Schedule of changes in the company's allowance for loan losses

Allowance for Loan Losses—Changes in the Company’s allowance for loan losses were as follows for the three months ended September 30, 2023 and 2022 ($ in thousands):


	General Allowance
					Held to
	Construction				Maturity Debt		Specific
Three Months Ended September 30, 2023	Loans		Loans		Securities		Allowance		Total
Allowance for loan losses at beginning of period	$	—	$	389	$	—	$	—	$	389
Provision for loan losses⁽¹⁾		—		95		—		—		95
Allowance for loan losses at end of period	$	—	$	484	$	—	$	—	$	484

Three Months Ended September 30, 2022
Allowance for loan losses at beginning of period	$	861	$	450	$	1,014	$	708	$	3,033
Provision for (recovery of) loan losses⁽¹⁾		(13)		(72)		(67)		9		(143)
Allowance for loan losses at end of period	$	848	$	378	$	947	$	717	$	2,890

(1)

During the three months ended September 30, 2023 and 2022, the Company recorded a provision for (recovery of) loan losses of $0.1 million and ($0.2) million, respectively, in its combined and consolidated statements of operations. The provision in 2023 was due primarily to the origination of a new loan during the three months ended September 30, 2023. The recovery in 2022 was due primarily to the repayment of loans during the three months ended September 30, 2022.

Changes in the Company’s allowance for loan losses were as follows for the nine months ended September 30, 2023 and 2022 ($ in thousands):


	General Allowance
					Held to
	Construction				Maturity Debt		Specific
Nine Months Ended September 30, 2023	Loans		Loans		Securities		Allowance		Total
Allowance for loan losses at beginning of period	$	92	$	437	$	—	$	396	$	925
(Recovery of) provision for loan losses⁽¹⁾		(92)		47		—		(396)		(441)
Allowance for loan losses at end of period	$	—	$	484	$	—	$	—	$	484

Nine Months Ended September 30, 2022
Allowance for loan losses at beginning of period	$	1,213	$	676	$	2,304	$	576	$	4,769
Provision for (recovery of) loan losses⁽¹⁾		(365)		(298)		23,643		141		23,121
Charge-offs⁽¹⁾		—		—		(25,000)		—		(25,000)
Allowance for loan losses at end of period	$	848	$	378	$	947	$	717	$	2,890

(1)

During the nine months ended September 30, 2023 and 2022, the Company recorded a provision for loan losses of $1.7 million and $22.6 million, respectively, in its combined and consolidated statements of operations. The provision in 2023 was due primarily to a $2.2 million provision on the sale of a loan held for sale, which was partially offset by a recovery of loan losses due to the repayment of loans during the nine months ended September 30, 2023. The provision in 2022 was due primarily to a $25.0 million charge-off on the Company’s held-to-maturity debt security, which was recorded at the repayment proceeds received in 2022.

Schedule of investment in performing loans, presented by class and by credit quality, as indicated by risk rating

The Company’s amortized cost basis in performing senior mortgage and subordinate mortgages, presented by year of origination and by credit quality, as indicated by risk rating, as of September 30, 2023 were as follows ($ in thousands):


	Year of Origination
	2023		2022		2021		2020		2019		Prior to 2019		Total
Senior mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		2,550		—		—		—		—		—		2,550
3.5		—		—		—		—		—		—		—
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	2,550	$	—	$	—	$	—	$	—	$	—	$	2,550
Subordinate mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		—		14,026		14,026
3.5		—		—		—		—		—		—		—
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	—	$	—	$	—	$	14,026	$	14,026
Total	$	2,550	$	—	$	—	$	—	$	—	$	14,026	$	16,576

The Company’s amortized cost basis in performing senior mortgages and subordinate mortgages, presented by year of origination and by credit quality, as indicated by risk rating, as of December 31, 2022 were as follows ($ in thousands):


	Year of Origination
	2022		2021		2020		2019		2018		Prior to 2018		Total
Senior mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		—		—		—
3.5		—		—		—		—		6,756		—		6,756
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	—	$	—	$	6,756	$	—	$	6,756
Subordinate mortgages
Risk rating
1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.5		—		—		—		—		—		—		—
2.0		—		—		—		—		—		—		—
2.5		—		—		—		—		—		—		—
3.0		—		—		—		—		—		13,331		13,331
3.5		—		—		—		—		—		—		—
4.0		—		—		—		—		—		—		—
4.5		—		—		—		—		—		—		—
5.0		—		—		—		—		—		—		—
Subtotal	$	—	$	—	$	—	$	—	$	—	$	13,331	$	13,331
Total	$	—	$	—	$	—	$	—	$	6,756	$	13,331	$	20,087

Schedule of recorded investment in impaired loans


	As of September 30, 2023						As of December 31, 2022
			Unpaid						Unpaid
	Amortized		Principal		Related		Amortized		Principal		Related
	Cost		Balance		Allowance		Cost		Balance		Allowance
With an allowance recorded:
Senior mortgages⁽¹⁾	$	—	$	—	$	—	$	29,493	$	29,358	$	(396)
Total	$	—	$	—	$	—	$	29,493	$	29,358	$	(396)

(1)	The Company had one non-accrual loan as of December 31, 2022 that was considered impaired and included in the table above. The Company did not record any interest income on impaired loans for the three and nine months ended September 30, 2023 and 2022.