Edgar Filing: Atlanticus Holdings Corp

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Available for
Issuance

ATLC-2014.03.31-10Q

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2014

ATLANTICUS HOLDINGS CORPORATION

a Georgia Corporation

IRS Employer Identification No. 58-2336689

SEC File Number 0-53717

Five Concourse Parkway, Suite 400

Atlanta, Georgia 30328

(770) 828-2000

Atlanticus’ common stock, no par value per share, is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the “Act”).

Atlanticus is not a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.

Atlanticus (1) is required to file reports pursuant to Section 13 of the Act, (2) has filed all reports required to be filed by Section 13 of the Act during the preceding 12 months and (3) has been subject to such filing requirements for the past 90 days.

Atlanticus has submitted electronically and posted on its corporate Web site every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.

Atlanticus is a smaller reporting company and is not a shell company.

As of May 5, 2014, 13,990,088 shares of common stock, no par value, of Atlanticus were outstanding. This excludes 1,549,800 loaned shares to be returned.

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Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)	1
		Consolidated Balance Sheets	1
		Consolidated Statements of Operations	2
		Consolidated Statements of Comprehensive Loss	3
		Consolidated Statement of Shareholders' Equity	4
		Consolidated Statements of Cash Flows	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
	Item 4.	Controls and Procedures	41

Part II. OTHER INFORMATION
	Item 1.	Legal Proceedings	42
	Item 1A.	Risk Factors	42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
	Item 3.	Defaults Upon Senior Securities	53
	Item 4.	Mine Safety Disclosure	53
	Item 5.	Other Information	53
	Item 6.	Exhibits	53
		Signatures	54

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PART I—FINANCIAL INFORMATION



ITEM 1.	FINANCIAL STATEMENTS

Atlanticus Holdings Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)



	March 31, 2014			December 31, 2013
Assets
Unrestricted cash and cash equivalents	$	47,133		$	50,873
Restricted cash and cash equivalents	23,454			18,871
Loans and fees receivable:
Loans and fees receivable, net (of $13,636 and $13,258 in deferred revenue and $23,075 and $24,214 in allowances for uncollectible loans and fees receivable at March 31, 2014 and December 31, 2013, respectively)	92,078			97,208
Loans and fees receivable, at fair value	11,691			12,080
Loans and fees receivable pledged as collateral under structured financings, at fair value	79,150			88,132
Rental merchandise, net of depreciation	22,052			28,849
Property at cost, net of depreciation	10,232			8,937
Investments in equity-method investees	35,182			35,134
Deposits	1,923			1,908
Prepaid expenses and other assets	15,035			10,243
Total assets	$	337,930		$	352,235
Liabilities
Accounts payable and accrued expenses	$	41,595		$	48,625
Notes payable, at face value	66,860			56,740
Notes payable associated with structured financings, at fair value	85,849			94,523
Convertible senior notes	96,092			95,934
Income tax liability	57,122			55,255
Total liabilities	347,518			351,077
Commitments and contingencies (Note 9)
Equity
Common stock, no par value, 150,000,000 shares authorized: 15,541,488 shares issued and outstanding (including 1,549,800 loaned shares to be returned) at March 31, 2014; and 15,594,325 shares issued and outstanding (including 1,672,656 loaned shares to be returned) at December 31, 2013	—			—
Additional paid-in capital	210,642			210,315
Accumulated other comprehensive loss	(642		)	(737		)
Retained deficit	(219,588		)	(208,414		)
Total shareholders’ equity	(9,588		)	1,164
Noncontrolling interests	—			(6		)
Total equity	(9,588		)	1,158
Total liabilities and equity	$	337,930		$	352,235

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)



	For the Three Months Ended March 31,
	2014			2013
Interest income:
Consumer loans, including past due fees	$	19,957		$	19,824
Other	237			111
Total interest income	20,194			19,935
Interest expense	(6,187		)	(5,772		)
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable	14,007			14,163
Fees and related income on earning assets	32,885			6,806
Losses upon charge off of loans and fees receivable recorded at fair value, net of recoveries	(1,885		)	(5,798		)
Provision for losses on loans and fees receivable recorded at net realizable value	(7,875		)	(3,282		)
Net interest income, fees and related income on earning assets	37,132			11,889
Other operating income:
Servicing income	1,240			2,601
Other income	1,067			2,136
Equity in income of equity-method investees	2,406			4,307
Total other operating income	4,713			9,044
Other operating expense:
Salaries and benefits	5,098			4,409
Card and loan servicing	13,778			10,679
Marketing and solicitation	762			1,935
Depreciation	25,708			373
Other	5,540			6,078
Total other operating expense	50,886			23,474
Loss before income taxes	(9,041		)	(2,541		)
Income tax expense	(1,982		)	(446		)
Net loss	(11,023		)	(2,987		)
Net income attributable to noncontrolling interests	(151		)	(21		)
Net loss attributable to controlling interests	$	(11,174	)	$	(3,008	)
Net loss attributable to controlling interests per common share—basic	$	(0.79	)	$	(0.22	)
Net loss attributable to controlling interests per common share—diluted	$	(0.79	)	$	(0.22	)

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Comprehensive Loss (Unaudited)

(Dollars in thousands)



	For the Three Months Ended March 31,
	2014			2013
Net loss	$	(11,023	)	$	(2,987	)
Other comprehensive loss:
Foreign currency translation adjustment	61			(1,394		)
Income tax expense related to other comprehensive income	34			108
Comprehensive loss	(10,928		)	(4,273		)
Comprehensive income attributable to noncontrolling interests	(151		)	(21		)
Comprehensive loss attributable to controlling interests	$	(11,079	)	$	(4,294	)

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Equity

For the Three Months Ended March 31, 2014 (Unaudited)

(Dollars in thousands)



	Common Stock
	Shares Issued		Amount		Additional Paid-In Capital			Treasury Stock		Accumulated Other Comprehensive Loss			Retained Deficit			Noncontrolling Interests			Total Equity
Balance at December 31, 2013	15,594,325		$	—	$	210,315		$	—	$	(737	)	$	(208,414	)	$	(6	)	$	1,158
Compensatory stock issuances	80,800		—		—			—		—			—			—			—
Distributions to owners of noncontrolling interests	—		—		—			—		—			—			(145		)	(145		)
Amortization of deferred stock-based compensation costs	—		—		354			—		—			—			—			354
Redemption and retirement of shares	(133,637	)	—		(27		)	—		—			—			—			(27		)
Net loss	—		—		—			—		—			(11,174		)	151			(11,023		)
Foreign currency translation adjustment, net of tax	—		—		—			—		95			—			—			95
Balance at March 31, 2014	15,541,488		$	—	$	210,642		$	—	$	(642	)	$	(219,588	)	$	—		$	(9,588	)

