The allowance for credit losses for home equity loans as of December 31, 2025 was RMB251 million, a decrease from RMB627 million as of December 31, 2024. The decrease was primarily driven by the combined effect of a decrease in allowances that are collectively evaluated and an increase in allowances that are individually evaluated. The decrease in allowances that are collectively evaluated are mainly due to the decrease of the Company’s outstanding loan principal. The increase of allowances that are individually evaluated are mainly due to the increase in the outstanding loan principal of NPLs.

The table below presents the components of allowances for credit losses for loans principal, interest and financing service fee receivables by impairment methodology with the recorded investment as of December 31, 2024 and 2025.

The Group charges off loans principal, interest and financing service fee receivables if the remaining balance is considered uncollectable. Recovery of loans principal, interest and financing service fee receivables previously charged off would be recorded when received.

For the description of the Group’s related accounting policies of allowance for credit losses, see Note 2(e) Loans.

The following tables present the aging of allowance for credit losses as of December 31, 2025.

The following tables present the aging of allowance for credit losses as of December 31, 2024.

The following tables provides information on delinquency, which is the primary credit quality indicator for loan principal and financing service fee receivables as of December 31, 2025.

The following tables provides information on delinquency, which is the primary credit quality indicator for loan principal and financing service fee receivables as of December 31, 2024.

Loans principal, interest and financing service fee receivables are placed on non-accrual status when payments are 90 days contractually past.

Any interest accrued on non-accrual loans is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.

Individually evaluated loans are those loans where the Group, based on current information and events, believes it is probable all amounts due according to the contractual terms of the loan will not be collected. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. Individually evaluated loans without an allowance generally represent loans that the fair value of the underlying collateral meets or exceeds the loan’s amortized cost.

No debt restructuring in which contractual terms of loans are modified, has occurred during 2024 and 2025.

The Group transferred loans with carrying amounts of RMB1,674,043,872 and RMB961,847,815 to unrelated third party investors and recorded the transfers as sales for the years ended December 31, 2024 and 2025, respectively. The Group recognized net losses of RMB6,497,731 and RMB20,967,075 from transfers accounted for as sales of loans for the years ended December 31, 2024 and 2025, respectively.

The Group carries out pre-approval, review and credit approval of loans by professionals for credit risk arising from micro credit business. During the post-transaction monitoring process, the Group conducts a visit of customers regularly after disbursement of loans and conducts on-site inspection when the Group considers it is necessary. The review focuses on the status of the collateral.

The Group adopts a loan risk classification approach to manage the loan portfolio risk. Loans are classified as collectively evaluated and individually evaluated based on the different risk characteristics. When one or more events demonstrates there is objective evidence of changes in risk characteristics and causes losses, corresponding loans are considered to be classified as individually evaluated. The individually evaluated component is calculated on an individual basis for the loans whose payments are contractually past due more than 90 days or which do not share similar risk characteristics.

The Group applies a series of criteria in determining the classification of loans. The loan classification criteria focus on a number of factors, including (i) the borrower’s ability to repay the loan; (ii) the borrower’s repayment history; (iii) the borrower’s willingness to repay; (iv) the net realizable value of any collateral; and (v) the prospect for the support from any financially responsible guarantor. The Group also takes into account the length of time for which payments of principal and interest on a loan are overdue.

Loans held-for-sale are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loans classified as held-for-sale category had carrying amounts of RMB3,529,585,983 and RMB3,508,002,863 as of December 31, 2024 and 2025, respectively.

Corporate loans are unsecured loans granted to unrelated entities in order to fulfil their normal operating and capital requirement. Loans principal, interest and financing service fee receivables of corporate loan were RMB1,034,432,534 and RMB1,129,660,142 as of December 31, 2024 and December 31, 2025 and the Allowance for credit losses assessed on a collective basis were RMB50,094,979 as of December 31, 2024 and RMB62,730,405 as of December 31, 2025, respectively.