is estimated and periodically
recalculated based on the timing and amount of anticipated cash flows. Income on finance receivables is accrued quarterly based
on each pool's effective yield. Significant increases in expected future cash flows may be recognized prospectively, through an
upward adjustment of the yield, over a pool's remaining life. Under ASC 310-30, rather than lowering the estimated yield if the
collection estimates are below previous expectations, the carrying value of a pool would be written down to maintain the then
current yield and is shown as a reduction in revenue in the consolidated income statements with a corresponding valuation allowance
offsetting finance receivables, net, on the consolidated balance sheets. Cash flows greater than the interest accrual will reduce the
carrying value of the pool. This reduction in carrying value is defined as payments applied to principal (also referred to as principal
amortization). Likewise, cash flows that are less than the interest accrual will accrete the carrying balance. Generally, the Company
does not record accretion in the first six to twelve months of the estimated life of the pool; accordingly, the Company utilizes either
the cost recovery method or cash method when necessary to prevent accretion as permitted by ASC 310-30. Under the cash method,
revenue is recognized as it would be under the interest method up to the amount of cash collections. Under the cost recovery
method, no revenue is recognized until the Company has fully collected the cost of the pool, or until such time that the Company
considers the collections to be probable and estimable and begins to recognize income based on the interest method as described
above. The Company also uses the cost recovery method when collections on a particular pool of accounts cannot be reasonably
estimated.

A pool can become fully amortized (zero carrying balance on the balance sheet) while still generating cash collections. In

this case, all subsequent cash collections are recognized as revenue when received.

The Company records a valuation allowance when significant decreases in expected cash flows are identified or there are
changes in the timing of expected cash flows that would otherwise require a reduction in the stated yield on a pool of accounts.
Factors that may contribute to the recording of valuation allowances include both external and internal factors. External factors
that may have an impact on the collectability, and subsequently on the overall profitability of purchased 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 purchased pools of nonperforming loans, would include: necessary revisions to initial and post-acquisition scoring
and modeling estimates, non-optimal operational activities (which relate to the collection and movement of accounts on both the
collection floor of the Company and external channels), and decreases in productivity related to turnover and tenure of the Company's
collection staff.

The Company capitalizes certain fees paid to third parties related to the direct acquisition of a portfolio of accounts. These
fees are added to the acquisition cost of the portfolio and accordingly are amortized over the life of the portfolio using the interest
method.

The agreements to purchase the aforementioned receivables include general representations and warranties from the sellers
covering account holder death or bankruptcy 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. Any funds received from the
seller as a return of purchase price are referred to as buybacks. Buyback funds are applied against the finance receivable balance
received and are not included in the Company's cash collections from operations. In some cases, the seller will replace the returned
accounts with new accounts in lieu of returning the purchase price. In that case, the old account is removed from the pool and the
new account is added.

Fee income recognition: The Company utilizes the provisions of Topic 13A1 of Staff Accounting Bulletin ("SAB") No.
104, “Revenue Recognition” ("Topic 13A1") to account for fee income revenue from its class action claims recovery services.
Topic 13A1 requires an analysis to be completed to determine if persuasive evidence of an arrangement exists, delivery has occurred
or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

Property and equipment: Property and equipment, including improvements that significantly add to the productive capacity
or extend useful life, are recorded at cost. Maintenance and repairs are expensed currently. Property and equipment are depreciated
over their useful lives using the straight-line method of depreciation. Software and computer equipment are amortized or depreciated
over three to five years. Furniture and fixtures are depreciated over five to ten years. Equipment is depreciated over five to seven
years. Leasehold improvements are depreciated over the lesser of the useful life, which ranges from three to ten years, or the
remaining term of the lease. Building improvements are depreciated straight-line over ten to thirty-nine years. When property is

PRA Group, Inc.
Notes to Consolidated Financial Statements

sold or retired, the cost and related accumulated depreciation are removed from the balance sheet and any gain or loss is included
in the income statement.

Business combinations: The Company accounts for business combinations under the acquisition method. The cost of an
acquired company is assigned to the tangible and intangible assets acquired and the liabilities assumed on the basis of their fair
values at the date of acquisition. The determination of fair values of assets acquired and liabilities assumed requires management
to make estimates and use valuation techniques when market values are not readily available. Any excess of purchase price over
the fair value of net tangible and intangible assets acquired is allocated to goodwill. Transaction costs associated with business
combinations are expensed as 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. The Company performs its annual assessment 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, management conducts a two-step quantitative goodwill impairment test. The first step of the impairment test involves
comparing the fair value of the applicable reporting unit with its carrying value. The Company estimates the fair values of its
reporting units using a combination of the income approach, which uses present value techniques, and the market approach, which
uses market multiples from comparable transactions where the acquisition target has similar operating and investment characteristics
to the reporting unit. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, management performs the
second step of the goodwill impairment test. The second step of the goodwill impairment test involves comparing the implied fair
value of the affected reporting unit's goodwill with the carrying value of that goodwill. The amount, by which the carrying value
of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. See Note 5 for additional information.

Convertible senior notes: The Company accounts for its 3.00% Convertible Senior Notes due 2020 (the "2020 Notes") and
its 3.50% Converitible Notes due 2023 (the "2023 Notes" and, together with the 2020 Notes, the "Notes") in accordance with
ASC 470-20, "Debt with Conversion and Other Options" ("ASC 470-20"). ASC 470-20 requires that, for convertible debt
instruments that must be settled fully or partially in cash upon conversion, issuers must separately account for the liability and
equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. The excess of the principal amount of the liability component over its carrying amount is amortized to
interest expense over the expected life of a similar liability that does not have an associated equity component, using the effective
interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification
under ASC 815-40, "Derivatives and Hedging - Contracts in Entity's Own Equity." Transaction costs incurred with third parties
are allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance
costs and equity issuance costs, respectively.

For diluted earnings per share purposes, based upon the Company's intent and ability to settle conversions of the Notes
through a combination of cash and shares, only the conversion spread is included in the diluted earnings per share calculation, if
dilutive. Under such method, the settlement of the conversion spread has a dilutive effect when the average share price of the
Company's common stock during any quarter exceeds $65.72 for the 2020 Notes or $46.24 for the 2023 Notes, neither of which
occurred during the respective periods from when the Notes were issued through December 31, 2017.

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

The evaluation of a tax position in accordance with the guidance is a two-step process. The first step is recognition: the
enterprise determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution
of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position
has met the more-likely-than-not recognition threshold, the enterprise should presume that the position will be examined by the
appropriate taxing authority that would have full knowledge of all relevant information. The second step is measurement: a tax
position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in
the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold
should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax

PRA Group, Inc.
Notes to Consolidated Financial Statements

positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial
reporting period in which that threshold is no longer met. The Company records interest and penalties related to unrecognized tax
benefits as a component of income tax expense when positions are not met.

The estimate of income tax expense involves significant judgment in evaluating the impact of uncertainties in the application
of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact
on our results of operations and financial position.

Advertising costs: Advertising costs are expensed when incurred.

Operating leases: General abatements or prepaid leasing costs are recognized on a straight-line basis over the life of the
lease. Future minimum lease payments (including the impact of rent escalations) are expensed on a straight-line basis over the life
of the lease. Material leasehold improvements are capitalized and amortized over the remaining life of the lease.

Share-based compensation: The Company accounts for share-based compensation in accordance with the provisions of
ASC Topic 718 "Compensation-Stock Compensation" ("ASC 718"). ASC 718 requires that compensation expense associated with
share equity awards be recognized in the income statement. Based on historical experience, the Company estimates a forfeiture
rate for most equity share grants. Time-based equity share awards generally vest between one and three years from the grant date
and are expensed on a straight-line basis over the vesting period. Equity share awards that contain a performance metric, are
expensed over the requisite service period, generally three years, in accordance with the performance level achieved at each
reporting period. See Note 9 for additional information.

Derivatives: The Company follows the guidance of ASC Topic 815 "Derivatives and Hedging" ("ASC 815") to account for
its derivatives and records derivative financial instruments at fair value on its consolidated balance sheets. The Company's derivative
instruments are not designated as hedging instruments under ASC 815. Therefore, both the realized gain or loss and the change in
fair value of the instrument are recorded as interest expense in the Company's consolidated financial statements.

Use of estimates: The preparation of the consolidated financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates have been made by management with respect to the timing and amount of future cash collections of
the Company's finance receivables portfolios. Actual results could differ from these estimates making it reasonably possible that
a change in these estimates could occur within one year.

Commitments and contingencies: The Company is subject to various claims and contingencies related to lawsuits, certain
taxes, and commitments under contractual and other obligations. The Company recognizes liabilities for contingencies and
commitments when a loss is probable and estimable. The Company expenses related legal costs as incurred. For additional
information, see Note 14.

Estimated fair value of financial instruments: The Company applies the provisions of ASC Topic 820 "Fair Value
Measurements and Disclosures" ("ASC 820"). ASC 820 defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also requires
the consideration of differing levels of inputs in the determination of fair values. Disclosure of the estimated fair values of financial
instruments often requires the use of estimates. See Note 8 for additional information.

PRA Group, Inc.
Notes to Consolidated Financial Statements

Reclassification of prior year presentation: Certain prior year amounts have been reclassified for consistency with the

current year presentation.

Recent accounting pronouncements: In May 2014, FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue
from Contracts with Customers" ("ASU 2014-09") that updates the principles for recognizing revenue. The core principle of the
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance
specifically excludes revenue received for servicing finance receivables. ASU 2014-09 also amends the required disclosures of
the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is
effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and can be adopted either
retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, with early
application not permitted. The Company believes that the revenue generated by its subsidiary Claims Compensation Bureau, LLC
("CCB") is within the scope of this standard. Based on the Company's evaluation, the Company believes the new standard will
not impact the accounting for revenue generated by CCB.

In January 2016, FASB issued ASU 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities" ("ASU 2016-01"), which provides new guidance on the recognition, measurement, presentation,
and disclosure of financial assets and liabilities. The standard is effective for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years. Early adoption is permitted only for certain provisions. The Company believes
ASU 2016-01 will not have a material impact on its financial statements upon adoption in the first quarter of 2018.

In February 2016, FASB issued ASU 2016-02, "Leases (Topic 842) Section A - Leases: Amendments to the FASB Account
Standards Codification" ("ASU 2016-02"). ASU 2016-02 requires that a lessee should recognize a liability to make lease payments
and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. It is effective for
fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, using a modified retrospective
approach and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of the
ASU on its Consolidated Financial Statements. The Company currently discloses approximately $51.4 million in operating lease
obligations in its lease commitments footnote (Note 4) and will evaluate those contracts as well as other existing arrangements to
determine if they qualify for lease accounting under the new standard. The Company does not plan to adopt the standard early.