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)



	For the Three Months Ended March 31,
	2014			2013
Operating activities
Net loss	$	(11,023	)	$	(2,987	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of rental merchandise	25,011			—
Depreciation, amortization and accretion, net	(131		)	305
Losses upon charge off of loans and fees receivable recorded at fair value	4,748			8,479
Provision for losses on loans and fees receivable	7,875			3,282
Interest expense from accretion of discount on convertible senior notes	158			145
Income from accretion of discount associated with receivables purchases	(8,209		)	(6,812		)
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value	(3,535		)	(2,118		)
Income from equity-method investments	(2,406		)	(4,307		)
Changes in assets and liabilities:
(Increase) decrease in uncollected fees on earning assets	(11		)	282
Increase in income tax liability	1,910			281
Increase in deposits	(15		)	(14		)
Decrease (increase) in prepaid expenses	188			(104		)
Decrease in accounts payable and accrued expenses	(6,228		)	(6,643		)
Additions to rental merchandise	(18,210		)	—
Other	(3,614		)	3,554
Net cash used in operating activities	(13,492		)	(6,657		)
Investing activities
Increase in restricted cash	(4,579		)	(1,048		)
Proceeds from equity-method investees	2,459			4,545
Investments in earning assets	(47,695		)	(43,157		)
Proceeds from earning assets	62,842			63,867
Purchases and development of property, net of disposals	(1,979		)	(266		)
Net cash provided by investing activities	11,048			23,941
Financing activities
Noncontrolling interests (distributions) contributions, net	(145		)	26
Purchase and retirement of outstanding stock	(27		)	(444		)
Proceeds from borrowings	22,998			12,282
Repayment of borrowings	(24,100		)	(25,002		)
Net cash used in financing activities	(1,274		)	(13,138		)
Effect of exchange rate changes on cash	(22		)	(753		)
Net (decrease) increase in unrestricted cash	(3,740		)	3,393
Unrestricted cash and cash equivalents at beginning of period	50,873			67,915
Unrestricted cash and cash equivalents at end of period	$	47,133		$	71,308
Supplemental cash flow information
Cash paid for interest	$	8,134		$	7,653
Net cash income tax payments	$	72		$	165
Supplemental non-cash information
Issuance of stock options and restricted stock	$	931		$	305
Notes payable associated with capital leases	$	158		$	144

See accompanying notes.

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Atlanticus Holdings Corporation and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2014 and 2013


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 primarily focused on providing financial services. Through our subsidiaries, we offer an array of financial products and services to a market largely represented by credit risks that regulators classify as “sub-prime.” As discussed further below, we reflect our business lines within two reportable segments: Credit and Other Investments; and Auto Finance. See also Note 3, “Segment Reporting,” for further details.


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 United States (“GAAP”), under which we are required 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 of credit card receivables that we report at fair value and our notes payable associated with structured financings, at fair value; these estimates likewise affect the changes in these amounts reflected within our fees and related income on earning assets line item on our consolidated statements of operations. Additionally, estimates of future credit losses have a significant effect on loans and fees receivable, net, as shown on our consolidated balance sheets, as well as on the provision for losses on loans and fees receivable within our consolidated statements of operations.

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

Loans and Fees Receivable

Our loans and fees receivable include: (1) loans and fees receivable, net; (2) loans and fees receivable, at fair value; and (3) loans and fees receivable pledged as collateral under structured financings, at fair value.

Components of our aggregated categories of loans and fees receivable, net (in millions) are as follows:



	Balance at December 31, 2013			Additions			Subtractions			Balance at March 31, 2014
Loans and fees receivable, gross	$	134.7		$	65.4		$	(71.3	)	$	128.8
Deferred revenue	(13.3		)	(8.5		)	8.2			(13.6		)
Allowance for uncollectible loans and fees receivable	(24.2		)	(7.9		)	9.0			(23.1		)
Loans and fees receivable, net	$	97.2		$	49.0		$	(54.1	)	$	92.1
	Balance at December 31, 2012			Additions			Subtractions			Balance at March 31, 2013
Loans and fees receivable, gross	$	89.1		$	52.0		$	(51.5	)	$	89.6
Deferred revenue	(8.3		)	(7.3		)	6.8			(8.8		)
Allowance for uncollectible loans and fees receivable	(11.2		)	(3.3		)	4.4			(10.1		)
Loans and fees receivable, net	$	69.6		$	41.4		$	(40.3	)	$	70.7

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As of March 31, 2014 and March 31, 2013, the weighted average remaining accretion periods for the $13.6 million and $8.8 million, respectively, of deferred revenue reflected in the above tables were 10 months and 13 months, respectively.

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



For the Three Months Ended March 31, 2014	Credit Cards			Auto Finance			Other Unsecured Lending Products			Total
Allowance for uncollectible loans and fees receivable:
Balance at beginning of period	$	(11.6	)	$	(1.4	)	$	(11.2	)	$	(24.2	)
Provision for loan losses	(4.2		)	0.2			(3.9		)	(7.9		)
Charge offs	5.0			0.1			4.5			9.6
Recoveries	(0.1		)	(0.3		)	(0.2		)	(0.6		)
Balance at end of period	$	(10.9	)	$	(1.4	)	$	(10.8	)	$	(23.1	)
Balance at end of period individually evaluated for impairment	$	(0.2	)	$	—		$	—		$	(0.2	)
Balance at end of period collectively evaluated for impairment	$	(10.7	)	$	(1.4	)	$	(10.8	)	$	(22.9	)
Loans and fees receivable:
Loans and fees receivable, gross	$	18.5		$	59.4		$	50.9		$	128.8
Loans and fees receivable individually evaluated for impairment	$	0.3		$	—		$	—		$	0.3
Loans and fees receivable collectively evaluated for impairment	$	18.2		$	59.4		$	50.9		$	128.5



For the Three Months Ended March 31, 2013	Credit Cards			Auto Finance			Other Unsecured Lending Products			Total
Allowance for uncollectible loans and fees receivable:
Balance at beginning of period	$	(4.6	)	$	(3.1	)	$	(3.5	)	$	(11.2	)
Provision for loan losses	(2.2		)	0.2			(1.3		)	(3.3		)
Charge offs	2.8			1.1			1.3			5.2
Recoveries	—			(0.8		)	—			(0.8		)
Balance at end of period	$	(4.0	)	$	(2.6	)	$	(3.5	)	$	(10.1	)
Balance at end of period individually evaluated for impairment	$	—		$	—		$	—		$	—
Balance at end of period collectively evaluated for impairment	$	(4.0	)	$	(2.6	)	$	(3.5	)	$	(10.1	)
Loans and fees receivable:
Loans and fees receivable, gross	$	8.9		$	60.4		$	20.3		$	89.6
Loans and fees receivable individually evaluated for impairment	$	—		$	—		$	—		$	—
Loans and fees receivable collectively evaluated for impairment	$	8.9		$	60.4		$	20.3		$	89.6

