Atlanticus Holdings Corp [ATLCP] Filings

10-Q 1 atlc20230630_10q.htm FORM 10-Q atlc20230630_10q.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

ATLANTICUS HOLDINGS CORPORATION

a Georgia Corporation

IRS Employer Identification No. 58-2336689

SEC File Number 0-53717

Five Concourse Parkway, Suite 300

Atlanta, Georgia 30328

(770) 828-2000

	Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Act")

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, no par value per share	ATLC	NASDAQ Global Select Market
Series B Preferred Stock, no par value per share	ATLCP	NASDAQ Global Select Market
Senior Notes due 2026	ATLCL	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b- 2). ☐ Yes ☒ No

As of July 31, 2023, 14,431,072 shares of common stock, no par value, of Atlanticus were outstanding.

Table of Contents

Table of Contents

Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)	1
		Consolidated Balance Sheets	1
		Consolidated Statements of Income	2
		Consolidated Statement of Shareholders’ Equity and Temporary Equity	3
		Consolidated Statements of Cash Flows	4
		Notes to Consolidated Financial Statements	5
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
	Item 4.	Controls and Procedures	45

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	46
	Item 1A.	Risk Factors	46
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
	Item 3.	Defaults Upon Senior Securities	59
	Item 4.	Mine Safety Disclosure	59
	Item 5.	Other Information	59
	Item 6.	Exhibits	59
		Signatures	60

Table of Contents

PART I--FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Atlanticus Holdings Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

	*June 30,*			*December 31,*
	*2023*			*2022*

Assets
Unrestricted cash and cash equivalents (including $172.1 million and $202.2 million associated with variable interest entities at June 30, 2023 and December 31, 2022, respectively)	$	342,616		$	384,984
Restricted cash and cash equivalents (including $30.3 million and $27.6 million associated with variable interest entities at June 30, 2023 and December 31, 2022, respectively)		51,791			48,208
Loans, interest and fees receivable:
Loans, interest and fees receivable, at fair value (including $1,868.3 million and $1,735.9 million associated with variable interest entities at June 30, 2023 and December 31, 2022, respectively)		1,916,063			1,817,976
Loans, interest and fees receivable, gross		115,055			105,267
Allowances for uncollectible loans, interest and fees receivable		(1,700	)		(1,643	)
Deferred revenue		(18,863	)		(16,190	)
Net loans, interest and fees receivable		2,010,555			1,905,410
Property at cost, net of depreciation		12,549			10,013
Operating lease right-of-use assets		11,373			11,782
Prepaid expenses and other assets		25,818			27,417
Total assets	$	2,454,702		$	2,387,814
Liabilities
Accounts payable and accrued expenses	$	47,468		$	44,332
Operating lease liabilities		20,543			20,112
Notes payable, net (including $1,595.8 million and $1,586.0 million associated with variable interest entities at June 30, 2023 and December 31, 2022, respectively)		1,665,246			1,653,306
Senior notes, net		144,316			144,385
Income tax liability		75,640			60,689
Total liabilities		1,953,213			1,922,824

Commitments and contingencies (Note 10)

Preferred stock, no par value, 10,000,000 shares authorized:
Series A preferred stock, 400,000 shares issued and outstanding at June 30, 2023 (liquidation preference - $40.0 million); 400,000 shares issued and outstanding at December 31, 2022 (Note 5) (1)		40,000			40,000
Class B preferred units issued to noncontrolling interests (Note 5)		100,100			99,950

Shareholders' Equity
Series B preferred stock, no par value, 3,256,261 shares issued and outstanding at June 30, 2023 (liquidation preference - $81.4 million); 3,204,640 shares issued and outstanding at December 31, 2022 (1)		—			—
Common stock, no par value, 150,000,000 shares authorized: 14,428,039 and 14,453,415 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		—			—
Paid-in capital		107,633			121,996
Retained earnings		255,716			204,415
Total shareholders’ equity		363,349			326,411
Noncontrolling interests		(1,960	)		(1,371	)
Total equity		361,389			325,040
Total liabilities, preferred stock and equity	$	2,454,702		$	2,387,814

(1) Both the Series A preferred stock and the Series B preferred stock have no par value and are part of the same aggregate 10,000,000 shares authorized.