In March 2016, FASB issued ASU 2016-06, "Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt
Instruments" ("ASU 2016-06"). Topic 815 requires that embedded derivatives be separated from the host contract and accounted
for separately as derivatives if certain criteria are met, including the "clearly and closely related" criterion. ASU 2016-06 clarifies
the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments
are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments is required to assess
the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments in ASU 2016-06 apply
to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt
host) with embedded call (put) options. For public entities, this update is effective for fiscal years beginning after December 15,
2016, and interim periods within those fiscal years. The Company adopted ASU 2016-06 in the first quarter of 2017 which had
no material impact on its consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting" ("ASU 2016-09"). The guidance eliminates additional paid in capital ("APIC") pools and
requires companies to recognize all excess tax benefits and tax deficiencies in the income statement when the awards vest or are
settled. The standard also requires excess tax benefits to be presented as an operating activity on the statement of cash flows rather
than as a financing activity. An entity may elect to apply the change in presentation in the statement of cash flows either prospectively
or retrospectively to all periods presented. The guidance also requires an employer to classify as a financing activity in its statement
of cash flows the cash paid to a tax authority when shares are withheld to satisfy the employer’s statutory income tax withholding
obligation using a retrospective approach. Further, the amendments allow an entity to make an accounting policy election to either
estimate forfeitures or recognize forfeitures as they occur. If an election is made, the change to recognize forfeitures as they occur
must be adopted using a modified retrospective approach with a cumulative effect adjustment recorded to opening retained earnings.
ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and
early adoption is permitted. The Company adopted ASU 2016-09 in the first quarter of 2017, which increased its provision for
income taxes by $2.1 million during the year ended December 31, 2017, as a result of the recognition of all excess tax benefits
and tax deficiencies in its income statement. The Company applied the change in presentation to the statement of cash flows
retrospectively for all periods presented after adoption date. The Company also elected to use an estimated forfeiture rate, based
on historical data, to record its share-based compensation expense, which is consistent with its previous accounting treatment with
respect to forfeitures. None of the other provisions of ASU 2016-09 had a material impact on its consolidated financial statements.

PRA Group, Inc.
Notes to Consolidated Financial Statements

In June 2016, FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2016-13"). ASU
2016-13 requires the measurement of expected credit losses for financial instruments held at the reporting date based on historical
experience, current conditions and reasonable forecasts. The main objective of ASU 2016-13 is to provide financial statement
users with more decision-useful information about the expected credit losses on financial instruments and other commitments to
extend credit held by a reporting entity at each reporting date. ASU 2016-13 is effective for fiscal years beginning after December
15, 2019, including interim periods within those fiscal years and allows for early adoption as of the beginning of an interim or
annual reporting period beginning after December 15, 2018. ASU 2016-13 supersedes ASC Topic 310-30, which the Company
currently follows to account for revenue on its finance receivables. Topic 310-30 provides an integrated model for revenue
recognition and impairment loss at an aggregated pool level. Under ASU 2016-13, changes in credit loss are required to be
evaluated at a pool level by combining accounts of similar credit and risk characteristics. ASU 2016-13 does not permit pooling
for income recognition for purchased credit deteriorated assets. In addition, ASU 2016-13 requires an allowance to be recorded
upon acquisition of a purchased credit deteriorated ("PCD") asset. For PCD assets, the initial allowance for credit losses is added
to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses
are recorded as a credit loss expense for these assets. Accordingly, ASU 2016-13 could have a significant impact on how the
Company measures and records net revenue on its finance receivables. The Company is currently in the process of evaluating the
impact of adoption of ASU 2016-13 on its consolidated financial statements.

In August 2016, FASB issued ASU 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash
Payments (Topic 230)" ("ASU 2016-15"). ASU 2016-15 reduces diversity in practice of how certain transactions are classified in
the statement of cash flows. The new guidance clarifies the classification of cash activity related to debt prepayment or debt
extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business
combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life
insurance policies, distributions received from equity-method investments, and beneficial interests in securitization transactions.
The guidance also describes a predominance principle in which cash flows with aspects of more than one class that cannot be
separated should be classified based on the activity that is likely to be the predominant source or use of cash flow. ASU 2016-15
is effective for the Company for fiscal years beginning after December 15, 2018. Early adoption is permitted, including adoption
in an interim period, but requires all elements of the amendments to be adopted at once rather than individually. The new standard
must be adopted using a retrospective transition method. The Company is currently in the process of evaluating the impact of
adoption of ASU 2016-15 on its consolidated financial statements.

In October 2016, FASB issued ASU 2016-16, "Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory" ("ASU
2016-16"), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than
inventory when the transfer occurs. The standard is effective for fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year. The new standard must be adopted
using a modified retrospective transition method which is a cumulative-effect adjustment to retained earnings as of the beginning
of the first effective reporting period. The Company has determined the adoption of this standard will not have a significant impact
on its consolidated financial statements.

In January 2017, FASB issued ASU-2017-01, "Business Combinations - Clarifying the Definition of a Business (Topic
805)" ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist companies
with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new
guidance is expected to reduce the number of transactions that need to be further evaluated as businesses. The guidance applies
to transactions that occur on or after an entity’s adoption date, the earliest of which is January 1, 2017. The Company did not
complete a business combination in 2017.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 eliminates Step 2 of the goodwill impairment test. Instead, an entity should
perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.
An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still
has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
ASU 2017-04 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for
interim or annual goodwill impairment tests performed after January 1, 2017. The Company is currently in the process of evaluating
the impact of adoption of ASU 2017-04 on its consolidated financial statements.

In May 2017, FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of Modification
Accounting” (ASU 2017-09"). ASU 2017-09 clarifies when a change to the terms or conditions of a share-based payment award
must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition
or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award.

PRA Group, Inc.
Notes to Consolidated Financial Statements

The new guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted.
This new guidance is not expected to have an impact on the Company's consolidated financial statements.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging - Targeted Improvements to Accounting for
Hedging Activities" ("ASU 2017-12"). ASU 2017-12 modifies the presentation and disclosure of hedging results. Further, it provides
partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge
ineffectiveness separately in income. The amendments in ASU 2017-12 are effective for fiscal years beginning after December
15, 2018 and for interim periods therein. The Company is currently in the process of evaluating the impact of adoption of ASU
2017-12 on its consolidated financial statements.

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

Consolidated Financial Statements.

2. Finance Receivables, net:

Changes in finance receivables, net, for the years ended December 31, 2017 and 2016, were as follows (amounts in thousands):

Balance at beginning of year
Acquisitions of finance receivables (1)
Cash collections applied to principal and net allowance charges

Foreign currency translation adjustment

2017

2016

2,307,969

2,202,113

1,084,418
(731,802)
111,336

938,273
(746,867)
(85,550)
2,307,969

Balance at end of year
(1) Acquisitions of finance receivables are net of buybacks and include certain capitalized acquisition related costs. They also
include the acquisition date finance receivable portfolios that are acquired in connection with certain business acquisitions.

2,771,921

During the year ended December 31, 2017, the Company purchased finance receivable portfolios with a face value of $7.5
billion for $1.1 billion. During the year ended December 31, 2016, the Company purchased finance receivable portfolios with a
face value of $10.5 billion for $0.9 billion. At December 31, 2017, the estimated remaining collections ("ERC") on the receivables
purchased during the years ended December 31, 2017 and 2016 were $1.6 billion and $1.2 billion, respectively. At December 31,
2017 and 2016, the total ERC was $5.70 billion and $5.05 billion, respectively.

At the time of acquisition and each quarter thereafter, the life of each 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 years ending December 31, (amounts in thousands):

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Thereafter

Total ERC expected to be applied to principal

809,115

623,030

491,880

388,344
223,179

114,431

54,703

31,287

20,814

11,799

3,339

2,771,921

At December 31, 2017 and 2016, the Company had aggregate net finance receivables balances in pools accounted for under

the cost recovery method of $166.6 million and $105.5 million, respectively.

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
analytical models. Net reclassifications from nonaccretable difference to accretable yield primarily result from the increase in the

PRA Group, Inc.
Notes to Consolidated Financial Statements

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 years ended December 31, 2017 and 2016 were as follows (amounts in thousands):

Balance at beginning of year

Income recognized on finance receivables, net

Additions from portfolio purchases

Reclassifications from nonaccretable difference

Foreign currency translation adjustment

Balance at end of year

2017

2016

2,740,006
(780,803)
702,914

149,512

120,515

2,932,144

2,727,204
(745,119)
720,638

41,056
(3,773)
2,740,006

The following is a summary of activity within the Company's valuation allowance account, all of which relates to loans

acquired with deteriorated credit quality, for the years ended December 31, 2017, 2016 and 2015 (amounts in thousands):

Beginning balance
Allowance charges

Reversal of previous recorded allowance charges

Net allowance charges

Foreign currency translation adjustment

Ending balance

3. Investments:

2017

2016

2015

211,465
13,826
(1,928)
11,898

2,192

225,555

114,861
100,202
(1,723)
98,479
(1,875)
211,465

86,166
31,974
(2,605)
29,369
(674)
114,861

Investments consisted of the following at December 31, 2017 and 2016 (amounts in thousands):

Available-for-sale

Government bonds and mutual funds

Held-to-maturity

Securitized assets

Other investments

Private equity funds

Total investments

Available-for-Sale

2017

2016

6,838

2,138

57,204

14,248

78,290

51,407

14,998

68,543

Government bonds and mutual funds: The Company's investments in government bonds and mutual funds 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.

Held-to-Maturity

Investments in securitized assets: The Company holds a majority interest in a closed-end Polish investment fund. The
investment, which provides a preferred return based on the expected net income of the portfolios, is accounted for as a beneficial
interest in securitized financial assets and stated at amortized cost. The Company has determined it has the ability and intent to
hold these certificates until maturity, which occurs when the fund terminates or liquidates its assets. The preferred return is not a
guaranteed return. Income is recognized under FASB ASC Topic 325-40, "Beneficial Interest in Securitized Financial
Assets" ("ASC 325-40"). Prior to April 1, 2017, income was recognized using the effective yield method. Effective April 1, 2017,
the Company determined that it could not reasonably forecast the timing of future cash flows and accordingly began using the
cost recovery method to recognize income. The unrealized loss on this investment in securitized assets was caused by a change in

PRA Group, Inc.
Notes to Consolidated Financial Statements

the timing of the estimated cash flows. Total expected cash flows expected on this investment did not change. Therefore, the
Company does not consider this investment to be other-than-temporarily impaired at December 31, 2017.

