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OTHER NOTES RECEIVABLE

6 Months Ended

Jun. 30, 2024

5. OTHER NOTES RECEIVABLE

Other notes receivable relate to notes issued to mobile home park owners and dealers and are not directly tied to the sale of mobile homes. These other notes have varying maturity dates and generally require monthly principal and interest payments. They are collateralized by mortgages on real estate, mobile homes that we have financed for which the borrower uses as offices, as well as vehicles. These notes typically are personally guaranteed by the borrowers. The interest rates on the other notes generally are fixed and range from 5.00% to 17.90%. The Company reserves for estimated losses on the other notes based on current economic conditions that may affect the borrower’s ability to pay, the borrower’s financial strength, and historical loss experience.

As of June 30, 2024 and December 31, 2023 there were past due balances of $544 and $22, respectively, on the other notes excluding the Default Loans, as defined below. For the three months ended June 30, 2024 and 2023, there were no charge offs recorded for other notes. For the six months ended June 30, 2024 and 2023, there were no charge offs recorded for other notes. Allowance for loan loss for the other notes was $211 and $236 as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, the impaired balance of other notes was $104 and $84, respectively. Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell.

Approximately $49 million of MHP Notes and Other notes receivable is with borrowers either owned or operated by one individual. Approximately $32 million of these notes currently is in default (the “Default Loans”) and is the subject of ongoing litigation in which the Company is the plaintiff. These notes are collateralized by mobile homes and land and are personally guaranteed by multiple borrowers. The Company evaluated the recoverability of these notes as of June 30, 2024 and determined a provision for expected loan losses is not necessary based on the analysis of the fair value of underlying collateral. The Company accelerated the Default Loans at the end of January, 2024. Upon acceleration, the loans accrue interest at a rate of 17.5% and are due on demand. At June 30, 2024 the Default Loans are presented on the accompanying balance sheets under the heading Current assets, with $21 million in Current portion of notes receivable from mobile home parks (“MHP”) and $11 million in Current portion of other notes receivable. During the three months ended March 31, 2024, the Company foreclosed on property of $1.1 million and homes of $1.2 million that are included on the accompanying balance sheets in Property, plant and equipment, net and Other assets, respectively. During the three months ended June 30, 2024, the Company foreclosed on homes of $4.3 million that are included on the accompanying balance sheets in Other assets. On July 27, 2024, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with the borrowers and guarantors. This Settlement Agreement is

described in more detail in Note 19, Subsequent Events, in these Notes to Condensed Financial Statements (Unaudited) for the quarter ended June 30, 2024.

Other notes receivable, net of allowance for loan losses and deferred financing fees, consisted of the following at June 30, 2024 and December 31, 2023:


	As of June 30,		As of December 31,
	2024		2023
Outstanding principal balance	$	31,330	$	35,353
Loan discount and deferred financing fees		(277)		(527)
Allowance for loan losses		(211)		(236)
Total	$	30,842	$	34,590

The following table presents a detail of the activity in the allowance for loan losses for the three and six months ended June 30, 2024 and 2023:


	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Allowance for loan losses, beginning of period	$	176	$	433	$	236	$	—
Provision for loan losses		35		(202)		(25)		231
(Charge offs) recoveries		—		—		—		—
Allowance for loan losses, end of period	$	211	$	231	$	211	$	231

The following table presents impaired and general reserve for allowance for loan losses at June 30, 2024 and December 31, 2023:


	As of June 30,		As of December 31,
	2024		2023
Total Other notes receivable	$	31,330	$	35,353
Allowance for loan losses		211		236
Impaired loans individually evaluated for impairment		25,362		25,135
Specific reserve against impaired loans		104		84
Other notes receivable collectively evaluated for allowance		5,968		10,218
General allowance for loan losses		107		152

We evaluate the credit quality of our Other notes receivable portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is generally based upon borrower payment activity, relative to the contractual terms of the loan. The following table disaggregates the outstanding principal balance of Other notes

receivable by credit quality indicator based on delinquency status and fiscal year of origination and is presented as of June 30, 2024:


	Year of Origination
	2024		2023		2022		2021		2020		Prior		Total		% of Portfolio
< 30 days past due	$	1,200	$	16,940	$	—	$	174	$	300	$	41	$	18,655	%	59.5
30-90 days past due		—		—		466		—		—		57		523		1.7
> 90 days past due		—		11,274		229		649		—		—		12,152		38.8
Total	$	1,200	$	28,214	$	695	$	823	$	300	$	98	$	31,330	%	100.0