Provision for Credit Losses	6 Months Ended
Jun. 30, 2023
Provision For Credit Losses
Provision for Credit Losses	6. Provision for Credit Losses Effective December 31, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses. As of December 31, 2022, and June 30, 2023 we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan. We analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss reserves. For the three and six months ended June 30, 2023, the Company recorded a Loan loss reserve of approximately $3,757,000. General Loan Portfolio Reserve - Based upon a relatively young loan portfolio that are relatively new loans to generally credit worthy borrowers, we do not believe that a substantial general loan portfolio reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general contingent portfolio reserve of $145,000 and $199,000 or approximately ¼ of 1% of the loan portfolio loan balance as of December 31, 2022 and June 30, 2023, respectively. Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of December 31, 2022 and June 30, 2023. Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness in the Borrow 4 loan, which has a current principal and interest balance of $884,000. As of December 31, 2022 and June 30, 2023 we have recorded a specific loan loss reserve for the full balance due the Company. As of December 31, 2022 and June 30, 2023, the Company reserved for principal and of $27,831,000. As of June 30, 2023, the Company identified credit weakness in borrower 2 and has placed a reserve approximating $2,884,000 against the outstanding principal and interest.

Provision for Credit Losses

6 Months Ended

Jun. 30, 2023

6. Provision for Credit Losses

Effective December 31, 2022, the Company adopted amended accounting guidance “ASU No.2016-13 – Credit Losses” for the measurement of credit losses on financial instruments and other financial assets. That guidance requires an allowance for credit losses to be deducted from the amortized cost basis of financial assets to present the net carrying value that is expected to be collected over the contractual term of the assets considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance replaced the previous incurred loss model for determining the allowance for credit losses.

As of December 31, 2022, and June 30, 2023 we have reviewed the entire loan portfolio as well as all financial assets of the Company for the purpose of evaluating the loan portfolio and the loan balances, including a review of individual and collective portfolio loan quality, loan(s) performance, including past due status and covenant defaults, assessment of the ability of the borrower to repay the loan on the loan terms, whether any loans should be placed on nonaccrual or returned to accrual, any concentrations in any single borrower and/or industry that we might need to further manage, and if any specific or general loan loss reserve should be established for the entire loan portfolio or for any specific loan.

We analyzed the loan loss reserve from three basis: general loan portfolio reserves; industry portfolio reserves, and specific loan loss reserves. For the three and six months ended June 30, 2023, the Company recorded a Loan loss reserve of approximately $3,757,000.

General Loan Portfolio Reserve - Based upon a relatively young loan portfolio that are relatively new loans to generally credit worthy borrowers, we do not believe that a substantial general loan portfolio reserve is due at this time. However, we do recognize that some inherent risks are in all loan portfolios, thus we recorded a general contingent portfolio reserve of $145,000 and $199,000 or approximately ¼ of 1% of the loan portfolio loan balance as of December 31, 2022 and June 30, 2023, respectively.

Industry Portfolio Reserves - Given the relatively young loan portfolio and a diversification of the portfolio over several different loan products, the risk is reduced. Accordingly, we have not recorded a discretionary reserve as of December 31, 2022 and June 30, 2023.

Specific Loan Reserves - Previously, we had identified credit weaknesses and borrower repayment weakness in the Borrow 4 loan, which has a current principal and interest balance of $884,000. As of December 31, 2022 and June 30, 2023 we have recorded a specific loan loss reserve for the full balance due the Company. As of December 31, 2022 and June 30, 2023, the Company reserved for principal and of $27,831,000. As of June 30, 2023, the Company identified credit weakness in borrower 2 and has placed a reserve approximating $2,884,000 against the outstanding principal and interest.