The underlying securities have both known principal repayment terms as well as unknown principal repayments due to
potential borrower pre-payments. Accordingly, it is difficult to accurately predict the final maturity date of these investments.
Revenues recognized on these investments are recorded in the Other Revenue line item in the income statement and was $1.3
million for the year ended December 31, 2017 compared to $6.1 million for the year ended December 31, 2016.

Other Investments

Investments in private equity funds: Investments in private equity funds represent limited partnerships in which the
Company has less than a 3% interest and are carried at cost. Income is recognized in Other Revenue in the consolidated income
statements when distributions, up to reported income, are received from the partnerships. During the year ended December 31,
2017, one of the investments experienced an other-than-temporary impairment which resulted in an impairment charge of $1.7
million. The aggregate carrying amount of cost-method investments for which cost exceeded fair value but for which an impairment
loss was not recognized was $14.2 million and $15.0 million at December 31, 2017 and December 31, 2016, respectively. The
Company evaluates the investments based its our estimated allocable share of the expected remaining cash flows of the funds as
reported by the investment manager. Distributions received from these investments were $5.2 million and $2.7 million for 2017
and 2016, respectively.

The amortized cost and estimated fair value of available-for sale and held-to-maturity investments at December 31, 2017

and 2016 were as follows (amounts in thousands):

Available-for-sale

Government bonds and mutual funds

6,758

102

6,838

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

Aggregate Fair
Value

December 31, 2017

Held-to-maturity

Securitized assets

Available-for-sale

57,204

—

14,249

42,955

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

Aggregate Fair
Value

December 31, 2016

Government bonds and mutual funds

2,161

—

Held-to-maturity

Securitized assets

4. Operating Leases:

51,407

4,147

—

2,138

55,554

The Company leases office space and equipment under operating leases. Rental expense was $11.8 million, $12.3 million

and $11.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Future minimum lease payments for operating leases at December 31, 2017, are as follows for the years ending December 31,

(amounts in thousands):

2018

2019

2020

2021

2022

Thereafter

Total future minimum lease payments

11,837

9,556

8,316

6,734

5,418

9,580

51,441

PRA Group, Inc.
Notes to Consolidated Financial Statements

5. Goodwill and Intangible Assets, net:

In connection with the Company's previous 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 an annual review of goodwill as of October 1 or more frequently if indicators
of impairment exist. The Company performed an annual review of goodwill as of October 1, 2017, and concluded that no goodwill
impairment was necessary.

The following table represents the changes in goodwill for the years ended December 31, 2017 and 2016 (amounts in

thousands):

Balance at beginning of period:

Goodwill

Accumulated impairment loss

Changes:

Acquisitions

Foreign currency translation adjustment

Reclassifications to assets held for sale

Net change in goodwill

Balance at end of period:

Goodwill

Accumulated impairment loss

2017

2016

506,308
(6,397)
499,911

—

26,602

—

26,602

526,513

—

526,513

501,553
(6,397)
495,156

28,792

5,646
(29,683)
4,755

506,308
(6,397)
499,911

The change in accumulated impairment loss during the year ended December 31, 2017, was related to the June 2017 sale of

PRA Location Services, LLC ("PLS"), the goodwill of which was fully impaired during 2013.

The $28.8 million addition to goodwill during the year ended December 31, 2016, was mainly attributable to the acquisition
of DTP S.A. ("DTP") and the acquisition of Recovery Management Systems Corporation ("RMSC"). The goodwill recognized
from the DTP acquisition is not expected to be deductible for tax purposes, while the goodwill recognized from the RMSC
acquisition is expected to be deductible for tax purposes.

Intangible assets, excluding goodwill, consisted of the following at December 31, 2017 and 2016 (amounts in thousands):

Client and customer relationships

Non-compete agreements

Trademarks

Technology

Total

2017

2016

Gross
Amount

Accumulated
Amortization

Gross
Amount

Accumulated
Amortization

30,397

10,752

35,936

13,455

1,388

3,285

3,240

1,118

1,479

1,389

1,412

3,315

3,102

667

988

720

38,310

14,738

43,765

15,830

The Company amortizes the intangible assets over the estimated useful lives. Total amortization expense for the years ended
December 31, 2017, 2016 and 2015 was $4.3 million, $6.2 million and $3.7 million, respectively. The Company reviews intangible
assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable and the carrying amount exceeds its fair value.

PRA Group, Inc.
Notes to Consolidated Financial Statements

The future amortization of intangible assets is estimated to be as follows as of December 31, 2017 for the following years

ending December 31, (amounts in thousands):

2018
2019
2020
2021
2022
Thereafter
Total

6. Borrowings:

4,599
4,330
3,661
2,672
2,075
6,235
23,572

The Company's borrowings consisted of the following as of the dates indicated (amounts in thousands):

North American revolving credit

Term loans
European revolving credit

Convertible senior notes

Less: Debt discount and issuance costs

Total

December 31,
2017

December 31,
2016

373,206

764,830
476,609

632,500

2,247,145
(76,963)
2,170,182

695,088

430,764
401,780

287,500

1,815,132
(31,031)
1,784,101

The following principal payments are due on the Company's borrowings at December 31, 2017 for the years ending

December 31, (amounts in thousands):

2018

2019

2020

2021

2022

Thereafter

Total

10,000

297,500

806,439

778,206

345,000

2,247,145

Following the receipt of the covenant waiver during the fourth quarter of 2017 as discussed in the European Revolving Credit
Facility and Term Loan section below, the Company believes it was in compliance with the covenants of its financing arrangements
as of December 31, 2017 and 2016.

North American Revolving Credit and Term Loan

On May 5, 2017, the Company amended and restated its existing credit agreement (as amended, and modified from time to
time, the “North American Credit Agreement”) with Bank of America, N.A., as administrative agent, Bank of America, National
Association, acting through its Canada branch, as the Canadian administrative agent, and a syndicate of lenders named therein.
The total credit facility under the North American Credit Agreement includes an aggregate principal amount of $1.2 billion (subject
to compliance with a borrowing base and applicable debt covenants), which consists of (i) a fully-funded $445.0 million term loan,
(ii) a $705.0 million domestic revolving credit facility and (iii) a $50.0 million Canadian revolving credit facility. The facility
includes an accordion feature for up to $45.0 million in additional commitments (at the option of the lender) and also provides for
up to $25.0 million of letters of credit and a $25.0 million swingline loan sublimit that would reduce amounts available for
borrowing. The term and revolving loans accrue interest, at the option of the Company, at either the base rate or the Eurodollar
rate (as defined in the North American Credit Agreement) for the applicable term plus 2.50% per annum in the case of the Eurodollar
rate loans and 1.50% in the case of the base rate loans. The base rate is the highest of (a) the Federal Funds Rate (as defined in the
North American Credit Agreement) plus 0.50%, (b) Bank of America's prime rate or (c) the one month Eurodollar rate plus 1.00%.
Canadian Prime Rate Loans bear interest at a rate per annum equal to the Canadian Prime Rate plus 1.50%. The loans under the

PRA Group, Inc.
Notes to Consolidated Financial Statements

North American Credit Agreement mature as of May 5, 2022. As of December 31, 2017, the unused portion of the North American
Credit Agreement was $381.8 million. Considering borrowing base restrictions, as of December 31, 2017, the amount available
to be drawn was $353.1 million.

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

•

•
•
•

•

•
•

borrowings under each of the domestic revolving loan facility and the Canadian revolving loan facility are subject to
separate borrowing base calculations and may not exceed 35% of the ERC of all domestic or Canadian, as applicable,
core eligible asset pools, plus 55% of ERC of domestic or Canadian, as applicable, insolvency eligible asset pools, plus
75% of domestic or Canadian, as applicable, eligible accounts receivable;
the consolidated total leverage ratio cannot exceed 2.75 to 1.0 as of the end of any fiscal quarter;
the consolidated senior secured leverage ratio cannot exceed 2.25 to 1.0 as of the end of any fiscal quarter;
subject to no default or event of default, cash dividends and distributions during any fiscal year cannot exceed $20.0
million;
subject to no default or event of default, stock repurchases during any fiscal year cannot exceed $100.0 million plus 50%
of the prior year's net income;
permitted acquisitions during any fiscal year cannot exceed $250.0 million (with a $50.0 million per year sublimit for
permitted acquisitions by non-loan parties);
indebtedness in the form of senior, unsecured convertible notes or other unsecured financings cannot exceed $750.0
million in the aggregate (without respect to the 2020 Notes);
the Company must maintain positive consolidated income from operations during any fiscal quarter; and
restrictions on changes in control.

The revolving credit facility also bears an unused line fee of 0.375% per annum, payable quarterly in arrears.

Information on the outstanding balances and weighted average interest rates by type of borrowing under the credit facility

as of the dates indicated (dollar amounts in thousands):

Term loan
Revolving facility

December 31, 2017

December 31, 2016

Amount Outstanding
445,000
373,206

Weighted Average
Interest Rate

4.07% $
4.05

Amount Outstanding
150,000
695,088

Weighted Average
Interest Rate

3.27%
3.28

European Revolving Credit Facility and Term Loan

On October 23, 2014, the Company entered into a credit agreement with DNB Bank ASA for a Multicurrency Revolving
Credit Facility (such agreement as later amended or modified, the "European Credit Agreement"). Under the terms of the European
Credit Agreement, the credit facility includes an aggregate amount of approximately $1.2 billion (subject to the borrowing base),
of which 267.0 million EURO (approximately $319.8 million) is a term loan, accrues interest at the Interbank Offered Rate ("IBOR")
plus 2.80%-3.90% under the revolving facility and 4.25%-4.50% under the term loan facility (as determined by the loan-to-value
ratio ("LTV Ratio") as defined in the European Credit Agreement), bears an unused line fee, currently 1.26% per annum, of 35%
of the margin, is payable monthly in arrears, and matures on February 19, 2021. The European Credit Agreement includes an
overdraft facility in the aggregate amount of $40.0 million (subject to the borrowing base), which accrues interest (per currency)
at the daily rates as published by the facility agent, bears a facility line fee of 0.125% per quarter, payable quarterly in arrears, and
also matures February 19, 2021. As of December 31, 2017, the unused portion of the European Credit Agreement (including the
overdraft facility) was $463.4 million. Considering borrowing base restrictions and other covenants, as of December 31, 2017, the
amount available to be drawn under the European Credit Agreement (including the overdraft facility) was $157.0 million.