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

(Dollars in thousands, except per share data)

	*For the Three Months Ended*						*For the Six Months Ended*
	*June 30,*						*June 30,*
	*2023*			*2022*			*2023*			*2022*
Revenue:
Consumer loans, including past due fees	$	220,042		$	191,547		$	429,743		$	356,353
Fees and related income on earning assets		62,874			65,839			107,231			120,537
Other revenue		7,835			12,410			14,759			22,676
Total operating revenue, net		290,751			269,796			551,733			499,566
Other non-operating revenue		87			239			146			300
Total revenue		290,838			270,035			551,879			499,866

Interest expense		(24,215	)		(18,925	)		(48,449	)		(36,335	)
Provision for losses on loans, interest and fees receivable recorded at amortized cost		(309	)		(182	)		(1,013	)		(329	)
Changes in fair value of loans, interest and fees receivable recorded at fair value		(177,829	)		(146,559	)		(327,651	)		(251,239	)
Net margin		88,485			104,369			174,766			211,963

Operating expenses:
Salaries and benefits		10,629			10,099			21,233			21,525
Card and loan servicing		23,814			23,997			48,149			46,672
Marketing and solicitation		14,486			20,231			24,892			40,804
Depreciation		643			549			1,261			1,142
Other		6,900			6,953			13,136			21,646
Total operating expenses		56,472			61,829			108,671			131,789
Income before income taxes		32,013			42,540			66,095			80,174
Income tax expense		(7,199	)		(8,743	)		(15,387	)		(1,622	)
Net income		24,814			33,797			50,708			78,552
Net loss attributable to noncontrolling interests		275			228			593			483
Net income attributable to controlling interests		25,089			34,025			51,301			79,035
Preferred dividends and discount accretion		(6,289	)		(6,257	)		(12,516	)		(12,463	)
Net income attributable to common shareholders	$	18,800		$	27,768		$	38,785		$	66,572
Net income attributable to common shareholders per common share—basic	$	1.30		$	1.88		$	2.68		$	4.50
Net income attributable to common shareholders per common share—diluted	$	1.02		$	1.46		$	2.11		$	3.43

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity and Temporary Equity (Unaudited)

For the Three and Six Months Ended June 30, 2023 and June 30, 2022

(Dollars in thousands)

	*Series B Preferred Stock*					*Common Stock*																*Temporary Equity*
	*Shares Issued*			*Amount*		*Shares Issued*			*Amount*		*Paid-In Capital*			*Retained Earnings*		*Noncontrolling Interests*			*Total Equity*			*Class B Preferred Units*		*Series A Preferred Stock*
Balance at December 31, 2022		3,204,640		$	—		14,453,415		$	—	$	121,996		$	204,415	$	(1,371	)	$	325,040		$	99,950	$	40,000
Accretion of discount associated with issuance of subsidiary equity		—			—		—			—		(75	)		—		—			(75	)		75		—
Discount associated with repurchase of preferred stock		—			—		—			—		16			—		—			16			—		—
Preferred dividends		—			—		—			—		(6,168	)		—		—			(6,168	)		—		—
Stock option exercises and proceeds related thereto		—			—		1,258			—		19			—		—			19			—		—
Compensatory stock issuances, net of forfeitures		—			—		146,227			—		—			—		—			—			—		—
Issuance of series B preferred stock, net		51,327			—		—			—		1,069			—		—			1,069			—		—
Contributions by owners of noncontrolling interests		—			—		—			—		—			—		4			4			—		—
Stock-based compensation costs		—			—		—			—		931			—		—			931			—		—
Redemption and retirement of preferred shares		(1,806	)		—		—			—		(45	)		—		—			(45	)		—		—
Redemption and retirement of common shares		—			—		(72,354	)		—		(1,947	)		—		—			(1,947	)		—		—
Net income (loss)		—			—		—			—		—			26,212		(318	)		25,894			—		—
Balance at March 31, 2023		3,254,161		$	—		14,528,546		$	—	$	115,796		$	230,627	$	(1,685	)	$	344,738		$	100,025	$	40,000
Accretion of discount associated with issuance of subsidiary equity		—			—		—			—		(75	)		—		—			(75	)		75		—
Preferred dividends		—			—		—			—		(6,214	)		—		—			(6,214	)		—		—
Stock option exercises and proceeds related thereto		—			—		5,160			—		40			—		—			40			—		—
Compensatory stock issuances, net of forfeitures		—			—		(220	)		—		—			—		—			—			—		—
Issuance of series B preferred stock, net		2,100			—		—			—		43			—		—			43			—		—
Stock-based compensation costs		—			—		—			—		1,031			—		—			1,031			—		—
Redemption and retirement of common shares		—			—		(105,447	)		—		(2,988	)		—		—			(2,988	)		—		—
Net income (loss)		—			—		—			—		—			25,089		(275	)		24,814			—		—
Balance at June 30, 2023		3,256,261		$	—		14,428,039		$	—	$	107,633		$	255,716	$	(1,960	)	$	361,389		$	100,100	$	40,000

