Company: SWKH
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001628280-25-025955
Chunk: 57

Company: SWK Holdings Corp
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 8
Chunk 57
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 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):

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Three Months Ended March 31, 2025Three Months Ended March 31, 2024Term LoansRoyaltiesTotalTerm LoansRoyaltiesTotalAllowance at beginning of period$7,158 $4,091 $11,249 $9,731 $4,170 $13,901 Provision (benefit) for credit losses(296)(1,169)(1,465)5,547 (250)5,297 Write offs— (999)(999)(6,000)— (6,000)Allowance at end of period$6,862 $1,923 $8,785 $9,278 $3,920 $13,198 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 based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. The Company would generally place term loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the term loan is both well-secured and in the process of collection. When placed on nonaccrual, the Company would reverse any accrued unpaid interest receivable against interest income and amortization of any net deferred fees is suspended. Generally, the Company would return