The European Credit Agreement is secured by the shares of most of the Company's European subsidiaries and all intercompany
loan receivables in Europe. The European Credit Agreement also contains restrictive covenants and events of default, which are
defined in the European Credit Agreement, including the following:

•
•
•

the LTV Ratio cannot exceed 75%;
the GIBD Ratio in Europe cannot exceed 3.25 to 1.0 as of the end of any fiscal quarter;
interest bearing deposits in AK Nordic AB cannot exceed SEK 1,500,000,000; and

PRA Group, Inc.
Notes to Consolidated Financial Statements

•

PRA Europe's cash collections must exceed 95% of Europe's ERC for the same set of portfolios, measured on a quarterly
basis.

During the fourth quarter of 2017, the Company was in a position to purchase a portfolio that would have violated the
Approved Loan Portfolio covenant in its European Credit Agreement. Accordingly, the Company requested and was granted a
waiver by the lenders prior to purchasing the portfolio. Subsequently, in the first quarter of 2018, the Company entered into the
Fourth Amendment and Restatement Agreement (the "Fourth Amendment") to its European Credit Agreement which, among other
things, expanded the scope of loan portfolios that constitute Approved Loan Portfolios (as defined in the Fourth Amendment).
Additionally, other changes to the European Credit Agreement resulting from the Fourth Amendment include: reduced all applicable
margins for the interest payable under the multicurrency revolving credit facility by 15 basis points; reduced all applicable margins
for the interest payable under the term loan facility by 50 basis points, subject to the lenders’ right to increase the applicable margin
by up to 50 basis points if one or more of the lenders elects to syndicate and/or transfer its commitment under the term loan in
accordance with the terms of the Fourth Amendment; reduced the maximum permitted amount of interest bearing deposits in AK
Nordic AB from SEK 1,500,000,000 to SEK 1,200,000,000; and revised the definitions of ERC and LTV Ratio.

Information on the outstanding balances and weighted average interest rates by type of borrowing under the European Credit

Agreement as the dates indicated (dollar amounts in thousands):

December 31, 2017

December 31, 2016

Term loan
Revolving facility

Amount Outstanding
319,830
$
476,609

Convertible Senior Notes due 2020

Weighted Average
Interest Rate

4.25% $
5.01

Amount Outstanding
280,764
401,780

Weighted Average
Interest Rate

4.25%
5.34

On August 13, 2013, the Company completed the private offering of $287.5 million in aggregate principal amount of its
2020 Notes. The 2020 Notes were issued pursuant to an Indenture, dated August 13, 2013 (the "2013 Indenture"), between the
Company and Regions Bank, as successor trustee. The 2013 Indenture contains customary terms and covenants, including certain
events of default after which the 2020 Notes may be due and payable immediately. The 2020 Notes are senior unsecured obligations
of the Company. Interest on the 2020 Notes is payable semi-annually, in arrears, on February 1 and August 1 of each year, beginning
on February 1, 2014. Prior to February 1, 2020, the 2020 Notes will be convertible only upon the occurrence of specified events.
On or after February 1, 2020, the 2020 Notes will be convertible at any time. The Company does not have the right to redeem the
2020 Notes prior to maturity. As of December 31, 2017 and December 31, 2016, none of the conditions allowing holders of the
2020 Notes to convert their notes had occurred.

The conversion rate for the 2020 Notes is initially 15.2172 shares per $1,000 principal amount of 2020 Notes, which is
equivalent to an initial conversion price of approximately $65.72 per share of the Company's common stock, and is subject to
adjustment in certain circumstances pursuant to the 2013 Indenture. Upon conversion, holders of the 2020 Notes will receive cash,
shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's
election. The Company's current intent is to settle conversions through combination settlement (i.e., the 2020 Notes would be
converted into cash up to the aggregate principal amount, and shares of the Company's common stock or a combination of cash
and shares of the Company's common stock, at the Company's election, for the remainder). As a result and in accordance with
authoritative guidance related to derivatives and hedging and earnings per share, only the conversion spread is included in the
diluted earnings per share calculation, if dilutive. Under such method, the settlement of the conversion spread has a dilutive effect
when the average share price of the Company's common stock during any quarter exceeds $65.72.

The Company determined that the fair value of the 2020 Notes at the date of issuance was approximately $255.3 million,
and designated the residual value of approximately $32.2 million as the equity component. Additionally, the Company allocated
approximately $7.3 million of the $8.2 million 2020 Notes issuance cost as debt issuance cost and the remaining $0.9 million as
equity issuance cost.

Convertible Senior Notes due 2023

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

PRA Group, Inc.
Notes to Consolidated Financial Statements

2017. Prior to March 1, 2023, the 2023 Notes will be convertible only upon the occurrence of specified events. On or after March 1,
2023, the 2023 Notes will be convertible at any time. The Company has the right, at its election, to redeem all or any part of the
outstanding notes at any time on or after June 1, 2021 for cash, but only if the last reported sale price (as defined in the 2017
Indenture) exceeds 130% of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending
on and including the trading day immediately before the date the Company sends the related redemption notice. As of December 31,
2017, none of the conditions allowing holders of the 2023 Notes to convert their notes had occurred.

The conversion rate for the 2023 Notes is initially 21.6275 shares per $1,000 principal amount of 2023 Notes, which is
equivalent to an initial conversion price of approximately $46.24 per share of the Company's common stock, and is subject to
adjustment in certain circumstances pursuant to the 2017 Indenture. Upon conversion, holders of the 2023 Notes will receive cash,
shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's
election. The Company's current intent is to settle conversions through combination settlement (i.e., the 2023 Notes would be
converted into cash up to the aggregate principal amount, and shares of the Company's common stock or a combination of cash
and shares of the Company's common stock, at the Company's election, for the remainder). As a result and in accordance with
authoritative guidance related to derivatives and hedging and earnings per share, only the conversion spread is included in the
diluted earnings per share calculation, if dilutive. Under such method, the settlement of the conversion spread has a dilutive effect
when the average share price of the Company's common stock during any quarter exceeds $46.24.

The Company determined that the fair value of the 2023 Notes at the date of issuance was approximately $298.8 million,
and designated the residual value of approximately $46.2 million as the equity component. Additionally, the Company allocated
approximately $8.3 million of the $9.6 million 2023 Notes issuance cost as debt issuance cost and the remaining $1.3 million as
equity issuance cost.

The balances of the liability and equity components of the Notes outstanding were as follows as of the dates indicated

(amounts in thousands):

Liability component - principal amount
Unamortized debt discount
Liability component - net carrying amount
Equity component

December 31,
2017

December 31,
2016

$
$

632,500
(55,537)
576,963
76,216

$
$

287,500
(17,930)
269,570
31,306

The debt discount is being amortized into interest expense over the remaining life of the 2020 Notes and the 2023 Notes

using the effective interest rate, which is 4.92% and 6.20%, respectively.

Interest expense related to the Notes was as follows for the years ended December 31, 2017 , 2016 and 2015 (amounts in

thousands):

Interest expense - stated coupon rate
Interest expense - amortization of debt discount

Total interest expense - convertible senior notes

Interest Expense, Net

2017

2016

2015

15,870
8,583

24,453

8,625
4,472

13,097

8,625
4,260

12,885

The Company incurs interest expense on its borrowings, interest-bearing deposits, and interest rate swap agreements. The
Company earns interest income on certain of its cash and cash equivalents and its interest rate swap agreements. Interest expense,
net, was as follows for the years ended December 31, 2017, 2016, and 2015 (amounts in thousands):

Interest expense

Interest (income)

Interest expense, net

2017

2016

2015

103,653
(5,612)
98,041

85,911
(5,047)
80,864

62,411
(2,075)
60,336

PRA Group, Inc.
Notes to Consolidated Financial Statements

7. Property and Equipment, net:

Property and equipment, at cost, consisted of the following as of December 31, 2017 and 2016 (amounts in thousands):

Software

Computer equipment

Furniture and fixtures

Equipment

Leasehold improvements

Building and improvements

Land

Accumulated depreciation and amortization

Assets in process

Property and equipment, net

2017

2016

51,065

19,260

15,560

9,643

14,778

7,409

1,296
(80,967)
11,267

49,311

53,793

19,594

13,607

12,065

13,644

7,323

1,296
(82,578)
—

38,744

Depreciation and amortization expense relating to property and equipment for the years ended December 31, 2017, 2016

and 2015 was $15.4 million, $18.2 million and $16.2 million, respectively.

8. Fair Value:

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

Those levels of input are summarized as follows:

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

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

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

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level

input that is significant to the fair value measurement in its entirety.

Financial Instruments Not Required To Be Carried at Fair Value

In accordance with the disclosure requirements of ASC Topic 825, "Financial Instruments" ("ASC 825"), the table below
summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total
of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the
Company. The carrying amounts in the table are recorded in the consolidated balance sheets at December 31, 2017 and December 31,
2016 (amounts in thousands):

PRA Group, Inc.
Notes to Consolidated Financial Statements

Financial assets:

Cash and cash equivalents

Held-to-maturity investments

Other investments

Finance receivables, net

Financial liabilities:

Interest-bearing deposits

Revolving lines of credit

Term loans

Convertible senior notes

December 31, 2017

December 31, 2016

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

120,516

94,287

57,204

14,248

42,955

8,820

51,407

14,998

94,287

55,554

12,573

2,771,921

3,060,907

2,307,969

2,708,582

98,580

849,815

764,830

576,963

98,580

849,815

764,830

620,079

76,113

1,096,868

430,764

269,570

76,113

1,096,868

430,764

270,825

Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The Company uses the

following methods and assumptions to estimate the fair value of financial instruments:

Cash and cash equivalents: The carrying amount approximates fair value and quoted prices for identical assets can be

found in active markets. Accordingly, the Company estimates the fair value of cash and cash equivalents using Level 1 inputs.

Held-to-maturity investments: Fair value of the Company's investment in the certificates of a closed-end Polish investment
fund is estimated using proprietary pricing models that the Company utilizes to make portfolio purchase decisions. Accordingly,
the Company estimates the fair value of its held-to-maturity investments using Level 3 inputs as there is little observable market
data available and management is required to use significant judgment in its estimates.

Other investments: This class of investments consists of private equity funds that invest primarily in loans and securities
including single-family residential debt; corporate debt products; and financially-oriented, real-estate-rich and other operating
companies in the Americas, Western Europe, and Japan. These investments are subject to certain restrictions regarding transfers
and withdrawals. The investments cannot be redeemed with the funds. Instead, the nature of the investments in this class is that
distributions are received through the liquidation of the underlying assets of the fund. The fair value of the Company's interest is
valued by the fund managers; accordingly, the Company estimates the fair value of these investments using Level 3 inputs. The
investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over 1 to
6 years.