	*Series B Preferred Stock*				*Common Stock*																*Temporary Equity*
	*Shares Issued*		*Amount*		*Shares Issued*			*Amount*		*Paid-In Capital*			*Retained Earnings*		*Noncontrolling Interests*			*Total Equity*			*Class B Preferred Units*		*Series A Preferred Stock*
Balance at December 31, 2021		3,188,533	$	—		14,804,408		$	—	$	227,763		$	60,236	$	(500	)	$	287,499		$	99,650	$	40,000
Cumulative effects from adoption of the CECL standard		—		—		—			—		—			8,582		—			8,582			—		—
Accretion of discount associated with issuance of subsidiary equity		—		—		—			—		(75	)		—		—			(75	)		75		—
Preferred dividends		—		—		—			—		(6,131	)		—		—			(6,131	)		—		—
Stock option exercises and proceeds related thereto		—		—		1,000,534			—		2,788			—		—			2,788			—		—
Compensatory stock issuances, net of forfeitures		—		—		113,165			—		—			—		—			—			—		—
Contributions by owners of noncontrolling interests		—		—		—			—		—			—		4			4			—		—
Stock-based compensation costs		—		—		—			—		1,111			—		—			1,111			—		—
Redemption and retirement of shares		—		—		(1,005,212	)		—		(65,214	)		—		—			(65,214	)		—		—
Net income (loss)		—		—		—			—		—			45,010		(255	)		44,755			—		—
Balance at March 31, 2022		3,188,533	$	—		14,912,895		$	—	$	160,242		$	113,828	$	(751	)	$	273,319		$	99,725	$	40,000
Accretion of discount associated with issuance of subsidiary equity		—		—		—			—		(75	)		—		—			(75	)		75		—
Preferred dividends		—		—		—			—		(6,182	)		—		—			(6,182	)		—		—
Stock option exercises and proceeds related thereto		—		—		3,402			—		33			—		—			33			—		—
Compensatory stock issuances, net of forfeitures		—		—		(183	)		—		—			—		—			—			—		—
Stock-based compensation costs		—		—		—			—		1,186			—		—			1,186			—		—
Redemption and retirement of shares		—		—		(355,036	)		—		(12,861	)		—		—			(12,861	)		—		—
Net income (loss)		—		—		—			—		—			34,025		(228	)		33,797			—		—
Balance at June 30, 2022		3,188,533	$	—		14,561,078		$	—	$	142,343		$	147,853	$	(979	)	$	289,217		$	99,800	$	40,000