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The components (in millions) of loans and fees receivable, net as of the date of each of our consolidated balance sheets are as follows:



	March 31, 2014		December 31, 2013
Current loans receivable	$	101.1	$	103.3
Current fees receivable	5.3		6.0
Delinquent loans and fees receivable	22.4		25.4
Loans and fees receivable, gross	$	128.8	$	134.7

An aging of our delinquent loans and fees receivable, gross (in millions) by class of receivable as of March 31, 2014 and December 31, 2013 is as follows:



Balance at March 31, 2014	Credit Cards		Auto Finance		Other Unsecured Lending Products		Total
30-59 days past due	$	1.5	$	3.9	$	1.7	$	7.1
60-89 days past due	1.6		1.5		1.8		4.9
90 or more days past due	5.4		1.1		3.9		10.4
Delinquent loans and fees receivable, gross	8.5		6.5		7.4		22.4
Current loans and fees receivable, gross	10.0		52.9		43.5		106.4
Total loans and fees receivable, gross	$	18.5	$	59.4	$	50.9	$	128.8
Balance of loans 90 or more days past due and still accruing interest and fees	$	—	$	1.1	$	3.9	$	5.0

Balance at December 31, 2013	Credit Cards		Auto Finance		Other Unsecured Lending Products		Total
30-59 days past due	$	1.6	$	5.6	$	2.5	$	9.7
60-89 days past due	1.9		1.7		2.2		5.8
90 or more days past due	5.6		1.1		3.2		9.9
Delinquent loans and fees receivable, gross	9.1		8.4		7.9		25.4
Current loans and fees receivable, gross	12.8		55.1		41.4		109.3
Total loans and fees receivable, gross	$	21.9	$	63.5	$	49.3	$	134.7
Balance of loans 90 or more days past due and still accruing interest and fees	$	—	$	0.1	$	3.2	$	3.3

Income taxes

We experienced negative effective income tax benefit rates of 21.9% and 17.6% for the three months ended March 31, 2014 and 2013, respectively. Our negative effective income tax benefit rates resulted principally from (1) the effects in the three months ended March 31, 2014 of legislative changes enacted during that period in certain state filing jurisdictions, (2) interest accruals on our liabilities for uncertain tax positions in both the three months ended March 31, 2014 and 2013, and (3) changes in valuation allowances against income statement-oriented federal, foreign and state deferred tax assets in both the three months ended March 31, 2014 and 2013.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized $0.6 million of potential interest and penalties associated with these uncertain tax positions during the three months ended March 31, 2014, compared to $0.4 million during the three months ended March 31, 2013. To the extent interest and penalties are not assessed as a result of resolution of an uncertain tax position, amounts accrued are reduced and reflected as a reduction of income tax expense. We recognized no such reductions in either of the three months ended March 31, 2014 and 2013.

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Fees and Related Income on Earning Assets

The components (in thousands) of our fees and related income on earning assets are as follows:



	Three months ended March 31,
	2014			2013
Fees on credit products	$	5,387		$	3,916
Changes in fair value of loans and fees receivable recorded at fair value	4,692			16,723
Changes in fair value of notes payable associated with structured financings recorded at fair value	(1,157		)	(14,605		)
Rental revenue	21,933			—
Other	2,030			772
Total fees and related income on earning assets	$	32,885		$	6,806

The above changes in fair value of loans and fees receivable recorded at fair value category excludes the impact of charge offs associated with these receivables which are separately stated on our consolidated statements of operations. See Note 6, “Fair Values of Assets and Liabilities,” for further discussion of these receivables and their effects on our consolidated statements of operations.

Subsequent Events

We evaluate subsequent events that occur after our consolidated balance sheet date but before our consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements; and (2) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. We have evaluated subsequent events occurring after March 31, 2014, and based on our evaluation, other than as disclosed below, we did not identify any recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements.

We note however, that on May 15, 2014 we amended the outstanding loan agreement associated with our revolving credit facilities secured by the financial and operating assets of CAR and another of our borrowing subsidiaries to extend the expiration dates on the notes. The amended expiration dates are included in the table in Note 7, "Notes Payable".


3.	Segment Reporting

We operate primarily within one industry consisting of two reportable segments by which we manage our business. Our two reportable segments are: Credit and Other Investments; and Auto Finance. We have renamed our Credit Cards and Other Investments segment as the Credit and Other Investments segment to encompass ancillary investments and product offerings that are largely start-up in nature and do not qualify for separate segment reporting. All prior period data have been reclassified to this new current period presentation.

As of both March 31, 2014 and December 31, 2013, we did not have a material amount of long-lived assets located outside of the U.S., and only a negligible portion of our 2014 and 2013 revenues were generated outside of the U.S.

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Summary operating segment information (in thousands) is as follows:



Three months ended March 31, 2014	Credit and Other Investments			Auto Finance			Total
Interest income:
Consumer loans, including past due fees	$	14,396		$	5,561		$	19,957
Other	237			—			237
Total interest income	14,633			5,561			20,194
Interest expense	(5,832		)	(355		)	(6,187		)
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable	$	8,801		$	5,206		$	14,007
Fees and related income on earning assets	$	32,802		$	83		$	32,885
Servicing income	$	1,055		$	185		$	1,240
Depreciation of rental merchandise	(25,011		)	—			(25,011		)
Equity in income of equity-method investees	$	2,406		$	—		$	2,406
(Loss) income before income taxes	$	(10,063	)	$	1,022		$	(9,041	)
Income tax expense	$	(1,625	)	$	(357	)	$	(1,982	)
Total assets	$	281,700		$	56,230		$	337,930



Three months ended March 31, 2013	Credit and Other Investments			Auto Finance			Total
Interest income:
Consumer loans, including past due fees	$	14,044		$	5,780		$	19,824
Other	41			70			111
Total interest income	14,085			5,850			19,935
Interest expense	(5,339		)	(433		)	(5,772		)
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable	$	8,746		$	5,417		$	14,163
Fees and related income on earning assets	$	6,740		$	66		$	6,806
Servicing income	$	2,400		$	201		$	2,601
Depreciation of rental merchandise	—			—			—
Equity in income of equity-method investees	$	4,307		$	—		$	4,307
(Loss) income before income taxes	$	(3,971	)	$	1,430		$	(2,541	)
Income tax expense	$	(78	)	$	(368	)	$	(446	)
Total assets	$	307,056		$	62,053		$	369,109


4.	Shareholders' Equity

Retired Shares

During the three months ended March 31, 2014, we repurchased and contemporaneously retired 10,781 shares of our common stock at an aggregate cost of $26,629, pursuant to the return of stock by holders of equity incentive awards to pay tax withholding obligations. During the three months ended March 31, 2013, we repurchased and contemporaneously retired 120,100 shares of our common stock at an aggregate cost of $0.4 million, pursuant to open market purchases and the return of stock by holders of equity incentive awards.