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

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

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

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

Convertible notes: The Notes are carried at historical cost, adjusted for the debt discount. The fair value estimates for the
Notes incorporate quoted market prices which were obtained from secondary market broker quotes which were derived from a
variety of inputs including client orders, information from their pricing vendors, modeling software, and actual trading prices when
they occur. Accordingly, the Company uses Level 2 inputs for its fair value estimates. Furthermore, in the table above, carrying
amount represents the portion of the Notes classified as debt, while estimated fair value pertains to the face amount of the Notes.

PRA Group, Inc.
Notes to Consolidated Financial Statements

Financial Instruments Required To Be Carried At Fair Value

The carrying amounts in the following table are measured at fair value on a recurring basis in the accompanying consolidated

balance sheets at December 31, 2017 and 2016 (amounts in thousands):

Assets:

Available-for-sale investments

6,838

— $

6,838

Liabilities:

Interest rate swap contracts (recorded in accrued expenses)

—

1,108

—

1,108

Fair Value Measurements as of December 31, 2017

Level 1

Level 2

Level 3

Total

Fair Value Measurements as of December 31, 2016

Level 1

Level 2

Level 3

Total

Assets:

Available-for-sale investments

2,138

— $

2,138

Liabilities:

Interest rate swap contracts (recorded in accrued expenses)

—

2,825

—

2,825

Available-for-sale investments: Fair value of the Company's investment in government bonds and fixed income funds is

estimated using quoted market prices. Accordingly, the Company uses Level 1 inputs.

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

9. Share-Based Compensation:

The Company has an Omnibus Incentive Plan (the "Plan") that is intended to assist the Company in attracting and retaining
selected individuals to serve as employees and directors, who are expected to contribute to the Company's success and to achieve
long-term objectives that will benefit stockholders of the Company. The Plan enables the Company to award shares of the Company's
common stock to select employees and directors, as described in the Plan, not to exceed 5,400,000 shares as authorized by the
Plan.

Total share-based compensation expense was $8.7 million, $6.1 million and $16.3 million for the years ended December 31,
2017, 2016 and 2015, respectively. With the adoption of ASU 2016-09 in the first quarter of 2017, the Company now recognizes
all excess tax benefits and tax deficiencies in the income statement when the awards vest or are settled. Prior to 2017, tax benefits
resulting from tax deductions in excess of share-based compensation expense (windfall tax benefits) recognized under the provisions
of ASC 718 were credited to additional paid-in capital. Realized tax shortfalls, if any, were first offset against the cumulative
balance of windfall tax benefits, if any, and then charged directly to income tax expense. The total tax benefit realized from share-
based compensation was approximately $3.2 million, $2.7 million and $8.9 million for the years ended December 31, 2017, 2016
and 2015, respectively.

Nonvested Shares

As of December 31, 2017, total future compensation expense related to grants of nonvested share grants to employees and
directors (not including nonvested shares granted under the Long-Term Incentive ("LTI") program), is estimated to be $5.4 million
with a weighted average remaining life for all nonvested shares of 1.2 years. Grants made to key employees and directors of the
Company were assumed to have no forfeiture rates associated with them due to the historically low turnover among this group.
With the exception of the grants made pursuant to the LTI program and a few employee and director grants, the nonvested shares
vest ratably generally over one to three years and are expensed over their vesting period.

PRA Group, Inc.
Notes to Consolidated Financial Statements

The following summarizes all nonvested share transactions, excluding those related to the LTI program, from December 31,

2014 through December 31, 2017 (amounts in thousands, except per share amounts):

December 31, 2014

Granted

Vested

Canceled

December 31, 2015

Granted

Vested

Canceled

December 31, 2016

Granted

Vested

Canceled
December 31, 2017

Nonvested Shares
Outstanding

Weighted-Average
Price at Grant Date

339

100
(151)
(4)
284

196
(117)
(60)
303

195
(173)
(27)
298

47.34

53.29

42.15

47.49

52.20

28.43

48.78

51.71

38.19

33.70

37.49

43.05
35.25

The total grant date fair value of shares vested, excluding those granted under the LTI program, during the years ended

December 31, 2017, 2016 and 2015, was $6.5 million, $5.7 million and $6.4 million, respectively.

Long-Term Incentive Program

Pursuant to the Plan, the Compensation Committee may grant time-vested and performance-based nonvested shares. All

shares granted under the LTI program were granted to key employees of the Company.

The following table summarizes all LTI share transactions from December 31, 2014 through December 31, 2017 (amounts

in thousands, except per share amounts):

Nonvested LTI Shares
Outstanding

Weighted-Average
Price at Grant Date

December 31, 2014

Granted at target level

Adjustments for actual performance

Vested

Canceled

December 31, 2015
Granted at target level

Adjustments for actual performance

Vested

Canceled

December 31, 2016

Granted at target level

Adjustments for actual performance

Vested

Canceled

December 31, 2017

488

132

122
(252)
(7)
483
240
(67)
(176)
(55)
425

192

5
(51)
(99)
472

30.52

52.47

34.59

20.21

40.05

42.80
28.98

34.59

43.68

39.57

33.50

60.00

40.80

20.91

41.06

The total grant date fair value of LTI shares vested during the years ended December 31, 2017, 2016 and 2015, was

$2.1 million, $6.1 million and $5.1 million, respectively.

PRA Group, Inc.
Notes to Consolidated Financial Statements

At December 31, 2017, total future compensation expense, assuming the current estimated performance levels are achieved,
related to nonvested shares granted under the LTI program is estimated to be approximately $2.9 million. The Company assumed
a 15.0% forfeiture rate for these grants and the remaining shares have a weighted average life of 1.4 years at December 31, 2017.

10. Earnings per Share:

Basic earnings per share ("EPS") are computed by dividing net income available to common stockholders of PRA Group,
Inc. by weighted average common shares outstanding. Diluted EPS are computed using the same components as basic EPS with
the denominator adjusted for the dilutive effect of the Notes and nonvested share awards, if dilutive. For the Notes, only the
conversion spread is included in the diluted EPS calculation, if dilutive. Under such method, the settlement of the conversion
spread has a dilutive effect when the average share price of the Company's common stock during any quarter exceeds $65.72 for
the 2020 Notes or $46.24 for the 2023 Notes, neither of which occurred during the respective periods from which the Notes were
issued through December 31, 2017. Share-based awards that are contingent upon the attainment of performance goals are included
in the computation of diluted EPS if the effect is dilutive. The dilutive effect of nonvested shares is computed using the treasury
stock method, which assumes any proceeds that could be obtained upon the vesting of nonvested shares would be used to purchase
common shares at the average market price for the period.

The following table provides a reconciliation between the computation of basic EPS and diluted EPS for the years ended

December 31, 2017, 2016 and 2015 (amounts in thousands, except per share amounts):

Net Income
Attributable
to PRA
Group, Inc.

2017

Weighted
Average
Common
Shares

Net Income
Attributable
to PRA
Group, Inc.

EPS

2016

Weighted
Average
Common
Shares

Net Income
Attributable
to PRA
Group, Inc.

EPS

2015

Weighted
Average
Common
Shares

EPS

Basic EPS

$ 162,265

45,671

3.55

$ 85,097

46,316

1.84

$ 167,926

48,128

3.49

Dilutive effect of
nonvested share awards

152

(0.01)

Diluted EPS

$ 162,265

45,823

3.54

$ 85,097

46,388

(0.01)
1.83

277

$ 167,926

48,405

(0.02)
3.47

There were no antidilutive options outstanding as of December 31, 2017, 2016 and 2015.

11. Derivatives:

Based on the guidance of ASC Topic 815 "Derivatives and Hedging" ("ASC 815"), the Company records derivative financial

instruments at fair value on its consolidated balance sheets.

The Company's derivative instruments are not designated as hedging instruments under ASC 815. Therefore, both the realized
gain or loss and the change in fair value of the instrument are recorded as interest expense in the Company's consolidated financial
statements. During the years ended December 31, 2017, 2016 and 2015, the Company recorded $0.5 million, $2.8 million and
$4.9 million respectively, in interest expense related to its interest rate swaps in its consolidated income statements.

The financing of portfolio investments is generally drawn in the same currencies as the underlying expected future cash flow
from the portfolios. The interest rate risk related to the loans is reduced through the use of a combination of interest rate swaps in
the European Union euro, Great British pound, Norwegian kroner, Swedish kroner, and Polish zloty. At December 31, 2017 and
2016, approximately 48% and 57%, respectively, of the net borrowings of PRA Europe was hedged, reducing the related interest
rate risk.

The following table sets forth the fair value amounts of the derivative instruments not designated as hedging instruments as

of December 31, 2017 and 2016 (amounts in thousands):

Interest rate swap contracts

— $

1,108

— $

2,825

2017

2016

Asset
Derivatives

Liability
Derivatives

Asset
Derivatives

Liability
Derivatives

PRA Group, Inc.
Notes to Consolidated Financial Statements

12. Stockholders' Equity:

On October 22, 2015, the Company's board of directors authorized a share repurchase program to purchase up to
$125.0 million of the Company's outstanding shares of common stock. During the year ended December 31, 2017, the Company
purchased 1,311,200 shares of its common stock under the plan at an average price of $34.25 per share which concluded the plan.
No shares were purchased during the year ended December 31, 2016. During the year ended December 31, 2015, the Company
purchased 2,072,721 shares of its common stock under the plan at an average price of $38.60 per share.

13. Income Taxes:

The income tax expense/(benefit) recognized for the years ended December 31, 2017, 2016 and 2015 is comprised of the

following (amounts in thousands):

For the year ended December 31, 2017:

Current tax expense

Deferred tax (benefit)

Total income tax expense/(benefit)

For the year ended December 31, 2016:

Current tax expense

Deferred tax expense/(benefit)

Total income tax expense

For the year ended December 31, 2015:

Current tax expense

Deferred tax expense/(benefit)

Total income tax expense

Federal

State

Foreign

Total

77,656
(112,118)
(34,462) $

38,986
(7,350)
31,636

62,869

2,887

65,756

16,543
(2,051)
14,492

5,037

575

5,612

9,399
(600)
8,799

25,087
(16,653)
8,434

20,868
(14,925)
5,943

25,692
(10,856)
14,836

119,286
(130,822)
(11,536)

64,891
(21,700)
43,191

97,960
(8,569)
89,391

On December 22, 2017, the United States government enacted comprehensive tax legislation commonly referred to as the
Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not
limited to the following provisions which are most relevant the Company, (1) reducing the U.S. federal corporate tax rate from 35
percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign
subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current
inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations referred to as Global Intangible
Low-Taxed Income (“GILTI”); (5) creating the base erosion anti-abuse tax, a new minimum tax; (6) creating a new limitation on
deductible interest expense; and (7) increased limitations on the deductibility of executive compensation.