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

	*For the Six Months Ended June 30,*
	*2023*			*2022*
Operating activities
Net income	$	50,708		$	78,552
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net		1,696			3,400
Provision for losses on loans, interest and fees receivable		1,013			329
Income from accretion of merchant fees and discount associated with receivables purchases		(82,680	)		(69,417	)
Changes in fair value of loans, interest and fees receivable recorded at fair value		327,651			251,239
Amortization of deferred loan costs		2,904			2,345
Stock-based compensation costs		1,962			2,297
Lease liability payments		(361	)		(3,635	)
Changes in assets and liabilities:
Increase in uncollected fees on earning assets		(113,268	)		(113,786	)
Increase (decrease) in income tax liability		14,951			(2,583	)
Increase in accounts payable and accrued expenses		3,950			6,117
Other		1,261			(2,252	)
Net cash provided by operating activities		209,787			152,606

Investing activities
Proceeds from recoveries on charged off receivables		30,101			12,847
Investments in earning assets		(1,192,213	)		(1,293,526	)
Proceeds from earning assets		924,499			927,169
Purchases and development of property, net of disposals		(3,798	)		(601	)
Net cash used in investing activities		(241,411	)		(354,111	)

Financing activities
Noncontrolling interests contributions		4			4
Proceeds from issuance of Series B preferred stock, net of issuance costs		1,112			—
Preferred dividends		(12,429	)		(12,365	)
Proceeds from exercise of stock options		59			2,821
Purchase and retirement of outstanding common and preferred stock		(4,964	)		(78,075	)
Proceeds from borrowings		252,212			249,762
Repayment of borrowings		(243,159	)		(100,914	)
Net cash (used in) provided by financing activities		(7,165	)		61,233
Effect of exchange rate changes on cash and cash equivalents and restricted cash		4			(36	)
Net decrease in cash and cash equivalents and restricted cash		(38,785	)		(140,308	)
Cash and cash equivalents and restricted cash at beginning of period		433,192			506,628
Cash and cash equivalents and restricted cash at end of period	$	394,407		$	366,320
Supplemental cash flow information
Cash paid for interest	$	45,501		$	33,162
Net cash income tax payments	$	436		$	4,205
Decrease in accrued and unpaid preferred dividends	$	(47	)	$	(52	)

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2023 and 2022

1.	Description of Our Business

Our accompanying consolidated financial statements include the accounts of Atlanticus Holdings Corporation (the “Company”) and those entities we control. We are a purpose driven financial technology company. We are primarily focused on facilitating consumer credit through the use of our financial technology and related services. Through our subsidiaries, we provide technology and other support services to lenders who offer an array of financial products and services to consumers who may have been declined by other providers of credit.

We are principally engaged in providing products and services to lenders in the U.S. and, in most cases, we invest in the receivables originated by lenders who utilize our technology platform and other related services. From time to time, we also purchase receivables portfolios from third parties. In these Notes to Consolidated Financial Statements, “receivables” or “loans” typically refer to receivables we have purchased from our bank partners or from third parties.

Within our Credit as a Service (“CaaS”) segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $37 billion in consumer loans over more than 25 years of operating history, to support lenders in offering more inclusive financial services. These products include private label credit and general purpose credit cards originated by lenders through multiple channels, including retailers and healthcare providers, direct mail solicitation, digital marketing and partnerships with third parties. The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions. Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers and other service providers. Using our technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing who focus exclusively on consumers with higher FICO scores. Atlanticus’ underwriting process is enhanced by artificial intelligence and machine learning, enabling fast, sound decision-making when it matters most.

We also report within our CaaS segment: 1) servicing income; and 2) gains or losses associated with investments previously made in consumer finance technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. None of these companies are publicly-traded and the carrying values of our investments in these companies are not material.

Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business. We purchase auto loans at a discount and with dealer retentions or holdbacks that provide risk protection. Also within our Auto Finance segment, we are providing certain installment lending products in addition to our traditional loans secured by automobiles.

