Company: ATLCL
Filing Date: 2025-03-10
Form Type: CORRESP
Source: 0001437749-25-006744
Chunk: 6

Company: Atlanticus Holdings Corp
Filing Date: 2025-03-10
Form: CORRESP
Chunk 6
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 impacts of payments, chargeoffs, yield, etc. The below discussions are based on our calculation of the fair value of receivables as of December 31, 2024; the same analysis applies to September 30, 2024 and is included in the discussion below.

Confidential Treatment Requested by Atlanticus Holdings Corporation
AHC - 004

In order to remove the impact of cash flows associated with subsequent purchases in our fair value model we changed the expected purchase rate utilized in the model to indicate that no subsequent purchases would occur. Further, we slightly increased the charge off rate used in the model to reflect some expected increase in chargeoffs, as the most recent vintages of acquired receivables (those acquired within six months prior to the end of the measurement period) would go through their peak charge off period without the offsetting benefit of newly-acquired subsequent purchases. As discussed above, our models are dynamic. A change to one model input rate (in this case purchase rates and expected chargeoff rates) has multiple impacts on the expected cash flows generated by the model. By changing the purchase rate (to 0%) in our model, a consumer’s outstanding balance would no longer include subsequent purchase amounts and in turn would pay down similar to an installment loan. Both this accelerated paydown, and the impact of the increased charge off rate, negatively impact cash flows used in our analysis in the following ways: 1) reduces the amount of gross payments received (which is calculated when the payment rate is applied to the now diminishing consumer receivable balance), and 2) reduces the amount of gross billed yield (and cash collections thereon), as the estimated gross billed yield is based on a now diminished outstanding receivables balance. Offsetting these negative impacts are the following positive impacts: 1) reduces the paydown period for the outstanding consumer receivable (thus increasing the present value associated with cash flows) as customer payments (albeit at reduced total dollar amounts) are no longer reduced by subsequent purchases, and 2) reduces expected servicing costs as the outstanding consumer receivable starts to decline at an accelerated rate.

Given the revolving nature of our general purpose credit cards, the application of cash payments to the ending balance, even with a reduction in gross payment dollars, as noted above, results in a slight increase in the assessed fair value of the asset when compared to our prior fair value methodology. This increase in fair value is a result of the expected timing of cash flows, which are greatly accelerated and more in line with