We had 1,549,800 loaned shares outstanding at March 31, 2014 (1,672,656 shares as of December 31, 2013), which were originally lent in connection with our November 2005 issuance of convertible senior notes.

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5.	Investments in Equity-Method Investees

Our equity-method investments outstanding at March 31, 2014 consist of our 66.7% interest in a joint venture formed to purchase a credit card receivable portfolio and our 50.0% interest in a joint venture that was formed to purchase the outstanding notes issued out of the structured financing trust underlying our non-U.S. acquired credit card receivables (the “Non-U.S. Acquired Portfolio”).

In the following tables, we summarize (in thousands) combined balance sheet and results of operations data for our equity-method investees:



	As of
	March 31, 2014		December 31, 2013
Loans and fees receivable pledged as collateral under structured financings, at fair value	$	32,063	$	35,241
Investments in non-marketable debt securities, at fair value	$	35,636	$	36,158
Total assets	$	70,203	$	74,145
Notes payable associated with structured financings, at fair value	$	8,311	$	12,125
Total liabilities	$	8,422	$	12,251
Members’ capital	$	61,781	$	61,894



	Three months ended March 31,
	2014		2013
Net interest income, fees and related income on earning assets	$	4,116	$	8,637
Total other operating income	$	49	$	338
Net income	$	3,780	$	8,414
Net income attributable to our equity investment in investee	$	2,406	$	4,307

In June 2013, we increased, from 50.0% to 66.7% our overall ownership in the above mentioned joint venture formed in 2004 to purchase a credit card receivables portfolio. We continue to account for this investment using the equity method of accounting due to specific voting and veto rights held by each investor, which do not allow us to control this investee. The additional June 2013 investment in this investee was made at a discount to the fair value of the investee's assets, thereby resulting in a gain of approximately $0.9 million for us in the three months ended June 30, 2013 based on the investee's reporting of substantially all of its assets at their fair values under its fair value option election.

The above tables include our aforementioned 50.0% interest in the joint venture that purchased in March 2011 the outstanding notes issued out of our Non-U.S. Acquired Portfolio structured financing trust. Separate financial data for this entity are as follows:



	As of
	March 31, 2014		December 31, 2013
Investments in non-marketable debt securities, at fair value	$	35,636	$	36,158
Total assets	$	36,031	$	36,770
Total liabilities	$	—	$	—
Members’ capital	$	36,031	$	36,770

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	Three months ended March 31,
	2014		2013
Net interest income, fees and related income on earning assets	$	1,985	$	7,230
Net income	$	1,974	$	7,219
Net income attributable to our equity investment in investee	$	987	$	3,609

As noted in Note 7, “Notes Payable,” notes payable with a fair value of $35.6 million correspond with the $35.6 million investment in non-marketable debt securities, at fair value held by our equity method investee as noted in the above table.


6.	Fair Values of Assets and Liabilities

Valuations and Techniques for Assets

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The table below summarizes (in thousands) by fair value hierarchy the March 31, 2014 and December 31, 2013 fair values and carrying amounts of (1) our assets that are required to be carried at fair value in our consolidated financial statements and (2) our assets not carried at fair value, but for which fair value disclosures are required:



Assets – As of March 31, 2014 (1)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount of Assets
Loans and fees receivable, net for which it is practicable to estimate fair value	$	—	$	—	$	99,654	$	84,131
Loans and fees receivable, net for which it is not practicable to estimate fair value (2)	$	—	$	—	$	—	$	7,947
Loans and fees receivable, at fair value	$	—	$	—	$	11,691	$	11,691
Loans and fees receivable pledged as collateral, at fair value	$	—	$	—	$	79,150	$	79,150



Assets – As of December 31, 2013 (1)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount of Assets
Loans and fees receivable, net for which it is practicable to estimate fair value	$	—	$	—	$	94,579	$	92,924
Loans and fees receivable, net for which it is not practicable to estimate fair value (2)	$	—	$	—	$	—	$	4,284
Loans and fees receivable, at fair value	$	—	$	—	$	12,080	$	12,080
Loans and fees receivable pledged as collateral, at fair value	$	—	$	—	$	88,132	$	88,132


(1)	For cash, deposits and other short-term investments (including our investments in rental merchandise), the carrying amount is a reasonable estimate of fair value.


(2)	We do not disclose fair value for this portion of our loans and fees receivable, net because it is not practicable to do so. These loans and fees receivable consist of a variety of receivables that are largely start-up in nature and for which we have neither sufficient history nor a comparable peer group from which we can calculate fair value.

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For those asset classes above that are required to be carried at fair value in our consolidated financial statements, gains and losses associated with fair value changes are detailed on our fees and related income on earning assets table within Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components.” For our loans and fees receivable included in the above table, we assess the fair value of these assets based on our estimate of future cash flows net of servicing costs, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.

For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the three months ended March 31, 2014 and March 31, 2013:



	Loans and Fees Receivable, at Fair Value			Loans and Fees Receivable Pledged as Collateral under Structured Financings, at Fair Value			Total
Balance at January 1, 2014	$	12,080		$	88,132		$	100,212
Total gains—realized/unrealized:
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value	—			2,684			2,684
Net revaluations of loans and fees receivable, at fair value	2,008			—			2,008
Settlements, net	(2,397		)	(11,949		)	(14,346		)
Impact of foreign currency translation	—			283			283
Net transfers in and/or out of Level 3	—			—			—
Balance at March 31, 2014	$	11,691		$	79,150		$	90,841
Balance at January 1, 2013	$	20,378		$	133,595		$	153,973
Total gains—realized/unrealized:
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value	—			13,924			13,924
Net revaluations of loans and fees receivable, at fair value	2,799			—			2,799
Settlements, net	(5,571		)	(21,894		)	(27,465		)
Impact of foreign currency translation	—			(2,649		)	(2,649		)
Net transfers in and/or out of Level 3	—			—			—
Balance at March 31, 2013	$	17,606		$	122,976		$	140,582

The unrealized gains and losses for assets within the Level 3 category presented in the tables above include changes in fair value that are attributable to both observable and unobservable inputs.

Net Revaluation of Loans and Fees Receivable. We record the net revaluation of loans and fees receivable (including those pledged as collateral) in the fees and related income on earning assets category in our consolidated statements of operations, specifically as changes in fair value of loans and fees receivable recorded at fair value.