In March 2020, a national emergency was declared under the National Emergencies Act due to a new strain of coronavirus ("COVID-19"). The COVID-19 pandemic has negatively impacted global supply chains and business operations. In addition, rising inflation in 2021 and 2022 resulted in increased costs for many goods and services. As a result of persistently high inflation, interest rates have been on the rise. Russia’s invasion of Ukraine has intensified supply chain disruptions and heightened uncertainty surrounding the near-term outlook for the broader economy. The impacts of responses to the COVID-19 pandemic by both consumers and governments, rising energy costs, inflation, rising interest rates, and the unresolved geopolitical tensions relating to Russia’s invasion of Ukraine could significantly affect the economic outlook. The duration and severity of the effects of these impacts on our financial condition, results of operations and liquidity remain uncertain.

As a result of the COVID-19 pandemic and subsequent declaration of a national emergency and the associated government policy responses and corresponding inflation, certain consumers were previously offered the ability to defer their payment without penalty during the national emergency period. In March 2020, the federal bank regulatory agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” ("COVID-19 Guidance"). The COVID-19 Guidance encouraged financial institutions to work prudently with borrowers that were unable to meet their contractual obligations because of the effects of COVID-19. In accordance with the COVID-19 Guidance, certain consumers negatively impacted by COVID-19 were provided short-term payment deferrals and fee waivers. Receivables enrolled in these short-term payment deferrals continued to accrue interest and their delinquency status was not changed through the deferment period. The Biden administration ended the COVID-19 national and public health emergencies on May 11, 2023. This action ended the flexibility provided under the COVID-19 Guidance. The long-term impact that the cessation of certain benefits provided under emergency relief programs will have on our consumers is uncertain although the remaining financial statement impact for those customers previously provided the aforementioned short-term payment deferrals and fee waivers is not material.

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2.	Significant Accounting Policies and Consolidated Financial Statement Components

The following is a summary of significant accounting policies we follow in preparing our consolidated financial statements, as well as a description of significant components of our consolidated financial statements.

Basis of Presentation and Use of Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements, as well as the reported amounts of revenues and expenses during each reporting period. We base these estimates on information available to us as of the date of the financial statements. Actual results could differ materially from these estimates. Certain estimates, such as credit losses, payment rates, costs of funds, discount rates and the yields earned on credit card receivables, significantly affect the reported amount (and changes thereon) of our Loans, interest and fees receivables, at fair value on our consolidated balance sheets and consolidated statements of income. Additionally, estimates of credit losses have a significant effect on loans, interest and fees receivable, net, as shown on our consolidated balance sheets, as well as on the provision for losses on loans, interest and fees receivable within our consolidated statements of income.

We have eliminated all significant intercompany balances and transactions for financial reporting purposes.

Unrestricted Cash and Cash Equivalents

Unrestricted cash and cash equivalents consist of cash, money market investments and overnight deposits. We consider all highly liquid cash investments with low interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market. We maintain unrestricted cash and cash equivalents for general operating purposes. We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amounts that exceed FDIC insured amounts which aggregated approximately $3.0 million based on our current banking relationships.

Loans, Interest and Fees Receivable

We maintain two categories of Loans, Interest and Fees Receivable on our consolidated balance sheets: those that are carried at fair value (Loans, interest and fees receivable, at fair value) and those that are carried at net amortized cost (Loans, interest and fees receivable, gross). For both categories of loans, interest and fees receivable, other than our Auto Finance receivables, interest and fees are discontinued when loans, interest and fees receivable become contractually 90 or more days past due. We charge off our CaaS receivables, against our Changes in fair value of loans, interest and fees receivable recorded at fair value, when they become contractually more than 180 days past due. We charge off our Auto Finance segment receivables, against our Allowance for uncollectible loans, interest and fees receivable, when they become contractually more than 180 days past due. For all of our receivables portfolios, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death. However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or estate large enough to pay the debt in full.