The Company has not completed its accounting for the income tax effects of the Tax Act. Where the Company has been
able to make reasonable estimates of the effects for which its analysis is not yet complete, the Company has recorded provisional
amounts in accordance with SEC Staff Accounting Bulletin No. 118. Where the Company has not yet been able to make reasonable
estimates of the impact of certain elements, the Company has not recorded any amounts related to those elements and has continued
accounting for them in accordance with ASC 740 on the basis of the tax laws in effect immediately prior to the enactment of the
Tax Act.

The Company’s accounting for the following elements of the Tax Act is incomplete. However, the Company was able to

make reasonable estimates of certain effects and, therefore, has recorded provisional amounts as follows:

• Revaluation of deferred tax assets and liabilities: The Tax Act reduces the U.S. federal corporate tax rate from 35% to
21% for tax years beginning after December 31, 2017. In addition, the Tax Act makes certain changes to the depreciation
rules and implements new limits on the deductibility of certain executive compensation. The Company has evaluated
these changes and has recorded a provisional decrease to net deferred tax liabilities of $73.8 million with a corresponding
increase to deferred tax benefit. The Company is still completing its calculation of the impact of these changes in its
deferred tax balances.

• Transition Tax on unrepatriated foreign earnings: The Transition Tax on unrepatriated foreign earnings is a tax on
previously untaxed accumulated and current earnings and profits (“E&P”) of the Company’s foreign subsidiaries. To
determine the amount of the Transition Tax, the Company must determine, among other factors, the amount of post-1986
E&P of its foreign subsidiaries, as well as the amount of non-U.S. income tax paid on such earnings. The Company was

PRA Group, Inc.
Notes to Consolidated Financial Statements

able to make a reasonable estimate of the Transition Tax and has provisionally recorded no Transition Tax expense. The
Company is continuing to gather additional information to more precisely compute the amount of the Transition Tax to
complete its calculation of E&P as well as the final determination of non-U.S. income taxes paid.

The Company’s accounting for the following elements of the Tax Act is incomplete, and it has not yet been able to make

reasonable estimates of certain effects of these items. Therefore, no provisional amounts were recorded.

• GILTI: The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by foreign subsidiaries must be
included currently in the gross income of the U.S. shareholder. Due to the complexity of the new GILTI tax rules, the
Company is continuing to evaluate the provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, the
Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable
income related to GILTI as a current-period expense when incurred or to factor such amounts into the Company’s
measurement of its deferred taxes. The Company has not yet completed its analysis of GILTI tax rules and is not yet able
to reasonably estimate the effect of this provision of the Tax Act. Therefore, the Company has not recorded any amounts
related to potential GILTI tax in its financial statements and has not yet made a policy decision regarding whether to
record deferred taxes on GILTI.

•

Indefinite reinvestment assertion: Beginning in 2018, the Tax Act provides a 100% deduction for dividends received
from ten percent owned foreign corporations by U.S. corporate shareholders, subject to a one-year holding period.
Although dividend income will now be exempt from U.S. federal tax in the hands of U.S. corporate shareholders, companies
must still apply the guidance of ASC 740-30-25-28 to account for the tax consequences of outside basis differences and
other tax impacts of their investments in non-U.S. subsidiaries. While the Company has provisionally determined that
it owes no Transition Tax on the untaxed E&P of the Company's foreign subsidiaries, the Company was unable to determine
a reasonable estimate of the remaining tax liability, if any, under the Tax Act for its remaining outside basis differences
or evaluate how the Tax Act will affect the Company’s existing accounting position to indefinitely reinvest unremitted
foreign earnings. Therefore, the Company has not included a provisional amount for this item in its financial statements
for 2017. The Company will record amounts as needed for this item beginning in the first reporting period during the
measurement period in which the Company obtains necessary information and is able to prepare a reasonable estimate.

A reconciliation of the Company's expected tax expense at the statutory federal tax rate to actual tax expense/(benefit) for

the years ended December 31, 2017, 2016 and 2015 is as follows (amounts in thousands):

Income tax expense at statutory federal rates

State tax expense, net of federal tax benefit

Foreign rate difference

Federal rate change

Other

Total income tax (benefit)/expense

2017

2016

2015

55,139

9,072
(4,681)
(73,779)
2,713
(11,536) $

46,929

3,696
(7,839)
—

405

43,191

90,133

5,719
(9,495)
—

3,034

89,391

PRA Group, Inc.
Notes to Consolidated Financial Statements

The Company recognized a net deferred tax liability of $113.7 million and $229.9 million as of December 31, 2017 and

2016, respectively. The components of the net deferred tax liability are as follows (amounts in thousands):

Deferred tax assets:

Employee compensation
Net operating loss carryforward
Accrued liabilities
Interest
Finance receivable revenue recognition - international
Other

Total deferred tax asset

Deferred tax liabilities:

Depreciation expense
Intangible assets and goodwill
Convertible debt
Finance receivable revenue recognition - IRS settlement
Finance receivable revenue recognition - domestic
Other

Total deferred tax liability

Net deferred tax liability before valuation allowance
Valuation allowance
Net deferred tax liability

2017

2016

5,190
42,332
2,750
11,027
27,835
9,165
98,299

15,417
8,856
14,645
117,026
16,957
—
172,901
74,602
39,054
113,656

9,120
48,298
5,136
10,596
8,274
6,154
87,578

7,610
10,625
6,955
—
239,337
893
265,420
177,842
52,021
229,863

A valuation allowance for deferred tax assets is recognized and charged to earnings in the period such determination is made,
if it is determined that it is more likely than not that the deferred tax asset will not be realized. If the Company subsequently realized
deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed,
resulting in a positive adjustment to earnings in the period such determination is made. The determination for a valuation allowance
is made on a jurisdiction by jurisdiction basis. At December 31, 2017 and 2016, the valuation allowance, relating mainly to net
operating losses, capital losses and deferred interest expense in Norway, Brazil, UK and Luxembourg, was $39.1 million and $52.0
million, respectively. The Company believes it is more likely than not that the results of future operations will generate sufficient
taxable income to realize the net deferred tax assets.

For tax purposes, the Company utilized the cost recovery method of accounting for its finance receivable income through
December 31, 2016. Under the cost recovery method, collections on finance receivables are applied first to principal to reduce the
finance receivables balance to zero before taxable income is recognized. The Internal Revenue Service ("IRS") examined the
Company's 2005 through 2012 tax returns and asserted that tax revenue recognition using the cost recovery method did not clearly
reflect taxable income and therefore issued Notices of Deficiency to the Company for tax years ended December 31, 2005 through
2012 (the "Notices"). In response to the Notices, the Company filed petitions in the U.S. Tax Court (the “Tax Court”) challenging
the deficiencies and the Tax Court set the trial to begin on May 15, 2017. On May 10, 2017, the Company reached a settlement
with the IRS in regards to the Notices. Under the settlement, both parties agreed that no amounts were due for years 2005 through
2012 and the Tax Court entered decisions to that effect on June 22, 2017. Also, under the settlement, the Company will utilize a
new tax accounting method to recognize net finance receivables revenue effective with tax year 2017. Under the new method, a
portion of the annual collections amortize principal and the remaining portion is taxable income. The Company will not be required
to pay any interest or penalties related to the prior periods. The deferred tax liability related to the difference in timing between
the new method and the cost recovery method will be incorporated evenly into the Company’s tax filings over four years.

ASC 740 requires the recognition of interest if the tax law would require interest to be paid on the underpayment of taxes,
and recognition of penalties if a tax position does not meet the minimum statutory threshold to avoid payment of penalties. The
Company believes it has sufficient support for the technical merits of its positions and that it is more likely than not these positions
will be sustained. Accordingly, the Company has not accrued for interest or penalties on any of its tax positions.

At December 31, 2017, the tax years subject to examination by the major federal, state and international taxing jurisdictions

are 2013 and subsequent years.

PRA Group, Inc.
Notes to Consolidated Financial Statements

As of December 31, 2017, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately
$23.8 million. The Company intends for predominantly all foreign earnings to be indefinitely reinvested in its foreign operations
and, therefore, the recording of deferred tax liabilities for such unremitted earnings is not required. It is impracticable to determine
the total amount of unrecognized deferred taxes with respect to these indefinitely reinvested earnings.

The Company's foreign subsidiaries had $3.3 million and $3.7 million of net operating loss carryforwards net of valuation
allowances as of December 31, 2017 and 2016, respectively. Most of the net operating losses do not expire under local law and
the remaining jurisdictions allow for a 7 to 20 year carryforward period.

14. Commitments and Contingencies:

Employment Agreements:

The Company has entered into employment agreements with all of its U.S. executive officers and with several members of
its U.S. senior management group. Such agreements provide for base salary payments as well as potential discretionary bonuses
that are based on the attainment of a combination of financial and management goals. As of December 31, 2017, estimated future
compensation under these agreements was approximately $21.9 million. The agreements also contain confidentiality and non-
compete provisions. Outside the U.S., employment agreements are in place with employees pursuant to local country regulations.
Generally, these agreements do not have expiration dates and therefore it is impractical to estimate the amount of future compensation
under these agreements. Accordingly, the future compensation under these agreements is not included in the $21.9 million total
above.

Leases:

The Company is party to various operating leases with respect to its facilities and equipment. The future minimum lease

payments at December 31, 2017 totaled approximately $51.4 million.

Forward Flow Agreements:

The Company is party to several forward flow agreements that allow for the purchase of nonperforming loans at pre-
established prices. The maximum remaining amount to be purchased under forward flow agreements at December 31, 2017 was
approximately $203.2 million.

Finance Receivables:

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

Litigation and Regulatory Matters:

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

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

PRA Group, Inc.
Notes to Consolidated Financial Statements

The Company believes that the estimate of the aggregate range of reasonably possible losses in excess of the amount accrued

for its legal proceedings outstanding at December 31, 2017, where the range of loss can be estimated, was not material.

In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover
all or portions of its litigation expenses, judgments, or settlements. Loss estimates and accruals for potential liability related to
legal proceedings are typically exclusive of potential recoveries, if any, under the Company's insurance policies or third-party
indemnities. The Company recorded $4.0 million in potential recoveries under the Company's insurance policies or third-party
indemnities as of December 31, 2017.