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For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of March 31, 2014:



Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements	Fair Value at March 31, 2014		Valuation Technique	Unobservable Input	Range (Weighted Average)(1)
Loans and fees receivable, at fair value	$	11,691	Discounted cash flows	Gross yield	25.0	%
				Principal payment rate	3.5	%
				Expected credit loss rate	13.9	%
				Servicing rate	9.0	%
				Discount rate	15.9	%
Loans and fees receivable pledged as collateral under structured financings, at fair value	$	79,150	Discounted cash flows	Gross yield	17.0% to 27.6% (23.2%)
				Principal payment rate	1.9% to 3.2% (2.7%)
				Expected credit loss rate	8.9% to 18.0% (14.2%)
				Servicing rate	8.3% to 12.0% (9.8%)
				Discount rate	15.9% to 16.2% (16.0%)

(1) Our loans and fees receivable, at fair value consist of a single portfolio with one set of assumptions. As such, no range is given.

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Valuations and Techniques for Liabilities

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability. The table below summarizes (in thousands) by fair value hierarchy the March 31, 2014 and December 31, 2013 fair values and carrying amounts of (1) our liabilities that are required to be carried at fair value in our consolidated financial statements and (2) our liabilities not carried at fair value, but for which fair value disclosures are required:



Liabilities – As of March 31, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount of Liabilities
Liabilities not carried at fair value
CAR revolving credit facility	$	—	$	—	$	20,500	$	20,500
ACC amortizing debt facility	$	—	$	—	$	608	$	608
Amortizing debt facility	$	—	$	—	$	33,274	$	33,274
Revolving credit facility	$	—	$	—	$	4,000	$	4,000
U.K. credit card accounts revolving credit facility	$	—	$	—	$	8,320	$	8,320
5.875% convertible senior notes	$	—	$	54,392	$	—	$	95,642
Liabilities carried at fair value
Interest rate swap underlying CAR facility	$	—	$	68	$	—	$	68
Economic sharing arrangement liability	$	—	$	—	$	268	$	268
Notes payable associated with structured financings, at fair value	$	—	$	—	$	85,849	$	85,849



Liabilities - As of December 31, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount of Liabilities
Liabilities not carried at fair value
CAR revolving credit facility	$	—	$	—	$	22,000	$	22,000
ACC amortizing debt facility	$	—	$	—	$	928	$	928
Amortizing debt facility	$	—	$	—	$	21,411	$	21,411
Revolving credit facility	$	—	$	—	$	4,000	$	4,000
U.K. credit card accounts revolving credit facility	$	—	$	—	$	8,245	$	8,245
5.875% convertible senior notes	$	—	$	57,007	$	—	$	95,484
Liabilities carried at fair value
Interest rate swap underlying CAR facility	$	—	$	97	$	—	$	97
Economic sharing arrangement liability	$	—	$	—	$	354	$	354
Notes payable associated with structured financings, at fair value	$	—	$	—	$	94,523	$	94,523

Gains and losses associated with fair value changes for our notes payable associated with structured financing liabilities that are carried at fair value are detailed on our fees and related income on earning assets table within Note 2, “Significant Accounting Policies and Consolidated Financial Statement Components.” See Note 7, “Notes Payable,” for further discussion on our notes payable.

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For our material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the three months ended March 31, 2014 and 2013.



	Notes Payable Associated with Structured Financings, at Fair Value
	2014			2013
Beginning balance, January 1	$	94,523		$	140,127
Transfers in due to consolidation of equity-method investees	—			—
Total (gains) losses—realized/unrealized:
Net revaluations of notes payable associated with structured financings, at fair value	1,157			14,605
Repayments on outstanding notes payable, net	(10,149		)	(22,410		)
Impact of foreign currency translation	318			(2,772		)
Net transfers in and/or out of Level 3	—			—
Ending balance, March 31	$	85,849		$	129,550

Net Revaluation of Notes Payable Associated with Structured Financings, at Fair Value. We record the net revaluations of notes payable associated with structured financings, at fair value, in the changes in fair value of notes payable associated with structured financings line item within the fees and related income on earning assets category of our consolidated statements of operations.

For material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement for the period ended March 31, 2014:



Quantitative Information about Level 3 Fair Value Measurements
Fair Value Measurements	Fair Value at March 31, 2014 (in Thousands)		Valuation Technique	Unobservable Input	Range (Weighted Average)
Notes payable associated with structured financings, at fair value	$	85,849	Discounted cash flows	Gross yield	17.0% to 27.6% (23.2%)
				Principal payment rate	1.9% to 3.2% (2.7%)
				Expected credit loss rate	8.9% to 18.0% (14.2%)
				Discount rate	15.9% to 20.9% (18.0%)

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Other Relevant Data

Other relevant data (in thousands) as of March 31, 2014 and December 31, 2013 concerning certain assets and liabilities we carry at fair value are as follows:



As of March 31, 2014	Loans and Fees Receivable at Fair Value		Loans and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value
Aggregate unpaid principal balance within loans and fees receivable that are reported at fair value	$	14,155	$	99,636
Aggregate fair value of loans and fees receivable that are reported at fair value	$	11,691	$	79,150
Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)	$	23	$	262
Aggregate excess of balance of unpaid principal receivables within loans and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans and fees receivable	$	583	$	3,646



As of December 31, 2013	Loans and Fees Receivable at Fair Value		Loans and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value
Aggregate unpaid principal balance within loans and fees receivable that are reported at fair value	$	16,620	$	109,945
Aggregate fair value of loans and fees receivable that are reported at fair value	$	12,080	$	88,132
Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)	$	31	$	299
Aggregate excess of balance of unpaid principal receivables within loans and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans and fees receivable	$	728	$	4,555



Notes Payable	Notes Payable Associated with Structured Financings, at Fair Value as of March 31, 2014		Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2013
Aggregate unpaid principal balance of notes payable	$	209,113	$	219,619
Aggregate fair value of notes payable	$	85,849	$	94,523

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7.	Notes Payable

Notes Payable Associated with Structured Financings, at Fair Value

Scheduled (in millions) in the table below are (1) the carrying amounts of structured financing notes secured by certain credit card receivables and reported at fair value as of both March 31, 2014 and December 31, 2013, (2) the outstanding face amounts of structured financing notes secured by certain credit card receivables and reported at fair value as of March 31, 2014, and (3) the carrying amounts of the credit card receivables and restricted cash that provide the exclusive means of repayment for the notes (i.e., lenders have recourse only to the specific credit card receivables and restricted cash underlying each respective facility and cannot look to our general credit for repayment) as of March 31, 2014 and December 31, 2013.



