Company: SWKH
Filing Date: 2025-03-20
Form Type: 10-K
Source: 0001628280-25-013989
Chunk: 174

Company: SWK Holdings Corp
Filing Date: 2025-03-20
Form: 10-K
Item: Item 8
Chunk 174
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 the consolidated balance sheets. Please refer to Note 9 for further information on the Company's unfunded commitments.Allowance for Credit Losses - methodology updateDuring the year ended December 31, 2024, the Company revised its methodology for calculating the allowance for credit losses to be more directly tied to the individual risk ratings, as determined by management, of finance receivables. This resulted in a re-allocation of the existing allowance and did not have a material impact on the total allowance for credit losses amount. Previously, the Company's quarterly assessment of the allowance included two portfolio pools: Term Loans and Royalties. After the change in methodology effective for the quarter ended June 30, 2024, these pools are further broken down into individual risk ratings applied to each investment to allow for a more precise method for calculating the allowance for credit losses.

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The following table details the changes in the allowance for credit losses by portfolio segment for the respective periods (in thousands):December 31, 2024December 31, 2023Term LoansRoyaltiesTotalTerm LoansRoyaltiesTotalAllowance at beginning of period$9,731 $4,170 $13,901 $— $11,846 $11,846 Effect of adoption of ASU 2016-13— — — 8,900 2,886 11,786 Provision for (benefit from) credit losses8,907 (79)8,828 831 1,284 2,115 Write offs, net of recoveries(1)(11,480)— (11,480)— (11,846)(11,846)Allowance at end of period$7,158 $4,091 $11,249 $9,731 $4,170 $13,901 (1) Reversal of finance receivable-specific ACL recognized in prior periods. No impact to consolidated statement of income for the year ended December 31, 2023.Non-Accrual Finance ReceivablesThe Company originates finance receivables to companies primarily in the life sciences sector. This concentration of credit exposes the Company to a higher degree of risk associated with this sector.On a quarterly basis, the Company evaluates the carrying value of its finance receivables. Recognition of income is suspended, and the finance receivable is placed on non-accrual status when management determines that collection of future income is not probable. This evaluation is generally