The matters described below fall outside of the normal parameters of the Company's routine legal proceedings.

Multi-State Investigation

The Company previously received Civil Investigative Demands from multiple state Attorneys General offices broadly relating
to its debt collection practices in the U.S. The Company, which has fully cooperated with the investigation, has discussed potential
resolution of the investigation with this coalition of Attorneys General, which could include penalties, restitution and/or the adoption
of new practices and controls in the conduct of the Company's business. In these discussions, the state Attorneys General offices
have taken positions with which the Company disagrees. If the Company is unable to resolve its differences with this multi-state
coalition, it is possible that individual state Attorneys General offices may file claims against the Company. The range of loss, if
any, cannot be estimated at this time.

Internal Revenue Service Audit

The IRS examined the Company's 2005 through 2012 tax returns and asserted that tax revenue recognition using the cost
recovery method for its finance receivable income did not clearly reflect taxable income and therefore issued Notices to the
Company for tax years ended December 31, 2005 through 2012. In response to the Notices, the Company filed petitions in the
Tax Court challenging the deficiencies and the Tax Court set the trial to begin on May 15, 2017. On May 10, 2017, the Company
reached a settlement with the IRS in regards to the Notices. Under the settlement, both parties agreed that no amounts were due
for years 2005 through 2012 and the Tax Court entered decisions to that effect on June 22, 2017. Also, under the settlement, the
Company agreed to utilize a new tax accounting method to recognize net finance receivables revenue effective with tax year 2017.
Under the new method, a portion of the annual collections will amortize principal and the remaining portion will be considered
taxable income. The Company will not be required to pay any interest or penalties related to the prior periods. The deferred tax
liability related to the difference in timing between the new method and the prior method will be incorporated evenly into the
Company’s tax filings over four years.

Iris Pounds v. Portfolio Recovery Associates, LLC

On November 21, 2016, Iris Pounds filed suit against the Company in Durham County, North Carolina alleging violations
of the North Carolina Prohibited Practices by Collection Agencies Act. The purported class consists of all individuals against
whom the Company had obtained a judgment by default in North Carolina on or after October 1, 2009. The Company removed
the matter to the United States District Court for the Middle District of North Carolina, and has filed a motion to dismiss. The
range of loss, if any, cannot be estimated at this time due to the uncertainty surrounding liability, class certification and the
interpretation of statutory damages.

15. Retirement Plans:

The Company sponsors defined contribution plans both in the U.S. and Europe. The U.S. plan is organized as a 401(k) plan
under which all employees over eighteen years of age are eligible to make voluntary contributions to the plan up to 100% of their
compensation, subject to IRS limitations, after completing six months of service, as defined in the plan. The Company makes
matching contributions of up to 4% of an employee's salary. For the defined contribution plans in Europe, the Company pays
contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Total
compensation expense related to the Company's contributions was $5.2 million, $5.1 million and $4.3 million for the years ended
December 31, 2017, 2016 and 2015, respectively.

16. Redeemable Noncontrolling Interest:

With the acquisition of DTP in 2016, the Company acquired a 20% owned Polish securitization fund (the "Fund"). Under
ASC 810-10, the Company has determined that it has control over this Fund and as such has fully consolidated the operations of
the Fund. The noncontrolling shareholders have the right to redeem their ownership interests at the current net asset value subject
to certain conditions. Redeemable noncontrolling interest presented in temporary equity on the consolidated balance sheets,
represents the interest not owned by the Company and is stated at the greater of the original invested capital or redemption amount.
74

PRA Group, Inc.
Notes to Consolidated Financial Statements

Net income attributable to the redeemable noncontrolling interest is stated separately in the Company's consolidated income
statements. Additionally, the Company has guaranteed the noncontrolling shareholders a 5.1% per annum return on their investment.
The Company recorded a liability for the guaranty in the amount of $1.0 million as of December 31, 2017.

17. Sale of Subsidiaries:

As part of the Company’s strategy to focus on its primary business of the purchase, collection and management of portfolios
of nonperforming loans, the Company decided in the fourth quarter of 2016 to sell its government services businesses: PRA
Government Services, LLC; MuniServices, LLC; and PRA Professional Services, LLC. On January 24, 2017, the Company
completed the sale of its government services businesses for $91.5 million in cash plus additional consideration for certain balance
sheet items. The impact of the transaction was reported in the first quarter of 2017. The gain on sale was approximately $46.8
million.

On June 30, 2017, the Company sold its vehicle location, skip tracing and collateral recovery business, PLS, for $4.5 million

which resulted in a gain on sale of approximately $1.6 million.

The assets and liabilities of the businesses that were sold during the year ended December 31, 2017 consisted of the following

(amounts in thousands):

Other receivables, net

Property and equipment, net

Goodwill

Intangible assets, net

Other assets

Total assets

Accrued expenses

Total liabilities

2017

8,277
4,559

29,683

1,711

772

45,002

3,123

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or
that the degree of compliance with the policies or procedures may deteriorate. We conducted an evaluation, under the supervision
and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on this evaluation, the principal executive officer and
principal financial officer have concluded that, as of December 31, 2017, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting that
occurred during the quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and
maintaining effective internal control over financial reporting. Internal control over financial reporting is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f) as a process designed by, or under the supervision of, the company’s principal executive and principal
financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control
over financial reporting based on the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission. Based on its assessment under this framework, management has determined
that, our internal control over financial reporting was effective as of December 31, 2017. Our independent registered public
accounting firm, KPMG LLP, has issued an audit report on the effectiveness of our internal control over financial reporting as of
December 31, 2017, which is included herein.

Report of Independent Registered Public Accounting Firm

To the stockholders and board of directors
PRA Group, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited PRA Group, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of
December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated
statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period
ended December 31, 2017, and the related notes (collectively, the “consolidated financial statements”) and our report dated
February 27, 2018 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Norfolk, Virginia
February 27, 2018

Item 9B. Other Information.

None.

Item 10. Directors, Executive Officers and Corporate Governance.

PART III

The information required by Item 10 is incorporated herein by reference to the sections labeled "Executive Officers," "Security
Ownership of Certain Beneficial Owners and Management," "Our Board and Its Committees," "Corporate Governance," and
"Report of the Audit Committee" in our definitive Proxy Statement for use in connection with the Company's 2018 Annual Meeting
of Stockholders (the "Proxy Statement").

Item 11. Executive Compensation.

The information required by Item 11 is incorporated herein by reference to the sections labeled "Compensation Discussion

and Analysis" and "Compensation Committee Report" in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters.

The information required by Item 12 is incorporated herein by reference to the section labeled "Security Ownership of Certain

Beneficial Owners and Management" in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 is incorporated herein by reference to the sections labeled "Policies for Approval of

Related Party Transactions" and "Director Independence" in the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required by Item 14 is incorporated herein by reference to the section labeled "Fees Paid to KPMG" in the

Proxy Statement.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Financial Statements.

The following financial statements are included in Item 8 of this Form 10-K:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Income Statements

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(b) Exhibits.

2.1

3.1

3.2

4.1

Equity Exchange Agreement between Portfolio Recovery Associates, L.L.C. and Portfolio Recovery Associates,
Inc. (Incorporated by reference to Exhibit 2.1 of Amendment No. 2 to the Registration Statement on Form S-1
(Registration No. 333-99225) filed on October 30, 2002).

Fourth Amended and Restated Certificate of Incorporation of PRA Group, Inc. (Incorporated by reference to Exhibit
3.1 of the Current Report on Form 8-K (File No. 000-50058) filed on October 29, 2014).

Amended and Restated By-Laws of PRA Group, Inc. (Incorporated by reference to Exhibit 3.1 of the Current Report
on Form 8-K (File No. 000-50058) filed on May 22, 2015).

Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to the
Registration Statement on Form S-1 (Registration No. 333-99225) filed on October 15, 2002).

4.2

4.3

4.4

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

10.10

10.11

10.12

10.13

10.14

10.15

Form of Warrant (Incorporated by reference to Exhibit 4.2 of Amendment No. 2 to the Registration Statement on
Form S-1 (Registration No. 333-99225) filed on October 30, 2002).

Indenture dated August 13, 2013 between Portfolio Recovery Associates, Inc. and Wells Fargo Bank, National
Association, as trustee (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No.
000-50058) filed on August 14, 2013).

Indenture dated May 26, 2017 between PRA Group, Inc. and Regions Bank, as trustee (Incorporated by
reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 000-50058) filed on May 26, 2017).

Executive Chairman Agreement, dated February 23, 2017, by and between Steven D. Fredrickson and PRA
Group, Inc. (Incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q (File No.
000-50058) filed on May 10, 2017).

Employment Agreement, dated February 23, 2017, by and between Kevin P. Stevenson and PRA Group, Inc.
(Incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q (File No. 000-50058) filed on
May 10, 2017).

Form of Employment Agreement between PRA Group, Inc. and Certain Executives effective January 1, 2018
(Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 000-50058) filed on
January 2, 2018).

Employment Agreement, dated December 19, 2014, by and between Christopher Graves and PRA Group, Inc.
(Incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K (File No. 000-50058) filed on
January 5, 2015).

Employment Agreement, dated June 21, 2016, by and between Peter M. Graham and PRA Group, Inc.
(Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 000-50058) filed on
June 22, 2016).

Employment Agreement, dated December 19, 2014, by and between Michael J. Petit and PRA Group, Inc.
(Incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K (File No. 000-50058) filed on
January 5, 2015).

Separation and Release Agreement, dated December 29, 2016, by and between Michael J. Petit and PRA Group,
Inc. (Incorporated by reference to Exhibit 10.4 of the Annual Report on Form 10-K (File No. 000-50058) filed
on March 1, 2017).

Form of Performance Stock Unit Agreement (Incorporated by reference to Exhibit 10.1 of the Quarterly Report
on Form 10-Q (File No. 000-50058) filed on May 10, 2017).

Form of Restricted Stock Unit Agreement (Incorporated by reference to Exhibit 10.2 of the Quarterly Report on
Form 10-Q (File No. 000-50058) filed on May 10, 2017).

Credit Agreement dated as of December 19, 2012 by and among Portfolio Recovery Associates, Inc., Portfolio
Recovery Associates, LLC, PRA Holding I, LLC, PRA Location Services, LLC, PRA Government Services,
LLC, PRA Receivables Management, LLC, PRA Holding II, LLC, PRA Holding III, LLC, MuniServices, LLC,
PRA Professional Services, LLC, PRA Financial Services, LLC, Bank of America, N.A. as administrative agent,
swingline lender, and l/c issuer, Wells Fargo Bank, N.A. and SunTrust Bank as co-syndication agents, KeyBank,
National Association, as documentation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo
Securities, LLC, and SunTrust Robinson Humphrey, Inc. as joint lead arrangers and joint book managers, and
the lenders named therein. (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File
No. 000-50058) filed on December 20, 2012).