We adopted Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments on January 1, 2022. This ASU requires the use of an impairment model (the current expected credit loss (“CECL”) model) that is based on expected rather than incurred losses. The ASU also allows for a one-time fair value election for receivables. Upon adoption, we elected the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost and recorded an increase to our Allowances for uncollectible loans, interest and fees receivable for our remaining Loans, interest and fees receivable associated with our Auto Finance segment. The adoption of CECL resulted in an increase to our opening balance of retained earnings of $8.6 million.

Loans, Interest and Fees Receivable, at Fair Value. Loans, interest and fees receivable held at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables"). The Fair Value Receivables are held by entities that qualify as variable interest entities ("VIE"), and are consolidated onto our consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities. Loans and finance receivables include accrued and unpaid interest and fees. As discussed above, as of January 1, 2022 all receivables associated with our private label credit and general purpose credit cards are included within this category of receivables.

Under the fair value option, direct loan origination fees (such as annual and merchant fees) are taken into income when billed to the consumer or upon loan acquisition and direct loan origination costs are expensed in the period incurred. The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as remaining cumulative charge-offs, remaining cumulative prepayments, average life and discount rate. The Company re-evaluates the fair value of loans receivable at the close of each measurement period. Changes in the fair value of loans, interest and fees receivable are recorded as a component of “Changes in fair value of loans, interest and fees receivable recorded at fair value” in the consolidated statements of income in the period of the fair value changes. Changes in the fair value of loans, interest and fees receivable recorded at fair value include the impact of current period charge-offs associated with these receivables.

Further details concerning our loans, interest and fees receivable held at fair value are presented within Note 6, “Fair Values of Assets and Liabilities.”

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Loans, Interest and Fees Receivable, Gross. Our loans, interest and fees receivable, gross, currently consist of receivables associated with our Auto Finance segment’s operations. We purchased auto loans with outstanding principal of $55.3 million, $120.3 million, $52.8 million and $109.3 million for the three and six months ended June 30, 2023 and 2022, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies.

We show both an allowance for uncollectible loans, interest and fees receivable and for unearned fees (or “deferred revenue”) for our loans, interest and fees receivable that are not carried at fair value. A considerable amount of judgment is required to assess the ultimate amount of uncollectible loans, interest and fees receivable, and we regularly evaluate and update our methodologies to determine the most appropriate allowance necessary. We may individually evaluate a receivable or pool of receivables for impairment if circumstances indicate that the receivable or pool of receivables may be at higher risk for non-performance than other receivables (e.g., if a particular retail or auto-finance partner has indications of non-performance (such as a bankruptcy) that could impact the underlying pool of receivables we purchased from the partner).

Certain of our loans, interest and fees receivable also contain components of deferred revenue related to loan discounts on the purchase of our auto finance receivables. As of June 30, 2023 and December 31, 2022, the weighted average remaining accretion period for the $18.9 million and $16.2 million of deferred revenue reflected in the consolidated balance sheets was 27 months for both periods.

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A roll-forward (in millions) of our allowance for uncollectible loans, interest and fees receivable by class of receivable is as follows:

For the Three Months Ended June 30, 2023	*Auto Finance*
Allowance for uncollectible loans, interest and fees receivable:
Balance at beginning of period	$	(1.7	)
Provision for credit losses		(0.3	)
Charge-offs		0.8
Recoveries		(0.5	)
Balance at end of period	$	(1.7	)

For the Six Months Ended June 30, 2023	*Auto Finance*
Allowance for uncollectible loans, interest and fees receivable:
Balance at beginning of period	$	(1.6	)
Provision for credit losses		(1.0	)
Charge-offs		1.8
Recoveries		(0.9	)
Balance at end of period	$	(1.7	)

As of June 30, 2023	*Auto Finance*
Allowance for uncollectible loans, interest and fees receivable:
Balance at end of period individually evaluated for impairment	$	—
Balance at end of period collectively evaluated for impairment	$	(1.7	)
Loans, interest and fees receivable:
Loans, interest and fees receivable, gross	$	115.1
Loans, interest and fees receivable individually evaluated for impairment	$	—
Loans, interest and fees receivable collectively evaluated for impairment	$	115.1

