Company: SWKH
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001628280-25-025955
Chunk: 22

Company: SWK Holdings Corp
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 22
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 level of economic uncertainty, the complexity of the ACL estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially, in future periods. Changes in the ACL may result from changes in current economic conditions, our economic forecast, and circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For finance receivables that do not share similar risk characteristics with other finance receivables, expected credit losses are estimated on an individual basis. Expected credit losses are estimated over the contractual terms of the finance receivables, adjusted for expected prepayments and unfunded commitments, generally excluding extensions and modifications. The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The reserve for unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents management's estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. As of March 31, 2025 and December 31, 2024, the Company had a $0.1 million liability for credit losses on off-balance sheet exposures related to unfunded commitments with this liability included in accounts payable and accrued liabilities on the condensed consolidated balance sheets. Please refer to Note 7 for further information on the Company's unfunded commitments.Allowance for Credit LossesDuring the three months ended June 30, 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 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.The following table details the changes in the allowance for credit losses by Term Loans and Royalties (in thousands):

9

Three Months Ended March 31, 2025Three Months Ended March 31, 2024Term LoansRoy