	Carrying Amounts at Fair Value as of
	March 31, 2014		December 31, 2013
Amortizing securitization facility issued out of our upper-tier originated portfolio master trust (stated maturity of December 2014), outstanding face amount of $140.1 million bearing interest at a weighted average 4.4% interest rate (4.2% as of December 31, 2013), which is secured by credit card receivables and restricted cash aggregating $50.2 million ($58.4 million as of December 31, 2013) in carrying amount	$	50.2	$	58.3
Amortizing term securitization facility (denominated and referenced in U.K. sterling and a stated maturity of October 2014) issued out of our Non-U.S. Acquired Portfolio securitization trust, outstanding face amount of $69.0 million bearing interest at a weighted average 5.7% interest rate (5.6% as of December 31, 2013), which is secured by credit card receivables and restricted cash aggregating $36.0 million ($36.8 million as of December 31, 2013) in carrying amount	35.6		36.2
Total structured financing notes reported at fair value that are secured by credit card receivables and to which we are subordinated	$	85.8	$	94.5

Contractual payment allocations within these credit cards receivable structured financings provide for a priority distribution of cash flows to us to service the credit card receivables, a distribution of cash flows to pay interest and principal due on the notes, and a distribution of all excess cash flows (if any) to us. Each of the structured financing facilities in the above table is amortizing down along with collections of the underlying receivables and there are no provisions within the debt agreements that allow for acceleration or bullet repayment of the facilities prior to their scheduled expiration dates. The aggregate carrying amount of the credit card receivables and restricted cash that provide security for the $85.8 million in fair value of structured financing notes in the above table is $86.2 million, which means that our maximum aggregate exposure to pre-tax equity loss associated with the above structured financing arrangements is $0.4 million at March 31, 2014.

Beyond our role as servicer of the underlying assets within the credit cards receivable structured financings, we have provided no other financial or other support to the structures, and we have no explicit or implicit arrangements that could require us to provide financial support to the structures.

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Notes Payable, at Face Value

Other notes payable outstanding as of March 31, 2014 and December 31, 2013 that are secured by the financial and operating assets of either the borrower, another of our subsidiaries or both, include the following, scheduled (in millions); except as otherwise noted, the assets of our holding company (Atlanticus Holdings Corporation) are subject to creditor claims under these scheduled facilities:



	As of
	March 31, 2014		December 31, 2013
Revolving credit facilities at a weighted average rate equal to 4.7% (4.7% at December 31, 2013) secured by the financial and operating assets of CAR and another of our borrowing subsidiaries with a combined aggregate carrying amount of $82.2 million ($83.5 million at December 31, 2013)
Revolving credit facility (expiring October 4, 2017) (1) (2)	$	20.5	$	22.0
Revolving credit facility (expiring May 17, 2015) (2)	4.0		4.0
Amortizing facilities at a weighted average rate equal to 6.4% (8.8% at December 31, 2013) secured by certain receivables, rental streams and restricted cash with a combined aggregate carrying amount of $23.0 million ($16.5 million as of December 31, 2014)
Amortizing debt facility (expiring December 15, 2014) (3) (4)	1.9		3.3
Amortizing debt facility (expiring April 20, 2015) (3) (4)	3.4		5.8
Amortizing debt facility (expiring July 15, 2015) (3) (4)	5.7		8.3
Amortizing debt facility (expiring February 19, 2015) (3)	7.1		3.5
Amortizing debt facility (expiring March 31, 2015) (3)	15.0		—
Amortizing debt facility (expiring April 1, 2016) (3)	0.2		0.5
Other facilities
Amortizing debt facility (expiring November 6, 2016) that is secured by our ACC Auto Finance segment receivables and restricted cash with an aggregate carrying amount of $1.6 million ($2.5 million as of December 31, 2013) (5)	0.6		0.9
Revolving credit facility associated with our credit card accounts in the U.K. that can be drawn to the extent of outstanding eligible principal receivables up to £5.0 million, expiring December 1, 2016 with an annual rate equal to the lender’s cost of funds plus 7.0% (9.1% as of March 31, 2014 and 9.1% as of December 31, 2013) secured by certain receivables and restricted cash with a combined aggregate carrying amount of $7.5 million ($9.6 million as of December 31, 2013)	8.3		8.2
Vendor-financed software and equipment purchases (expiring September 2014) at an implied rate of 15.0%, that are secured by certain equipment	0.2		0.2
Total notes payable outstanding	$	66.9	$	56.7


(1)	Loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance by our CAR Auto Finance operations.


(2)	Loans are from the same lender and are cross-collateralized; thus, combined security interests are subject to claims upon the default of either lending arrangement. The assets of Atlanticus Holdings Corporation are not subject to creditor claims arising due to asset performance-related covenants under this loan.


(3)	Loans are subject to certain affirmative covenants tied to default rates and other performance metrics the failure of which could result in required early repayment of the remaining unamortized balances of the notes.


(4)	Loans are from the same lender and are cross-collateralized; thus, combined security interests are subject to claims upon the default of either lending arrangement.

(5)

The terms of this lending agreement provide for the application of all excess cash flows from the underlying auto finance receivables portfolio (above and beyond interest costs and contractual servicing compensation to our outsourced third-party servicer) to reduce the outstanding principal balance of the debt, and the outstanding principal balance was repaid in the fourth quarter of 2012. Now that we have repaid the principal portion of the

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note, the lending agreement requires that we remit 37.5% of future cash flows (net of contractual servicing compensation) generated on the auto finance receivables portfolio to the note holders as additional compensation for the use of their capital. Based on current estimates of this additional compensation, we currently are accruing interest expense on this liability based on current expectations of future collections, and the amount disclosed in the above table represents our accrued interest expense liability under this lending agreement. The assets of Atlanticus Holdings Corporation are not subject to creditor claims arising under this loan.

On May 15, 2014 we amended the outstanding loan agreement associated with our revolving credit facilities secured by the financial and operating assets of CAR and another of our borrowing subsidiaries to extend the expiration dates on the notes. The amended expiration dates are included in the table above.


8.	Convertible Senior Notes

In May 2005, we issued $250.0 million aggregate principal amount of 3.625% convertible senior notes due 2025 (“3.625% convertible senior notes”), and in November 2005, we issued $300.0 million aggregate principal amount of 5.875% convertible senior notes due 2035 (“5.875% convertible senior notes”). These notes (net of repurchases since the issuance dates) are reflected within convertible senior notes on our consolidated balance sheets. The following summarizes (in thousands) components of our consolidated balance sheets associated with our convertible senior notes:



	As of
	March 31, 2014			December 31, 2013
Face amount of 3.625% convertible senior notes	$	450		$	450
Face amount of 5.875% convertible senior notes	139,467			139,467
Discount	(43,825		)	(43,983		)
Net carrying value	$	96,092		$	95,934
Carrying amount of equity component included in additional paid-in capital	$	108,714		$	108,714
Excess of instruments’ if-converted values over face principal amounts	$	—		$	—


9.	Commitments and Contingencies

General

In the normal course of business through the origination of unsecured credit card receivables, we incur off-balance-sheet risks. These risks include commitments of £1.8 million ($3.0 million) at March 31, 2014 to purchase receivables associated with cardholders who have the right to borrow in excess of their current balances up to the maximum credit limit on their credit card accounts. We have never experienced a situation in which all of our customers have exercised their entire available line of credit at any given point in time, nor do we anticipate this will ever occur in the future. Moreover, there would be a concurrent increase in assets should there be any exercise of these lines of credit. We also have the effective right to reduce or cancel these available lines of credit at any time. At March 31, 2014, the available lines of credit mentioned above are related to cards issued under programs in the U.K.