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For the Three Months Ended June 30, 2022	*Credit Cards*		*Auto Finance*			*Other Unsecured Lending Products*		*Total*
Allowance for uncollectible loans, interest and fees receivable:
Balance at beginning of period	$	—	$	(1.6	)	$	—	$	(1.6	)
Provision for credit losses		—		(0.2	)		—		(0.2	)
Charge-offs		—		0.4			—		0.4
Recoveries		—		(0.2	)		—		(0.2	)
Balance at end of period	$	—	$	(1.6	)	$	—	$	(1.6	)

For the Six Months Ended June 30, 2022	*Credit Cards*			*Auto Finance*			*Other Unsecured Lending Products*			*Total*
Allowance for uncollectible loans, interest and fees receivable:
Balance at beginning of period	$	(43.4	)	$	(1.4	)	$	(12.4	)	$	(57.2	)
Cumulative effects from adoption of fair value under the CECL standard		43.4			—			12.4			55.8
Cumulative effects from adoption of the CECL standard		—			(0.2	)					(0.2	)
Provision for credit losses		—			(0.3	)		—			(0.3	)
Charge-offs		—			0.8			—			0.8
Recoveries		—			(0.5	)		—			(0.5	)
Balance at end of period	$	—		$	(1.6	)	$	—		$	(1.6	)

As of December 31, 2022	Auto Finance
Allowance for uncollectible loans, interest and fees receivable:
Balance at end of period individually evaluated for impairment	$	—
Balance at end of period collectively evaluated for impairment	$	(1.6	)
Loans, interest and fees receivable:
Loans, interest and fees receivable, gross	$	105.3
Loans, interest and fees receivable individually evaluated for impairment	$	—
Loans, interest and fees receivable collectively evaluated for impairment	$	105.3

Delinquent loans, interest and fees receivable reflect the principal, fee and interest components of loans we did not collect on or prior to the contractual due date. Amounts we believe we will not ultimately collect are included as a component in our overall allowance for uncollectible loans, interest and fees receivable.

Recoveries, noted above, consist of amounts received from the efforts of third-party collectors. All proceeds received, associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at amortized cost on our consolidated statements of income.

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We consider loan delinquencies a key indicator of credit quality because this measure provides the best ongoing estimate of how a particular class of receivable is performing. An aging of our delinquent loans, interest and fees receivable, gross (in millions) by class of receivable as of June 30, 2023 and December 31, 2022 is as follows:

As of June 30, 2023	*Auto Finance*
30-59 days past due	$	8.1
60-89 days past due		3.0
90 or more days past due		1.7
Delinquent loans, interest and fees receivable, gross		12.8
Current loans, interest and fees receivable, gross		102.3
Total loans, interest and fees receivable, gross	$	115.1
Balance of loans greater than 90-days delinquent still accruing interest and fees	$	1.3

As of December 31, 2022	Auto Finance
30-59 days past due	$	8.5
60-89 days past due		3.0
90 or more days past due		2.1
Delinquent loans, interest and fees receivable, gross		13.6
Current loans, interest and fees receivable, gross		91.7
Total loans, interest and fees receivable, gross	$	105.3
Balance of loans greater than 90-days delinquent still accruing interest and fees	$	1.7

Troubled Debt Restructurings

As part of ongoing collection efforts, once an account, the receivable of which is included in our CaaS segment, becomes 90 days or more past due, the related receivable is placed on a non-accrual status. Placement on a non-accrual status results in the use of programs under which the contractual interest associated with a receivable may be reduced or eliminated, or a certain amount of accrued fees is waived, provided a minimum number or amount of payments have been made. Following this adjustment, if a customer we serve demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, the customer’s account is re-aged. When an account is re-aged, the status of the account is adjusted to bring a delinquent account current, but generally no further modifications to the payment terms or amounts owed are made. Once an account is placed on a non-accrual status, it is closed for further purchases. Accounts that are placed on a non-accrual status and thereafter make at least one payment qualify as troubled debt restructurings (“TDRs”). The above referenced COVID-19 Guidance issued by federal bank regulatory agencies, in consultation with the Financial Accounting Standards Board (“FASB”) staff, concluded that short-term modifications (e.g., six months) made on a good faith basis to borrowers who were impacted by COVID-19 and whose accounts were less than 30 days past due as of the implementation date of a relief program are not TDRs. Although we are not a financial institution and therefore not directly subject to the COVID-19 Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances. As a result, the below tables exclude certain accounts that are included under that guidance. As of January 1, 2023, receivables accounted for using fair value are not included in our disclosure of TDRs.