First Amendment to Credit Agreement (Incorporated by reference to Exhibit 10.1 of the Current Report on Form
8-K (File No. 000-50058) filed on August 6, 2013).

Second Amendment to Credit Agreement (Incorporated by reference to Exhibit 10.1 of the Current Report on
Form 8-K (File No. 000-50058) filed on March 20, 2014).

Third Amendment to Credit Agreement (Incorporated by reference to Exhibit 10.1 of the Current Report on
Form 8-K (File No. 000-50058) filed on June 6, 2014).

Fourth Amendment to Credit Agreement (Incorporated by reference to Exhibit 10.1 of the Current Report on
Form 8-K (File No. 000-50058) filed on June 3, 2015).

Fifth Amendment to Credit Agreement (Incorporated by reference to Exhibit 10.1 of the Current Report on Form
8-K (File No. 000-50058) filed on August 10, 2015).

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24*

10.25*

10.26

10.27

10.28

21.1

23.1

24.1

31.1

31.2

32.1

Amended and Restated Credit Agreement dated as of May 5, 2017 among PRA Group, Inc. as a borrower and a
guarantor, PRA Group Canada, Inc., as a borrower, the domestic subsidiaries of PRA Group, Inc., as the
guarantors, the Canadian subsidiaries of PRA Group Canada, Inc. party thereto from time to time, as Canadian
guarantors, the lenders party thereto, Bank of America, N.A., as administrative Agent, swing line lender and an l/
c issuer, Bank of America, N.A., acting through its Canada branch, as Canadian administrative agent, Capital
One, N.A., Fifth Third Bank and Suntrust Bank, as co-syndication agents, DNB Capital LLC, ING Capital, the
Bank of Tokyo Mitsubishi Ufj, Ltd. and Regions Bank, as co-senior managing agents, and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Capital One, N.A., Fifth Third Bank and Suntrust Robinson Humphrey, Inc., as
joint lead arrangers and joint bookrunners (Incorporated by reference to Exhibit 10.1 of the Quarterly Report on
Form 10-Q (File No. 000-50058) filed on August 9, 2017).

Loan Modification Agreement and Seventh Amendment to the Credit Agreement dated as of December 19, 2012.
(Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 000-50058) filed on
March 30, 2016).

Multicurrency Revolving Credit Agreement dated as of October 23, 2014. (Incorporated by reference to Exhibit
10.1 of the Current Report on Form 8-K (File No. 000-50058) filed on October 29, 2014).

First Amendment and Restatement Agreement to the Multicurrency Revolving Credit Agreement dated as of
October 23, 2014. (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No.
000-50058) filed on June 16, 2015).

Second Amendment and Restatement Agreement to the Multicurrency Revolving Credit Agreement dated as of
October 23, 2014. (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No.
000-50058) filed on February 25, 2016).

Third Amendment and Restatement Agreement to the Multicurrency Revolving Credit Agreement, dated as of
September 2, 2016, by and among PRA Group Europe Holding S.à r.l. and DNB Bank ASA. (Incorporated by
reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q (File No. 000-50058) filed on November 8,
2016).

Lender Commitment Agreement dated as of August 21, 2013 by and among Portfolio Recovery Associates, Inc.,
and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.2 of the Quarterly
Report on Form 10-Q (File No. 000-50058) filed on November 8, 2013).

Lender Joiner Agreement dated as of August 21, 2013, by and among Portfolio Recovery Associates, Inc., Bank
of Hampton Roads, Heritage Bank, Union First Market and Bank of America, N.A., as administrative agent.
(Incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q (File No. 000-50058) filed on
November 8, 2013).

2013 Annual Bonus Plan (Incorporated by reference to the Proxy Statement on Schedule 14A (File No.
000-50058) filed on April 19, 2013).

2013 Omnibus Incentive Plan (Incorporated by reference to the Proxy Statement on Schedule 14A (File No.
000-50058) filed on April 19, 2013).

Deed of Novation, Amendment and Restatement, dated May 5, 2014, by and between Geveran Trading Co. Ltd
and Portfolio Recovery Associates, Inc., PRA Holding IV, LLC and Tekagel Invest 742 AS (Incorporated by
reference to the to Exhibit 10.1 of the Quarterly Report on Form 10-Q (File No. 000-50058) filed on May 8,
2014).

Novated, Amended and Restated Sale and Purchase Agreement, dated May 5, 2014, for the Sale and Purchase of
Aktiv Kapital AS (Incorporated by reference to the to Exhibit 10.1 of the Quarterly Report on Form 10-Q (File
No. 000-50058) filed on May 8, 2014).
Purchase Agreement, dated May 22, 2017, by and among PRA Group, Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and SunTrust Robinson Humphrey, Inc., as representatives of the several initial purchasers
named therein (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No.
000-50058) filed on May 26, 2017).

Subsidiaries of PRA Group, Inc. (filed herewith).

Consent of KPMG LLP (filed herewith).

Powers of Attorney (included on signature page) (filed herewith).

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed
herewith).

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed
herewith).
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes
Oxley Act of 2002 (filed herewith).

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

* Denotes management contract or compensatory plan or arrangement in which directors or executive officers are eligible to
participate.

Item 16. Form 10-K Summary.

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused

this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

February 27, 2018

PRA Group, Inc.
(Registrant)

By:

/s/ Kevin P. Stevenson

Kevin P. Stevenson

President and Chief Executive Officer

(Principal Executive Officer)

By:

/s/ Peter M. Graham

Peter M. Graham

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose signature appears below constitutes and
appoints Kevin P. Stevenson and Peter M. Graham, his true and lawful attorneys-in-fact, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in any and all capacities to execute and sign any and all
amendments or post-effective amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the registrant hereby confers like authority on its behalf.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following

persons on behalf of the registrant and in the capacities and on the dates indicated.

February 27, 2018

By:

/s/ Kevin P. Stevenson

Kevin P. Stevenson

President and Chief Executive Officer

(Principal Executive Officer)

By:

/s/ Peter M. Graham

Peter M. Graham

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

February 27, 2018

By:

/s/ Kevin P. Stevenson
Kevin P. Stevenson
Director

By:

/s/ Steven D. Fredrickson
Steven D. Fredrickson
Director

By:

/s/ Vikram A. Atal
Vikram A. Atal
Director

By:

/s/ Marjorie M. Connelly
Marjorie M. Connelly
Director

By:

/s/ John H. Fain
John H. Fain
Director

By:

/s/ Penelope W. Kyle
Penelope W. Kyle
Director

By:

/s/ James A. Nussle
James A. Nussle
Director

By:

/s/ Geir Olsen
Geir Olsen
Director

By:

/s/ Scott M. Tabakin
Scott M. Tabakin
Director

By:

/s/ Lance L. Weaver
Lance L. Weaver
Director

Exhibit 31.1

I, Kevin P. Stevenson, certify that:

I have reviewed this annual report on Form 10-K of PRA Group, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be
designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the financial statements for external purposes in accordance with generally accepted accounting
principles;

conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting.

February 27, 2018

By:

/s/ Kevin P. Stevenson

Kevin P. Stevenson
President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

I, Peter M. Graham, certify that:

I have reviewed this annual report on Form 10-K of PRA Group, Inc.;

conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting.

February 27, 2018

By:

/s/ Peter M. Graham

Peter M. Graham

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of PRA Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31,
2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin P. Stevenson, President
and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.

February 27, 2018

By:

/s/ Kevin P. Stevenson

Kevin P. Stevenson

President and Chief Executive Officer
(Principal Executive Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of PRA Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31,
2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter M. Graham, Executive
Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.

February 27, 2018

By:

/s/ Peter M. Graham

Peter M. Graham

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Corporate Information

Stock Exchange Listing
Stock Exchange Listing PRA Group, Inc.’s common

Financial Publications/Investor Inquiries
Stockholders may obtain copies of this 2017

stock trades on the NASDAQ Global Select Market

Annual Report, our Annual Report onForm 10-K

under the symbol “PRAA”.

Transfer Agent and Registrar
CONTINENTAL STOCK TRANSFER

& TRUST COMPANY
1 State Street, 30th Floor

New York, NY 10004

Tel.: 212-509-4000

Fax: 212-616-7612

Independent Registered

Public Accounting Firm
KPMG LLP
Norfolk, Virginia

for the year ended December 31, 2017 our Proxy

Statement for the 2018 Annual Meeting of Stock-

holders and other documents filed with the U.S.

Securities and Exchange Commission by visiting

the Company’s website at www.pragroup.com or

by writing to us at:

PRA GROUP, INC.
Attn: Investor Relations

120 Corporate Blvd., Suite 100

Norfolk, Virginia 23502

Price Range of Common Stock
The following table sets forth the high and low

sales price for the Company’s common stock for

the year ended December 31, 2017.
h HIGH

2017

$42.70

i LOW

$25.72

We had 54 record holders and 38,830 beneficial

owners of our common stock as of February

16, 2018.

This Annual Report contains forward-looking statements within the meaning of the federal securities

laws. These forward-looking statements involve risks, uncertainties and assumptions that could cause our

actual results to differ materially from those expressed or implied by such forward-looking statements.

See “Cautionary Statements Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform

Act of 1995” in the attached Annual Report on Form 10-K for the year ended December 31, 2017 for a

discussion of the risks, uncertainties and assumptions that could cause our actual results to differ from

those contained in our forward-looking statements.

Board of Directors
& Management

BOARD OF DIRECTORS

Steve Fredrickson*

Executive Chairman

MANAGEMENT

Kevin Stevenson*

President and Chief Executive Officer

Kevin Stevenson

Deborah Cassidy

President and Chief Executive Officer

Chief Information Officer

Vikram Atal

Director

Marjorie Connelly

Director

John Fain

Director

Penelope Kyle

Director

James Nussle

Director

Geir Olsen

Director

Scott Tabakin

Director

Lance Weaver

Lead Director

Pete Graham*

Executive Vice President and

Chief Financial Officer

Chris Graves*

Executive Vice President, Americas

Chris Lagow*

Senior Vice President, General Counsel

and Assistant Secretary

Pete Palermo

Chief Data and Analytics Officer

Tiku Patel*

Chief Executive Officer, PRA Group Europe

Steve Roberts*

Chief Strategy and Business

Development Officer

Laura White*

Chief Compliance Officer

(*) Executive Officer

PRAGROUP.COM