Additionally our CAR operations 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. The financings allow dealers and finance companies to borrow in excess of their current balances up to the maximum pre-approved credit limit allowed in order to finance ongoing inventory needs. These loans are secured by the underlying auto inventory and, in certain cases where we have other lending products outstanding with the dealer, are secured by the collateral under those lending arrangements as well, including any outstanding dealer reserves. As of March 31, 2014, CAR had unfunded outstanding floor-plan financing commitments totaling $9.3 million. Each draw against unused commitments is reviewed for conformity to pre-established guidelines.

Under our point-of-sale finance products, we give consumers the ability to borrow up to the maximum credit limit assigned to each individual’s account. Our unfunded commitments under these products aggregated $74.9 million at March 31, 2014. We have never experienced a situation in which all of our customers have exercised their entire available line of credit at

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any given point in time, nor do we anticipate this will ever occur in the future. Moreover, there would be a concurrent increase in assets should there be any exercise of these lines of credit. We also have the effective right to reduce or cancel these available lines of credit at any time.

Under agreements with third-party originating and other financial institutions, we have agreed to indemnify the financial institutions for certain liabilities associated with the financial institutions’ activities on our behalf—such indemnification obligations generally being limited to instances in which we either (a) have been afforded the opportunity to defend against any potentially indemnifiable claims or (b) have reached agreement with the financial institutions regarding settlement of potentially indemnifiable claims. As of March 31, 2014, we have assessed the likelihood of any potential payments related to the aforementioned contingencies as remote. We will accrue liabilities related to these contingencies in any future period if and in which we assess the likelihood of an estimable payment as probable. In October 2013, we were released from certain contingent liabilities which resulted in the release of $4.4 million of cash previously held in escrow and previously included on our consolidated balance sheet as a deposit within our prepaid expenses and other assets category.

Total System Services, Inc. provides certain services to Atlanticus Services Corporation as a system of record provider under an agreement that extends through May 2015. If Atlanticus Services Corporation were to terminate its U.S. relationship with Total System Services, Inc. prior to the contractual termination period, it would incur significant penalties ($6.2 million as of March 31, 2014).

Litigation

We are involved in various legal proceedings that are incidental to the conduct of our business, none of which are material to us.


10.	Net Loss Attributable to Controlling Interests Per Common Share

We compute net loss attributable to controlling interests per common share by dividing loss attributable to controlling interests by the weighted-average common shares (including participating securities) outstanding during the period, as discussed below. Diluted computations applicable in financial reporting periods in which we report income reflect the potential dilution to the basic income per common share computations that could occur if securities or other contracts to issue common stock were exercised, were converted into common stock or were to result in the issuance of common stock that would share in our results of operations. In performing our net loss attributable to controlling interests per common share computations, we apply accounting rules that require us to include all unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, in the number of shares outstanding in our basic and diluted calculations. Common stock and certain unvested share-based payment awards earn dividends equally, and we have included all outstanding restricted stock awards in our basic and diluted calculations for current and prior periods.

The following table sets forth the computations of net loss per common share (in thousands, except per share data):



	For the Three Months Ended March 31,
	2014			2013
Numerator:
Net loss attributable to controlling interests	$	(11,174	)	$	(3,008	)
Denominator:
Basic (including unvested share-based payment awards) (1)	14,081			13,840
Effect of dilutive stock compensation arrangements (2)	—			—
Diluted (including unvested share-based payment awards) (1)	14,081			13,840
Net loss attributable to controlling interests per common share—basic	$	(0.79	)	$	(0.22	)
Net loss attributable to controlling interests per common share—diluted	$	(0.79	)	$	(0.22	)


(1)	Shares related to unvested share-based payment awards we included in our basic and diluted share counts are 567,674 for the three months ended March 31, 2014, compared to 197,500 shares for the three months ended March 31, 2013.

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(2)	The effect of dilutive options is shown only for informational purposes where we are in a net loss position. In such situations, the effect of including outstanding options and restricted stock would be anti-dilutive, and they are thus excluded from all loss period calculations.

As their effects were anti-dilutive, we excluded all of our stock options from our net loss per share computations for the three months ended March 31, 2014 and 2013.

For the three months ended March 31, 2014 and 2013, there were no shares potentially issuable and thus includible in the diluted net loss attributable to controlling interests per common share calculations under our 3.625% convertible senior notes and 5.875% convertible senior notes. However, in future reporting periods during which our closing stock price is above the respective $20.22 and $24.61 conversion prices for the 3.625% convertible senior notes and 5.875% convertible senior notes, and depending on the closing stock price at conversion, the maximum potential dilution under the conversion provisions of such notes is 22,246 and 5.7 million shares, respectively, which could be included in diluted share counts in net income per common share calculations. See Note 8, “Convertible Senior Notes,” for a further discussion of these convertible securities.

11. Stock-Based Compensation

We currently have three stock-based compensation plans, the Employee Stock Purchase Plan (the “ESPP”), the 2008 Equity Incentive Plan (the "2008 Plan") and the 2014 Equity Incentive Plan (the “2014 Plan”).

The following table provides the reserved common shares and common shares available for future issuance for each of our stock plans as of March 31, 2014:


(1)	On March 20, 2014, our Board of Directors adopted, and on May 9, 2014 our shareholders approved, the 2014 Plan. The 2014 Plan replaces the 2008 Plan. Outstanding awards under the 2008 Plan will continue to be governed by the terms of the 2008 Plan until exercised, expired or otherwise terminated or canceled, but no further equity awards will be granted under the 2008 Plan.

Exercises and vestings under our stock-based compensation plans resulted in no income tax-related benefits or charges to additional paid-in capital during the three months ended March 31, 2014 and 2013.

Restricted Stock and Restricted Stock Unit Awards

During the three months ended March 31, 2014 and 2013, we granted 80,800 and 93,000 shares of aggregate restricted stock, respectively, with aggregate grant date fair values of $0.3 million and $0.3 million, respectively. When we grant restricted stock, we defer the grant date value of the restricted stock and amortize that value (net of the value of anticipated forfeitures) as compensation expense with an offsetting entry to the additional paid-in capital component of our consolidated shareholders’ equity. Our restricted stock generally vests over a range of 12 to 60 months and is amortized to salaries and benefits expense ratably over applicable vesting periods. As of March 31, 2014, our unamortized deferred compensation costs associated with non-vested restricted stock awards were $1.3 million with a weighted-average remaining amortization period of 1.5 years.