The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged, as of December 31, 2022

	As of
	December 31, 2022
	Private label credit		General purpose credit card
Number of TDRs		24,594		171,729
Number of TDRs that have been re-aged		2,499		28,598
Amount of TDRs on non-accrual status (in thousands)	$	31,350	$	119,785
Amount of TDRs on non-accrual status above that have been re-aged (in thousands)	$	4,606	$	24,440
Carrying value of TDRs (in thousands)	$	18,827	$	70,519
TDRs - Performing (carrying value, in thousands)*	$	15,001	$	59,735
TDRs - Nonperforming (carrying value, in thousands)*	$	3,826	$	10,784

*“TDRs - Performing” include accounts that are current on all amounts owed, while “TDRs - Nonperforming” include all accounts with past due amounts owed.

We do not separately reserve or impair these receivables outside of our general reserve process.

The Company modified 98,880 accounts in the amount of $106.7 million during the twelve month period ended June 30, 2022 that qualified as TDRs. As of January 1, 2023, receivables accounted for using fair value are not included in our disclosure of TDRs. The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the prior twelve months and subsequently defaulted.

	*Twelve Months Ended*
	*June 30, 2022*
	*Private label credit*		*General purpose credit card*
Number of accounts		4,971		14,991
Loan balance at time of charge off (in thousands)	$	7,983	$	12,358

Income Taxes

We experienced effective tax rates of 22.3% and 23.1% for the three and six months ended June 30, 2023, compared to 20.4% and 2.0% for the three and six months ended June 30, 2022.

Our effective tax rates for the three and six months ended June 30, 2023, are above the statutory rate principally due to (1) state and foreign income t

Atlanticus Holdings Corp [ATLCP] Filings
Atlanticus Holdings Corp [ATLC] Filings
Atlanticus Holdings Corp [ATLCL] Filings
10-Q	[2023-08-09]
10-Q	[2023-05-09]
10-K	[2023-03-15]
10-Q	[2022-11-08]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-15]
10-Q	[2021-11-12]
10-Q	[2021-08-13]
10-Q	[2021-05-14]
10-K	[2021-03-31]
10-Q	[2020-11-13]
10-Q	[2020-08-14]
10-Q	[2020-05-15]
10-K	[2020-03-30]
10-Q	[2019-11-14]
10-Q	[2019-08-14]
10-Q	[2019-05-14]
10-K	[2019-03-27]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-Q	[2018-05-15]
10-K	[2018-04-02]
10-Q	[2017-11-14]
10-Q	[2017-08-11]
10-Q	[2017-05-15]
10-K	[2017-03-31]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-Q	[2016-05-12]
10-K	[2016-03-30]
10-Q	[2015-11-13]
10-Q	[2015-08-14]
10-Q	[2015-05-15]
10-K	[2015-03-06]
10-Q	[2014-11-14]
10-Q	[2014-08-14]
10-Q	[2014-05-15]
10-K	[2014-03-28]
10-Q	[2013-11-12]
10-Q	[2013-08-13]
10-Q	[2013-05-10]
10-K	[2013-02-25]
10-Q	[2012-11-08]
10-Q	[2012-08-09]
10-Q	[2012-05-10]
10-K	[2012-03-06]

Atlanticus Holdings Corp [ATLCP] Filings

Atlanticus Holdings Corp [ATLC] Filings

Atlanticus Holdings Corp [ATLCL] Filings