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Stock Options

Our 2014 Plan provides that we may grant options on or shares of our common stock (and other types of equity awards) to members of our Board of Directors, employees, consultants and advisors. The exercise price per share of the options may be less than, equal to, or greater than the market price on the date the option is granted. The option period may not exceed 5 years from the date of grant. The vesting requirements for options granted by us could range from 0 to 5 years. We had expense of $67,000 and $0 related to stock option-related compensation costs during the three months ended March 31, 2014 and 2013, respectively. When applicable, we recognize stock option-related compensation expense for any awards with graded vesting on a straight-line basis over the vesting period for the entire award. Information related to options outstanding is as follows:



	March 31, 2014
	Number of Shares	Weighted- Average Exercise Price		Weighted- Average of Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2013	—	$	—
Issued	450,000	$	2.52
Outstanding at March 31, 2014	450,000	$	2.52	5	$	27,000
Exercisable at March 31, 2014	—	$	—	0	$	—

As of March 31, 2014, we had $0.6 million of unamortized deferred compensation costs associated with non-vested stock options.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the related notes included therein and our Annual Report on Form 10-K for the year ended December 31, 2013, where certain terms (including trust, subsidiary and other entity names and financial, operating and statistical measures) have been defined.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. We base these forward-looking statements on our current plans, expectations and beliefs about future events. There are risks, including the factors discussed in “Risk Factors” in Part II, Item 1A and elsewhere in this Report, that our actual experience will differ materially from the expectations. For more information, see “Forward‑Looking Information ” below.

In this Report, except as the context suggests otherwise, the words “Company,” “Atlanticus Holdings Corporation,” “Atlanticus,” “we,” “our,” “ours” and “us” refer to Atlanticus Holdings Corporation and its subsidiaries and predecessors.

OVERVIEW

We are a provider of various credit and related financial services and products to or associated with the financially underserved consumer credit market—a market largely represented by credit risks that regulators classify as sub-prime.

Currently, within our Credit and Other Investments segment, we are applying the experiences and infrastructure associated with our historic credit card offerings to provide point-of-sale financing, whereby we partner with retailers and service providers in various industries across the U.S. to provide credit to their customers for the purchase of goods and services or the rental of merchandise to their customers under rent-to-own arrangements. These products are often extended to customers who may have been declined under traditional financing options. We specialize in providing this "second-look" credit service. Using our infrastructure and technology platform, we also provide loan servicing, including underwriting, marketing, customer service and collections operations for third parties. Also through our Credit and Other Investments segment, we engage in testing and limited investment in ancillary finance, technology and other products as we seek to capitalize on our expertise and infrastructure.

Beyond these activities within our Credit and Other Investments segment, we continue to collect on portfolios of credit card receivables underlying now-closed credit card accounts. These receivables include both receivables we originated through third-party financial institutions and portfolios of receivables we purchased from third-party financial institutions. The only open credit card accounts underlying our credit card receivables are those we originate through our credit card products in the U.K. Some of our portfolios of credit card receivables underlying now-closed accounts are encumbered by non-recourse structured financings, and for these portfolios our principal remaining economic interest is the servicing compensation we receive as an offset against our servicing costs given that the likely future collections on the portfolios are insufficient to allow for full repayment of the financings.

Lastly, we report within our Credit and Other Investments segment the income earned from investments in two equity-method investees—one that holds credit card receivables for which we are the servicer and another that holds structured financing notes underlying credit card receivables for which we are the servicer.

The recurring cash flows we receive within our Credit and Other Investments segment principally include those associated with (1) our point-of-sale finance activities, (2) servicing compensation and (3) credit card receivables portfolios that are unencumbered or where we own a portion of the underlying structured financing facility.

We historically financed most of our credit card receivables through the asset-backed securitization markets. These markets deteriorated significantly in 2008, and the level of “advance rates,” or leverage against credit card receivable assets, in the current asset-backed securitization markets is below pre-2008 levels. Considering this reality coupled with constraints on credit card asset returns in the U.S., we no longer market or maintain open credit card accounts in the U.S. We do believe, however, that our point-of-sale finance activities are generating and will continue to generate attractive returns on assets, thereby allowing us to secure debt financing under terms and conditions (including advance rates and pricing) that will allow us to achieve our desired returns on equity, and we continue to pursue aggressive growth in this area.

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Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business. In 2010, we started offering floor-plan financing to this same group of dealers and finance companies. 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 collecting on portfolios of auto finance receivables that we previously originated through franchised and independent auto dealers in connection with prior business activities, as well as providing certain lending products in addition to our traditional loans secured by automobiles.

Subject to the availability of capital at attractive terms and pricing, we plan to continue to evaluate and pursue a variety of activities, including: (1) the expansion of our point-of-sale finance products; (2) the acquisition of additional financial assets associated with our point-of-sale finance activities as well as the acquisition of receivables portfolios; (3) investments in other assets or businesses that are not necessarily financial services assets or businesses; (4) the repurchase of our convertible senior notes and other debt or our outstanding common stock; and (5) the servicing of receivables and related financial assets for third parties (and in which we have limited or no equity interests) to allow us to leverage our expertise and infrastructure.

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CONSOLIDATED RESULTS OF OPERATIONS



							Income
	For the Three Months Ended March 31,						Increases (Decreases)
(In Thousands)	2014			2013			from 2013 to 2014
Total interest income	$	20,194		$	19,935		$	259
Interest expense	(6,187		)	(5,772		)	(415		)
Fees and related income on earning assets:
Fees on credit products	5,387			3,916			1,471
Changes in fair value of loans and fees receivable recorded at fair value	4,692			16,723			(12,031		)
Changes in fair value of notes payable associated with structured financings recorded at fair value	(1,157		)	(14,605		)	13,448
Rental revenue	21,933			—			21,933
Other	2,030			772			1,258
Other operating income:
Servicing income	1,240			2,601			(1,361		)
Other income	1,067			2,136			(1,069		)
Equity in income equity-method investees	2,406			4,307			(1,901		)
Total	$	51,605		$	30,013		$	21,592
Losses upon charge off of loans and fees receivable recorded at fair value	1,885			5,798			3,913
Provision for losses on loans and fees receivable recorded at net realizable value	7,875			3,282			(4,593		)
Other operating expenses:
Salaries and benefits	5,098			4,409			(689		)
Card and loan servicing	13,778			10,679			(3,099		)
Marketing and solicitation	762			1,935			1,173
Depreciation	25,708